Does Bank Capital Increase the Productivity of the Banking Industry? A Critical Review

Abstract The purpose of this paper is to assess the level of productivity of the banking sector in the Central African Economic and Monetary Community based on the evolution of the level of minimum bank capital. This study used data from the annual reports and bulletins of the Central African Banking Commission, the database of the Bank of Central African States and the World Bank’s Worldwide Government Indicators for 1998 to 2020. We opted for the estimation of the Malmquist index of total factor productivity based on data envelopment analysis on the one hand, and an estimation of the channels influencing productivity using the generalised method of moments in system on the other hand. This study finds that the minimum capital requirement for banks has a significant positive impact on industry productivity. In addition, the ownership structure and the socio-political framework influence the productivity of banks in the Central African Economic and Monetary Community.