Credit constraints, growth and inequality dynamics

Getachew, Yoseph

doi:10.1016/j.econmod.2016.01.005

Cited by 10 publications

(5 citation statements)

References 57 publications

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“…A common feature of credit markets is the presence of imperfect (asymmetric) information by both borrowers and lenders concerning the intentions of each other in the credit transaction. To circumvent this market friction, it has been theoretically explained that lending is made under heavy collateral contracts (Hoff and Stiglitz, 1990;Barham et al, 1996;Boucher et al, 2008;Getachew, 2016). As a result, households that do not have collateral, for instance the poor, have limited access to credit either in quantity or by denial entirely.…”

Section: Literature Reviewmentioning

confidence: 99%

“…To circumvent this market friction, it has been theoretically explained that lending is made under heavy collateral contracts ( Hoff and Stiglitz, 1990 ; Barham et al., 1996 ; Boucher et al . , 2008 ; Getachew, 2016 ). As a result, households that do not have collateral, for instance the poor, have limited access to credit either in quantity or by denial entirely.…”

Section: Literature Reviewmentioning

confidence: 99%

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Determinants of credit demand and credit constraints among households in Ghana

Asiamah¹,

Steel

Ackah

2021

Heliyon

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This paper investigates the determinants of and trends in credit demand and credit constraints of households with respect to both formal and informal financial institutions in Ghana. Trends and explanatory factors over 1992-2013 using pooled data from four Ghana Living Standards Surveys are analysed using the Heckman Probit model. Estimates for the full population reveal that tertiary education is a significant determinant of both credit requests (positively) and credit constraints (negatively). In the rural population, household heads that were widowed or separated and those that lived below the poverty line are more likely to request credit and also more likely to experience credit constraints. In the urban population, the aged are less likely to request credit but more likely to experience credit constraints. The policy implication is that financial inclusion measures targeted to people living below the poverty line, the widowed and separated in rural communities are needed to respond to their relatively high demand for credit services and overcome their exclusion from access to credit that could help in generating income to reduce poverty. The sex of a household head is significant for binding credit constraints in the full population and the urban sample, but not significant in the rural sample. Surprisingly, the study finds a decline in the proportion of households requesting credit in the full population as well as rural and urban areas, indicating increasing self-exclusion.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Determinants of credit demand and credit constraints among households in Ghana

Asiamah¹,

Steel

Ackah

2021

Heliyon

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“…A significant proportion of studies, however, found an insignificant link between LTC and firm growth. A reasonable explanation is that LTC isn't crucial for daily operations, as working capital requirements of small and young firms is markedly important (Field, Pande, Papp, & Rigol, 2013;Getachew, 2016;Lay, 2020;Leon, 2018;Leon, 2019). Studies by Fisman and Love (2007) and Fafchamps and Schündeln (2013) studied the impact of growth opportunities by including it in the base model and analyzing its relationship with credit growth maturity.…”

Section: Discussionmentioning

confidence: 99%

The Provision of Long-Term Credit and Firm Growth in Developing Countries

Watson¹

2020

Asian Journal of Economics and Empirical Research

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This study evaluates the impact of the provision of long-term credit (LTC) on the growth of small and young firms in developing countries. The growth of firms is evaluated on the basis of employment growth and total sales. Credit provisions have also been collected from the short-and LTC extended to the private sector. This study uses data on firm levels from more than 19000 firms in 52 countries between 2006-2016. In order to avoid the endogeneity issues that usually occur in such studies, this study has implemented a crosscountry model to evaluate the significance of total bank credit, both long-and short-term, on the growth of sales and employment. The econometric results indicate that the availability of short-term credit (STC) is more beneficial for the growth of the firms, i.e. STC was found to have a significant impact on employment growth and sales in small and young firms. Although positive, LTC seemed to have no significance in the growth of the small and young firms. This study suggests that the prime reason behind these results is the availability of long-term loans for small and young firms.

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“…Various researchers have confirmed that through accessing credit, more effective wealth distribution, poverty alleviation and inequality reduction could be achieved (Beck et al 2009;Yadav and Sharma 2015). Markedly, even when the over-borrowing situation of bad borrowers can have several negative effects, credit constraints are considered one of the most significant obstacles causing persistent growth (Coeurdacier et al 2015;Getachew 2016;Petrick 2004;Rajan and Zingales 2003). As a result, deeper evaluations of credit access are required to make the financial system more inclusive for every participant within the whole economy.…”

Section: Overview On Credit Accessmentioning

confidence: 99%

Credit Access and the Firm–Government Connection: Is There Any Link?

Phan,

Ta,

Pham

et al. 2023

JRFM

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Access to credit for businesses is an unresolved issue, especially in developing countries and transition economies. There has been a lot of research exploring factors affecting firms’ credit accessibility. Particularly, factors related to borrowers and lenders are always placed under consideration. However, besides those factors, institutional elements could also play an important role in guiding companies’ operations. In countries where the economy lacks transparency and low-level development is limited, informal institutional factors can have potential impacts. In this paper, we focus on exploring the relationship between firm–government links and credit access, thereby offering managerial implications through utilizing cross-sectional data sets at the firm level, with an initial sample of 26,849 observations from 38 countries at different levels of development around the world. The results show a positive correlation of firm–government connection with credit access. Moreover, this relationship may vary depending on the market in which the business primarily operates. Specifically, firms working internationally are less influenced by links with governments and tend to rely more on their own characteristics and conditions.

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Credit constraints, growth and inequality dynamics

Cited by 10 publications

References 57 publications

Determinants of credit demand and credit constraints among households in Ghana

Determinants of credit demand and credit constraints among households in Ghana

The Provision of Long-Term Credit and Firm Growth in Developing Countries

Credit Access and the Firm–Government Connection: Is There Any Link?

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