Determinants of Credit Growth in Africa

The importance of bank credit as an essential instrument that determines the efficacy of the financial system has been widely discussed in the literature. Some studies even opine a minimum threshold for it to generate the desired impact while others suggest efficient allocation rather than volume of credit. All these underlie the need for an increase in bank credit without overlooking the efficient utilization hence our choice of private sector credit as proxy. The paper conducts a panel study of the main factors that propels credit growth and covers 1970 – 2006 for thirty-three African countries. The research finds that real export is inversely related to real private sector credit while real capital inflow and real imports is positively related to real private sector credit