Credit Allocation, Central Bank Intervention and Development Finance in Fragile States in Sub-Saharan Africa

Sub-Saharan Africa continues to experience instability and violence, as economic exclusion, weak governance systems and inadequate financial resources constrain development. This study examines the effect of credit allocation on development finance and the moderating role of central bank intervention across ten fragile Sub-Saharan African states from 2010 to 2024. Using data from the World Development Indicators, Global Findex and Worldwide Governance Indicators, the study estimated a random-effects panel regression model. Credit allocation to productive sectors had a negative but statistically insignificant relationship with development finance (coefficient = −0.621, p = 0.273), while central bank intervention also had a negative and statistically insignificant effect at the 5% level (coefficient = −1.483, p = 0.065). By contrast, the interaction between credit allocation and central bank intervention had a positive and statistically significant effect on development finance (coefficient = 0.525, p < 0.001). GDP per capita growth had a negative but statistically insignificant effect (coefficient = −2.146, p = 0.138), whereas institutional quality had a positive but statistically insignificant effect at the 5% level (coefficient = 19.992, p = 0.079). The findings indicate that the effectiveness of financial instruments depends on institutional reform, policy coordination and carefully designed development-finance strategies. Fragile states should therefore improve productive credit access, strengthen central bank regulatory frameworks and enhance governance arrangements so that financial expansion contributes more effectively to sustainable development and economic resilience.