Trade Credit and Access to Finance of Retailers in Ethiopia

T.H.L. Beck, Mohammad Hoseini, Burak Uras

Research output: Working paperOther research output

Abstract

Using data on 5,500 Ethiopian retailers, we document that there is lower use of trade credit in areas with more access to bank finance. Among firms within an area, however, receiving a bank loan increases the use of trade credit by informal firms, but has no association with trade credit of formal firms. This result suggests that relationship with banks acts as a signal of creditworthiness of informal firms which are usually more credit constrained due to agency problems. In contrast, formal firms, registered under state authorities, have more transparent operations preferred by formal lenders. As an additional empirical evidence, we also find that firms with a female owner are more willing to lend trade credit but less likely to obtain it.
LanguageEnglish
Place of PublicationTilburg
PublisherTilburg University
Number of pages16
StatePublished - 2018

Publication series

NameDFID Working Paper

Fingerprint

Access to finance
Trade credit
Ethiopia
Retailers
Finance
Authority
Creditworthiness
Agency problems
Bank loans
Empirical evidence
Owners
Credit

Cite this

Beck, T. H. L., Hoseini, M., & Uras, B. (2018). Trade Credit and Access to Finance of Retailers in Ethiopia. (DFID Working Paper). Tilburg: Tilburg University.
Beck, T.H.L. ; Hoseini, Mohammad ; Uras, Burak. / Trade Credit and Access to Finance of Retailers in Ethiopia. Tilburg : Tilburg University, 2018. (DFID Working Paper).
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Beck, THL, Hoseini, M & Uras, B 2018 'Trade Credit and Access to Finance of Retailers in Ethiopia' DFID Working Paper, Tilburg University, Tilburg.

Trade Credit and Access to Finance of Retailers in Ethiopia. / Beck, T.H.L.; Hoseini, Mohammad; Uras, Burak.

Tilburg : Tilburg University, 2018. (DFID Working Paper).

Research output: Working paperOther research output

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T1 - Trade Credit and Access to Finance of Retailers in Ethiopia

AU - Beck,T.H.L.

AU - Hoseini,Mohammad

AU - Uras,Burak

PY - 2018

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N2 - Using data on 5,500 Ethiopian retailers, we document that there is lower use of trade credit in areas with more access to bank finance. Among firms within an area, however, receiving a bank loan increases the use of trade credit by informal firms, but has no association with trade credit of formal firms. This result suggests that relationship with banks acts as a signal of creditworthiness of informal firms which are usually more credit constrained due to agency problems. In contrast, formal firms, registered under state authorities, have more transparent operations preferred by formal lenders. As an additional empirical evidence, we also find that firms with a female owner are more willing to lend trade credit but less likely to obtain it.

AB - Using data on 5,500 Ethiopian retailers, we document that there is lower use of trade credit in areas with more access to bank finance. Among firms within an area, however, receiving a bank loan increases the use of trade credit by informal firms, but has no association with trade credit of formal firms. This result suggests that relationship with banks acts as a signal of creditworthiness of informal firms which are usually more credit constrained due to agency problems. In contrast, formal firms, registered under state authorities, have more transparent operations preferred by formal lenders. As an additional empirical evidence, we also find that firms with a female owner are more willing to lend trade credit but less likely to obtain it.

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BT - Trade Credit and Access to Finance of Retailers in Ethiopia

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Beck THL, Hoseini M, Uras B. Trade Credit and Access to Finance of Retailers in Ethiopia. Tilburg: Tilburg University. 2018, (DFID Working Paper).