The Impact of Financial Indicators on Economic Growth in Sierra Leone: Evidence from the Banking Sector (1980–2024)

Abstract

Abu Kai Kamara, Dante Bendu and Mohamed Sajor Jalloh

This study looks at the relationship between economic growth in Sierra Leone from 1980 to 2024 and important financial indicators such as lending rates, private sector credit, interest rate spreads, and broad money (M2/GDP). The financial industry is still fragmented and shallow in spite of multiple banking reforms and liberalizations. The study uses the Autoregressive Distributed Lag (ARDL) model to assess both short- and long-term correlations using annual time- series data from the Bank of Sierra Leone and the World Development Indicators. Results reveal that broad money and private sector credit exhibit positive but statistically negligible effects on growth, while lending rate and interest rate spread have negative and substantial effects in the near run. According to the findings, financial deepening and sustainable growth are still hampered by inefficiencies and excessive intermediation costs. The main goals of policy recommendations are to strengthen financial inclusion through institutional reforms, lower lending costs, and increase credit accessibility.

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