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In this paper, we reexamine the determinants of nonperforming loans through the impact of supervisory devices in credit risk management in Africa. The paper employs bank-specific, macroeconomic and institutional data for a panel of 14 universal banks over the period 2009 to 2020. We develop models that capture the role of regulatory supervision on credit risk. Findings from the Panels Corrected Standard Errors (PCSE) and the system GMM shows that previous year's NPL and inflation significantly affect NPLs in the banking space of Gana. Bank size and financial development are inversely associated with NPLs. The interactive term of regulatory quality and government effectiveness on NPLs has net negative effect. This suggest that regulatory quality enhances the reductive effects of government effectiveness on NPLs. Our findings in general lends credence to the financial instability theory as NPLs in the Ghanaian context has been the outcome of activities of speculative borrowers. [ABSTRACT FROM AUTHOR]

This paper contributes to the debate about Africa's financial stability by focusing on the prevalence of systemic risk in 40 listed derivatives user-banks over 2011–2017, employing the systemic risk index (SRI), and subsequently exploring how it links to the continent's financial market development. The systemic risk buildup within the industry is mainly depicted as an unstable, diluted, and possibly depleting process. Gloomy predictions persist in the subsequent attempts to uncover plausible causes of systemic risk formation. Mainly, conventional defining factors for risk exhibit irrelevance toward systemic risk development, as threats to financial stability remain confined within the industry, supported by a lack of diversification in financial services. The investigated markets may be individually subject to internal vulnerabilities that could be exacerbated by financial shocks, feedback effects, and the likelihood of contagion and failure among financial institutions. [ABSTRACT FROM AUTHOR]

Mobile money is a mobile-phone-based financial tool that can transfer money safely and quickly across a wide geographical area. Mobile money has transformed the way businesses in Eastern sub-Saharan Africa operate. Nowadays, banks team up with mobile-money-service providers and pay interest on deposits and grant loans based on financial transactions in mobile-money accounts. In this paper, these recent developments are investigated in order to determine whether the adoption of mobile money by firms can actually help them mitigate the vexing problem of access to finance. To answer this question, the World Bank's Enterprise Surveys Program data set for the year 2013 is used, thus making the study applicable to the present time. The results obtained, after controlling for a large number of firm-level characteristics and using a newly introduced measure to identify access-to-finance status of the firms, indicate that firms which use mobile money are more likely to obtain loans or lines of credit. Further analysis shows that the firms that use mobile money are more productive than other firms in the region. [ABSTRACT FROM AUTHOR]

This paper investigates the long-and short-run rate of transmission of the prime rate to interest rates since the implementation of inflation targeting policy in Ghana. Monthly data covering the period January 2002 to March 2016 is used. The Johansen and Hansen parameter instability cointegration, the FMOLS and DOLS estimation procedures were used. The long-run results show incomplete pass-through of the prime rate to commercial banks' lending and deposit rates but over pass-through to the 91-day Treasury bill rate. The short-run adjustment shows relatively slow transmission of the prime rate to the respective interest rates. Given the findings, relevant policy suggestions are provided. [ABSTRACT FROM AUTHOR]

This paper analyses the implications of cross-border banking (CBB) and institutional quality (IQ) for bank competition in Africa. It applies a two-step estimation procedure using bank-level panel data for 29 African countries. In step one, the Boone indicator and the Lerner index are used to gauge bank competition in a given country in Africa. In the second step, it analyzes the sources of bank competition placing emphasis on the impact of CBB and IQ. The results suggest that competition increased in the period of 2002–2005, before decreasing somewhat between 2006 and 2007 and increasing again thereafter. The results also show that cross-border banking enhances bank competition in African countries with stronger governance structures and institutional quality. These results are robust to an array of controls including an alternative methodology, variable specifications, and the regulatory environments that banks operate in. [ABSTRACT FROM AUTHOR]

