nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2020‒10‒12
thirty-one papers chosen by
Georg Man

  1. The macroeconomic effects of banking crises: evidence from the United Kingdom, 1750–1938 By Kenny, Seán; Lennard, Jason; Turner, John D.
  2. Weighing up the Credit-to-GDP Gap: A Cautionary Note By Özer Karagedikli; Ole Rummel
  3. Financial Inclusion, Information and Communication Technology Diffusion and Economic Growth: A Panel Data Analysis By Amrita Chatterjee; Nitigya Anand
  4. Information and Communication Technology Diffusion and Financial Inclusion: An Interstate Analysis for India By Amrita Chatterjee; Simontini Das
  5. Credit supply driven boom-bust cycles By Yavuz Arslan; Bulent Guler; Burhan Kuruscu
  6. Fostering Innovation Activities with the Support of a Development Bank: Evidence from Brazil By Marco Carreras
  7. Online Appendix to "Misallocation and Financial Frictions: the Role of Long-Term Financing" By Marios Karabarbounis; Patrick Macnamara
  8. Macroeconomic Effects of Global Shocks in The GCC: Evidence from Saudi Arabia By Kamiar Mohaddes; Mehdi Raissi; Niranjan Sarangi
  9. Credit market frictions and rational agents' myopia: Modeling financial frictions and shock to expectations in a DSGE setting estimated on Slovenian data By Roccazzella, Francesco
  10. Financial integration in the EU28 equity markets: measures and drivers By Nardo, Michela; Ossola, Elisa; Papanagiotou, Evangalia
  11. Investment Home Bias in the European Union By António Martins
  12. Trade, Financial Flows and Stock Market Interdependence: Evidence from Asian Markets By Sudha Narayanan; Sowmya Dhanaraj; Arun Kumar Gopalaswamy; M. Suresh Babu
  13. Sectoral Capital Flows: Covariates, Co-movements, and Controls By Etienne Lepers; Rogelio Mercado, Jr.
  14. Financial Flows Centrality: Empirical Evidence using Bilateral Capital Flows By Rogelio V. Mercado Jr.; Shanty Noviantie
  15. Governance and the Capital Flight Trap in Africa By Asongu, Simplice; Nnanna, Joseph
  16. Economic Uncertainty and Remittances Flow: Heterogeneity Matters By Charles Mawusi
  17. Toward a macroprudential regulatory framework for mutual funds By Argyropoulos, Christos; Candelon, Bertrand; Hasse, Jean-Baptiste; Panopoulou, Ekaterini
  20. The Effect of Finance on Inequality in Sub-Saharan Africa: Avoidable CO2 emissions Thresholds By Asongu, Simplice; Vo, Xuan
  21. Growth, Inequality, Cash Transfers and Poverty in Uganda By Sara N. Ssewanyana
  22. Does Access to Microcredit Lead to Technology Adoption by Smallholder Farmers? Experimental Evidence from Rural Bangladesh By Chowdhury, Shyamal; Smits, Joeri; Sun, Qigang
  23. Effects of interest rate caps on microcredit: evidence from a natural experiment in Bolivia By María José Roa; Alejandra Villegas; Ignacio Garrón
  24. Sustainability and Efficiency of Microfinance Institutions in South Asia By Brijesh C. Purohit; S. Saravanan
  25. Accès équitable aux services financiers : la microfinance suffit-elle ? By Degol Hailu
  26. A Gendered Look at Savings Behavior among Nigerian Microsavers By Mirpourian, Mehrdad
  27. Negative interest rates may be more psychologically acceptable than assumed: Implications for savings By Efendic, Emir; D'Hondt, Catherine; De Winne, Rudy; Corneille, Olivier
  28. What leads people to tolerate negative interest rates on their savings? By Corneille, Olivier; D'Hondt, Catherine; De Winne, Rudy; Efendic, Emir; Todorovic, Aleksandar
  29. Fintech and big tech credit: a new database By Giulio Cornelli; Jon Frost; Leonardo Gambacorta; Raghavendra Rau; Robert Wardrop; Tania Ziegler
  30. Forecasting recovery rates on non-performing loans with machine learning By Bellotti, Anthony; Brigo, Damiano; Gambetti, Paolo; Vrins, Frédéric
  31. Financial Sector Transparency and Net Interest Margins: Should the Private or Public Sector lead Financial Sector Transparency? By Kusi, Baah; Agbloyor, Elikplimi; Gyeke-Dako, Agyapomaa; Asongu, Simplice

