The impact of financial regulations on bank lending in emerging economies in Sub-Saharan Africa
-
DOIhttp://dx.doi.org/10.21511/bbs.19(3).2024.06
-
Article InfoVolume 19 2024, Issue #3, pp. 58-66
- 122 Views
-
43 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The aim of this study is to investigate the impact of financial regulations on bank lending in emerging economies in Sub-Saharan Africa. The dynamic system-generalized method of measures (GMM) is used to address difficulties such as unexplained periods and nation-specific implications, besides the endogeneity of the variables in question. Spanning from 2012 to 2022, the research used data from 80 banks in 20 sub-Saharan African nations. The findings show that expansive financial regulation, which includes a boost in the amount of cash in circulation, induces bank lending. At the same time, restrictive financial regulations, with the value as an improvement in interest rates by central banks, lead to credit contractions, albeit with little impact because of the attainable poverty of banking sectors, organizational limitations, bank-focused attention, and additional system rigidity typical of developing nations, which compromises the efficiency of the system. Other characteristics that substantially impact bank lending routes include capital sufficiency ratios and the scale of economic activity. Sub-Saharan African countries may boost the efficiency of financial regulations propagation on bank lending by making better use of the transfer process of fluctuations in cash supplies and interest rates.
- Keywords
-
JEL Classification (Paper profile tab)G21, G28, O16
-
References53
-
Tables3
-
Figures0
-
- Table 1. Description of variables and data sources
- Table 2. Descriptive statistics
- Table 3. Outcomes of the bank lending method
-
- Abdullahi, I., & Fakunmoju, S. (2019). Stock market development and economic performance of West-African countries: A dynamic panel data analysis. Journal of Management, Economics, and Industrial Organization, 3(3), 12-26.
- Adeleke, O. K., & Olusola. (2021). Asymmetric Effect of Fiscal and Monetary Policies on The Stock Market Performance In Nigeria.
- Afful, K. B., & Asiedu, K. F. (2014). Stock markets development in Sub-Saharan Africa: Business regulations, governance and fiscal Policy. International Journal of Economics and Finance, 6(1), 15-31.
- Ahamed, M. M., & Mallick, S. K. (2019). Is financial inclusion good for bank stability? International evidence. Journal of Economic Behavior & Organization, 157, 403-427.
- Akinkuotu, O. (2021). Comparative Impact of Fiscal and Monetary Policies on Stock Market Performance in Nigeria.
- Akinlo, A. E., & Egbetunde, T. (2010). Financial development and economic growth: The experience of 10 sub-Saharan African countries revisited. The Review of Finance and Banking, 2(1), 17-28.
- Akinsola, F. A., & Odhiambo, N. M. (2017). The impact of financial liberalization on economic growth in sub-Saharan Africa. Cogent Economics & Finance, 5(1), 1338851.
- Akudugu, M. A. (2013). The determinants of financial inclusion in Western Africa: Insights from Ghana. Research Journal of Finance and Accounting, 4(8), 1-9. 10.
- Aliamutu, K. F., & Mkhize, M. (2024b). The impact of failure to make payment behaviour on the profitability of South African municipal electricity suppliers. International Journal of Environmental, Sustainability, and Social Science, 5(3), 435-451.
- Aliamutu, K. F., & Mkhize, M. V. (2024c). The Influence of Social Responsibility on Profitability in the Southern African Banking Industry. Journal of Accounting Research, Organization and Economics, 7(1), 111-129.
- Aliamutu, K., & Mkhize, M. (2024a). Financial management engagement and small and medium-sized businesses in eThekwini municipality, South Africa. Economics, Management and Sustainability, 9(1), 90-104.
- Allen, F., & Giovannetti, G. (2011). The effects of the financial crisis on Sub-Saharan Africa. Review of Development Finance, 1, 1-27.
- Aluko, O. A. & Kolapo, F. T. (2020). Macroeconomic factors and stock market development in sub-Saharan Africa: does the measure of stock market development matter? Transnational Corporations Review, 12(1), 5362.
