Performance Of Financial Institutions In Five Sub-Saharan African Countries
DOI:
https://doi.org/10.14738/abr.712.7582Abstract
The purpose of this study is to investigate the performance of financial institutions in five Sub-Saharan African countries: Kenya, Nigeria, Namibia, Rwanda and Senegal. The investigation is based on four proxies towards performance namely: financial access, financial depth, financial efficiency and financial stability. The overall proxies are composed of thirty variables. There are four objectives in the study; the first objective has examined access and information of financial services in financial institutions of Sub-Saharan African countries. The second objective investigated and measured depth of financial institutions. The third objective evaluated efficiency of financial institutions in Sub-Sahara Africa. The last objective was intended to measure the stability of financial institutions in Africa. We created a development of financial performance model describing the proxies and variables in this study. The main analysis of the study is Mean calculation and regression analysis by using weighted Least Squares multiple regression analysis (WLS). This study investigated secondary data. The data was analyzed by using Excel software and Statistical Package for Social Sciences (SPSS) in descriptive statistics. The result of all target countries except Nigeria is significant in financial access. Result also showed significance in financial depth of all five target countries. The financial institutions of all five target countries are inefficient. Also the result of financial stability in financial institutions of target countries showed insignificance except Rwanda.
References
Abdulai, A., & Tewari, D. D. (2017). Determinants of Microfinance Outreach in Sub-Saharan Africa: A panel Approach. Acta Commercii - Independent Research Journal in the Management Sciences , 17 (1), 1-10.
Akande, J. O., & Kwenda, F. (2017). Competitive Condition of Sub-Saharan Africa Commercial Banks. De Gruyter Open. Studia Universitatis Babes-Bolyai Oeconomica, 62 (2), 55-76.
Akinlo, A. E., & Egbetunde, T. (2010). Financial Development and Economic Growth: The Experience of 10 Sub-Saharan African Countries Revisited. The Review of Finance and Banking , 02 (1), 017-028.
Allen, F., Carletti, E., Cull, R., Qian, J., Senbet, L., & Valenzuela, P. (2013). Improving Access to Banking: Evidence from Kenya. World Bank. Policy Research Working Paper 6593 , 1-39.
Allen, F., Otchere, I., & Senbet, L. W. (2011). African Financial Systems: A Review. Review of Development Finance , 79-113.
Allen, J., & Engert, W. (2007). Efficiency and Competition in Canadian Banking. Department of Monetary and Financial Analysis. Bank of Canada Review , pp. 33-45.
Alpha, B. B., Ding, Y., Abdrahmane, K., & Kargbo, M. (2016). A Study on the Impact of Financial Intermediation on Economic Growth: Panel Evidence from West Africa. Journal of Management Policies and Practices , 4 (1), 27-55.
Aluko, O. A., & Ajayi, M. A. (2017). Determinants of Banking Sector Development: Evidence From Sub-Saharan African Countries. Borsa Istanbul Review , 1-18.
Amel, D., Barnes, C., Panetta, F., & Salleo, C. (2002, August 15). Consolidation and Efficiency in the Financial Sector: A Review of the International Evidence. Federal Reserve Board, Washington, DC / Department of Finance - Ottawa, Canada / Research Department, Bank of Italy , pp. 1-52.
Anayiotos, G. C., & Toroyan, H. (2009, November). Institutional Factors and Financial Sector Development: Evidence from Sub-Saharan Africa. IMF Working Paper, Monetary and Capital Markets Department , pp. 3-14.
Anayiotos, G., Toroyan, H., & Vamvakidis, A. (2010). The Efficiency of Emerging Europe’s Banking Sector Before and After the Recent Economic Crisis. Financial Theory and Practice , 34 (3), 247-267.
Asongu, S. A. (2017). Improving financial Access in Africa: Insights from Information Sharing and Financial Sectors Development. MPRA Munich Personal RePEc Archive , 1-9.
Ayat, T. L. (2016). The Causes of the Financial Crisis in Nile Commercial Bank in Juba, South Sudan. International Journal of Economics and Finance , 5 (3), 14-34.
Babajide, A. A., Olokoyo, F. O., & Adegboye, F. B. (2015). Predicting Bank Failure in Nigeria Using Survival Analysis
Approach. Journal of South African Business Research , 2015 (2015), 1-17. Doi: 10.5171/2015.965940.
