Issue #2 (Volume 17 2022)
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Articles6
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19 Authors
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47 Tables
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0 Figures
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Do microfinance banks’ activities affect Nigeria’s economic development?
Adegbola Olubukola Otekunrin, Onyegiri Paul Kenechukwu , Damilola Felix Eluyela
, Okoye Nonso John , Ayomide Ibrahim doi: http://dx.doi.org/10.21511/bbs.17(2).2022.01
Microfinance banks were set up to provide financial services to poor people to reduce the rate of poverty and improve the quality of living in the country. As such, this study ascertained the effect of microfinance banks on the economic development of Nigeria. Secondary data were obtained from the CBN Bulletin and records of the National Population Commission from 1996 to 2019. The study used Vector Autoregressive (VAR) estimates to test the effect of the independent variables (microfinance banks’ total loans and advances, total investments, and total deposits) on the dependent variable (per capita income). Johansen Co-integration results showed a relationship between microfinance banks and Nigeria’s economic development in the long run. The VAR results show that the activities of microfinance banks have a positive but insignificant effect on Nigeria’s economic development in the short term. Microfinance banks have not done well in their intermediation function to positively and significantly affect economic development, especially reducing the poverty rate, unemployment rate, and improving living standards, among other macroeconomic development indices in the short run. The study recommends that microfinance banks will help to improve the standard of living in the country by granting more credits to rural dwellers through the creation of corporative societies, age grades, and unions that are predominant in rural areas.
Acknowledgment
We are grateful to all researchers who contributed to this paper. -
Does the efficiency of banks adversely affect financial stability? A comparative study between traditional and Islamic banks: Evidence from Egypt
Hassan Mohamed Mohamed Hafez doi: http://dx.doi.org/10.21511/bbs.17(2).2022.02The efficiency of banks is an important factor that effectively contributes to the stability of the world financial system, thus reducing financial failure rates of banks and international financial crises that leads to the stability of the global financial system. This study aims to investigate whether the efficiency of Egyptian banks adversely affects financial stability. A sample of 30 banks operating in Egypt was selected to answer this question using the data envelopment analysis (DEA) approach and financial ratios. This study enables the Central Bank of Egypt to identify which banking system (Islamic banks or traditional banks) is more efficient and contributes significantly to boost economic growth. Results revealed that the efficiency of banks is a core factor to affect financial stability. The statically explanatory power of this effect is significant but weak at 14.1% for all Egyptian banks, 6.3% for traditional banks, strong for traditional banks with Islamic window at 22%, and stronger for Islamic banks at 55%. Consequently, the Islamic banking system in Egypt is more efficient compared to traditional banks and has a greater impact on financial stability as one of the pillars of financial inclusion to boost economic growth in Egypt.
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Loan loss provision index and bank risk: An empirical study in Indonesia
The purpose of this study is to determine an index for loan loss provision as a new measurement and examine its effect on bank risk. The study also compared the results with a commonly used measurement, which is the ratio of loan loss provision (LLP). The population of this study is all conventional banks, including foreign banks with branch offices in Indonesia. The period of observation is from 2015 to 2018. The sample selection based on the purposive sampling method resulted in 86 banks. This study used panel data analysis. The data were collected from the annual reports of each bank and the website of the Financial Services Authority. The research findings show that the index of loan loss provision can decrease credit risk, liquidity risk, and operational risk. Meanwhile, the ratio of the loan loss provision only affects operational risk and does not affect credit risk and liquidity risk. The findings of this study suggest that the index for loan loss provision is more suitable to be used as an alternative measurement in the research design related to loan loss provision because the implementation of IFRS 9 requires more detailed disclosure of how banks estimate the amount of loan loss provision.
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Determinants of Indonesian banking profitability: Before and during the COVID-19 pandemic analysis
Abdul Rohman, Ahmad Nurkhin
, Hasan Mukhibad
, Kusumantoro
, Christian Wiradendi Wolor
doi: http://dx.doi.org/10.21511/bbs.17(2).2022.04
The purpose of this paper is to substantiate the determinants of Indonesian banking profitability before and during the COVID-19 pandemic. Return on assets (ROA), return on equity (ROE), and net interest margin (NIM) were used to measure banking profitability. The research population is 43 banks listed on the Indonesia Stock Exchange in 2020. Purposive sampling has been used to determine the research sample. The criteria are banks issued annual reports during the observation period (2019–2020). The data collection method used is documentation. Data analysis techniques used are descriptive analysis methods and multiple regression analysis. The results of the study indicate that banks experienced a decrease in profitability during the pandemic compared to before the pandemic. ROA before the pandemic was 0.82 and dropped to 0.62 during the pandemic; ROE from 1.76 to 1.32; and NIM became 4.79 from 4.91. Other results show that only Capital Adequacy Ratio CAR and Non-performing Loans (NPL) can determine bank profitability (ROA and ROE) significantly, both before and during the pandemic (the coefficient is –0.112 and –4.856 for CAR; –0.977 and –0.913 for NPL). CAR and NPL influence profitability negatively. Meanwhile, size and liquidity are not able to significantly influence profitability of Indonesian banking (ROA, ROE, and NIM). Bank management that can control NPL well will have a significant impact on profitability.
Acknowledgment
We thank to Faculty of Economics and Business Universitas Diponegoro for the funding of research and publication. -
Institutional culture and staff performance: A case study of the banking industry in South Africa
Although research in the past focused on the direct association between organizational culture and staff performance, the effect of any mediating variable was not fully investigated. Thus, this study aimed to examine the effect of innovation and communication as mediating variables in the association between institutional culture and staff performance.
A quantitative methodology was used to collect data through a survey using an on-line Likert-scale questionnaire. Simple random sampling was used to select 19 employees from two commercial banks in South Africa, which included senior executives, managers, supervisors, administrative staff and cashiers. Since these banks were very similar in size, 10 respondents were selected from Bank A and 9 from Bank B according to the above selection criteria. Both descriptive and inferential statistical analyses were conducted to address the aim of the study.
The findings confirmed that communication and innovation facilitated the relationship between institutional culture and employee performance, which was mediated by innovation and communication. Thus, the leadership of the banks should strategically and effectively employ communication tools to ensure that the institution remains innovative. Furthermore, an innovative culture should be nurtured, which encourages and invites participation by staff. -
Interest rate spread determinant based on the interdependency relationship between a bank’s loan rate and time deposit rate
Vina Nugroho , Roy Sembel , Edison Hulu , Gracia Ugut doi: http://dx.doi.org/10.21511/bbs.17(2).2022.06This study analyzes the factors responsible for the lower net interest rate at commercial banks located in Indonesia, Thailand and the Philippines. Data were collected from 35, 10 and 13 commercial banks in Indonesia, Thailand, and the Philippines, respectively, from 2012 to 2020 using the Fixed effect model. The Simultaneous Equation Model was used to analyze the macroeconomic factors and banks’ specific characteristics towards Loan and Time Deposit rates. The result showed that macroeconomic factors, such as the inflation rate, significantly affect loan and time deposit rates in these countries. In Indonesia, bank competition should be reduced and banks’ stability should be higher to minimize Net Interest Margin Spread (difference between Loan Rate and Deposit Rate). In the Philippines, banks should increase their capital and liquidity. So, they will be more confident and prudent in lowering their NIM. Thailand’s banking industry has unique characteristics with high monopoly power. The bigger and greater the market share, the larger the interest rate spread on customers. Therefore, regulators in each country need to consider these important variables when making decisions on lowering the net interest rates by banks to enhance social welfare.