Cooperative Institutions as Pathways to Formal Banking: Evidence from Zambian Micro, Small, and Medium Enterprises

Abstract

This study investigates the relationship between cooperative registration and formal financial access among Micro, Small, and Medium Enterprises (MSMEs). It examines whether cooperative membership expands financial service breadth and assesses formalization as a potential institutional pathway. The research uses cross-sectional data from the 2022 Zambia MSME Finance Survey. The empirical strategy applies survey-weighted logistic regression to estimate average marginal effects. The study employs inverse-probability weighting (IPW) to adjust for a rare treatment group and uses multiple imputation by chained equations to address missing income data. The sample comprises 4,063 business owners. Baseline adjusted models rely on 2,542 observations with complete covariate information. Cooperative registration has a positive association with formal bank account ownership. Adjusted estimates suggest a 14.7 percentage point higher probability of bank access for registered cooperatives. IPW estimates remain positive and statistically significant. The positive association with financial-service breadth reaches statistical significance under count specifications but not under ordered-logit estimation. The inclusion of enterprise formality metrics reduces the magnitude of the cooperative coefficient. Conceptually, the paper distinguishes between general financial breadth and targeted formal banking access. Methodologically, it addresses rare treatment constraints and item non-response in observational survey data.