Private sector lending and growth of the real sectors in a developing economy: An Ardl approach

In this paper, we focused on the growth of the economy looking at the impact of Bank lending. The study disaggregated growth into agricultural sector, manufacturing sector and growth in commerce. Volume of Bank credit represents the major regressor with Growth of Agriculture (GAPI), manufacturing (GDPI), commerce (GDPT) as well as overall economic growth, all serving as dependent variables. The results reveal a significant positive link amongst growth of agriculture, manufacturing and commerce with volume of bank credit while overall growth is positive but nonsignificant. Based on the results, evidence of a convergence long-run equilibrium for the LGDPA, LGDPC and LGDPM models was established. The fastest of them all is that of LGDPA, which stands at 36%, followed respectively by 34% for LGDPM and 23% for LGDPC. It is therefore recommended that the government should evolve policies that will not only improve on the overall growth of the economy but also ensure a balanced growth through due contributions from all the sectors of the economy. Moreover, efficient policies should be made in the areas of improved macroeconomic and regulatory environment, which would make the economy move from its present focus on oil to a more inclusive one that focuses more on agriculture, manufacturing and commerce.