Examining the Link Between Corruption and Bank Credit

Abstract

This research examines the influence of corruption on the expansion of bank credit in Sub-Saharan Africa from 2000 to 2017. By utilizing the generalized method of moments (GMM) technique, the investigation reveals a significant positive correlation between corruption and bank credit. Additionally, the findings indicate that while stability in the banking sector leads to a decrease in bank credit, economic growth and inflation contribute significantly to the growth of bank credit. Based on these results, the study offers essential recommendations to foster integrity and responsible lending practices in the banking sector. It proposes that banks establish robust whistleblowing procedures, encouraging employees to promptly report any instances of corrupt transactions associated with credit advancement. Through the cultivation of a transparent and accountable culture, banks can effectively address and mitigate the adverse impacts of corruption on credit growth. Furthermore, the research advocates for the enforcement of strict non-price constraints to regulate lending practices.