Beck, T., & Cull, R. (2013). Banking in Africa. CSAE Centre for the Study of African Economies. Working Paper , 1-44.
Beck, T., Demirgüç-Kunt, A., & Honohan, P. (2008, May 15). Access to Financial Services: Measurement, Impact and Policies. The World Bank Research Observer. Doi: 10.1093/wbro/lkn008 · Source: RePEc , pp. 1-42.
Belanová, K. (2013). Comparison of Access to Finance in Visegrad Countries. 9th International Scientific Conference Financial Management of Firms and Financial Institutions (pp. 14-23). Ostrava, Czech Republic: VŠB-TU Ostrava, Faculty of Economics, Finance Department.
Berger, A. N., & DeYoung, R. (1997). Problem Loans and Cost Efficiency in Commercial Banks. Journal of Banking and Finance , 21, 1-30.
Brack, E., & Jimborean, R. (2009, April). The Cost- Efficiency of French Banks. International Affairs Department, French Banking Federation / Monetary Policy Research Department, Banque de France , pp. 1-30.
Castellanos, S. G., & Garza-García, J. G. (2013). Competition and Efficiency in the Mexican Banking Sector. BBVA Research. Working Paper No 13/29 , 1-30.
Chang, H.-J. (2011). Institutions and Economic Development: Theory, Policy and History. Doi:10.1017/S1744137410000378. Journal of Institutional Economics , 7 (4), 473-498.
Chege, L. M., & Bichanga, J. (2017). Non-Performing Loans and Financial Performance of Banks: An Empirical Study of Commercial Banks in Kenya. International Journal of Management and Commerce Innovations , 4 (2), 909-916.
Cichy, J., & Szunke, A. (2013). Instruments to Guarantee the Financial Stability of the Banking Sector in the Long Term Towards their Assessment. 9th International Scientific Conference Financial Management of Firms and Financial Institutions (pp. 108-116). Ostrava, Czech Republic: VŠB-TU Ostrava, Faculty of Economics, Finance Department. Čihák, M., Demirgüç-Kunt, A., Feyen, E., & Levine, R. (2012, August 1). Benchmarking Financial Systems Around the World. World Bank Policy Research Working Paper No. 6175. Availble at SSRN: https://ssrn.com/abstract=2152254 , pp. 1-56.
Cull, R., Ehrbeck, T., & Holle, N. (2014). “Financial Inclusion and Development: Recent Impact Evidence” Focus Note 92. Washington, D.C.: CGAP.
Desrochers, M., & Lamberte, M. (2003, April). Efficiency and Expense Preference in Philippines' Cooperative Rural Banks. CIRPÉE, Centre Interuniversitaire de Recherche en Risque, Politique Economique et L’emploi, Faculté des Sciences de L’administration, Univeristé Laval, Québec, G1K 7P4, Canada. / PIDS, Philippines Institute of Development Studies. , pp. 1-27.
Fang, Y., Hasan, I., & Marton, K. (2011). Bank Efficiency in Transition Economies: Recent Evidence from South-Estern Europe. Bank of Finland Research. Discussion Papers , 1-43.
Finau, G., Rika, N., Samuwai, J., & McGoon, J. (2016). Perceptions of Digital Financial Services in Rural Fiji. Information Technologies & International Development [Special Issue] , 12 (4), 11-21.
Fiordelisi, F., Marques-Ibanez, D., & Molyneux, P. (2010). Efficiency and Risk in European Banking. ECB European Central Bank. Working Paper Series No 1211 , 1-39.
Hagendorff, J., Keasey, K., & Vallascas, F. (2012, June 18). Systemic Size, Bank Risk and Systemic Crises. University of Edinburgh, 29 Buccleuch Place, Edinburgh EH8 9AL, UK/ University of Leeds, Maurice Keyworth Building, Leeds LS2 9JT, UK , pp. 1-48.
Hamid, N., Ramli, N. A., & Sheikh Hussin, S. A. (2017). Efficiency Measurement of the Banking Sector in the
Presence of Non-performing loan. AIP Conference Proceedings 1795, 020001 (2017); doi: 10.1063/1.4972145 (pp. 1-9). American Institute of Physics.
