Information Sharing and Banking Efficiency in Africa: A Disaggregated Panel Data Analysis

Asongu, Simplice and Odhiambo, Nicholas (2022): Information Sharing and Banking Efficiency in Africa: A Disaggregated Panel Data Analysis.

Abstract

The study assesses the how information sharing by means of mobile phones affects banking system efficiency in Africa with particular emphasis on income levels (Middle income versus Low income countries) and legal origins (English Common law versus French Civil law countries). The focus is on 53 African countries with data for the period 1996-2019 and the empirical evidence is based in Quantile regressions which enable the study to assess the nexus throughout the conditional distribution of banking system efficiency. The following findings are established: (i) mobile phone penetration promotes banking system efficiency in the 25th quantile and the median of banking system efficiency in low income countries while for middle income countries; it is significant exclusively in the bottom quantile (i.e. 10th quantile). (ii) With the exception of the highest (i.e. 90th) quantile in which the effect of the mobile phone is not significant in English Common law countries, the impact is significant throughout the conditional distribution of banking system efficiency in Common law countries. (iii) As for French Civil law countries, the nexus is only significant in the median and highest (i.e. 90th) quantile of the conditional distribution of banking system efficiency. Policy implications are discussed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Allocation efficiency; Information asymmetry; Mobile phones
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G20 - General; G - Financial Economics > G2 - Financial Institutions and Services > G29 - Other; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L96 - Telecommunications; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

References

Al-Obaidan, A, M., (2008). “Efficiency Effect of Openness in the Banking Industry of Emerging Markets”, International Research Journal of Finance and Economics, 17, pp. 92-104.

Aminuzzaman, S., Baldersheim, H., & Jamil, I., (2003). “Talking back! Empowerment and mobile phones in rural Bangladesh: a study of the village phone scheme of Grameen Bank”, Contemporary South Asia, 12(3), pp. 327-348.

Andonova, V., (2006). “Mobile phones, the Internet and the institutional environment”, Telecommunications Policy, 30(1), pp. 29-45.

Asongu, S. A. (2013). “How Has Politico-Economic Liberalization Affected Financial Allocation Efficiency? Fresh African Evidence”, Economics Bulletin, 33(1), pp. 663-676.

Asongu, S. A., (2014a). “Correcting Inflation with Financial Dynamic Fundamentals: Which Adjustments Matter in Africa?”, Journal of African Business, 15(1). pp. 64-73.

Asongu, S. A., (2014b). “Financial development dynamic thresholds of financial globalisation: evidence from Africa”, Journal of Economic Studies, 41(2), pp. 166-195.

Asongu, S. A., (2014c). “Globalization (fighting), corruption and development: How are these phenomena linearly and nonlinearly related in wealth effects?”, Journal of Economic Studies, 41(3), pp. 346-369.

Asongu, S. A., (2017). “Conditional Determinants of Mobile Phones Penetration and Mobile Banking in Sub-Saharan Africa”, Journal of the Knowledge Economy, 9(1), pp. 81–135.

Asongu, S. A., Efobi, U., & Beecroft, I., (2015). “Inclusive Human Development in Pre-Crisis Times of Globalisation-Driven Debts”, African Development Review, 27(4), pp. 428-442.

Asongu, S. A., le Roux, S., Nwachukwu, J. C., & Pyke, C., (2019).“The Mobile Phone as an Argument for Good Governance in Sub-Saharan Africa”, Information Technology & People, 32(4), pp. 897-920.

Asongu, S. A., Nwachukwu, J., & Tchamyou, S. V., (2016). “Information Asymmetry and Financial Development Dynamics in Africa”, Review of Development Finance, 6(2), pp. 126–138.

Asongu, S. A. & Tchamyou, S. V., (2014). “Inequality, Finance and Pro-Poor Investment in Africa”, Brussels Economic Review, 57(4), pp. 515-547.

