scholarly journals Interest Rate Spread as the 'Power of Growth' on Financial Profitability of Banks in Africa

2021 ◽  
pp. 312-332
Author(s):  
Emmanuel Kwaku Manu ◽  
Wen Xuezhou ◽  
Mary Akosuah Somuah
Keyword(s):  
Interest Rate ◽  
Bank Credit ◽  
Parameter Estimates ◽  
Cross Sectional ◽  
High Interest Rate ◽  
Long Period ◽  
Panel Ardl ◽  
Homogeneity Assessment ◽  
The Impact ◽  
Financial Profitability

The high-interest rate has postured solemn distresses to the administration, managers, firms, and the masses. Commercial banks in Africa, principally, are exasperated to use the policy rate to bring down loaning charges. Interest rate charges though have sustained to persist gluey downwards. This study considered the impact of interest rate as the power of growth on financial profitability and examine the causal link amid the measurement variables (bank credit, savings, non-performing loans, and interest rate) between 2000 and 2016. The countries used in this study were investigated as a whole panel and individually per country. First, considering the results from homogeneity assessment and Pesaran CD's checks, we detect the presence of heterogeneity and cross-sectional correlations for the explored data. Second, the CADF and CIPS panel unit root tests report that the variables are non-stationary at their stages but become stationary at their first transformations. Third, the Westerlund-Edgerton panel bootstrap cointegration test shows that the variables are cointegrated and hence possess a structural long-run relationship. Forth, results from the PMG estimator through the panel ARDL model show that; (1) A two-way connectedness is verge by bank credit and FP in the long-period and short-run; (2) A positive and significant one-way cause running from NPLs to BC, a one-way cause amid interest rate and bank credit and lastly one-way causality only in the long-period for NPLs and SAV are evidenced; (3) The PMG estimator through the panel ARDL framework is evidenced to be very significantly effective to the application of Granger causatives test. Though different parameter estimates are evidenced, the results are generally consistent with that of the PMG in terms of connections.

Interest rate liberalization and economic growth nexus: does corruption matter?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abdulhadi Aliyara Haruna ◽  
Abu Sufian Abu Bakar
Keyword(s):  
Economic Growth ◽  
Interest Rate ◽  
Positive Impact ◽  
Reform Process ◽  
Negative Effects ◽  
African Countries ◽  
Cross Sectional ◽  
Content Type ◽  
Interest Rate Liberalization ◽  
The Impact

Purpose This paper aims to examine the impact of interest rate liberalization on economic growth and the relevance of corruption in the five selected sub-Saharan African countries. Design/methodology/approach The study used the modified version of Driscoll and Kraay’s model by Hoechle, which solved the effects of cross-sectional dependence and heteroscedasticity. Findings The findings reveal a positive impact of the index on economic growth, and it was found that foreign direct investment (FDI) and credit to private sector by banks (CPSB) all stimulate economic growth. The interaction terms of corruption with FDI and CPSB indicate negative effects that show how corruption erodes the benefits of liberalization. Finally, the paper recommends the pursuit of appropriate policies with the sole aim of eradicating corruption and providing a conducive environment for business. Originality/value The paper developed a composite domestic financial liberalization index to capture the timing and essential dimensions of the reform process. The study investigates the effect of interest rate liberalization on economic growth and the relevance of corruption. Most of the recent and past studies only examined the impact of interest rate reforms on growth without investigating the relevance of corruption.

scholarly journals The Effect of Risks on Banking Safety: Applied Study on Jordanian Traditional Banks (2005-2016)

2017 ◽  
Vol 9 (9) ◽  
pp. 102
Author(s):  
Mohammad Abdel Mohsen Al-Afeef ◽  
Atallah Hassan Al-Ta'ani
Keyword(s):  
Interest Rate ◽  
Credit Risk ◽  
Commercial Banks ◽  
Banking Sector ◽  
Liquidity Risk ◽  
Interest Rate Risk ◽  
Bank Credit ◽  
Applied Study ◽  
Rate Risk ◽  
The Impact

