Bank efficiency, ownership, and market structure: why are interest spreads so high in Uganda ?

Thorsten Beck and Heiko Hesse

No 4027, Policy Research Working Paper Series from The World Bank

Abstract: Using a unique bank-level data set on the Ugandan banking system during 1999-2005, the authors explore the factors behind consistently high interest rate spreads and margins. While foreign banks charge lower interest rate spreads, they do not find a robust and economically significant relationship between privatization, foreign bank entry, market structure, and banking efficiency. Similarly, macroeconomic variables can explain little of the over-time variation in bank spreads. Bank-level characteristics, on the other hand, such as bank size, operating costs, and composition of loan portfolio explain a large proportion of cross-bank, cross-time variation in spreads and margins. However, time-invariant bank-level fixed effects explain the largest part of bank variation in spreads and margins. Further, the authors find tentative evidence that banks targeting the low end of the market incur higher costs and therefore higher margins.

Keywords: Banks&Banking Reform; Economic Theory&Research; Investment and Investment Climate; Financial Crisis Management&Restructuring; Financial Intermediation (search for similar items in EconPapers)
Date: 2006-10-01
New Economics Papers: this item is included in nep-afr, nep-ban, nep-com, nep-dev, nep-eff, nep-fdg, nep-fin, nep-fmk and nep-mac
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Citations: View citations in EconPapers (38)

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Related works:
Working Paper: Bank Efficiency, Ownership and Market Structure,Why are Interest Spreads so High in Uganda? (2006)
Working Paper: Bank efficiency, ownership and market structure: Why are interest spreads so high in Uganda? (2006)
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