What microfinance schemes for women-owned microenterprises’ productivity in rural Benin?

Government and financial institutions are attempting to address the low financial inclusion for developing sustainable microenterprises in rural Benin. Yet, their actions remain to be guided by evidence pertaining to the design of financing schemes intended to boost rural women-owned enterprises. This paper focuses on the relationship between the various financing schemes that exist and the economic performance of women-owned enterprises in rural Benin, using a sample of 3949 small businesses. Results show that social network-based financing improves the business performance of rural women entrepreneurs in small-scale commerce. This is also the case for microenterprises managed by adult women and women with primary-school education. Formal credit-based financing increases the profit margins of mature microenterprises owned by women. This paper also shows that self-financing is more profitable for young rural women entrepreneurs. The results partly inform the need to target women more in financing policies in Benin. Plain English Summary Microenterprises’ financing and performance require more gender considerations in rural Benin. Because of the demand rationing of formal credit, there is a coexistence of other sources of financing in use that induce differential impacts on the performance of women-owned microenterprises. This study finds that informal social network-based financing is more beneficial for rural women traders, adults, or educated owners. A substitute formal microcredit would enhance the growth of rural women-owned microenterprises operating with social networks-based financing. This has to be rural women having proven experience in small businesses. For inexperienced young women, a self-financing mechanism is more appropriate to start small businesses. Our findings call thus for policies targeting experienced female microenterprises for innovative microfinance programs and young female entrepreneurs for subsidy programs.