Nexus of financial inclusion, competition, concentration and financial stability

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mallika Saha ◽  
Kumar Debasis Dutta
Keyword(s):  
Low Income ◽  
Financial Stability ◽  
Generalized Method Of Moments ◽  
Financial Inclusion ◽  
Least Square ◽  
Middle Income ◽  
Content Type ◽  
Study Support ◽  
Econometric Tests ◽  
The Impact

Purpose Since the strike of the 2007-2008 global financial crises, financial stability has been discussed with immense interest in academic and policy circles. Following this essence, this paper aims to investigate the nexus of financial inclusion, competition concentration and financial stability. Design/methodology/approach To analyze this relationship, this study uses different inclusion indices constructed by principle component analysis, Boon indicator, different concentration measures and Z-score, for a sample of 92 countries and subsamples based on income and economic grouping of those countries as well as for pre- and post-crisis episodes over the period of 2004-2014. This study also investigates the variation in inclusion–stability relationships in the presence of competition and concentration. This study uses two-step system-generalized method of moments (GMM) and two-stage least square to address the endogeneity. Findings The study finds that competition contributes to stability; however, there is evidence of fragility in the presence of concentration in the banking industry. Moreover, this study finds a U-shaped inclusion–stability relationship. The overall results of this study support the competition–stability view and a trade-off between inclusion and stability, which are consistent and robust to alternative econometric tests. Research limitations/implications Financial inclusion should be endorsed with caution in low-income, middle-income and emerging countries, and prudent policies should be taken to govern the market concentration to maintain financial stability. Originality/value To the best of the authors’ knowledge, this paper is the first to explain the impact of financial inclusion on financial stability in the presence of market heterogeneity.

Determinants, persistence and value implications of liquidity creation: an evidence from Indian banks

2021 ◽  
Vol 15 (2) ◽  
pp. 384-400
Author(s):  
Naina Grover ◽  
Pankaj Sinha
Keyword(s):  
Market Share ◽  
Financial Stability ◽  
Generalized Method Of Moments ◽  
Content Type ◽  
Factors Affecting ◽  
Dynamic Framework ◽  
Lending Rate ◽  
Equity Ratio ◽  
Indian Banks ◽  
The Impact

Purpose The purpose of this paper is to explore the micro and macro factors affecting liquidity creation by scheduled commercial banks (excluding Regional Rural Bank) in India from 2005 to 2018. Design/methodology/approach Two measures of liquidity creation, the broad and narrow measures, are constructed using RBI data available on Indian banks. System generalized method of moments has been applied to explore the factors affecting liquidity creation. Findings This study finds high level of persistence in liquidity creation in banks. Variation in the broad measure is explained by equity ratio, market share, GDP, gross savings and lending rate, whereas the narrow measure is explained by equity ratio, market share, size and lending rate. The Global Financial Crisis had a negative effect on liquidity creation as per both the measures, and the impact was more severe for the broad measure as compared to the narrow measure. Research limitations/implications This study finds a positive correlation between bank value and liquidity creation which suggests that the investors favourably evaluate banks that create more liquidity. This study is confined to India only. Practical implications There is a negative influence of capital on liquidity created by banks, which implies a trade-off that exists between financial stability and liquidity creation. Basel III norms impose higher capital and liquidity standards which will have negative implications for liquidity creation. Originality/value To the best of authors’ knowledge, this is the first study in the Indian context that focusses on factors affecting liquidity creation in a dynamic framework and determines the relationship between liquidity creation and market value of a bank.

Can financial inclusion reduce the presence of corruption? Evidence from selected countries in Africa

2020 ◽  
Vol 47 (11) ◽  
pp. 1345-1362
Author(s):  
Folorunsho M. Ajide
Keyword(s):  
Random Effect ◽  
Secondary Data ◽  
Threshold Level ◽  
Financial Inclusion ◽  
Least Square ◽  
African Countries ◽  
Content Type ◽  
The Impact ◽  
Control Of Corruption

