Innovation and conventional lending practice of banks in Ethiopia: Perspectives from patented innova
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Date
2011-06
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Addis Ababa University
Abstract
The research was initiated to pinpoint the trend of bank lending from the context of enabling
startups and innovations, to clarify the current practice of lending from the above context, to
identify the basic facto rs that influence the success of innovations and to forward workable solutions
in the area.
The basic methods of data collection used to come up with the findings of the research were:
interviews with bank professionals and patented innovators, desk review of lending policies of
selected banks, review of innovation and patenting policy of the nation, reviewing the domestic
credit portfolio of the country and survey question naires. The survey questionnaire was collected
from 40 different minor inventors out of a total of around 70 inventors and 1 to inventions. The
basic data analysis methods used to analyze the data obtained in the aforementioned ways were
description and econometric analysis.
T he findings obtained through these methods show that: bank lending has been skewed towards
more organized, experienced and collateral possessing firms than new startups and innovators. In
addition , the current practice has nothing new when compared with the trend despite the fact that
the share of loan granted to the manufacturing sector has increased recently. Finally, in assessing
the factors that affect the success of innovation, access to finance was found the only significant
variable. Educational level, fami ly size, nature of the invention and availability of training were
found insignificant to affect the success of innovation.
Basing this, the researcher forwarded some workable solutions regarding the need for frequent
revision of innovation policies, separating the possession of private banks from respective
borrowers and encouraging financial policies that favor new startups and innovators.
Key Words: innovation, patenting, access to finance, lending
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Keywords
innovation, patenting, access to finance, lending