The influence of ethnic enclaves in trade credit allocation: an Examination of Trade Credit Provisions among Ethnic Groups in Tanzania

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Date
2010
Journal Title
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Publisher
University of Dar es Salaam
Abstract
The research explores whether allocation of trade credit by ethnic enclaves is influenced with behavioural sentiments attributed with ethnic group that individuals’ belong. In examining the criteria for trade credit provision, ordinary least square regression is followed in modelling the variables. Robustness test is conducted using Indian Tanzanians whom possibly the distribution of the trade credit among the group is influenced with the skin colour than the factors (tribes) used to categorise the individuals under the investigation. Furthermore, bank overdraft is used to provide robustness of the result by analysing whether accessibility of credit is equally the same in formal financial institution. In this study, ethnicity has been found to play a role in trade credit provision in 2 out of the 3 groups under examination. Such influence is more significant at 1% for Indian Tanzanians purporting that minority effect attributes to mental allocation of credit than ethnicity effects. For the bank overdraft, no evidence has been found to show the influence of ethnicity in accessing credit. However such influence has been noticed with Indian-Tanzanians that they have higher access to bank overdraft than the rests possibly because of their grouping, superiority in education level than others and the reputation of their firms. Based on the findings it is obviously that, the role of credits and the relationship between buyers and sellers is not clear to parties engaging in business transactions thus limiting customers’ base. Therefore education on business relationship needs to be enhanced while encouraging borrowing from formal sectors to have equal access to business opportunities to all ethnic groups.
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Keywords
Credit allocation, Ethnic groups, Tanzania
Citation
Ibrahim, H.A (2010) The influence of ethnic enclaves in trade credit allocation: an Examination of Trade Credit Provisions among Ethnic Groups in Tanzania master dissertation,University of Dar es Salaam. Available at http://41.86.178.3/internetserver3.1.2/detail.aspx