nep-afr New Economics Papers
on Africa
Issue of 2023‒07‒10
six papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. Digital Financial Services regulations: Their evolution and impact on financial inclusion in East Africa By Ochen, Ronald; Bulime, Enock Will Nsubuga
  2. Exploring the Potential of Artificial Intelligence for Supporting Indigenous Language Journalism Pedagogy in Nigeria By Iyinolakan, Olayinka
  3. Taxing Mobile Money in Kenya: Impact on Financial Inclusion By Diouf, Awa; Carreras, Marco; Santoro, Fabrizio
  4. Examining volatility and spillover effects between markets for sovereign bonds of African countries and the world’s long term interest rate By Debalke, Negash Mulatu
  5. Fintech and bank stability in a small-open economy context: The case of Kenya By Osoro, Jared; Cheruiyot, Kiplangat Josea
  6. Economic Globalisation and Africa’s Quest for Greener and More Inclusive Growth: The Missing Link By Isaac K. Ofori; Andreas Freytag; Simplice A. Asongu

  1. By: Ochen, Ronald; Bulime, Enock Will Nsubuga
    Abstract: Digital Financial Services such as mobile money provides immeasurable benefits for financial inclusion and intermediation in East Africa. In this paper, we use a Fixed Effects panel model and annual data collected from 2007 to 2021 to examine the evolution of Digital Financial Services regulatory frameworks and their effects on conventional banking and Financial Inclusion in East African countries - Kenya, Tanzania, and Uganda. Results indicate that digital financial services regulations positively and significantly affect conventional banking services and mobile money (financial inclusion). Also, during the COVID19 pandemic period when the different governments instituted COVID19 policy response measures in the digital payments space to circumvent the use of cash and physical contact, positively affected digital financial services, thereby enhancing financial inclusion in the region. Also, an increase in lending rates and the consumer price index causes mobile money to decline. Therefore, digital financial services regulations are pivotal in advancing financial inclusion and intermediation through mobile money and conventional banking services in East Africa. Also, Central Banks should be concerned with mobile money in the economy because it forms part of the loanable funds by banks thus, stabilizing lending rates and prices in the economy is crucial for financial inclusion.
    Date: 2023
  2. By: Iyinolakan, Olayinka
    Abstract: The African continent has more than 2100 indigenous languages, but many of them are not well- represented in the media. Artificial intelligence (AI) technology offers an opportunity to digitally incorporate these languages into news media and enable journalism pedagogy that emphasizes their use. However, there is limited research on how to integrate AI into journalism training in Africa, especially for indigenous languages. This study evaluates the benefits and challenges of integrating AI tools into journalism training in Nigeria to promote productivity and inclusion of indigenous communities in media content. Mixed research design via in-depth interviews was used to collect data from journalism schools in Nigeria, semi-structured survey with current journalist and secondary data available via AI tools. The findings suggest that using AI tools in journalism education can improve the quality of journalism and equip journalists with skills needed to succeed in the digital age. However, there is no immediate urgency to integrate native language journalism beyond entry level. A bureaucracy-free dynamic curriculum is needed to train budding journalists and retrain veteran practitioners, with funding for recent tools. Future research should broaden the scope and sample size to produce comprehensive and generalizable results for other AI contexts within and beyond Nigeria.
    Date: 2023–03–31
  3. By: Diouf, Awa; Carreras, Marco; Santoro, Fabrizio
    Abstract: Many people argue that mobile money has the potential to increase financial inclusion and improve the livelihoods of poor people in Africa. However, while many African governments impose specific taxes on mobile money transactions, very little is known about their effect on the use of mobile money services. This study assesses the short- and long-term impact of the tax on money transfer fees that the Kenyan government introduced in 2013. The tax, more specifically an excise duty, was imposed on fees incurred in all money transactions, including mobile money. It was introduced at 10 per cent and increased to 12 per cent in 2018. Our analysis has two parts. We use country-level data to see if the tax affected the use of mobile money – transaction values and volume – and the number of active mobile money agents. In addition, we use four rounds of nationally representative survey data to estimate changes in the use of mobile money after introduction of the tax. We find that the excise duty did not have a significant impact on different aggregated indicators relating to the use of mobile money. However, survey data shows that the tax may have reduced the rate of increase in use of mobile money services affected by the changes in tax, such as sending and receiving money, compared to services that were not, like savings and paying bills. Importantly, while the amounts transacted may not change, users send and receive money within households less regularly. In addition, the tax seems to have a more detrimental impact on poorer households, which were less likely to be financially included before the tax was introduced. Larger households also show more negative effects after the tax.
