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Assessment of Competition in the Zimbabwean Banking Sector since Dollarization

Author

Listed:
  • Kupukile Mlambo
  • Nebson Mupunga

    (Reserve Bank of Zimbabwe)

Abstract

In this study we assess the degree of competition in the Zimbabwean banking sector since the adoption of dollarization in 2009 using bank-level quarterly data. We applied two methods to measure competition, namely, the Panzar-Rosse approach and the Lerner Index. Both methods suggest that banks in Zimbabwe operate under monopolistic conditions. The results from the Panzar–Rosse estimation generated an H-statistic of 0.416 for the period 2009-2016, while the Lerner index averaged 0.3 for the industry over the sample period. The Lerner index however, show an increase of market power over time, suggesting that competition in the Zimbabwean banking sector has generally eroded, especially with bank closures and consolidations post 2012. In terms of the factors influencing competition, our results show the importance of capital regulations, profitability, bank size and market efficiency. Foreign entry also increases competition in the banking sector. Overall, the results underscore the need for the central bank to implement reforms in the banking sector that result in greater competition and welfare gains for the economy

Suggested Citation

  • Kupukile Mlambo & Nebson Mupunga, 2018. "Assessment of Competition in the Zimbabwean Banking Sector since Dollarization," The African Finance Journal, Africagrowth Institute, vol. 20(1), pages 1-23.
    • Handle: RePEc:afj:journl:v:20:y:2018:i:1:p:1-23
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    More about this item

    Keywords

    Dollarization; bank competition; Panzar-Rose; Lerner Index; Zimbabwean banking;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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