Development Of Financial Institutions Research Articles

Do higher government spending, financial development, and trade reduce income inequality in low‐income countries? A Bayesian perspective

AbstractWe employed the Bayesian method to investigate the impact of government spending, financial development (measured by bank credit), and trade on income inequality reduction in 66 low‐income countries (LICs) across Africa, Asia, America, and Europe from 2000 to 2018. Controlling inflation and unemployment, our results indicate that trade and inflation exacerbate income inequality in LICs, while financial development and government spending have no impact on reducing income inequality in these countries. Furthermore, the findings show that real GDP per capita reduces income inequality in LICs. To ensure the robustness of our results, we also conducted frequentist quantile regression, which yielded consistent findings that financial development, government spending, and trade do not reduce income inequality in LICs. We further discuss the potential channels through which trade, financial development, inflation, and government spending contribute to income inequality in LICs, and provide policy implications based on the empirical evidence.Related ArticlesAdegboye, Alex, Kofo Adegboye, Uwalomwa Uwuigbe, Stephen Ojeka, and Eyitemi Fasanu. 2023. “Taxation, Democracy, and Inequality in Sub‐Saharan Africa: Relevant Linkages for Sustainable Development Goals.” Politics & Policy 51(4): 696–722. https://doi.org/10.1111/polp.12547.Asongu, Simplice, and Nicholas M. Odhiambo. 2023. “The Effect of Inequality on Poverty and Severity of Poverty in Sub‐Saharan Africa: The Role of Financial Development Institutions.” Politics & Policy 51(5): 898–918. https://doi.org/10.1111/polp.12558.Polacko, Matthew. 2023. “Turning Off the Base: Social Democracy's Neoliberal Turn, Income Inequality, and Turnout.” Politics & Policy 51(4): 538–68. https://doi.org/10.1111/polp.12550.

Prospects and challenges of achieving structural transformation in Africa through the African Continental Free Trade Area

The African Continental Free Trade Area (AfCFTA) agreement seeks to integrate markets in Africa into one large market. With the growing concerns about continental integration, this study identifies prospects and challenges of achieving structural transformation in Africa through the AfCFTA. The study employs the Interactive Structural Modelling technique, which helps to develop a contextual relationship between the factors in terms of their driving power or dependence power. The results indicate that unequal trade and investment opportunities, poor infrastructure, poor access to development finance, and the degree of industrialisation have a high driving power, hence a greater potential to create a ripple effect on other factors associated with African integration. Based on the findings, this study recommends that a platform be created within the agreement where these challenges can be tackled. In this view, the establishment of various development finance institutions monitored and facilitated by the AfCFTA affiliates, could be explored.

ACTIVATING PRO-ENVIRONMENTAL BEHAVIOUR AT THE WORKPLACE THROUGH GREEN HUMAN RESOURCE MANAGEMENT PRACTICES: THE ROLE OF PERCEIVED INNOVATION CHARACTERISTICS

This study explores the influence of seven green human resource management (GHRM) practices and perceived innovation characteristics (PICs) on employees' pro-environmental behaviour (PEB) at the workplace. It bridges a gap in research that combines the Ability-Motivation-Opportunity (AMO) and Diffusion of Innovation (DOI) theories. Utilizing partial least squares structural equation modelling (PLS-SEM) and survey data of 366 employees from six Malaysian development financial institutions, the findings suggested that four out of seven GHRM practices have a positive direct effect on PEB. Additionally, PICs mediate the relationship between four GHRM practices and PEB, suggesting the importance of employee perceptions of GHRM practices in fostering workplace PEB.

Role of Development Banking in Economic Growth in Kenya

Purpose: This study delineates the impact of development banking on Kenya's economic growth. The current study adopted a quantitative and exploratory research design.
 Materials and Methods: The study used a quantitative research design. Secondary data was utilized in this study. The data was collected from the financial statements of development banks in Kenya. The target population was 6 development banks in Kenya. The study then progressed to more complex regression analysis, where financial performance ratios and percentages for predictor factors formed the basis of the analysis. The study focused on 6 development financial institutions operating in Kenya.
 Findings: The findings (β=0.1153, p=0.0056), reveal that development banking had a positive and significant effect on economic growth. This infers that an improvement in development banking by one unit would lead to an improvement in economic growth by 0.115 units. The investigation substantiates a tangible and statistically significant correlation between the maturation of the development banking sector and the economic growth spectrum in Kenya.
 Implications to Theory, Practice and Policy: Policymakers in Kenya should work to maintain a stable regulatory system that enhances the role of the banking system in stimulating economic growth. The study emphasizes the need for a stable regulatory environment and well-considered interest rate policies to mitigate adverse economic impacts. Additionally, the study advocates for a pro-poor banking approach to reduce wealth disparities and boost economic growth through improved savings and customer deposits in banks. the banks.

