Non-bank Financing Research Articles

Micro-financing in the era of good governance: economic benefits. An empirical study

In an era of good governance, micro-financing can benefit from rules of the game enabling individuals in developing economies to borrow funds while ensuring the institutions lending such funds will be repaid. This study looked at the types of mechanisms making this possible. Even at this exploratory stage, the current study showed the benefit of good governance for both lenders and borrowers. African people, the primary focus of this study, were encouraged to help themselves out of poverty by putting in place well governed institutions, in order to attract desperately needed funding. Data from a micro-segment of African natives found individuals’ familiarity with Non-Bank Financing Institutions (NBFIs), and individuals’ acceptance of good governance directly impacted their likelihood to patronise these NBFIs. This study’s contribution is to suggest Micro-financing, implemented the right way, that is, guided by good governance, could be one way to help minority populations get out of poverty.

Media Coverage and Debt Financing

We examine whether media coverage influences firms’ debt financing and, more importantly, the channels through which it occurs. We find that more media coverage significantly reduces firms’ reliance on bank loans while increasing their nonbank debt financing. This effect is concentrated among firms with more information available from other sources, suggesting that the media complements other information sources, and among firms with a higher demand for external monitoring, suggesting that the media substitutes for other governance mechanisms. News sentiment predicts subsequent credit ratings and firm value changes and affects access to new debt financing. Our findings validate the media’s role as one of providing supplemental information: it supplies additional information content after controlling for other information sources. We also find that, as negative news coverage increases, firms opt for the private placement of debt over pubic bonds and bank debt and report significantly negative discretionary accruals. These additional findings lend further support to the media having a governance effect.

EMPLOYER BRANDING AND WORK ENGAGEMENT IN NON-BANK FINANCING COMPANY

This research was conducted to determine whether employer branding has a relationship with work engagement in a private company in the field of non-bank financing. The population of this research is the workers of a national private company engaged in the field of non-bank financing, especially the head office workers located in Jakarta. The number of samples of this study were 117 people, consisting of 62 men and 55 women with an age range of 20-67 years (Mean = 28.13; SD = 5.849). The method used is quantitative with stratified sampling technique. The research instrument used was the Employee Attractiveness Scale (EmpAt) (α = .956; 20 items). Whereas to measure the Work Engagement using Utrech Work Engagement Scale (UWES) (17 items; α = .896). The analysis carried out is a simple linear regression, t-test and one-way ANOVA. The results of this study found that Employer Branding had a significant positive effect on Work Engagement (F (1.115) = 50.333; β = .552, r = .552; R2 = .304; P <.001). Employer branding can be a strategy for companies to identify the needs of current and future workers, and build an image as a company of choice for work, so as to increase employee engagement with the company and its work.

Adaptive Financing Pattern for Small Scale Fisheries with Case Study of Pajeko Fisheries in Bitung

he agriculture, forestry, and fisheries sectors have a share of 22.05% with 4.21% growth in North Sulawesi. The fisheries sub-sector dominates by 30%. The disbursement of banking institutions' credit for the sector increased by 35% in 2015-2017 but absorbs only 7% of total loans disbursed. The reluctance of formal financial institutions to provide credit to improve small fisheries has increased in non-formal financing. This study identifies factors influencing financing sources choice, comparison of bank and non-bank financing sources, and recommend adaptive financing patterns for small fisheries. Based on descriptive qualitative analysis of in-depth interviews with 32 respondents from 85 Pajeko fishers (mini purse seine) in the Bitung Oceanic Fishing Port (PPS), concluded that 97% of Pajeko fishers in Bitung chose non-bank to finance their operation with determinant factors of financial source: (i) easiness administration (88%), (ii) payment flexibility (78%), and (iii) collateral (69%). The result of comparison simulation shows that boat owner financing with profit sharing for three (boat, boat owner, crews) is the most profitable for the boat owner, while bank loan financing with profit sharing for two (boat owner, crews) is the most profitable for crews. Accordingly, an adaptive financing strategy development is recommended for banking institutions based on influencing factors of fisher’s choices and Pajeko fisher’s characteristics-based approach. Keywords: Pajeko fishery, resource of financing, bank financing source, non-bank financing source, adaptive financing

Performance analysis of non-banking finance companies using two-stage data envelopment analysis

