On the different survival rates of Portuguese microbusinesses – the case of projects supported by microcredit

ABSTRACT

In spite of their importance to the micro-entrepreneur’s life, Portuguese microbusinesses exhibit a short duration in activity. However, until now there has been scarce attention about the determinants characterizing the microbusiness and/or the micro-entrepreneur. This paper is based on a very comprehensive survey distributed to the microcredit borrowers in Portugal. The main empirical findings suggest that more mature entrepreneurs, with family support, a permanent set of customers, and an awareness of the quality of their goods and services exhibit lower hazard rates of finishing the business. Conversely, high-fixed costs, bad business locations, and periods of economic crisis significantly reduce the duration of the business.

KEYWORDS:

• Microcredit
• Borrowers
• Microbusiness
• Survival analysis

JEL CLASSIFICATION:

• J54
• L11
• M13
• C83

Acknowledgments

The author acknowledges the suggestions provided by anonymous referees’ from Applied Economics on a previous version of this research. The author also acknowledges the contribution of Jose Centeio (ANDC) on providing the access to the data collected from the survey conducted by ANDC in 2014. The author also acknowledges the suggestions provided by the participants at a Seminar in USCS (São Caetano do Sul, 2017) and at a Conference in UEL (Londrina, 2018) in which a previous version of this work has been discussed. Remaining limitations are author’s exclusive ones.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ The literature tends to converge that a microbusiness/microfirm has a maximum number of five workers/employees (including the manager/micro-entrepreneur). Given the characteristics of the Portuguese projects funded by microcredit, it is not controversial to identify these projects as microbusinesses or as micro-enterprises.

Additional information

Funding

This work was carried out within the funding with COMPETE reference nº [POCI-01-0145-FEDER-006683], with the FCT/MEC’s (Fundação para a Ciência e a Tecnologia, I.P.) financial support through national funding and by the ERDF through the Operational Programme on “Competitiveness and Internationalization – COMPETE 2020 under the PT2020 Partnership Agreement.