Why are small and medium-sized businesses in Africa turning away from the bank credit market?

Désiré Avom () and Cherif Abdramane ()
Additional contact information
Désiré Avom: University of Yaoundé II
Cherif Abdramane: University of Yaoundé II

SN Business & Economics, 2024, vol. 4, issue 7, 1-24

Abstract: Abstract This paper examines the effect of corruption on the discouragement of SMEs on the credit market in certain African countries. To do so, a sample of 13,635 firms from 26 countries observed over the period 2010–2022 was selected. The results obtained from the OLS, Probit and IV-Probit estimations show that corruption has a positive and significant effect on the discouragement of SMEs. These results are robust to the use of alternative measures of corruption and discouragement. The main economic policy recommendation arising from our study is the introduction and strengthening of anti-corruption measures. These include measures to increase the efficiency of the judicial system, reduce court delays and introduce clear credit-granting procedures to improve the transparency of the process. This will increase firms' confidence in the banking system and make them less reluctant to apply for credit when they need it. More specifically, public authorities can encourage banks to put in place a plan to detect and prevent corruption and influence peddling, based on a set of internal procedures. This involves mapping the risks of corruption, influence peddling and conflicts of interest, and drawing up rules of ethics and good conduct.

Keywords: Corruption; Discouraged borrowers; Self-rationing; Africa; IV-Probit regression (search for similar items in EconPapers)
JEL-codes: D73 G21 L25 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s43546-024-00668-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:snbeco:v:4:y:2024:i:7:d:10.1007_s43546-024-00668-9

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/43546

DOI: 10.1007/s43546-024-00668-9

Access Statistics for this article

SN Business & Economics is currently edited by Gino D'Oca

More articles in SN Business & Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().