Financial institutions and the formalisation of informal trade in African secondary cities: а conceptual diagnostic of Fianarantsoa, Madagascar
DOI:
https://doi.org/10.26661/2522-1566/2026-3/37-03Keywords:
financial inclusion; informal economy; enterprise formalisation; secondary cities; microfinance; mobile money; MadagascarAbstract
Purpose: Financial institution presence is routinely treated as a natural lever for formalising informal trade. This article develops a conceptual diagnostic of why presence and formalisation nevertheless diverge sharply in African secondary cities, using Fianarantsoa, Madagascar as an illustrative case. Design/methodology/approach: The article integrates finance-growth theory, asymmetric information theory, institutional economics and digital-finance research into an original conceptual framework, then applies it diagnostically to secondary data on Fianarantsoa's financial-institution inventory and national financial-access indicators. No primary data were collected. Findings: The Proximity–Accessibility Gap framework distinguishes nominal financial proximity from effective financial accessibility. Fianarantsoa hosts fourteen financial institutions across eighteen service points, yet recorded only fourteen new formal enterprises in 2024 against 2,259 in the Antananarivo region, while national data show 61.8 per cent account ownership against 8 per cent bank-credit access. The framework positions the city predominantly within a “proximity illusion” quadrant and generates six testable research propositions. Research limitations/implications: The diagnostic relies on national proxies and a documented institutional inventory rather than branch-level lending data; propositions require primary validation. Practical implications: Institution-specific interventions are indicated: underwriting delegation for commercial banks, capital and density expansion for microfinance institutions, and credit-scoring integration for mobile money. Social implications: Closing the gap bears directly on livelihoods in a commercial sector where informality is close to universal. Originality/value: The framework offers a portable diagnostic construct for secondary-city financial inclusion research beyond Madagascar.
JEL Classification: G21, G28, J46, O17.
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