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The purpose of this paper is to investigate the factors that tend to influence credit union efficiency, specifically examining cost efficiency (CE) and technical efficiency.

Using a two-stage method, the authors first estimate CE using Tones’ SBM data envelopment analysis method and technical efficiency in a variable returns to scale setting during the period 2008–2014. The authors estimate a mixed-effects and two-limit Tobit regression to examine the effect of credit union specific characteristics, banking industry and macroeconomic conditions, on efficiency.

Credit unions’ CE averaged 38.9 percent compared to 54.4 percent for technical efficiency. The authors find that technical efficiency does not translate into CE and vice versa.

The authors suggest that when targeting CE, credit union managers would have to make technical efficiency a priority. A monopolized and inefficient banking sector does not challenge efficiency improvement in the credit unions industry.

This study employs data from a frontier market.

This study aims to analyze the potential implications of economic freedom and competition for bank stability.

Using system generalized method of moments and data from 139 banks across 11 Sub-Saharan African (SSA) countries during the period 2006–2012, this study considers whether the degree of economic freedom affects the relationship between competition and bank stability.

The results show evidence of the competition-fragility hypothesis in SSA banking, but suggests that beyond a setting threshold, increases in market power may also be damaging to bank stability. Financial freedom has a negative effect on bank stability, suggesting that banks operating in environments with greater financial freedom generally tend to be less stable or more risky. The authors also find evidence of a conditional effect of economic freedom on the competition–stability relationship, implying that bank failure is more likely to occur in countries with greater economic freedom, but with low competition in the banking sector.

The results suggests to policy makers that a moderate level of competition and economic freedom may be the appropriate policy to ensure the stability of banks.

The study provides insight on the competition–bank stability relationship, by providing new empirical evidence on the effect of economic freedom, which has not been previously considered.

The management of external debt among highly indebted poor countries (HIPCs) in Africa still remains a challenge despite numerous packages and attempts to ameliorate the consequences of such odious debt. The purpose of this paper is to establish the factors that contribute to the growth rate of external debt and how these factors respond to shocks to external debt growth rate in Africa.

Data were obtained from 24 African countries and analyzed using a panel vector autoregression estimation methodology.

The study found that external debt growth rates respond positively to unit shock or changes in government investment spending, consumption spending, and domestic borrowings over a long period of time. In the medium term, external debt growth rates respond negatively to shocks in tax revenue, inflation, and output growth rates. The paper also provides empirical support that external debt may be consumed rather than invested among HIPCs in Africa.

The findings of this paper are limited to only HIPCs in Africa.

This study has some few debilitating implications for external debt management among HIPCs in Africa. First, the paper suggests that debt repayment may be a problem. This is largely because external debt is consumed rather than invested. External debt sustainability needs a holistic approach in less developed countries. The findings place much emphasis on improvements in gross domestic product and tax revenues as the principal routes out of the debt doldrums. However, this option must be exploited with great caution as there is ample evidence that these poor countries increase their external borrowing capacities with improvements in economic outlook.

This paper fills a research gap that identifies specific components of government deficit budgets that may be contributing to the growth rate of external debts among HIPCs.

The purpose of this paper is to document and appraise two innovations by which nontraditional forms of collateral are being used to make smallholder crop and livestock farmers bankable in Ghana and Zimbabwe.

The setup and operations of the warehouse receipt system (WRS) in Ghana were evaluated for the extent to which the WRS was meeting crop farmers’ expectations and the WRS’s own objectives. Owners of the WRS, a certified warehouse operator in a big city, and two operators of certified community warehouses in farming communities were interviewed. Two focus group discussions with crop farmers were also held. Information about the setup and operations of the Tawanda Nyambirai Livestock Trust (TNLT) Private Limited in Zimbabwe (TNLT) and extent of serving the credit needs of livestock farmers was obtained by telephone from the managing director. Data were gathered in April 2014 and were analyzed later.

Due to low output no smallholder farmer targeted by the WRS had been issued with a tradable certified warehouse receipts to serve as collateral to potential lenders. Grain aggregators (non-farmers) have aggregated enough grains from farmers to be issued warehouse receipts. Grain farmers report substantial reduction in post-harvest losses when they lodge farm proceeds with certified community warehouses. For the TNLT, more than 140 farmers had deposited 700 cattle and had been issued with tradable certificates of deposit within one year of TNLT to obtain revolving credit from one bank. Other benefits and challenges are highlighted.

Both approaches have potential of helping to solve liquidity constraints of farmers.

The purpose of this paper is to examine differences in determinants of bank profit persistence among Sub-Saharan African (SSA) countries.

Using system generalized method of moments and data from four SSA countries during the period 2006–2012, this study considers differences in determinants of bank profit persistence across countries.

Efficiency in cost management is a major determinant of profit persistence in all the countries. However, concentration is found to be insignificant in all the estimations, suggesting that efficiency may be a more important determinant of profit persistence than concentration. Economic freedom associates negatively with profit persistence in Ghana, but its effect is insignificant in Tanzania, Kenya and South Africa. Lending specialization translates into less profit persistence in South Africa, but greater persistence in Tanzania. Higher levels of financial development result in lower profit persistence in Kenya and Ghana, but does not matter in Tanzania and South Africa.

The level of profit persistence gives an indication of the effectiveness of competition policies, and the differences observed in their determinants in this study suggest the need for tailor-made policy responses in the different countries.

This study improves the understanding of why some banking market competition policies have not achieved the desired outcomes in some countries. It is evident that blanket rules or wholesale importation of policies from other countries may not work in different contexts.

