Bank Competition and Access to Finance: Evidence from African Countries

Misraku Molla Ayalew () and Zhang Xianzhi ()
Additional contact information
Misraku Molla Ayalew: Dongbei University of Finance and Economics
Zhang Xianzhi: Dongbei University of Finance and Economics

Journal of Industry, Competition and Trade, 2019, vol. 19, issue 1, No 9, 155-184

Abstract: Abstract Whether competition helps or hinders firms’ access to finance is a much-debated question in economic literature and policy issues. This study considers the consequences of bank competition on credit constraints using rich enterprise-level data set from the World Bank’s Enterprise Surveys. The study addresses 9632 firms from 27 African Countries. In addition to classical concentration measure, competition is measured by three non-structural measures (Boone indicator, H-statistics and Lerner index). The results show that bank competition worsens credit/financing constraints which supports the information hypothesis. However, further investigations show that bank competition has a significant positive effect on firms’ need for external financing, decision to apply for new line of credit and banks loan approval decision. Despite higher loan application approval rate by banks, large proportion of firms are discouraged to apply for bank loan. Small, medium and young firms are more likely to report higher financing constraints, more likely to need external financing but less likely to apply for bank loans and have low access to bank loan.

Keywords: Access to finance; Africa; Banking competition; Credit constraints; Discourage firms (search for similar items in EconPapers)
JEL-codes: D22 G20 L11 O55 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://link.springer.com/10.1007/s10842-018-0283-6 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:jincot:v:19:y:2019:i:1:d:10.1007_s10842-018-0283-6

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/10842/PS2

DOI: 10.1007/s10842-018-0283-6

Access Statistics for this article

Journal of Industry, Competition and Trade is currently edited by Karl Aiginger, Marcel Canoy and Michael Peneder

More articles in Journal of Industry, Competition and Trade from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().