Hermes N., Kihanga E., Lensink R., Lutz C.
Faculty of Economics and Business, University of Groningen, Netherlands; Faculty of Commerce, Mzumbe University, Tanzania; Development Economics Group, Wageningen University, Netherlands
Hermes, N., Faculty of Economics and Business, University of Groningen, Netherlands; Kihanga, E., Faculty of Commerce, Mzumbe University, Tanzania; Lensink, R., Development Economics Group, Wageningen University, Netherlands; Lutz, C., Faculty of Economics and Business, University of Groningen, Netherlands
We use primary survey data to analyse the relationship between trade credit and customer switching in the context of trade transactions between wholesalers and retailers in the Tanzanian rice market. Results reveal a negative relation of trade credit and customer switching, that is, trade credit acts as a switching barrier; retailers are reluctant to move to another supplier if they depend on trade credit as a source of external finance. This interpretation fits with the underdeveloped financial markets in Tanzania, in which access to external finance is poor among rice retailers. © 2012 Copyright Taylor and Francis Group, LLC.