- Aluko, O. A., & Ajayi, M. A. (2018). Determinants of banking sector development: Evidence from Sub-Saharan African countries. Borsa Istanbul Review, 18(2), 122-139.
- Amatus, H., & Alireza, N. (2015). Financial inclusion and financial stability in Sub-Saharan Africa (Ssa). International Journal of Social Sciences, 36(1), 39-49.
- Anarfo, E. B., & Abor, J. Y. (2020). Financial regulation and financial inclusion in Sub-Saharan Africa: Does financial stability play a moderating role? Research in International Business and Finance, 51, 101070.
- Anarfo, E. B., Abor, J. Y., Osei, K. A. & Gyeke-Dako, A. (2019b). Monetary policy and financial inclusion in sub-Sahara Africa: a panel VAR approach. Journal of African Business, 20(4), 549-572.
- Anarfo, E. B., Abor, J. Y., Osei, K. A., & Gyeke-Dako, A. (2019a). Financial inclusion and financial sector development in Sub-Saharan Africa: A panel VAR approach. International Journal of Managerial Finance, 15(4), 444-463.
- Anthony-Orji, O. I., Orji, A., Ogbuabor, J. E., & Nwosu, E. O. (2019). Do financial stability and institutional quality have impact on financial inclusion in developing economies? A new evidence from Nigeria. International Journal of Sustainable Economy, 11(1), 18-40.
- Antwi, S., Zhao, X., & Mills, E. F. E. A. (2013). Impact of macroeconomic policies on the Ghana stock exchange: a cointegration analysis. International Business Research, 6(3), 100.
- Arun, T., & Kamath, R. (2015). Financial inclusion: Policies and practices. IIMB Management Review, 27(4), 267-287.
- Asuming, P. O., Osei-Agyei, L. G., & Mohammed, J. I. (2019). Financial inclusion in sub-Saharan Africa: Recent trends and determinants. Journal of African Business, 20(1), 112-134.
- Beck, T., Senbet, L., & Simbanegavi, W. (2015). Financial inclusion and innovation in Africa: An overview. Journal of African Economies, 24(1), i3-i11.
- Brei, M., Jacolin, L., & Noah, A. (2020). Credit risk and bank competition in Sub-Saharan Africa. Emerging Markets Review, 44, 100716.
- Dwumfour, R. A. (2017). Explaining banking stability in sub-saharan Africa. Research in International Businessand Finance, 41, 260-279.
- Evans, O. (2016). Determinants of financial inclusion in Africa: A dynamic panel data approach.
- Frey, L., & Volz, U. (2013). Regional Financial Integration In Sub-Saharan Africa–An Empirical Examination Of Its Effects On Financial Market Development. South African Journal of Economics, 81(1), 79-117.
- García, M. J. R., & José, M. (2016). Can financial inclusion and financial stability go hand in hand. Economic Issues, 21(2), 81-103.
- Ho, S.-Y. (2017). The macroeconomic determinants of stock market development: Evidence from South Africa. International Journal of Emerging Markets, 14(2), 322-342.
- Idowu, O., Bamidele, I., & Elumah, L. (2020). Monetary and Fiscal Policies Interactions on Stock Returns in Nigeria. Binus Business Review, 11(1), 17-24.
- Jungo, J., Madaleno, M., & Botelho, A. (2022). The effect of financial inclusion and competitiveness on financial stability: Why financial regulation matters in developing countries? Journal of Risk and Financial Management, 15(3), 122.
- Karikari, J. A. (2010). Governance, financial liberalization, and financial development in Sub-Saharan Africa. African Economic Conference.
- Kebede, J., Selvanathan, S., & Naranpanawa, A. (2021). Foreign bank presence, institutional quality, and financial inclusion: Evidence from Africa. Economic Modelling, 102, 105572.
- Khan, I., Khan, I., Sayal, A. U., & Khan, M. Z. (2022). Does financial inclusion induce poverty, income inequality, and financial stability: empirical evidence from the 54 African countries? Journal of Economic Studies, 49, 303-314.
