MSMEs Financing in Burundi and its Welfare Effect

The business sector in Burundi is dominated by small firms, with a median firm size of seven permanent workers. This has implications for firm resilience, access to resources, productivity and welfare. Large firms are more resilient, more productive, offer higher wages and other job-related benefits, and have a better access to resources. The question explored in this paper is whether supporting MSMEs in a fragile state like Burundi could increase welfare. This issue should be analyzed using panel data, which is not yet available. Relying on cross-sectional data, there are indications that welfare could not be improved just through the provision of loans to MSMEs. Other channels could include the fostering of female entrepreneurship, increasing training, helping firms to grow, and focusing aid on MSMSEs outside the capital city where entrepreneurship suffers from the urban bias.  (download)

J. Nkurunziza