YEAR 2010
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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. | ||
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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. | ||
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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. | ||
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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. | ||
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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. | ||
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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. | ||
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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. | ||
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Résumé | ||
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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. | ||
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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. | ||
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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 | ||
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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. | ||
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For three decades microfinance has rapidly expanded around the globe. The recent global crisis was feared to have stopped, if not reversed, this process. CGAP reported in 2009 that the microcredit portfolios of many MFIs “are stagnant or shrinking”. This study is based on the hypothesis that savings-led MFIs tend to be resilient to such crises, presenting the units of Bank Rakyat Indonesia (BRI) as a case. During the 1970s the units served as channels for subsidized credit. A global crisis in 1982 forced the bank to either close or reform them. With new savings and credit products at market rates of interest, they grew into the largest provider of microfinance. When crisis hit in 1997/98 and again in 2008/09, they proved resilient. Moreover, in 1998 they inspired the restructuring of insolvent BRI, now the most profitable bank with the widest (inclusive) outreach in Indonesia. | ||
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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. | ||
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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. | ||