Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
Formal and Informal Lending Rates in Sub-Saharan Africa:
Any Possibility of Convergence?
Anthony Anyii Akamobi
This paper examines the likelihood of the lending rates of banks equating those of
informal lenders such as rotating credit and thrift associations. Three objectives were
set: To compare formal lending and informal lending rates in Sub-Saharan Africa; to
examine the possibility of both markets arriving at equilibrium in the near future and to
recommend policy options based on the discourse. Cross-sectional data were combined
with time-series data and carefully discussed to realize the objectives. Several topical
issues were a product of the discussions, the hallmark of which is that if formal lending
rates are allowed to increase continuously as has been the case, in the nearest future,
such rate will exceed those of informal lenders. This will impact negatively on
development since the informal sector is inhibited by the inadequacy of funds required to
push the economy to the next level. Several recommendations were made, the principal
of which is that governments should make conscious efforts through sound monetary
policies, to reduce the lending rates of banks.
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Dr. Anthony Anyii Akamobi, Department of Economics, Anambra State University, Nigeria.