{"id":7484,"date":"2022-03-26T15:26:34","date_gmt":"2022-03-26T10:26:34","guid":{"rendered":"https:\/\/scholarpublishing.org\/sse\/?p=7484"},"modified":"2022-03-26T15:39:25","modified_gmt":"2022-03-26T10:39:25","slug":"eb215","status":"publish","type":"post","link":"https:\/\/scholarpublishing.org\/sse\/eb215\/","title":{"rendered":"The Case for Income Diversification in the Banking Sector in Zambia"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"7484\" class=\"elementor elementor-7484\">\r\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-5cf77908 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"5cf77908\" data-element_type=\"section\" data-e-type=\"section\">\r\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\r\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-64f25e2c\" data-id=\"64f25e2c\" data-element_type=\"column\" data-e-type=\"column\">\r\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\r\n\t\t\t\t\t\t<section class=\"elementor-section elementor-inner-section elementor-element elementor-element-7db05d03 elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"7db05d03\" data-element_type=\"section\" data-e-type=\"section\">\r\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\r\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-inner-column elementor-element elementor-element-2d1c2b66\" data-id=\"2d1c2b66\" data-element_type=\"column\" data-e-type=\"column\">\r\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\r\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-43a7e20f custom-sub-heading elementor-widget elementor-widget-heading\" data-id=\"43a7e20f\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">The Case for Income Diversification in the Banking Sector in Zambia<\/h2>\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t<\/section>\r\n\t\t\t\t<section class=\"elementor-section elementor-inner-section elementor-element elementor-element-44209eb elementor-section-boxed elementor-section-height-default elementor-section-height-default\" data-id=\"44209eb\" data-element_type=\"section\" data-e-type=\"section\">\r\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\r\n\t\t\t\t\t<div class=\"elementor-column elementor-col-66 elementor-inner-column elementor-element elementor-element-432fd3fe\" data-id=\"432fd3fe\" data-element_type=\"column\" data-e-type=\"column\">\r\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\r\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-43f6518b elementor-widget elementor-widget-heading\" data-id=\"43f6518b\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t<h6 class=\"elementor-heading-title elementor-size-default\">Kelvin Mukolo Kayombo<\/h6>\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-54413302 elementor-icon-list--layout-traditional elementor-list-item-link-full_width elementor-widget elementor-widget-icon-list\" data-id=\"54413302\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"icon-list.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t<ul class=\"elementor-icon-list-items\">\r\n\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\r\n\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\">Deputy Vice Chancellor \u2013 Zcas University, Zambia<\/span>\r\n\t\t\t\t\t\t\t\t\t<\/li>\r\n\t\t\t\t\t\t<\/ul>\r\n\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-6cdb0bb3 elementor-icon-list--layout-inline elementor-list-item-link-full_width elementor-widget elementor-widget-icon-list\" data-id=\"6cdb0bb3\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"icon-list.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t<ul class=\"elementor-icon-list-items elementor-inline-items\">\r\n\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item elementor-inline-item\">\r\n\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\"><strong>DOI:<\/strong><\/span>\r\n\t\t\t\t\t\t\t\t\t<\/li>\r\n\t\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item elementor-inline-item\">\r\n\t\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/doi.org\/10.14738\/eb.215.2021\">\r\n\r\n\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\">https:\/\/doi.org\/10.14738\/eb.215.2021<\/span>\r\n\t\t\t\t\t\t\t\t\t\t\t<\/a>\r\n\t\t\t\t\t\t\t\t\t<\/li>\r\n\t\t\t\t\t\t<\/ul>\r\n\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-12d8769e elementor-icon-list--layout-traditional elementor-list-item-link-full_width elementor-widget elementor-widget-icon-list\" data-id=\"12d8769e\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"icon-list.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t<ul class=\"elementor-icon-list-items\">\r\n\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\r\n\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\"><strong>Keywords:<\/strong><\/span>\r\n\t\t\t\t\t\t\t\t\t<\/li>\r\n\t\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\r\n\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\">Interest Income, Profit Performance, Income Volatility, Profitability<\/span>\r\n\t\t\t\t\t\t\t\t\t<\/li>\r\n\t\t\t\t\t\t<\/ul>\r\n\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-1a3d5c90 custom-text-justify elementor-icon-list--layout-traditional elementor-list-item-link-full_width elementor-widget elementor-widget-icon-list\" data-id=\"1a3d5c90\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"icon-list.