Bank Financial Intermediation Research Articles

Modeling Bank Financial Intermediation Functions: Theoretical and Empirical Evidence from Nigeria

This research examined the modeling of the financial intermediation functions of banks in Nigeria. The effectiveness of financial intermediation was determined by its impact on economic growth in Nigeria. Secondary time series data were collected to determine the association between variables. The study adopted an ex post facto research design and used ordinary least squares regression tests that reveal the predictive power of the model as well as the relative statistics of the short-term variables, while testing for the existence of a long-term equilibrium relationship, based on the multivariate cointegration technique performed. The results of the study suggest that there are both short-term and long-term relationships between financial intermediation and economic growth in Nigeria. Specifically, CBCPS has a positive relationship with GDP, while MS and MLR have a positive and significant relationship with GDP in the long run. The study recommends, inter alia, that monetary authorities, in particular the Central Bank of Nigeria, has to use measures to force banks to reduce their interest rates on loans. This will increase investment and enhance the overall performance of the economy's productive sectors.

The role of Islamic banking financial intermediation on Indonesia’s economic growth

This study attempts to examine the relationship between deposits, disbursed financing, the number of bank offices, and economic growth before and during the COVID-19 crisis. The time series data of Indonesian Islamic banking for the period from 2009 to 2022, has been utilized in this study, estimated using Auto Regressive Distributed Lag (ARDL). Deposits and disbursed financing respectively are the ratio of total deposits and total disbursed financing to nominal GDP. Economic growth is measured using Indonesia’s real GDP growth based on 2010 constant prices. The results show that in the long run, deposits have a very significant positive effect on economic growth. Meanwhile, financing and the number of bank offices do not affect economic growth. In the short term, except for the number of bank offices, real GDP, deposits, and financing contribute to the adjustment of changes in real GDP towards long-term balance, which takes approximately seven quarters. This study fills a gap in the literature on the role of Islamic banking on economic growth. This study also adds a new view of the role of Islamic banking in economic growth during the COVID-19 crisis. This study provides an important contribution to policymakers and other stakeholders.

Evaluation of the efficiency of banking financial intermediation for the Iraqi banking sector using the DEA model - comparative study between commercial and Islamic banks for the period 2017-2021

Evaluation of the efficiency of banking financial intermediation for the Iraqi banking sector using the DEA model - comparative study between commercial and Islamic banks for the period 2017-2021

Effect of microfinance bank financial intermediation on agricultural output in nigeria: 1992 - 2018

This study examined the effect of financial intermediation by microfinance banks on the output of agricultural sector in Nigeria between 1992 and 2018. Data were collected in this study from the secondary sources and analyzed by means of inferential statistics. Specifically, the study employed Vector Error Correction model technique in data analysis after establishing the stationarity of the data series by means of Augmented Dickney-Fuller test and determined long run equilibrium relationship via Johansen cointegration technique.Findings from this study revealed that in the long-run, there was a positive and significant relationship between microfinance banks’ credits to agriculture and the output of agricultural sector in Nigeria as MCA was found to be positively promoting agricultural output by about 2.7%. Also, micro-finance banks’ gross saving deposit (MGSD) was found to have negative and significant relationship with agricultural output both in the short-run and in the long-run. Moreover, the deposit interest rate was found in this study to exhibit positive behavior in the short run but negative and significant relationship with agricultural output in the long-run. The lending interest rate by finding of this study negatively facilitated agricultural output in the short run but maintained positive relationship with agricultural output in the long run.Based on these findings, it was concluded that financial intermediation by microfinance banks was an insignificant determinant of agricultural output in Nigeria.Consequently, it was recommended that microfinance banks should be brought under close monitoring and supervision by the monetary authorities to ensure that significant portion of their deposits is not left fallowed and unproductive but optimally converted to credits for lending, especially to the grassroots farmers who lack investable capital for agricultural investment.

