| Summary: | Financial services to the poor are seen as a principal way to achieve goals of poverty reduction and job creation. This study explores the dynamic of microcredit clients with informal sector characteristics. These characteristics include number of employees, registration status, having a permanent address, being based at home, being based in an open space, operating from a temporary place, and government support of businesses. In recent years, the informal sector on the West Bank has grown to become a major source of job creation for poor Palestinians. Using data collected by the author, this study finds that a majority of the responding microcredit clients are in the informal sector and some of them use microcredit to create a job for themselves because they had no alternative. There is some interest directed towards formal registration from lenders and borrowers, while general progress, in terms of formalization, is found to be fairly insignificant. Finally, we do not find that microcredit increases the probability of less informal sector characteristics acknowledged by microcredit clients. Therefore, while other factors may explain lack of formalization, microcredit is found not to provide enough stimulus on its own to lead questionnaire respondents away from the informal sector.
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