The aim of this paper is to understand why firms choose to finance their fixed asset
investments by informal credit. We examine the both country and firm level
determinants of this choice in a cross-country setting. Data on informal credit use
of firms is extracted from the Business Environment and Enterprise Performance
Surveys which enable us to study with a wider data compared to the previous
studies. Our results address financial constraints as the source of informal credit
use. Moreover firm size, owners’ gender and location are important firm level
factors affecting firms’ reliance on informal credit. Finally financial develop