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An analysis of the moderating role of Internet penetration in the banking competition-banks’ profitability nexus: case of the CEMAC banking sector

Author

Listed:
  • Muhamadu Awal Kindzeka Wirajing

    (University of Dschang
    University of Dschang)

  • Valery Giscard Moutie

    (University of Buea)

  • Bruno Emmanuel Ongo Nkoa

    (University of Yaounde II)

  • Germain Stephane Ketchoua

    (University of Johannesburg)

Abstract

This study investigates the role of Internet penetration in moderating the effect of banking competition on banks’ profitability in the CEMAC zone from 2010 to 2020. The Hirschman Herfindahl Index (HHI) is employed as a proxy for banking competition both in the loan and the deposit market. The findings are obtained by employing the instrumental Two-Stage Least Square (2SLS) and Lewbel’s strategies. Three main findings have been established. First, the direct effect results provide strong evidence to support the positive competition–profitability relationship in both the loan and deposit markets, except for the net interest margins. Second, the indirect effect findings indicate a negative moderating role of Internet penetration on the banking competition–profitability nexus. Third, the net effect findings reveal that though, with the interaction of internet penetration, the direct enhancing effect of competition on profitability still outweighs the negative challenges to the banking sector instilled by the high internet penetration rate. The findings conform to the modern competition–efficiency paradigm and contradict the competition–fragility paradigm. Banks in the CEMAC zone should be efficient in their regulatory compliance, ameliorate customer service, and create direct mobile marketing to be able to cope in a competitive global market with the role of financial intermediation vividly becoming less imperative.

Suggested Citation

  • Muhamadu Awal Kindzeka Wirajing & Valery Giscard Moutie & Bruno Emmanuel Ongo Nkoa & Germain Stephane Ketchoua, 2025. "An analysis of the moderating role of Internet penetration in the banking competition-banks’ profitability nexus: case of the CEMAC banking sector," Digital Finance, Springer, vol. 7(2), pages 173-200, June.
  • Handle: RePEc:spr:digfin:v:7:y:2025:i:2:d:10.1007_s42521-025-00129-4
    DOI: 10.1007/s42521-025-00129-4
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    Keywords

    Banking competition; Bank’s profitability; CEMAC; Herfindahl Hirschman index; Internet penetration;
    All these keywords.

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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