scholarly journals Revenue diversification and financial sustainability of microfinance institutions

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peter Nderitu Githaiga
Keyword(s):  
Generalized Method Of Moments ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Revenue Diversification ◽  
Estimation Model ◽  
Data Set ◽  
Content Type ◽  
Method Of Moments Estimation ◽  
The Impact ◽  
Positive Effect

PurposeThis paper aims to investigate whether revenue diversification affects the financial sustainability of microfinance institutions (MFIs).Design/methodology/approachThe study uses a worldwide panel data set of 443 MFIs in 108 countries for the period 2013–2018 and two-step system Generalized Method of Moments estimation model.FindingsThe study finds that revenue diversification has a significant and positive effect on the financial sustainability of MFIs.Practical implicationsThe findings of this study actually offer important managerial and policy lessons on MFIs’ financial sustainability. Microfinance managers and policymakers should consider revenue diversification as a strategy through which MFIs can attain financial sustainability instead of overreliance on donations and government subsidiesOriginality/valueUnlike previous studies that examined revenue diversification in the context of banking firms, this study contributes to literature by examining the impact of revenue diversification of the financial sustainability of MFIs.

scholarly journals Credit composition and income inequality in Vietnam: an empirical analysis

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Le Quoc Hoi ◽  
Hương Lan Trần
Keyword(s):  
Income Inequality ◽  
Educational Level ◽  
Generalized Method Of Moments ◽  
Institutional Quality ◽  
Primary Data ◽  
Data Set ◽  
Content Type ◽  
Private Credit ◽  
The Impact

PurposeThis paper aims to examine the credit composition and income inequality reduction in Vietnam. In particular, the authors focus on the distinction between policy and commercial credits and investigate whether these two types of credit had adverse effects on income inequality. The authors also examine whether the impact of policy credit on income inequality is conditioned by the educational level and institutional quality.Design/methodology/approachThe authors use the primary data set, which contains a panel of 60 provinces collected from the General Statistics Office of Vietnam from 2002 to 2016. The authors employ the generalized method of moments to solve the endogenous problem.FindingsThe authors show that while commercial credit increases income inequality, policy credit contributes to reducing income inequality in Vietnam. In addition, we provide evidence that the institutional quality and educational level condition the impact of policy credit on income inequality. Based on the findings, the paper implies that it was not the size of the private credit but its composition that mattered in reducing income inequality, due to the asymmetric effects of different types of credit.Originality/valueThis is the first study that examines the links between the two components of credit and income inequality as well as constraints of the links. The authors argue that analyzing the separate effects of commercial and policy credits is more important for explaining the role of credit in income inequality than the size of total credit.

The role of national culture in the impact of board gender diversity on firm performance: evidence from a multi-country study

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Navaz Naghavi ◽  
Saeed Pahlevan Sharif ◽  
Hafezali Bin Iqbal Hussain
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Generalized Method Of Moments ◽  
Gender Diversity ◽  
Governance Structure ◽  
Corporate Governance Structure ◽  
Data Set ◽  
Content Type ◽  
Board Gender Diversity ◽  
The Impact

PurposeThis study seeks to add more insights to the debate on “whether”, “how”, and “under which condition” women representation on the board contributes to firm performance. More specifically, the current study aims to investigate if the effect of board gender diversity on firm performance is dependent on macro factors of national cultures.Design/methodology/approachThe authors used the generalized method of moments regression and a data set consists of 2,550 company year observations over 10 years.FindingsThe results indicated that cultural variables interact with board diversity to influence firm performance. Having women on the board in countries with high power distance, individualist, masculine and low-uncertainty avoidance culture influences the firm performance negatively.Originality/valueThe findings indicate that the effects of corporate governance structure on firm performance depends on culture-specific factors, providing support for the argument that institutional norms that are governed by cultural norms affect the effectiveness of corporate governance structure.

