Determinants of Net Interest Margin in Selected Commercial Banks in Ethiopia

Abstract

The aim of this study was to investigate into the determinants of net interest margin of selected commercial banks in Ethiopia over the period 2010 to 2017 inclusive. To do so, fixed effects panel regression model was employed for 13 selected commercial banks. The study covered bank level, industry level and macro level variables that affect the net interest margin of the selected banks. The findings of the study revealed that assets quality, capital adequacy, bank size, earning ability, liquidity position, management soundness, exchange rate, inflation and market concentration are significant factors for net interest margin of banks under the study. On the other hand, economic growth and political instability are found to be insignificant variables.

Keywords: net interest margin, exchange rate, market concentration