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Determinants of bank credit in Pakistan: A supply side approach

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  • Imran, Kashif
  • Nishat, Mohammed

Abstract

This study empirically identifies the factors which explain the bank credit to the businesses in varying financial environments and emerging global challenges. With the major focus on supply side this study uses the ARDL econometric approach using annual data from the period 1971 to 2010 for Pakistan. The empirical results indicate that the foreign liabilities, domestic deposits, economic growth, exchange rate, and the monetary conditions are significantly associated with bank credit to the private sector in Pakistan, particularly in the long run. Whereas the inflation and money market rate does not affect the private credit. Moreover, in the short run the domestic deposit does not influence private credit. The results also infer that the financial health and liquidity of the banks play a significant and vital role in the determination of loan. Results also indicate that the long run relationship is stable and any disequilibrium formed in the short run will be temporary and get corrected over a period of time with a high speed of 53.5% per year. This study does not statistically distinguish the behavior of bank credit during non-financial (1971–1989) and financial reform periods (after 1990) in Pakistan.

Suggested Citation

  • Imran, Kashif & Nishat, Mohammed, 2013. "Determinants of bank credit in Pakistan: A supply side approach," Economic Modelling, Elsevier, vol. 35(C), pages 384-390.
    • Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:384-390
    DOI: 10.1016/j.econmod.2013.07.022
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    1. Misati, Roseline Nyakerario & Kamau, Anne, 2015. "Local and international dimensions to credit provision by commercial banks in Kenya," KBA Centre for Research on Financial Markets and Policy Working Paper Series 14, Kenya Bankers Association (KBA).
    2. Jameel Ahmed, 2016. "Credit Conditions in Pakistan: Supply Constraints or Demand Deficiencies?," The Developing Economies, Institute of Developing Economies, vol. 54(2), pages 139-161, June.
    3. Zafer Adali & Bilgin Bari, 2017. "Monetary Policy And Bank Lending Chanel in Turkey," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 6(2), pages 24-36, April.
    4. Abimbola Oluwaseyi ADEMOLA, 2023. "Determinants Of Deposit Money Banks’ Credit To Manufacturing Sector In Nigeria," Contemporary Economy Journal, Constantin Brancoveanu University, vol. 8(1), pages 161-175.
    5. Almir ALIHODŽIĆ & İbrahim Halil EKŞİ, 2018. "Credit growth and non-performing loans: evidence from Turkey and some Balkan countries," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 9, pages 229-249, December.
    6. Lorna Katusiime, 2018. "Private Sector Credit and Inflation Volatility," Economies, MDPI, vol. 6(2), pages 1-13, April.
    7. Achraf Haddad & Anis El Ammari & Abdelfettah Bouri, 2019. "Are Islamic banks really more solvent than conventional banks in a financially stable period?," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(11), pages 346-366, November.
    8. Shashi Kant Chaudhary, PhD & Kiran Raj Pandit, 2019. "Price Elasticity of Sectoral Lending in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 31(2), pages 1-24, October.
    9. Md. Moslah Uddin, 2023. "Lending Principles and Practice in the Banking Sector: A Case Study of Some Selected Private Commercial Banks in Bangladesh," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 1276-1291, November.
    10. Alamsyah, Janoearto & Masih, Mansur, 2017. "Impact of islamic money market development on islamic bank liquidity management: a case study of Indonesia," MPRA Paper 106778, University Library of Munich, Germany.
    11. Onder Ozgur & Erdal Tanas Karagol & Fatih Cemil Ozbugday, 2021. "Machine learning approach to drivers of bank lending: evidence from an emerging economy," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-29, December.
    12. Stef, Nicolae & Dimelis, Sophia, 2020. "Bankruptcy regime and the banking system," Economic Modelling, Elsevier, vol. 87(C), pages 480-495.
    13. Ndanshau, Michael O.A. & Semu, Amanda M., 2023. "Determinants of Bank Credit Supply to the Private Sector in Tanzania," African Journal of Economic Review, African Journal of Economic Review, vol. 11(2), March.
    14. Kabir, Anis & Abdul Rehman Shah, Syed Muhammad & Hassan, M. Kabir & Akmal, Muhammad, 2022. "The Transmission Mechanism of Monetary Policy via Bank’ Balance Sheet: An Empirical Study of Dual Banking System in Pakistan," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 56(2), pages 129-140.
    15. Othman, Arshad Nuval & Masih, Mansur, 2015. "Do profit and loss sharing (PLS) deposits also affect PLS financing? Evidence from Malaysia based on DOLS, FMOLS and system GMM techniques," MPRA Paper 65224, University Library of Munich, Germany.
    16. Badar Nadeem Ashraf & Sidra Arshad & Yuancheng Hu, 2016. "Capital Regulation and Bank Risk-Taking Behavior: Evidence from Pakistan," IJFS, MDPI, vol. 4(3), pages 1-20, August.

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    More about this item

    Keywords

    Bank credit; Reforms; Pakistani;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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