Features of the financial services market and consumer behavior on it in the context of digital transformation

The digital transformation of modern economic life has actually «opened the door» for the penetration of breakthrough innovative technologies in many areas, and, above all, in the financial services market. Breakthrough innovations such as artificial intelligence, robotics, blockchain technologies, the Internet of Things, Big Data, cryptocurrency, etc., having become commonplace today, «provoked» the destruction of traditional systems in the financial services market and the formation of ecosystems, more and more, «Blurring» the boundaries of the specified market and financial activities, in particular. As a result, a symbiotic model is replacing the traditional bank–based model and market–based model; conditions were created for the emergence of a non–bank financial intermediation model.The key competitive advantage of modern companies is the use of innovative technologies for remote access and personalization of services.Today we can talk about the massive nature of the introduction of financial technologies in all segments of the modern market, which, of course, could not but affect consumer behavior. Particularly interesting for companies in the financial services sector are the behavioral features of modern young people as the most valuable target audience, as a segment that in the near future may become a «core of loyalty».The subject of the research in this article is the features of the modern financial services market, which is transforming under the pressure of digital «expansion» of breakthrough innovative technologies, and the behavior of modern student youth on it as a bright representative of the generation of centennials (buzzers). The object of the research is financial technologies and their perception by student youth who do not have special financial education. It is this target audience that is most significant for assessing the impact of fintech on behavioral models.

Effect of Bank Financial Intermediation on Agricultural Performance in Nigeria

Effect of Bank Financial Intermediation on Agricultural Performance in Nigeria

Need for calibration: applying a maximum threshold to liquidity ratio for Islamic banks

PurposeThe purpose of this paper is to highlight the effects of liquidity regulations on Islamic banking using Turkey as a case study. It recommends an alternative mechanism using capital market standards for liquidity requirement of Islamic banks to mitigate certain risks.Design/methodology/approachThe paper evaluates the correlation between cash and profit and between liquidity coverage ratio and capital adequacy ratio of participating banks in Turkey.FindingsIslamic banks hold higher cash than they should. The paper suggests a maximum liquidity ratio for Islamic banks. Applying a cap to the liquidity coverage ratio will impose discipline on Islamic banks to manage their assets appropriately as well as to encourage their financial intermediation to the real sector. In addition, the authors argue that even if the cash outflows from investment account on the right side of Islamic banks’ balance sheets are included in the short-term projection, they should not be included in the denominator of the liquidity coverage ratio.Practical implicationsThe current Basel requirements and Islamic Financial Services Board standards are disincentives to Islamic banks to provide risk-sharing or partnership-based investments and services to their customers and depositors. Effective legal and regulatory framework and supervisory oversight need to take into account the difference between the risk profile of a typical Islamic bank and a conventional bank.Originality/valueAlthough it is well accepted that without adequate regulatory involvement it would not be possible to control and mitigate the risks related to Islamic banking financial intermediation, there should be a balance between the growth and stability of the industry. The regulatory involvement that satisfies this balance would be welcome.

The Future of Asian Finance

The of Asian Finance. Edited by Ratna Sahay, Jerald Schiff, Cheng Hoon Lim, Chikahisa Sumi and James P. Walsh. Washington, D.C.: International Monetary Fund, 2015. Pp. 310. In a single reference volume, The of Asian compiles the results of the research and policy seminars conducted by the International Monetary Fund (IMF) under its Future of Asia's Finance project from 2013 to 2015. This edited book is comprehensive both in terms of the scope of issues covered--ranging from banking, capital markets, demographic shifts, regional financial centres, regional integration, the evolving global regulatory environment, etc.--as well as the depth of original research analysis of these issues. The IMF's global perspective affords a certain objectivity in pointing out current weaknesses in Asian financial markets and institutions versus the significant tasks in financing growth in the region. Part I: The Structure of in highlights many similarities shared by Asia's financial sectors. The book is replete with regional and cross-country quantitative factoids which adds to its value as a handy reference work. While Asian countries have led the global economy in terms of growth, many countries face challenges from shifting demographics, weaker external demand for exports, and major infrastructure bottlenecks. The editors take the view that given the tasks of more efficient mobilization of savings, financing investments in human and physical capital, and deepening capital markets, financial sectors in Asian countries will have an important role in facilitating the economic transformation of Asia and become themselves engines for growth. The study observes that Asia as a whole a large financial sector comparable to other regions, and considerably larger than their peers outside (p. 10). However, the evolution of Asian financial sectors must address existing realities and vulnerabilities if they are to continue to support financing the requirements of growth. Banks dominate the financial sectors in emerging Asia. They have generally been well capitalized and relied on traditional deposit taking and loan origination rather than and investment banking (Chapter 2). This contributed to the resilience of the Asian financial sectors during the Global Financial Crisis (other factors that enhanced resiliency were the policy measures compelled by the Asian financial crisis to strengthen the regulatory and supervisory framework for corporate governance, penalties for unsafe and unsound banking practices, the early adoption of macro-prudential measures and the shift to more flexible exchange rates (p. 9)). Financial intermediation by banks, however, has relatively higher costs and will face additional constraints due to Basle III capital and liquidity standards (Chapter 11). Bank financial intermediation needs to be augmented by efforts to hasten the further development of capital markets. While capital markets in Asia have achieved notable growth, they have generally lagged behind their counterparts in peer regions. Equity and bond markets remain underdeveloped and illiquid in part due to the paucity of real money and long-term institutional investors (p. 9). Stock markets in Asia are an important source of fund raising but are constrained by the idiosyncratic nature of pricing in these markets (pp. 43, 46). The research conducted for the book, using an arbitrage pricing model of market returns, identifies pricing behaviour consistent with noise trading and emphasizes the importance of improving securities regulations to enhance investor confidence (p. …

