Browsing by Author "Karimu, A."

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Are competitive microfinance services worth regulating? Evidence from microfinance institutions in Sub‐Saharan Africa
(International Journal of Finance and Economics, 2019-11-26) Karimu, A.; Salia, S.; Hussain, J.G.; Tingbani, I.
In recent years, there is increasing appetite for regulation of microfinance services after the 2008 financial crisis. Policy questions such as whether competitive microfinance institution (MFI) requires strong regulation to reduce, for example, credit risk or competition and regulation operate in the opposite direction, which each tends to dampen the effect of the other, are an empirical issue that this paper provides answers based on data on Sub-Saharan Africa (SSA) for the period 1995–2015, utilizing panel data approaches. Finding from the study indicates that low competition increases credit risk among MFIs in SSA, which regulation helps reduce such behaviour. The effect of regulation on credit risk is conditional on the level of competition, at the first percentile of competition (imply more competition); regulation does not reduce credit risk behaviour of MFIs but does at competition level above the 25th percentile (imply less competition). Regulation, on the other hand, does not affect operational risk at any level of competition. These findings have implications for policy formulation on the regulation and operations of MFIs in SSA. Our findings suggest that the MFI industry could be regulated efficiently if policymakers develop policies targeted at reducing credit risk exposures of MFIs than their exposure to operational risk.
Convergence in global environmental performance: assessing heterogeneity
(Springer Tokyo, 2018) Brännlund, R.; Karimu, A.
This paper examines convergence in environmental/carbon performance by constructing a measure based on production theory, where production processes explicitly result in the production of two outputs; a good output (GDP) and a bad output (CO2). We use the derived measure to test the β-convergence hypothesis for a panel of 94 countries. The results reveal evidence in support of β-convergence in environmental, or carbon performance for the entire (global) sample and each of the sub-samples. The evidence points to a slower convergence rate for the high-income countries relative to low-income countries. Moreover, the rate of convergence does not vary with capital in the global sample, but does vary in the high-income sample, possibly reflecting differences in abatement cost induced by differences in the stringency of environmental regulation and enforcement. Additionally, we find evidence of a negative relation between environmental performance and fossil fuel share, both at the global level as well as at the middle and high sub-samples, which tend to vary with capital intensity. As such, the results conform to the results from studies on the dynamics of per capita emissions. © 2017, The Author(s).
Oil revenues and economic growth in oil-producing countries: The role of domestic financial markets
(Resources Policy, 2020) Mohammed, J.I.; Karimu, A.; Fiador, V.O.; Abor, J.Y.
The study estimates the effects of oil revenues on economic growth through financial markets development channel. Using a Panel VAR framework, we determine the proportional contribution of government oil revenue investment and private oil revenue investment among a sample of 83 oil-producing countries during the period, 1990–2015. Also, a two-step system GMM is used to estimate the effect of oil revenues on economic growth conditional on financial markets development. We find that government investment of oil revenues positively affects economic growth conditional on banking sector development but has no effect in the case of the stock market development except via turnover ratio. The findings further indicate that private investment of oil rev enues negatively impacts economic growth conditional on banking sector development. In the case of stock market development, in general, we find no effect. The policy recommendation is that oil-producing countries should pay more attention to share of the oil rent that goes to the government and the development of their banking sector since this can have a positive spill over effect on the development of the economy by government investment of oil revenue.
Ownership structure of oil revenues: Political institutions and financial markets in oil-producing countries
(Journal of Multinational Financial Management, 2022) Mohammed, J.I.; Fiador, V.O.; Karimu, A.; Abor, J.Y.
This study examines the impact of the ownership structure of oil revenues on financial markets and institutions, and the intermediating role of political institutions. Using the fixed-effects model and GMM for robustness, we analyse data from 82 oil-producing countries. We found several key results. Firstly, government ownership of oil revenues undermines the efficiency of financial institutions when the quality of political institutions is weak but enhances their efficiency when political institutions are strong. Secondly, the impact of private ownership of oil revenues is negative on the depth of and access to financial institutions when the quality of political institutions is weak, but positive when political institutions are strong. We observe similar threshold effects for the depth of and access to financial markets in the subsample of developing countries. We conclude that oil-producing countries need solid political institutions to benefit from oil wealth and to boost financial development.
Re-examining the financial development and openness nexus: A nonparametric evidence for developing countries
(2017) Karimu, A.; Marbuah, G.
This paper re-examines the nexus between financial development and openness in developing countries. Specifically, we test whether both financial and trade openness explain financial development and its variations across 44 developing economies. Questioning the functional specifications in previous studies, we propose a fully nonparametric modelling approach to validate the simultaneous openness hypothesis. Our findings from the parametric approach suggest that both openness dimensions positively impact financial development, providing a loose support for the simultaneous openness hypothesis. The results based on the nonparametric approach suggest a negative effect of closed economies (economies with relatively closed trade and capital accounts) on financial development, supporting the strong version of the simultaneous openness hypothesis. Correct model specification test results support the nonparametric model relative to the parametric model as appropriate for the sampled data. Our conclusion is therefore based on the nonparametric finding, which supports the simultaneous openness hypothesis for the selected developing countries.
Regulation, governance and the role of the informal sector in influencing environmental quality?
(Ecological Economics, 2020-03-14) Karimu, A.; Swain, R.B.; Kambhampati, U.S.
We investigate the effect of the informal sector and a range of governance indicators on both global and local pollutants for a panel of 58 countries during 1996–2011. The analysis employs a fixed effects-instrumental variable generalized method of moments approach. We find that the size of the informal sector has a significant impact on environmental quality, which is conditional on the level of economic development. For developing countries, the informal sector has a significant positive impact on local pollutants, whereas for the developed countries the informal sector has a significantly negative effect on global pollutants. The findings also reveal that the impact of governance depends on the type of governance measure, the level of economic development and type of pollutant. Control of corruption emerges as the single most important factor especially in the non-OECD countries in improving environmental quality. We argue that the efficacy of an environmental policy for a country with a large informal sector will be low if the policy measures do not address governance, size of the informal sector and environmental policy targets.
Renewable electricity and sustainable development goals in the EU
(World Development, 2019-11-10) Karimu, A.; Swain, B.L.
Renewable energy (RE) has a strong synergy with some of the sustainable development goals (SDGs), thus its successful deployment can potentially result in an impact on these SDGs. In this study, we examine the synergy effect of renewable electricity on selected SDGs via the electricity prices for the European Union (EU) countries. Using panel data and a two-step estimation approach, our findings indicate a strong synergy effect between renewable electricity prices, SDG 7 (affordable and clean energy) and SDG 8 (decent work and economic growth). The results further reveal that SDG 12 (responsible production and consumption) accounts for most of the future renewable electricity price variation (excluding selfeffect), whereas future variation in SDG 7 (affordable and clean energy) and SDG 13 (climate action) are explained mostly by SDG 8 and SDG 12, respectively