PurposeThe purpose of this paper is to evaluate the impact of financial inclusion (FI) on control of corruption in selected African countries.Design/methodology/approachThe study employs secondary data spanning over a period of 2005–2016. These data are sourced from IMF's International Financial Statistics, World Bank Development Indicators, Global Financial Development Database, Transparency International and International Country Risk Guide. The author uses Sarma (2008) approach to construct the FI index for 13 countries in Africa. The author applies random effect, robust least square and instrumental variable (IV) estimations to examine the impact of FI on control of corruption in Africa.FindingsThe author finds that financial inclusion improves the control of corruption. The author tests for possible FI threshold to avoid the case of extreme FI in Africa. The results show that there is a threshold level if reached, FI would have negative impacts in the control of corruption. This may likely happen mainly due to weak institutions in Africa. The results are robust to alternative proxy for control of corruption and various alternative estimation techniques.Practical implicationsThe finding indicates that FI can serve as part of toolkits for reducing corruption in Africa.Originality/valueThis study stresses the important role of FI in the economic system. It is the first paper that empirically suggests the role of FI in controlling corruption in Africa.

scholarly journals On the determinants of trade openness in low- and lower–middle-income countries in Africa: how important is economic growth?

2019 ◽  
Vol 5 (1) ◽  
Author(s):  
Dennis Boahene Osei ◽  
Yakubu Awudu Sare ◽  
Muazu Ibrahim
Keyword(s):  
Economic Growth ◽  
Low Income ◽  
Trade Openness ◽  
Generalized Method Of Moments ◽  
Low Income Countries ◽  
Special Focus ◽  
Middle Income ◽  
Middle Income Countries ◽  
Real Gdp Per Capita ◽  
The Impact

AbstractThe existing literature highlights the determinants of trade openness with disregard to the income classifications of countries in examining whether the determinants differ given their income levels. This study, therefore, re-examines the drivers of trade openness in Africa relying on panel data with special focus on the role of economic growth. More specifically, we perform a comparative analysis of the factors influencing trade openness for low-income and lower–middle-income countries using the system generalized method of moments. Our findings suggest that, while economic growth robustly enhances openness in low-income countries, in the case of lower–middle-income countries, the impact is not robust and largely negative suggesting that higher growth is associated with less openness. We also find that, economic growth–openness nexus for the lower-income countries exhibits non-linearities and inverted U-shaped relationship in particular. Thus, while increases in real GDP per capita enhance openness, beyond an estimated threshold point, any increases in economic growth dampen openness. We discuss key implications for policy.

Cross-country income variations and inclusive financing

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Nabeel Safdar ◽  
Tian Lin ◽  
Saba Amin
Keyword(s):  
Information Technology ◽  
Principal Component ◽  
High Income ◽  
Financial Inclusion ◽  
Middle Income ◽  
Content Type ◽  
Middle Income Countries ◽  
Cross Country ◽  
The Impact ◽  
Low And Middle Income

Purpose This study, a symposium, aims to explore the determinants of financial inclusion, impact of cross-country income-variations on financial inclusion, do high-income countries really uplift the financial inclusion and does the higher financial inclusion index indicate the larger economy? Design/methodology/approach This study adopts the panel data model to investigate the impact of high-income countries and low- and middle-income countries on financial inclusion. However, this study further adopts the principal component analysis rather than Sarma’s approach to calculate the financial inclusion index. Findings Based on the Data of World Bank, United Nations, International Monetary Fund, World Development Indicators, this study concludes that there is no nexus between income variations and financial inclusion, as the study reveals that some low- and middle-income countries have greater financial inclusion index such as Thailand (2.8538FII), Brazil (1.9526FII) and Turkey (0.8582FII). In low- and middle-income countries, the gross domestic product per capita, information technology and communication, the rule of law, age dependency ratio and urbanization have a noteworthy impact on financial inclusion that accumulatively describe the 83% of the model. Whereas, in high-income countries, merely, information technology and urbanization have a substantial influence on the growth of financial revolution and financial inclusion that describes the 70% of the total. Research limitations/implications The biggest limitation is the availability of data from different countries. Originality/value The originality of this paper is its technique, which is used in this paper to calculate the financial inclusion index. Furthermore, this study contributes to 40 different countries based on income, which could help to boost financial inclusion, and ultimately, it leads them toward economic growth.

scholarly journals Effect of Financial Inclusion on Financial Stability: Countrys by Income Level Clasiffication, 2004-2014

2020 ◽  
Vol 1 (1) ◽  
pp. 11-22
Author(s):  
Wirdatul Aini ◽  
A. Tony Prasetiantono
Keyword(s):  
Financial Crisis ◽  
Commercial Bank ◽  
Low Income ◽  
Financial Stability ◽  
High Income ◽  
Financial Inclusion ◽  
Low Income Countries ◽  
Service Development ◽  
Middle Income ◽  
Middle Income Countries

