IDEAS home Printed from https://ideas.repec.org/a/spr/jsecdv/v21y2019i2d10.1007_s40847-019-00082-0.html
   My bibliography  Save this article

Change in employment level and financial constraint: evidence from Ethiopian manufacturing SMEs

Author

Listed:
  • Wondemhunegn Ezezew Melesse

    (University of Gondar)

Abstract

This paper examines the effect of access to external sources of finance on employment growth in small and micro-manufacturing enterprises in Ethiopia. Based on a sample of 1321 respondents covering the 11 zonal capital towns of Amhara region, the key findings include: (1) A large fraction (60.5%) of small and micro-manufacturing enterprises are financially constrained. (2) Access to external finance has positive and significant effect on employment growth—specifically in the metal-wood work subsector, in family-/group-operated enterprises, and in those enterprises that started operation with a mix of own capital and borrowed money. (3) Even though a significant fraction of the enterprises in the sample reported having exposure to some type of industrial extension service, this exposure has no significant effect on employment growth. (4) Women participation in the management/ownership of small and micro-manufacturing enterprises is relatively low (about 29%), and male-operated enterprises are significantly more likely to report expansion in employment than their female-operated counterparts.

Suggested Citation

  • Wondemhunegn Ezezew Melesse, 2019. "Change in employment level and financial constraint: evidence from Ethiopian manufacturing SMEs," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(2), pages 329-352, December.
  • Handle: RePEc:spr:jsecdv:v:21:y:2019:i:2:d:10.1007_s40847-019-00082-0
    DOI: 10.1007/s40847-019-00082-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40847-019-00082-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s40847-019-00082-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Patillo & Måns S–derbom & Francis Teal & Albert Zeufack, 2003. "Credit Constraints in Manufacturing Enterprises in Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 12(1), pages 104-125, March.
    2. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
    3. Beck, Thorsten & Cull, Robert, 2014. "SME finance in Africa," Policy Research Working Paper Series 7018, The World Bank.
    4. Beck, Thorsten & Demirguc-Kunt, Asli & Laeven, Luc & Maksimovic, Vojislav, 2006. "The determinants of financing obstacles," Journal of International Money and Finance, Elsevier, vol. 25(6), pages 932-952, October.
    5. Alvaro Aguiar & Ines Drumond, 2007. "Business Cycle and Bank Capital: Monetary Policy Transmission under the Basel Accords," FEP Working Papers 242, Universidade do Porto, Faculdade de Economia do Porto.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    7. Carlstrom, Charles T & Fuerst, Timothy S, 1997. "Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis," American Economic Review, American Economic Association, vol. 87(5), pages 893-910, December.
    8. World Bank, 2015. "SME Finance in Ethiopia : Addressing the Missing Middle Challenge," World Bank Publications - Reports 21488, The World Bank Group.
    9. Ms. Ratna Sahay & Mr. Martin Cihak & Mr. Papa M N'Diaye & Mr. Adolfo Barajas & Ms. Annette J Kyobe & Ms. Srobona Mitra & Yen N Mooi & Mr. Seyed Reza Yousefi, 2017. "Banking on Women Leaders: A Case for More?," IMF Working Papers 2017/199, International Monetary Fund.
    10. repec:cup:jfinqa:v:46:y:2011:i:06:p:1545-1580_00 is not listed on IDEAS
    11. Ali Dib, 2010. "Banks, Credit Market Frictions, and Business Cycles," Staff Working Papers 10-24, Bank of Canada.
    12. Cassar, Gavin, 2004. "The financing of business start-ups," Journal of Business Venturing, Elsevier, vol. 19(2), pages 261-283, March.
    13. Bojan Markovic, 2006. "Bank capital channels in the monetary transmission mechanism," Bank of England working papers 313, Bank of England.
    14. Asli Demirguc-Kunt & Dorothe Singer & Leora Klapper & Saniya Ansar & Jake Hess, 2018. "Global Findex Database 2017 [La base de datos Global Findex 2017]," World Bank Publications - Books, The World Bank Group, number 29510, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hayelom Abrha Meressa, 2022. "Micro- and small-scale enterprises’ financing preference in line with POH and access to credit: empirical evidence from entrepreneurs in Ethiopia," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-30, December.
