Non-bank Financial Institutions Research Articles

Preventing the financing of terrorism in Ukraine: separate issues of theory and practice

The article is dedicated to the pressing issue of countering terrorist financing, which is becoming increasingly important in the context of the global threat posed by terrorist activities. The authors analyzes the current state of the fight against terrorist financing, emphasizing the need for continuous improvement of legislative mechanisms and financial control to effectively combat this socially dangerous phenomenon. The study provides a theoretical analysis of issues related to preventing terrorist financing in Ukraine. Attention is drawn to the fact that preventive measures to ensure peace and security are among the key instruments of state policy. Such measures are aimed at neutralizing criminals and preventing terrorist acts at the earliest stages (during preparation or attempts). It is noted that complex financial schemes and the use of money laundering tools allow for the concealment of the true origins and directions of funds, complicating the process of detecting terrorist financing activities and necessitating constant improvement of legislative tools to combat this current threat. Particular attention is paid to the role of financial institutions in detecting and blocking suspicious financial flows that may be used to finance terrorism. The authors highlight that the financial schemes of terrorist organizations are constantly evolving, utilizing modern technologies and legal entities such as charitable and public organizations. This significantly complicates the detection of illegal operations, as financial resources can be moved through legal channels without raising suspicion in financial monitoring systems. The article also examines the role of international standards, such as those of the FATF (Financial Action Task Force), which set the basic principles for combating money laundering and terrorist financing. The compliance of national legislation with these international standards is analyzed, with emphasis on the need to adapt international practices to improve the effectiveness of the national system of combating terrorist financing. Additionally, the challenges associated with financing terrorist activities through banking and non-banking financial institutions are explored. Despite the existence of certain legislative mechanisms and financial monitoring programs, the system for detecting suspicious operations often operates formally, and the results remain insufficient. In conclusion, the article proposes specific measures to improve the national system for combating terrorist financing, particularly through strengthening international cooperation, adapting best foreign practices, and continuously improving financial monitoring. The need for enhanced interaction between financial institutions and law enforcement agencies is emphasized to more effectively detect and block financial flows linked to terrorist activities.

Administrative and legal aspects of financial monitoring of business under martial law

Financial monitoring is an activity aimed at identifying illegally obtained income and preventing the financing of terrorism. The National Bank establishes requirements for banks and non-banking institutions regarding the prevention of laundering of illegally obtained income and verifies their compliance. Carrying out financial monitoring, banks and non-bank financial institutions check clients and analyze their financial transactions. In case of detection of suspicious transactions, banks inform the State Financial Monitoring Service and law enforcement agencies of Ukraine. The National Bank acts in accordance with FATF International Standards for Combating Money Laundering and the Financing of Terrorism and the Proliferation of Weapons of Mass Destruction. The issue of financial monitoring of business in Ukraine under martial law is more relevant than ever. It is about preventing and countering the legalization (laundering) of criminal proceeds, the financing of terrorism, and the financing of the proliferation of weapons of mass destruction. According to the current legislation, banking institutions are delegated the authority of the subject of primary financial monitoring. The task of the primary financial entity is to develop internal documents on financial monitoring, which should contain procedures sufficient to ensure effective risk management, as well as to prevent the use of services and products of the subject of primary financial monitoring for the legalization (laundering) financial monitoring for the legalization (laundering) of proceeds obtained through crime, the financing of terrorism and the financing of the proliferation of weapons of mass destruction and appoints an employee responsible for its implementation. Banking institutions, as subjects of primary financial monitoring, create and ensure the functioning of an independent structural unit to perform functions related to financial monitoring. But it is very difficult for enterprises that have re-registered their activities from the temporarily occupied territories to the territory under the control of Ukraine to undergo financial monitoring, since, first of all, their financial activities are «paralyzed» while waiting for the decision of the banking institution, and accounts are very often blocked. The fact is that at the beginning of 2024, the above enterprises and banking institutions were checked in Russian registers, such as Ukrainian YouControl, Opendatabot, etc. Why did they rely on them more than on Ukrainian legal registers. Therefore, a very important question arises: financial monitoring of enterprises - legal protection or destruction of business under martial law?