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t<ul class=\"elementor-icon-list-items\">\r\n\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\r\n\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\"><strong>Abstract:<\/strong><\/span>\r\n\t\t\t\t\t\t\t\t\t<\/li>\r\n\t\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\r\n\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\">This study aims to evaluate the extent to which banks in Zambia are benefiting from revenue diversification activities. Research design\/methodology \u2013 The study used a quantitative research approach based on secondary data from 12 of the 18 banks in Zambia. Data analysis was buttressed by the use of several techniques such as the Herfindahl-Hirschman Index to measure bank diversification, ZScore to measure bank income volatility\/risk and risk adjusted returns on assets and equity to measure profitability. Findings \u2013 The study finds that, in Zambia, some banks do not enhance their profit performance by diversifying into non-interest activities. For other banks, diversification yields better profit performance in some years, but not always. The overall picture, however, is that diversification into non-interest income earning activities enhances the profit performance of banks. With respect to bank riskiness as measured by income volatility, the study finds that, in Zambia, some banks do not reduce their income volatility by diversifying into non-interest earning activities. For other banks, diversification reduces income volatility in some periods, but not others. The overall picture, however, is that the larger the bank is, the more non-interest income diversification reduces its income volatility. Limitations \u2013 Although the Central Bank provided financial data for all the 18 banks in the country, only data for 12 banks was usable. Data for six banks did not cover the whole ten-year study period and was unusable for the purposes of the study. This limited the actual sample size. Furthermore, to preserve confidentiality, the bank data provided was anonymised such that it was impossible to tell the geographical spread of the bank, the bank\u2019s product or market strategy, or whether the bank was foreign or locally owned. This limited the scope of analysis. Recommendations \u2013 Given that in general bank profitability has declined as banks have become less diversified, the Bank of Zambia needs to closely monitor performance of banks and avoid imposing regulations that stifle bank innovation. And since diversification does not always result in enhanced bank performance, banks should consider the extent to which their business models support non-bank activities before making diversification decisions.<\/span>\r\n\t\t\t\t\t\t\t\t\t<\/li>\r\n\t\t\t\t\t\t<\/ul>\r\n\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-5c5dafa9 elementor-widget elementor-widget-text-editor\" data-id=\"5c5dafa9\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t\t\t<!-- References Button -->\n<div class=\"py-3 text-center\"><button class=\"btn btn-lg btn-primary\" type=\"button\" data-bs-toggle=\"collapse\" data-bs-target=\"#collapseExample\" aria-expanded=\"false\" aria-controls=\"collapseExample\">\nView References\n<\/button><\/div>\n\t\t\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-5ed68b73 elementor-widget elementor-widget-text-editor\" data-id=\"5ed68b73\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t\t\t<div id=\"collapseExample\" class=\"collapse mt-3\"><ol><li>Alhassan, A. 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Strategic Management Journal, 10, 523\u2013551.<\/li><li>Republic of Zambia. (2018). The BoZ Prohibition against Unwarranted Charges and Fees. Government Printers.<\/li><li>Sanya, S., &amp; Wolfe, S. (2011). Can Banks in Emerging Economies Benefit from Revenue Diversification? Journal of Financial Services Research, 40(1\u20132), 79. <a href=\"https:\/\/doi.org\/10.1007\/s10693-010-0098-z\">https:\/\/doi.org\/10.1007\/s10693-010-0098-z<\/a><\/li><li>Saunders, A., Schmid, M., &amp; Walter, I. (2019). Strategic Scope and Bank Performance (SSRN Scholarly Paper ID 2504675). Social Science Research Network. <a href=\"https:\/\/doi.org\/10.2139\/ssrn.2504675\">https:\/\/doi.org\/10.2139\/ssrn.2504675<\/a><\/li><li>Saunders, A., &amp; Walter, I. (1994). Universal banking in the United States: What could we gain? what could we lose? Oxford University Press.<\/li><li>Saunders, M., Lewis, P., &amp; Thornhill, A. (2016). Research Methods for Business Students (7th ed.). Pearson Education Limited.<\/li><li>Senyo, D. B., Olivia, A.-T., &amp; Musah, A. (2015). Income Diversification and Financial Stability of Banks in Ghana. International Journal of Business and Social Science, 6(6), 8.<\/li><li>Smith, R., Staikouras, C., &amp; Wood, G. E. (2003). Non-Interest Income and Total Income Stability. SSRN Electronic Journal. <a href=\"https:\/\/doi.org\/10.2139\/ssrn.530687\">https:\/\/doi.org\/10.2139\/ssrn.530687<\/a><\/li><li>Stiroh, K. J. (2004). Do Community Banks Benefit from Diversification? Journal of Financial Services Research, 26(2\/3), 135\u2013160.<\/li><li>\u00a0<\/li><\/ol><\/div>\t\t\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-column elementor-col-33 elementor-inner-column elementor-element elementor-element-aa50645\" data-id=\"aa50645\" data-element_type=\"column\" data-e-type=\"column\">\r\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\r\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-1573df92 img-thumbnail elementor-widget elementor-widget-image\" data-id=\"1573df92\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<img fetchpriority=\"high\" decoding=\"async\" width=\"241\" height=\"300\" src=\"https:\/\/scholarpublishing.org\/sse\/wp-content\/uploads\/2022\/03\/Untitled-15-241x300.jpg\" class=\"attachment-medium size-medium 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class=\"elementor-divider-separator\">\r\n\t\t\t\t\t\t<\/span>\r\n\t\t<\/div>\r\n\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-119aa6d0 custom-sub-heading elementor-widget elementor-widget-heading\" data-id=\"119aa6d0\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"heading.