Financial inclusion has become a main key for financial service development yet this development should also consider financial stability. The Asian financial crisis 1997 and the Global financial crisis 2008 gave us lesson of how important to maintain financial stability. Thus, the development of the financial services sector through financial inclusion is expected to impact the financial stability of the countries income levels. This study aims to determine the effect of financial inclusion relation to the financial stability in many countries based on their level of income during 2004-2014. This study used unbalanced panel data regression with fixed effect model. The results showed that financial inclusion proxied by commercial bank outstanding deposit has positive yet unsignignificant effect on financial stability for high income and upper-middle income countries, and has negative significant effect for lower-middle income and low income countries. Meanwhile, financial inclusion proxied by commercial bank outstanding loan has negative significant effect on financial stability in high income and upper middle income countries. This result is the opposite of lower-middle income which showed positive yet unsignificant effect, and positive significant impact for low  income countries

Country-level sustainability and cross-border banking flows

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sureyya Burcu Avci ◽  
Gözde Sungu-Esen
Keyword(s):  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Developed Countries ◽  
Least Square ◽  
Real Sector ◽  
Content Type ◽  
The Real ◽  
Cross Border ◽  
Country Level ◽  
The Impact

Purpose This paper aims to investigate the association between country-level sustainability scores and cross-border bank-to-non-bank flows within countries. Design/methodology/approach The authors analyze cross-border banking flows into the real sector firms of 26 developed countries from 2006 to 2017. The authors use a dynamic panel ordinary least square along with an instrumental variable and a generalized method of moments regressions to test the relationship between country-level sustainability scores and cross-border banking flows. Additionally, the authors apply Fama-MacBeth cross-sectional regression and non-parametric portfolio tests to obtain robust results. Findings The impact of country-level sustainability scores on cross-border banking flows is positive and significant. This finding is consistent with the signaling theory, which states that a country’s sustainability score is a signal to attract more international fund flows. Notably, the authors deduce that environmental sustainability is more important than the social and governance pillars. Practical implications The findings indicate that the real sector firms located in countries having higher sustainability scores can receive more international bank flows. Consequently, policymakers should focus more on country-level sustainability investments to improve the financing of resident firms. Social implications Policymakers should focus more on country-level sustainability investments to improve the financing of resident firms. Originality/value To the best of the authors’ knowledge, no existing study has investigated the signaling function of country-level sustainability scores in the cross-border banking flow conjecture. By investigating this relationship for real sector firms, this study portrays how the non-banking sector can benefit from such a policy that promotes sustainable practices at the country level.

Financial inclusion in Africa: does it promote entrepreneurship?

2020 ◽  
Vol 12 (4) ◽  
pp. 687-706 ◽  
Author(s):  
Folorunsho M. Ajide
Keyword(s):  
World Bank ◽  
Random Effect ◽  
Financial Inclusion ◽  
Least Square ◽  
African Region ◽  
African Countries ◽  
Ongoing Debate ◽  
Content Type ◽  
Development Indicators ◽  
The Impact

Purpose Financial inclusion policy focuses on bringing the less privileged groups into the formal financial system. Financial inclusion has a lot of benefits in the society. It can reduce the level of poverty, inequality and encourage business startup. This study aims to examine the impact of financial inclusion on entrepreneurship in selected African countries. Design/methodology/approach This paper examines how financial inclusion impacts entrepreneurship in 13 selected African countries using data from World Bank Development Indicators, IMF’s International Financial Statistics, doing business and World Bank Entrepreneurship Survey for the period of 2005-2016. It uses panel data regression techniques such as random effect, IV estimation and robust least square. Findings The results show that financial inclusion has a significant and positive effect on entrepreneurship in Africa. This result is robust to both alternative measures of financial inclusion and alternative estimators. Originality/value The possible relationship between financial inclusion and entrepreneurial development has been an ongoing debate in other developing countries. However, this issue has been neglected in the African region. There are little or no evidence to support the possible relationship in Africa. This paper makes an important contribution in this respect and further provides insightful information in the ongoing debate.

scholarly journals Analyzing the Impact of Foreign Remittances upon Poverty: A Case of Uzbekistan from Central Asia.