Financial development, human capital and its impact on economic growth of emerging countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aaqib Sarwar ◽  
Muhammad Asif Khan ◽  
Zahid Sarwar ◽  
Wajid Khan
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Financial Development ◽  
Emerging Economies ◽  
Generalized Method Of Moments ◽  
Emerging Countries ◽  
Data Set ◽  
Content Type ◽  
The World ◽  
The Impact

Purpose This paper aims to investigate the critical aspect of financial development, human capital and their interactive term on economic growth from the perspective of emerging economies. Design/methodology/approach Data set ranged from 2002 to 2017 of 83 emerging countries used in this research and collected from world development indicators of the World Bank. The two-step system generalized method of moments is used to conduct this research within the endogenous growth model while controlling time and country-specific effects. Findings The findings of the study indicate that financial development has a positive and significant effect on economic growth. In emerging countries, human capital also has a positive impact on economic growth. Financial development and human capital interactively affect economic growth for emerging economies positively and significantly. Research limitations/implications The data set is limited to 83 emerging countries of the world. The time period for the study is 2002 to 2017. Originality/value This research contributes to the existing literature on human capital, financial development and economic growth. Limited research has been conducted on the impact of financial development and human capital on economic growth.

Can BRICS and ASEAN-5 emerging economies benefit from bank diversification?

2019 ◽  
Vol 27 (1) ◽  
pp. 43-69 ◽  
Author(s):  
Syed Moudud-Ul-Huq
Keyword(s):  
Risk Taking ◽  
Generalized Method Of Moments ◽  
The Other ◽  
Set Covering ◽  
Diversification Strategy ◽  
Data Set ◽  
Content Type ◽  
Diversification Benefit ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to empirically investigate the impact of bank diversification on performance and risk-taking behavior. The analysis uses an unbalanced panel data set covering the period between 2007 and 2015 for a total of 1,397 banks from ASEAN-5 and BRICS economies. Design/methodology/approach Dynamic panel generalized method of moments (GMM) has been used primarily to examine the relationship between bank diversification on performance and risk-taking and later, validate the core results by incorporating two-stage least squares (2SLS). Findings Similar to the results of previous studies based on the developed economy, this study also confirms the hypothesis of the portfolio diversification. The key robust result is that the benefits from revenue and assets diversification are heterogeneous and the BRICS banks achieve higher benefit from using both diversification strategies. On the other hand, ASEAN-5 banks fail to show the significant advantage from assets diversification. Among the diverse sources of income, interest is not a major determinant of efficiency and bank’s stability, while ASEAN-5 banks should foster commission and others income as mechanisms for diversification benefit in the region. Originality/value A few studies are available in the current literature which examines the impact of revenue and assets diversification on either bank performance or risk-taking in the developed economy’s context. However, very few studies are found that examine the relationship between bank diversification, performance and risk-taking together. Moreover, to the best of the author’s knowledge, there is a dearth of literature on this topic that built on the comparative analysis between two regions, i.e. ASEAN-5 and BRICS. As a result, the empirical results of this research provide useful information to the stakeholders so that they can enhance bank diversification strategy and implement them successfully by considering the other factors.

The effects of board experience and independence on mitigating agency conflict

2017 ◽  
Vol 7 (4) ◽  
pp. 445-467
Author(s):  
Ebenezer Agyemang Badu ◽  
Kingsley Opoku Appiah
Keyword(s):  
Resource Dependence ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Board Independence ◽  
Corporate Board ◽  
Data Set ◽  
Content Type ◽  
Agency Conflict ◽  
Human And Social Capital ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of board experience and independence on mitigating agency conflict between shareholders and managers. Design/methodology/approach This paper uses a panel data of 137 firms listed on stock exchanges in Ghana and Nigeria over a period of seven years. System generalized method of moments and other estimation techniques were adopted for the study. Using agency and resource dependence theories, board experience and independence ignored in previous studies are selected for the study. Findings The findings of this paper indicate a negative and statistically significant relationship between board experience, board independence, and agency conflict. A further examination using an agency score computed from the principal factor analysis of the four main agency proxies indicates a significant and negative relationship between board independence and agency conflict, but a negative and statistically non-significant relation between board experience and agency conflict. Practical implications The authors’ evidence has important implications for countries that are currently or contemplating pursuing board reforms to recommend the appointment of more independent and experience directors to corporate board. Originality/value This paper introduces a new proxy for assessing human and social capital of directors to test the integration hypothesis of a unique data set from Ghana and Nigeria toward mitigating agency conflict.

