Abstract

Financial capital (FC) can transform self-image, unlock potential and boost the productivity and well-being of the poor. This paper assesses the access to FC by rural people in the Upper East Region (UER) of Ghana. The study results showed that Rural Banks (RBs) are the main source of FC to rural people in UER with only 21% of them having access to FC from the RBs in pursuance of their livelihoods developments. It is recommended that the RBs and government among others should take pragmatic measures towards covering more rural people who constitute 84% of the population of UER.

Abstract

M-PESA is a remarkably successful mobile payments system launched in Kenya three years ago. Users are able to send money to each other conveniently from their M-PESA using only their mobile phones. A key to the success of M-PESA is the availability of an extensive network of retail shops that accept M-PESA deposits and withdrawals, i.e. they stand ready to exchange cash and electronic value. It is the stores that provide liquidity to the system, and they are paid a commission by M-PESA for this service. Behind the store is a network of intermediaries that arrange the logistics around cash management. In this paper we look at daily transactional data from six M-PESA stores in Western Kenya supplemented by case studies and interviews of M-PESA store managers and employees in order to better understand the liquidity management needs of these stores. We examine how liquidity needs vary by location and day of week/month, and by the level of service offered by the store. We find that stores require intense daily management of liquidity to maintain customer service levels and that this is more difficult in rural areas. We also find some evidence of market discipline for agents who can’t maintain service levels.

Abstract

Globally, many microfinance schemes (MFIs) are gradually shifting their focus from loans-only to multiple financial products, including insurance and savings. This phenomenon, which could be described as combined microfinance (CMF), has received relatively little research attention by recent literature despite its increasing relevance. This paper builds on a historical literature review on savings mobilisation and recent work on microinsurance and microcredit. It is a first conceptual attempt to bring forward the characteristics of CMF in the reviewed inclusive financial systems approach to microfinance. It questions the potential effect of CMF on its various stakeholders and highlights possible positive and negative effects on economic and social performance. Policy and donor support have a stake in accessing more evidence on the possible effects of CMF on the intended development outcomes, aiming at both maximizing social and economic results.

This paper is the first to analyze the credit risk of a microfinance institution based on the loan portfolio of a leading Maghrebian MFI, both in terms of number of clients served and of portfolio size. This allows us to work with a proprietary data set of 1,144,770 contracts issued between 1997 and 2007. Using a resampling technique, we estimate the probability density function of losses and value-at-risk measures for a portfolio of loans granted to female and male microfinance clients. Results show similarities and differences in credit risk between male and female clients with implications in terms of capital requirements.

Abstract

This paper tests the life cycle hypothesis that private saving rises with a higher percentage of population working and falls by higher percentages among the young and the retired, using the case of selected Pacific Island countries. Our results provide strong empirical evidence that age structure is a prime determinant of national savings. The results reveal a statistically significant and positive relationship between national savings ratio and the percentage of working population groups. The research also revealed a statistically significant and negative relationship between national savings and percentage of retired population. Policy makers need to set up measures that improve the economic welfare of the working age population, such as instituting and enforcing minimum wage laws, encouraging compulsory savings for private and public sector workers, adjusting wages to inflation on a consistent and regular basis, providing tax rebates to low-income earners and those providing care for the elderly family members and improving the private sector business environment so as to facilitate the absorption of more working age population.

This study assesses the extent of correlation between ethical investment and Shari’ah-compliant investments in different economic situations. By employing a battery of time series investigation techniques, this study aims to determine if the nature of the relationship between the funds changes in the non-crisis period and during the 2007 crisis period for three developed markets and major financial centers i.e. US, UK and Japan.

By estimating the short- and long-term dynamics between the ethical and Islamic indexes, and the extent of cointegration between the two funds, our analysis aims to help fund managers as well as investors in the composition of their portfolio by answering the following question: should investors chose one of the two funds or can they further diversify by investing in a fund of funds containing both ethical and Islamic funds for better risk to return performance? Our findings show that ethical and Islamic funds in the three major financial centers have a significantly different behavior in the short run as well as in the long run. This study shows that in the US as well as in the UK and Japan, there are potential diversification benefits for active investors in the short run, as well as for passive investors in the long run before the crisis in the US and in both sub periods in Japan and UK.

This paper, firstly, takes advantage of the principal component analysis to build a synthetic financial development indicator for every state member of the West Africa Economic and Monetary Union (WAEMU). Secondly, it examines empirically the link between financial development and economic growth, on the one hand, and the link between financial development and sectoral activities, on the other hand, over the period 1961-2005. To this end, it performs cointegration and Granger causality tests. The results show the existence of a stable long-run relationship between financial development and economic growth in WAEMU countries. The causality is either unidirectional, running from finance to economic growth, in 3 countries out of 8, and in 5 countries out of 8 the causality is bidirectional. Furthermore, at a sectoral level, results reveal some cases of unidirectional causality, running from finance to economic sector activities, and some cases of bidirectional causality. However, there are many cases of non-cointegration and non-causality between financial development and the agricultural sector. This may suggest that the financial sector does not drain sufficient amount of fund to the agricultural sector in order to favour its development.

