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Journal of Finance and Economics. 2020, 8(5), 211-221
DOI: 10.12691/jfe-8-5-2
Open AccessArticle

The Effect of Bank Credit on the Economic Growth of Tanzania

Elizabeth Joseph1,

1Department of Finance, University of Dar- es- Salaam Business School, Dar-es-Salaam, Tanzania

Pub. Date: September 29, 2020
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Cite this paper:
Elizabeth Joseph. The Effect of Bank Credit on the Economic Growth of Tanzania. Journal of Finance and Economics. 2020; 8(5):211-221. doi: 10.12691/jfe-8-5-2

Abstract

The purpose of this study is to examine the causal relationship between bank credit and economic growth. Specifically, the study examined the causal relationship between bank credit by borrowing sector and economic growth and between overall financial intermediation and economic growth. Time series data for the period 1993-2017 is used. Causality test and vector error correction is applied. Results show that there is no causal relationship between bank credit and economic growth and between economic growth and bank credit. In the long run, bank credit has a significant positive effect on economic growth. Policies towards enhancing growth of financial sector should be emphasized to enable increase in credit provision and promote economic growth through investment in different sectors of the economy. The positive long run effect of financial intermediation means that enhancing deposit mobilization still remain paramount towards credit provision by banking financial institutions.

Keywords:
 banking sector credit economic sector economic growth financial intermediation

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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