Credit Constraints in Manufacturing Enterprises in Africa
We investigate the question of whether firms in Africa's manufacturing sector are credit constrained. The fact that few firms obtain credit is not sufficient to prove constraints, since certain firms may not have a demand for credit while others may be refused credit as part of profit maximising behaviour by banks. To investigate this question, we use direct evidence on whether firms had a demand of credit and whether their demand was satisfied in the formal credit market, based on panel data on firms in the manufacturing sector from six African countries. Of those firms with a demand for credit, only a quarter obtained a formal sector loan. Our analysis suggests that while banks allocate credit on the basis of expected profits, micro or small firms are much less likely to get a loan than large firms. We also find that outstanding debt is positively related with obtaining further lending. The role of outstanding debt is likely to be a reflection of inefficiency in credit markets, while the fact that size matters is consistent with a bias as well, although we cannot totally exclude that they reflect transactions costs on the part of banks. We present an analysis showing how much more profitable small firms must be to obtain a loan than large firms. Copyright 2003, Oxford University Press.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 12 (2003)
Issue (Month): 1 (March)
|Contact details of provider:|| Postal: |
Phone: +44-(0)1865 271084
Fax: 01865 267 985
Web page: http://www.jae.oupjournals.org/Email:
More information through EDIRC
|Order Information:||Web: http://www.oup.co.uk/journals|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nabi, Ijaz, 1989. "Investment in Segmented Capital Markets," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 453-62, August.
- G. S. Maddala, 1987. "Limited Dependent Variable Models Using Panel Data," Journal of Human Resources, University of Wisconsin Press, vol. 22(3), pages 307-338.
- Raturi, Mayank & Swamy, Anand V, 1999. "Explaining Ethnic Differentials in Credit Market Outcomes in Zimbabwe," Economic Development and Cultural Change, University of Chicago Press, vol. 47(3), pages 585-604, April.
- Soyibo, Adedoyin, 1997. "Financial Liberalisation and Bank Restructuring in Sub-Saharan Africa: Some Lessons for Sequencing and Policy Design," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 100-150, March.
- R. Glenn Hubbard, 1998.
"Capital-Market Imperfections and Investment,"
Journal of Economic Literature,
American Economic Association, vol. 36(1), pages 193-225, March.
- Xiaoqiang Hu & Fabio Schiantarelli, 1998. "Investment And Capital Market Imperfections: A Switching Regression Approach Using U.S. Firm Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 466-479, August.
- Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.
- Tybout, James R, 1983. "Credit Rationing and Investment Behavior in a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 598-607, November.
When requesting a correction, please mention this item's handle: RePEc:oup:jafrec:v:12:y:2003:i:1:p:104-125. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.