The Effect of Financial Inclusion on Credit Risk in SADC Countries

Jungo, João; Madaleno, Mara; Botelho, Anabela

doi:10.1163/09744061-bja10063

Cited by 7 publications

(7 citation statements)

References 70 publications

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“…The indexes of inclusion and financial innovation are specified according to the suggestion of Jungo et al. (2019, 2022a) and are presented by the expressions (2) and (3).Where ifi is the financial inclusion index, banks is the number of bank branches per 100,000 adults, bancount is the percentage of adults over age 15 who have a bank account, save is the percentage of adults over age 15 who made savings in the past year, borrowers is the percentage of adults over age 15 who took out bank loans, deposit is the percentage of adults over age 15 who made bank deposits, withdraw is the percentage of adults over age 15 who made bank withdrawals from a financial institution, atms represents the percentage of adults over age 15 who used ATMs to make payments or withdrawals and WJ′s are the weights of the respective coefficients.Where innov is the financial innovation index, WP′s…”

Section: Methodsmentioning

confidence: 99%

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Controlling corruption in African countries: innovation, financial inclusion and access to education as alternative measures

Jungo

Madaleno²,

Botelho³

2023

IJSE

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PurposeThis study aims to examine the impact of financial inclusion and financial innovation on corruption, considering the moderating role of education, as well as identify the specific modality of digital inclusion and payments that contribute to corruption reduction.Design/methodology/approachThe study uses a representative sample consisting of 46 African countries in three different years 2011, 2014 and 2017. On the data, feasible generalized least squares (FGLS), instrumental variables – two stages least squares (IV-2SLS) and two-stage generalized method of moments (IV-2GMM) model estimation methods were employed.FindingsThe results suggest that financial inclusion and education significantly reduce corruption. As well, the interaction between financial inclusion and education reduces corruption. Additionally, the authors find that the expansion of bank credit and the use of credit and debit cards are the specific modes of financial inclusion and digital payments that can contribute to corruption reduction.Research limitations/implicationsThis study awakens policymakers in African countries about the need to consider education as an alternative measure to support financial inclusion and reduce the use of physical cash in transactions for an effective fight against corruption.Practical implicationsRegarding practical implications, the study shows that financial inclusion besides reducing poverty for households can contribute to macroeconomic stability in Africa.Originality/valueThe study uses a representative sample composed of 46 African countries and considers the role of education in moderating the relationship between financial inclusion and financial innovation on corruption. Furthermore, the study identifies the specific modality of financial inclusion and digital payments that contribute to corruption reduction.

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Section: Methodsmentioning

confidence: 99%

“…The indexes of inclusion and financial innovation are specified according to the suggestion of Jungo et al (2019Jungo et al ( , 2022a and are presented by the expressions (2) and (3).…”

Section: Controlling Corruption Inmentioning

confidence: 99%

Controlling corruption in African countries: innovation, financial inclusion and access to education as alternative measures

Jungo

Madaleno²,

Botelho³

2023

IJSE

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“…These measures are diverse and include various changes in regulatory requirements that banks are required to comply. These regulatory measures include higher capital adequacy requirements (Jungo et al , 2022; Ezeocha, 2020), countercyclical provisioning, as well as liquidity risk and leverage management (Kuo et al , 2022; Prasad, 2010).…”

Section: Brief Literature Reviewmentioning

confidence: 99%

“…The effects of reforms on banking sector’s financial and regulatory performance, as well as on the economy, according to evidence by different studies, have been varied. Some studies find that banking reforms improve the sector’s financial and operational performance in terms of better returns, productivity and efficiency (Ezeocha, 2020; Olajide et al , 2011; Zhao et al , 2010; Adegbaju and Olokoyo, 2008; Brissimis et al , 2008; Angelini and Cetorelli, 2003), financial system stability (Jungo et al , 2022; Kuo et al , 2022) and thus support economic growth and development (Boikos et al , 2021), while some others could not establish any positive linkage between reforms and performance (Okpara, 2011; Das and Ghosh, 2006; Fernandez De Guevara et al , 2005; Maudos and Fernandez De Guevara, 2004; Kumbhakar and Sarkar, 2003).…”

