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    What drives bank lending? A closer look at bank lending types in Africa
    (African Journal of Economic and Management Studies, 2022) Ayagre, P.; Kusi, B.; Dzeha, G.; Kriese, M.
    Purpose: In this study, the authors present unique evidence on bank lending types by paying particular attention to the factors that drive the different types of bank lending in Africa using bank-level data. Design/methodology/approach – In presenting such evidence, the study employs a robust fixed effect panel data with year and technological controls comprising 57 banks from 29 African economies between 2006 and and 2015. Findings: The results show that different factors affect different bank lending types differently in Africa. Specifically, while the authors find that total or aggregate bank lending is positively driven by bank capitalization and spread but negatively driven by bank size, corporate and commercial bank lending is positively driven by bank size, spread, inflation, elections and extent of business disclosure but negatively driven by bank capitalization, loan loss reserves, operational costs, and gross domestic product per capita. Moreover, interbank lending is both negatively and positively driven by bank capitalization and size respectively, while other bank lending type are driven positively by financial crises but negatively by bank size, inflation and extent of business disclosure. Finally, retail and consumer lending are positively driven by bank capitalization, loan loss reserves, and spread. while negatively driven by bank size and inflation. Practical implications: These imply that bank managers, regulators, policymakers and researchers must begin to see each bank lending category separately and independently since varying factors influence the different categories of bank lending differently. Originality/value: The study presents new insights into how different factors determine different lending types in Africa for the first time, to the best of the authors’ knowledge.
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    Bank Competition in Africa: Do Institutional Quality and Cross-border Banking Matter?
    (Journal of African Business, 2020) Amidu, M.
    This paper analyses the implications of cross-border banking (CBB) and institutional quality (IQ) for bank competition in Africa. It applies a two-step estimation procedure using bank-level panel data for 29 African countries. In step one, the Boone indicator and the Lerner index are used to gauge bank competition in a given country in Africa. In the second step, it analyzes the sources of bank competition, placing emphasis on the impact of CBB and IQ. The results suggest that competition increased in the period of 2002–2005, before decreasing somewhat between 2006 and 2007 and increasing again thereafter. The results also show that cross-border banking enhances bank competition in African countries with stronger governance structures and institutional quality. These results are robust to an array of controls, including an alternative methodology, variable specifications, and the regulatory environments that banks operate in.
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    Bank Deposit Mobilization, Loan Advancement and Financial Stability: The Role of Bank Branches in an Emerging Market
    (Journal of African Business, 2021) Kusi, B.A.; Mensah, L.; Agbloyor, E.
    This study investigates the relationship between bank branches, financial intermediation and financial stability in Ghana using 35 banks between 2009 and 2017. Employing a panel, two-step dynamic GMM model, a non-linear “inverted U-shaped” relationship is documented between bank branches and financial stability. This implies that initial increases in bank branches promote financial stability but beyond 191 and 173 bank branches, bank branching derails banking stability. The findings further reveal that bank branches enhance the positive effects of deposits on bank stability whilst reducing the negative consequences of bank lending on financial stability. These findings imply that while bank management can rely on bank branches to enhance loans and deposits in promoting banking stability, bank management should also be cautious about the number of bank branches they keep giving that beyond a certain threshold, it may impede stability.
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    The Effects of Digital Banking Platforms on the Profitability of a Bank: The Case of a Private Bank in Ghana
    (Proceedings of Eighth International Congress on Information and Communication Technology, 2023) Owusu, A.
