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Banking Reform And Smes Financing In Ethiopia: The Case Of Smes In The Manufacturing Sector

Abstract: 

This study assesses the effect of banking reform on Small and Medium Enterprises' (henceforth SMEs) access to bank credit during the post-liberalization period, 1994-2007. Aiming at casting light on the changes in the country's banking sector, bank concentration, competition, efficiency, and liquidity have been assessed. Also undertaken is the survey of 102 randomly selected manufacturing SMEs to examine changes in SMEs' access to bank loan. Assessment of changes in the banking sector reveals that the sector has become less concentrated. However, the sector is found to be uncompetitive, inefficient, and has been continuously accumulating liquidity. Changes in the banking sector are not found to be robust as to ease SMEs' credit access and there have not been significant variations in terms of access across firms of different age groups, ownership forms, and across three stages of life cycle. Thus, SMEs' problem of credit access has still persisted despite the introduction of the banking sector reform in 1994 that led to expansion of the banking industry. The change in the structure of the banking sector is not sufficient to introduce competition and hence enhance efficiency, nor an improvement in credit access of SMEs. Policy makers should, therefore, exert efforts towards fostering competition in the banking sector by softening regulatory controls without compromising safety and soundness of the financial system. Besides, banks need to be encouraged to lend to small firms through credit guarantee program. Credit bureaus need also to be established by the government or by private investors to supply SMEs credit information to lenders

Corporate Author: 
Getnet Alemu & Worku Gebeyehu (Editor) & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: 
Ethiopian Economic Association (EEA)
ISBN/ISSN: 
978-99944-54-19-8
Primary Descriptors: 

SMEs financing, manufacturing sector

Secondary Descriptor: 

Credit Access

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
02/27/2013
Broad Subject heading: 
Banking reform
Call Number: 
330.963 PRO 2011
Serial Key Title: 
Proceedings of the Eighth International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
II
Publication date: 
2013-06-27 23:11:00
Forum or Discussion date: 
2013-02-27 15:43:10
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annualy