COVID-19, financing and sales decline of informal sector MSMEs in Senegal.

Abstract

Using the survey data collected on informal sector MSMEs in Senegal, this study performs logit and propensity score matching (PSM) both to examine the determinants of access to credit, the decline in sales, and the business growth prospect in the 12 months following the COVID‐19 pandemic and to assess the impact of credit on the MSMEs sales decline. We find that being a male manager and aged 46–55 years old reduces the likelihood of a decline in sales, whereas those who are 25–35 years present a high probability of experiencing a decrease in sales due to COVID‐19. Being between 25 and 35 and 36–45 years old with a formalized MSME increases the probability of having access to loans. MSMEs that undertake manufacturing businesses appear more pessimistic about the future. More importantly, PSM findings show that MSMEs with loans have a higher average treatment effect of sales decline than their counterparts. This suggests that the greater the access to credit, the greater the difference in sales decline between MSMEs with credit and their counterpart without. The policy implications underline the importance of extended maturities and direct government financial support—not debt—to help the most affected informal sector MSMEs recover from the COVID‐19 pandemic adverse effects.