Bank intermediation margins in transition banking domains: panel evidence from Africa

Bismark Addai, Wenjin Tang (), Adjei Gyamfi Gyimah and Kingsley Opoku Appiah
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Bismark Addai: Changsha University of Science and Technology
Wenjin Tang: Changsha University of Science and Technology
Adjei Gyamfi Gyimah: Career Spring Institute
Kingsley Opoku Appiah: Kwame Nkrumah University of Science and Technology

Economic Change and Restructuring, 2023, vol. 56, issue 4, No 3, 2129-2167

Abstract: Abstract Developing countries are noted for higher interest margins, and banking in Africa has recently witnessed the rise of African regional banks with a Pan-African ambition and the quest to modify the banking landscape. So far, the banking literature has received little attention regarding the determinants of net interest margin (NIM) of commercial banks in Africa, and the empirics across domestic, regional African, and non-African banks has not been studied either. Thus, we fill this lacuna by analyzing the intermediation margins of commercial banks across Africa while detailing the determinants for the three banking groups. We employ annual data of 552 commercial banks for eight years (2011 to 2018) across fifty-two African countries. The results of the study indicate that bank intermediation margin in Africa is a function of pure spread variables (bank concentration, credit risk, risk aversion, interest rate volatility), income from non-traditional banking activities, specialization, other bank-specific (transaction size, operating cost) and macro-economic variables (financial innovation and GDP). The results also suggest that there are some similarities and nuances for the determinants of bank intermediation margins across the domestic, regional African, and non-African banks. The results obtained have significant policy implications for bank regulation and financial sector development.

Keywords: Net interest margin; Non-interest income; Market concentration; African banks; Non-African banks (search for similar items in EconPapers)
JEL-codes: F23 G21 L10 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10644-023-09496-7

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