Downloads: 0
Experimental Research Paper | Business and Finance | Volume 15 Issue 8, August 2026 | Pages: 1897 - 1912 | Sierra Leone
Commercial Banks' Credit and Agricultural Sector Development in Sierra Leone (2000-2024): Trends, Impacts, and Policy Implications
Abstract: Agriculture remains a cornerstone of Sierra Leone's economy, contributing substantially to employment, food security, and national income. However, despite its strategic importance, the sector continues to receive a relatively small share of commercial bank credit. This study investigates the long-run and short-run effects of commercial bank credit on agricultural development in Sierra Leone over the period 2000-2024. Specifically, it examines whether commercial bank lending has significantly contributed to agricultural value added while accounting for the influence of lending rates, exchange rates, and international commodity prices. The study employs an explanatory mixed-methods research design. Annual secondary data were obtained from the Bank of Sierra Leone, the World Bank's World Development Indicators, and the World Bank Pink Sheet commodity price database, while complementary survey data were collected from farmers and commercial banks to provide institutional context. The Autoregressive Distributed Lag (ARDL) modelling approach was adopted to estimate both long-run and short-run relationships after confirming the order of integration using Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests. The ARDL Bounds Test was then applied to determine the existence of a long-run equilibrium relationship among the study variables. The findings reveal a statistically significant long-run equilibrium relationship between commercial bank credit and agricultural development. However, commercial bank credit exhibits a negative and statistically significant long-run effect on Agricultural Value Added (β = -0.0799, p = 0.0356), while the short-run effect is also negative (β = -0.0336, p = 0.0556). These findings suggest that increased lending has not translated into improved agricultural productivity, largely because of structural inefficiencies in credit allocation and utilization. In contrast, international commodity prices positively and significantly influence agricultural performance in both the short run and long run, whereas exchange rate movements produce mixed effects. The error correction coefficient (-0.8851, p < 0.001) indicates that approximately 88.5% of short-run disequilibrium is corrected within one year, demonstrating rapid adjustment towards long-run equilibrium. The study concludes that expanding the volume of agricultural credit alone is insufficient to stimulate agricultural development in Sierra Leone. The effectiveness of commercial bank lending depends on improved credit targeting, stronger loan monitoring, agricultural risk management, and complementary investments in rural infrastructure, agricultural extension services, and value-chain development. The study recommends strengthening agricultural credit guarantee schemes, promoting digital agricultural finance, expanding agricultural insurance, and enhancing collaboration among government agencies, commercial banks, and development partners to improve the contribution of formal finance to sustainable agricultural transformation.
Keywords: Agricultural Development, Commercial Bank Credit, Agricultural Finance, ARDL Model, Agricultural Value Added, Financial Intermediation, Sierra Leone
How to Cite?: Tamba Sam, Momodu Sahid Kanu, Robert Dauda Korsu, Morrison K. Lahai, Victoria Blango, "Commercial Banks' Credit and Agricultural Sector Development in Sierra Leone (2000-2024): Trends, Impacts, and Policy Implications", Volume 15 Issue 8, August 2026, International Journal of Science and Research (IJSR), Pages: 1897-1912, https://www.ijsr.net/getabstract.php?paperid=SR26825184848, DOI: https://dx.doi.org/10.21275/SR26825184848