This paper analyses the performance of non-banking finance companies (NBFC) in the Indian context using data envelopment analysis (DEA). The underlying objective of this study is to fill the void in the domain of NBFC, although a lot of research has been done on the banking industry in the context of the application of DEA, but none on NBFCs. The paper takes the panel data of the last 5 years (2014–2018) to calculate super-efficiencies in the first stage and then regresses the same on exogenous factors in stage-2. Descriptive statistics are used to estimate the efficiency by carrying out the calculations using both the traditional models (OTE, PTE and SE) and super-efficiency model. A comparison is made by categorizing NBFC’s based on the size of total assets and using non-parametric statistic tests to find whether the efficiency scores are significantly different across different categories. The second stage DEA analysis uses Tobit regression to find the exogenous factors which affect the model significantly. Based on traditional models, the total number of efficient DMUs are 8 out of 43 while there are 15 after considering the super-efficiency algorithm. Malmquist Indices are used to study the productivity indices of NBFCs over the last 5 years, and it gives us a maximum productivity growth of 8.53%. It was noticed that there is a significant difference in the mean efficiency values of different sized NBFC’s which can be explained by the lack of standardization in the NBFC domain and the few companies which are listed on the stock market. The managers should not consider ROE as a significant indicator of efficiency and should instead focus on aspects such as ROA and income diversity. Through the Malmquist analysis, the managers can break down the productivity change into technical and efficiency shifts for further investigation.

From shadow banking to digital financial inclusion: China’s rise and the politics of epistemic contestation within the Financial Stability Board

Global financial standard-setting has been the exclusive domain of advanced economies for decades. Following the 2008–09 crisis, China and other emerging markets and developing economies obtained formal membership in the forums of global financial regulatory governance. Has their incorporation changed global regulatory politics? We analyze the epistemic contestation, bargaining, and persuasion surrounding the latest item on the financial regulatory reform agenda of the G20 and the Financial Stability Board: non-bank credit intermediation. Our study identifies three groups of norm entrepreneurs with different epistemic backgrounds that advance partially overlapping and competing interpretative frames of how to define, understand, and regulate this amorphous financial (non-)sector. Regulators from Western advanced economies took the lead in defining non-bank finance as stability-threatening shadow banking, successfully asserting epistemic authority against alternative frames advanced by China and other developing countries that include developmental prerogatives. Confronted with this impasse, Chinese authorities have sought to re-frame non-bank finance at the G20 under the label of digital financial inclusion. Our findings challenge and refine salient theories of global regulatory politics and underscore the importance of epistemic concerns for debates over the consequences of the entry of new actors from the ‘Global South’ into the core institutions of global financial governance.

Financial frictions and the SME investment gap: new survey evidence for Ireland

ABSTRACT In this paper, we use novel firm-level survey data on investment expenditure for Irish SMEs to investigate the existence of investment constraints between 2016 and 2018. We model investment as a function of firms’ economic fundamentals and factors affecting firms’ access to finance. We use an empirical version of the traditional fundamental Q model which links investment to the marginal returns to capital. Empirically we deploy a two-stage Heckman model and include measures of financial frictions such as access to collateral, non-bank financing, internal finance and indebtedness. We find evidence that investment is substantially lower than the level suggested by economic fundamentals alone and that a considerable financing gap is evident. On average, we find that investment could be 55% higher than present if financing constraints were completely eliminated.

Non-bank financial intermediation as a factor of vulnerabilities in the global financial system

The article analyzes the indicators that characterize the sector of non-bank fi nancial intermediation. It is revealed that non-bank fi nancing provides a valuable alternative to bank fi nancing for many fi rms and households. It is established that the growth of non-bank fi nancial intermediation may also give rise to vulnerabilities in the global fi nancial system. The methodology for the detection and classifi cation of the structures that may pose bank-like fi nancial stability risks are described. Special attention is given to the problem of implementation of reforms to strengthen oversight and regulation of non-bank fi nancial intermediation at both the country-specifi c and international levels.

