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africaI was reading a recent article by some World Bank economists, and they document that the spread between loans and deposits is 18% in Uganda! The net interest margin, however, is only 11% because of defaults, and to put that in perspective the Net Interest Margin in the US is about 3.5%. The real interest rate there is much higher on average--6.5% vs about 1% in the US (recently)--and so are bank overhead costs (8% in Uganda vs 3% in the US), so the actual equity return premium in banks there isn't significantly higher than in the US.

Talk about a poverty trap, with costs of doing business that high, and having to build in these kind of costs into every financed transaction, this is a real tax on production. It's important to remember that defaults and overhead are real costs, so it is short-sighted to simply mandate lowering spreads. A developed economy, with it's rule of law, information on borrow's creditworthyness (eg, Bureau scores, audited financials, stable contact information), allows growth in a way that is really unappreciated. Historically scribblers have always distrusted those who specialize in banking (eg, Jews, Knights Temlar), seeing them as parasites. In reality, they offer an essential service of financing investment that generates productivity we generally take for granted (eg, those economists who assume a growth rate in productivity irrespective of institutions and laws, as in the development economists who made excuses for Africa and other lesser-devloped countries for the past 50 years). We in the developed world are lucky to have cost-conscious and efficient bankers. The alternative is not pretty.
Goldfish (guest) meinte am 5. Oct, 19:06:
Brazilian spreads
Try not to fall off your chair: in Brazil, bank spreads hover in the vicinity of 40/50 percentage points per year (with 15/16% average nominal basic interest rates, that is a 200% spread), and real interest rates have been around 11% for the last 10 years. 
HedgeFundGuy antwortete am 6. Oct, 04:10:
I think you are defining things differently than me. I assume a spread is just "Loan Rate-Deposit Rate". How is a bank spread 40% given a 15% nominal interest rate? Is the 15% on deposits or loans? What is 200%? 
Goldfish (guest) antwortete am 6. Oct, 21:09:
I'm defining the spread as the difference between the Loan rate and the banks' marginal financing cost, given by the interbank funds market. In that market the interest rate has been around 15% , but the loan rate by private banks to private debtors has been around 60/70% p.a. on average.

Then there is a 40 or 50 percentage points spread, which amounts to 200% the financing cost. 
dsquared (guest) meinte am 11. Oct, 11:23:
they can't be using "net interest margin" conventionally
The net interest margin doesn't take defaults into account as normally calculated. It's usually equal to net interest income / interest earning assets, and differs from the average spread to the extent to which IEAs are financed out of non-interest-bearing liabilities like current account deposits and equity capital.

Spreads in the region 18% were not terribly uncommon in Europe, the UK and USA twenty years ago btw; they have come down massively as a result of deregulation.