Financial Intermediation Costs in Low-Income Countries : The Role of Regulatory, Institutional, and Macroeconomic Factors.

By: Poghosyan, TigranMaterial type: TextTextSeries: IMF Working PapersPublisher: Washington : International Monetary Fund, 2012Copyright date: ©2012Description: 1 online resource (36 pages)Content type: text Media type: computer Carrier type: online resourceISBN: 9781475564136Subject(s): Intermediation (Finance) -- Developing countries -- Econometric modelsGenre/Form: Electronic books.Additional physical formats: Print version:: Financial Intermediation Costs in Low-Income Countries : The Role of Regulatory, Institutional, and Macroeconomic FactorsDDC classification: 332.152 LOC classification: HG3891.5 -- .I58 2012ebOnline resources: Click to View
Contents:
Cover -- Contents -- I. Introduction -- II. Interest Margin Decomposition -- A. Conceptual Framework -- B. Decomposition Results -- III. Econometric Analysis of Bank- and Country-Specific Determinants of Interest Margins -- A. Model Specification -- B. Variables -- C. Descriptive Statistics -- D. Results -- IV. Robustness Checks -- V. Conclusions -- References -- Figures -- 1. Comparison of Implicit Net Interest Margins in LICs and EMs -- 2. Percentile Distribution of Net Interest Margin Determinants in LICs and EMs -- 3. Median Interest Margins in LICs and EMs by Countries -- Tables -- 1. Variable Definition and Sources -- 2. Descriptive Statistics -- 3. Correlations Matrix -- 4. Estimation Results Controlling for Bank-Specific Determinants -- 5. Estimation Results Controlling for Macroeconomic Variables -- 6. Estimation Results Controlling for Institutional Variables -- 7. Estimation Results Controlling for Regulatory Variables -- 8. Robustness Check for LICs: Using Market Share Instead of Market Concentration -- 9. Robustness Check for LICs: Using Loan Market Concentration -- 10. Robustness Check for LICs: Using Deposit Market Concentration -- 11. Robustness Check for LICs: Using Interaction of Market Concentration with Regional Dummies -- 12. Robustness Check for LICs: Using Annual Average Variables.
Summary: We analyze factors driving persistently higher financial intermediation costs in low-income countries (LICs) relative to emerging market (EMs) country comparators. Using the net interest margin as a proxy for financial intermediation costs at the bank level, we find that within LICs a substantial part of the variation in interest margins can be explained by bank-specific factors: margins tend to increase with higher riskiness of credit portfolio, lower bank capitalization, and smaller bank size. Overall, we find that concentrated market structures and lack of competition in LICs banking systems and institutional weaknesses constitute the key impediments preventing financial intermediation costs from declining. Our results provide strong evidence that policies aimed at fostering banking competition and strengthening institutional frameworks can reduce intermediation costs in LICs.
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Cover -- Contents -- I. Introduction -- II. Interest Margin Decomposition -- A. Conceptual Framework -- B. Decomposition Results -- III. Econometric Analysis of Bank- and Country-Specific Determinants of Interest Margins -- A. Model Specification -- B. Variables -- C. Descriptive Statistics -- D. Results -- IV. Robustness Checks -- V. Conclusions -- References -- Figures -- 1. Comparison of Implicit Net Interest Margins in LICs and EMs -- 2. Percentile Distribution of Net Interest Margin Determinants in LICs and EMs -- 3. Median Interest Margins in LICs and EMs by Countries -- Tables -- 1. Variable Definition and Sources -- 2. Descriptive Statistics -- 3. Correlations Matrix -- 4. Estimation Results Controlling for Bank-Specific Determinants -- 5. Estimation Results Controlling for Macroeconomic Variables -- 6. Estimation Results Controlling for Institutional Variables -- 7. Estimation Results Controlling for Regulatory Variables -- 8. Robustness Check for LICs: Using Market Share Instead of Market Concentration -- 9. Robustness Check for LICs: Using Loan Market Concentration -- 10. Robustness Check for LICs: Using Deposit Market Concentration -- 11. Robustness Check for LICs: Using Interaction of Market Concentration with Regional Dummies -- 12. Robustness Check for LICs: Using Annual Average Variables.

We analyze factors driving persistently higher financial intermediation costs in low-income countries (LICs) relative to emerging market (EMs) country comparators. Using the net interest margin as a proxy for financial intermediation costs at the bank level, we find that within LICs a substantial part of the variation in interest margins can be explained by bank-specific factors: margins tend to increase with higher riskiness of credit portfolio, lower bank capitalization, and smaller bank size. Overall, we find that concentrated market structures and lack of competition in LICs banking systems and institutional weaknesses constitute the key impediments preventing financial intermediation costs from declining. Our results provide strong evidence that policies aimed at fostering banking competition and strengthening institutional frameworks can reduce intermediation costs in LICs.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2018. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.

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