IDEAS home Printed from https://ideas.repec.org/a/taf/wjabxx/v17y2016i3p308-318.html
   My bibliography  Save this article

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

Author

Listed:
  • Ashenafi Beyene Fanta

Abstract

Despite their contribution to job creation, small and medium enterprises (SMEs) are financially constrained. Lenders view SMEs as high risk borrowers and hence demand collateral, but lack of collateral inhibits SMEs access to credit. Relationship lending is believed to lessen collateral requirement and increase SMEs access to credit. However, recent studies question substitutability of relationship lending and collateral. The present study adds to the debate by drawing on the survey of 102 randomly selected manufacturing SMEs in Ethiopia. Our binary logistic regression results suggest that banks in Ethiopia are cautious in extending credit to SMEs, evidenced by simultaneous usage of relationships, collateral and other criteria, suggesting complementarity between collateral and relationship lending.

Suggested Citation

  • Ashenafi Beyene Fanta, 2016. "Complementarity between Relationship Lending and Collateral in SME Access to Bank Credit: Evidence from Ethiopia," Journal of African Business, Taylor & Francis Journals, vol. 17(3), pages 308-318, September.
    • Handle: RePEc:taf:wjabxx:v:17:y:2016:i:3:p:308-318
    DOI: 10.1080/15228916.2016.1177785
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/15228916.2016.1177785
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/15228916.2016.1177785?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. AfDB AfDB, . "Annual Report 2012," Annual Report, African Development Bank, number 461.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simplice A. Asongu & Nicholas M. Odhiambo, 2018. "Information asymmetry, financialization, and financial access," International Finance, Wiley Blackwell, vol. 21(3), pages 297-315, December.
    2. Mang’unyi Eric & Govender Krishna K., 2019. "Exploring the Development Strategies of Rural Small, Medium and Micro Enterprises," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 27(4), pages 95-123, December.
    3. Moulick, Raj Kumar, 2020. "Determinants predicting credit accessibility of SME: Evidence from Bangladesh," Journal of Internet Banking and Commerce, , vol. 25(03), pages 01-09, July.
    4. Manpreet Kaur & Kanwaljeet Singh & Sarita Arora, 2023. "Are SMEs relationship seekers or price watchers? Target marketing implications for banks," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(3), pages 615-625, September.
    5. Simplice A. Asongu & Nicholas M. Odhiambo, 2019. "Size, efficiency, market power, and economies of scale in the African banking sector," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-22, December.
    6. Simplice Asongu & Jacinta Nwachukwu, 2018. "Bank size, information sharing and financial access in Africa," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 14(2), pages 188-209, February.
    7. Mohamed Oudgou & Abdeslam Boudhar, 2023. "The bank–SME relationship and rationing risk reduction: an empirical study on survey data," SN Business & Economics, Springer, vol. 3(8), pages 1-39, August.
    8. Williams, Kamilah & Brown, Leanora, 2021. "Does information sharing matter? Cross-country evidence on foreign bank presence," Journal of Economics and Business, Elsevier, vol. 116(C).
    9. Edward Kiringa & Fredrick W.S. Ndede & Argan Wekesa, 2021. "Relationship lending and access to financial services by SMEs in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(5), pages 235-244, July.
    10. Mahdevi Tiagarassa Pillay & Harshana Kasseeah, 2024. "Does environmental commitment improve access to finance? Evidence from small firms in Mauritius," Business Strategy and the Environment, Wiley Blackwell, vol. 33(8), pages 7729-7749, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Craig Garthwaite & Tal Gross & Matthew J. Notowidigdo, 2014. "Public Health Insurance, Labor Supply, and Employment Lock," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 653-696.
