Showing papers in "Journal of African Business in 2017"
TL;DR: In this article, the effect of information sharing has on financial sector development in 53 African countries for the period 2004 to 2011, and the empirical evidence is based on Ordinary Least Squares (OLS) and Generalized Method of Moments (GMM).
Abstract: This study investigates the effect information sharing has on financial sector development in 53 African countries for the period 2004 to 2011. Information sharing is measured with private credit bureaus and public credit registries. Hitherto unexplored dimensions of financial sector development are employed, namely: financial sector dynamics of formalization, informalization, and non-formalization. The empirical evidence is based on Ordinary Least Squares (OLS) and Generalized Method of Moments (GMM). The following findings are established. Information-sharing bureaus increase (reduce) formal (informal/non-formal) financial sector development. In order to ensure that information-sharing bureaus improve (decrease) formal (informal/non-formal) financial development, public credit registries should have between 45.45 and 50% coverage while private credit bureaus should have at least 26.25% coverage.
417 citations
TL;DR: In this paper, a qualitative field data collected on young mobile telephony entrepreneurs in Accra was used to argue that despite the businesses being "informal", they cannot be dismissed as "necessity" enterprises unworthy of support.
Abstract: Despite increasing research interest in the mobile telephony sector, only a few studies have devoted attention to informal businesses in the sector. Using qualitative field data collected on young mobile telephony entrepreneurs in Accra, this paper argues that despite the businesses being ‘informal’, they cannot be dismissed as ‘necessity’ enterprises unworthy of support. On the contrary, many young entrepreneurs have aspirations which are influencing their desire to stay in business. The article thus questions the bifurcated nature of entrepreneurial motivations, using the burgeoning mobile telephony sector as a case study, and draws out implications for policy support for youth-run businesses in the informal sector generally.
124 citations
TL;DR: In this paper, the effects of exchange rate volatility on economic growth in Ghana were investigated. And the results showed that while shocks to the exchange rate are mean reverting, misalignments tend to correct very sluggishly, with painful consequences in the short run as economic agents recalibrate their consumption and investment choices.
Abstract: What drives exchange rate volatility, and what are the effects of fluctuations in the exchange rate on economic growth in Ghana? These questions are the subject matter of this study. The results showed that while shocks to the exchange rate are mean reverting, misalignments tend to correct very sluggishly, with painful consequences in the short run as economic agents recalibrate their consumption and investment choices. About three quarters of shocks to the real exchange rate are self-driven, and the remaining one quarter or so is attributed to factors such as government expenditure and money supply growth, terms of trade and output shocks. Excessive volatility is found to be detrimental to economic growth; however, this is only up to a point as growth-enhancing effect can also emanate from innovation, and more efficient resource allocation.
98 citations
TL;DR: In this paper, the determinants of African bank profitability while controlling for bank capital regulation were investigated using static and dynamic panel estimation techniques, and the findings indicated that bank size, total regulatory capital, and loan loss provisions are significant determinants for the return on assets of listed banks compared to non-listed banks.
Abstract: 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.
65 citations
TL;DR: In this article, the authors revisited the debate between financial development and economic growth and found that portfolio flows and Foreign Direct Investment (FDI) have consistently positive effects on economic growth under endogenous stock market capitalization.
Abstract: We revisit in this paper the debate between financial development and economic growth. In contrast to previous studies examining banking related measures, we focus on the capital account and the depth of African stock markets. We examine 15 African countries from 1995 to 2010 and employ both static and dynamic panel data methods. While the former suggest weak results overall, portfolio flows and Foreign Direct Investment (FDI) have consistently positive effects on economic growth under endogenous stock market capitalization. These findings reinforce the view that African countries should open their equity markets to international investors and encourage FDI.
59 citations
TL;DR: In this article, the authors examined the impact of aid and its volatility on sectoral growth by relying on panel dataset of 37 sub-Saharan African countries for the period 1983-2014.
Abstract: This article examines the impact of aid and its volatility on sectoral growth by relying on panel dataset of 37 sub-Saharan African (SSA) countries for the period 1983–2014. Findings from the syste...
53 citations
TL;DR: In this article, the authors investigated the impact of SMEs financing on banks' profitability in Ghana using the fixed effect model as the main regression tool and found that SMEs significantly contribute to banks profitability and transaction cost in administering SME loans was insignificant in all the models.
Abstract: 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.
51 citations
TL;DR: In this paper, the authors examined the impact of both bank and market-based financial development on economic growth in Kenya during the period 1980 to 2012, using the autoregressive distributed lag bounds testing approach.
Abstract: In this paper, we have examined the impact of both bank- and market-based financial development on economic growth in Kenya during the period 1980 to 2012, using the autoregressive distributed lag bounds testing approach. To capture as far as possible the breadth and depth of the Kenyan bank- and market-based financial systems, the study employs the method of means-removed average to construct both bank- and market-based financial development indices from an array of banking sector and stock market variables. The empirical results of this study show that market-based financial development has a positive impact on economic growth in Kenya. However, the results have also shown that bank-based financial development has no impact on economic growth in the study country. These results apply irrespective of whether the regression analysis is conducted in the long run or in the short run. The findings of this study, therefore, lend more support to pro-market-based financial development policies in Kenya.