Donor Coordination and Evidence Uptake in Early Childhood Education Policy

ABSTRACT In this reflective piece, representatives of the agencies that funded and managed the Early Learning Systems Research program – the UK Foreign, Commonwealth and Development Office (FCDO) and the World Bank – take stock of recent global developments in research, policy, and financing by donors for early childhood education (ECE). A rapid increase in research on early childhood interventions has secured a consensus that in vesting in early matters for later outcomes in life. In recent years, development finance institutions have taken unprecedented steps to incorporate ECE into their policies and approaches, have helped build research capacity, and fostered communities of practice on ECE. Despite these developments, however, the share of official development assistance (ODA) for ECE remains extremely low. Limited prioritization of ECE by donors may be reinforced by a persistence of low demand for ECE financing from governments and differences in delivery mechanisms between ECE and other levels of education. The authors conclude with considerations for researchers, practitioners, and policymakers interested in increasing donor finance for ECE.

ПРОЕКТ USAID «ІНВЕСТИЦІЇ ДЛЯ СТІЙКОСТІ БІЗНЕСУ»: ГРАНТИ ДЛЯ СЕРЕДНЬОГО ТА ВЕЛИКОГО БІЗНЕСУ

The article examines the USAID Project “Investments for business sustainability”, in particular opportunities for large business companies. It was emphasized that in 2024, the IBR Project will implement its tasks through the provision of grants for joint investment and technical assistance to Ukrainian enterprises with an annual turnover of 8 million US dollars and more. “Co-investment” means that, in addition to grant funds, the potential grantee must contribute its own or other (non-grant) funds or resources that are clearly tied to the implementation and costs of the proposed concept. The study demonstrates the conditions for receiving grant assistance, and examines the eligibility criteria. And also, it is emphasized: in order to receive a grant of up to 2,000,000 US dollars, organizations must have a successful business model, take into account standards and trends, as well as demonstrate management skills to adapt new practices and capital investments. Emphasis is placed on the fact that the IBR Project determines that the minimum multiplier of sales volumes compared to the amount of the IBR Project grant must be at least five (for example, each USD 1 of the grant should lead to an increase in sales and exports of at least USD 5). Development finance institutions, institutional investors, direct investment funds, venture capital funds, angel investors, incubators/accelerators, business/professional associations, as well as other suppliers and consortia of investment services can also apply for a grant under the USAID Project “Investments for Business Sustainability “. It was concluded that the USAID Project “Investments for business sustainability” is an important initiative to support business sustainability in Ukraine, aimed at stimulating economic development, increasing sales and exports, as well as creating new jobs. Joint investments and technical assistance from grants can contribute to the effective financing and development of enterprises, contributing to their competitiveness and compliance with international standards.

EXPLORING THE BANKERS’ PERSPECTIVES ON SHARIAH AND OPERATIONAL ISSUES OF RESTRUCTURING AND RESCHEDULING IN ISLAMIC FINANCING DURING COVID-19 PANDEMIC

The Central Bank of Malaysia ordered all banks to give an automatic six months moratorium or loan or financing deferment starting April, 1 2020 to their customers during the Covid-19 pandemic since many customers had difficulties paying their monthly financing obligations to banks. Thus, the objective of this paper is to explore the bankers’ perspectives on Shariah and operational issues arising in Islamic banks in implementing moratorium which involves restructuring and rescheduling financing facilities during Covid-19 pandemic. At the same time, the methods these bankers used to manage the issues are also highlighted in this paper. A qualitative analysis is applied in this paper where the researchers conducted interview sessions with the Head of Shariah Department from an Islamic banking window and another from the Development Financial Institution which offers Islamic banking products and services. This study's findings show that there are certain perspectives from bankers in dealing with Shariah issues regarding restructuring and rescheduling during moratorium such as the issue of qalb al-dayn (debt restructuring), capitalization of accrued profit in the financing facilities as well as the operational issues related to the system and people. It can be deduced then that all Islamic banks were doing extremely well in their steadfast endeavors towards offering remedies to the issues faced for the sake of the overall improvement of Islamic banks in the implementation of restructuring and rescheduling of financing facilities as outlined by guidelines or Resolutions issued by the Shariah Advisory Council of Bank Negara Malaysia.