- Mecagni, M., Marchettini, D., & Maino, R. (2015). Banking In Sub-Saharan Africa: Key Features And Challenges. Recent Trends in Banking in sub-Saharan Africa (pp. 9-38).
- Motelle, S., & Biekpe, N. (2015). Financial integration and stability in the Southern African development community. Journal of Economics and Business, 79, 100-117.
- Msomi, T. S. (2022). Factors affecting non-performing loans in commercial banks of selected West African countries. Banks and Bank Systems, 17(1), 1-12.
- Msomi, T. S. (2023). Macroeconomic and firm-specific determinants of financial performance: Evidence from non-life insurance companies in Africa. Cogent Business & Management, 10(1), 2190312.
- Msomi, T. S., & Olarewaju, O. M. (2022). Dynamic panel investigation of the determinants of South African commercial banks’ operational efficiency. Banks and Bank Systems, 17(4), 35-49.
- Muyanga, C. (2014). The effect of fiscal policy on the performance of the Nairobi securities exchange (Thesis). University of Nairobi.
- Mwega, F. M. (2016). Financial regulation in Kenya: Balancing inclusive growth with financial stability. Achieving Financial Stability and Growth in Africa. Routledge.
- Nwakobi, P. C., Ananwude, A., & Umezurike, C. M. (2020). Fiscal Policy and Stock Market Development in an Emerging West African Economy: The Case of Nigeria. Finance & Economics Review, 2(3), 52-68.
- Nwaogwugwu, I. C. (2018). The effects of monetary and fiscal policy on the stock market in Nigeria. Journal of Economics and Development Studies, 6, 79-85.
- Omachar, A. E. (2022). Securities Market Development, Bank Industry Performance, Government Regulations and Economic Growth in the Common Market for Eastern and Southern Africa Member States. University of Nairobi.
- Pearce, D. (2011). Financial inclusion in the Middle East and North Africa: Analysis and roadmap recommendations (Policy Research working paper No. WPS 5610). World Bank.
- Phesa, M., Sibanda, M., & Gumede, Z. H. (2023). JSE Delisted Companies’ Use of Impression Management Practices in the Chairman’s Statement and Audit Committee Report Preceding Delisting from the 2016–2021 Period. International Journal of Environmental, Sustainability, and Social Science, 4(4), 1162-1179.
- Siddik, M. N. A., & Kabiraj, S. (2018). Does financial inclusion induce financial stability? Evidence from cross-country analysis. Australasian Accounting, Business and Finance Journal, 12(1), 34-46.
- Tarus, D. K., & Manyala, P. O. (2018). What determines bank interest rate spread? Evidence from Sub-Saharan Africa. African Journal of Economic and Management Studies, 9(3), 335-348.
- Thaddeus, K. J., Ngong, C. A., Nnecka, U. J., Nubong, N. M., Ibe, G. I., Chinyere C. O., & Onwumere, J. U. J. (2022). Stock market development and economic growth in sub-Saharan Africa (1990–2020): an ARDL approach. Journal of Economic and Administrative Sciences, 40(2), 344-363.
- Thamae, R. I., & Odhiambo, N. M. (2023). Bank regulation, supervision and lending: empirical evidence from selected Sub-Saharan African countries. Macroeconomics and Finance in Emerging Market Economies, 16(3), 485-504.
- Tita, A. F., & Aziakpono, M. J. (2017). The relationship between financial inclusion and income inequality in sub-Saharan Africa: Evidence from disaggregated data. African Review of Economics and Finance, 9(2), 30-65.
- Yakubu, I. N., Kapusuzoğlu, A., & Ceylan, N. B. (2021). Examining The Nexus Between Institutional Quality And Stock Market Development: Evidence From Ghana. Finansal Araştırmalar ve Çalışmalar Dergisi, 13(25), 864-878.
- Zeqiraj, V., Sohag, K., & Hammoudeh, S. (2022). Financial inclusion in developing countries: Do quality institutions matter? Journal of International Financial Markets, Institutions and Money, 81, 101677.