The Effect of Credit on Economic Growth in Kenya

Abstract

The objective of the study was to establish the effect of credit on economic growth in Kenya. Both qualitative and quantitative methods were used to achieve the objective of the study. A regression model was used to carry out the empirical analysis. The study used secondary data that was collected from the supervision department of the Central bank of Kenya for a period of 15 years. The findings and analysis reveal that private credit advanced has an effect on economic growth in Kenya.The study used a simple regression model,descriptive statistics and correlation analysis to establish the effect of credit on economic growth in Kenya.The model equated economic growth as a function of credit.The results obtained from the regression model show that there is a positive correlation between credit and economic growth in Kenya.Commercial banks should therefore expand their financial outreach to the various sectors of the economy to be able to improve economic growth rate in Kenya. In view of these findings, the researcher recommends that financial institutions should endevour to expand their financial outreach. The regulator should also review policies set to ensure that the low income earners have as much access to credit as the middle and high income earners. As indicated by the research findings credit is critical to Kenya’s economic growth.