Asongu, S. A. & Tchamyou, S. V., (2015). “The Comparative African Regional Economics of Globalization in Financial Allocation Efficiency”, African Governance and Development Institute Working Paper No. 15/053, Yaoundé.

Asognu, S. A., & Tchamyou, V. S., (2020). “Human Capital, Knowledge Creation, Knowledge Diffusion, Institutions and Economic Incentives: South Kea versus Africa”. Contemporary Social Sciences, 15(1), pp. 26-47.

Ataullah, A., Cockerill, T., & Le, H., (2004). “Financial liberalization and bank efficiency: a comparative analysis of India and Pakistan”, Applied Economics, 36(17), pp. 1915-1924.

Beck, T., Demirgüç-Kunt, A., & Levine, R.,(2003), “Law and finance: why does legal origin matter?”, Journal of Comparative Economics, 31(4), pp. 653-675.

Beegle, K., Christiaensen, L., Dabalen, A., & Gaddis, I., (2016). “Poverty in a Rising Africa”, Africa Poverty Report, the World Bank, Washington. http://www.worldbank.org/en/region/afr/publication/poverty-rising-africa-poverty-report (Accessed: 23/07/2016).

Boateng, A., Asongu, S. A., Akamavi, R., & Tchamyou, V. S., (2018). “Information Asymmetry and Market Power in the African Banking Industry”, Journal of Multinational Financial Management, 44(March), pp. 69-83.

Boulianne, S., (2009). “Does Internet Use Affect Engagement? A Meta-Analysis of Research”, Political Communication, 26(2), pp. 193-211.

Boyd, J. H., Levine, R., & Smith, B. D., (2001), “The impact of inflation on financial sector performance”, Journal of Monetary Economics, 47(2), pp. 221-248.

Chen, C., (2009). “Bank Efficiency in Sub-Saharan African Middle-Income Countries”, IMF Working Paper, No. WP/09/14, Washington.

Claus, I., & Grimes, A., (2003). “Asymmetric Information, Financial Intermediation and the Monetary Transmission Mechanism: A Critical Review”, NZ Treasury Working Paper No. 13/019, Wellington.

Coccorese, P., & Pellecchia, A., (2010), “Testing the ‘Quiet Life’ Hypothesis in the Italian Banking Industry”, Economic Notes by Banca dei Paschi di Siena SpA, 39(3), pp. 173-202.

Demirguc-Kunt, A., & Beck, T., (2009, May), “Financial Institutions and Markets Across Countries over time: Data and Analysis”, World Bank Policy Research Working Paper No. 4943, Washington.

Diamond, L., (2010). “Liberation Technology”, Journal of Democracy, 21(3), pp. 69-83.

Djankov, S., McLeish, C., & Shleifer, A., (2007), “Private credit in 129 countries”, Journal of Financial Economics, 84(2), pp. 299-329.

Do, Q. T., & Levchenko, A. A., (2004), “Trade and financial development”, World Bank Policy Research Working Paper No. 3347, Washington.

Fouda, O. J. P., (2009), “The excess liquidity of banks in Franc zone: how to explain the paradox in the CEMAC”, Revue Africaine de l’Integration, 3(2), pp. 1-56.

Greenwood, J., & Jovanovic, B., (1990), “Financial development, growth and distribution of income”, Journal of Political Economy, 98(5), pp. 1076-1107.

Grossman, G., Humphreys, M., and Sacramone-Lutz, G., (2014). ““I wld like u WMP to extend electricity 2 our village”: On Information Technology and Interest Articulation”, American Political Science Review, 108(3), pp. 688-705.

Ejemeyovwi, J. O., Osabuohien, E. S., & Bowale, E. I. K., (2021). “ICT adoption, innovation and financial development in a digital world: empirical analysis from Africa”, Transnational Corporations Review, 13(1), pp. 16-31.

Fasakin, A., (2021). “The coloniality of power in postcolonial Africa: experiences from Nigeria”, Third World Quarterly, 42(5), pp. 902-921.