    Keywords: Finance,
    Date: 2023
  4. By: Debalke, Negash Mulatu
    Abstract: The study sets out to examine the existence of volatility and spillover effects between sovereign bond returns of South Africa and Ethiopia and the world’s long term interest rate using weekly data in the period of 2014–2022. An MGARCH-DCC model is estimated to analyze the direction and strength of sovereign bonds’ volatility interaction. The result indicated that volatility from the long-term world interest rate and South Africa’s sovereign bond return affected the Ethiopian sovereign bond return negatively and positively, respectively. Then, it shows the existence of a bidirectional return spillover between Ethiopia’s and South Africa’s sovereign bond markets, and a unidirectional transmission from the US’s long-term Treasury bond market to Ethiopia’s sovereign bond market. Besides, the sum of ARCH and GARCH terms is very close to unity for both Ethiopia and South Africa, implying that both markets display high persistence in their volatilities. On the other hand, Ethiopia’s and South Africa’s sovereign bonds have weak or insignificant correlation with the world’s long term interest rate. Besides, volatility in both markets is significantly affected by their own respective shocks and volatilities. The findings suggest that African financial policy makers should consider their own economies realities and specific reactions to volatility and spillover effects from the world’s long-term interest rate. That means contextual policy workout is required to contain the negative impacts of the world’s long-term world interest rates. Finally, the strong correlation between Ethiopia’s and South Africa’s sovereign bond market suggests the need to maintain financial stability through monitoring of both national and regional monetary policies.
    Keywords: Africa; volatility; spillover; sovereign bond; long term interest rate; correlation.
    JEL: E44
    Date: 2023–03–01
  5. By: Osoro, Jared; Cheruiyot, Kiplangat Josea
    Abstract: This paper seeks to examine the effect of Fintech credit on bank stability using an unbalanced panel dataset of 37 commercial banks in Kenya between 2013 and 2020. The recent evolution of Fintech comes with the promise of being both revolutionary and disruptive. The temptation of a unidirectional expectation that effects of Fintech will only be positive masks the potential destabilization effects, hence the motivation to examine possibility of its being a source of fragility in the banking sector in Kenya. We employ both static panel models and a dynamic panel of System Generalized Method of Moments (GMM) that lead us to the conclusion that Fintech credit has not occasioned concerns of market fragility. If anything, the empirical results reveal that the FinTech credit is associated with higher bank stability in the sense that FinTech intermediated credit is associated with a higher Z-score suggesting higher overall bank stability. The relationship is however nonlinear, with the squared term of the FinTech credit being negative and statistically significant. We infer that the influence of FinTech on bank stability is inverted "U" type relationship. Bank-specific factors such as equity to assets, asset quality and cost-to-income rations having a strong influence on bank stability. That is a pointer to the possibility of the current magnitude of Fintech credit - the possible conduit of instability - not being associated with fragility, with the likelihood of that changing as the its share of bank assets grows with time.
    Keywords: Bank Stability, FinTech, Kenya
    Date: 2023
  6. By: Isaac K. Ofori; Andreas Freytag; Simplice A. Asongu
    Abstract: This study examines the contingency and threshold effects of economic freedom in the economic globalisation (EG) and inclusive green growth (IGG) relationship in Africa. Based on macro data for 22 African countries and the Driscoll-Kraay standard errors with fixed effects instrumental variable regression, the following findings are established. First, Africa’s mostly unfree economic setting, conditions EG to reduce IGG. Second, when we disaggregate EG into its financial and trade globalisation components, we find that the IGG-impeding net effect of the latter is rather striking. Third evidence from our threshold analysis suggests that by improving Africa’s mostly unfree economic architecture to 60% (moderately free) or 80% (free), the IGG-deteriorating net effects of EG are mitigated (but not nullified). We conclude that unless effort is made to improve Africa’s economic architecture level, the envisaged IGG gains of economic globalisation might prove elusive.
    Keywords: Africa, economic freedom, economic globalisation, inclusive green growth
    JEL: F14 F40 O56 Q01
    Date: 2023

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