Exploring the financial resources of entrepreneurs in the informal economy: insights from North West Nigeria

The informal economy plays significant roles in developing and advanced economies, particularly in developing economies. Despite widespread financial sector reforms in such economies, about 93 per cent of informal economy entrepreneurs lack access to formal finance. Until now, few studies of the entrepreneurship process in the context of extreme poverty exist. Little is known on how informal entrepreneurs in such settings access and mobilise financial resources to start their ventures as well as grow and survive, whilst institutional challenges persist. There is a well-developed body of literature on the informal economy, from various disciplines and perspectives, but limits remain regarding our understanding and theorising. To date, knowledge of how informal entrepreneurs initiate, organise and transact with financial resources remains incomplete in emerging economy contexts. Thus, this investigation adopts institutional theory and resource-based perspectives in explaining and understanding this phenomenon from North West Nigeria. By adopting a qualitative inductive methodology, 56 informal entrepreneurs, bank managers, informal financial services providers, government officials, enterprise union leaders and an NGO representative were interviewed and examined. The results suggest that asymmetry in the institutional environment strongly influences the intermingling and diverse processes of financial resources acquisition and usage. This research broadens our empirical understanding of informal entrepreneurs’ financial resources and offers nuanced and finer-grained delineations of how they access and mobilise financial resources for business start-up, growth and survival. Furthermore, this research enlarges the conception of institutional asymmetry and resource orchestration framework in another context, through revealing the effects of three pillars of institutions as well as breadth, life cycle and depth processes in different venture formations, growth and survival in the informal economy. It also formulates useful guidance to academics and practitioners to better understand and improve access to and use of financial resources in related contexts.