Market power and pricing of loan : Evidence from the WAEMU banking sector

Abdoulaye NdiaYe
Université Gaston Berger de Saint-Louis, Sénégal
UFR Sciences Economiques et de Gestion
Laboratoire de Recherche en Économie de Saint-Louis (LARES),
ORCID : 0000-0002-4550-0848

Abstract : This article assesses the relationship between market power and the credit pric- ing using a sample of 49 banks drawing from seven West African Economic and Monetary Union (WAEMU) countries for the period 2003–2014. Our empirical methodology relies on a panel data analysis and nonlinear estimation. We find that market power influences positively the credit pricing in the WAEMU. This is consistent with the market power hy- pothesis, which stipulates that concentrated markets encourages strong pricing of banking products (higher debtors rates and lower creditors rates, so more important interest mar- gins), and limits access to financing. The nonlinear regression highlights the existence of a threshold that is not significant in ours sample because only the first or second percentile of our data verify the second regim. While the remaining 98% to 99% confirm the results of the linear model. These results have importantes implications for bank regulation poli- cies in the WAEMU.

Keywords : market power, concentration, pricing of loan, access to credit, WAEMU.
Jel classification : G20, L11, E51.