Bank Efficiency, Ownership and Market Structure,Why are Interest Spreads so High in Uganda?
AbstractUsing a unique bank-level dataset on the Ugandan banking system over the period 1999 to 2005, we explore the factors behind consistently high interest rate spreads and margins. While foreign banks charge lower interest rate spreads, we 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, we find tentative evidence that banks targeting the low-end of the market incur higher costs and therefore higher margins.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 277.
Date of creation: 01 Sep 2006
Date of revision:
Foreign Bank Entry; Financial Sector Reform; Bank Efficiency; Financial Intermediation; Uganda;
Other versions of this item:
- Beck, T.H.L. & Hesse, H., 2006. "Bank efficiency, ownership and market structure: Why are interest spreads so high in Uganda?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3508408, Tilburg University.
- Beck, Thorsten & Hesse, Heiko, 2006. "Bank efficiency, ownership, and market structure : why are interest spreads so high in Uganda ?," Policy Research Working Paper Series 4027, The World Bank.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-23 (All new papers)
- NEP-BAN-2006-09-23 (Banking)
- NEP-COM-2006-09-23 (Industrial Competition)
- NEP-EFF-2006-09-23 (Efficiency & Productivity)
- NEP-FIN-2006-09-23 (Finance)
- NEP-FMK-2006-09-23 (Financial Markets)
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