The impact of borrowing concentration on innovation: When is one not just enough?

Michael Machokoto and Oluwatoba James Omotilewa

Economics Letters, 2024, vol. 236, issue C

Abstract: Using a survey dataset of small and medium-sized enterprises (SMEs) in Tanzania and Kenya, we find that nearly half of these SMEs concentrate their borrowings exclusively with a single bank. These SMEs rely heavily on internal financing, have limited access to external finance, and are less likely to introduce new or improved products, processes, or services in both local and international markets. Our findings provide valuable insights into the financing decisions of SMEs in developing markets and their impact on critical outcomes such as innovation. They also highlight the need for policy interventions to improve access to finance and diversify financing options to promote sustainable and inclusive economic growth.

Keywords: Innovation; Borrowings; Concentration; Exports; Access to finance; Developing countries (search for similar items in EconPapers)
JEL-codes: G30 M40 M41 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:236:y:2024:i:c:s016517652400096x

DOI: 10.1016/j.econlet.2024.111613

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