Female board members: the effect of director affiliation

2020 ◽  
Vol 35 (2) ◽  
pp. 225-254 ◽  
Author(s):  
Emrah Arioglu
Keyword(s):  
Financial Performance ◽  
Generalized Method Of Moments ◽  
Omitted Variables ◽  
Reverse Causality ◽  
Data Set ◽  
Content Type ◽  
Cultural Setting ◽  
Management Culture ◽  
Female Directors ◽  
Positive Effect

Purpose This study aims to investigate whether female directors have an effect on company financial performance in a patriarchal emerging country that has a collectivistic culture with a substantial gender equality gap and is characterized with a paternalistic management culture. In addition, it aims to investigate whether the affiliations of female directors matter performance-wise in a setting where the majority of the companies are ultimately controlled by large business groups including families. Design/methodology/approach The current study uses a unique hand-collected data set that covers all non-financial public companies quoted at the Borsa Istanbul between the years 2009 and 2017. To investigate the relationships between the presence and ratio of female directors and company financial performance, the current study uses the pooled ordinary least squares method, as well as the firm-fixed effects method to overcome potential omitted variables problems and various generalized method of moments methods to overcome potential reverse causality problems. Findings The findings of the current study demonstrate that the presence and percentage of female directors both have a positive effect on company financial performance in a cultural setting where the opposite might be expected. They also present evidence suggesting that the effect becomes larger as the level of the independence of female directors becomes greater. Originality/value The current study demonstrates that the presence of female directors on boards has a positive effect on company financial performance, even in a cultural setting that is very different from those of countries where the majority of previous studies on female directors are conducted on. In addition, it demonstrates how company financial performance varies with the level of the affiliation of female directors.

Income diversification and bank performance: evidence from BRICS nations

2018 ◽  
Vol 67 (9) ◽  
pp. 1625-1639 ◽  
Author(s):  
Shweta Sharma ◽  
Anand Anand
Keyword(s):  
Generalized Method Of Moments ◽  
Structural Response ◽  
Bank Performance ◽  
Income Diversification ◽  
Diversification Discount ◽  
Data Set ◽  
Content Type ◽  
Brics Countries ◽  
And Performance ◽  
The Impact

PurposeThe purpose of this paper is to examine the impact of income diversification on bank performance in BRICS countries as a structural response to concentration risk. The authors argue that effectiveness of this approach is conditional upon its extent and quality. To understand the role of firm-specific characteristics on effectiveness of diversification, the authors examine this relationship across asset sizes.Design/methodology/approachAn unbalanced panel data set of 169 BRICS banks is sampled over the period 2001–2015. Fixed effect models and system generalized method of moments techniques are used to test the relationship between diversification and bank performance using alternate measures.FindingsResults indicate a positive relationship between diversification and performance measured in terms of bank risk and returns for medium and large size banks. However, for small banks this relationship is negative suggesting a “diversification discount.”Originality/valueThe study indicates that diversification as a risk mitigating tool can be effective but the managers and regulators should not emphasize on the “one-size-fits-all” approach for all banks. Policy frameworks for controlling concentration risk should be developed keeping in mind factors like bank size, customer base and financial leverage which brings variations to the risk profile of banks.

Overconfidence and credit risk-taking in microfinance institutions: a cross-regional analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Marwa Fersi ◽  
Mouna Boujelbène
Keyword(s):  
Credit Risk ◽  
Risk Taking ◽  
Regional Analysis ◽  
Microfinance Institutions ◽  
Negative Consequences ◽  
Loan Loss ◽  
Data Set ◽  
Content Type ◽  
Loan Officers ◽  
The Impact

Purpose The purpose of this paper is to investigate the impact of loan officers’ overconfidence on risk-taking decision and solvency performance measured by z-scores in the context of Islamic and conventional microfinance institutions (MFIs). Design/methodology/approach A random effect generalized least square regression was applied to examine the effect of overconfidence on credit risk-taking. The data set covers 326 conventional MFIs and 57 Islamic MFIs in six different regions over the period of 2005–2015. Findings Overconfidence proxies have shown through high loan growth, low-interest margin and loan loss provision reveal negative consequences on risk-exposures for both MFIs averagely. The loan officer’s overconfidence is significantly and positively related to the risk-taking decision, and thus, a lower loan portfolio quality. Besides, loan officers’ risk-taking behaviour harms these institutions’ solvency performance. Originality/value This paper makes an initial attempt to evaluate the effect of overconfidence behavioural bias on risk-taking decisions and its implication on the MFIs solvency and sustainability.

