Informality and Access to Finance: Evidence from India

T.H.L. Beck, M. Hoseini

Research output: Working paperOther research output

Abstract

This paper gauges the effect of financial deepening and bank outreach on informality using micro data from the Indian manufacturing sector and exploiting cross-industry variation in the need for external finance. We distinguish between two channels through which access to finance can reduce informality: reducing the entry barrier to the formal sector and increasing productivity of formal firms. We find that bank outreach has a stronger effect on reducing the incidence of informality by cutting barriers to entering the formal economy, especially for smaller firms, and thus diminishing opportunistic informality. In comparison, financial deepening increases the productivity of formal sector firms while it has no significant impact on informal sector firms.
LanguageEnglish
Place of PublicationTilburg
PublisherTilburg University
Number of pages49
StatePublished - Aug 2014

Publication series

NameDFID Working Paper

Fingerprint

Access to finance
India
Informality
Financial deepening
Productivity
Outreach
Industry
Manufacturing sector
Barriers to entry
Small firms
Micro data
Informal sector
External finance

Keywords

  • Informality
  • Financial Development
  • India

Cite this

Beck, T. H. L., & Hoseini, M. (2014). Informality and Access to Finance: Evidence from India. (DFID Working Paper). Tilburg: Tilburg University.
Beck, T.H.L. ; Hoseini, M./ Informality and Access to Finance : Evidence from India. Tilburg : Tilburg University, 2014. (DFID Working Paper).
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Beck, THL & Hoseini, M 2014 'Informality and Access to Finance: Evidence from India' DFID Working Paper, Tilburg University, Tilburg.

Informality and Access to Finance : Evidence from India. / Beck, T.H.L.; Hoseini, M.

Tilburg : Tilburg University, 2014. (DFID Working Paper).

Research output: Working paperOther research output

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Beck THL, Hoseini M. Informality and Access to Finance: Evidence from India. Tilburg: Tilburg University. 2014 Aug, (DFID Working Paper).