  1. By: Kenny, Seán; Lennard, Jason; Turner, John D.
    Abstract: This paper analyses the macroeconomic effects of banking crises in the United Kingdom between 1750 and 1938. We construct a new annual chronology of banking crises, which we define as episodes of runs and panics combined with significant, geographically-dispersed failures and suspensions. Using a vector autoregression, we find that banking crises are associated with short, sharp and significant drops in economic growth. Using the narrative record to identify plausibly exogenous variation, we show that this finding is robust to potential endogeneity.
    Keywords: banking crisis; macroeconomy; narrative identification; United Kingdom; vector autoregression
    JEL: E32 E44 G21 N13 N14 N23 N24
    Date: 2020–08–26
  2. By: Özer Karagedikli (The South East Asian Central Banks (SEACEN) Research and Training Centre); Ole Rummel (The South East Asian Central Banks (SEACEN) Research and Training Centre)
    Abstract: It has been argued that credit-to-GDP gaps (credit gap) are useful early warning indicators for banking crises. In addition, the Basel Committee on Banking Supervision has also advocated using these gaps - estimated using a one-sided Hodrick-Prescott filter with a smoothing parameter of 400,000 - to inform policy on the appropriate counter-cyclical capital buffer. We use the weighted average representation of the same filter and show that it attaches high weights to observations from the past, including the distant past: up to 40 lags (10 years) of past data are used in the calculation of the one-sided trend/permanent component of the credit-to-GDP ratio. We show how past data that belongs to the ‘old-regime’ prior to the crises continue to influence the estimates of the trend for years to come. By using narrative evidence from a number of countries that experienced deep financial crises, we show that this leads to some undesirable influence on the trend estimates that is at odds with the post-crisis environment.
    Keywords: Credit gap, Hodrick-Prescott filter, Trend-cycle decomposition
    JEL: J64
    Date: 2020–02
  3. By: Amrita Chatterjee (Assistant Professor, Madras School of Economics); Nitigya Anand (Associate Solution Advisor, Deloitte & Touche Assurance and Enterprise Risk Services India Pvt. Ltd.)
    Abstract: There have been enough evidences to accept that Financial Inclusion (FI) and Information and Communication Technology (ICT) play positive role in economic growth, even though there are some exceptions. Moreover, we cannot deny the fact that ICT like mobile phone and internet penetration can strengthen the inclusiveness of formal banking sector. The present study has first examined whether ICT development can be an important determinant of Financial Inclusion by using a fixed effect panel data model. The results show that ICT is indeed an important determinant of FI. The same panel data of 41 countries was then used to test whether the growth process of the countries are influenced by Financial Inclusion and ICT diffusion in a dynamic Panel Data Model. Further the paper has investigated the role of FI powered by a better ICT penetration in fostering the growth of the nations using system GMM method by incorporating interactions between FI and ICT indicators. The results suggest that both FI and ICT individually and together through their close interaction can improve current year’s growth. However, we need education, awareness and technical assistance to get sustained growth.
