Local Banking Finance and Its Impact on Economic Growth

Dr. Issa Abu Al-Qasim Al-Aini / Mr. Ramadan Muhammad Al-Tibawi

This study aims to examine the impact of bank credit granted by commercial banks on Gross Domestic Product (GDP) growth in Libya from 1985 to 2015. The core problem lies in the weakness and insufficiency of bank credit provided to the Libyan economy to achieve a noticeable effect on GDP, alongside administrative and technological limitations. The study employed an econometric methodology using the Vector Autoregression (VAR) model to analyze economic functions, impulse responses, and causality. Empirical findings revealed that bank credit has a positive and statistically significant effect on GDP growth, whereas interest rates and deposit volumes exhibited weak impacts on total credit. Consequently, the study recommended restructuring banking policies to support the national economy, enforcing stricter loan recovery procedures, and optimizing credit regulations.

Bank Credit, Gross Domestic Product (GDP), Libyan Commercial Banks, Local Financing, Vector Autoregression (VAR)