Nexus Between Financial Innovation and Financial Intermediation in Nigeria’s Banking Sector

This study evaluated the relationship between financial innovation and financial intermediation in Nigeria. It seems that banks in Nigeria may have a problem of deposit-loan mismatch and losing customers to start-ups given increasing cost of deposits attributable to disruptive practice arising from financial innovations. The specific objectives of this study were to examine the relationship between financial innovation (value of the automated teller machine, internet banking, mobile banking, point of sale transactions) and financial intermediation (commercial banks deposit mobilization) in Nigeria for the period 2009–2018. This study was anchored on the financial innovation theory of Joseph Schumpeter, which states that technology creates opportunities for new profits and super profits as a result of increased investment by banks or financial institutions on products of innovation. The ordinary least square was used to estimate the parameters. The data used were extracted from the Central Bank of Nigeria statistical bulletin. The results showed that there is a positive and significant relationship between financial innovation (value of Automated Teller Machine) and financial intermediation (commercial banks deposit mobilization) in Nigeria; there is a positive but no significant relationship between financial innovation (internet banking) and financial intermediation (commercial banks deposit mobilization) in Nigeria; there is a positive but no significant relationship between financial innovation (mobile banking) and financial intermediation (commercial banks deposit mobilization) in Nigeria; and there is no positive and significant relationship between financial innovation (point of sale transactions) and financial intermediation (commercial banks deposit mobilization) in Nigeria. The f-test result showed that financial innovations proxies jointly related significantly to commercial banks’ deposits. The work concludes that financial innovations contributed to commercial banks’ deposits in Nigeria. The researchers recommended among others that banks should improve on the security of transactions done on their platforms, continue to improve and partner with start-ups in technological infrastructure, improve on power and network stability, deploy more innovative products, and improve on the efficiency of bank staff by regular training.

Bank solvency: The role of credit and liquidity risks, regulatory capital and economic stability

Banking stability is essential to any economy due to its many functions, including intermediation, payment facilitation, and credit creation. Thus, the stability of the banking industry is one of the critical ingredients in economic growth. This paper analyzes how bank capital requirements, credit, and liquidity impact bank solvency using ten major banks that control 90% of the market share in the UK in 2009–2018. The GMM model indicates a strong association between credit and liquidity risks. That is, when banks finance a risky or distressed project, this will lead to an increase in non-performing loans (NPL), which reduces bank liquidity. Poor liquidity profile of the bank may restrict it from providing financial intermediation role. In addition, the findings indicate that efficiency, asset quality, and economic growth have a significant positive effect on the solvency of banks. The results also show that the regulatory capital (tier1) has a positive significant influence on solvency of the banks. Further, the results indicate that during the economic boom, banks tend to increase their regulatory capital. Therefore, there is a need to ensure that during the “good time”, banks can accumulate enough capital that is genuinely capable of absorbing negative shock. Also, it is important for banks to ensure that they are efficient but also have robust credit appraisal system to reduce NPL. This paper also demonstrates the implication of increased capital requirements. That is, increased capital requirements ensure not only banks are liquid but also solvent which enables them to provide financial intermediation.

The impact of trade openness on the cost of financial intermediation and bank performance: evidence from BRICS countries

PurposeThe purpose of this paper is to examine the impact of trade openness on the cost of financial intermediation and bank performance. Developed and developing countries are currently pursuing trade openness to achieve higher bank performance with less intermediation costs.Design/methodology/approachIn attaining the study's objectives, several regression methodologies were employed (i.e. system generalized method of moments (GMM), fixed effect, pooled ordinary least squares (OLS) and vector error correction model (VECM)). The authors tested the hypothesis on data of 885 banks from BRICS countries, which span 18 years (2000–2017).FindingsThe results from this robust study showed that embedding higher trade openness reduces financial intermediation costs and improves banks' performance. The results remain robust following the use of different estimation methods and alternative variables as proxies. In addition, results were still valid upon considering bank level, industry level and country level as control variables. It was also observed that the relation pattern holds its rigidity during “good” and “bad” times (i.e. the global financial crisis).Originality/valueThe results provide better references for bank regulators, academics and policymakers to take advantage of the low financial intermediation costs resulting from trade openness.