Section: Brief Literature Reviewmentioning

confidence: 99%

Banking sector reforms in Nigeria: an empirical appraisal

Alley¹,

Hassan²,

Ahmad³

et al. 2023

JFRC

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Purpose This paper provides evidence that the banking sector reforms of 2004 and 2009 enhanced prudential performance of the banking industry and financial system stability in Nigeria. Design/methodology/approach This study uses regression analysis with regime shift to confirm results from tests of two means and variances model to examine the effectiveness of banking sector reforms in Nigeria. Findings Evidence from the regression model agrees with findings from the test of means model (not controlling for trend effects) that capital to assets ratio rose while non-performing loan ratio declined after the reforms, and that capital to earning assets ratio rose when trend effects were accounted for. Both the regression model and the tests of means model controlling for trend effects show that return on asset, return on equity and return on earning assets ratios declined after the reforms. Research limitations/implications This paper evaluated the effectiveness of banking sector reforms in Nigeria using models that avoid weaknesses that besieged many previous studies. It however used data covering 1983–2020 period, due to data availability. A larger scope of data may improve the results, and future research may re-examine this theme as more data become available. Furthermore, banking stability issues could be examined using specialised techniques such as the generalised autoregressive conditional heteroscedasticity model and related family. Practical implications These results suggest that the reforms led to improvement in the sector’s resilience (risks-absorbing capacity) and asset quality, and that profitability had not been the primary focus of the reforms. Social implications The authors recommend that regulatory and supervisory authorities in Nigeria continue to implement and improve on banking sector reforms for a more resilient and functional banking system. As a contribution to social research, this study shows that studies on policy evaluation should be located within appropriate theoretical framework: the theory of change. It shows that an appropriate use of attribution analysis and contribution analysis within this theoretical framework engenders robust analysis and results. Otherwise, the analytical findings would be erroneous and policy advice misguided. Originality/value The statistical significance of our findings establishes that the banking sector reforms in Nigeria have been effective in promoting financial system stability in Nigeria. By deploying both the test of means with and without trend effects (an attribution analysis) and the multivariate regression analysis with regulatory shift (a contribution analysis), and relying more on the later for its superiority, this study contributes to the body of knowledge in that, it not only determined the true effects of banking sector reforms in Nigeria for appropriate policy guidance but also demonstrated that, in research, an inappropriate methodology produces results that may diverge from the more accurate ones that were derived from the correct methodology.

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“…One strand of literature highlights a potential positive relationship between financial inclusion and bank credit risk. Jungo et al (2022) found that higher levels of financial inclusion in rural areas in Uganda could result in increased credit risk for banks. The authors attribute this finding to policymakers' emphasis on increasing bank credit to meet political demands, potentially leading to insufficient consideration of the financial skills and repayment abilities of newly included individuals and ultimately increasing credit risk.…”

Section: Impact Of Financial Inclusion On Bank Credit Riskmentioning

confidence: 99%

Financial inclusion and the financial and economic development: review of the literature, evidence gaps and the road ahead

Naili,

Jabbouri,

Helmi

2023

QMR

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Purpose The purpose of this study is to provide a comprehensive review of the literature on financial inclusion, with a focus on its relationship to financial and economic development. Design/methodology/approach This paper begins by surveying the field of financial inclusion research over the past 15 years, highlighting the evolution of how financial inclusion has been studied in practice. By reviewing 107 studies published between 2008 and 2023 in 63 peer-reviewed journals, the study emphasizes the importance of recent research in this field. Findings The analysis reveals key findings on the positive impact of financial inclusion on economic growth, poverty reduction, financial stability and CO2 emissions, among other factors. Despite the extensive empirical and theoretical work accomplished in the field, the study argues that there is still a need for further research on financial inclusion, including exploring new regions and financial and economic development indicators such as social capital, entrepreneurship and political stability. Practical implications This research aspires to map the emerging discourse on this topic, identify major gaps, and provide a productive line to guide future research. This will contribute to the ongoing debate led by the World Bank on financial inclusion as an effective measure to fight poverty. This study attempts to proffer ideas to encourage collaborative research and deepen our understanding on the role of financial inclusion. Originality/value This study offers a comprehensive overview of recent research on financial inclusion and highlights the need for further research in this field. This study also proposes a promising future research agenda to guide future advancements in the area of financial inclusion.

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The Effect of Financial Inclusion on Credit Risk in SADC Countries

Cited by 7 publications

References 70 publications

Controlling corruption in African countries: innovation, financial inclusion and access to education as alternative measures

Controlling corruption in African countries: innovation, financial inclusion and access to education as alternative measures

Banking sector reforms in Nigeria: an empirical appraisal

Financial inclusion and the financial and economic development: review of the literature, evidence gaps and the road ahead

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