A major weakness of bank regulation is “regulatory forbearance,” which is partly attributable to the scope for discretionary intervention by bank regulators. Therefore, bank regulation might be improved by subjecting intervention policy to a set of rules, such as the “Prompt Corrective Action” (PCA) rules in the US. The introduction of PCA rules is under consideration in a number of developing countries (DCs), stimulated by costly bank failures. This paper examines the potential benefits and feasibility of incorporating PCA rules into banking regulation in DCs. The paper concludes that PCA rules can improve bank regulation in DCs if introduced as part of a comprehensive set of prudential reforms which strengthens the operational independence of the bank regulators, improves their on-site examination capacities, strengthens accounting standards and raises public and political understanding of the need for strong and impartial bank regulation. [ABSTRACT FROM PUBLISHER]

This paper uses robust econometric methods to estimate the determinants of non-performing loans (NPLs) with a specific focus on the role of the 2007–2009 financial crisis in explaining NPLs in the banking industry of Ghana. Findings suggest that non-performing loans are significantly affected by bank-specific, industry, and macroeconomic variables. We observed heterogeneity in the determinants of NPLs for sub-samples of the data. The effect of the financial crisis on NPLs is observed to be conditional on the level of credit risk in our sub-sample analysis. The results from the impulse response corroborate that of the regression estimation. [ABSTRACT FROM AUTHOR]

Small and medium enterprises (SMEs) are the core of most economies and are a major source of economic growth. In recent times, banks have been actively involved in the financing of SMEs through the provision of loans to this sector. This paper investigates the impact of SMEs financing on banks’ profitability in Ghana. The study employed the fixed effect model as the main regression tool. The study result reveals that SMEs significantly contribute to banks’ profitability in Ghana. Interestingly, transaction cost in administering SME loans was insignificant in all the models. Higher inflation reduces the real value of the loan and erodes the interest returns on the total credit to the SMEs. Conversely, growth of GDP enhances the growth of the bank profit. [ABSTRACT FROM PUBLISHER]

This paper examines the effect of the inclusion of non-interest income on efficiency and economies of scale of Ghanaian banks in a two-stage analysis. The data envelopment analysis technique is employed to estimate efficiency scores with and without non-interest income of 26 Ghanaian banks from 2003 to 2011 in the first-stage analysis. In the second stage, a truncated bootstrapped regression is estimated to examine the effect of contextual variables on bootstrapped efficiency scores. The findings indicate that the exclusion of non-interest income as output variable leads to the under-estimation of efficiency scores. From the second-stage regression analysis, we find a curve-linear relationship between bank size and efficiency to suggest that bank efficiency increases as size also increase due to economies of scale but only up to an optimal point after which inefficiency sets. Market concentration, leverage, and loan loss provisions are also identified as the other significant determinants of efficiency. Policy implications for improving bank efficiency are discussed. [ABSTRACT FROM PUBLISHER]

This paper provides an empirical analysis of the determinants of the bank lending rate in Ghana using annual time series data from 1970 to 2013. We found evidence of a long-run equilibrium relationship between the average lending rate charged by commercial banks and its determining factors. In the long run, bank lending rates in Ghana are positively influenced by nominal exchange rates and Bank of Ghana’s monetary policy rate but negatively with fiscal deficit, real GDP and inflation. We also find positive dependence of the bank lending rate on exchange rates, and the monetary policy rate both in the short and long run. Specifically, our findings reveal that the Bank of Ghana’s monetary policy rate and the exchange rate, by far, show strong contemporaneous effects on the average bank lending rate in Ghana. [ABSTRACT FROM AUTHOR]

This paper examines the firm- and macro-level drivers of financial innovations in Kenya's commercial banks. We focus on branchless banking innovations, namely: mobile banking, agency banking, internet banking and automated teller machines. These financial innovations represent a departure from traditional branch based banking. We conduct an empirical analysis of the four financial innovations using Koyck distributed lag models, estimated using dynamic panel estimation with System Generalized Method of Moments. We use 10-year panel data from 42 out of 43 commercial banks in Kenya covering the years 2004-2013. We provide empirical evidence that at the firm level, branchless banking is driven by firm size, transaction cost, agency costs, technological developments at the firm level and firm constraints. In addition, at themacro level, regulation, technological developments at the macro level, incompleteness in financial markets and globalization are important drivers of branchless banking. [ABSTRACT FROM AUTHOR]