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t<h5 class=\"elementor-heading-title elementor-size-default\">License<\/h5>\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-551d1c2e elementor-widget elementor-widget-text-editor\" data-id=\"551d1c2e\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t\t\t<p>This work is licensed under a\u00a0<a href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\" rel=\"license\">Creative Commons Attribution 4.0 International License<\/a>.<\/p>\t\t\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t<div class=\"elementor-element elementor-element-2b4b0f86 dropdown-divider elementor-widget-divider--view-line elementor-widget elementor-widget-divider\" data-id=\"2b4b0f86\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"divider.default\">\r\n\t\t\t\t<div class=\"elementor-widget-container\">\r\n\t\t\t\t\t\t\t<div class=\"elementor-divider\">\r\n\t\t\t<span class=\"elementor-divider-separator\">\r\n\t\t\t\t\t\t<\/span>\r\n\t\t<\/div>\r\n\t\t\t\t\t\t<\/div>\r\n\t\t\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t<\/section>\r\n\t\t\t\t\t<\/div>\r\n\t\t<\/div>\r\n\t\t\t\t\t<\/div>\r\n\t\t<\/section>\r\n\t\t\t\t<\/div>\r\n\t\t","protected":false},"excerpt":{"rendered":"<p>This study aims to evaluate the extent to which banks in Zambia are benefiting from revenue diversification activities. Research design\/methodology \u2013 The study used a quantitative research approach based on secondary data from 12 of the 18 banks in Zambia. Data analysis was buttressed by the use of several techniques such as the Herfindahl-Hirschman Index to measure bank diversification, ZScore to measure bank income volatility\/risk and risk adjusted returns on assets and equity to measure profitability. Findings \u2013 The study finds that, in Zambia, some banks do not enhance their profit performance by diversifying into non-interest activities. For other banks, diversification yields better profit performance in some years, but not always. The overall picture, however, is that diversification into non-interest income earning activities enhances the profit performance of banks. With respect to bank riskiness as measured by income volatility, the study finds that, in Zambia, some banks do not reduce their income volatility by diversifying into non-interest earning activities. For other banks, diversification reduces income volatility in some periods, but not others. The overall picture, however, is that the larger the bank is, the more non-interest income diversification reduces its income volatility. Limitations \u2013 Although the Central Bank provided financial data for all the 18 banks in the country, only data for 12 banks was usable. Data for six banks did not cover the whole ten-year study period and was unusable for the purposes of the study. This limited the actual sample size. Furthermore, to preserve confidentiality, the bank data provided was anonymised such that it was impossible to tell the geographical spread of the bank, the bank\u2019s product or market strategy, or whether the bank was foreign or locally owned. This limited the scope of analysis. Recommendations \u2013 Given that in general bank profitability has declined as banks have become less diversified, the Bank of Zambia needs to closely monitor performance of banks and avoid imposing regulations that stifle bank innovation. And since diversification does not always result in enhanced bank performance, banks should consider the extent to which their business models support non-bank activities before making diversification decisions.<\/p>\n","protected":false},"author":2,"featured_media":7487,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"no-sidebar","site-content-layout":"plain-container","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"disabled","ast-breadcrumbs-content":"disabled","ast-featured-img":"disabled","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[2,38,47,51],"tags":[128,129,127,130],"class_list":["post-7484","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ebooks","category-business-management","category-economy","category-finance","tag-income-volatility","tag-interest-income","tag-profit-performance","tag-profitability"],"_links":{"self":[{"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/posts\/7484","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/comments?post=7484"}],"version-history":[{"count":5,"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/posts\/7484\/revisions"}],"predecessor-version":[{"id":7491,"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/posts\/7484\/revisions\/7491"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/media\/7487"}],"wp:attachment":[{"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/media?parent=7484"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/categories?post=7484"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarpublishing.org\/sse\/wp-json\/wp\/v2\/tags?post=7484"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}