Funding self-employment - the role of consumer credit

Authors: Kneiding, Christoph¹; Kritikos, Alexander S.²

Source: Applied Economics, Volume 45, Number 13, 1 May 2013 , pp. 1741-1749(9)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

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

Document Type: Research article

DOI: http://dx.doi.org/10.1080/00036846.2011.637895

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: 2013-05-01

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