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The Determinants of Net Interest Margin in the Ghanaian Banking Industry


  • Franklin Amuakwa-Mensah
  • George Marbuah


This study investigates the determinants of net interest margin and the role of the financial crisis in explaining net interest margin (NIM) in the banking industry in Ghana. Further, we assess the sensitivity of our results to the measure of credit risk. We observe a sharp drop in NIM and an increase in bad debt growth during the 2007-2009 financial crisis in Ghana's banking sector. Depending on the definition of credit risk, we observe marginal differences in the magnitude and significance of the determinants of NIM. Generally, NIM is explained by bank-specific, industry and macroeconomic factors. We find risk aversion, operating cost, inflation rate and previous year's GDP growth to be robust drivers of NIM.

Suggested Citation

  • Franklin Amuakwa-Mensah & George Marbuah, 2015. "The Determinants of Net Interest Margin in the Ghanaian Banking Industry," Journal of African Business, Taylor & Francis Journals, vol. 16(3), pages 272-288, September.
  • Handle: RePEc:taf:wjabxx:v:16:y:2015:i:3:p:272-288
    DOI: 10.1080/15228916.2015.1069679

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    References listed on IDEAS

    1. Nooman Rebei, 2014. "Determinants of Interest Rate Spreads in Solomon Islands," IMF Working Papers 14/105, International Monetary Fund.
    2. Johan Mathisen & Thierry D. Buchs, 2005. "Competition and Efficiency in Banking; Behavioral Evidence from Ghana," IMF Working Papers 2005/017, International Monetary Fund.
    3. Calixte Ahokpossi, 2013. "Determinants of Bank Interest Margins in Sub-Saharan Africa," IMF Working Papers 13/34, International Monetary Fund.
    4. Johan Mathisen & Thierry D. Buchs, 2005. "Competition and Efficiency in Banking; Behavioral Evidence from Ghana," IMF Working Papers 05/17, International Monetary Fund.
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    Cited by:

    1. Samia Nur Jui & Rokibul Hasan Sakib & Md. Abu Rafsan, 2020. "Association between Interest Rate Changes and Profitability of Commercial Banks of Bangladesh," International Journal of Science and Business, IJSAB International, vol. 4(9), pages 17-37.
    2. Ozili, Peterson, K, 2016. "Bank Profitability and Capital Regulation: Evidence from Listed and non-Listed Banks in Africa," MPRA Paper 75856, University Library of Munich, Germany.
    3. Murad Khan & Abdul Jalil, 2020. "Determinants of Interest Margin in Pakistan: A Panel Data Analysis," Economies, MDPI, Open Access Journal, vol. 8(2), pages 1-14, March.

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