The Role of Governance and Digital Transformation in Enhancing Operational Sustainability of Non-Banking Financial Institutions

The Role of Governance and Digital Transformation in Enhancing Operational Sustainability of Non-Banking Financial Institutions

Sharia Financing in Improving the Ummah's Economy

Sharia financing is one of the important instruments in the modern economy, especially in the context of the people's economy. The basic concept of sharia financing that is free from elements of riba, gharar (uncertainty), and maysir (gambling), offers alternative solutions for Muslims in carrying out economic activities in accordance with sharia principles. In its development, sharia financing has proven to make a significant contribution to improving the welfare of the people, both through the micro, small, and medium (MSME) sector and other sectors. Through Islamic financial institutions, such as Islamic banks, Islamic cooperatives, and non-bank financial institutions, Islamic financing provides fairer and more transparent access to financing, as well as reducing economic inequality. Financing based on mudharabah, musharakah, murabahah, and ijarah, for example, encourages collaboration between capital owners and entrepreneurs, increases productivity, and creates wider employment. In addition, sharia products such as sukuk also play an important role in attracting beneficial investments for infrastructure development and increasing the economic capacity of the community. However, although sharia financing has great potential, challenges still exist, such as the lack of public understanding of sharia products, limited access to sharia financial institutions in certain regions, and challenges in creating a supportive ecosystem. Therefore, it is necessary to increase Islamic financial literacy, strengthen regulations, and support from the government and the community to optimize the role of Islamic financing in improving the economy of the people in a sustainable manner.

К вопросу о необходимости изучения небанковских финансовых институтов в контексте проведения денежно-кредитной политики

The article substantiates the need for a detailed study of the impact of the market of non–bank financial intermediaries on the transmission mechanism of monetary policy. As a result of the research, the author studies the stages of its implementation within the credit channel of the monetary policy of the Central Bank, analyzes the transformation of the Bank of Russia’s approach to the composition of channels and structural elements of transmission. The definition of non-banking financial institutions (intermediaries) according to the interpretation of the Financial Stability Board is given and it is established that this segment of the financial market is increasingly developing in the modern economic system. It is revealed that the functioning of the credit channel of the transmission mechanism in different countries of the world follows a similar pattern, and non-bank financial intermediaries are beginning to play an increasingly important role in this channel in recent years.

Study of problems and solutions caused by the impact of digitalization in non-banking financial institutions (with special reference of Chhattisgarh)

In today's time, digitalization is a part of modern culture. In this research, the impact of digitalization in a bank-like company providing financing has been studied, in which the state of Chhattisgarh has been chosen as the research area (Ujjwal More et al 2023). The people of the state, i.e., non-banking financial institution employees and beneficiaries have been interviewed by selecting sample samples of some questions through questionnaires, which reveals the impact of digitalization in non-banking financial institutions, which makes this study even more special. Only the positive impact of digitalization is understood in this study, which has come on the basis of the facts of this study (eBooks). Non-banking financial institutions provide facilities in financing any project or small scale industries. There are also digital processes for this financing, to what extent it is helpful, has been seen in this research paper. Modernization is being used in every place today a part of this is digitalization, which makes every task easy (Dr. Debsarita Kanungo 2021). There are many problems in NBFC due to the impact of digitalization. These have also been studied and suggestions have been given for their resolution.

The welfare impact of financial inclusion: does the source of financing matter? A GMM and channel analysis

