Effects of corruption on banking in sub-Saharan Africa (SSA)

Abstract

This paper analyses the effect of corruption on bank lending activity on a sample of 302 private banks from 25 countries in sub-Saharan Africa over the period 1995 to 2018. Using the generalized moments method, we find a negative effect of corruption on bank credit on the one hand, and a positive effect of corruption on non-performing loans on the other hand. This negative effect is empirically verified even if the heterogeneity linked to membership of a regional economic community in which integration is deep (ECOWAS) and membership of the CFA Franc zone is taken into account. These results suggest that anti-corruption policies are crucial in reducing the negative spillover effects generated by a poor institutional environment on access to bank lending and the quality of bank credit.(original abstract)