Determinants of Bank Credit Growth in Ethiopian Private Commercial Banks

Abstract

This study is mainly aimed to investigate factor that determine the growth of credit of private commercial bank of Ethiopia by using data for 9 years by Eviews through the use of OLS. Both descriptive and econometric analysis has been applied in order to investigate factors that determine growth of loan in the case of private commercial banks in Ethiopia. As determinants GDP, Inflation, Bank liquidity, population growth rate, unemployment rate and deposit growth were included. The result of the econometric result indicates GDP, inflation, bank liquidity and deposit growth are found to have significant positive impact for the growth of private banks credit. However, population growth rate has a positive but insignificant effects on credit growth, contrarily unemployment rate has a negative and insignificant effect on credit growth of private commercial banks. The study recommends policymakers should control variations in Economic growth and inflation to maintain the stability of credit flows to the different sector. Clearly, these variables are closely linked to monetary policy actions, and the results generally show that macroeconomic stability is vital for the flow of credit in Ethiopia.

Keywords: Credit growth, private banks and macro-economic factor

DOI: 10.7176/DCS/11-2-03

Publication date: February 28^th 2021