  This paper examines the effects of institutional quality on financing choice
of individual using a large dataset of 137,160 people from 131 countries. We
classify borrowing activities into three categories, including formal,
constructive informal, and underground borrowing. Although the result shows
that better institutions aids the uses of formal borrowing, the impact of
institutions on constructive informal and underground borrowing among three
country sub-groups differs. Higher institutional quality improves constructive
informal borrowing in middle-income countries but reduces the use of
underground borrowing in high- and low-income countries.
