Repository logo

Strengthening Central Bank regulations to stimulate economic growth through commercial bank lending system: a study of Central Bank lending system in the Kingdom of eSwatini.

Thumbnail Image



Journal Title

Journal ISSN

Volume Title



This dissertation assesses the state of compliance to central regulation, impact of the central bank lending system on commercial banks credit to the private sector, and determines the optimal thresholds for monetary policy instruments with the aim of strengthening the lending policy of the Central Bank of eSwatini. The CAMELS Rating System Framework was used to establish the status and effect of compliance. The Autoregressive Distributed Lag (ARDL) regression model was used on monthly time series spanning from 2000 to 2019 to establish the links and impact of monetary policy instruments on bank credit to the private sector in the Kingdom of eSwatini. Thresholds of the three variables of concern, the discount rate, reserve requirement and liquidity requirement, were obtained by applying a Quadratic model. The CAMELS results show that the commercial banks were compliant, except for management efficiency. The results on management efficiency imply that there is a need to closely monitor and capacitate commercial banks’ principal officers and board of directors, who are posing a risk in the banking sector. The results also show that excess liquidity was associated low credit to the private sector. The ARDL results show that out of the three monetary policy variables of concern (discount rate, reserve requirement and liquidity requirement), only the discount rate is statistically significant in the short and long-run, suggesting a weak policy mix. This study shows that the optimal thresholds for the lending system are: 5.42 percent (3.50 percent to 5.42 per cent) for the discount rate, 4.03 percent (2.5 percent to 4.03 per cent) for the reserve requirement and 12.48 percent (10 percent to 12.48 per cent) for the liquidity requirement to influence bank lending and economic growth in the right path. This implies the need for the Central Bank of eSwatini to actively use the reserve requirement and liquidity requirement to balance its policy mix. Therefore, strategies to stimulate bank lending and economic growth should recognise the need to adjust the three instruments downward. This will increase bank credit to high-yielding investments, translating to economic growth.


Doctoral Degree. University of KwaZulu-Natal, Durban.