Determinants of Bank Lending: Evidence from BRICS Countries

Determinants of Bank Lending: Evidence from BRICS Countries
Author: Abdullai Ahmed
Degree: Master’s in International Trade and Finance
Date: 2023
Program: Kadir Has University, Istanbul, Turkey
Supervisor: Assist. Prof. Gamze Öztürk

This thesis investigates the determinants of bank lending in the BRICS countries—Brazil, Russia, India, China, and South Africa—using data from 130 listed commercial banks spanning 2000–2021. Bank-level data were sourced from Thomson Reuters Refinitiv Eikon, and country-level variables were obtained from the World Bank.

Panel data estimation techniques, particularly fixed-effects regression models, are employed to analyze the impact of both bank-specific and country-specific factors on lending behavior. Key findings reveal that bank-level variables—bank size, capital adequacy ratio, credit risk, deposit share, and return on assets—have a positive and statistically significant effect on lending. Larger banks, and those with higher capital, deposits, returns, or credit risk, lend more.

Conversely, most country-level variables, including GDP per capita, real interest rate, deposit interest rate, and lending interest rate, do not directly affect bank lending. Inflation is an exception, with higher inflation associated with increased lending.

The study highlights notable differences in lending determinants for BRICS banks compared to global norms, offering valuable policy implications for regulators and banking institutions in these emerging economies.