Unlocking Sub-Saharan Africa's Export Potential: A Reassessment of the Influence of Manufacturing Firms Access to finance

Abstract

Abstract Enhancing sub-Saharan Africa's manufacturing exports is an imperative necessity, given its numerous economic and developmental benefits. While significant scholarly contributions have explored the factors influencing firms' exporting activities, further research is needed to deepen our understanding of the access to finance perspective. Despite previous studies examining the link between access to finance and exporting activities, a lack of consensus persists in the existing literature. Moreover, the majority of these studies have focused primarily on formal finance, neglecting the role of informal finance. Therefore, this study fills this gap by investigating the impact of access to finance on the exporting activities of manufacturing firms in sub-Saharan Africa. The World Bank Enterprise Survey data for 38 sub-Saharan African countries is utilised to measure firm exporting, employing the extended probit regression model for empirical testing. The findings reveal a direct relationship between access to formal finance and manufacturing firms' exports, indicating that improved access to formal finance increases the likelihood of exporting for firms in sub-Saharan Africa. We found a similar result for the effect of access to informal finance. To ensure the robustness of our results, we employ alternative measures of firm exporting in terms of export value and apply instrumental variable Tobit and Heckman selection two-step regression models. The results remain consistent with our initial findings. Based on these findings, policy recommendations are provided to support and enhance manufacturing exports in sub-Saharan Africa. JEL Classification: C36, D22, F14, G23, L60, M20