| Author(s) | Suliman Ibrahim Shelash Mohmmad |
| Affiliation | Assistant Professor, Business Administration Department, Faculty of Finance and Business Adminstration, Al-Bait University, Jordan |
| Title | Interest Rates and Their Effect on Credit Facilities in Jordan |
| Source | Journal of King Saud University. Administrative Sciences. Volume 19, No 2. (2007/1427) |
| Abstract | . This study aims at illuminating the development of interest rates of economy in Jordan during the price floating period and the period of fixing rate by the Central Bank, and observing their effects on credit facilities in the licensed banks. The study concludes that there is statistically significant relationhips between interest rates and credit facilities during the period (1981-2003). There is also statistically significant relationships between interest rates during the period of fixing rates and credit facilities, and there is a weak significant relationship between interest rates and credit facilities during price floating period. Accordingly, we notice that there is a contradiction between the results of testing the premises on the one hand, and economic theory on the other. This result is due to the high size of liquidily in Jordanian banks, a matter that led to the increase of facilities although interest rates were up. Also, the Jordanian economy is considered one of the developing economics, and its economic cycle is unadvanced wherein loans are insensitive to interest rates; a matter that indicates the incompetency of the monetary policy. The study recommends that the Central Bank should adopt recycled floating system and should develop the tool of monetary policy to make it more effective in influencing banks since banks liquidity in Jordan is high. There is also the possibility of making use of wasted extra liquidity in current bank accounts at trading banks by increasing the efficiency of and developing the services and tools of Islamic financial institutions, seeking to implement the idea of comprehensive bank that can offer a wide range of banking services. Also, contributing in the processes of privatization of the companies and institutions of the public sector, and encourging banks to merge so that they would be able to increase varied investments after their transformation into big banks that can share internally and externally in large international loans. |