2022 ◽  
Vol 12 (1) ◽  
pp. 1-6
Author(s):  
Farrukh Nawaz Kayani
Keyword(s):  
Low Income ◽  
Migrant Workers ◽  
Poverty Reduction ◽  
Recipient Country ◽  
Least Square ◽  
Middle Income ◽  
Central Asian ◽  
The Rich ◽  
Ordinary Least Square Regression ◽  
The Impact

Remittances have always played a central role in strengthening the economies of low-income and middle-income developing countries. The remittances have also provided a phenomenal support to the economy of Uzbekistan, which is the third leading recipient country of  foreign remittances in the Central Asian region after Kyrgzstan and Tajikistan. There is a strong need to investigate the impact of foreign remittances upon poverty reduction in case of Uzbekistan. This study has empirically investigated the impact of remittances on poverty in Uzbekistan by taking the variables like remittances, poverty size, capital formation, per capita GDP, savings and unemployment for the period of 2008-2019. Ordinary Least Square Regression was applied, and the results show an insignificant relationship between foreign remittances and poverty reduction. The reason could be that remittances in Uzbekistan are not pro-poor as mostly the workers from the rich families migrate to Russia. Furthermore most of the migrant workers prefer to settle down in Russia along with their families.

scholarly journals Does country governance foster revenue efficiency of Islamic and conventional banks in GCC countries?

2016 ◽  
Vol 11 (2) ◽  
pp. 181-211 ◽  
Author(s):  
Fakarudin Kamarudin ◽  
Fadzlan Sufian ◽  
Annuar Md. Nassir
Keyword(s):  
Generalized Method Of Moments ◽  
Estimation Method ◽  
Political Stability ◽  
Positive Influence ◽  
Least Square ◽  
Content Type ◽  
Gcc Countries ◽  
Conventional Banks ◽  
Revenue Efficiency ◽  
The Impact

Purpose – The purpose of this paper is to provide new empirical evidence on the impact of country governance on the revenue efficiency of Islamic and conventional banks. The empirical analysis is confined to Islamic and conventional banks operating in the Gulf Cooperation Council (GCC) countries banking sectors during the period of 2007-2011. Design/methodology/approach – The analysis comprises two main stages. In the first stage, the authors employ the data envelopment analysis (DEA) method to compute the revenue efficiency of Islamic and conventional banks. The authors then used the multivariate panel regression analysis with the ordinary least square and generalized method of moments as an estimation method to investigate the potential determinants and the effect of country governance on the revenue efficiency. Findings – The empirical findings indicate that greater voice and accountability, government effectiveness, and rule of law enhance the revenue efficiency of both Islamic and conventional banks. The authors find that regulatory quality exerts positive influence on Islamic banks, while the impact of political stability and control of corruption enhances the revenue efficiency of conventional banks. Originality/value – The study on the specific revenue efficiency concept of Islamic and conventional banking is still in its formative stage. In regards, majority of the studies that examined the effect of governance on bank efficiency have focused more on the corporate or bank governance that affects the governance within the institution. Thus, to the best of the knowledge, no study has been done to address the effect of country governance on the revenue efficiency of Islamic and conventional banks specifically on the GCC countries.

The effect of corruption on FDI and its modes of entry

2019 ◽  
Vol 11 (2) ◽  
pp. 232-250 ◽  
Author(s):  
Hiep Ngoc Luu ◽  
Ngoc Minh Nguyen ◽  
Hai Hong Ho ◽  
Vu Hoang Nam
Keyword(s):  
Time Windows ◽  
Generalized Method Of Moments ◽  
Least Square ◽  
Least Square Estimator ◽  
Content Type ◽  
Gmm Estimator ◽  
Empirical Results ◽  
Cross Border ◽  
Greenfield Investments ◽  
The Impact

Purpose The purpose of this paper is to empirically investigate the impact of corruption on foreign direct investment (FDI) and its two major modes of entry: greenfield investment (greenfield) and cross-border mergers and acquisitions (M&As). Design/methodology/approach Data are collected from 131 countries. Modern econometric techniques, including the generalized method of moments (GMM) estimator, two-stage least square estimator and two-step system GMM estimator, are used to evaluate the impact of corruption on FDI activities. Findings The empirical results illustrate that corruption is a deterioration factor that significantly hinders FDI inflows. However, this finding turns out to be contradictory when the two major components of FDI – greenfield investment and cross-border M&As – are separately examined. Specifically, while corruption consistently discourages cross-border M&As over time, it appears to exert positive effect on greenfield investments. Originality/value This is among the first to empirically examine the impact of corruption on FDI and its modes of entry in a number of countries spanning different time windows. In this sense, this paper also captures the changing nature of societies and economic conditions overtime and, therefore, enable academic researchers, policy-makers and business practitioners to draw broad inferences from the empirical results.

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