Abstract:
This article examines the effect of funding strategy on the lending patterns of banks in
Ghana. We employ a panel dataset of banks from 2005 to 2011, to analyse the impact of
funding sources on three sets of lending patterns employed by banks: Primary, secondary
and tertiary economic sectors. The result shows that banks in Ghana use internally generated
funds to finance loans to the primary and secondary sectors of the economy. In addition, our
findings suggest that bank lending to the tertiary sector of the economy is significantly more
sensitive to wholesale funding than to deposit and internally generated funds. The overall
implication of this finding is that the bank funding structure needs to be considered in
addition to the traditional bank-specific indicators when assessing banks’ ability to finance
economic activities.