Does Liberalizing Credit Market Induce Investment? Evidence from Sub-Saharan Africa

Abstract

The study aimed to analyze the impact of credit market regulations in
facilitating investment in Sub-Saharan Africa. Annual dataset on credit
market regulations between 2000 and 2020 from Fraser Institute, along
with other relevant control variables, and over a panel of 34 countries
were put to empirical testing. Grounded on the theoretical framework of
neoclassical investment model, public choice theory and the credit
channel for monetary policy, the study employs a panel data regression
model that control for fixed effect and with clustered and Driscoll-Kraay
standard errors, to estimate the relationship among the variables. Finding
from the study shows that relaxing the regulatory burden in credit market
can improve investment in Sub-Saharan Africa. By examining the
relationship between credit market regulation and investment, the study
provides a valuable insight for policy makers, investors and researchers.
Findings could contribute to the design of policy reforms that enhances
credit access, reduces regulatory barrier and promote investment thereby
economic growth and development in the region.