Abstract

All economic sectors and individuals in Jordan rely mainly on banks to cover their shortage in money, thus banking sector plays a vital role in enhancing investments and economic development by standing in the middle between deficit units and surplus units. The major goal of this study is to identify what are the main drivers that impact lending behavior in Jordan. Using panel data and applying multi regression analysis on (13) Jordanian Conventional banks and two Islamic banks for the period (2000-2013) that are covered in this research, we found that lending behavior is statistically significantly affected by internal factors (DV, IR and net profit after tax) and it is also affected significantly by external factor (RR, GDP, IFR, OWDR and Red. R). Also the analysis indicated that OWDR and Red. R as a proxy for monetary policy did have a negative impact on lending behavior but not significantly proven. The study also reached to a conclusion that the amount of loans and advances extended by Jordanian banks is not affected by rate of interest. We recommend that Jordanian banks’ management should take into consideration internal specific factors as well as external specific factor with more care while formulating their lending policy, moreover central bank in cooperation with the Jordanian banking sector should work in more productive relationship in order to enhance more the economic growth.

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