Bank credit’s role in influencing economic growth in the emerging market

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Abstract

The relationship between bank credit and economic growth has been subject to extensive empirical research. This study applied a vector autoregressive (VAR) approach to examine the relationship between bank credit and economic growth in South Africa based on three separate periods: pre-crisis (2001–2008), post-crisis (2009–2016), and the combined period. The findings suggested two-way causality between bank credit and economic growth in the post-crisis period; however, the combined sample found evidence of unidirectional causality in support of a demand-leading hypothesis. Bank credit was found to have a positive and statistically significant relationship with the gross domestic product (GDP) growth rate in the pre-crisis period, concurring with Miftari (2023) that the financial system is the crucial supporter of economic growth (economic activities). However, following the events of the financial crisis, both the post-crisis and combined samples revealed that bank credit had a negative influence on economic growth, and this confirms to Koutima-Banzouzi et al. (2024) and Tchouassi and Tomo (2022). Since the financial crisis, the South African economy has been plagued by many issues that have resulted in non-existent economic growth for some time, which, to some extent, has limited banks’ credit ability to positively influence economic growth in South Africa.

Keywords: Bank Credit, Economic Growth, Vector Autoregressive Model, Financial Crisis, Emerging Market

Authors’ individual contribution: Conceptualization — L.J., C.R.J.E., S.M., and J.M.; Methodology — S.A. and J.M.; Software — S.M.; Validation — J.M.; Formal Analysis — L.J., C.R.J.E., S.A., S.M., and J.M.; Investigation — S.A.; Resources — S.M.; Data Curation — S.M. and J.M.; Writing — Original Draft — L.J., S.A., and J.M.; Writing — Review & Editing — L.J., S.A., S.M., and J.M.; Project Administration — L.J.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C5, C59, G00, G180

Received: 03.10.2024
Revised: 31.01.2025; 26.07.2025; 24.09.2025
Accepted: 29.09.2025
Published online: 01.10.2025

How to cite this paper: Jeke, L., Erasmus, C. R. J., Abel, S., Matsvai, S., & Mukarati, J. (2025). Bank credit’s role in influencing economic growth in the emerging market [Special issue]. Risk Governance and Control: Financial Markets & Institutions, 15(3), 300–310. https://doi.org/10.22495/rgcv15i3sip12