PurposeThis study investigates how finance contributes to socioeconomic development through an inclusive financial system and the impact of financial inclusion programs pursued by non-bank financial institutions (NBFIs) in Ghana.Design/methodology/approachIn this study, we leverage a rich, nationally representative household survey (ICPSR, 2014) from 17 Ghanaian MFIs (1,629 households), sponsored by the World Bank, to analyze microfinance impacts using a generalized method of moment (GMM) and channel analysis.FindingsOur findings reveal a statistically significant positive impact of donor-funded financial inclusion projects on targeted households’ welfare, regardless of implementing agency (donor, government or microfinance institution). The channel analysis further suggests that credit unions and savings and loan (S&L) institutions may be particularly effective conduits for delivering these welfare gains through financial inclusion programs. These findings hold valuable insights for funders seeking to maximize the welfare impact of such interventions: credit unions and S&Ls may be preferential channels for delivering financial inclusion programs aimed at improving household well-being.Research limitations/implicationsThe poverty-reducing impact of informal non-bank financial intermediaries like credit unions and susu groups highlights the need for policies that integrate these institutions into the formal financial system. Therefore, donor-funded initiatives should not rely solely on local government implementation. Since the focus of this study is on Ghana, we caution readers to exercise caution when generalizing the findings to other jurisdictions.Practical implicationsThe World Bank/IMF-backed financial sector reform in Ghana has many important implications for financial inclusion and welfare impacts which are rare in other jurisdictions. Our finding has policy implications for agencies that wish to translate financial inclusion into significant economic inclusion, especially in middle- and low-income countries (LICs) where the COVID-19 pandemic and the global impact of the recent war in Ukraine could exacerbate the exclusion gap.Originality/valueThe focus of this study is to understand if MFIs, funded by different sources, can contribute to inclusive growth and welfare. This research employs channel analysis, considering that donor and government programs are often channeled through community-based NBFIs and offer key contributions to the existing body of knowledge on financial inclusion and household welfare. This study extends the current literature by providing a deeper understanding of the role of each NBFI type in deepening financial inclusion and improving household welfare and allows policymakers, donors and governments to target inclusion efforts for maximum impact.

MANAJEMEN STRATEGI PENGELOLAAN TINGKAT KECUKUPAN MODAL, RESIKO KREDIT DAN LIKUIDITAS TERHADAP PROFITABILITAS LEMBAGA PERKREDITAN DESA (LPD) DI KABUPATEN TABANAN

The Village Credit Institution (LPD) plays a crucial role in building the economy in Bali, particularly in Desa Pakraman. The LPD functions as a non-bank financial institution that manages the financial potential of the village and provides loans to the community. This research aims to analyze the impact of capital adequacy, credit risk, and liquidity on the profitability of LPD in Tabanan Regency. The methodology used includes both quantitative and qualitative approaches, with data collection through financial reports of the LPD and multiple linear regression analysis. The research findings indicate that capital adequacy and liquidity have a positive effect on profitability, while credit risk has a negative impact. These findings are expected to provide insights into the profitability performance of LPD and serve as considerations for improving the financial health of institutions in Desa Pakraman, especially in Tabanan Regency.

Vulnerabilities and Risks in Denmark’s Nonbank Financial Institutions

Vulnerabilities and Risks in Denmark’s Nonbank Financial Institutions

CONSUMER LENDING BUSINESS PROCESSES FOR BANKING AND NON-BANKING FINANCIAL INSTITUTIONS: CORE DIFFERENCES

The article explores the fundamental distinctions between banks and non-bank financial institutions in the consumer lending sector, emphasizing Make-and-Sell (M/S) and Sense-and-Respond (S/R) business strategies. To define these strategies, four key criteria were analyzed: “profit focus,” “know-how,” “general business process,” and “organizational priority.” Banks traditionally adopt a structured M/S approach that prioritizes long-term planning and standardized processes. In contrast, non-bank financial institutions use the adaptive S/R strategy, characterized by flexibility, modular customization, and rapid innovation. These institutions emphasize agility in responding to customer needs and utilize advanced technologies to optimize their processes.The research highlights how these differences impact customer relationship management (CRM) processes and credit risk assessment. Banks primarily rely on traditional credit scoring models, classifying borrowers into "good" or "bad" categories based on their delinquency. In contrast, non-bank financial institutions adopt a segmented approach based on profitability. This segmentation, represented through the Whale curve, allows non-bank institutions to identify high-profit clients and tailor strategies to maximize returns. The difference is also present in the usage of credit bureau data.The findings underscore the dual impact of fintech innovation on financial stability. While non-bank financial institutions have expanded access to credit and driven innovation, they operate in higher-risk environments with less regulatory oversight, contributing to potential financial instability. Conversely, banks face increasing competitive pressures, necessitating the adaptation of rigid traditional processes to remain viable in this evolving landscape.

