Business, Management and Accounting
6 years ago

Trade credit signals creditworthiness for Ethiopian retailers, impacting access to bank loans.

Journal of African Economies
Trade Credit and Access to Finance: Evidence from Ethiopian Retailers†
Thorsten Beck, Mohammad Hoseini, Burak Uras

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Business, Management and Accounting
6 years ago

Trade credit signals creditworthiness for Ethiopian retailers, impacting access to bank loans.

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Trade credit is used less in areas with more access to bank loans. Informal firms that receive trade credit are more likely to get bank loans, while formal firms are not affected. This shows that informal firms use trade credit as a signal of creditworthiness, helping them overcome financial constraints.