Financial Reforms and Interest Rate Spreads in the Commercial Banking System in Malawi
January 1, 2002
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Summary
This study investigates the impact of financial sector reforms on interest rate spreads in the commercial banking system in Malawi. The financial reform program commenced in 1989 when both the Reserve Bank Act and the Banking Act were revised with the easing of entry requirements into the banking system, and indirect monetary policy instruments were subsequently introduced in 1990. The adoption of a floating exchange rate in 1994 marked the end of major policy reforms in the Malawian financial sector. Using alternative definitions of spreads, our analysis shows that spreads increased significantly following liberalization, and panel regression results suggest that the observed high spreads can be attributed to high monopoly power, high reserve requirements, high central bank discount rate and high inflation.
Subject: Banking, Commercial banks, Deposit rates, Discount rates, Financial institutions, Financial regulation and supervision, Financial sector reform, Financial services, Monetary policy, Reserve requirements
Keywords: bank, bank behavior, bank spread, commercial bank, Commercial banks, Deposit rates, Discount rates, financial liberalization, financial product, Financial sector reform, interest rate, interest spreads, liberalization, Malawi, market share, monetary policy, Reserve requirements, Sub-Saharan Africa, WP
Pages:
30
Volume:
2002
DOI:
Issue:
006
Series:
Working Paper No. 2002/006
Stock No:
WPIEA0062002
ISBN:
9781451842302
ISSN:
1018-5941