    Businesses are adapting digital technologies to reach bigger markets, reduce operational costs, improve financial performance or profitability, and gain competitive advantage. The banking sector in Ghana is a very competitive one with most banks adapting one or more forms of digital banking products to facilitate their current operations, gain competitive advantage, and achieve future business goals. While many studies have accessed the impact of digital banking solutions on the profitability of financial institutions mostly in developed economies, the same cannot be said about developing economies. There is, therefore, the need to add to the body of knowledge on how digital banking solutions impact the profitability of banks in developing countries. This paper was underpinned by the updated DeLone and McLean IS success model and used a qualitative approach with purposive sampling of 28 staff and customers to assess a private bank’s digital banking platforms through thematic data analysis. The findings show that system usage and user satisfaction which results in net benefits are positively influenced by information quality, system quality, and service quality. It is therefore concluded that the deployment and use of digital banking solutions improve the profitability of banks. Other implications are also discussed.
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    Does corporate governance explain the quality of bank loan portfolios? Evidence from an emerging economy
    (Journal of Financial Economic Policy, 2020-04-17) Fiador, V.; Sarpong-Kumankoma, E.
    Purpose – The purpose of this study is to assess the impact of corporate governance variables on the quality of bank loan portfolios. Design/methodology/approach – The study used a panel-corrected standard errors estimation model with the most recent 11-year data from2006 to 2016 on selected Ghanaian banks. Findings – The findings indicate that corporate governance is relevant within the banking sector and plays a key role in improving loan quality. Having a large board with the attendant pool of expertize, boards with mostly non-executive members and duality of the CEO-board chair can be harnessed to improve bank loan quality. Female participation on boards seems to detract from good performance, creating the impression of tokenism in the Ghanaian banking sector. Originality/value – The study has important implications for board construction within the banking sector and the discourse on bank asset quality. Keywords Corporate governance, Asset quality, Bank loan quality, Banking sector, Gender diversity, Non-performing loans, NPLs, Banks, Financial institutions and services, Corporate finance and governance
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    Financial freedom, market power and bank margins in sub-Saharan Africa
    (Journal of Financial Regulation and Compliance, 2019-10-31) Sarpong-Kumankoma, E.; Abor, J.; Aboagye, A.Q.Q.; Amidu, M.
    Purpose – This paper examines the effect of financial (banking) freedom and market power on bank net interest margins (NIM). Design/methodology/approach – The study uses data from 11 sub-Saharan African countries over the period, 2006-2012, and the system generalized method of moments to assess how financial freedom affects the relationship betweenmarket power and bank NIM. Findings – The authors find that both financial freedom and market power have positive relationships with bank NIM. However, there is some indication that the impact of market power on bank margins is sensitive to the level of financial freedom prevailing in an economy. It appears that as competition intensifies, margins of banks in freer countries are likely to reduce faster than those in areas with more restrictions. Practical implications – Competition policies could be guided by the insight on how financial freedom moderates the effect of market power on bank margins. Originality/value – This study provides new empirical evidence on how the level of financial freedom affects bankmargins and the market power-bank margins relationship.
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    Do banking institutions respond to incentives? Banking awards and stability evidence from an emerging economy
    (2019) Mensah, L.; Andoh, C.; Kuttu, S.; Kusi, B.A.
    This study investigates how banking awards influence stability in the banking sector of Ghana. We employ a robust random effect panel model of 30 banks between 2007 and 2014 and the results show that banking institutions respond to incentives in the form of awards. However, banking stability is weakened when previous year awards are concentrated in fewer individual banks. These imply that awards at the industry and individual bank levels promotes and weakens stability, respectively. From these findings, it is obvious that regulators of banks can rely on industry-level focused awards to reinforce stability but not on individual bank level focused awards. Also, organizers of banking awards in conjunction with regulators should structure and design banking awards to avoid concentration of awards in few banks and to be industry oriented.
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    Bank productivity in Africa
    (International Journal of Productivity and Performance Management, 2019-06) Nartey, S.B.; Osei, K.A.; Sarpong-Kumankoma, E.
