Determinants of Bank Lending Rates in Zambia: A Balance Sheet Approach

The aim of this study is to shed light on how various elements going into banks’ cost structure influence lending rates in Zambia. The authors employ panel regression techniques using detailed bank-specific data that reflect a wide range of cost and income determinants for banks. The results indicate that lending rates are to a significant extent influenced by variables relating to banks’ costs. The analysis also indicates, however, that only a small part of the large drop in lending rates that occurred in 2012 is explained by changes in variables on banks’ balance sheets, implying other factors at play.