abstract: Informal finance in this paper refers to the financing activities of individuals or households to borrow money through channels other than formal financial institutions such as commercial banks. Using data from China Household Finance Survey (CHFS) conducted by Southwestern University of Finance and Economics (SWUFE) and the People's Bank of China, this paper employs Probit model to analyze the factors that may influence the financing needs of Chinese households and factors that influence their likelihood of obtaining loans from formal financial institutions versus from informal channels. Results show that household wealth, family structure, and household head’s characteristics are the major factors that influence their financing needs. Moreover, the results suggest that (a) richer families are more likely to obtain loans from formal financial channels while poorer families are more likely to do so from informal channels; (b) families with stronger social ties are more likely to obtain loans from formal financial channels, but this relationship is weaker in regions where the financial market is more competitive;and (c) the increase of formal financial services is positively related to the probability of households obtaining formal finance, but has no relationship with the probability of households obtaining informal finance. These findings have important implications for finance policy making. / Dissertation/Thesis / Doctoral Dissertation Business Administration 2016

This research investigates the role business incubators on the MSMEs’ access to informal and semi-formal finance. To meet this purpose, firstly, the relationship between business incubation models and models of financial accessibility is assessed. secondly, the contribution of business incubators to the MSMEs informal and semi-formal financial accessibility is determined, by assessing the direct impact of monitoring services on financial accessibility and also assessing the incubator’s financial intermediation role between incubatees and financiers. Due to the important role played by social capital in non-formal financing, the influence of both incubatee and incubator manager’s social capital on incubatee’s informal and semi-formal financial accessibility is also investigated. The results indicate that, business incubator’s monitoring services have significant positive influence on incubatee’s access to informal and semi-formal finance, and also there is a significant positive relationship between monitoring services and financial management capabilities. Also, incubatee’s financial management capabilities have significant positive impact on semi-formal financial accessibility, nevertheless, there is insignificant relationship between incubatee’s financial management capabilities and informal financial accessibility. Furthermore, the results show, incubatee’s bonding and bridging social capital have direct positive impact on both informal and semi-formal financial accessibility, while incubator manager’s linking social capital has positive impact on semi-formal financial accessibility but insignificant impact on informal financial accessibility. Incubatee’s bridging social capital also negatively moderates the relationship between financial management capabilities and semi-formal financial accessibility, whereas incubatee’s bonding has no moderating effect on the same relationship. Incubator manager’s bonding and bridging social capital and incubatee’s linking social capital have insignificant direct impact on both informal and semi-formal financial accessibility, as well as insignificant moderating impact on the relationship between financial management capabilities and semi-formal financial accessibility. These findings show the importance of financial management capabilities on incubatee’s access to semi-formal finance and highlights the role of incubatee’s bonding and bridging network links and incubator manager’s linking social networks to the incubatee’s access to non-formal finance. They also reveal that informal financiers do not consider incubatee’s financial management capabilities as an important criterion in deciding to provide them credits:Acknowledgement i Table of contents iii List of tables viii List of figures xii Abbreviations xv Zusammenfassung xx Summary xxxii CHAPTER ONE 1 INTRODUCTION 1 1.1 Background to the problem 1 1.2 Statement of the Problem 4 1.3 Objectives of the study 10 1.3.1 General objective 10 1.3.2 Specific objectives 10 CHAPTER TWO 11 LITERATURE REVIEW 11 2.1 Start-ups and Micro, Small and Medium Enterprises 11 2.1.1 Micro, Small and Medium Enterprises 11 2.1.1.1 MSMEs’ sector in Tanzania 14 2.1.2 Start-ups 15 2.1.2.1 Startups in Tanzania 16 2.2 Business incubators 18 2.2.1 Services provided by business incubators 21 2.2.2 Business incubators in Tanzania 23 2.3 Financial management capabilities 28 2.3.1 Financial management capabilities in MSMEs 29 2.4 Financial system 32 2.4.1 Formal financing 33 2.4.2 Informal financing 33 2.4.3 Semi-formal financing 34 2.4.4 Financing system in Tanzania 34 2.4.5 Informal and Semi-formal financing system in Tanzania 36 2.4.5.1 Informal financiers 37 2.4.5.2 Semi-formal financiers 45 2.5 MSMEs’ financial accessibility 52 2.5.1 MSMEs’ financial accessibility in Tanzania 55 2.5.2 The role of business incubators in promoting MSMEs’ access to finance 56 2.6 Information asymmetries between MSMEs and financiers 59 2.7 Theory of financial intermediation 61 2.8 Social capital 62 2.8.1 Role of social capital on MSMEs’ access to finance 65 2.9 Summary of the theoretical framework 69 2.10 Proposed model 70 CHAPTER THREE 75 RESEARCH METHODOLOGY 75 3.1 Research Design 75 3.2 Study Area 76 3.3 Targeted population 78 3.4 Sample 79 3.5 Operational definitions and measurement of the variables 83 3.5.1 Variable indicators 83 3.5.2 Business incubators' monitoring services 83 3.5.3 Financial management capabilities 84 3.5.4 Incubatee's bonding social capital 84 3.5.5 Incubatee's bridging social capital 85 3.5.6 Incubatee's linking social capital 85 3.5.7 Incubator manager's bonding social capital 86 3.5.8 Incubator manager's bridging social capital 86 3.5.9 Incubator manager's linking social capital 87 3.5.10 MSMEs’ Financial accessibility 87 3.6 Data collection instrument 92 3.6.1 Questionnaire 92 3.6.2 Personal interviews 93 3.7 Data collection 93 3.8 Data Analysis 94 3.8.1 Qualitative data analysis 94 3.8.2 Quantitative analysis 95 3.8.2.1 Data preparation 95 3.8.2.2 Descriptive statistics 96 3.8.2.3 Factor analysis 96 3.8.2.4 Inferential Statistics 104 3.8.2.4.1 Spearman correlations analysis 105 3.8.2.4.2 Kruskal-Wallis test 105 3.8.2.4.3 Partial Least Squares regressions analysis 105 3.9 Validity and Reliability 106 3.9.1 Validity and reliability of qualitative research 106 3.9.2 Validity and reliability in quantitative research 107 CHAPTER FOUR 110 PRESENTATION OF FINDINGS 110 4.1 Introduction 110 4.2 Qualitative results 110 4.2.1 Current status of business incubation programs in Tanzania 110 4.2.2 Factors for business incubators’ successful financial intermediary role118 4.3 Quantitative results 132 4.3.1 Descriptive results 132 4.3.1.1 Sample demography 133 4.3.1.1.1 Relationship between age and incubation period of incubated MSMEs 133 4.3.1.1.2 Categorizing incubated MSMEs by number of employees and business capital 135 4.3.1.1.3 Distribution of incubatees by their nature of ownership and business activity 138 4.3.1.1.4 Financiers’ provision of requested amount of loans to incubatees 140 4.3.1.2 The contribution of business incubators to MSMEs financial accessibility 145 4.3.1.2.1 The Business Incubator's Monitoring services 146 4.3.1.2.2 Financial Management capabilities of incubatees 147 4.3.1.2.3 MSMEs’ financial accessibility 149 4.3.1.3 Relationship between business incubation models and models of MSMEs financing 150 4.3.1.4 Factors for successful intermediary role of an incubator 152 4.3.1.5 Incubatees and incubator managers’ social capital on Incubatees' financial accessibility 155 4.3.2 The impact of business incubation on MSMEs access to informal and semi-formal finance 160 4.3.2.1 Demographic characteristics of incubated enterprises 161 4.3.2.2 Relationship between business incubation models and models of financial accessibility 165 4.3.2.3 Contribution of incubators to the MSMEs informal and semi-formal financial accessibility 166 4.3.2.3.1 Impact of business incubator’s monitoring services on MSMEs’ informal and semi-formal financial accessibility 167 4.3.2.3.2 Business incubators’ financial intermediation role between incubated MSMEs and financiers. 170 4.3.2.4 Impact of incubatee and incubator manager’s social capital on iMFA and sMFA 173 4.3.2.5 Moderating impact of Incubatee's and incubator manager's social capital on the FMC-MFA relationship 179 4.4 Summary of chapter four 183 4.4.1 Developing a model on incubated MSMEs’ access to informal and semi- formal finance. 190 4.4.1.1 A model on incubated MSMEs’ access to informal finance 190 4.4.1.2 A model on incubated MSMEs’ access to semi-formal finance. 191 4.4.1.3 The influence of demographic characters on the relationship between social capital and financial accessibility. 192 CHAPTER FIVE 196 DISCUSSION OF FINDINGS 196 5.1 Introduction 196 5.2 Demographic characteristics of incubatees 196 5.3 Relationship between business incubation models and models of financial accessibility 201 5.4 Business incubators’ financial intermediation role between MSMEs and financiers. 203 5.5 Factors for successful business incubator’s financial intermediary role 207 5.6 Impact of incubatee’s and incubator manager’s social capital on informal and semi-formal financial accessibility 209 5.7 Moderating impact of Incubatee's and incubator manager's social capital on the FMC-MFA relationship 212 CHAPTER SIX 214 CONCLUSIONS AND RECOMMENDATIONS 214 6.1 Conclusions 214 6.2 Recommendations 221 6.3 Scope for further research 229 Reference 234 Appendix I Total Variance Explained 253 Appendix II Component Matrix 254 Appendix III Pattern Matrix 255 Appendix IV Questionnaire 256 Appendix V Questionnaire (Swahili version) 261 Appendix VI Interview guide for the financiers (English version) 266 Appendix VII Interview guide for the financiers (Swahili version) 267 Apendix VIII Interview guide for incubators’ managers and key informants (English version) 268 Appendix IX Interview guide for incubators’ managers and key informants (Swahili version) 269 Appendix X Eigenständigkeitserklärung 270