1 Introduction
2 Conceptual framework and hypotheses
2.1 Financial inclusion
2.2 Business practices
H1: Microentrepreneurs that adopt more business practices will use more financial services.
2.3 Formality
(H2) Business formality is associated with greater use of financial products.
From the review of the literature on business practices, formalization, and financial inclusion, we present the following hypothesis regarding a derived effect of adopting business practices on financial inclusion:(H3) A potential channel for H1 is via formalization: microentrepreneurs who adopt more business practices will be more formal, and this triggers higher financial inclusion.
2.4 Personal initiative
(H4) Microentrepreneurs who adopts more personal initiative will have more business practices.
2.5 Beliefs on formality of the local economic sector
(H5) Microentrepreneurs’ beliefs on the formality level of other firms in the same economic activity in their city are associated positively with their level of formality.
2.6 Heterogeneity
(H6) The effects of the usage of business practices on financial inclusion will be lower for women than for men.
(H7) Microentrepreneurs with a higher level of education will be more financially included.×
3 Data
3.1 Measures of the main variables of interest
3.2 Summary statistics
4 Methods
4.1 Measurement system
4.2 Structural equations regression model
4.3 Mediation analysis
4.4 Heterogeneity
5 Results
5.1 Measurement system
(1) | (2) | (3) | (4) | |
---|---|---|---|---|
Factor | Mean | Std dev | Min | Max |
Panel A. Statistics on predicted factors | ||||
Financial inclusion (FI) | 0.282 | 0.195 | − 0.014 | 1.100 |
Formality (FO) | 0.175 | 0.158 | − 0.288 | 0.356 |
Business practices (BP) | 0.172 | 0.147 | − 0.178 | 0.415 |
Personal initiative (PI) | 0 | 0.431 | − 1.877 | 0.570 |
Panel B. Statistics on normalized indices | ||||
Financial inclusion (FI) | .2666415 | 0.1755119 | 0 | 1 |
Formality (FO) | .719863 | 0.2462036 | 0 | 1 |
Business practices (BP) | .5921732 | 0.2480803 | 0 | 1 |
Personal initiative (PI) | .7671156 | 0.1764387 | 0 | 1 |
FI | FO | BP | PI | |
---|---|---|---|---|
Panel C. Correlation matrix of predicted factors | ||||
Financial inclusion (FI) | 1.0000 | |||
Formality (FO) | 0.4163 | 1.0000 | ||
Business practices (BP) | 0.6305 | 0.4133 | 1.0000 | |
Personal initiative (PI) | 0.1381 | 0.0524 | 0.2376 | 1.0000 |
5.2 Structural equations
(1) | (2) | |
---|---|---|
No controls | Controls | |
Panel A. Main estimated coefficients | ||
\(\beta _3\): Personal Initiative \(\rightarrow\) Business practices | 0.069*** | 0.060*** |
(0.011) | (0.010) | |
\(\beta _5\): Business practices \(\rightarrow\) Formal | 0.071 | 0.071 |
(0.153) | (0.179) | |
\(\beta _4\): Difference formal beliefs \(\rightarrow\) Formal | 0.171*** | 0.155*** |
( 0.017) | (0.017) | |
\(\beta _2\): Formal \(\rightarrow\) Financial Inclusion | 0.231 | 0.229 |
(0.138) | (0.166) | |
Panel B. Paths from BP to FI | ||
\(\beta _1 + \beta _2 \cdot \beta _5\): Business practices \(\overrightarrow{Total}\) Financial inclusion | 1.115*** | 1.069*** |
(0.297) | (0.344) | |
[100%] | [100%] | |
\(\beta _1\): Business practices \(\overrightarrow{Direct}\) Financial inclusion | 1.099*** | 1.053*** |
(0.297) | (0.346) | |
[98.6%] | [98.5%] | |
\(\beta _2 \cdot \beta _5\): Business practices \(\rightarrow\) Formal \(\rightarrow\) Financial inclusion | 0.016 | 0.016 |
0.037 | 0.043 | |
[1.4%] | [1.5%] | |
Observations | 1542 | 1542 |
RMSEA | 0.069 | 0.057 |
SRMR | 0.075 | 0.060 |
P-value (Chi-square) | 0.000 | 0.000 |
Comparative fit index (CFI) | 0.659 | 0.598 |
Tucker-Lewis index (TLI) | 0.641 | 0.573 |
(1) | (2) | (3) | (4) | (5) | |
---|---|---|---|---|---|
Female | Male | Primary | High school | College | |
Panel A. Main estimated coefficients | |||||
\(\beta _3\): Personal Initiative \(\rightarrow\) Business practices | 0.078*** | 0.042*** | 0.063*** | 0.070*** | 0.039*** |
(0.018) | (0.012) | (0.020) | (0.019) | (0.013) | |
\(\beta _5\): Business practices \(\rightarrow\) Formal | − 0.115 | 0.470 | 0.066 | − 0.268 | 0.274 |
(0.226) | (0.355) | (0.285) | (0.245) | (0.279) | |
\(\beta _4\): Difference formal beliefs \(\rightarrow\) Formal | 0.131*** | 0.202*** | 0.204*** | 0.124*** | 0.057*** |
( 0.022) | (0.028) | (0.040) | (0.027) | (0.017) | |
\(\beta _2\): Formal \(\rightarrow\) Financial Inclusion | 0.284 | 0.190 | − 0.172 | 0.347 | 1.167 |
(0.287) | (0.174) | (0.122) | (0.337) | (0.939) | |
Panel B. Paths from BP to FI | |||||
\(\beta _1 + \beta _2 \cdot \beta _5\): Business practices \(\overrightarrow{Total}\) Financial inclusion | 0.759* | 1.524** | -0.113 | 1.207** | 2.530** |
(0.444) | (0.620) | (0.304) | (0.478) | (1.174) | |
[100%] | [100%] | [100%] | [100%] | [100%] | |
\(\beta _1\): Business practices \(\overrightarrow{Direct}\) Financial inclusion | 0.792* | 1.435** | -0.101 | 1.300*** | 2.210** |
(0.443) | (0.618) | (0.309) | (0.501) | (1.199) | |
[104.3%] | [94.1%] | [89.4%] | [107.7%] | [87.3%] | |
\(\beta _2 \cdot \beta _5\): Business practices \(\rightarrow\) Formal \(\rightarrow\) Financial inclusion | − 0.033 | 0.089 | − 0.011 | − 0.093 | 0.320 |
(0.072) | (0.105) | (0.050) | (0.123) | (0.412) | |
[− 4.3%] | [5.8%] | [10.6%] | [− 7.7%] | [12.7%] | |
Observations | 786 | 756 | 382 | 534 | 626 |
RMSEA | 0.059 | 0.057 | 0.061 | 0.059 | 0.058 |
SRMR | 0.065 | 0.063 | 0.073 | 0.066 | 0.066 |
P-value (Chi-square) | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 |
Comparative fit index (CFI) | 0.588 | 0.597 | 0.594 | 0.559 | 0.544 |
Tucker-Lewis index (TLI) | 0.563 | 0.572 | 0.570 | 0.532 | 0.516 |