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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Credit Constraints in Manufacturing Enterprises in Africa
Authors:Bigsten, ArneISNI
Collier, PaulISNI
Dercon, StefanISNI
Fafchamps, MarcelISNI
Gauthier, BernardISNI
Gunning, Jan W.
Oduro, Abena
Oostendorp, Remco H.
Patillo, Cathy
Periodical:Journal of African Economies
Geographic terms:Subsaharan Africa
Development and Technology
Economics and Trade
External link:https://jae.oxfordjournals.org/content/12/1/104.full.pdf
Abstract:This paper investigates the question of whether firms in Africa's manufacturing sector are credit constrained. It uses direct evidence on whether firms had a demand for 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 (Ghana, Zimbabwe, Kenya, Côte d'Ivoire, Burundi and Cameroon). Of those firms with a demand for credit, only a quarter obtained a formal sector loan. The 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. The paper also finds 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 it cannot totally be excluded that they reflect transactions costs on the part of banks. The paper presents an analysis showing how much more profitable small firms must be to obtain a loan than large firms. App., bibliogr., notes, ref., sum. [Journal abstract]