Linkage Between Electoral Cycle and the Discouragement of African Firms in the Credit Market

Abstract

This article analyzes the linkage between the electoral cycle and the discouragement of SMEs in the credit market of 14 African countries. It focuses on 12,145 firms over the period 2006–2020. The results obtained from Probit estimates show elections are negatively linked with the discouragement of firms in the credit market. Firms are less discouraged from asking for credit during the electoral period. The negative relationship begins during the pre-election year and continues into the post-election year. Results are robust to the use of alternative measures of discouragement and the employment of sophisticated econometric techniques. When within-African heterogeneity in terms of firm size is taken into account, large firms have a relatively higher probability than small firms of requesting credit during the election year as well as during pre-election years. Small firms have a relatively higher probability than medium firms of requesting credit during post-election years. Implications are discussed.