Robo advisory and its potential in addressing the behavioral biases of investors — A qualitative study in Indian context

Technological developments have given shape to robotic services which have forayed in the finance and investment industry in the form of Robo-advisors. Robo-advisors are in use in the developed nations since over a decade but have recently entered the developing nations, like India, since early 2015. This research explores the present state of Robo-advisory services in the Indian context and investigates how Robo-advisors can help in mitigating behavioral biases of a retail investor.The present study gives an in-depth understanding about the ability of Robo-advisory to mitigate behavioral biases from the perspective of experts. These experts are from the product development team, quality control team, middleware, or at top management level from BFSI (Banking and Financial Services Industry), IT (Information Technology), FINTECH (Finance Technology) and NBFCs (Non-Banking Finance Companies) in India. The researchers have adopted a qualitative approach, of interviewing these experts, to discover the phenomenon and gain insight about Robo-advisory services. Each interview was recorded and transcribed on word-for-word basis. The transcribed content underwent a structured content analysis, using different categories, resulting from the conducted literature review. The intent is not to generalize the findings, since the field of Robo-advisory is at a nascent stage as far as Indian market is concerned.The key findings indicate that the current focus is to increase awareness level amongst investors, by educating them and by building trust. Our conclusion emphasizes the fact that Robo-advisors still need to mitigate investor’s biases while performing risk analysis and profiling the investors. Robo-advisory platforms are not yet comprehensively self-sufficient to accurately perform risk analysis for retail investors.

Information Flow Networks of Chinese Stock Market Sectors

Transfer entropy measures the strength and direction of information flow between different time series. We study the information flow networks of the Chinese stock market and identify important sectors and information flow paths. This paper uses the daily closing price data of the 28 level-1 sectors from Shenyin \& Wanguo Securities ranging from 2000 to 2017 to study the information transmission between different sectors. We construct information flow networks with the sectors as the nodes and the transfer entropy between them as the corresponding edges. Then we adopt the maximum spanning arborescence (MSA) to extracting important information flows and the hierarchical structure of the networks. We find that, during the whole sample period, the \textit{composite} sector is an information source of the whole stock market, while the \textit{non-bank financial} sector is the information sink. We also find that the \textit{non-bank finance}, \textit{bank}, \textit{computer}, \textit{media}, \textit{real estate}, \textit{medical biology} and \textit{non-ferrous metals} sectors appear as high-degree root nodes in the outgoing and incoming information flow MSAs. Especially, the \textit{non-bank finance} and \textit{bank} sectors have significantly high degrees after 2008 in the outgoing information flow networks. We uncover how stock market turmoils affect the structure of the MSAs. Finally, we reveal the specificity of information source and sink sectors and make a conclusion that the root node sector as the information sink of the incoming information flow networks. Overall, our analyses show that the structure of information flow networks changes with time and the market exhibits a sector rotation phenomenon. Our work has important implications for market participants and policy makers in managing market risks and controlling the contagion of risks.

Macroprudential Capital Requirements with Non-Bank Finance

I analyze the impact of raising capital requirements on the quantity, composition, and riskiness of aggregate investment in a model in which firms borrow from both bank and non-bank lenders. The bank funds loans with insured deposits and costly equity, monitors borrowers, and must maintain a minimum capital to asset ratio. Non-banks have deep pockets and competitively price loans. A tight capital requirement on the bank reduces risk-shifting and decreases bank leverage, reducing the risk of costly bank failure. In response, though, the bank can change both price and non-price contract terms. This may induce firms to substitute out of bank finance, leading to a theoretically ambiguous effect on the profile of aggregate investment. Quantitatively, I find that the bank's incentive to insure itself against issuing costly equity and competition from the non-bank sector mutes the long run impact of raising capital requirements. Increasing the capital requirement from 8% to 26% eliminates bank failures with effectively no change in the quantity or riskiness of aggregate investment.

Malaysian SMEs’ Liability Structure and its Impact on Profitability and Growth

This paper offers new evidence as to how the heterogeneity in small and medium enterprises’ (SMEs’) liability structure affects their growth and profitability. On average, SMEs in our sample incurred a shortage in spontaneous (supplier) financing of 24.9% of total assets. This shortage is financed by bank debt of 21.1% which consists of trade-line facilities (9.6%) and term loans (11.6%). SMEs also finance this shortage in spontaneous financing with non-bank financing sources such as leasing (3.3%) and related party loans (2.9%). Regression results show that SMEs that are efficient in working capital management (shorter cash conversion cycle) tend to perform better. This value creation in efficient working capital management mainly arises from longer payable period enjoyed from the suppliers. SMEs that obtained more loans from related parties tend to exhibit higher performance. Conversely, SMEs that extend more loans to their related parties are associated with lower performance. In terms of growth, SMEs with access to banking facilities tend to enjoy higher growth rate. However, excessive debt in balance sheet is detrimental to SMEs’ growth prospect.

