Determinants of Bank Interest Margins in Sub-Saharan Africa

IMF Working Papers, January 31, 2013

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Determinants of Bank Interest Margins in Sub-Saharan Africa

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Bibliographic details

• Authors: Calixte Ahokpossi
• Published: January 31, 2013
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781475551136.001

Overview

• Author: Calixte Ahokpossi
• Publication date: January 31, 2013
• Study sample: 456 banks in 41 SSA countries
• Paper type: IMF Working Paper

Key findings

• Market concentration is positively associated with interest margins.
• The impact of market concentration on margins depends on bank efficiency: efficient banks increase their margins more than inefficient banks in concentrated markets.
• Bank-specific factors identified as important determinants of interest margins include:
  • credit risk
  • liquidity risk
  • bank equity
• Interest margins are sensitive to inflation.
• Interest margins are not sensitive to:
  • economic growth
  • public ownership
  • foreign ownership
• There are regional differences within SSA in the level of interest margins even after controlling for other factors.

Policy implications

• Policies that promote competition and reduce market concentration would help lower interest margins in SSA.

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