Funding Self-Employment: The Role of Consumer Credit

26 Pages Posted: 13 Nov 2011

See all articles by Christoph Kneiding

Christoph Kneiding

World Bank - Consultative Group to Assist the Poor (CGAP); German Institute for Economic Research (DIW Berlin)

Alexander Kritikos

Europa-Universitaet Viadrina - Fakultat fur Wirtschaftswissenschaften; German Institute for Economic Research (DIW Berlin); IZA Institute of Labor Economics

Abstract

This paper investigates whether self-employed households use consumer loans – in particular instalment loans and overdrafts – to finance business activities. Controlling for financial and non-financial household variables we show that self-employed households particularly use personal overdrafts significantly more often than employee households. When analyzing 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

JEL Classification: G32, D12, D14

Suggested Citation

Kneiding, Christoph and Kritikos, Alexander S., Funding Self-Employment: The Role of Consumer Credit. IZA Discussion Paper No. 6093, Available at SSRN: https://ssrn.com/abstract=1958749 or http://dx.doi.org/10.2139/ssrn.1958749

Christoph Kneiding (Contact Author)

World Bank - Consultative Group to Assist the Poor (CGAP) ( email )

1818 H St NW
Washington, DC
United States

German Institute for Economic Research (DIW Berlin)

Mohrenstraße 58
Berlin, 10117
Germany

Alexander S. Kritikos

Europa-Universitaet Viadrina - Fakultat fur Wirtschaftswissenschaften ( email )

15230 Frankfurt (Oder)
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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