Determinants of Bank Net Interest Margin: Case of Tunisia

Net interest margin is a significant indicator of the efficiency of the banking financial intermediation. In general, the level of net interest margin is primarily a consequence of result of the level of development and competitiveness of the financial system of country.Therefore, It is important to determine their determinants. In this article, we analyze the determinants of net interest margin of 18 banks in Tunisia between ( 2000…2013). We found that among the internal factors, size, deposits, TLA, CEA, risk have an significant impact on net interest margin. In external factors, only inflation have a significant impact on net interest margin..

Monetary policy and financial stability in a banking economy: Transmission mechanism and policy tradeoffs

The 2008 global financial crisis demonstrated that monetary policy and financial stability policy are more highly interrelated than previously thought. This paper analyzes the interactions between these policies using a non-linear overlapping-generations model with financial frictions in the form of banking financial intermediation. The paper embeds negative externalities due to contagion effects in physical investments which creates the need for financial stability policy. We show how the monetary policy transmission mechanism depends on financial stability policy tools as well as on regulatory and institutional constraints.We find policy tradeoffs in trying to accomplish both monetary and financial stability targets. The central bank must take these tradeoffs into account when selecting the tools in its policy toolbox. Another important finding is the interchangeability of price stability and financial stability policy tools.

Characteristics of bank financial intermediation in Croatian counties

Research on bank financial intermediation in a country’s narrower territorial units is scarce, in both domestic and international literature. Banks are almost the only financial intermediaries in narrower territorial units and their role is substantial, ranging from participating in regional development to the successful running of their own business. Hence, the main objective of this paper is to examine the characteristics of the financial intermediation of banks in the counties of the Republic of Croatia, both through a comparison between their economic development levels and the general presence of financial intermediation, and a more specific analysis of their deposit and credit policies. The article uses hierarchical and non-hierarchical (k-means) cluster analyses to identify relatively homogeneous groups of counties based on sets of indicators of: economic environment, financial development and infrastructure and, at a more detailed level, the deposit and credit policies of banks. The research results suggest heterogeneity and diversity of bank policies across the counties and sets of indicators. Differences have been observed between developed and developing counties, as well as in approaches to banks’ deposit and credit policies. The paper’s findings encourage further research into these issues.

Исследование теоретических подходов банковского финансового посредничества и направлений его развития

Исследование теоретических подходов банковского финансового посредничества и направлений его развития

Does Bank Financial Intermediation Cause Growth in Developing Economies: The Nigerian Experience

Whether banks through their financial intermediation activities (savings mobilization and lending) cause economic growth is the theme on which this study was based. Data on gross domestic product (GDP), credit to private sector (CPS) and total bank deposit (DPS) were obtained from Central Bank of Nigeria (CBN) statistical bulletin and used to compute savings ratio (SR) and credit ratio (CPR). A time frame of 1980-2008 was adopted. The hypotheses that no causal relationship exist between savings mobilization and credit on one hand and economic growth on the other were tested. The Granger Causality Test was used to test these hypotheses. It could not identify any significant causal relationship between banks’ savings/credit and economic growth. The absence of such a relationship was conjectured to be due to the economies developmental stage characterized by infrastructural decay and the inefficient utilization of mobilized deposits. The study therefore recommended improvement in infrastructure such as roads and power supply. It also suggested close regulatory monitoring to ensure that mobilized deposits are used mainly in funding the productive sector. Key words: Financial intermediation; Economic growth; Savings; Credit; Liberalization

Role of the Nature of Information in the Banking Intermediation (Role de la Nature de l'Information dans l'Intermediation Bancaire)

One studies the role of the data processing within the framework of the banking financial intermediation. In this context, one is interested in the various solutions adopted by the banks vis-a-vis with the various types of imperfections of information. One then tries to highlight various dimensions and natures of information available and produced, in order to release a typology of information software vs hardware. Lastly, one then discusses the advantages and the disadvantages of these two types of information, within the framework of the banking intermediation.