Hauner, D., & Peiris, S. J., (2005). “Bank Efficiency and Competition in Low-Income Countries:The Case of Uganda”, IMF Working Paper, No. WP/05/240, Washington.

Huang, Y., (2005), “ What determines financial development?”, Bristol University, Discussion Paper No. 05/580, Bristol.

Huang, Y., & Temple, J. R. W., (2005), “Does external trade promote financial development?” CEPR Discussion Paper No. 5150, London.

Huybens, E., & Smith, B. D., (1999), “Inflation, financial markets and long-run real activity”, Journal of Monetary Economics, 43(2), pp. 283-315.

Ikeanyibe, O. M., (2021). “Managing post-privatisation challenges: a review of Nigeria’s electricity sector”, Journal of Contemporary African Studies, 39(1), pp. 70-87.

Jaffee, D., & Levonian, M., (2001), “Structure of banking systems in developed and transition economies”, European Financial Management, 7 (2), pp. 161-181.

Jappelli, T., & Pagano, M., (2002), “Information sharing, lending and default: Cross-country evidence”, Journal of Banking & Finance, 26(10), pp. 2017–2045.

Kablan, S., (2009). “Mesure de l'Efficacité des Banques dans les Pays en Voie de Développement: Le Cas de l'Union Economique et Monetaire Ouest Africaine (UEMOA) ”, African Development Review, 21(2), pp. 367-369.

Kablan, S., (2010). “Banking efficiency and financial development in Sub-Saharan Africa”, IMF Working Paper No.10/136, Washington.

Koenker, R., & Hallock, F.K., (2001), “Quantile regression”, Journal of Economic Perspectives, 15(4), pp.143-156.

Kiyota, H., (March 2009). “Efficiency of commercial banks in Sub-Saharan Africa: a comparative analysis of domestic and foreign banks”, Asian Development Bank Institute.

La Porta, R., Lopez-de-Silanes, F., & Shleifer, A., (2008), “The Economic Consequences of Legal Origin,” Journal of Economic Literature, 46(2), pp. 285-332.

Levine, R., (1997), “Financial development and economic growth: Views and agenda”, Journal of Economic Literature, 35(2), pp. 688-726.

Lussuamo, J. M., & Serrasqueiro, Z. (2020). “Restrictions on access to bank finance for SMEs in Cabinda–Angola”. Small Enterprise Research, 27(3), pp. 275–288.

Machokoto, M., (2021). “Do financial constraints really matter? A case of understudied African firms”, International Journal of Finance and Economics, 26(3), pp. 4670-4705.

Manacorda, M., & Tesei, A., (2016). “Liberation Technology: Mobile Phones and Political Mobilization in Africa”, Queen Mary University of London, http://personal.lse.ac.uk/manacorm/liberation_technology.pdf (Accessed: 20/02/2016).

Mensah, E., Abor, J., Aboagye, A.Q.Q., & Adjasi, C. K. D., (2012). Enhancing the Economic Growth of Africa: Does Banking Sector Efficiency Matter?, in Kojo Menyah, Joshua Abor (ed.) Finance and Development in Africa (Research in Accounting in Emerging Economies, Volume 12 Part B) Emerald Group Publishing Limited, pp.1 - 23.

Mlachila, M., Tapsoba, R., & Tapsoba, S. J. A., (2017). “A Quality of Growth Index for 28 Developing Countries: A Proposal”, Social Indicators Research, 134(2), pp 675–710.

Mosheni-Cheraghlou, A. (2013), “Mobile banking: who is in the driver’s seat?”, Working for a World Free of Poverty, The World Bank, Washington, DC, available at: http://blogs.worldbank.org/allaboutfinance/mobile-banking-who-driver-s-seat (accessed 19 March 2015).

Moyo, B., & Sibindi, A. B., (2020). “Does Bank Competition Affect Credit Access in Sub-Saharan Africa? Evidence from World Bank Informal Firms Surveys”, Journal of African Business, DOI: 10.1080/15228916.2020.1826857.