Hintošová, A. B., Demjanová, L., & Lešková, Ľ. (2013). Structural Analysis of Banking Sector in Slovakia. 9th International Scientific Conference Financial Management of Firms and Financial Institutions (pp. 248-255). Ostrava, Czech Republic: VŠB-TU Ostrava, Faculty of Economics, Finance Department.
Honohan, P., & Beck, T. (2007). Making Finance Work for Africa. Washington DC 20433, USA: World Bank.
Kablan, S. (2010). Banking Efficiency & Financial Development in Sub-Saharan Africa. IMF Working Paper. WP/10/136. African Department , 1-26.
Kagoyire, A., & Shukla, J. (2016). Effect of Credit Management on Performance of Commercial Banks in Rwanda (A Case Study of Equity Bank Rwanda LTD). International Journal of Business and Management Review , 4 (4), 1-12.
Kamberoglou, N. C., Liapis, E., Simigiannis, G. T., & Tzamourani, P. (2004, January 9). Cost Efficiency in Greek Banking. Working Paper: Bank of Greece, Economic Research department and Statistics Department , pp. 1-33.
Kothari, C. R. (2004). Research Methodology (Methods and Techniques). New Delhi: New Age International (P) Ltd., Publishers.
Mehrotra, A., & Yetman, J. (2015, March). Financial Inclusion – Issues for Central Banks. BIS Quarterly Review , pp. 83-96.
Miklaszewska, E., Mikołajczyk, K., & Pawłowska, M. (2014). Do Safe Banks Create Safe Systems? Central and Eastern European Banks' Perspective. Revue de l'OFCE , 243-267 https://www.cairn.info/revue-de-l-ofce-2014-1-page-243.htm.
Mufandaedza, S. (2017). Determinants of Commercial Bank Lending Behaviour in Zimbabwe: An Empirical Investigation of the Post Dollarization Era. International Journal of Economics and Finance , 6 (3), 1-13.
Mutambanadzo, T., Bhiri, T., & Makunike, S. (2013). An Analysis Challanges faced by Zimbabwean Micro Finance Institutions in Providing Financial Services to the Poor and Information Sector in the Dollarized Regime. Global Journal of Commerce and Management Perspective , 2 (3), 154-159.
Nikolaidoua, E., & Vogiazas, S. (2017). Credit Risk Determinants in Sub-Saharan Banking Systems: Evidence from Five Countries and Lessons learnt from Central East and South East European Countries. Review of Development Finance , 52-63.
Niţoi, M., & Spulbar, C. (2015). An Examination of Banks’ Cost Efficiency in Central and Eastern Europe. 2nd International Conference ‘Economic Scientific Research - Theoretical, Empirical and Practical Approaches’, ESPERA 2014, 13-14 November 2014, Bucharest, Romania. 22, pp. 544-551. Bucharest: PROCEDIA Economics an Finance.
Nouaili, M., Abaoub, E., & Ochi, A. (2015). The Determinants of Banking Performance in Front of Financial Changes: Case of Trade Banks in Tunisia. International Journal of Economics and Financial , 5 (2), 410-417.
Nyantakyi, E. B., & Sy, M. (2015). The Banking System in Africa: Main Facts and Challenges. AFDB Africa Economic Brief , 6 (5), 1-16.
Obamuyi, T. M. (2013). Determinants of Banks' Profitability in A Developing Economy: Evidence from Nigeria. Organizations and Markets in Emerging Economies, 4 (2), 97-111.
Okungu, A. E., Mule, R. K., Nyongesa, D., Aila, F. O., Momanyi, G., Ogut, A. S., et al. (2014). Effect of Commercial Bank Loans on Financial Performance of Savings and Credit Co-operative Societies in Kisumu, Kenya. Greener Journal of Economics and Accountancy , 3 (1), 009-019.
Oso, Y. W., & Onen, D. (2008). Guide to Research Writing Proposal and Report.
Rahim, R. A. (2016). Does Competition Foster Efficiency? Emperical Evidence from Malaysian Commercial Banks. Asian Academy of Management Journal of Accounting and Finance, 12 (1), 1-23.
