What Influences Bank Lending in the Uae? ...Financial Structure and Determination of Lending Capacity

Banks as nancial intermediaries play very important role in the economy by transferring funds from surplus units (savers) to investors who need funds to implement their projects. lending activity is the most important business of banks that contributes the largest income proportion to the banks. Therefore, thepurpose of this paper is to investigate empirically the effect of total nancial resources components on the lending capacity of UAE banks. Eight commercial banks operating in the nancial market was selected. Annual panel data covers the period from 2008 to 2018 was obtained from the nancial statements of the selected commercial banks.In this study we employ random effect model which is generally estimated by using Generalized Least Squares method (GLS). The Hausman test (1978), which examines the consistency of the Generalized Least Square (GLS) (random effects) estimates, was used to select between xed effect and random effect model. Our results indicate that bank borrowings (BB), equity (EQU) and total deposits (TOD) exert positive and signicant effect on lending capacity while demand deposits (DD) and quasi deposits (QUD) exert positive but insignicant effect on lending capacity. The theoretical contribution embodied in the fact that the paper provides conrmation to the established contention in the body of knowledge and shows a variation on the degree of signicance of the coefcients in the relationship between the total deposits and lending capacity as compared to the effect of the components of the total deposits taken on individual basis.