Determinants of Credit Growth and Interest Margins in the Philippines and Asia

Tatum Blaise Pua Tan

No 2012/123, IMF Working Papers from International Monetary Fund

Abstract: Despite robust deposit growth, credit growth has been sluggish in the Philippines. We attribute this to legacy weaknesses in bank balance sheets, consumption-led economic growth, and relatively high net interest margins. Bank-level analysis suggests that interest margins in the Philippines rise with bank size, bank capitalization, foreign ownership, overhead costs and tax rates. Using bank-level data for a number of Asian economies, we find that higher growth, lower inflation, higher reserve requirements, greater banking sector development, smaller stock market development and lower government deficits reduce net interest margins, informing the policy debate on strengthening financial intermediation in the Philippines.

Keywords: WP; financial system; private sector; credit growth; net interest margins; Philippines; bank size; bank capitalization; market share; deposit base; Fed fund rate; bank Capitalization; Credit; Commercial banks; Bank credit; Loans; Credit booms; Central and Eastern Europe (search for similar items in EconPapers)
Pages: 25
Date: 2012-05-01
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Citations: View citations in EconPapers (1)

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