Effects of lending rates and financial development on loan portfolio in sub-Saharan Africa

David Aboagye Danquah () and Kofi Osei Adu ()
Additional contact information
David Aboagye Danquah: University of South Africa
Kofi Osei Adu: Ghana Export-Import Bank

Future Business Journal, 2025, vol. 11, issue 1, 1-19

Abstract: Abstract This study investigates the complex dynamics between lending interest rates, loan portfolio structures, and financial sector development in Sub-Saharan Africa (SSA). Utilizing a panel data econometric approach, specifically two-step system GMM and the fixed effect regression models, the analysis covers 47 SSA countries from 2010 to 2023. The findings reveal that elevated lending rates adversely affect both the size and quality of loan portfolios. Conversely, financial development, particularly in access and efficiency exerts a positive influence on portfolio performance. Importantly, the interactive effect shows that greater financial access significantly mitigates the negative impact of rising interest rates on loan portfolio quality. These results highlight the need to enhance financial inclusion, deepen capital markets, and improve institutional efficiency to foster sustainable credit systems and financial resilience in SSA.

Keywords: Credit Markets; Financial Sector Development; Lending Rates; Loan Portfolio; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: E43 G21 O16 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1186/s43093-025-00653-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:futbus:v:11:y:2025:i:1:d:10.1186_s43093-025-00653-0

Ordering information: This journal article can be ordered from
https://fbj.springeropen.com/

DOI: 10.1186/s43093-025-00653-0

Access Statistics for this article

Future Business Journal is currently edited by Soad Kamel Rizk and Hayam Wahba

More articles in Future Business Journal from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().