An appraisal of the role of banking in financial intermediation and economic growth: a case study of Sterling Bank
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Background of the Study
Banks play a pivotal role in financial intermediation, channeling funds from savers to borrowers, and thereby stimulating economic growth. Sterling Bank has been instrumental in promoting financial intermediation by providing credit facilities, facilitating investments, and supporting entrepreneurial activities across various sectors. Between 2023 and 2025, the bank has implemented innovative lending practices and diversified its financial products to meet the needs of both individual and corporate clients (Oluwaseun, 2023; Musa, 2024). These initiatives are designed to foster economic development by enabling capital formation and improving liquidity in the market.
The role of banking in economic growth extends beyond mere credit provision. By mobilizing savings and allocating them efficiently, banks such as Sterling Bank contribute to a more dynamic and resilient economy. The bank’s strategic investments in technology and risk management have further enhanced its ability to offer competitive rates and tailored financial solutions, thereby increasing its intermediation effectiveness (Chinwe, 2023). However, challenges remain in ensuring that the benefits of financial intermediation are evenly distributed across different sectors and regions. Disparities in access to banking services, particularly in rural and underdeveloped areas, can hinder the overall impact on economic growth.
Moreover, external factors such as regulatory changes, market volatility, and global economic shifts further complicate the role of banks in economic development. This study seeks to appraise the multifaceted role of Sterling Bank in financial intermediation and its contribution to economic growth. By analyzing lending patterns, investment flows, and overall economic performance, the research aims to provide a comprehensive evaluation of how effective banking operations can drive economic progress and identify areas for improvement (Ibrahim, 2025).
Statement of the Problem :
Despite the recognized role of Sterling Bank in promoting financial intermediation, challenges persist in fully realizing its potential contribution to economic growth. Inefficiencies in credit allocation, coupled with regional disparities in banking access, have led to suboptimal capital distribution. In some instances, funds are not channeled to high-growth sectors or underserved regions, thereby limiting the overall impact on economic development (Okeke, 2024). Moreover, regulatory constraints and market volatility further complicate the bank’s ability to maintain a stable intermediation process, resulting in periods of reduced lending and investment.
The misalignment between the bank’s financial intermediation strategies and the economic needs of different sectors has raised concerns among policymakers and stakeholders. Inadequate risk management and inefficiencies in loan processing can lead to higher default rates, thereby undermining investor confidence and slowing economic progress. Additionally, disparities in the implementation of financial services between urban and rural areas further exacerbate the problem, leading to uneven economic development.
This study aims to identify the key factors that limit Sterling Bank’s effectiveness in financial intermediation and to assess their impact on economic growth. By integrating quantitative data on lending and investment flows with qualitative insights from industry experts and stakeholders, the research will provide actionable recommendations for optimizing intermediation practices. The ultimate goal is to propose strategies that enhance the bank’s contribution to sustainable economic growth while addressing the inherent challenges of financial intermediation (Adeniyi, 2023).
Objectives of the Study:
To evaluate the role of Sterling Bank in financial intermediation.
To assess the impact of intermediation practices on economic growth.
To recommend improvements for optimizing credit allocation and risk management.
Research Questions:
How does Sterling Bank’s intermediation affect economic growth?
What are the challenges in credit allocation that limit economic impact?
What strategies can improve the effectiveness of financial intermediation?
Research Hypotheses:
H1: Effective financial intermediation by Sterling Bank positively influences economic growth.
H2: Inefficient credit allocation negatively impacts the bank’s contribution to economic development.
H3: Enhanced risk management improves the overall effectiveness of financial intermediation.
Scope and Limitations of the Study:
This study focuses on Sterling Bank’s role in financial intermediation from 2023 to 2025. Limitations include the complexity of isolating intermediation effects from broader economic factors and potential data constraints.
Definitions of Terms:
Financial Intermediation: The process of channeling funds from savers to borrowers.
Economic Growth: The increase in the production of goods and services in an economy over time.
Credit Allocation: The distribution of loans and financial resources to various sectors.
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