Rivas, A., Ozuna, T., & Policastro, F. (2006). Does the Use of Derivatives Increase Bank Efficiency? Evidence from Latin American Banks. International Business & Economics Research Journal , 5 (11), 47-56.
Rosalinde, J. A., Woolthuis, K., & Taminiau, Y. (2017, June). Waves of Change - The Dynamics of Institutional Pressures. Centre for Sustainable Entrepreneurship. University of Groningen/Campus Fryslân , pp. 3-44.
Said, R. M., Nor, F. M., Low, S.-W., & Abdul Rahman, A. (2008). The Efficiency Effects of Mergers and Acquisitions in Malaysian Banking Institutions. Asian Journal of Business and Accounting , 1 (1), 47-66.
Saqib, N. (2013). Impact of Development & Efficiency of Financial Sector on Economic Growth: Empirical Evidence from Developing Countries. Journal of Knowledge Management, Economics and Information Technology , III (3), 1-15.
Saunders, M., Lewis, P., & Thornhill, A. (2009). Research Methods for Business Students. Harlow: Pearson Education Limited.
Siudek, T. (2008). Theoretical Foundations of Banks Efficiency and Emperical Evidence from Poland. Socialiniai tyrimai / Social Research , 3 (13), 150-158.
Spulbӑr, C., Niţoi, M., & Angel, L. (2015). Efficiency in Cooperative Banks and Savings Banks: A Stochastic Frontier Approach. Romanian Journal of Economic Forecasting , XVIII (1), 5-21.
Stiansen, E., & Guyer, J. I. (1999). Credit, Currencies and Culture (African Financial Institutions in Historical Perspective). Stockholm: Nordiska Afrikainstitutet (The Nordic Africa Institute).
Suddaby, R. (2013). Institutional Theory. In E. H. Kessler, Encyclopedia of Management Theory (pp. 379-383). Los Angeles; London; New Delhi; Singapore; Washington DC: Janke, Rolf, A. (SAGE Publications).
Tayie, S. (2005). Research Methods and Writing Research Proposals. Cairo: Centre for Advancement of Post Graduate Studies and Research in Engineering Sciences, Faculty of Engineering-Cairo University (CAPSCU).
Trochim, W. K., & Donnelly, J. P. (2007). The Research Methods Knowledge Base. United States of America: Thomson.
Ugoani, J. N. (2015). Poor Credit Risk Management and Bank Failures in Nigeria. International Journal of Economics and Business Administration , 1 (1), 17-24.
UNCTAD. (2014, September 3). Impact of Access to Financial Services, Including by Highlighting Remittances on Development: Economic Empowerment of Women and Youth. United Nations Conference on Trade and Development , pp. 1-20.
Uzokwe, N. J., & Ohaeri, C. S. (2014). Distress in the Nigerian Banking Industry - Causes, Effects and Strategies for Solution. International Journal of Science and Research (IJSR) , 3 (10), 76-81.
Wang, F., Yang, S., Reisner, A., & Liu, N. (2019). Does Green Credit Policy Work in China? The Correlation between Green Credit and Corporate Environmental Information Disclosure Quality. Sustainability , 1-15.
Wang, Z. Y., & Zhong, X. (2017). The Study on Influence Period of the Green Credit Policy Based on CGE Model. Advances in Social Science, Education and Humanities Research. 4th International Conference on Education, Management and Computing Technology (ICEMCT 2017) (pp. 1-5). Guangdong, Guangzhou, China 510000: Institute of finance, Guangzhou University.
Weber, O. (2016, March 21). The Sustainability Performance of Chinese Banks: Institutional Impact. School for Environment, Enterprise and Development (University of Waterloo) , pp. 1-29.
Wu, X. J., & Zhang, X. H. (2018). Analysis of the Problems and Countermeasures of China’s Green Credit. Journal of Geoscience and Environment Protection , 111-119 https://doi.org/10.4236/gep.2018.66009.
Zago, A., & Dongili, P. (2006, November). Bad Loans and Efficiency in Italian Banks. Dipartimento di Scienze Economiche - Università di Verona , pp. 1-51.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2020 Husein Mohamed Irbad, M. G. Jayaprakash
This work is licensed under a Creative Commons Attribution 4.0 International License.
