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Cyclicality of lending in Africa: The influence of bank ownership

Alexandra Zins and Laurent Weill ()

Emerging Markets Review, 2018, vol. 37, issue C, 164-180

Abstract: Ownership structure of banks has dramatically changed over the past two decades in African countries with privatization and foreign bank entry, including the expansion of Pan-African banks. The objective of this paper is to investigate how bank ownership influences cyclicality of lending in Africa. We are then able to assess how changes in bank ownership influence the economy. To this end, we measure the sensitivity of bank loan growth to GDP per capita growth of the host country with dynamic GMM estimations. We use panel data from 190 commercial banks covering 20 African countries spanning the period from 2002 to 2015. We find that lending of African banks is procyclical for all types of banks. However, we observe that Pan-African banks are the least procyclical banks, while no significant difference in procyclicality is observed between state-owned banks, domestic private banks, and other foreign banks. In addition, we find evidence that foreign banks are influenced by GDP per capita growth of their home country. Therefore, our findings support the view that the expansion of Pan-African banks contributes to reduce cyclicality of lending. However, foreign bank entry can enhance the transmission of external shocks.

Keywords: Africa; Bank; Loan growth; Business cycles; Financial stability; Pan-African banks (search for similar items in EconPapers)
JEL-codes: G21 G32 N27 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:ememar:v:37:y:2018:i:c:p:164-180