Bank efficiency, ownership, and market structure : why are interest spreads so high in Uganda ?
AbstractUsing 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.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4027.
Date of creation: 01 Oct 2006
Date of revision:
Banks&Banking Reform; Economic Theory&Research; Investment and Investment Climate; Financial Crisis Management&Restructuring; Financial Intermediation;
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.
- Heiko Hesse & Thorsten Beck, 2006. "Bank Efficiency, Ownership and Market Structure,Why are Interest Spreads so High in Uganda?," Economics Series Working Papers 277, University of Oxford, Department of Economics.
- 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-AFR-2006-10-14 (Africa)
- NEP-ALL-2006-10-14 (All new papers)
- NEP-BAN-2006-10-14 (Banking)
- NEP-COM-2006-10-14 (Industrial Competition)
- NEP-DEV-2006-10-14 (Development)
- NEP-EFF-2006-10-14 (Efficiency & Productivity)
- NEP-FDG-2006-10-14 (Financial Development & Growth)
- NEP-FIN-2006-10-14 (Finance)
- NEP-FMK-2006-10-14 (Financial Markets)
- NEP-MAC-2006-10-14 (Macroeconomics)
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