Eritrea: Bank credit to the private sector

The latest value from 2014 is 19 percent, an increase from 15.55 percent in 2013. In comparison, the world average is 50.90 percent, based on data from 176 countries. Historically, the average for Eritrea from 1995 to 2014 is 24.47 percent. The minimum value, 15.55 percent, was reached in 2013 while the maximum of 45.1 percent was recorded in 1998. See the global rankings for that indicator or use the country comparator to compare trends over time.

Bank credit in Eritrea and other countries is defined as the credit extended by the banking institutions to the private sector only: both firms and households. It does not include lending to the government.

Credit is essential for the economy to function well. It funds new investments and allows people to purchase houses, cars, and other items. Of course, excessive lending and borrowing usually end up in financial crises but, in principle, credit availability is good for economic development.

If the banking credit to the private sector is about 70 percent of GDP and more, then the country has a relatively well developed financial system. The amount of credit can even exceed 200 percent of GDP in some very advanced economies. In some poor countries, the credit could be less than 15 percent of GDP. In these countries, firms and households essentially do not have access to credit for investment and various purchases.

Definition: Domestic credit to private sector by banks refers to financial resources provided to the private sector by other depository corporations (deposit taking corporations except central banks), such as through loans, purchases of nonequity securities, and trade credits and other accounts receivable, that establish a claim for repayment. For some countries these claims include credit to public enterprises.