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Finance, Gender, and Entrepreneurship: India's Informal Sector Firms

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  • Gang, Ira N.

    () (Rutgers University)

  • Natarajan, Rajesh Raj

    () (Sikkim University)

  • Sen, Kunal

    () (University of Manchester)

Abstract

How does informal economic activity respond to increased financial inclusion? Does it become more entrepreneurial? Does access to new financing options change the gender configuration of informal economic activity and, if so, in what ways and what directions? We take advantage of nationwide data collected in 2010/11 and 2015/16 by India's National Sample Survey Office on unorganized (informal) enterprises. This period was one of rapid expansion of banking availability aimed particularly at the unbanked, under-banked, and women. We find strong empirical evidence supporting the crucial role of financial access in promoting entrepreneurship among informal sector firms in India. Our results are robust to alternative specifications and alternative measures of financial constraints using an approach combining propensity score matching and difference-in-differences. However, we do not find conclusive evidence that increased financial inclusion leads to a higher likelihood of women becoming entrepreneurs than men in the informal sector.

Suggested Citation

  • Gang, Ira N. & Natarajan, Rajesh Raj & Sen, Kunal, 2020. "Finance, Gender, and Entrepreneurship: India's Informal Sector Firms," IZA Discussion Papers 13854, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13854
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    References listed on IDEAS

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    1. Thorsten Beck & Asli Demirguc‐Kunt & Luc Laeven & Ross Levine, 2008. "Finance, Firm Size, and Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(7), pages 1379-1405, October.
    2. Levenson, Alec R. & Maloney, William F., 1998. "The informal sector, firm dynamics, and institutional participation," Policy Research Working Paper Series 1988, The World Bank.
    3. Pallavi Chavan, 2020. "Women’s Access to Banking in India: Policy Context, Trends, and Predictors," Journal, Review of Agrarian Studies, vol. 10(1), pages 7-36, January-J.
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    More about this item

    Keywords

    entrepreneurship; financial constraints; gender; informal sector; difference-in-differences; India;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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