Sin Working Paper Series the Importance of Informal Finance in Kenyan Manufacturing

This paper investigates the importance of informal finance for Kenyan manufacturing firms. The results indicate that informal borrowing is not an important alternative to other forms of finance. The main clients of informal finance are informal firms and relatively small formal ones, although informal credit is to some extent demanded by firms of all sizes. Most important among the informal financial sources are relatives and friends. The principal reasons for using informal finance are low interest rates, easier formalities, and the fact that no collateral is required.