Banking sector is one of the most important sectors that support the sustainable economic development in Jordan, therefore this study aimed to test the impact of risks; (Liquidity risk, bank credit risk and interest rate risk) on the safety in the banking sector in the Jordanian commercial banks during the period 2005-2016.The results of the study showed that there is a statistically significant impact for each of liquidity risk and interest rate risk on the safety in the banking sector, and there isn't statistically significant impact for credit risk on the safety in the banking sector during the period of this study, and also find that the explanatory of model was 60.5%, which means that 39.5% due to other factors.

Impact of Financial Risks on the Profitability of Systematically Important Banks in Nigeria

Paradigm ◽  
2019 ◽  
Vol 23 (2) ◽  
pp. 117-129
Author(s):  
Olufemi Adewale Aluko ◽  
Funso Tajudeen Kolapo ◽  
Patrick Olufemi Adeyeye ◽  
Patrick Olajide Oladele
Keyword(s):  
Interest Rate ◽  
Fixed Effects ◽  
Positive Impact ◽  
Financial Risks ◽  
Cross Sectional ◽  
Bank Profitability ◽  
Alternative Measures ◽  
Cross Sectional Dependence ◽  
Fixed Effects Regression ◽  
The Impact

This study examines the impact of financial risks in form of credit, interest rate and liquidity risk on the profitability of systematically important banks in Nigeria over the period from 2010 to 2016. The fixed effects regression model is estimated with Driscoll–Kraay standard errors in order to produce results that are robust to heteroscedaticity, autocorrelation, cross-sectional dependence and temporal dependence. After controlling for some bank-specific, industry-specific, macroeconomic and institutional factors, the empirical results show that credit and liquidity risks have a positive impact on bank profitability while interest rate does not have an impact. The results are robust to alternative measures of profitability.

Intended and Unintended Consequences of Government Credit Guarantee Programmes

2018 ◽  
Author(s):  
Vasso Ioannidou ◽  
José Maria Liberti ◽  
Thomas Mosk ◽  
Jason Sturgess
Keyword(s):  
Unintended Consequences ◽  
Bank Credit ◽  
Entrepreneurial Firms ◽  
Efficient Allocation ◽  
Cross Sectional ◽  
Government Guarantee ◽  
Loan Guarantees ◽  
The Impact ◽  
Intended Effect

In this chapter, we provide empirical evidence that the underwriting of private sector loans through a loan guarantee programme distorts the efficient allocation of bank credit. We exploit cross-sectional and time series variation in the availability of loan guarantees to entrepreneurial firms in the Netherlands after the financial crisis to examine the impact of loan guarantees on a large sample of individual borrowers. The introduction and posterior withdrawal of the programme had the intended effect on the number of loan applications. Firms eligible for loan guarantees applied for more loans relative to those that were not. However, loan guarantees reduced the incentives on banks to screen and monitor the quality of loans by reducing collateralized loans and making riskier loans. Our findings suggest that government guarantee programmes may have adverse effects on the screening incentives of banks.

scholarly journals The CAPM with Measurement Error: ‘There’s life in the old dog yet!’

2020 ◽  
Vol 240 (4) ◽  
pp. 417-453
Author(s):  
Anastasia Simmet ◽  
Winfried Pohlmeier
Keyword(s):  
Measurement Error ◽  
Abnormal Returns ◽  
Parameter Estimates ◽  
Capital Asset Pricing ◽  
Cross Sectional ◽  
Market Index ◽  
Practical Guidelines ◽  
The Impact ◽  
Test Outcomes ◽  
Distance Approach

AbstractThis paper takes a closer look at the consequences of using a market index as a proxy for the latent market return in the capital asset pricing model. In particular, the consequences of two major sources of misspecification are analyzed: (i) the use of inaccurate weights and (ii) the use of only a subset of the asset universe to construct the index. The consequences resulting from the use of a badly chosen market proxy reach from inconsistent parameter estimates to misinterpretation of test outcomes indicating the existence of abnormal returns.A minimum distance approach of estimating the CAPM under measurement error is presented, which identifies the CAPM parameters by exploiting the cross-equation cross-sectional restrictions resulting from a common measurement error. The new approach allows for quantifying the impact of measurement error and for testing the presence of spurious abnormal returns. Practical guidelines are presented to mitigate potential biases in the estimated CAPM parameters.