Repo haircuts: Market practices and the impact of minimum requirements on leverage

We use transaction-level data on the euro area repo market to assess the calibration of the Financial Stability Board's (FSB) recommended minimum haircut framework and its impact on leverage in non-bank financial institutions. We find that market haircuts are currently not in line with the framework. Therefore, a market failure exists that needs to be addressed by regulation, such as the minimum haircut framework. In assessing its potential impact, we find that it would affect larger and more leveraged entities the most, indicating its capability to make a meaningful contribution to addressing risks from leverage in non-bank financial institutions.

Pemanfaatan Sistem Keuangan Digital Dalam Mewujudkan Inklusi Keuangan (Studi Kasus Lembaga Keuangan Non Bank)

The purpose of this study is to identify and analyze the Digital Financial System in Realizing Financial Inclusion (Case Study of Non-Bank Financial Institutions). The approach taken in this study uses interview techniques and direct discussions with customers and employees of non-bank financial institutions. This study has a novelty, namely that there has been no research that has a non-bank financial institution as its research object, most studies use banks. The research method used by researchers in this study is a qualitative approach with a descriptive method. This study uses a qualitative research approach where qualitative research as a scientific method is often used and implemented by a group of researchers in the field of social sciences, including education. research results Partially, the influence of services has a significant effect on financial inclusion. The influence of innovation has a significant effect on financial inclusion. The influence of the system has a significant effect on financial inclusion. While simultaneously, services, innovation and systems have a significant effect on financial inclusion.

Socially responsible HRM practices in social enterprises: the case of microfinance

PurposeThis paper examines the difficulties faced by microfinance loan officers in their daily work and highlights that these difficulties may be grouped into six categories: variable remuneration; fieldwork; trade-off between the social mission and financial objectives; leadership problems; exhausting work both morally and physically and microfinance organization (MFO) not showing enough consideration for its employees.Design/methodology/approachThis paper analyses the root causes of employee turnover in social enterprises by examining a well-known microfinance organization that was created in 2008 as a non-bank financial institution and which is active in a Latin American country. Its mission is to “accompany with adequate and responsible financial services the development of entrepreneurial families, mainly from the rural sector”. Among its clients, 65% are rural and half are women. This major MFO is experiencing high growth (57.8% in 2016) and had 63 branches across the country in 2016. At the time of data collection (in 2016), it employed more than 1,100 staff members, including approximately 600 loan officers (55% of them being women), had a loan portfolio of more than 85 million USD and served approximately 105,000 active borrowers.FindingsOne can be highly tempted to say that microfinance institutions and other social enterprises should dedicate the same attention to their employees as to their clients by deploying ethical and socially responsible human resource management (HRM) practices, but it is not that simple. Implementing socially responsible HRM practices may be particularly costly, though some practices may be less expensive than others. Moreover, as most microfinance institutions operate in developing countries, the resources or infrastructure needed to implement some of these practices may be limited, and corporate social responsibility is less formalized or institutionalized in such countries than in developed ones (Visser, 2008). Moreover, one may also argue that the financial resources required to implement such practices could instead be dedicated to the development of better services for clients or to practices favouring a better respect of those clients. The implementation of socially responsible HRM practices may thus, in some cases, limit the pursuit of MFOs’ social mission, even if some authors argue that, on the contrary, implementing ethical HRM practices contributes to the development of corporate social responsibility (CSR) for external stakeholders. It should also be noted that the funders of MFOs may not make the implementation of such practices a priority and can even be against it. Therefore, as mentioned by Foote (2001, p. 35) in his study on charities, “a difficult balance must be achieved between the ethical interests of charity sector employees and the demands of the bottom line in a market of increasing competition for donations”.Research limitations/implicationsBased on our study, one can be highly tempted to say that microfinance institutions and other social enterprises should dedicate the same attention to their employees as to their clients by deploying ethical and socially responsible HRM practices, but it is not that simple. Implementing socially responsible HRM practices may be particularly costly, though some practices may be less expensive than others. Moreover, as most microfinance institutions operate in developing countries, the resources or infrastructures needed to implement some of these practices may be limited, and corporate social responsibility is less formalized or institutionalized in such countries than in developed ones (Visser, 2008). Moreover, one may also argue that the financial resources required to implement such practices could instead be dedicated to the development of better services for clients or to practices favouring a better respect of those clients. The implementation of socially responsible HRM practices may thus, in some cases, limit the pursuit of MFOs’ social mission, even if some authors argue that, on the contrary, implementing ethical HRM practices contributes to the development of CSR for external stakeholders. It should also be noted that the funders of MFOs may not make the implementation of such practices a priority and can even be against it.Originality/valueOur study contributes to the literature on ethics and HRM since it discusses the pertinence of implementing ethical and socially responsible HRM in non-conventional organizations. It also contributes to the literature on microfinance and social enterprises by offering a comprehensive overview of the difficulties faced by employees of such organizations.