NON-PERFORMING LOANS AND FINANCIAL STABILITY OF DEPOSIT TAKING SACCOS REGULATED BY SASRA

Purpose: The study sought to investigate the effect of non-performing loan on financial stability of deposit taking SACCOs in Kenya. Materials and Methods: The study adopted a desktop methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library Results: Nonperforming loans and their effect on the financial stability of SACCOs using have not been adequately featured in any of the studies reviewed. This leaves a gap that needs to be filled. SACCOs play a very vital role in the financial intermediation in the Kenyan economy and their uniqueness in operations. This study will therefore focus on filling this gap. Unique contribution to theory, practice and policy: the study findings of this study will assist the regulators of Sacco’s SASRA to formulate stringent policies to tame the rising cases of non-performing loans. The findings of this study will be useful to SACCOs within Nairobi County in evaluating how effective their approach to managing NPLs has been. This will enable them to identify the gaps in their management of NPLs and adjust accordingly.

Bangladesh toward Digital Financial Inclusion: FinTech Experience

Digitalization in financial services, in another way financial technology or FinTech, has drastically extended financial intermediation while customers are experiencing and engaging with the development of new digital products and competencies. Nevertheless, over two billion people worldwide remain out of accessing financial services that make financial inclusion an equally important concern for all economies, including Bangladesh. Over the last few years, a good number of academic literature has been made on FinTech covering how essential it is to serve the unbanked and underbanked countries. This study tries to provide an inclusive survey of relevant literature on FinTech and its potential to disruptive financial intermediation globally and nationally. Therefore, a descriptive research design has been adopted entirely based on secondary resources and mostly relying on the Global Findex database, International Monetary Fund (IMF) releases, and Bangladesh Bank reports. It has been evident that digital financial inclusion is connecting more and more people to the financial system at a growing pace resulting in substantial welfare benefits throughout the nation. Even if the active use of mobile money systems, digital banking, especially internet banking, is reshaping our bank. However, there is much work to be done compassing the challenges and the threats of FinTech as important policy issues for the existing financial landscape. In conclusion, this study provides an insight into the country's digital financial system and contributes to further study in relevant disciplines.

MONETARY CIRCULATION AND BANKS IN THE INTERPRETATION OF THE MAIN ECONOMIC SCHOOLS

The topicality of the research lies in the fact that the long-term evolution of financial markets, reinforced by global transformations, has led to the development of convergent processes in banking activities in the presence of significant paradigmatic differences between the major banking systems of the world. The existing peculiarities in the mechanisms and methods of regulation of the banking sector within individual countries have caused drastic changes in views on the nature of the bank and its activities. The traditional view of banks as institutions of financial intermediation, providing the exchange of monetary assets between the owners of savings and borrowers, does not provide for the creation of new money. Instead, proponents of the alternative viewpoint emphasize that in today's world banks finance borrowers mainly through the mechanism of money emission. Both points of view are present to varying degrees in various theoretical and conceptual approaches to understanding the essence of the bank as an institution of financial intermediation. The current economic realities require a detailed study of national banking systems, which largely developed historically, and methodological aspects of their evolution in the context of global transformations. The research subject. In the process of evolution of theoretical and conceptual approaches to the definition of the essence of money, banks, the banking system, the prevailing point of view on this issue has not yet taken a definite form. Nevertheless, the recognition of the effectiveness of banks as a factor of economic growth brings together the positions of competing schools of economic theory. Banks become a factor in the investment process even in the theoretical models of the neoclassical school, which traditionally denies the dependence of economic growth on the money supply. Endogenous growth models recognize the role of banks primarily as a factor in accumulating capital and increasing savings, as well as a mediator between owners of savings and borrowers. Although the Keynesian school of thought initially gave little weight to the functioning of the banking system, neo-Keynesian models have attempted to explain the importance of confidence in the banking system and the need for sound regulatory constraints. The above-mentioned has urged us to carry out this research. The methodological framework of the research is based on an analysis of research on the global debate about the nature of banks in the economy and the architecture of monetary policy. A wide range of theoretical and empirical research methods were used: systematic analysis, synthesis and generalization to formulate conclusions. The aim of the research is to generalize and systematize the evolution of perspectives on money in the interpretations of today’s main economic schools. Conclusion. The findings consist of a conceptualization views' evolution on money, the banking sector in a more open economy to capital flows, and our firm belief that the banking system and the related process of money issuance affect income levels cyclically and over the long term.