Interest rate spread (lending rate minus deposit rate, %) - Central America & the Caribbean
Definition: Interest rate spread is the interest rate charged by banks on loans to private sector customers minus the interest rate paid by commercial or similar banks for demand, time, or savings deposits. The terms and conditions attached to these rates differ by country, however, limiting their comparability.
Description: The map below shows how Interest rate spread (lending rate minus deposit rate, %) varies by country in Central America & the Caribbean. The shade of the country corresponds to the magnitude of the indicator. The darker the shade, the higher the value. The country with the highest value in the region is Jamaica, with a value of 10.85. The country with the lowest value in the region is The Bahamas, with a value of 3.41.
Source: International Monetary Fund, International Financial Statistics and data files.
Development Relevance: Both banking and financial systems enhance growth, the main factor in poverty reduction. At low levels of economic development commercial banks tend to dominate the financial system, while at higher levels domestic stock markets tend to become more active and efficient. The size and mobility of international capital flows make it increasingly important to monitor the strength of financial systems. Robust financial systems can increase economic activity and welfare, but instability can disrupt financial activity and impose widespread costs on the economy.
Limitations and Exceptions: Countries use a variety of reporting formats, sample designs, interest compounding formulas, averaging methods, and data presentations for indices and other data series on interest rates. The IMF's Monetary and Financial Statistics Manual does not provide guidelines beyond the general recommendation that such data should reflect market prices and effective (rather than nominal) interest rates and should be representative of the financial assets and markets to be covered. For more information, please see http://www.imf.org/external/pubs/ft/mfs/manual/index.htm.
Statistical Concept and Methodology: The interest rate spread - the margin between the cost of mobilizing liabilities and the earnings on assets - measures financial sector efficiency in intermediation. A narrow spread means low transaction costs, which reduces the cost of funds for investment, crucial to economic growth.
Aggregation method: Median