Beyond Uncertainty: Exploring Demographic Drivers of Sharia Insurance Adoption in Indonesia

This research is motivated by the fact that human life is inevitably exposed to various risks, both economic risks such as business bankruptcy, fires, and losses, as well as personal risks such as accidents, illnesses, and even death. Although death is certain, the exact time of its occurrence is unknown. The purpose of this research is to determine the impact of demographic factors on the growth of Sharia insurance in Indonesia. This study employs a qualitative research method. The results show that insurance companies, as non-bank financial institutions engaged in risk coverage, are one of the pillars of the national economy. This is due to their ability to accept risk transfers from the public and their role in absorbing and accumulating public funds.

The Current State of the Russian Budget System and the Potential for Financing the Federal Budget Deficit

For the first time, Russia’s budget system is under large-scale stress in all areas: risks of losing the tax base due to international sanctions, a steady increase in unforeseen expenses, inflation risks, and rising debt servicing costs. In this regard, it is necessary to identify and analyze potential sources of financing the federal budget deficit as the main guarantor of budget stability. The article examines the state of the consolidated budget of the Russian Federation and the budgets of state extra-budgetary funds based on the results of the first half of 2024. It is shown that oil and gas revenues remain the main source of revenue growth. Among non-oil and gas revenues, personal income tax and VAT from domestic sales are growing at an accelerated rate. At the same time, the positive dynamics of some sectors of the Russian economy is largely due to budget financing. At the same time, inflation remains above target values, which forces the Central Bank of the Russian Federation to tighten monetary policy. The excess growth of federal budget expenditures and the increase in nominal rates threaten financial stability. In this regard, the article assesses the potential for financing the federal budget deficit in the context of strict borrowing restrictions. Based on the analysis of the state of the domestic federal loan bond market, a conclusion is made about the high risk of a liquidity crisis and the potential for placing domestic debt at the expense of non-bank financial institutions and individuals.

Assessing the contribution of shadow banking to systemic risk in South Africa during COVID-19

Background: Systemic risk studies in the coronavirus disease 2019 (COVID-19) period focus mostly on the banking sector. Regulators however, yearn for data on the contribution of shadow banking to systemic risk during the pandemic.Aim: The primary goal of the study is to determine the contribution of shadow banking to systemic risk during the COVID-19 period in South Africa.Setting: The study focussed on shadow banking, non-bank financial institutions involved in credit intermediation outside the traditional banking system in South Africa.Method: Systemic risk is measured by conditional value-at-risk methodology using monthly market returns of fixed-income funds, funds-of-funds, money market funds and multi-asset funds from January 2015 to December 2021.Results: Shadow banking contributed to systemic risk during COVID-19, and systemic risk reached an all-time high during the onset of the pandemic. Money market funds exhibited higher systemic risk because of the COVID-19 shock. However, multi-asset funds and funds-of-funds are the classes that contributed more to systemic risk during the COVID-19 period. Furthermore, systemic risk trends of multi-asset funds and funds-of-funds increased with the rise in COVID-19 infections, except in the third wave when systemic risk peaked months after the surge in COVID-19 cases.Conclusion: Shadow banking contributes to systemic risk in South Africa and systemic risk peaked during the COVID-19 period.Contribution: There is growing evidence on systemic risk during COVID-19, and this study extends the focus to shadow banking. It draws attention of regulators to credit intermediation outside traditional banks.