    Keywords: Financial Inclusion, Growth, Information and Communication Technology, Dynamic Panel data model, System GMM estimator
    JEL: L86 L96 C23 O0 G2
  4. By: Amrita Chatterjee (Assistant Professor, Madras School of Economics); Simontini Das (Assistant Professor, Jadavpur University, Kolkata: 700032)
    Abstract: Financial Inclusion has its primary objective in providing access to useful and affordable financial products and services that meet the needs of so far unbanked population for transactions, payments, savings, credit and insurance in a responsible and sustainable way. The penetration of banking services in India has made reasonable progress though there are still regional disparities with especially the rural and female population lagging behind. However, not only access but also usage of financial services matters. Moreover, as there is a strong initiative towards digitalized cashless economy in India, it is important to examine whether the country is ready for a more technology-driven financial system. As far as the diffusion of telecommunication technology is concerned, India has made a remarkable progress in urban areas giving rise to significant digital divide between rural and urban India. With spread of mobile and mobile internet though, this divide has come down to some extent. Thus if this inclination towards mobile technology can be properly channelized to improve the access as well as usage of financial services through spread of mobile banking then more and more people can be brought under the purview of institutional credit system leading to reduction in poverty and inequality. The current paper intends to study the role of information and communication technology (ICT) diffusion in improving the status of financial inclusion across the different states of India. Two separate indices for Financial Inclusion and Information Technology Diffusion are formed and the states are clustered to club the states similar in terms of their performance. Then the paper tries to test whether ICT diffusion is one of the indicators of Financial Inclusion in India. The dynamic panel data analysis helped us to identify the role of technology as well as other socio-economic factors which can contribute in interstate disparities in FI. The results show that technology does play an important role in improving financial inclusion. As the elderly people in rural as well as urban areas are still not that familiar with mobile and internet, they may not be able to get benefited by ICT revolution. But lack of education and more importantly poor status of financial literacy play a very vital role in FI
    Keywords: Financial Inclusion, Information and Communication Technology Diffusion, Dynamic Panel Data Model
    JEL: L86 L96 C23 G21
  5. By: Yavuz Arslan; Bulent Guler; Burhan Kuruscu
    Abstract: Can shifts in the credit supply generate a boom-bust cycle similar to the one observed in the US around 2008? To answer this question, we develop a general equilibrium model that combines a rich heterogeneous agent overlapping-generations structure of households who make housing tenure decisions and borrow through long-term mortgages, firms that finance their working capital through short-term loans from banks, and banks whose ability to intermediate funds depends on their capital. Using a calibrated version of this framework, we find that shocks to banks' leverage can generate sizable boom-bust cycles in the housing market, the banking sector, and the rest of the macroeconomy, which provides strong support for the credit supply channel. The deterioration of bank balance sheets during the bust, the existence of highly leveraged households, and the general equilibrium feedback from the credit supply to household labor income significantly amplify the bust. Moreover, mortgage credit growth across the income distribution is consistent with recent findings that were otherwise argued to be against the credit supply channel. A comparison of the model outcomes across credit supply, house price expectation, and productivity shocks suggests that housing busts accompanied by severe banking crises are more likely to be generated by credit supply shocks.
    Keywords: credit supply, house prices, financial crises, household and bank balance sheets, leverage, foreclosures, mortgage valuations, consumption, and output
    Date: 2020–09
  6. By: Marco Carreras (Institute of Development Studies)
    Abstract: I evaluate the impact of the Banco Nacional de Desenvolvimento Econômico e Social, (BNDES) disbursements on companies’ R&D intensity of companies operating in the Brazilian manufacturing sector for the period of 2003-2011. Using Instrumental Variable (IV) technique, I find a crowding-in impact of receiving funding from BNDES on business-funded innovation intensity, resulting in an increased commitment in innovation activities for funded Brazilian manufacturing companies. The findings of this analysis provide new evidence regarding the industrial sector activity of the Brazilian development bank, adding on the debate about additionality/substitutability of public financial resources.
    Keywords: BNDES, development bank, crowding-in/out, R&D intensity2
    Date: 2020–09
  7. By: Marios Karabarbounis (Federal Reserve Bank of Richmond); Patrick Macnamara (University of Manchester)
    Abstract: Online appendix for the Review of Economic Dynamics article
    Date: 2020
  8. By: Kamiar Mohaddes (University of Cambridge); Mehdi Raissi (International Monetary Fund); Niranjan Sarangi (United Nations Economic and Social Commission for Western Asia (ESCWA))
    Abstract: We develop a quarterly macro-econometric model for the Saudi economy over the period 1981Q2- 2018Q2 and integrate it within a compact model of the world economy (including the global oil market). This framework enables us to disentangle the size and speed of the transmission of growth shocks originating from the United States, China and the world economy to Saudi Arabia, as well as study the implications of stress in global financial markets, low oil prices and domestic fiscal adjustment on the Saudi economy. Results show that Saudi Arabia's economy is more sensitive to developments in China than to shocks in the United States—in line with the direction of evolving trade patterns and China's growing role in the global oil market. A global growth slowdown (e.g., from trade tensions or geopolitical developments) could have significant implications for Saudi Arabia (with a growth elasticity of about 2½ after one year) and the oil market (reducing prices by about 5 percent for 0.5 percentage point reduction in global growth). We also illustrate that a 10 percent lower oil prices and stress in global financial markets could both have a negative effect on the Saudi economy, but given the prevailing social contract in Saudi Arabia, their impact is countered by fiscal easing. Finally, we argue that a domestic fiscal adjustment in Saudi Arabia does not show a negative impact on economic growth in the data. The impact on growth would depend upon the quality of fiscal adjustment and whether it is complemented with structural reforms or not.
