Complementarity between Relationship Lending and Collateral in SME Access to Bank Credit: Evidence from Ethiopia

Fanta, Ashenafi Beyene

doi:10.1080/15228916.2016.1177785

Cited by 28 publications

(24 citation statements)

References 39 publications

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“…This cell depicts the typical African SME context. Entrepreneurs know the existence of significant market but they fail to exploit the opportunity and fill the market gap due to limited access to finance (Ishengoma and Kappel 2011;Mbonyane and Ladzani 2011), high collateral requirements to get the necessary capital (Fanta 2016), low access to market and marketing skills (Mbonyane and Ladzani 2011), more structural factors such as trade liberalization (Roux and Bengesi 2014) and an unfavorable business climate (CIDRC 2013).…”

Section: Collaboration Stagementioning

confidence: 99%

“…However, there are also multitudes of systematic challenges unique to African SMEs. The pressing ones are limited access to finance (Ishengoma and Kappel 2011;Mbonyane and Ladzani 2011), very limited access to markets and marketing skills (Mbonyane and Ladzani 2011), high collateral requirement to secure loans (Fanta 2016), and an unfavorable business climate (Canada International Development Research Center [CIDRC] 2013). These challenges can be largely attributed to limited resource abundance and lack of proper resource deployment skills and/or the stiff competition in the market (Meagher 2007).…”

Section: Introductionmentioning

confidence: 99%

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Munificence contingent small business growth model (special emphasis to African SMEs’ context)

Alemayehu

Vuuren

2017

Journal of Small Business & Entrepreneurship

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Classifications:B. Functional management and growth of an SME; C. Strategic management and change in an SME; Factors of success and failure in SME and entrepreneurial firms; Growth of SMEs; Managing change in an uncertain and changing environment Abstract:Despite the growth in number and kind of research emphasizing small and medium-sized enterprises (SMEs), little is known about the relationship between drivers and modes of SMEs' growth. To address this gap, the paper systematically analyzes the relationship between growth drivers and strategies based on the dynamic resource-based view and proposes munificence contingent growth model. The authors argue that the selection of growth strategy should base on firm's resource and environmental munificence settings. Firms can select either organic or inorganic growth strategies based on the abundance or scarcity of certain resources and the accommodative capacity of the economic environment. When the economic environment comes with attractive opportunities SMEs tend to cooperate with other firms either through collaborative framework or diversification strategies. Conversely, when they are faced with very competitive market conditions and the resource availability is limited bootstrapping strategies found to be helpful to maintain competitiveness and thrive. Subsequently, as the resource muscle of the firm develops through bootstrapping strategies SMEs are expected to employ expansion strategies.

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Section: Collaboration Stagementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Munificence contingent small business growth model (special emphasis to African SMEs’ context)

Alemayehu

Vuuren

2017

Journal of Small Business & Entrepreneurship

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“…Over the decade since the 2008 financial crisis, the literature on banking and finance has seen renewed interest in a number of areas, including the nexus between loan growth, regulation, diversification, and competition, and the development indicators for risk, capital management, and efficiency of banks (Kashif et al 2016;Bokpin 2016;Fanta 2016;Zheng et al 2017;Ozili 2017;Khraisha and Arthur 2018). Interest has also grown regarding banking industry performance in terms of allocation efficiency, risk management and profitability (Moudud-Ul-Huq 2017; Hamdi et al 2018), the application of manifold learning approaches (Huang and Kou 2014;Yan et al 2017), and the implications of Basel III for banking sector development (Ramlall and Mamode 2017).…”

Section: Introductionmentioning

confidence: 99%

Size, efficiency, market power, and economies of scale in the African banking sector

Asongu

Odhiambo

2019

Financ Innov

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There is a growing body of evidence that interest rate spreads in Africa are higher for big banks compared to small banks. One concern is that big banks might be using their market power to charge higher lending rates as they become larger, more efficient, and unchallenged. In contrast, several studies found that when bank size increases beyond certain thresholds, diseconomies of scale are introduced that lead to inefficiency. In that case, we also would expect to see widened interest margins. This study examines the connection between bank size and efficiency to understand whether that relationship is influenced by exploitation of market power or economies of scale. Using a panel of 162 African banks for 2001-2011, we analyzed the empirical data using instrumental variables and fixed effects regressions, with overlapping and non-overlapping thresholds for bank size. We found two key results. First, bank size increases bank interest rate margins with an inverted U-shaped nexus. Second, market power and economies of scale do not increase or decrease the interest rate margins significantly. The main policy implication is that interest rate margins cannot be elucidated by either market power or economies of scale. Other implications are discussed.

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“…First, a substantial bulk of African business literature is consistent with the position that a fundamental challenge to doing business on the continent is the lack of finance (Tuomi, 2011;Darley, 2012;Fanta, 2016). This position has recently been confirmed by Ndikumana and Blackson (2015), who have shown that domestic investment in Africa is more positively linked to domestic sources of capital when compared with external sources of capital.…”

Section: Introductionmentioning

confidence: 79%

Information Asymmetry, Financialisation and Financial Access

Asongu

Odhiambo

2018

SSRN Journal

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This study investigates whether information sharing channels that are meant to reduce information asymmetry have led to an increase in financial access. The study employs a Generalised Method of Moments technique using data from 53 African countries during the period from 2004-2011 to examine this linkage. Information sharing channels are theoretically designed to promote the formal financial sector and discourage the informal financial sector. The study uses two information sharing channels: private credit bureaus and public credit registries. The study found that both information sharing channels have a positive and significant impact on financial access. The study also found that public credit registries complement the formal financial sector to promote financial access. The policy implications are discussed.

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Complementarity between Relationship Lending and Collateral in SME Access to Bank Credit: Evidence from Ethiopia

Cited by 28 publications

References 39 publications

Munificence contingent small business growth model (special emphasis to African SMEs’ context)

Munificence contingent small business growth model (special emphasis to African SMEs’ context)

Size, efficiency, market power, and economies of scale in the African banking sector

Information Asymmetry, Financialisation and Financial Access

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