Determinants of Net Interest Margins of Commercial Banks in Kenya: A Panel Study

Abstract

This study investigates the determinants of net interest margin of commercial banks in Kenya using secondary data. We apply pooled and fixed effects regression to a panel of 44 Kenyan banks that covers the period 2000-2009. The estimation results show that operating expenses and credit risk has a positive and significant effect on net interest margin of the commercial banks in Kenya. The paper also finds that the higher the inflation, the wider the net interest margin, while growth and market concentration a have negative effect on net interest margin.