The Extent of the Impact of Bank Deposits on Credit Facilities in Jordan in View of the COVID-19 Pandemic

Abstract

AbstractThe study aims to highlight the role of the volume of deposits of all kinds with banks in influencing credit facilities granted by banks in Jordan over the period 2010–2020. The COVID-19 pandemic has generated a state of economic uncertainty, leading to shop closures and social distancing. Government intervention is necessary through monetary policy decisions by the central bank. It provides liquidity to banks and therefore this affects credit available to oil the wheels of the economy.The study showed the existence of a direct positive relationship between the volume of deposits with banks and the volume of granted credit facilities, so that the volume of deposits in banks is constantly increasing with the progress over the years and is accompanied by a continuous increase in the volume of granted credit facilities. Where the lowest amount of deposits was recorded at the beginning of the period in 2010 by 22,504 MJOD accompanied by the lowest amount of facilities granted recorded for the same period and the same year 14,451 MJOD and with the succession of years, all deposits and granted facilities continued to increase until the end of the study period in 2020 where deposits were recorded The highest value amounted to 36,789 MJOD and credit facilities recorded the highest value for the same period and the same year, with a value of 24,634 MJOD.Even at the end of the study period in 2019 and 2020, during the outbreak of the COVID-19 pandemic, the volume of deposits in banks maintained a positive change rate of 4.3% and 4.2%, respectively, and credit facilities also maintained a positive change rate of 3.7% and 5.7%, for the same period.Compared to the previous year for both years, this confirms the direct relationship of deposits to the volume of credit facilities considering the COVID-19 pandemic. This positive impact of deposits on loans remain in steady increase due to the monetary policy that used by the central bank in reducing the monetary reserve ratio by 75 points in 2019 and 150 points in 2020 in a way to stand up the pandemic.KeywordsBankDepositsLoansCredit facilitiesCOVID-19Central bank