Table 4: Indicators of Financial Constraints

||Non-exporting|Exporting|Total|
|---|---|---|---|
|Access to Finance: Moderate to Severe|0.6643|0.6095|0.6407|
|(2-4) Problem||||
|Access to Finance: Major to Severe|0.4506|0.3619|0.4125|
|(3-4) Problem||||
|Finances for Investment 100%|0.262|0.1887|0.2305|
|internally fnanced<sup>_∗_</sup>||||
|Finances for Working Capital 100%|0.1907|0.1321|0.1655|
|internally fnanced<sup>_∗_</sup>||||
|Overdraft facility or line of credit|0.6715|0.6506|0.6626|
|Ifyes, % currentlyunused|22.31|30.36|25.63|

_Source:_ Bangladesh Investment Climate Assessment survey: 2002, World Bank. Note: All variables are indicator variables except for percent of credit line unused.<sup>_∗_</sup> 100% internally financed and also reported access to finance as a problem.

affect the firm’s decision to enter international markets where the time delays are much longer than domestic sales. Table 4 compares financial indicators between exporting and non-exporting firms. Access to finance is a subjective variable where respondents are asked to rank the problem from 0, being no problem to 4 as a severe problem. There is a smaller percentage of exporters who reported access to finance as a problem than the percentage of non-exporters. Furthermore, non-exporters report greater severity of the problem. Respondents are also asked where they sourced their financing for investment and for working capital and report the percentage from each category.<sup>23</sup> Exporters source a smaller percent of their finances internally for both investment and working capital; indicating that exporters do indeed have better access to credit. The last financial indicator is whether the firm has an overdraft facility or a line of credit available to them, and if yes, to report the percent of the line unused. Here, a larger proportion of non-exporters than exporters have overdraft facilities or credit lines however, out of those that do have credit lines, the average percent of credit lines used by non-exporters is higher. This suggests that non-exporters are closer to their borrowing limit than exporters or that exporters generally do not use this type of credit as much. Overall, these statistics suggest that non-exporters have less access to finance than exporters.

It is not only important to verify whether exporters have better access to finance than non-exporting firms but also to see whether access is allocated according to firm productivity. As discussed in the introduction, the results of existing theoretical models is driven by a direct correspondence between productivity and the amount of credit the firm has access to. It is this correspondence that supports the self selection of the most productive firms into exports even under financial distortion. Table 5 shows the average productivity according to each financial variable. There is no significant difference in average productivity between firms that report access to finance as a problem and between firms that fund investment wholly from internal finance. Productivity is slightly higher for those who can borrow to fund working capital<sup>24</sup> and those who have overdraft facilities. The difference in productivity however, does not appear large and the size of the standard deviations imply considerable overlap in the TFP distribution between constrained and not constrained categories. Therefore there is no strong evidence to suggest that credit is allocated along productivity lines.

> 23There are 14 categories the respondents are asked to choose to fill in: a. Internal funds or retained earnings b. Local commercial banks (loan, overdraft) c. Foreign-owned commercial banks d. Leasing or hire purchase arrangement e. Government subsidies f. Investment Funds/Special Development Financing/ Or Other State Services g. Trade credit (Supplier or customer credit) h. Credit cards i. Equity (Capital, sales of stock) j. Family, friends k. Informal sources (e.g. money lender) l By selling other assets m. Letters of credit n. Other (specify source):

> 24That is, firms that do not fund working capital wholly internally.

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