Determinants of Credit Rationing in Ethiopia: Firm-Level Evidence

This study examines the determinants of credit rationing at the firm level in Ethiopia using the World Bank Enterprise Survey. A seemingly unrelated bivariate probit model is estimated to control for potential selection bias. The result reveals that in the context of Ethiopia, the age of firm, sales growth, and having checked financial statement by external auditor reduces the probability of being credit rationed. An increase in sales growth lowers the probability of being credit rationed by 21%. Firms that checked their account by external auditor reduces the probability of being rationed by 18.5%. Female ownership, the profitability of the firm, and firm size are insignificant.