Domestic Credit to Private Sector by Banks and Economic Development in Selected Sub-Saharan African Countries (2002 – 2023)

Abstract

This study examined the effect of domestic credit to private sector by banks on economic development in selected Sub-Saharan African countries (Nigeria, South Africa, Kenya, and Ghana) from 2002 to 2023. This study was motivated by the controversial issue in literature on the real effect of domestic credit to private sector by banks on economic development. Specifically, this study ascertained the effect of domestic credit to private sector by banks on real gross domestic product, standard of living, and human development index. An ex post facto research design was adopted using secondary data that were sourced from Central Bank of Nigeria and World Bank Reports. The models were estimated using the Panel Ordinary Least Square (POLS) regression technique. The findings of the study reveal that domestic credit to private sector by banks has significant effect on real gross domestic product in the four selected Sub-Saharan African countries; domestic credit to private sector by banks has no significant effect on standard of living in the four selected Sub-Saharan African countries; and domestic credit to private sector by banks has no significant effect on human development index in the four selected Sub-Saharan African countries. The study concluded and asserts that within the period reviewed, domestic credit to private sector by banks have no significant effects on economic development(real gross domestic product, standard of living, and human development index) in the four selected Sub-Saharan African countries. Since Sub-Saharan Africa has a large unbanked population, the study recommends that banks can improve economic growth by expanding access to financial services through mobile banking, agent banking, and innovative financial technology solutions. This enables more individuals and businesses to participate in the formal economy and access credit. Governments in Sub-Saharan Africa are advised to invest in education by providing loans for school fees, vocational training, and higher education. Access to education equips individuals with skills and knowledge essential for economic participation and social mobility