The Factors that Affect Net Interest Margin of Commercial Banks in Case of Central Asian Countries (2011-2017)

Abstract

Abstract Research paper investigates the factors that affect high Net Interest Margin of commercial banks in case of Central Asian Countries. The white paper embrace three countries as Kazakhstan, Uzbekistan and Kyrgyz Republic, covering years from 2011 to 2017. Unbalanced data employed 50 banks and in total 329 number of observations. Arellano-Bover/Blundell-Bond dynamic model estimation was applied into the model. It was defined that Inflation, Exchange rate, Market Concentration, Foreign ownership, Reserve rate, Operating Cost facilitate an increase net interest margin. Whereas Demand Deposits, Bank Size, Bank Capital decrease net interest margin overall in the Central Asian region. If we look at countries separately for Kazakhstan mostly macroeconomic factors play crucial role. In Uzbekistan Operating Cost has biggest magnitude to net interest margin to be high. In Kyrgyz Republic NPL, Operating Cost enormously impact to increse interest margin, while Non Interest Revenue decrease interest margin with highest magnitude.