Access to Financing for Productive Employment Opportunities for Women in Rural Benin

Government and financial institutions have attempted to address low financial inclusion in the development of sustainable microenterprises in rural Benin, especially with regard to women. In general, however, their actions have not been guided by evidence regarding the design of financing schemes intended to boost rural, women-owned enterprises. This paper reports on the relationship between various financing schemes in rural Benin and the economic performance of women-owned enterprises. Using an extended multinomial, endogenous-switching-regression selection-bias-correction model on a representative sample of rural microenterprises, we find that social-network-based financing improves the business performance of rural women entrepreneurs in small-scale commerce more than any other alternative financing scheme in any sector. This is particularly true for microenterprises managed by adult women and by women with a primary-school education level. Formal credit-based financing increases the profit margins of mature microenterprises led by rural women or that employ salaried workers, as well as of all businesses that operate on the basis of credit obtained from social-network-based financing. Finally, our study shows that self-financing is more profitable for young rural women entrepreneurs than other financing alternatives. Our results call for policies that target experienced women microenterprises for innovative microfinancing programs and young women entrepreneurs for subsidy programs.