47 citations
TL;DR: In this article, the authors examined micro-finance intervention in rural poverty reduction in Ghana by surveying 100 rural women farmer-entrepreneurs and found that microfinance interventions that emphasize both credit provision and social intermediation improve access to credit, improve business performance, and contribute to a higher standard of living for female farmers and their families.
Abstract: This paper examines microfinance intervention in rural poverty reduction in Ghana by surveying 100 rural women farmer-entrepreneurs. The findings reveal that microfinance interventions that emphasize both credit provision and social intermediation improve access to credit, improve business performance, and contribute to a higher standard of living for female farmer-entrepreneurs and their families. The results show that the microfinance scheme has been successful due to a strong social network and group relationships among the farmers. An implication of the study is that poverty reduction programs in developing countries need to emphasize social and human development components in microfinancing policies.
45 citations
TL;DR: In this article, the effects of real exchange rate changes on the trade balance of Ghana during the period 1986Q1 to 2016Q3 were studied using both linear and nonlinear specifications.
Abstract: Using linear and nonlinear specifications, we studied the effects of real exchange rate changes on the trade balance of Ghana during the period 1986Q1 to 2016Q3. We found no evidence in support of the short- and long-run impact of exchange rate changes on the trade balance in the linear specification. The J-curve is refuted in this case. In contrast, exchange rate changes affected the trade balance in the nonlinear specification. Depreciations improve the trade balance in the long run, but appreciations have no impact. Hence, exchange rate changes have nonlinear effects on the trade balance. This is consistent with the J-curve phenomenon.
28 citations
TL;DR: This paper used 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.
Abstract: 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.
TL;DR: In this paper, the authors examined the SME financing gap on a sectoral basis using the survey approach and found that there are sectoral differences in the SMEs financing gap with the agriculture sector being the most credit constrained.
Abstract: Access to credit is critical for SMEs’ growth. However, these businesses that need credit to take advantage of growth opportunities are noted to be credit constrained. The paper examined the SME financing gap on a sectoral basis using the survey approach. The study adopted descriptive and non-parametric statistics in the analyses of data involving 1200 SMEs with 200 each from the agriculture, manufacturing, transportation, construction, retail and hospitality sectors. It was revealed that there are sectoral differences in the SME financing gap with the agriculture sector being the most credit constrained. Sector-specific policies are therefore recommended to tackle the problem.
TL;DR: In this article, the authors employed the Toda-Yamamoto approach and instantaneous causality test to examine the causal relationship between domestic savings and economic growth in 10 sub-Saharan African countries utilizing time series data.
Abstract: In addition to the standard Granger causality, this paper employs the Toda–Yamamoto approach and instantaneous causality test to examine the causal relationship between domestic savings and economic growth in 10 sub-Saharan African countries utilizing time series data. Findings from both the standard Granger causality and Toda–Yamamoto approach are consistent and robust only in five countries where domestic savings and economic growth are completely independent in three countries. For the remaining two, causality runs from savings to growth. However, for the other five countries, findings produced from both causality tests are grossly inconsistent and mixed leaving us under a quandary although the Toda–Yamamoto test is often reliable on account of its ability to avoid misleading results associated with the asymptotic nature of the standard Granger causality test. Our findings further reveal an instantaneous unidirectional causality from domestic savings to economic growth for only Benin, Mali, and...
TL;DR: In this paper, the authors examined the effect of the inclusion of non-interest income on efficiency and economies of scale of Ghanaian banks in a two-stage analysis and found a curve-linear relationship between bank size and efficiency.
Abstract: 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 effic...
TL;DR: In this article, an integrated CSR model that provides a framework for CSR initiatives in South Africa is presented. But, some of these CSR projects have attracted criticism, controversy, and conflicts, thus creating an acrimonious relationship between affected corporate organizations and host communities.
Abstract: Corporate organizations conducting business in developing economies have increased their corporate social responsibility (CSR) activities over time. However, some of these CSR projects have attracted criticism, controversy, and conflicts, thus creating an acrimonious relationship between affected corporate organizations and host communities. A deductive explanation of this phenomenon has been attributed to the default in the approach adopted by corporate organizations when initiating and implementing CSR projects. This has motivated the need to expand the categorization of CSR that was developed by Carroll, in order to incorporate additional dimensions that are environmentally specific and crucial to the success of CSR programs in South Africa. Using a case study research design and a qualitative research approach, this paper developed an integrated CSR model that provides a framework for CSR initiatives in South Africa.
TL;DR: In this article, the authors argue that to equip smallholders with the understanding of how markets function and what customers value, trainings that address fundamental marketing concepts are required, which can make important contributions to rural development and food security.