    2. Ebrahim Endris & Andualem Kassegn, 2023. "Profitability of Agricultural Micro and Small-Scale Enterprise in North Wollo Zone, Amhara Regional State, Ethiopia," SAGE Open, , vol. 13(2), pages 21582440231, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Melesse Wondemhunegn Ezezew, 2015. "Small DSGE Model with Financial Frictions," Working Papers 2015:20, Department of Economics, University of Venice "Ca' Foscari".
    2. Ali Dib, 2010. "Capital Requirement and Financial Frictions in Banking: Macroeconomic Implications," Staff Working Papers 10-26, Bank of Canada.
    3. Falagiarda, Matteo & Saia, Alessandro, 2017. "Credit, Endogenous Collateral and Risky Assets: A DSGE Model," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 125-148.
    4. repec:rza:wpaper:221 is not listed on IDEAS
    5. Clancy, Daragh & Merola, Rossana, 2014. "The effect of macroprudential policy on endogenous credit cycles," Research Technical Papers 15/RT/14, Central Bank of Ireland.
    6. Liu, Guangling (Dave) & Seeiso, Nkhahle E., 2012. "Basel II procyclicality: The case of South Africa," Economic Modelling, Elsevier, vol. 29(3), pages 848-857.
    7. Waters, George A., 2013. "Quantity rationing of credit and the Phillips curve," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 68-80.
    8. Ansgar Rannenberg, 2012. "Asymmetric information in credit markets, bank leverage cycles and macroeconomic dynamics," Working Paper Research 224, National Bank of Belgium.
    9. Alejandro Torres-García & Carlos A. Ballesteros-Ruiz & Alfredo Villca-Condori, 2020. "Bank procyclicality, business cycles and capital requirements," Journal of Banking Regulation, Palgrave Macmillan, vol. 21(2), pages 152-169, June.
    10. Lawrence Christiano & Daisuke Ikeda, 2011. "Government Policy, Credit Markets and Economic Activity," NBER Working Papers 17142, National Bureau of Economic Research, Inc.
    11. Michiel Bijlsma & Wim Suyker, 2008. "The credit crisis and the Dutch economy... in eight frequently asked questions," CPB Memorandum 210.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    12. Abdelkrim Araar & Yesuf Mohammednur Awel & Jonse Bane Boka & Hiywot Menker & Ajebush Shafi & Eleni Yitbarek & Mulatu Zerihun, 2019. "Impact of Credit and Training on Enterprise Performance: Evidence from Urban Ethiopia," Working Papers PMMA 2019-13, PEP-PMMA.
    13. Aadland, David, 2005. "Detrending time-aggregated data," Economics Letters, Elsevier, vol. 89(3), pages 287-293, December.
    14. Meh, Césaire A. & Moran, Kevin, 2010. "The role of bank capital in the propagation of shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 555-576, March.
    15. Jonathan Hoddenbagh & Mikhail Dmitriev, 2017. "The Financial Accelerator and the Optimal State-Dependent Contract," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 24, pages 43-65, March.
    16. Andreas Kern & Puspa Amri, 2021. "Political credit cycles," Economics and Politics, Wiley Blackwell, vol. 33(1), pages 76-108, March.
    17. Ruggero Grilli & Gabriele Tedeschi & Mauro Gallegati, 2015. "Markets connectivity and financial contagion," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 10(2), pages 287-304, October.
    18. Meisenzahl, Ralf R., 2014. "Verifying the state of financing constraints: Evidence from U.S. business credit contracts," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 58-77.
    19. Michiel Bijlsma & Jeroen Klomp & Sijmen Duineveld, 2010. "Systemic risk in the financial sector; a review and synthesis," CPB Document 210.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    20. Arturo Galindo & Alejandro Micco, 2005. "Bank Credit to Small and Medium-Sized Enterprises: The Role of Creditor Protection," Working Papers Central Bank of Chile 347, Central Bank of Chile.
    21. Ariel Zetlin-Jones & Ali Shourideh, 2010. "Aggregate Fluctuations with Adverse Selection in Credit Markets," 2010 Meeting Papers 376, Society for Economic Dynamics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jsecdv:v:21:y:2019:i:2:d:10.1007_s40847-019-00082-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.