Liquidity funding and lending in MENA

This study examines the impact of liquidity on bank lending by commercial banks in the MENA region following the 2008 financial crisis. The findings indicate that liquidity has a minimal effect on credit supply, likely due to low economic growth from 2009 to 2020. GDP growth acts as a mediating factor between liquidity and lending, as banks remained cautious during economic slowdowns, even with high liquidity and capital levels. While increased liquidity bolsters bank resilience, it may reduce profitability. Ensuring the safety and stability of the banking system should take precedence over cost and return concerns. For policy implications, it is clear that liquidity must be ensured at all times, and policymakers should consider monetary policy easing, given the demand-driven nature of lending.