What Influences Banks' Lending in Sub-Saharan Africa?

Mohammed Amidu

Working Papers from African Economic Research Consortium

Abstract: Banking literature, especially those on the developing economies, has not emphasized the link between macroeconomic activities, monetary policy, bank market structure, bank specific condition, and the supply of bank loans. This study employs dynamic panel data techniques to investigate the broad determinants of lending behaviour of 264 banks across 24 sub-Saharan Africa (SSA) countries. The results show that the market structure of banks influences credit delivery in SSA in an environment where the financial sector is reformed and banks are allowed to operate freely. More so, there is evidence to suggest a link between bank credit and the financial strength of the banks. The study further reveals that, regulatory initiative, which restricts banking activities, imposes severe entry requirements and requires high regulatory capital, and influences banks' decisions to supply loans.

Date: 2014-03
Note: African Economic Research Consortium
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