The State of Competitiveness in Kuwait Banking Sector

Abstract

The aim of this study is to examine the competitiveness in the Kuwaiti banking sector for the period 2010 - 2020. The methodology of study assessed the degree of competition among nine national Kuwaiti banks using the Panzar and Rosse model, or the H statistic approach. The study assessed how close the banking sector in Kuwait is to perfect competition. It built a model for the revenues of the banking sector in Kuwait. The model considered various specifications that affect the banking sector’s performance like revenues, risk, deposits, and bank size. In addition, this study analyzed the major factors affecting this sector’s performance. Using the panel data methodology of estimation, the results revealed that the market structure for the banking sector in Kuwait is close to monopolistic competition. Though the banking sector in Kuwait is still in its development stages, the results provided a signal to policy makers regarding their policies. One main implication of the study is to keep strong competition among banks which requires maintaining the stability within the banking system.