Determinants of Trade Credit Use by Private Traders in Ethiopia: Case of Mekelle City, Tigray Regional State

Abstract

This study aims to investigate the determinants of trade credit use by taking 198 samples of private traders in Mekelle city, Tigray regional state of Ethiopia. Semi-structured questionnaire and interview were used to collect data and binary logistic regression model was used to examine significant factors determining trade credit use. The result highlighted that trade credit was widely practiced among private traders in Mekelle city. It has been found that about 58 percent of sample traders that are found in Mekelle city were trade credit users and about 42 percent of them were non-users. The result of binary logistic regression model shows that from owner factors, gender and education of traders significantly determined trade credit use. Similarly, business specific factors such as age of the business, length of trade relation, frequency and volume of purchase were found significant variables in determining trade credit use. Therefore, private traders and concerned government offices that are concerned with the promotion of trade and private sector development need to take these factors into consideration in order to enhance trade credit use by private traders.

Key Words: Binary Logistic Regression, Determinants, Ethiopia, Private Traders, Trade Credit