This paper analyzes whether multinational, domestic national and domestic rural banks are perceived differently by consumers in a developing economy-Ghana. The paper investigates the critical determinants of consumer perceived product and service quality for each type of institution in the Ghana banking industry. The evidence shows variation in bank quality in the sense that multinational banks are perceived more positively than both types of domestic banks on the dimensions of transactional and relational customer service, but they are viewed more negatively for benefits advertised in promotions and interest rate on savings accounts. Unexpectantly, multinational banks have a competitive advantage with respect to both technology and human relationship management. Their competitive advantage enables multinational banks to pay lower interest rates on deposits. [ABSTRACT FROM AUTHOR]

This paper probes into the application of Basel III in Mauritius. Findings show that although Mauritian banks are well-capitalized and carry excess liquidity, they will have to restructure their balance sheets by incorporating highly liquid assets such as government securities. While Basel III will foster greater financial stability, this will translate into lower supply of credit, higher cost of credit and lower returns with potential strains on SME lending. Similarly, Bank of Mauritius’s ability to control credit growth will be hindered because banks’ existing leverage ratios are already higher than the stipulated minimum leverage ratio of 3%. To harness the full benefits of the reforms, additional measures tailored to the specificities of the Mauritian economy will be needed. Other challenges prevail like establishing robust data management, risk methodologies, reporting systems and IT architecture as well as identifying the timing and the size of the Countercyclical Capital Buffer. Local banks anticipate Basel IV in the coming years as a refined tool. [ABSTRACT FROM PUBLISHER]

The purpose of this article is to test the moderating effect of social networks in the relationship between mobile money usage and financial inclusion in rural Uganda. The results revealed that there is a significant and positive moderating effect of social networks in the relationship between mobile money usage and financial inclusion in rural Uganda. Besides, mobile money usage and social networks have direct and significant effects on financial inclusion in rural Uganda. Thus, the findings suggest that existence of social networks of strong and weak ties among mobile money users promote financial inclusion in rural Uganda. Previous studies have concentrated only on investigating the impact of mobile money in promoting financial inclusion in developing economies, especially in Sub-Saharan Africa. However, this particular study introduces the moderating effect of social networks in the relationship between mobile money usage and financial inclusion in rural Uganda, which seems to be sparse and lacking in literature. [ABSTRACT FROM AUTHOR]

This article assesses the adjustment of inflation with financial dynamic fundamentals of money (financial depth), credit (financial activity), and efficiency. Three main findings are established: (a) there are significant long-run relationships between inflation and the fundamentals; (b) the error correction mechanism is stable in all specifications but in case of any disequilibrium, only financial depth is significant in adjusting inflation to the long-run relationship; and (c) in the long-run, short-term adjustments in the ability of banks to transform money into credit do not matter in correcting inflation. This is most probably due to surplus liquidity issues. Policy implications are discussed. [ABSTRACT FROM AUTHOR]

The study aims at determining the effect of inflation on finance-growth nexus on 23 Sub-Saharan Africa countries with 5-year averaged data set over the period 1982–2016. A non-dynamic threshold approach is utilized. Strong evidence of inflation threshold of 31% beyond which the impact of financial development on economic growth turns negative from positive is obtained. There is also inflation threshold of 13% obtained when financial development is represented by private credit by deposit money banks and other financial institutions (% of GDP) but with an even higher positive impact of financial development on economic growth beyond the identified inflation threshold. This supports the view that financial development can only become inversely related to growth at much higher-inflation level of above 31%, below which there is robust positive finance-growth nexus. It is, therefore, recommended to always keep inflation levels at lower levels, preferably below 31%, which would ensure sustainable development through financial development. [ABSTRACT FROM AUTHOR]

