“Financial sector reforms led to the removal of credit ceilings and interest rate controls and opened the banking system to new competition. This study examines the effect of financial sector reforms on market structure, financial intermediation, savings mobilization and commercial bank profitability in the Malawian banking industry. The evidence in this study shows that some signs of financial repression still exist, although some positive developments have taken place. The results show that financial liberalization has significantly increased financial depth and savings mobilization, increased credit to the manufacturing sector, and reduced the monopoly power in the Malawian banking system. However, real interest rates have fallen, intermediation margins have increased, credit to the public sector has increased and that to the private sector has
fallen. Using the market structure–performance hypothesis, the study finds a significant relationship between monopoly power and commercial bank profitability, but rejects the efficient market hypothesis.”