    Purpose – The purpose of this paper is to provide a total factor productivity index for the African banking industry. It also investigates the impact of some internal and external determinants affecting bank productivity. Design/methodology/approach – The biennial Malmquist productivity index and various regression models (ordinary least squares, Tobit and truncated bootstrapped regression) are employed in analyzing data from 120 banks in 24 African countries from 2007 to 2012. Findings – The results indicate a general decline in productivity of banks in Africa, largely due to inadequate technological progress. State banks are found to be more productive than foreign and private banks. The regression analyses showed that non-executive directors, leverage, management quality, credit risk, competition and exchange rate have significant impact on bank productivity, but ownership and CEOduality do not. Practical implications – The results have implications for management of banks, governments and regulators. It shows the need for policy and investments that improve state-of-the art technology. The findings also seem to suggest poor management practices in input usage, especially in operational management, as well as costs emanating from non-interest sources. Bank managers need to address these deficiencies to improve productivity in African banking markets. Originality/value – A major contribution of this paper is the productivity index provided for the African banking industry. This study is also the first to apply the biennial Malmquist to analyze productivity in the African banking industry.
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    Does credit information sharing affect funding cost of banks? Evidence from African banks
    (International Journal of Finance and Economics, 2018-01) Kusi, B.A.; Opoku-Mensah, M.
    This study takes advantage of the lack of empirical studies on the effect of credit information sharing and funding cost of banks and investigates credit information sharing and bank funding cost in Africa between 2006 and 2012. Employing a two‐step generalized method of moments regression of 233 banks in 17 African countries, the study provides new revelations. The study shows that the quality of credit information shared is key and persistent in reducing funding cost of banks. Again, the study confirms that the coverage of private credit bureaus significantly reduced bank funding cost whereas no such evidence was found for coverage of public credit registries. Further, although the study found evidence to support that the presence of credit information reduces bank funding cost, no evidence was found to support that countries that use both private credit bureaus and public credit registries are able to reduce funding cost of banks in Africa. From these results, it is evident that credit information sharing presence, coverage, and quality reduces funding cost in Africa. For policy recommendations, policymakers and bank boards must team up and set up credit information sharing institutions to help reduce information asymmetry and funding cost in countries that do not share credit information. Also, the introduction and establishment of credit information sharing must be geared towards private bureaus as they are more effective in reducing funding cost of banks. Again, policymakers must enact laws and policies that deepen the coverage, depth, and quality of credit information shared so that the financial sector of Africa countries can realize the full potential of credit information sharing.
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    Explaining banking spread
    (Journal of Financial Economic Policy, 2019) Dwumfour, R.A.
    Purpose The paper aims to explain bank interest spread from 2000 to 2014. Design/methodology/approach The study used the ordinary least square panel corrected standard errors (OLS-PCSE) estimation. Generalised least squares results (unreported but available on request) are consistent with the OLS-PCSE results. This is done for 110 developing countries, 50 Europe & Central Asia countries, 33 Latin American countries, 21 Middle East and North African (MENA) countries, 46 Sub-Saharan African (SSA) counties and 8 South Asia countries. The developing countries are further grouped into small, medium and large-size banking markets. Findings The study finds consistent results which indicate that the bigger a bank the less margin charged. The results further show an ambiguous relationship between concentration and net interest margin. The authors find strong evidence to show that less competition leads to inefficient banking market. The study finds lower operational efficiency can lead to higher or lower margin depending on the region or market size. General growth in the economy can lead to a more efficient banking market. The results allude to the fact that inflationary shocks do pass on to deposit and loan rates at different extent and speed. Little evidence show that higher presence of foreign banks leads to higher margins. Practical implications The study recommends Central banks to encourage banks to grow/expand either through mergers or acquisitions. This could be done by increasing minimum capital requirements. When this is done, it is most likely that economies of scale among the merged banking entities will be materialised, potentially causing a sizable reduction in overhead costs that could eventually also increase the intermediation efficiency. While at this, further efficiency should be ensured through stirring up competition. Originality/value This study is the first to give new evidence of banking spread using country level data for developing countries and across different continents.