Strategic Preferential Procurement Policy for Localisation and Inclusive Growth for Micro Small Medium Enterprises (MSMEs) in Gauteng Province

The study aims to develop interventions to address the low productive capacity and competitiveness levels of township Micro Small Medium Enterprises (MSMEs) to enable meaningful participation in the mainstream economy. Most township firms continue to be informal and underdeveloped. Despite countless interventions by the development finance institutions, most township enterprises remain perpetual survivalists. The study is anchored upon the neoliberal theory, which emphasizes value for money and market efficiencies in procurement, as well as interventionist theories promoting the inclusion and participation of MSMEs in business, and advocating for the localization of products through various policy interventions. The researcher adopted a mixed-method approach to gather primary and secondary data. Secondary data was used for analysis and supported by the primary information or empirical evidence. The secondary data enriched the research content and complemented the primary data. Databases and reports on township suppliers from the Gauteng Provincial Treasury (Procurement Division) and Gauteng Department of Economic Development helped determine the extent of MSMEs' access to development and financial support opportunities. The study found that the high informality level of township businesses, low level of development, poor economic infrastructure, and lack of access to finance hinder MSMEs' participation in public procurement. Programs and products offered by government agencies do not adequately respond to public procurement challenges facing MSMEs, e.g. product testing and accreditation. The high barriers to entry due to complicated administrative processes and procedures continue to deter MSMEs from participating in the mainstream economy. The Development Finance Institutions (DFIs) were found to be a challenge due to a mismatch between the resource structure to drive economic development and the products offered. The study recommends that to increase the participation of MSMEs in public procurement, there needs to be a targeted growth continuum strategy that tracks interventions from the beginning to the end. Additionally, there needs to be a shift from a quantitative approach with minimal impact to a customised one with qualitative, tangible and tradable products and skills aimed at increasing participation of MSMEs. Furthermore, the political will is required to address the resource mismatch, repurpose resources, or develop specific products by the well-resourced Development Finance Institutions to suit the material conditions of township MSMEs with lesser stringent measures.

Understanding CDFI Financial Data: A Primer for New Investors

Community Development Financial Institutions (CDFIs) are gaining broader recognition as effective conduits of capital to underserved communities. As a result of the diversity of CDFI business models and their unique approach to blending different capital sources, these mission-driven capital providers have varied and often complex financial structures, and their financial statements can be difficult to understand for those not familiar with the sector. As interest in the sector from prospective investors has grown, so too has the need for broader understanding of how to assess CDFI financial health and soundness. This brief highlights sector dynamics that provide important context for any analysis of individual CDFIs, and shares suggestions for both the CDFI industry and investors new to the sector for how to improve understanding of CDFI financial metrics. Key takeaways • CDFI loan funds are unique entities relative to other financial institutions, and measures of financial health typically used for traditional financial institutions often do not readily map onto the CDFI sector. • Heterogeneity in the sector makes CDFI loan funds difficult to assess at an industry level; institution-level evaluations are likely to be more fruitful. • Efforts around standardization of financials have been undertaken by the sector itself in the past but more can be done (both by CDFIs and investors) to increase the understanding of CDFI loan fund financial data by mainstream financial actors

Increasing the supply of health products in underserved regions

We study mechanisms that encourage manufacturers of health products to build production and distribution capacity. This is important for low‐ and middle‐income country (LMIC) markets where ability to pay is lower and demand risks are greater. Development finance institutions and philanthropies are beginning to utilize new instruments to incentivize manufacturers to build production/distribution capacity for LMIC markets. The goal of this paper is to understand the effectiveness of such mechanisms in different settings. We examine four instruments: (1) subsidy proportional to unit sales (sales subsidy), (2) subsidy proportional to unit capacity (variable‐capacity subsidy), (3) subsidy proportional to total capacity investment (total‐capacity subsidy), and (4) a minimum volume guarantee. We analyze incentivized capacity as a function of the social‐investor budget for each instrument. We show how our framework can be used to identify a social investor's preferred instrument given relevant parameter estimates, and we provide insight into the type of settings where a particular instrument dominates. A sales subsidy dominates when ability to pay is very low; a total‐capacity subsidy dominates when ability to pay is low. Outside of these settings, instrument preference is nuanced, though a sales subsidy is dominated by at least one other instrument. When ability to pay is moderate, a variable‐capacity subsidy tends to be preferred under high variable‐capacity cost and high budget, a volume guarantee tends to be preferred under low variable‐capacity cost and high budget, and a total‐capacity subsidy tends to be preferred under low budget.

