Purpose This study investigates how climate risk exacerbates the nexus between credit risk and bank liquidity creation in African economies, where both financial and environmental vulnerabilities converge. Design/methodology/approach Using an unbalanced panel of 474 commercial banks from 49 African countries for the period 2013–2022, we estimate a two-step system generalized method of moments model to account for endogeneity and dynamic effects. We test robustness using alternative proxies for climate and credit risks, as well as an alternative fixed-effects ordinary least squares estimator. Findings Results show that credit risk reduces liquidity creation, and this effect is amplified by climate risk. The vulnerability dimension – particularly sensitivity and exposure – has the strongest amplifying effect. Economic, governance, and social-readiness factors partially cushion these adverse effects but remain limited in the African context. The amplification takes effect through asset- and off-balance-sheet liquidity creation and is most pronounced in low- and lower-middle-income countries, among smaller banks, and during the pre-COVID-19 period. Originality/value This study provides the first large-scale empirical evidence of how climate and credit risks jointly influence bank liquidity creation in Africa. The findings highlight the importance of integrating climate risk into prudential frameworks, strengthening credit infrastructure and enhancing adaptive capacity to improve banking resilience across structurally fragile economies.
Mdaghri et al. (2026) studied this question.