Is Sharia Pawnshop being important for Indonesian society: Quadruple Helix Analysis

<em>The development of sharia pawning is very rapid, viewed from the large number of branch offices opening due to the increasing transactions throughout Indonesia. The problem is the existence of Sharia pawning as driven by the socio-cultural conditions of society. The form of research used is normative juridical with a descriptive-analytical approach. The legal sources used are obtained from primary and secondary sources and use interdisciplinary studies in analyzing problems in Sharia pawning. This research aims to understand the existence of sharia pawning in Indonesia. In this research, the existence and position of Sharia pawn in improving lower middle-class society and MSMEs. The conclusions of this research show that the existence and position of Sharia pawning have shifted conventional pawning due to the increase in public trust in non-interest pawning and excellent service from these non-bank financial institutions in the eyes of the public, tiny and medium businesses. The use of four pillars - academics, business, government, and society - can further maximize the potential and increase the performance of this Sharia pawn in Indonesia.</em>

Multinomial Logit Modeling of Financial Inclusion and Financial Literacy of Women MSMEs in Tangerang

This research will examine the determinants of financial literacy and inclusion using sociodemographic variables of women MSMEs in Tangerang. The sociodemographic variables used are education, age, length of business, turnover, source of financing, type of savings, type of credit, credit ceiling, financial literacy score (OJK) and financial inclusion score (OJK). In Indonesia, there has been a lot of research on socio-demographic factors as determinants of financial literacy with mixed and unsatisfactory results, making it less reliable as a research reference. Some of the errors in previous research were that the respondents were not precise enough, for example only students or MSMEs at random. These two things result in the results of entering sociodemographic data being less reliable and ineffective when tested with categorical equation models from the simplest, namely logit, probit and tobit as well as binary logistic to the most complex models such as multinomial logit. Logit, probit and tobit and binary logistics models generally only use two categories of dependent variables, namely 0 if there is no decision or certain condition and 1 if there is a certain decision or condition. Preliminary research data before the Covid 19 pandemic, namely 150 women MSMEs who had unique characteristics in terms of socio-demographic factors as well as levels of literacy and financial inclusion, can be tried to prove empirically that these three variables will play an important role in each other through the multinomial logit categorical equation model according to Bayar et research procedures. al. (2020). The important result to be achieved is that the researcher wants to prove the business potential of women MSME actors in Tangerang, which so far has not been exposed enough to BI UMKM as one of the common market places for all MSME actors in Indonesia. There is a stigma that the low literacy and financial inclusion (OJK) scores of MSME players are a negative effect of less exposure to the business potential of MSME players in the local area. The results of this research succeeded in describing the socio-demographic profile of female MSMEs in Tangerang with several distinctive characteristics, namely the predominance of those with a productive age of 40 - 55 years, the majority having a tertiary education; have a turnover of more than 10-25 million per month and most of them use access to bank and non-bank financial institutions, usually pawnshops, for storage purposes and credit applications. Furthermore, this research succeeded in proposing a categorical equation model with multinomial logistic regression using STATA 13.0 software referring to the research model from Bayar et.al. (2020) and managed to find that socio-demographic variables of financial institutions are always a determining factor in financial inclusion and literacy. The implication is that individual women MSME actors in Tangerang can make financial decisions more quickly considering that they are so close to access to existing financial institutions.

Automatic for the (tax) people: information sharing and cross-border investment in tax havens

Summary This paper examines the impact of international automatic exchange of information (AEOI) treaties on cross-border investments in tax havens. Using a restricted version of the BIS Locational Banking Statistics, we find that AEOIs significantly reduced cross-border deposits. A sectoral breakdown assessment reveals that households were the key driving force behind this contraction. However, we also document evidence of households’ deposits shifting to non-AEOI haven countries and larger deposits by non-bank financial institutions between tax haven countries, suggesting an increased use of shell corporation networks since AEOI introduction. Extending the analysis to portfolio and direct investment, we observe that changes in investment patterns vis-à-vis tax havens are consistent with a significant impact of AEOI treaties on these forms of cross-border investment.

The Great Depression as a Savings Glut

New data covering 23 countries reveal that banking crises of the Great Depression coincided with a sharp international increase in deposits at savings institutions and life insurance. Deposits fled from commercial banks to alternative forms of savings. This fueled a credit crunch since other institutions did not replace bank lending. While asset prices fell, savings held in savings institutions and life insurance companies increased as a share of GDP and in real terms. These findings provide new explanations for the fall in credit and aggregate demand in the 1930s. They illustrate the need to consider nonbank financial institutions when studying banking crises.