Assessing the Venturing of Rural and Peri-Urban Youth into Micro- and Small-Sized Agricultural Enterprises in the Eastern Cape Province, South Africa

This study aimed to empirically assess the venturing by rural and peri-urban youth into micro- and small-sized agricultural enterprises in the Eastern Cape Province, South Africa. The aim of the study was achieved by focusing on the following specific objectives: analyzing youth involvement in agricultural enterprises; estimating the factors that influence youth participation in micro- and small-sized agricultural enterprises; and identifying constraints and opportunities for youth involvement in micro- and small-sized agricultural enterprises in the Eastern Cape Province. The study used multi-stage and snowballing sampling to select the respondents, and cross-sectional primary data were collected from 120 youths who ventured into micro- and small-sized agricultural enterprises. Only 70 youths from the sample participated in agricultural enterprises. The study was geared toward proposing a funding framework aligned with the characteristics of small- and micro-sized enterprises (SMEs) which can be used by both development finance institutions (DFIs) and commercial banks to assess applications for funding SMEs.

Corporate social responsibility and Islamic social finance impact on banking sustainability post-COVID-19 pandemic

This study aims to explore Corporate Social Responsibility (CSR) and Islamic Social Finance activities in Bank Pembangunan Malaysia Berhad (BPMB) as one of the Development of Financial Institutions (DFIs) in Malaysia and their impact on sustainability post-coronavirus disease (COVID-19) (2021–2023). A semi-structured interview was conducted among the top management and employees of BPMB. Resultantly, the bank has aligned its Islamic Social Finance and CSR activities with the third Sustainable Development Goal (SDG). Nevertheless, the impact on banking sustainability post-pandemic remains uncertain as efforts towards SDG remain at the preliminary stage. Conclusively, Islamic Social Finance and CSR are critical to enhance banking sustainability. This study provide insight to other DFIs in understanding the role of Corporate Social Responsibility (CSR) and Islamic Social Finance activities in achieving sustainability post pandemic.

Net zero portfolio targets for development finance institutions: Challenges and solutions

AbstractDevelopment finance needs to be better aligned with climate change objectives, and many experts see net zero portfolio targets as a powerful way to achieve this. This paper explores the operational implications of net zero portfolio targets for development finance institutions (DFIs). We set out an agenda to move development finance towards net zero goals in a way that acknowledges development concerns. These include (1) setting context‐specific emissions pathways with granular bottom‐up data and emphasising climate‐development win‐wins; (2) dealing with inertia and lumpiness in the portfolio through ‘when’ flexibility (multiyear carbon budgets) and ‘where’ flexibility (sharing of carbon space); (3) encouraging transition projects through future‐emissions accounting and transition credits; (4) managing climate‐development and other trade‐offs with an internal carbon price and ESG standards; and (5) accounting for emissions after project‐end with monitoring and legal provisions.

The African origin of public policy, programme and project monitoring and evaluation (M&E) practices

The literature has robust contestation about the origin of public policy, programme and project monitoring and evaluation (M&E). Cloete (2016) argues that public policy, programme and project M&E originated in Europe and America and was introduced in Africa by colonisers who divided the African continent among themselves in the early 1880s. Cloete (2016) does not explain why there was no public policy, programme or project M&E in Africa or any other non-western part of the world before the arrival of western colonisers. Mouton (2010) also argues that M&E was introduced in Africa by international development organisations and financial organisations in the 1980s. According to Mouton (2010), these western development organisations and financial institutions introduced M&E to the African continent as a condition for accessing foreign aid and as a funding requirement for the projects these institutions were funding. Neither Mouton (2010) nor Cloete (2016) accounts for ample literature which demonstrates that M&E practices existed in Africa (and in China) thousands of years before the arrival of the international development organisation and international financial organisations in these parts of the world. This paper uses the Secondary Data Analysis (Archival Study) approach to provide a systematic and chronological analysis of the available literature to trace the genesis of public policy, programme and project M&E as a practice. The findings in this paper indicate that M&E could potentially have become a practice in African countries such as Egypt and Asian countries such as China long before it was a practice in the U.S. and European countries. However, evidence suggests that academics and practitioners in the U.S. and European countries could have compiled the first recorded theoretical academic content about M&E models and approaches currently being used to train people who want to take up a career or profession in M&E.