Sharia Maqashid’s Inclusive Performance and Contribution to The Sharia Non-Bank Financial Industry in Indonesia

Abstract: This study aims to analyze the Sharia Non-Banking Financial Industry (henceforth INKB) performance in Indonesia based on the criterion of sharia maqashid and its inclusive contribution. This study's population is the Sharia IKNB, with the samples include sharia insurance companies, sharia finance companies, sharia pension funds, and pawnshop companies. The data in this study were analyzed using the Simple Additive Weighting method. The study results show the highest five ranks of Sharia Maqashid Index performance calculation, namely, in respective order, DPLK Muamalah, Reindo Syariah, Asuransi Takaful Indonesia, Sarana Multigriya Finansial, and lastly is Pegadaian Indonesia. To overcome the structural poverty that has been a prominent unfinished issue and often neglected by the state, it requires the ability and sensitivity to respond to the low class' turmoil by the sustainable economy, environment, and financial industry media. The Sharia IKNB must contribute to the public in becoming the frontline in improving the structural poverty system and leading industry in achieving the highest sharia objective, to maintain the life sustainability of humans, nature, economic resource, and other life aspects of the society.Abstrak: Penelitian ini bertujuan untuk menganalisis kinerja Industri Keuangan Non Perbankan Syariah (selanjutnya INKB) di Indonesia berdasarkan kriteria maqashid syariah dan kontribusinya yang inklusif. Populasi penelitian ini adalah IKNB Syariah, dengan sampel perusahaan asuransi syariah, perusahaan pembiayaan syariah, dana pensiun syariah, dan perusahaan pegadaian. Data dalam penelitian ini dianalisis menggunakan metode Simple Additive Weighting. Hasil studi menunjukkan lima peringkat tertinggi penghitungan kinerja Indeks Maqashid Syariah, yaitu di masing-masing urutan, DPLK Muamalah, Reindo Syariah, Asuransi Takaful Indonesia, Sarana Multigriya Finansial, dan terakhir adalah Pegadaian Indonesia. Untuk mengatasi kemiskinan struktural yang selama ini menjadi isu menonjol yang belum terselesaikan dan sering diabaikan oleh negara, diperlukan kemampuan dan kepekaan dalam merespon gejolak kelas bawah oleh media ekonomi, lingkungan, dan industri keuangan yang berkelanjutan. IKNB Syariah harus berkontribusi kepada masyarakat menjadi garda terdepan dalam memperbaiki sistem kemiskinan struktural dan industri unggulan dalam mencapai tujuan syariah yang setinggi-tingginya, menjaga keberlanjutan kehidupan manusia, alam, sumber daya ekonomi, dan aspek kehidupan masyarakat lainnya.

중국 비은행 지급결제기관의 모바일결제에 관한 규제 연구

중국 비은행 지급결제기관의 모바일결제에 관한 규제 연구

POTENSI FINANSIAL TEKNOLOGI SYARIAH DALAM MENJANGKAU PEMBIAYAAN NON-BANK

The purpose of this study is to analyze the potential of Crowdfunding and Peer-to-Peer Lending Financial Technology (FinTech) Sharia to reach the non-banking financing. There are four Crowdfunding and Peer-to-Peer Lending FinTech Sharia operators in Indonesia used as the sample. The data used in this study was obtained from direct interview with the FinTech operators and literature study of similar subject. The analysis method used in this study is SWOT analysis. The results of the study which used SWOT analysis model found that the Crowdfunding and Peer-to-Peer Lending FinTech Sharia are not a threat to existing Sharia financial institutions and can also increase the penetration of sharia financial industry in Indonesia because they offer cost efficiency, ease of access, speed of financing distribution, and the low rate of non-performing financing. However, there are still small quantity of FinTech Sharia registered at OJK, no specific regulation for FinTech Sharia and no Sharia Supervision Board in many FinTech Sharia can be obstacles for FinTech Sharia operators

Crisis in the Indian Non-Banking Finance Companies (NBFC) Sector

Managing one-fifth of credit in the country, the Non-Banking Finance Company (NBFC) is a vital sector for the Indian economy. A series of problems are hurting the Indian NBFC sector since the default of infrastructure finance major IL&FS in September 2018. What seemed to be a liquidity crisis is looming into a solvency issue. Some major players backed by reputed promoters are going out of business. Though the downgrades & defaults do have a considerable impact on the banking and finance industry as a whole, there is sufficient panic-triggering turbulence in certain pockets of the industry. The Housing Finance Companies (HFCs) and the Asset Management Industry are found to be vulnerable and got highly hurt by the crisis. A central issue that led to the liquidity issues in the industry is the asset-liability mismatch. Regulators prefer tweaking macro-economic variables to curtail the problem rather than providing a special liquidity window. The crisis highlighted the need for much closer interaction and the interplay between regulators such as RBI, IRDA, NHB, and SEBI to avert such possibilities in future failing which bubbles like these could culminate to become a systemic risk. Findings from this paper can help various stakeholders from the NBFC, the regulators, and the Government in better preparedness.

