The impact of the formal employment contract on credit access in Africa

Résumé

Utilizing a new database of over 200 employees surveyed in Senegal, we demonstrate the impact of formalization and employment contracts on credit access. Through a probit model, we show that formalization has a significantly positive impact on credit access since an employee’s probability of accessing credit increases by 23% if they have a formal employment contract. The possession of an employment contract increases the likelihood of having a bank account by 18%. We find that other potential determinants studied in the existing literature, such as gender, education and salary, do not have a significant impact on access to credit. These results highlight the impact of formalization on credit access and make a strong case for the economic development that could result from a continuation of the efforts being undertaken to formalize African economies, which still remain predominantly informal.
Citer

Monteiro S. (2019) "The impact of the formal employment contract on credit access in Africa", FERDI Working paper P261

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