| Popis: |
Informal finance, in the past, has been identified to act as an alternative information channel for formal lenders. With evidence for the complementary role of formal and informal finance on the rise, this study investigates if informal finance could help firms work around the lending technologies adopted by formal lenders and thereby help small firms access the scalable formal finance. This is especially insightful for developing economies and small firms that are more financially constrained. Employing non-recursive path model, we identify that through co-funding firms that lack information, collateral or lending relationship access formal finance. Additionally, we also document the significant role played by firm profitability in lending decisions. The findings imply that the benefits of co-funding can be channelled to create a better financial environment for firms that would normally be unserved by the formal financial sector. |