Sustainable development of microfinance customers

2017 ◽  
Vol 30 (1) ◽  
pp. 49-64 ◽  
Author(s):  
Saju Jose ◽  
Jacob Chacko
Keyword(s):  
Interest Rates ◽  
Research Question ◽  
Operating Cost ◽  
Small Sample ◽  
Bottom Of The Pyramid ◽  
Structured Interviews ◽  
Cross Sectional ◽  
High Interest Rate ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to examine whether microfinance activities aimed at the bottom of the pyramid consumers are sustainable. Design/methodology/approach The study follows a mixed methodology, manager’s views on sustainability of the programs were gauged by analyzing their responses in the areas of diversion of funds, operating cost, interest rates, and return rate of loans through semi-structured interviews. A survey was administered to 316 poor microfinance borrowers at the bottom of the pyramid in India in a cross-sectional field study format. The study used one sample t-test to test the sustainability of the microfinance activities. Findings All else being the same, microfinance activities aimed at the borrower’s communities are not sustainable. The major contributor to the lack of sustainability is the diversion of funds, results of both managers’ interviews and consumer survey provides strong evidence to support this. Though there are issues related to high interest rate, operating cost and low return on investment, it seems that the core issue behind all this is lack of full investment in the microfinance venture. Research limitations/implications The study was limited to only two states in India. The mixed nature of the study meant that semi-structured interviews with a relatively small sample were the most appropriate method to address the research question. Future studies with larger, more representative sample sizes are encouraged to investigate how the findings can be generalized to larger populations. Also the information which determines the experiences and satisfaction of the consumers is collected only once. This study does not account for any changes over time in the populations or their interest. Originality/value The impact of micro finance in alleviating poverty is questioned by researchers and there is demand for further empirical evidence. Therefore, the findings of this study complement with existing work to present a comprehensive understanding of this topic by investigating the sustainability aspect of these programs from the dimension of both customers and lenders.

scholarly journals Market Failure In African Agricultural Marketing Systems: An Econometric Testing And Analysis Of Market Efficiency

2011 ◽  
Vol 6 (9) ◽  
Author(s):  
Gbolahan S. Osho
Keyword(s):  
Interest Rate ◽  
Market Share ◽  
Market Failure ◽  
Least Square ◽  
Sub Saharan Africa ◽  
High Interest Rate ◽  
Market Growth ◽  
Sub Saharan ◽  
The Impact ◽  
Determinants Of Economic Growth

The last few years have seen substantial revivals of interest in the determinants of economic growth in Africa, especially in the Sub-Saharan Africa. This paper provides an econometric model that help to examine the impact of market share, interest rate and non-economic factors such as external shocks, structural adjustment policies on the GDP of Sub-Saharan Africa. Economic development data covering the period of 1970 to 2004 was used in estimation with ordinary least square (OLS). The results indicate that market share is the crucial element for low GDP in this region of the world and that high interest rate lowers the GDP and therefore impedes market growth. The econometric analysis showed the failure of interest rate to rise with the GDP has been the result of changes in fundamental determinants.

scholarly journals A Dual-Channel Sale System in Financially Constrained Supply Chain

2021 ◽  
Vol 2021 ◽  
pp. 1-10
Author(s):  
Xin Li ◽  
Zhang Tao ◽  
Nana Feng
Keyword(s):  
Interest Rate ◽  
The Other ◽  
High Interest Rate ◽  
The Sustainable Development ◽  
Dual Channel ◽  
Lower Interest Rate ◽  
The Interest Rate ◽  
Cournot Games ◽  
The Impact ◽  
Total Sales

