Go to AfricaBib home

Go to AfricaBib home AfricaBib Go to database home

bibliographic database
Previous page New search

The free AfricaBib App for Android is available here

Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Accessing Bank Credit in Eritrea: Bottlenecks for Small Firms and the Commercial Bank of Eritrea
Authors:Eije, Henk vonISNI
Fishazion, MichaelISNI
Lutz, ClemensISNI
Periodical:Journal of Eritrean Studies (Asmara)
Notes:biblio. refs.
Geographic terms:Eritrea
Northeast Africa
small enterprises
Development and Technology
Economics and Trade
Economics, Commerce
Banks and banking
Small business
Commercial Bank of Eritrea
Abstract:The Commercial Bank of Eritrea (CBE) deploys only 29 percent of the funds collected from its depositors. At the same time a lack of finance for small firms in Eritrea is an important obstacle in the development of the country. The paradox of the concomitant existence of ample money in the bank and scarcity of money with small firm owners can be explained by asymmetric information. Six mechanisms to overcome asymmetric information are presented. Besides traditional banking instruments such as collateral and covenants, business relationships, ownership, reputation and human capital can assist in bridging the information gap. Interviews conducted in 2000 with bank and monetary officials, as well as managers of small enterprises, revealed that the sole relevant mechanism in reducing asymmetric information in Eritrea was collateral, and that the collateral requirements were high. The other mechanisms had little impact. Moreover, the scope of the problem was wider than asymmetric information theory suggests. Mutual mistrust, conservatism and rigid credit policies of the CBE, a lack of accounting knowledge within small firms, and general development related problems also played a role. Bibliogr., notes, sum. [Journal abstract]