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

Magister Artium (Development Studies) - MA(DVS) / This study explores the informal saving institutions, with a particular focus on the Kobuakisa Carte practice, which is an informal financial institution that mobilizes savings for poverty reduction among low-income people in Kinshasa, Democratic Republic of Congo. The research investigates the extent to which the Kobuakisa Carte serves the purpose of mobilizing savings for poverty alleviation. It is hypothesized that Kobuakisa Carte influences informal savings, enables the poor to satisfy their basic material needs, reduces poverty and consequently leads to individual empowerment and development. This study integrated the case study methodology in its research design. It applied both qualitative and quantitative methods. The qualitative research data comprised document analysis, interviews with Kobuakisa Carte’s clients and officers. In addition, a questionnaire was utilized to gather quantitative research information from 50 informal traders. The findings of the study reveals that Kobuakisa Carte has not have a positive impact towards poverty reduction. Informal savings were incapable of helping the poor to increase their income because they were small in amount and were mainly used for fulfilling basic needs rather than financing income-generating activities. Savings from Kobuakisa Carte were used for survival rather than for poverty reduction. The majority of the poor favor Kobuakisa Carte due to its flexibility and adaptation to local culture and values. The study finds that the most positive impact of the scheme on the welfare of the poor was in the areas of education, health, food and housing. The scheme has the potential to empower the poor and to develop local finance system in following bottom up approach. This study recommends the partial integration of Kobuakisa Carte into formal financing channels and should be given proper recognition and adequate consideration in the nation’s financial system. The study concludes that Kobuakisa Carte is an active and dynamic saving scheme. It has demonstrated the potential to alleviate poverty. It needs to be studied and requires support in order to make it more effective.

This study is a Minor Field Study (MFS), which is a Sida funded scholarship who made this field study possible. With an institutionalist approach, this field study aims to outline the foundational reasons behind peoples’ participation in the South African informal financial stokvel system. In order to do that, interviews have been made trying to identify what roles normative, cultural and economic factors play in peoples’ decisions, why individuals’ find that the stokvel system is a better choice than other systems, and also to explore what individuals experience distinguish the informal and formal economic systems. The study has been conducted in South Africa, in the province KwaZuluNatal, and twenty-five persons has been interviewed in order to get the people perspective. Results show that both normative, cultural and economic factors appear as important, but that the economic factors play the overall biggest role for joining a stokvel. Both the main differences between the formal and informal system, and the reasons why individuals find that the stokvel system is the best system of choice, can be traced back to trust and trust issues.

Cette recherche qui porte sur la micro finance a comme zone d’étude la Moyenne Guinée ou Fouta Djallon, une des quatre régions naturelles de la Guinée. L’objectif principal est d’analyser la façon dont la micro finance contribue à articuler la finance formelle (banques) et la finance informelle (tontines, banques villageoises, etc.) pour fournir des services financiers durables en milieu rural et d’étudier son incidence sur la lutte contre la pauvreté. Tant au plan régional (Afrique de l’Ouest) qu’au plan national guinéen, nous avons souligné que les différents secteurs financiers fonctionnent dans un contexte de cloisonnement relativement souple. Le secteur de la micro finance, le dernier né des secteurs financiers, constitue aujourd’hui une alternative forte dans la collecte de l’épargne et le financement des activités locales à travers des mécanismes novateurs établis essentiellement sur la base de la proximité avec les populations locales. Pourtant, nous montrons comment deux visions de la micro finance continuent à s’affronter : l’une sociale, fondée sur le bon vouloir des donateurs, donc fortement dépendante des bailleurs de fonds; l’autre, commerciale, institutionnelle, fondée sur la volonté de construire une véritable autonomie fonctionnelle de l’IMF, à la fois aux plans, technique, financier et humain. Par ailleurs, nous avons montré comment le débat sur le lien entre micro finance et pauvreté n’est pas encore tranché, tant les impacts sur le terrain interpellent les chercheurs et les bailleurs de fonds sur l’efficacité de la micro finance comme outil de réduction effective de la pauvreté. La question demeure de voir comment la micro finance peut être un élément de décloisonnement à travers une articulation entre finance formelle et finance informelle. Pour répondre à cette question, nous avons identifié deux arguments qui constituent les deux parties de la thèse. La première partie expose la diversité des modes de financement en Afrique de l’Ouest, fait le lien entre micro finance et pauvreté, en reprenant les débats théoriques qui continuent à s’affronter sur cette question et présente la problématique de l’articulation entre services financiers comme solution de décloisonnement et d’amélioration de la fourniture des dits services. La deuxième partie montre des exemples empiriques d’articulation entre banque, micro finance et finance informelle à travers les pratiques des usagers et formule quelques préoccupations sur le devenir de cette activité dans la région. / This research focusing on micro finance covers the Middle Guinea area or Fouta Djalon, one of the four natural regions of Guinea. The main objective is to review how micro finance helps to articulate formal finance (banks) and informal finance (tontines, village banks, etc.) in order to provide sustainable financial services in rural areas and to examine the effect on the fight against poverty. At both regional (West Africa) and national levels (Guinea), we noted that the various financial sectors operate in a relatively flexible partitioned context. The micro finance sector, the latest financial sector, is now a strong alternative in the collection of savings and financing of local activities through innovative mechanisms established mainly on the basis of the proximity to local populations. However, we have shown how two visions of micro finance are continuing to compete: the social one, based on the goodwill of donors, so heavily dependent on donors; and the other, commercial, institutional one, based on the willingness to build a real functional autonomy of the MFI technically, financially and in human terms. In addition, we have shown how the debate on the relationship between micro finance and poverty is not yet settled, as the impact on the field is challenging for researchers and funders regarding the effectiveness of micro finance as a tool for effective poverty reduction. The question remains how micro finance can be an element of de-partitioning through an articulation between formal finance and informal finance. To answer this question, we identified two arguments which are the two parts of the thesis. The first part outlines the diversity of modes of financing in West Africa, articulating the link between micro finance and poverty, repeating the theoretical debates that continue to clash on this issue, and presents the challenge in articulating financial services as a solution for breaking down barriers and improving the provision of such services. The second part shows empirical examples of nexus between banking, micro finance and informal finance through the practices of users, but states some concerns about the future of this activity in the region.