A Comparative Study on Gold Loan Offered by Public Sector Banks and Non-Banking Financing Companies, Madurai

In today’s modernized world everybody prefer to avail gold loan as it can be availed within the short duration from Banking institution and Non-Banking Financing institution where the preference to other credit was comparatively lesser as it consumes time. This research study is related to a comparative survey of the gold loan offered by Public sector Banks and Non-Banking Financing Companies in Madurai. This study is focused on the preference of the borrowers in availing the gold loan, the awareness level of borrowers about lending norms, factors influencing borrowers to avail the gold loan, problems faced by the borrowers while availing gold loan and satisfaction level of borrowers towards Public sector Banks and Non-Banking Financing Companies in availing gold loan. An attempt has been made to collect information from 107 respondents from the borrowers of gold loan from Public sector Banks and Non-Banking Financing Companies in Madurai city. The data collected using an appropriate questionnaire were analyzed and interpreted using statistical techniques, and also the testing of the hypothesis was done, and conclusions arrived at whether the theories were accepted or rejected.

Financial Institutions Involved in the Bankruptcy and Liquidation Process in Kosovo

In modern states, economic system of state it function through financing institutions. So, financing system plays an important role in business and economic activities. Bankrupty and liquidation process in finance sector in Kosovo has intended avoiding the failure of the economic enterprise and its one of the important cases in finance direction. Therefore, studies of this form shows a big interes from scientific researcher in our state and wider. This paper is focused in bankrupty and liquidation process of finance institutions, studing the most important elements of bankrupty and liquidation process in out place and region. Research model gives a visual describe of research and this topic elaborates very well. Financing institution are registered and licensed from CBK and it consisting of: Banks, Pension Funds, Ensurance Companies, microfinancial institutions and other nonbank financial institutions. Central Bank of Kosovo (CBK) has executive responsibilities for licensing/ registering and monitoring financial institutions such as: banks, ensurance company, pension funds, microfinancial institutions, nonbank financing institutions and other legal subjects that exercising financial activity with Kosovo legislation.As th bankrupty process starts ealry, by taking signals from financial indicators, research preliminarly do actual evaluation of finance statements of financial institutions. The purpose of this paper is to give general frame of bankrupty and liquidation of financial institutions in Kosovo. Financial performance measurement which is thought to be a model of performance is limited with CAMEL model for banks and Dupont model for other financial institutions. Excepted of those, research is a subject of only financial institutions in Kosovo, so it could not be generalized.

An Alternative Proposal for Financing for the Agricultural Sector (Agricultural SME’s Bonds)

In today’s environment, where SME’s financing continues to be a serious problem, systems that facilitate non-bank financing models different from traditional ones should be considered. In the present article a model of financing based on bonds for SME’s is proposed, very suitable for the agricultural sector or any group with little access to traditional financing. To improve the analysis, a fuzzy logic system is proposed that allows the most representative variables to be properly selected and take into account the uncertainty of the environment and the subjectivity of the analysts.

The impact of deficit financing on economic stability

This study examines the effect of deficit financing on economic stability in Jordan during the period 2005-2017, using quarterly data by employing the Vector Error Correction Model (VECM) after seasonally adjusting the variables. This paper is unique as it is the first of its kind that tackles the issue of stability in Jordan. It provides empirical evidence that external borrowing (EBDT) and domestic bank financing (BANK) negatively affect economic stability in Jordan. The bank effect is due to crowding out the private sector. External borrowing negative impact is driven by the current high level of outstanding public debt, 98 percent of GDP. Public debt is mainly channeled to finance current expenditures at the expense of capital expenditures, which has a minimal impact on growth. Interest rate (REPO) effect is in line with the finance theory as higher rates lead to lower growth. Non-bank financing (NonBank), although not statistically significant, exhibits the right sign as it has a positive effect. Future research may extend this work by including other macroeconomic variables such as current account deficit, money supply and direct foreign investment.