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Competitive Structure and Bank Loan Rate in Pakistan’s Banking Industry

Author

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  • Amir Jahan Khan

    (Department of Economics, Institute of Business Administration (IBA), Karachi, Pakistan.)

Abstract

This paper estimates the relationship between loan price and the number of banks in the corporate loan markets of Pakistan. An original data set is constructed that includes loan price (interest rate) and market structure (number of banks) in more than 300 geographical markets across Pakistan. Variation in market structure (number of banks) along with variation in borrower and lender characteristics is employed to identify the factors that affect interest rates in loan markets. The findings based on regression result show that a competitive structure influences market price as loan rates decline when the number of banks increase in a market. Although the statistical evidence goes in favour of the structure conduct hypothesis, the findings are not robust across various functional forms. The detailed analysis of the Credit Information Bureau data and institutional details documented in this paper will be a useful reference for further research on the Industrial Organisation of Banking in Pakistan.

Suggested Citation

  • Amir Jahan Khan, 2020. "Competitive Structure and Bank Loan Rate in Pakistan’s Banking Industry," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(3), pages 377-398.
    • Handle: RePEc:pid:journl:v:59:y:2020:i:3:p:377-398
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    References listed on IDEAS

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    Cited by:

    1. N. P. Pil’nik & S. A. Radionov, 2022. "Forecasting Interest Rates and Maturity Indicators in the Russian Banking System," Studies on Russian Economic Development, Springer, vol. 33(3), pages 344-352, June.

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    More about this item

    Keywords

    Price-concentration; Loan Price; Industrial Organisation; Banking;
    All these keywords.

    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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