The study assess the roles played by cooperative societies’ savings and loans services on members’ economic condition, standard of living and in meeting participants financial needs in rural locations where there is no bank nor other formal financial providers. Using a combination of interview, focus group discussion and questionnaire techniques, the study covers the activities of cooperative societies located in rural communities and villages outside the state capital and local government headquarters where there is no electricity, water and tarred road in Ogun State, Nigeria. From its findings, this study identified and discussed potential areas for the improvement of cooperative societies that could be of benefit to rural finance providers and the cooperative members. The study is the first empirical investigation in Nigeria that focuses on the relevance of cooperative societies on members’ standard of living in rural communities and villages. The study shed light on how rural communities function – how their relationships develop, how individual esteem is increased, how interdependence grows, how hierarchies are maintained – and how this is facilitated in part by the loan-making of members promoted cooperatives. It has also provided more evidence on the importance of land ownership, and how this is enhanced when rural communities have access to cheap and affordable loans. It has also provided insights into the development of rural businesses, how complex they are, and how they require more input than the financing received through cooperative loans. The study breaks new ground in informal cooperative functioning, community development and rural finance research by providing a distinction between standard of living and quality of life variables in measuring the economic condition of rural dwellers, and the production of circle of social capital theory that the role of cooperatives to the members involve financial capital, physical capital and social capital which are interrelated. This helps to appropriately identify the roles of cooperative societies in rural finance to increase in household income, ownership of household assets and acquisition of enterprise assets. However, participation in the cooperative does not lead to enterprise profitability, while rural financial needs are more accessible from cooperatives than other sources.

This study is about informal institutions in informal finance and microfinance in Jamaica and Trinidad-Tobago. Informal institutions as understood in this study are unwritten social norms that cater to specific needs in the society, and can be indirectly captured and measured in their outcome. Informal institutions are deeply embedded in the socio-cultural matrix of a society. In the context of informal finance and microfinance, the outcome of the existence of informal institutions are the indigenous financial intermediaries like Roscas, community based lending, and individual financial brokers. The institutional theoretical framework of this study helps capture the institutional dynamics and the processes in informal finance and microfinance. The theoretical framework demonstrates the following: (1) Informal institutions exist in both informal finance and formal microfinance. (2) It exposes the interface between the financial intermediaries and the informal institutions that govern informal finance and microfinance through certain mechanisms like ‘joint liability’ and ‘social collateral’, which reduce information asymmetries and transactions costs. An implication is that informal institutions address the crucial issue of ‘moral hazards’. (3) The same informal institutions governing informal finance are being adapted and innovated by microfinance. Lending methodologies of informal finance are becoming embedded in microfinance. (4) Microfinance organizations are being transformed into formal financial intermediaries, thereby exposing the process by which informal institutions are also being formalized. (5) An empirical investigation of peoples’ needs, preference and benefits provides the evidence as to why they subscribe to informal institutions via the various financial intermediaries. The findings of this study provide some interesting insights: Firstly, models of financial services based on indigenous institutions have better chances of surviving than imported models. Secondly, informal institutions compete, coexist and even complement formal institutions in providing financial services to the economically active poor. Thirdly, microfinance has not just bridged the gap between formal and the informal finance; it is also becoming a catalyst through which informal institutions are slowly being formalized. Lastly, the client base’s needs, preferences and benefits account for the pervasiveness of informal institutions in informal finance and in microfinance.

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