In this study, we have explored the dynamic causal relationship between financial development and economic growth in Uganda during the period from 1980 to 2015. Although the finance-growth nexus debate has been raging for decades, Uganda, similar to many other low-income sub-Saharan African countries, has not yet received adequate coverage on the subject. To eliminate the variable omission bias associated with some previous studies, two intermittent variables, namely savings and inflation, have been included alongside financial development and economic growth in a multivariate Granger-causality setting. In addition, five proxies of financial sector development have been used in the current study, namely money supply to GDP, deposit money bank assets as a percentage of bank assets, liquid liabilities to GDP, private credit by deposit money banks to GDP, and bank deposits to GDP. Using the ARDL approach, the findings of the study reveal that the direction of causality between financial development and economic growth in Uganda is not clear-cut. It varies from one model to the other, depending on the proxy used for financial development. When financial development is proxied by liquid liabilities to GDP and bank deposits to GDP, a unidirectional causal flow from financial development to economic growth is found to prevail. When deposit money bank assets to bank assets ratio is considered a proxy of financial development, astrong bi-directional causal relationship between financial development and economic growth is found to predominate. However, when money supply to GDP and private credit by deposit money banks to GDP are used as proxies, no causality is found to exist between financial development and economic growth in either direction. Based on these results, it is recommended that when drafting policies aimed at boosting economic growth, policymakers should target growth-led financial development proxies as policy implementation outcomes may vary depending on the targeted financial development proxy. [ABSTRACT FROM AUTHOR]

The aim of this study is to investigate the role of Nigerian banks in funding the short-term and long-term financing requirements of Nigerian quoted manufacturing enterprises in an environment of economic reforms. It has been argued that the deregulation of the financial system induces financial fragility, credit rationing and bank disintermediation, thus limiting the effectiveness of the monetary transmission mechanism. We analyzed relevant data from selected authoritative official publications and found that the liberalization of the Nigerian economy in 1986 under the Structural Adjustment Program (SAP) resulted in deteriorating corporate liquidity, declining bank credit to the manufacturing sector, outrageous increases in interest rates, with the consequential decline in the contribution of the manufacturing sector to the GDP. As economic reforms commence, it is necessary for managers of banks and quoted manufacturing enterprises to maintain a well diversified portfolio of liquid assets. That way, spontaneous financial gaps can be better managed. Top management must make important borrowing decisions before relatively predictable events occur. As banks continue to emphasize high asset quality in their loan portfolio, manufacturing enterprises are expected to manage strategically the resulting credit crunch by expanding their corporate finance matrix in a way that matches their operating cycles. Monetary policy should be redirected to moderate interest rates, as well as improve credit supply in order to make the banking sector more relevant as competitive pressures intensify in the Nigerian financial services industry. [ABSTRACT FROM PUBLISHER]

The capacity of Ghanaian banks to absorb large but plausible losses resulting from concentration of individual bank loan portfolios in sectors of the Ghanaian economy is investigated. Stress scenarios consist of worsening of banks’ impaired loan charges by one, two and three standard deviations of the industry’s recent distribution of non-performing loans. Findings reveal that the capital adequacy ratios of many banks would have been negatively impacted, some to the point of becoming insolvent. It is argued that, though these would be micro-prudential breaches, they are of such magnitude as to have economy-wide repercussions. Thus, bank loan portfolios are too concentrated. [ABSTRACT FROM PUBLISHER]

This study investigates the determinants of African bank profitability while controlling for bank capital regulation. Using static and dynamic panel estimation techniques, the findings indicate that bank size, total regulatory capital, and loan loss provisions are significant determinants of the return on assets of listed banks compared to non-listed banks. Also, regulatory capital has a more significant (and positive) impact on the return on assets of listed banks than non-listed banks particularly when listed banks have sufficient regulatory capital ratio. We also find that higher regulatory thresholds have a negative impact on the return on asset of non-listed banks. [ABSTRACT FROM PUBLISHER]

