1887

n African Journal of Business and Economic Research - Determinants of credit rationing to the private sector in Ghana

Volume 5, Issue 1
  • ISSN : 1750-4554
  • E-ISSN: 1750-4562

Abstract

This study is designed to investigate the rationing behavior of Commercial banks in Ghana, by looking at the effect of chosen variables on the amount of loan realized even in the era of interest rate liberalization. A single equation model involving a categorical random dependent variable, being the amount of loan realized and security value, interest rate, the value of assets, the value of collateral security, net profits, experience in business, sex, age and purpose as the exogenous variables. The exogenous variables are jointly significant in explaining the dependent variable. The results suggest that even though interest rates may be liberalized as a way of ensuring credit allocation, the Commercial Banks would still ration out credit. It is therefore suggested, that there is the need for the government to play an active role in the financial sector and the banks to intensify their monitoring systems of minimizing default rate rather than using their traditional methods of credit ratings.

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/content/aa_ajber/5/1/EJC10460
2010-06-01
2019-10-22

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