    Date: 2020–04–20
  9. By: Roccazzella, Francesco
    Date: 2019–01–01
  10. By: Nardo, Michela (European Commission); Ossola, Elisa (European Commission); Papanagiotou, Evangalia (European Commission)
    Abstract: We examine time-invariant and time-varying market integration across European stock markets. Market integration has been increasing especially during the crisis period. Among others, market capitalization, technological developments and overall political uncertainty drive financial integration and systematic volatility, while macroeconomic variables do not impact idiosyncratic volatility. High market integration is associated with decreasing diversification benefit. During crisis periods investors select portfolios that are not explained only by firm characteristics.
    Keywords: financial integration, equity markets, common factor approach, diversification benefits, drivers of integration
    JEL: F3 C23
    Date: 2020–09
  11. By: António Martins
    Abstract: The creation of the European Single Market (ESM) and the adoption of the Euro elim-inated barriers for capital mobility. This paper analysis the dependency of investment on domestic savings across European Union (EU) economies over three different time frames split by major milestones in the economic history of the union. Using a panel error correction model, I find evidence of low capital mobility before the creation of the ESM and after the crisis of 2008, suggesting that a solvency constraint can bind investment to domestic savings even when barriers for capital mobility are eliminated.The estimates suggest that there is a long-run relationship between the aforementioned aggregates associated with a solvency constraint. However, this constraint does not appear to be binding between 1993 and 2007, matching with an increased spreadin the current account balances between high and low income economies among the EU.Between 2007 and 2020, restrictions on borrowing faced by some EU economies reduced capital mobility, despite the absence of capital controls and exchange rate risk.
    Keywords: Current Account, Savings, Investment, Capital Mobility, Feldstein-Horioka Puzzle
    Date: 2020–07
  12. By: Sudha Narayanan (Associate Professor, Indira Gandhi Institute of Development Research (IGIDR)); Sowmya Dhanaraj (Lecturer, Madras School of Economics); Arun Kumar Gopalaswamy (IIT Madras, India); M. Suresh Babu (IIT Madras, India)
    Abstract: Liberalization and globalization of Newly Industrialized Economies have contributed to increased integration of capital markets. This study tests whether convergence of macroeconomic variables and enhanced bilateral trade and financial flows causes greater interdependence of markets. Daily closing indices and quarterly differentials in interest, inflation, growth rates, exchange rates, trade of goods and services, direct and portfolio investment were used. Results revealed that markets of Asia are not immune to shocks originating in US although co-movements of macroeconomic variables do not help in explaining level of interdependence. Portfolio flows were found to be important than trade flows in explaining market interdependence
    Keywords: Dynamic market interdependence, US and Asian Newly Industrialized Economies (NIEs), Emerging Market Economies (EMEs), FEVD, Trade and Financial Flows
    JEL: F4 G1
  13. By: Etienne Lepers (Organisation for Economic Co-operation and Development (OECD)); Rogelio Mercado, Jr. (The SEACEN Centre)
    Abstract: This paper assembles a comprehensive sectoral capital flows dataset for 64 advanced and emerging economies, from 2000-18, including direct, portfolio, and other investment to and from five sectors: namely, central banks (CB), general government (GG), banks (BKs), non-financial corporates (NFCs) and other financial corporates (OFCs). Using such data, this paper highlights the usefulness of a sectoral approach in assessing capital flow covariates, co-movements, and the effectiveness of capital controls. We show that 1) sectoral flows have varying sensitivities to measures of the global financial cycle and different cyclicality with respect to output growth; 2) co-movements in intra-sectoral resident and non-resident and co-movements with OFC sectoral flows explain a large part of the observed positive correlation between gross inflows and outflows; and, 3) sector-specific tightening capital control measures appear effective in reducing the volume of flows to NFCs and OFCs.
    Keywords: sectoral capital flows, capital flows correlations, capital controls
    Date: 2020–05
  14. By: Rogelio V. Mercado Jr.; Shanty Noviantie (South East Asian Central Banks (SEACEN) Research and Training Centre)
    Abstract: This paper uses a dataset on bilateral capital flows to construct a financial centrality measure for 64 advanced and emerging economies from 2000-16 to capture an economy’s importance within the global financial flows network. The results highlight the varying significance of network systemic and idiosyncratic factors in explaining financial centrality across different types of investments and residency of investors. Most notably, the findings show that financial centres have deeper and more developed financial system, implying their importance in global financial intermediation.
