Dealing with High Bank Interest Margins in Tunisia: A Dynamic Panel Investigation

By investigating factors influencing interest margins adjustment, this paper aims to provide some answers on how to improve the efficiency of the Tunisian banking system. Focusing on different theoretical views on the determinants of banks intermediation margins using a quite representative sample observed between 1999 and 2014, we estimate an augmented model using the system GMM estimator assuming the existence of adjustment costs. Estimations results and robustness checks show that reducing intermediation margins of Tunisian banks is fundamentally a matter of improving cost efficiency, scale economies and competitiveness. Considering the highly distressed economic and financial context in which Tunisian banks operate since 2011, we think that improving bank efficiency and credit access in Tunisia is closely related to the capacity of the government and the regulatory authority to enforce urgent strategic reforms in order to consolidate the banking system and to improve its competitiveness.