CONCEPTUAL FRAMEWORK
This section dwells on conceptual
framework, which examines views on the concept of bank credit and economic
growth.
The Concept of Bank Credit
Credit
is the extension of money from the lender to the borrower. Spencer
(1977) noted that credit implies a promise by one party to pay another for
money borrowed or goods and services received.
Credit cannot be divorced from the banking sector as banks serve as a conduit for funds to be received in form of deposits from the surplus units of the economy and passed on to the deficit units who need funds for productive purposes.
Banks are therefore debtors to the depositors of funds and creditors to the borrowers of funds. Bank credit is the borrowing capacity provided to an individual, government, firm or organization by the banking system in the form of loans.
According to CBN (2003), the amount of loans and advances given by the banking sector to economic agents constitute bank credit. Bank credit is often accompanied with some collateral that helps to ensure the repayment of the loan in the event of default. Credit channels savings into productive investment thereby encouraging economic growth.
Thus, the availability of credit allows the role of inter-mediation to be carried out, which is important for the growth of the economy. The total domestic bank credit can be divided in to two: credit to the private sector and credit to the public sector.
Thus, for this paper, we adopt the definition of credit given by CBN (2003), which is defined above.
Credit cannot be divorced from the banking sector as banks serve as a conduit for funds to be received in form of deposits from the surplus units of the economy and passed on to the deficit units who need funds for productive purposes.
Banks are therefore debtors to the depositors of funds and creditors to the borrowers of funds. Bank credit is the borrowing capacity provided to an individual, government, firm or organization by the banking system in the form of loans.
According to CBN (2003), the amount of loans and advances given by the banking sector to economic agents constitute bank credit. Bank credit is often accompanied with some collateral that helps to ensure the repayment of the loan in the event of default. Credit channels savings into productive investment thereby encouraging economic growth.
Thus, the availability of credit allows the role of inter-mediation to be carried out, which is important for the growth of the economy. The total domestic bank credit can be divided in to two: credit to the private sector and credit to the public sector.
Thus, for this paper, we adopt the definition of credit given by CBN (2003), which is defined above.