    Keywords: Financial Centrality, Financial Depth, Network Analysis
    JEL: D85 F21 F36 G15
    Date: 2019–12
  15. By: Asongu, Simplice; Nnanna, Joseph
    Abstract: The study examines the use of governance tools to fight capital flight by reducing the capital flight trap. Two overarching policy syndromes are addressed in the study. It first assesses whether governance is an effective deterrent to the capital flight trap in Africa, before examining what thresholds of government quality are required to fight the capital flight trap in the continent. The following findings are established. Evidence of a capital flight trap is apparent because past values of capital flight have a positive effect on future values of capital flight. The net effects from interactions of the capital flight trap with political stability, regulation quality, economic governance and corruption-control on capital flight are positive. The critical masses at which “voice & accountability” and regulation quality can complement the capital flight trap to reduce capital flight are respectively, 0.120 and 0.680, which correspond to the best performing countries. Policy implications are discussed.
    Keywords: Governance; capital flight; capital flight trap; Africa
    JEL: C50 E62 F34 O55 P37
    Date: 2020–01
  16. By: Charles Mawusi (University of Bordeaux)
    Abstract: This paper analyzes the effect of economic policy uncertainty on inward remittances for 138 countries over the period 1995-2018. While our results suggest that increased economic policy uncertainty induces remittances in the long-run, we find that significant heterogeneity exists across advanced, emerging, and developing economies.
    Keywords: system GMM,Panel data,Economic uncertainty,Remittances
    Date: 2020–09–24
  17. By: Argyropoulos, Christos; Candelon, Bertrand; Hasse, Jean-Baptiste; Panopoulou, Ekaterini
    Keywords: financial stability ; mutual fund industry ; regulation ; macroprudential framework
    Date: 2020–01–01
  18. By: Giovanni Scarano
    Abstract: Some recent contributions to economic literature have highlighted the role of corporate savings decisions by big corporations in devoting their profits to direct investment in capital goods, showing how this role is affected by the features of corporate governance and the forms of competition, but also by the possibilities of holding liquid financial assets bearing high returns. However, at the macroeconomic level, some of these analyses show a fallacy of composition in explaining the effects of financialisation on real aggregate investment. The paper proposes an analytical framework in which the growing financialisation of big corporations, interacting with financial globalization, can play a major role in timing the rhythms of real investment in a part of the world economic system. Moreover, the paper shows how the liquidity degree of the assets can also be a very important determinant in portfolio choices by corporations, in close connection with business fluctuations.
    Keywords: Investment theory, Corporate Savings, Capital Movements, Financialisation, Financial Crises
    JEL: B51 E11 E12 E32 F23 G35
    Date: 2020–09
  19. By: Giovanni Scarano
    Abstract: The share of surplus devoted to direct investment in capital goods by big corporations also depends on their corporate savings decisions, which are closely connected not only to the features of corporate governance and the forms of competition, but also to the possibilities of holding liquid financial assets bearing high returns. Financial globalization, multiplying the potential range of financial instruments available to big corporations’ portfolios and creating new ways to access the high profits produced in the emergent markets, can contribute to change the portfolio composition. The paper deals with some contributions that analyse the effects of financial globalization on portfolio management and investment decisions in big corporations, seeking to determine how they may be playing a major role in timing the rhythms of real investment. The main objective is to understand whether these models can account for the tendency to put growing shares of social surplus into speculative channels.
    Keywords: Investment theory, Corporate Savings, Capital Movements, Financialisation, Financial Crises
    JEL: B51 E11 E12 E32 F23 G35
    Date: 2020–09
  20. By: Asongu, Simplice; Vo, Xuan
    Abstract: There is a glaring concern of income inequality in the light of the post-2015 global development agenda of sustainable development goals (SDGs), especially for countries that are in the south of the Sahara. There are also concerns over the present and future consequences of environmental degradation on development outcomes in sub-Saharan Africa (SSA). This study provides carbon dioxide (CO2) emissions thresholds that should be avoided in the nexus between financial development and income inequality in a panel of 39 countries in SSA over the period 2004-2014. Quantile regressions are used as an empirical strategy. The following findings are established. Financial development unconditionally decreases income inequality with an increasing negative magnitude while the interactions between financial development and CO2 emissions have the opposite effect with an increasing positive magnitude. The underlying nexuses are significant exclusively in the median and top quantiles of the income inequality distribution. CO2 emission thresholds that should not be exceeded in order for financial development to continuously reduce income inequality are 0.222, 0.200 and 0.166 metric tons per capita for the median, 75th quantile and 90th quantile of the income inequality distribution, respectively. Policy implications are discussed with particular relevance to Sustainable Development Goals (SDGs).