Muto, M., & Yamano, T., (2009). “The Impact of Mobile Phone Coverage Expansion on Market Participation: Panel Data Evidence from Uganda”, World Development, 37(12), pp. 1887-1896.

Murphy, J. T. & Carmody, P. (2015). Africa’s Information Revolution: Technical Regimes and Production Networks in South Africa and Tanzania, RGS-IBG Book Series, Chichester, UK: Wiley.

Nyasha, S., & Odhiambo, N. M. (2015a). “Do banks and stock market spur economic growth? Kenya’s experience”, International Journal of Sustainable Economy, 7(1), pp. 54-65.

Nyasha, S., & Odhiambo, N. M. (2015b). “The Impact of Banks and Stock Market Development on Economic Growth in South Africa: An ARDL-bounds Testing Approach “, Contemporary Economics, 9(1), pp. 93-108.

Osabuohien, E. S., & Efobi, E. R., (2013). “Africa’s Money in Africa”, South African Journal of Economics, 81(2), pp. 292-306.

Owusu, E. L., & Odhiambo, N. M., (2014). “Stock market development and economic growth in Ghana: an ARDL-bounds testing approach”, Applied Economics Letters, 21(4), pp. 229- 234.

Pagano, M., & Jappelli, T., (1993), “Information sharing in credit markets”, Journal of Finance, 43(5), pp. 1693-1718.

Pierskalla, J. H., & Hollenbach, F. M., (2013). “Technology and Collective Action: The Effect of Cell Phone Coverage on Political Violence in Africa”, American Political Science Review, 107(2), pp. 207-224.

Saint Paul, G., (1992), “Technological choice, financial markets and economic development”, European Economic Review, 36(4), pp. 763-781.

Saxegaard, M., (2006), “Excess liquidity and effectiveness of monetary policy: evidence from sub-Saharan Africa”, IMF Working Paper No. 06/115, Washington.

Stiglitz, J., &Weiss, A. (1981). “Credit rationing in market with imperfect information”, American Economic Review, 71(3), pp. 393-410.

Taiwo, A., (2021). “Financial Development, Real Sector and Economic Growth in Sub-Saharan Africa: The Threshold Effect”, Journal of African Business, 22(4), pp. 603-626.

Tchamyou, S. V., (2017). “The Role of Knowledge Economy in African Business”, Journal of the Knowledge Economy, 8(4), pp 1189–1228.

Tchamyou, V. S., (2019). “The role of Information sharing in modulating the effect of financial access on inequality”. Journal of African Business, 18(1), pp. 24-49.

Tchamyou, V. S., (2020). “Education, Lifelong learning, Inequality and Financial access: Evidence from African countries”, Contemporary Social Science, 15 (1), pp. 7-25.

Tchamyou, V. S., (2021). “Financial access, governance and the persistence of inequality in Africa: Mechanisms and policy instruments”, Journal of Public Affairs, 21(2), e2201.

Tchamyou, S. V., & Asongu, S. A., (2017a). “Information Sharing and Financial Sector Development in Africa”, Journal of African Business, 18(1), pp. 24-49.

Tchamyou, S. A., & Asongu, S. A., (2017b). “Conditional market timing in the mutual fund industry”, Research in International Business and Finance, 42(December), pp. 1355-1366.

Tchamyou, V. S., Erreygers, G., & Cassimon, D., (2019). “Inequality, ICT and Financial Access in Africa”, Technological Forecasting and Social Change, 139(February), pp. 169-184.

Triki, T., & Gajigo, O., (2014), “Credit Bureaus and Registries and Access to Finance: New Evidence from 42 African Countries”, Journal of African Development, 16(2), pp.73-101.

Weidmann, J. N., & Shapiro, N. B., (2015). “Is the Phone Mightier Than the Sword? Cellphones and Insurgent Violence in Iraq”, International Organisation, 69(2), pp. 247-274.