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Funding self-employment – the role of consumer credit

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This article investigates whether self-employed households use consumer loans – in particular, instalment loans and overdrafts – to finance business activities. Controlling for financial and nonfinancial household variables, we show that self-employed households particularly use personal overdrafts significantly more often than employee households. When analysing the correlation between consumer loan take-ups and consumption of self-employed in comparison to employee households, we find first evidence that overdrafts are used by self-employed to finance their business as well. This indicates that intermingling constitutes a financing strategy when regular business loans might not be accessible.

Keywords: D12; D14; G32; consumer credit; financial intermingling; household business interface; small business finance

Document Type: Research Article


Affiliations: 1: The World Bank, CGAP, 3rd Floor, 900 19th StreetWashington,DC 20005, USA 2: Gesellschaft für Arbeitsmarktaktivierung, Kufsteinerstr. 7,Berlin 10825, Germany

Publication date: May 1, 2013

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