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The Determinant of Bank Interest Rates Spreads in Ghana

Received: 20 July 2014     Accepted: 29 July 2014     Published: 10 August 2014
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Abstract

In Ghana, there is a widespread perception that interest rate spread is too wide. Banks, on the other hand, had justified the wide interest rate spread on the basis of some economic variables that affect the banks. The purpose of this paper is to examine the determinants of the bank interest margin in Ghana. This paper therefore examines the determinants of banking sector interest rate spreads in Ghana. Based on the availability of data, the paper focused on some banking industry-specific and macroeconomic determinants of (IR) spread. This study used exploratory and explanatory approaches. The exploratory methodology was used to identify the factors affecting determination of interest rate spreads and an explanatory approach was employed to establish how the factors affect the determination of interest spread in Ghana. The study found that factors affecting the determination of interest rate spread in Ghana are GDP, Exchange Rate, Prime Rate, Treasury Bill Rate, Liquidity, Overhead Costs, Loan Loss Provisioning and Profit Margin.

Published in International Journal of Economic Behavior and Organization (Volume 2, Issue 4)
DOI 10.11648/j.ijebo.20140204.11
Page(s) 49-57
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2014. Published by Science Publishing Group

Keywords

Interest Rate Spread, Treasury Bills, Bank of Ghana, Exchange Rate, Prime Rate, Liquidity

References
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[4] Brock, P. and Franken, H. (2003). Measuring the Determinants of Average and Marginal Bank Interest Rate Spreads in Chile, 1994-2001, Working Papers UWEC- 2003-25, University of Washington, Department of Economics.
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[18] Jayaraman, K. and Sharma, R. (2003). Determinant of Interest Rate Spread in the Pacific Island Countries: Some Evidences from Fiji. Pp. 8-9
[19] Khawaja and M. Din (2007). Determinants of Interest Rate Spreads in Pakistan- the Pakistan Development Review. Vol. 46. Pp 129-143
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Cite This Article
  • APA Style

    Ransford Quarmyne Churchill, Collins Owusu Kwaning, Owusu Ababio. (2014). The Determinant of Bank Interest Rates Spreads in Ghana. International Journal of Economic Behavior and Organization, 2(4), 49-57. https://doi.org/10.11648/j.ijebo.20140204.11

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    ACS Style

    Ransford Quarmyne Churchill; Collins Owusu Kwaning; Owusu Ababio. The Determinant of Bank Interest Rates Spreads in Ghana. Int. J. Econ. Behav. Organ. 2014, 2(4), 49-57. doi: 10.11648/j.ijebo.20140204.11

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    AMA Style

    Ransford Quarmyne Churchill, Collins Owusu Kwaning, Owusu Ababio. The Determinant of Bank Interest Rates Spreads in Ghana. Int J Econ Behav Organ. 2014;2(4):49-57. doi: 10.11648/j.ijebo.20140204.11

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  • @article{10.11648/j.ijebo.20140204.11,
      author = {Ransford Quarmyne Churchill and Collins Owusu Kwaning and Owusu Ababio},
      title = {The Determinant of Bank Interest Rates Spreads in Ghana},
      journal = {International Journal of Economic Behavior and Organization},
      volume = {2},
      number = {4},
      pages = {49-57},
      doi = {10.11648/j.ijebo.20140204.11},
      url = {https://doi.org/10.11648/j.ijebo.20140204.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijebo.20140204.11},
      abstract = {In Ghana, there is a widespread perception that interest rate spread is too wide. Banks, on the other hand, had justified the wide interest rate spread on the basis of some economic variables that affect the banks. The purpose of this paper is to examine the determinants of the bank interest margin in Ghana. This paper therefore examines the determinants of banking sector interest rate spreads in Ghana. Based on the availability of data, the paper focused on some banking industry-specific and macroeconomic determinants of (IR) spread. This study used exploratory and explanatory approaches. The exploratory methodology was used to identify the factors affecting determination of interest rate spreads and an explanatory approach was employed to establish how the factors affect the determination of interest spread in Ghana. The study found that factors affecting the determination of interest rate spread in Ghana are GDP, Exchange Rate, Prime Rate, Treasury Bill Rate, Liquidity, Overhead Costs, Loan Loss Provisioning and Profit Margin.},
     year = {2014}
    }
    

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    AU  - Ransford Quarmyne Churchill
    AU  - Collins Owusu Kwaning
    AU  - Owusu Ababio
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    AB  - In Ghana, there is a widespread perception that interest rate spread is too wide. Banks, on the other hand, had justified the wide interest rate spread on the basis of some economic variables that affect the banks. The purpose of this paper is to examine the determinants of the bank interest margin in Ghana. This paper therefore examines the determinants of banking sector interest rate spreads in Ghana. Based on the availability of data, the paper focused on some banking industry-specific and macroeconomic determinants of (IR) spread. This study used exploratory and explanatory approaches. The exploratory methodology was used to identify the factors affecting determination of interest rate spreads and an explanatory approach was employed to establish how the factors affect the determination of interest spread in Ghana. The study found that factors affecting the determination of interest rate spread in Ghana are GDP, Exchange Rate, Prime Rate, Treasury Bill Rate, Liquidity, Overhead Costs, Loan Loss Provisioning and Profit Margin.
    VL  - 2
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Author Information
  • Department of Accountancy, School of Business and Management Studies, Accra Polytechnic

  • Department of Liberal Studies, School of Business and Management Studies, Accra Polytechnic Ghana

  • Department of Liberal Studies, School of Business and Management Studies, Accra Polytechnic Ghana

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