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Volume 7 - Number 3 | November

Has bank credit really impacted agricultural productivity in the Central African Economic and Monetary Community?

Chi Aloysius Ngong, Chinyere Onyejiaku, Dobdinga Cletus Fonchamnyo, and Josaphat Uchechukwu Joe Onwumere

25/11/2023 41 0 0
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Bank credit Agricultural productivity CEMAC ARDL BEAC

Abstract:

Purpose
This paper investigates the impact of bank credit on agricultural productivity in the Central African Economic and Monetary Community (CEMAC) from 1990 to 2019. Studies’ results on the impact of bank credit on agricultural productivity are not conclusive. The studies demonstrate diverse outcomes which are debatable. The results are conflicting.

Design/methodology/approach
Agricultural value added (AGRVA) to the gross domestic product (GDP) proxies agricultural productivity while domestic credit to the private sector by banks (DCPSB), broad money supply, land, inflation (INF), physical capital (PHKAP) and labour supply are explanatory variables. The autoregressive distributed lag technique is utilized.

Findings
The co-integration test results show a long-run co-integration among the variables. The findings disclose that DCPSB, land and PHKAP impact positively on the AGRVA. Broad money supply, INF and labour impact negatively on the AGRVA to the GDP.

Research limitations/implications
The results suggest that the CEMAC governments should encourage effective ways to increase bank credit flow to private enterprises in the agricultural sector through efficient bank's intermediation.

Practical implications
The governments should create more agricultural banks and improve the operation of existing ones to ensure direct credit to agricultural activities. The Bank of Central African Economic and Monetary Community should apply aggressive policy which eliminates all the bottlenecks undermining credit flow to the private sector in mutualism with agricultural productivity.

Social implications
The commercial banks should give more credit to private sector to mutually benefit the agricultural sector and the banking sector. The governments of the CEMAC economies should expand funding into the capital market which considerably boosts agricultural productivity.

Originality/value
Studies’ results on the impact of bank credit on agricultural productivity are not conclusive. The studies demonstrate diverse outcomes which are debatable. The results are conflicting; some reveal positive impacts, some show negative impacts and others indicate U-shape behaviour. Hence, research is required to fill the lacuna.

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Further reading

  1. AfDB (2010), Annual Report 2010.
  2. AfDB (2015), African Development Bank Group.
  3. Aluko, O.A. and Ajayi, M.A. (2017), “Determinants of banking sector development: evidence from sub-Saharan African countries”, Borsa _Istanbul Review, Vol. 12 No. 3, pp. 56-72.
  4. Levine, R. (2005), “Finance and growth: theory and evidence”, Handbook of Economic Growth, 5th ed., Longman, London.

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