Lending rates and demand for credit by borrowers from the agricultural and manufacturing sectors in Zambia.

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Volk, Elsa
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The University of Zambia
Credit markets play an important role in facilitating economic growth and development of countries. Zambia’s Seventh National Development Plan (7NDP) for 2017-2021 identified the agriculture and manufacturing sectors as essential to facilitate the attainment of Zambia’s development agenda by 2030. The overall objective of this study was to examine the impact of lending rates on loan demand from different key economic sectors in Zambia, with a focus on the manufacturing and agriculture sectors. The study utilised quarterly time series data from the Bank of Zambia (BOZ) for 2012 to 2021. Using the Autoregressive Distributed Lag (ARDL) model, the study found a negative and significant relationship between credit demanded by the agricultural sector. Furthermore, the study found no significant relationship between lending rates and the credit demand by the manufacturing sector. Based on the findings, the study recommends policy reforms that would increase domestic credit to the private sector which would stir up investment in the manufacturing sector, which remains low, as well as promote more investment in the agriculture sector. The study further recommends that BOZ ensures stability of the lending rate in the financial sector which would make investment in these two key sectors predictable. Keywords: Agriculture sector, Manufacturing sector, Autoregressive distributed lag, lending rates, Credit demand.
Degree of Master of Arts in Economics
Loan demand and lending rates. , Banks and lending rates. , Bank loans.