Determinants of Interest Rate Spread in The Gambia

This paper contributes to the literature on the determinants of interest rate spreads by using actual loan and deposit interest rate data to scrutinize the bank specific, market-specific, and macroeconomic determinants of banking sector interest rate spreads in the Gambia. This paper examines macroeconomic factors that influence Interest Rate Spreads (IRS) in commercial banks of the Gambia using time series data set covering a 22-year period 1991 to 2012. The study employed quarterly time series data from 1991to 2012. Results from the regression indicate that interest rate spread in the Gambia are significantly influenced by Inflation (INF), Treasury Bills (T-bill), and Exchange Rate Volatility (EXV), while Gross Domestic Product Per Capita (GDPpc) and Required Reserve (RR) on the other hand are statistically insignificant.