Beyond conventional models: Lending by Native Community Development Financial Institutions

AbstractNative Community Development Financial Institutions (Native CDFIs) have become an increasingly important source of credit and financial services in the areas on or near American Indian reservations in the United States. Guided by a conceptual framework developed on the basis of the related finance literature and drawing on loan‐level data from eleven Native CDFI loan funds, we offer the first systematic quantitative analysis of lending in the Native CDFI industry. As hypothesized, Native CDFIs on average give out small loans but support borrowers in varied circumstances with diverse loan products. Important predictors of delinquency include both conventional, hard information‐based, measures of client risk, and alternative, soft information‐based, community‐informed and character‐based measures. Overall, these findings lend strong support to holistic approaches for assessing client creditworthiness for Native CDFI operations. More generally, our analysis contributes new insights into the operations of an industry that plays an instrumental role in removing barriers to socioeconomic development in Native communities.

Exploratory Factor Analysis for Pro-Environmental Behaviour Among Employees of Development Financial Institutions in Malaysia

Exploratory Factor Analysis for Pro-Environmental Behaviour Among Employees of Development Financial Institutions in Malaysia

Transnational governance of digital transformation: financing innovation in Europe’s periphery

ABSTRACT Policymakers in Europe have embraced the notion that they can and should drive economic growth by promoting digital technology. Efforts to do so, known as ‘digital transformation’, involve reallocating labour and capital to more efficient uses, especially those that produce technological innovation. Recent research has shed light on the politics of updating institutions for education and skills training, but we know little about the politics of reallocating capital in the current episode of economic upgrading, despite the specific and sizable costs of producing technological innovation. What strategies are policymakers implementing to finance technological innovation, especially in Europe’s periphery, where states lack fiscal resources? Focusing on the case of Portugal, this article illustrates the centrality of development financial institutions to financing technological innovation, identifying a distinct type of digital transformation in Europe’s periphery, where the state plays a marginal role in governing key aspects of economic upgrading. Instead, private finance allocates capital, and international organisations like the European Commission design policies to govern capital allocation. This article develops a framework for analysing the politics of digital transformation in Europe’s periphery that centres transnational actors and institutions, rather than the state, in directing the path of technological and structural change.

Local Recruits in Development Finance Institutions: Relocating Global North-South Divides in the International Aid Industry

This text explores locally recruited staff within a growing category of organisations in the international aid industry: Development Finance Institutions (DFIs). DFIs are banks that offer risk capital to development projects in the global South, increasingly using tax-funded aid money. Based on interviews with 13 DFI investment managers, I show how Kenyan DFI staff challenge three of the signature attributes commonly assigned to local development professionals: their ‘local’ expertise does not contrast with or preclude international expertise, but rather overlaps with it; their formal authority and career ladders are not restricted to technical or support positions – many field offices are headed by local employees; and they rarely face job insecurity given their competitive qualifications and permanent employment contracts. Meanwhile, decisions on investments are rarely taken by these field office staff but by their colleagues at headquarters, and unlike the latter, even those local recruits who head their field offices usually lack a secure place in the global organisation of their DFIs. This suggests that structural inequalities between donor and recipient country staff – integral to the development industry – have not disappeared in DFIs but rather relocated: from within the walls of field offices to the relationship between these offices and headquarters.

The Disclosure of Zakat by Islamic Banks (IBs) and Development Financial Institutions (DFIs) in Malaysia

As an Islamic finance institution, the transparent disclosure of zakat payment to stakeholders is one of the ways in which the organization demonstrates Islamic ethical value and accountability through business transaction. The effective, translucent, and timely reporting to the stakeholders (i.e., the public, regulators, investors, and others) is critical to the economic decision-making process as well as equitable distribution of resources to the society. Despite the various variations in zakat disclosure, less attention is given to the disclosure practices on zakat information by Islamic banks (IBs) and Development Financial Institutions (DFIs). Therefore, this study aims to examine firstly, the zakat disclosure requirements by regulations and then the zakat disclosure for all IBs and DFIs in Malaysia. This study adopted content analysis on the financial statement, annual report, annual integrated report, and annual sustainability report for the 2019 financial year. The whole population of 16 IBs and six DFIs were selected. This study found inconsistency in zakat disclosure of the different banks and other zakat-related practical issues in the descriptive analysis. The inconsistency varies from the method, rates, policy, and terminology used. Additionally, further embellishment on the non-financial information of zakat is also vital to demonstrate accountability to the general public.

Importance of Micro Financial Institutions in Development of Rural Economy

Importance of Micro Financial Institutions in Development of Rural Economy