Résumé

Dans ce travail de recherche, on se concentre sur les activités d’innovation comme déterminants de la valeur financière et comptable de l’entreprise. Notre approche rompt avec le caractère binaire pour mesurer le degré d’innovation pour le remplacer par un indice synthétique. On rapporte le niveau d’innovation correspondant à un ensemble d’activités d’innovation qu’on va étayer selon un « scoring » pour les entreprises industrielles traitées. Sur la base de cette proposition, on développe une mesure quantitative du niveau d’innovation qu’on utilisera dans un cadre économétrique habituel afin d’évaluer son impact sur la performance financière et ce en présence de quelques variables de contrôle. Sur un échantillon de 95 entreprises industrielles tunisiennes, les résultats empiriques montrent que la performance financière de l’entreprise dépend de la réalisation des activités d’innovation justifiée par un proxy synthétique.

Abstract

This paper examines the effect of macroeconomic developments on performance, credit quality and lending behaviour of banks in Kenya, by estimating a dynamic panel data model using Generalized Method of Moments. The paper finds banks’ behaviour to be largely influenced by macroeconomic developments. During down turns, banks tend to lend less on account of increased credit risk, rationing credit as dictated by macroeconomic developments. The study suggests that banks need to continue pursuing risk sensitive loan pricing policies to ease the extent of procyclical/countercyclical behaviour during economic upswings/downswings respectively, which in turn reduces the chances of supply-driven credit crunch effects.

This paper examined the impacts of the current 2007-09 global crisis on the macro-economy of Bangladesh. The evidence suggests that the impact of the crisis had been rather mild with modest slowdown of the economy and a few critical sectors (exports and remittances), but at the same time, the adverse effects being offset by improvements in some other sectors (agriculture and equity markets), thus showing remarkable resilience to the crisis. Further, the impact on Bangladesh was much milder than those felt in both developed countries (such as the U.S. and EU countries) and other emerging economies such as India and China. Appropriate and timely policy actions at the global level along with the country’s own fiscal and monetary policy stimulus were helpful in achieving these results.

Additional factors that helped minimize the adverse impacts include the country’s relative non-exposure to the overseas toxic assets, growth of the agricultural sector, and resilience of garment exports and worker remittance sectors. A SWOT analysis of the country indicates that, as the global economy turns around, the country could take advantage of many global opportunities provided the country can capitalize on its strengths, improve upon its weaknesses and deal effectively with emerging threats. Policy actions that may be helpful include strengthening internal and external sector reforms, infrastructure development, export diversification, finding new markets for exports and worker employment abroad, and leveraging benefits from cooperation and partnerships with foreign businesses including overseas Bangladeshi expatriates, among others.

Abstract

 The Nairobi Stock Exchange (NSE) has, as of 2007, 50 companies listed. In general, the NSE does not seem to be a major factor in the economy of the country. In this study we examined the factors that might have motivated the managers of NSE listed companies to pay dividends. This was done through multiple regression analysis of dividends paid as well as by a survey of company mangers. Dividends are strongly related to net income and to liquidity and they are negatively related to the existence of investment opportunities. These findings are in accord with received finance theory, but they have not previously been examined in the Kenyan context

Abstract

Microfinance institutions (MFIs) strive for financial sustainability, but also for the empowerment of the poor. The social nature of MFIs is mainly financed by subsidies. This paper measures the sustainability of microfinance, employing Yaron’s Subsidy Dependence Index (SDI) which measures the social cost of subsidized MFIs. Generating the data set directly from the audit reports of the 204 MFIs with 23 million borrowers in 54 Countries, the results show that microfinance sector is highly subsidized. Moreover, once subsidies are accounted for, MFIs financial performance declines substantially. Further, the paper also highlights the factors which contribute to and decrease the sustainability of microfinance.

Abstract

The paper determines the empirical relationship between risk, return and trading volume in the Karachi Stock Exchange (KSE) using the GARCH-M technique, and data for the time period December 1991 to December 2010. The paper contributes by introducing the trading volume as a proxy for the flow of information to explain the return in Pakistan’s stock exchange. Such information affects, at the same time, risk and return. The work considers a long time period, based on daily data. This study attempts to incorporate the changing settlement period during the study period. Results show that daily return volatility is time-varying and highly persistent. Contemporaneous changes in trading volume have a positive effect on returns. The previous day’s change in trading volume affects the conditional volatility of returns positively. Therefore, trading volumes have positive information content in predicting returns in all settlement periods except settlement period T+2. Moreover, as settlement period reduced, the day of the week anomalies disappeared, as identified by Nishat and Mustafa (2002). If settlement period T+1 is introduced, we expect that weekdays anomalies will disappear.

Abstract

 In the absence of formal insurance services, smallholder farmers are devoid of effective ways of managing numerous risks they encounter in their daily lives. One response mechanisms common among rural households is reliance on network-based collective action arrangement driven by motives of reciprocity and altruism. The indigenous financial institutions constitute a striking example of risk-sharing and risk-pooling arrangements widely practiced by the bulk of rural communities in Africa. Of these arrangements, the Ethiopian iddir can be considered as a unique and viable institution worth investigation to understand its nature and logic.Drawing on the synthesis of the available literature and household surveys, this study attempts to explain the essence and dynamism of iddir; describe its risk-pooling and risk-sharing mechanisms; investigate the principles and rules underlying its procedures and operations. It also assesses its rules using an analytical framework known as the “institutional analysis and development framework”.This study can contribute to the debate concerning the logic and potential of informal institutions in, partially, meeting the insurance needs of smallholder farmers. It is important to understand and promote the mechanisms by which indigenous arrangements attempt to bridge the gap left by the formal sector.