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The authors use firm-level, cross-county data from Investment Climate surveys in 49 developing countries to investigate an important channel through which informality can affect productivity: access to credit and external finance. Informality is measured as self-reported lack of tax compliance in a sample of registered firms that also answered questions on a large set of other characteristics. The authors find that more tax compliance is significantly associated with more access to credit both in OLS and in country fixed effects estimates. In particular, the link between credit and formality is stronger in high-formality countries. This suggests that firms' balance sheets are relatively more informative for financial institutions in environments where signal extraction is a less noisy process. The authors' results are robust to the inclusion of a wide array of correlates and to two-stage estimation.

Access to Credit --- Access to External Finance --- Access to Finance --- Balance Sheets --- Bankruptcy and Resolution of Financial Distress --- Banks --- Banks and Banking Reform --- Debt Markets --- Economic Theory and Research --- Exclusion --- External Finance --- Finance and Financial Sector Development --- Financial Institutions --- Financial Market --- International Bank --- Macroeconomics and Economic Growth --- Social Security

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This paper tests the hypothesis that enterprises may forgo formal finance in lieu of informal credit by choice. They do so to avoid the additional regulatory scrutiny and harassment that engaging with the formal financial sector invites. We test this hypothesis using enterprise-level data on 3,564 enterprises in 29 countries. In this sample, enterprises finance approximately 57 percent of their working capital requirements with external finance. This external finance comes from formal sources, such as commercial banks (53 percent) and informal sources (42 percent), such as trade creditors, or family and friends. In our sample, 14 percent of enterprises rely exclusively on informal finance. We find that the likelihood of enterprises preferring to only use informal finance is inversely related to the quality of the regulatory environment, particularly the quality of tax administration and overall governance. For example, we find that when an enterprise has been asked for bribes by tax inspectors, it is 17 percent more likely to prefer informal finance.

Access to Finance --- Banks and Banking Reform --- Bribes --- Capital Requirements --- Commercial Banks --- Creditors --- External Finance --- Finance and Financial Sector Development --- Formal Finance --- Formal Financial Sector --- Informal Credit --- Informal Finance --- Working Capital

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Identifying the determinants of entrepreneurship is an important research and policy goal, especially in emerging market economies where lack of capital and supporting infrastructure often imposes stringent constraints on business growth. This paper studies the impact of a comprehensive business and financial literacy program on firm outcomes of young entrepreneurs in an emerging post-conflict economy, Bosnia and Herzegovina. The authors conduct a randomized control trial and find that while the training program did not influence business survival, it significantly improved business practices, investments, and loan terms for surviving businesses. Entrepreneurs with higher ex-ante financial literacy further exhibited some improvements in business performance and sales.

Access to Finance --- Business Environment --- Business in Development --- Business Training --- Competitiveness and Competition Policy --- Entrepreneurs --- External Finance --- Finance and Private Sector Development --- Financial Literacy --- Financial Literacy Training Program --- Managerial Capital --- Private Sector Development

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This paper investigates the link between export survival of agri-food products and financial development. It tests the hypothesis that financial development differentially affects the survival of exports across products based on their need of external finance. The authors test whether exports of products that are relatively more reliant on external capital survive longer when initiated in more financially developed countries. The results suggest that agri-food products that require more external finance indeed sustain longer in foreign markets if the exporting country is more financially developed.

Agri-Food Trade --- Debt Markets --- Economic Theory & Research --- External Finance Dependence --- Financial Development --- Food & Beverage Industry --- International Economics & Trade --- Labor Policies --- Macroeconomics and Economic Growth --- Markets and Market Access --- Poverty Reduction --- Product Risk Index Duration of Trade --- Sps Regulation

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This paper uses a dataset of more than 70,000 firms in over 100 countries to systematically study the use of different financing sources for new and young firms, in comparison to mature firms. The authors find that in all countries younger firms rely less on bank financing and more on informal financing. However, they also find that younger firms use more bank finance in countries with stronger rule of law and better credit information, and that the reliance of young firms on informal finance decreases with the availability of credit information. Overall, the results suggest that improvements to the legal environment and availability of credit information are disproportionately beneficial for promoting access to formal finance by young firms.

Access to external finance --- Access to Finance --- Access to formal finance --- Availability of credit --- Bank financing --- Bankruptcy and Resolution of Financial Distress --- Banks & Banking Reform --- Credit information --- Debt Markets --- Earnings --- Economic development --- Entrepreneur --- Entrepreneurial Finance --- Entrepreneurs --- Finance and Financial Sector Development --- Financial development --- Financial Intermediation --- Growth opportunities --- Informal finance --- Informal financing --- Internal funds --- International Bank --- Investment opportunities --- New business --- Profitability --- Small businesses