In order to realize the sustainable development of the communication industry, many banks have developed some new projects to provide loan to the mobile phone brand companies (MPBCs). This paper studies a perfect information game among three parties: telecom operator (TO), MPBC, and bank. In the first stage, the bank decides an interest rate and shows it to the TO and the competitive MPBC. In the second stage, the TO and MPBC are engaged in Cournot games: a simultaneous subgame, a TO-as-leader sequential subgame, and an MPBC-as-leader sequential subgame. The TO’s and the MPBC’s decisions and the production/sale quantities are investigated. The impacts of the interest rate and the substitute factor on the TO’s and the MPBC’s optimal decisions are analyzed. When the substitute factor is high, at a low interest rate, the total sales in the simultaneous subgame is higher than those in the other two subgames; at a high interest rate, the total sales in the MPBC-as-leader subgame is higher than those in the other two subgames. However, when the substitute factor is low, at a low enough interest rate, the total sales in the simultaneous subgame is higher than those in the other two subgames; at a high enough interest rate, the total sales in the MPBC-as-leader subgame is higher than those in the other two subgames; at a moderate interest rate, the total sales in the TO-as-leader subgame is higher than those in the other two subgames. Besides, the optimal interest rate of the bank is investigated and the impact of the substitute factor on the optimal interest rate is analyzed. The bank sets a higher interest rate in the MPBC-as-leader subgame than those in the other two subgames. Besides, when the substitute factor is low, the bank sets a lower interest rate in the TO-as-leader subgame than that in the simultaneous subgame; however, when the substitute factor is high, the bank sets a higher interest rate in the TO-as-leader subgame than that in the simultaneous subgame.

scholarly journals Impact of commercial bank credit on agricultural output in Nigeria

2019 ◽  
Vol 5 (1) ◽  
pp. 5-20
Author(s):  
Aduralere O. Oyelade
Keyword(s):  
Interest Rate ◽  
Trend Analysis ◽  
Commercial Bank ◽  
Commercial Banks ◽  
Ordinary Least Squares ◽  
Least Square ◽  
Bank Loan ◽  
Bank Credit ◽  
Agricultural Output ◽  
The Impact

Purpose. The purpose of this study was to investigated the impact of commercial bank credits on agricultural output in Nigeria over the period 1980 to 2015 by setting three specific objectives which are to examine the trend of commercial bank credit and agricultural output in Nigeria; to investigate the effect of commercial bank credit on agricultural output in Nigeria and to investigate the effect of commercial bank credit on subsector of agriculture in Nigeria. The trend analysis and the impact of commercial bank credit on subsector of agriculture in Nigeria make this work unique and different from other studies in this area. Trend analysis was used to achieve the first objective and fully modified ordinary least square (OLS) for objective two and three. Methodology. The study employed Fully Modified Ordinary Least Squares (FMOLS) approach. Findings. It was evidenced that interest rate on commercial banks’ credit to agriculture and deposit money bank’s assets are statistically significant in determine agricultural output in Nigeria within the period considered. Also, commercial bank loan on agriculture and deposit money bank’s assets determine the output of crop production in Nigeria; commercial bank loan on agriculture and interest rate on commercial banks’ credit to agriculture determine the output of livestock production in Nigeria and commercial bank loan on agriculture and interest rate on commercial banks’ credit to agriculture determine the output of forestry in Nigeria while commercial bank loan on agriculture and interest rate on commercial banks’ credit to agriculture determine the output of fishing in Nigeria. Limitations. This study is limited because the study does not include other variables that determine the output of agricultural sector in Nigeria. Also, other theories and methods can still be used by other researcher to make it different from this work. Originality. This is an original work and has neither been published in any other peer-reviewed journal nor is under consideration for publication by any other journal.

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