    Keywords: Renewable energy; Inequality; Finance; Sub-Saharan Africa; Sustainable development
    JEL: H10 O11 O55 Q20 Q30
    Date: 2020–01
  21. By: Sara N. Ssewanyana (IPC-IG)
  22. By: Chowdhury, Shyamal; Smits, Joeri; Sun, Qigang
    Abstract: Agricultural productivity in many developing countries remains low owing mostly to the low adoption of readily available modern technologies such as modern seeds, chemical fertilisers and mechanized irrigation. To understand if relaxing credit constraints increases the adoption of agricultural technologies, we use results from a field experiment designed to estimate the effect of access to microcredit on agricultural technology adoption. We find mere offering of microcredit to smallholder farmers does not lead to the adoption of agricultural technologies. Nevertheless, there is strong evidence of a heterogeneous treatment effects: borrowers with medium-sized farms are 13.3 per cent more likely to adopt modern technologies. In addition, less-risk averse borrowers, and present-biased borrowers are 13.1 per cent and 12.3 per cent more likely to adopt modern technologies.
    Keywords: Research and Development/Tech Change/Emerging Technologies
    Date: 2020–09–16
  23. By: María José Roa (Investigadora del Instituto de Investigaciones Económicas y Sociales Francisco de Vitoria); Alejandra Villegas (Investigadora de Universidad Iberoamericana Ciudad de México); Ignacio Garrón (Consultor indpendiente)
    Abstract: This paper evaluates the imposition of caps on microcredit lending rates through directed credit policies for productive sectors. This financial inclusion intervention provides a unique quasi-experiment, allowing to estimate its causal effect following a difference-in-differences analysis. Our results suggest that the imposition of interest rate ceilings negatively affected the portfolio balance of new microcredits and loans to SMEs granted by MFIs. Particularly, we find robust results indicating that the balance of the microcredit and SME loans portfolio granted by MFIs, relative to the company portfolio granted by banks, decreased by 26.1% for an average MFI for the period 2011-2018.
    Keywords: Interest rate ceilings, financial inclusion, credit access, microcredit loans, small and medium enterprises loans .
    JEL: G18 G28 G38
    Date: 2020–09
  24. By: Brijesh C. Purohit (Professor, Madras School of Economics); S. Saravanan (Post Doctoral fellow, Madras School of Economics)
    Abstract: In this paper we focus on microfinance institutions in South Asia. These microfinance institutions (MFIs) provide credit to the poor who have no access to commercial banks. This is done to reduce poverty and to help the poor with setting up their own income generating businesses. There appears to be in general a conflict between the outreach activities of such MFIs and their sustainability. It may also influence the efficient functioning of such organizations. Therefore, the focus in literature has shifted from subsidizing MFIs to their financial sustainability and efficiency. It is now presumed that such institutions should be able to cover the cost of lending money out of the income generated from the outstanding loan portfolio and to reduce these costs as much as possible. Besides it there is an element of increasing competition among MFIs which is coupled with factors like commercialization, technological change and financial liberalization and regulation policies of the government. In view of such developments we analyze the behavior of microfinance institutions in South Asia comprising MFIs in India, Nepal, Bangladesh and Sri Lanka. We look into major aspects of access to poor by MFIs, sustainability in activities and finances as well as the efficiency of such organizations from different parameters. Using data for 5 years for 142 MFIs across these nations, our results indicate that the goals of sustainability and efficiency are not always mutually supportive. In the long run thus these organizations should choose their focus to those outreach activities in which they exhibit efficiency from different angles such that sustainability along with reduced dependence on lenders as well survival in competitive environment is feasible
    Keywords: Micro finance institutions, South Asia, sustainability, efficiency, competition
    JEL: G21 G32 G33 C33 I31
  25. By: Degol Hailu (IPC-IG)
  26. By: Mirpourian, Mehrdad
    Abstract: Well-designed financial products improve the overall financial health of users. The design of products is particularly important for low-income customers, for whom product design drives behavior. In this paper, we offer insights on low-income customers’ savings behavior and on how they use their savings accounts. More specifically, we focus on detecting and measuring the effects of a set of explanatory variables on transaction amount. To do so, we use quantile regression (QR) and apply it to a novel dataset collected from a financial institution in Nigeria. The data show individual transactions made using the account over time, along with additional socioeconomic information on each customer. Using these data, we specify a model that incorporates customer age, account age, location, transaction type, gender, and seasonality effects, evaluating their correlation with transaction size. With the QR model, we are able to study the effect of the explanatory variables within each quantile of transaction amount instead of just showing trends on average. This is the first study to examine transaction size among low-income customers through a gender lens using QR. All of the variables incorporated in this model have a significant effect on transaction size. However, among all of the explanatory variables, the season in which a customer places a transaction (seasonality effect) has the largest impact on predicting transaction amounts.
