Market Power and Pricing of Loan : Evidence from the WAEMU Banking Sector

Abstract

This article assesses the relationship between market power and the credit pricing 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 hypothesis, which stipulates that concentrated markets encourages strong pricing of banking products (higher debtors rates and lower creditors rates, so more important interest margins), 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 policies in the WAEMU.(original abstract)