    2. Tarek Roshdy Gebba & Mohamed Gamal Aboelmaged, 2016. "Corporate Governance of UAE Financial Institutions: A Comparative Study between Conventional and Islamic Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(5), pages 1-7.
    3. Clarete, Ramon L. & Villamil, Isabela Rosario G., 2015. "Readiness of the Philippine Agriculture and Fisheries Sectors for the 2015 ASEAN Economic Community: A Rapid Appraisal," Research Paper Series DP 2015-43, Philippine Institute for Development Studies.
    4. Li, Xi & Yu, Biying, 2019. "Peaking CO2 emissions for China's urban passenger transport sector," Energy Policy, Elsevier, vol. 133(C).
    5. Alleyne, Dillon & Emanuel, Elizabeth & Phillips, Willard, 2013. "An assessment of fiscal and regulatory barriers to the deployment of energy efficiency and renewable energy technologies in Saint Lucia," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38502, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. Cristian Pana, 2013. "The National Central Bank’S Management Of Reserve Requirements," Working papers 16, Ecological University of Bucharest, Department of Economics.
    7. Junlakarn, Siripha & Kittner, Noah & Tongsopit, Sopitsuda & Saelim, Supawan, 2021. "A cross-country comparison of compensation mechanisms for distributed photovoltaics in the Philippines, Thailand, and Vietnam," Renewable and Sustainable Energy Reviews, Elsevier, vol. 145(C).
    8. McMahon, Rob, 2020. "Co-developing digital inclusion policy and programming with indigenous partners: Interventions from Canada," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 9(2), pages 1-26.
    9. John V. Duca, 2013. "Regionally, Housing Rebound Depends on Jobs, Local Supply Tightness," Annual Report, Federal Reserve Bank of Dallas.
    10. Divya Ravindranath, 2017. "Visa regulations and labour market restrictions: implications for Indian immigrant women in the United States," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 60(2), pages 217-232, June.
    11. LametK.Maika & Kevin Wachira, 2020. "Effects of organizational culture on strategy implementation in water boards in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 9(4), pages 15-28, July.
    12. Kanbayashi, Yoji., 2015. "The situation of non-regular public employees in Japan," ILO Working Papers 994861763402676, International Labour Organization.
    13. Jose Cuesta & Jon Jellema & Lucia Ferrone, 2021. "Fiscal Policy, Multidimensional Poverty, and Equity in Uganda: A Child-Lens Analysis," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(3), pages 427-458, June.
    14. Zhang, Zibin & Yang, Wenxin & Ye, Jianliang, 2021. "Why sulfur dioxide emissions decline significantly from coal-fired power plants in China? Evidence from the desulfurated electricity pricing premium program," Energy Policy, Elsevier, vol. 148(PB).
    15. Katherine O. Baer, 2013. "What International Experience Can Tell Us About the Potential Challenges of Administering a U.S. Vat," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(2), pages 447-478, June.
    16. Wang, Can & Zheng, Xinzhu & Cai, Wenjia & Gao, Xue & Berrill, Peter, 2017. "Unexpected water impacts of energy-saving measures in the iron and steel sector: Tradeoffs or synergies?," Applied Energy, Elsevier, vol. 205(C), pages 1119-1127.
    17. Tyler Atkinson & David Luttrell & Harvey Rosenblum, 2013. "How bad was it? The costs and consequences of the 2007–09 financial crisis," Staff Papers, Federal Reserve Bank of Dallas, issue Jul.
    18. Christine Greenhalgh, 2013. "Science, Technology, Innovation and IP in India: New Directions and Prospects," Melbourne Institute Working Paper Series wp2013n37, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    19. Pieter Serneels & Stefan Dercon, 2021. "Aspirations, Poverty, and Education. Evidence from India," Journal of Development Studies, Taylor & Francis Journals, vol. 57(1), pages 163-183, January.
    20. Doan, Quang Hung & Vu, Hoang Nam & Dao, Ngoc Tien, 2013. "Sub-National Institutions and Firm Survival in Vietnam," MPRA Paper 63653, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:wjabxx:v:17:y:2016:i:3:p:308-318. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/wjab20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.