Banking sector openness and entrepreneurship

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amit Ghosh
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Data Set ◽  
Content Type ◽  
New Business Formation ◽  
Unit Increase ◽  
New Business ◽  
The Impact ◽  
Business Formation

Purpose Using an extensive data set of 137 nations spanning the period 2002–2014, this paper aims to examine the effect of banking sector openness on entrepreneurship, as measured by new business entry rate. Design/methodology/approach The paper uses a panel data estimation framework covering 137 nations during 2002–2014. This study uses fixed effects, two-stage instrumental variables, two-step systems-generalized method of moments and difference-in-difference estimation methodologies. Findings Greater banking sector openness significantly increases new business formations. This paper finds a one-unit increase in the share of non-residential bank loans leads to 1.25 new business start-ups in the average nation. Likewise, a unit increase in the ratio of external to domestic deposits raises new business formation by 1.31 new businesses. Furthermore, the positive impact of banking sector openness on entrepreneurial activities is strengthened in nations with deeper financial markets, ones with better business environments to start a business and those with higher economic growth and development. Practical implications These findings have key implications for policy measures on both institutional business entry reforms and banking sector openness and the interaction between the two. From a policy perspective, the results show greater banking sector openness can only maximize its benefits on entrepreneurship in the presence of an effective institutional framework and sound macroeconomic fundamentals in host nations. It is also imperative that policymakers simplify regulations for the entry of new businesses. Additionally, achieving higher economic growth rates and greater economic affluence should allow both current and potential business owners to respond better to changes in financing conditions like greater access to loans from foreign banks. Originality/value Entrepreneurship and new business formation are central to any economic and business activity in a nation. The entrance of new firms into an economy creates jobs, fosters research, diffusion of knowledge and innovation and contributes to economic growth. Liberalizing a nation’s banking industry may represent an invaluable source of capital for new entrepreneurs and foster the creation of new companies. However, there is scant literature that has empirically examined the impact of opening up a nation’s banking sector on new business formations.

A comparative analysis of the practice and performance of microfinance institutions in Nigeria

2017 ◽  
Vol 44 (11) ◽  
pp. 1522-1538 ◽  
Author(s):  
Abiola Ayopo Babajide ◽  
Joseph Niyan Taiwo ◽  
Kehinde Adekunle Adetiloye
Keyword(s):  
Best Practice ◽  
Sampling Procedure ◽  
Financial Sustainability ◽  
Microfinance Institutions ◽  
Content Type ◽  
Non Profit ◽  
For Profit ◽  
Multi Stage ◽  
And Performance ◽  
The Impact

Purpose The successful story of microfinance institutions is often tied to the practice and methods of credit delivery as evidence among international world class microfinance institutions across the globe. The purpose of this paper is to examine the impact of practice and methods of credit delivery employed by “non- profit” and “for-profit” microfinance institutions on financial sustainability and outreach programmes of the microfinance institutions in Nigeria. Design/methodology/approach The study adopts the survey research design and multi-stage stratified random sampling procedure to collect data from 372 senior management staff, managing directors and board members of microfinance institutions of both groups in Nigeria. Data collected were analyzed using descriptive statistics and multiple regressions analysis. Findings The findings suggest that the current practice and methods of credit delivery of microfinance in both “non-profit” and “for-profit” microfinance institutions have an inverse relationship with the financial sustainability and outreach programmes of the institutions. This study provides empirical evidence for the incessant failure of microfinance institutions in Nigeria. Research limitations/implications The study therefore recommends an immediate overhaul of the methodology and practice of microfinance institutions in the country to align with international best practice. Originality/value In spite of the huge literature on microfinance in Nigeria, there is not enough evidence to empirically prove that the practice of microfinance has affected the performance of the industry in Nigeria. This study sets out to fill that gap in the literature. The paper examines the practice of microfinancing in Nigeria vis-à-vis the performance of the microfinance institutions, categorized into NGO and microfinance bank “for-profit” institutions using international best practices from countries where microfinance is highly successful as a benchmark for deployment of microfinance in Nigeria, in order to proffer policy direction to stakeholders on steps to take to ensure viability in the microfinance subsector in Nigeria.

Sign in / Sign up

Export Citation Format

Share Document