Determinants of Bank Credit Supply to the Private Sector in Tanzania

Abstract

What determines bank credit supply to the private sector is an issue of policy and research interest in Tanzania and other countries. On the background of the financial sector reforms implemented in the country since the early 1990s, this study sought to establish empirically the most determinants of private bank credit in Tanzania over the period 1991:Q1 - 2019:Q4. ARDL bounds cointegration test method was used to establish both short and long run impact multipliers of the determinants of bank credit. The results revealed real bank credit was a superior regressand to alternative regressands; and, real short term lending rate was superior to the real overnight bank lending rate. Moreover, the study found bank deposits was unimportant determinant of bank credit; and, growth and inflation respectively had positive and negative effect on bank credit supply. The results also suggested real bank credit growth was cointegrated with its determinants over the long run.