Excessive risk-taking could spell doom for the financial market and the economy as a whole as evidenced by the recent global financial crisis of 2007/08. In this study, we document the impact of corporate governance on bank risk-taking behaviour whilst accommodating the moderating effect of forms of ownership on the relationship in a regulated environment as banks do not operate in a vacuum. A panel study with data spanning from 2000 to 2013 under the fixed effects model after several model diagnostics and performance of the Hausman specification test was used. We find reserve requirement regulation to significantly influence risk-taking positively. We advocate the reversal of the recent increase in the reserve requirement from 9% to 11% and rather recommend an increase in the regulatory capital adequacy ratio from the current 10%. [ABSTRACT FROM PUBLISHER]

This study investigates the determinants of net interest margin and the role of the financial crisis in explaining net interest margin (NIM) in the banking industry in Ghana. Further, we assess the sensitivity of our results to the measure of credit risk. We observe a sharp drop in NIM and an increase in bad debt growth during the 2007–2009 financial crisis in Ghana’s banking sector. Depending on the definition of credit risk, we observe marginal differences in the magnitude and significance of the determinants of NIM. Generally, NIM is explained by bank-specific, industry and macroeconomic factors. We find risk aversion, operating cost, inflation rate and previous year’s GDP growth to be robust drivers of NIM. [ABSTRACT FROM PUBLISHER]

The effects of the entry of foreign banks and changes in bank concentration on the technical efficiency of domestic banks in Ghana over the period 2000–2008 is analyzed. Technical efficiency scores were obtained by the Data Envelopment Analysis. Then, the Tobit regression was used to analyze the impact of hypothesized explanatory variables on bank efficiency. Foreign bank share of total industry assets was used to proxy the impact of foreign banks. The findings suggest that efficiency of domestic banks has been positively affected by the entry of foreign banks and reduction in concentration. Thus, the central bank's policy of liberalizing the banking sector appears to be well placed. [ABSTRACT FROM AUTHOR]

This research examines the role of project communication, individual commitment, and social networks in explaining perceived project performance. Despite the increased involvement of commercial banks in citizenship projects in Uganda, anecdotal evidence reveals that over 70% of citizenship projects fall short of the expected quality, fail to boost bank awareness, are cost overrun, and are completed behind schedule. Based on data from 121 citizenship projects conducted by 16 commercial banks in Uganda, findings revealed that project communication, individual commitment, and social networks are significant predictors of perceived project performance. This study has managerial implications, which are presented in this article. [ABSTRACT FROM AUTHOR]

Ghana, one of the fastest growing liberalized developing economies in Africa, has, in recent years, established a nationwide rural bank system and has witnessed an increase in the entry of foreign retail banks. Although there are increased activities and interest about bank offerings and bank-customer relationships in Ghana (Dadzie, Akaah, and Dunson, 1989), to date, researchers have overlooked the factors underpinning consumers' selection criteria of retail banks in Ghana (Owusu-Frimpong, 1999). This exploratory research complements extant studies on retail bank selection by developing a scale providing insights into consumers' selection of retail banks in Ghana. The results identify three key factors, namely, “competence,” “recommendation by parents,” and “free banking/no bank charges” that are important in the decisions and selection of retail banks. The reliability and validity of the scale were assessed using exploratory and confirmatory factor analyses. Conclusions, managerial implications, limitations, and future research directions are discussed. [ABSTRACT FROM AUTHOR]

This study ascertains the extent to which the marketing concept has been adopted and implemented by banks in Ghana. It addresses a gap in an area that is currently under researched and provides insight into the banking services industry in a developing country. All sixteen licensed banks in Ghana were included in this study. The data was collected through in-depth interviews and self completed questionnaires. The results suggest that marketing departments in the banks are organised mainly within headquarters and headed by marketing and advertising/public relations managers. The marketing activities in the banks are associated with the stage where marketing orientation is perceived as advertising and public relations. There is a partial lack of marketing culture in the banks. The total and formal acceptance and understanding of the marketing concept is at an embryonic stage in the evolutionary process. [ABSTRACT FROM PUBLISHER]