Formal finance Self-rationing and small business success: the moderate role of informal finance

Résumé

Why are some small businesses more successful than others? This study investigates the relationship between small business success and formal finance self-rationing by highlighting the moderate effect of informal financing.

A structural equation method is realized using questionnaire survey data from a sample of Beninese small business owners.

Overall, the study shows that the majority (more than 65%) of small businesses are self-rationed. Almost 40% of respondents have got financing support from their family or friends and about 38% apply for tontine. Additionally, we find that self-rationing negatively and significantly affects small business success. It also appears that informal financing moderates the relationship between self-rationing and small business success.

Our findings suggest that government in his small businesses financing policy, must find the way to organize informal finance, especially tontine. Formal institutions especially banks are to consider interpersonal factors to facilitate the financing conditions for small businesses.