    Keywords: Financial Inclusion, Behavioral Finance, Savings, Quantile Regression, Nigeria
    JEL: D03
    Date: 2020–07–30
  27. By: Efendic, Emir; D'Hondt, Catherine; De Winne, Rudy; Corneille, Olivier
    Keywords: saving ; negative interest rates ; financial desition making ; loss-aversion
    Date: 2019–01–01
  28. By: Corneille, Olivier; D'Hondt, Catherine; De Winne, Rudy; Efendic, Emir; Todorovic, Aleksandar
    Keywords: negative interest rate ; savings account
    JEL: G11 G21
    Date: 2020–01–01
  29. By: Giulio Cornelli; Jon Frost; Leonardo Gambacorta; Raghavendra Rau; Robert Wardrop; Tania Ziegler
    Abstract: Fintech and big tech platforms have expanded their lending around the world. We estimate that the flow of these new forms of credit reached USD 223 billion and USD 572 billion in 2019, respectively. China, the United States and the United Kingdom are the largest markets for fintech credit. Big tech credit is growing fast in China, Japan, Korea, Southeast Asia and some countries in Africa and Latin America. Cross-country panel regressions show that such lending is more developed in countries with higher GDP per capita (at a declining rate), where banking sector mark-ups are higher and where banking regulation is less stringent. Fintech credit is larger where there are fewer bank branches per capita. We also find that fintech and big tech credit are more developed where the ease of doing business is greater, and investor protection disclosure and the efficiency of the judicial system are more advanced, the bank creditto- deposit ratio is lower and where bond and equity markets are more developed. Overall, alternative credit seems to complement other forms of credit, rather than substitute for them.
    Keywords: fintech, big tech, credit, data, technology, digital innovation
    Date: 2020–09
  30. By: Bellotti, Anthony; Brigo, Damiano; Gambetti, Paolo; Vrins, Frédéric
    Keywords: loss given default ; credit risk ; defaulted loans ; debt collection ; superior set of models
    Date: 2020–01–01
  31. By: Kusi, Baah; Agbloyor, Elikplimi; Gyeke-Dako, Agyapomaa; Asongu, Simplice
    Abstract: This study examines the effect of private and public sector led financial sector transparency on bank interest margins across eighty-six economies. Using a two-step dynamic system generalized method of moments, least square dummy variables, fixed effects and bootstrap quantile panel models between 2005 and 2016, the findings of the two-step GMM are reported as follows. First, results reveal that financial sector transparency whether led by private or public sector reduces interest margins. Second, while no statistical evidence was found on which of the two (private or public sector led transparency) is more effective in dealing with bank interest margins, public sector-led financial transparency is found to be more consistent in reducing bank interest margins across many more economies. Third, the study shows that the effect of financial sector transparency is visible at lower and middle levels of bank interest margins implying that economies with lower and moderately high bank interest margin level can benefit more from policies targeted at improving transparency in the financial sector. These findings imply that the sampled countries must enact policies and laws that deepen and expand financial sector transparency in order to potentially reduce bank interest margins for the good of banking market participants and society at large.
    Keywords: Financial Sector Transparency; Net Interest margins; Private Sector; Public Sector
    JEL: G20 G29 O40 O55
    Date: 2020–01

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