The Role of Informal Financing on the Sustainability of Entrepreneurship in Kumba Municipality

Veronica Dinla Jumfongai, Ndamsa Dickson Thomas
International Journal of Economics and Business Administration, Volume X, Issue 3, 174-208, 2022
DOI: 10.35808/ijeba/783


Purpose: The main objective of this study was to identify the importance of informal financing in underlying the sustainability of businesses. Design/methodology/approach: In carrying out this research information was gathered from Kumba Municipality using primary sources of data, with the help of simple random sampling technique. A questionnaire was designed and administered and observations related to the main objective of this study were gathered. The study employed descriptive methods to summarize the opinions of the respondents and used the Probit regression model to assess the role of informal financing in explaining business sustainability in Kumba. Findings: Findings indicated that entrepreneurs mobilize majority (67.7%) of their funds from informal sources of financing out of which 38.7% come from njangi groups, 12.9% from friends and families and the remainder is gotten informally from credit unions. This is a clear indication that informal financing contributes greatly to the growth of entrepreneurship in Kumba municipality. The probit regression results indicated that borrowing from a financial institution does not play a significant role in boosting the survival of businesses in Kumba. Practical implications: The paper affirms that borrowing from family and friends has a significant likelihood to improve business survival in Kumba municipally. The probit regression results also indicated that funds borrowed from njangi groups have a significant likelihood to boosting business survival in this municipally. Originality/value: Studies on business survival and informal financing are rare in Cameroon. Businesses operating in Kumba Municipality should make good use of the informal financing available in their locality especially njangi groups, as this has important bearings on their sustainability.

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