The purpose of this paper is to investigate whether asset allocation across various industries listed on the Ghana Stock Exchange (GSE) varies across different monetary policy states.

This paper adopts the Markov Chain technique to split monetary policy into three different states. The authors further adopt the Markowitz portfolio optimization technique to find the minimum variance and optimum portfolio for the industries listed on the GSE.

The finding reveals a dynamic asset allocation, which varies the industry’s weight mix across the various monetary policy states enhance excess returns compared to the static asset allocation. Specifically, the authors find risk-return trade-off among industries listed on the GSE. Financial and Food and Beverage industries portfolios record high returns relative to the Government of Ghana 91-day Treasury bill. The Food and Beverage portfolio is the only portfolio that records relatively high excess returns across all the monetary policy states. The authors also find that, during expansionary state (high monetary policy rates) of the monetary policy, investors are to allocate about 69 and 30 percent of their investment into food and beverages and financials, respectively. Corner solution is found in the transient state where 100 percent of wealth is allocated to financial to obtain the optimum portfolio. The optimum portfolio in the contraction state assigns 52 percent to financials and 42 percent to manufacturing. In summary, the result supports the dependence of investors’ asset allocation decisions on monetary policy.

Therefore, the authors propose an investment strategy which is dynamic and takes into consideration the monetary policy states rather than static asset allocation which maintains the same industry weight mix over the investment period.

In sum, the authors interpret the result as support for the dependence of investors’ asset allocation decisions on monetary policy. In Ghana, an increase in the monetary policy appears to support industries listed on the equity market. The result also gives knowledge about investors’ asset allocation decisions on the GSE, which is practical balanced source of information for investors’ risk and return choices. For a prudent monetary policy framework, the monetary policy committee should monitor industries listed on the GSE. The result from the analysis has also an implication for investors, portfolio managers and fund managers to consider the state of the monetary policy in Ghana when making investment decisions.

The study differs from earlier research on asset allocation by breaking new grounds on two levels. First of all, based on the notion that different industries have different exposures to monetary policy states, the authors extend the portfolios by grouping the equities listed on the GSE into their industrial sectors. Second, the authors examine how investors’ optimal portfolio allocation may change depending on the state of monetary policy.

This study aims to consider the effect of financial (banking) freedom and competition on bank efficiency.

With data from 11 Sub-Saharan African countries over the period 2006-2012, the study estimates both competition (market power) and bank cost efficiency using the same stochastic frontier framework. Subsequently, Tobit models, including instrumental variable Tobit regression, are used to assess how financial freedom affects the relationship between competition and bank efficiency.

The results show that increase in market power (less competition) leads to greater bank cost efficiency, but the effect is weaker with higher levels of financial freedom. This is not consistent with the quiet life hypothesis.

Policymakers usually take the view that opening up banking markets to greater competition may lead to higher efficiency. However, the results have shown that allowing banks to maintain some level of market power may be necessary to ensure banking system efficiency.

This study deepens the understanding of the inconsistent relationship between competition and bank efficiency, by using the same framework to measure both competition and efficiency, and by providing new empirical evidence on how the level of financial freedom affects this relationship.

This paper takes the finance-growth nexus further by looking at the relationship between bank competition, financial innovations and economic growth in Ghana. The purpose of this paper is to find the causality among bank competition, financial innovations and economic growth in Ghana.

The relationship between bank competition, financial innovations and economic growth was established through the framework of the endogenous growth model. In addition, the paper employed the bound testing ARDL cointegration procedures to enable us to establish both short-run and long-run relationship between bank competition, financial innovations and economic growth. Granger causality test were also estimated to determine the direction of causality.

The results showed that, in the long run, bank competition is positively related to economic growth while financial innovation is negatively related to economic growth. In the short run, bank competition is negatively related to economic growth. By the same token, financial innovation is positively related to economic growth in the short run. In terms of causality, the results showed that there is unidirectional Granger causality from bank competition to economic growth. However, there is bidirectional Granger causality between financial innovation and economic growth.

The study therefore, recommends for more regulations toward a more competitive banking system with more innovative products tailored toward mobilization of savings and investment to growth induced sectors of the economy.

This paper provides a time series perspective to the finance-growth nexus and highlights the potential contribution of effective banking development to the economic welfare of the Ghanaian citizens.

This paper examines the effect of financial (banking) freedom and market power on bank net interest margins (NIM).

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 between market power and bank NIM.

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.

Competition policies could be guided by the insight on how financial freedom moderates the effect of market power on bank margins.

This study provides new empirical evidence on how the level of financial freedom affects bank margins and the market power-bank margins relationship.

This paper aims to examine the effects of financial freedom and competition on bank profitability.

The study uses system generalized method of moments and data from 139 banks across 11 Sub-Saharan African countries during the period 2006-2012.

The results of the study show that higher market power (less competition) is positively related to bank profitability, but operating efficiency is a more important determinant of profitability than market power. Also, both financial freedom and economic freedom show a positive impact on bank profits. The authors find evidence that banks with higher market power operating in countries with higher freedom for banking activities are more profitable than their counterparts in countries with greater restrictions on banking activities.

The results have shown that allowing banks greater freedom to operate would enhance their performance, without necessarily damaging the economy, as operating efficiency appears to be a more important reason for the observed profitability than market power.

This study provides insight on the ambiguous relationship between competition and bank profitability by considering the moderating effect of financial freedom which has not been taken into account in previous studies.