Abstract: An increasing number of the 600 million African smallholders are becoming integrated into the supply chains of supermarkets, fast food chains, and exporters. This process gradually transforms the smallholders into profit-oriented businesses that can make important contributions to rural development and food security. This article brings this issue to the attention of the readership of the Journal of African Business. It connects distinct lines of literature on smallholders, business training, and customer value creation. More specifically, it argues that to equip smallholders with the understanding of how markets function and what customers value, trainings that address fundamental marketing concepts are required. The arguments are captured in a conceptual framework explaining the livelihood performance of rural African smallholders. Based on these arguments, the article formulates implications for development workers and suggests directions for African business research.
TL;DR: In this article, the authors identify 10 conceptually linked barriers that are prevalent in the Ethiopian leather footwear industry and identify different clusters of firms that are facing specific sub-sets of barriers.
Abstract: Export competitiveness is an important success factor for developing economies. However, several barriers can prevent firms from exporting. This study empirically investigates export barriers in the Ethiopian leather footwear industry. We identify 10 conceptually linked barriers that are prevalent in the industry. Whereas some of the export barriers are in line with previous research, we find several new barriers such as logistics and export marketing. On the firm level, we identify different clusters of firms that are facing specific sub-sets of barriers. Depending on cluster membership, management must focus on certain export barriers for increasing competitiveness.
TL;DR: The authors assesses how retail firms in Ghana pursue positioning activities and finds that the dominant strategies are "service, value for money, attractiveness, reliability, and brand name", while the emphasis placed on each of these positioning strategies varies from firm to firm.
Abstract: This paper assesses how retail firms in Ghana pursue positioning activities. Overt observations, face-to-face interviews with staff, managers and mall intercept methods provide an insight into the positioning strategies of firms in the retail sector. We adopt an empirically based and generic consumer-derived typology of positioning strategies to obtain the results. The findings revealed that the dominant strategies are “service,” “value for money,” “attractiveness,” “reliability,” “top of the range,” selectivity, and “brand name.” The emphasis placed on each of these positioning strategies varies from firm to firm.
TL;DR: In this article, a qualitative study of South African retailers in other African markets, and how they have managed this process, was conducted to understand how these firms build networks with local stakeholders and overcome information deficits.
Abstract: African markets are complex environments for foreign multinationals. The continent, which has recently attracted significant attention for its rich potential and growth prospects, presents a multitude of challenges for the South African retailers leading the charge of retail expansion. This qualitative study seeks a deeper understanding of the contextual challenges experienced by these firms in other African markets, and how they have managed this process. It further engages how these firms build networks with local stakeholders and how they overcome information deficits. This study confirms the rich variety of capabilities and approaches developed by South African retailers operating across the continent, as opposed to a single standard approach. The research has further confirmed that these firms typically use SA Inc. as a country specific advantage in their expansion, leveraging off their inter-firm networks and personal exchanges to gain a better understanding of African markets and their cons...
TL;DR: In this paper, the application of Basel III in Mauritius is investigated and it is shown 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.
Abstract: 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...
TL;DR: In this paper, the authors examined the viability of the models for a sample that pools securities across nine African Frontier Stock Markets (AFSMs), and whether or not the risk factors of these models command risk premium on the AFSMs.
Abstract: The Capital Asset Pricing Model (CAPM), and the Fama-French and Carhart models have been widely applied in the developed and most emerging markets; however, there is scant evidence of the viability of the models on the African Frontier Stock Markets (AFSMs). This study examines the viability of the models for a sample that pools securities across nine AFSMs, and whether or not the risk factors of these models command risk premium on the AFSMs. The paper provides evidence of the existence of the size, value and momentum effects on the AFSMs. In addition, the models only partly capture the returns to size and book-to-market sorted portfolios on the AFSMs. Also, the risk factors of these models generally, command marginally significant premium on the AFSMs. Caution should in general be exercised when applying these models on the AFSMs.
TL;DR: In this article, the relation between intra-group trust and monitoring in a patriarchal society, and how this relation affects workgroup performance was examined, and the results indicated positive effects of intragroup trust on work group performance, and that the effect of monitoring runs through its relation with trust.
Abstract: We examine the relation between intra-group trust and monitoring in a patriarchal society, and how this relation affects workgroup performance. Data were collected from 352 women who were members of 72 female workgroups in Addis Ababa by means of field experiments and a survey. The data are analyzed using multiple mediation analysis. We find that intra-group trust needs time to develop, and that trust is higher in workgroups with more monitoring. The positive relation between monitoring and trust might be explained by women’s ambition to overcome disempowerment and negative gender stereotypes. The results also indicate positive effects of intra-group trust and monitoring on workgroup performance, and that the effect of monitoring runs through its relation with trust. The last finding stresses the importance of monitoring for developing intra-group trust in these female workgroups.
TL;DR: In this article, the authors investigated the long and short-run rate of transmission of the prime rate to interest rates since the implementation of inflation targeting policy in Ghana and provided relevant policy suggestions.
Abstract: 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.