Quality of Political Institutions and Bank Credit Supply in Sub–Saharan Africa Countries

Addressing institutional weaknesses is vital, as disparities in governance underscore the challenges in effective bank intermediation especially in a region facing rising sovereign debt and significant credit rationing despite available bank liquidity. The objective of this paper is to assess the effect of political institutional quality on bank credit supply in SubSaharan African countries. To achieve this, econometric estimates were conducted using the Generalized Method of Moments (GMM) in a dynamic panel comprising 33 countries in the region over the period 2004 to 2018. Results indicate that the quality of political institutions significantly influences the level of bank credit extended to the private sector in SubSaharan Africa. Specifically, effective governance, political stability, and a low level of corruption promotes bank lending and, consequently, reduces credit constraints. Poor governance undermines implemented economic and political strategies, hindering institutional effectiveness. To mitigate economic fluctuations from bank credit supply, we recommend that government authorities enhance their political institutions by adopting "good governance" practices to facilitate betteraccess to bank credit.