The effect of banking sector reforms on interest rate spread: Evidence from Ghana
Date
2023
Journal Title
Journal ISSN
Volume Title
Publisher
Cogent Economics & Finance
Abstract
The wide interest rate spread has been a matter of concern for many
developing economies. In Ghana, the perception is that the interest rate spread is
too wide and that banks have linked it to various variables affecting them. This
study examines the effect of banking sector reforms on bank interest rate spread in
Ghana over the period 2008–2020, using an unbalanced panel-data dynamic equation regression model. The findings reveal that bank size, profitability, gross
domestic product, and inflation rate significantly influence Ghana’s bank interest
rate spread. Results also suggest that these factors account for determining the
interest rate spread in the universal banking industry in Ghana. The industry needs
to mitigate the interest rate spread by improving the macroeconomic environment,
address industry-specific issues, strengthen institutional systems, such as govern ance and supervision, and also continue to ensure stability in the political environ ment. The study provides valuable insights regarding the design and formulation of
competitive policies and regulatory changes on interest rate regimes, to help pro mote the competitiveness of the universal banking industry in the country.
Policymakers and regulators should emphasize enterprise risk management prac tices in Ghana’s universal banking industry to check credit risk and other risk forms.
Description
Research Article
Keywords
Banking reforms, interest rate spread, two-step system GMM, macroeconomic factors, bank-specific factors, regulatory changes
Citation
To cite this article: Cornelius Yao Azumah, Anthony Owusu-Ansah, Godfred Amewu & Williams Ohemeng (2023) The effect of banking sector reforms on interest rate spread: Evidence from Ghana, Cogent Economics & Finance, 11:1, 2175463, DOI: 10.1080/23322039.2023.2175463