Sector Credit Research Articles

Financial Development and Private Investment

This paper finds that financial sector growth is key to boosting private investment in Pakistan. Banks, as financial intermediaries, enhance private investment by lowering risks and supporting decision-making through strong accounting standards. A broader financial system—measured by the ratio of commercial bank assets—positively impacts private investment. Financial deepening, or increasing liquid liabilities, also plays a critical role, as a developed banking system reduces transaction costs and improves fund access. Increasing private sector credit drives investment, so aligning the credit system with Pakistan's investment needs is essential. Strengthening financial intermediaries, enforcing contracts, and managing risks are necessary steps to support Pakistan’s financial sector growth and stimulate investment.

Contribution of Sectoral Credit on the Economic Growth of Nepal

Contribution of Sectoral Credit on the Economic Growth of Nepal

Effects of Interest Rate Change on Private Sector Investment, Evidence From Pakistan

This study examines the effects of lending rates, inflation, and exchange rate fluctuations on private sector credits (PSC) in Pakistan from 1961 to 2017. The analysis shows that lending rates have a minimal impact on PSC, with an insignificant relationship. However, inflation and exchange rates show significant negative effects, indicating that rising prices and currency depreciation reduce private sector borrowing by increasing costs and uncertainty. These findings suggest that while interest rate management remains important, policymakers should prioritize strategies for stabilizing inflation and exchange rates to support private sector investment. Consequently, fostering macroeconomic stability may mitigate the indirect effects of the crowding-out phenomenon, promoting a favorable investment environment conducive to private sector growth.

MODERN TRANSFORMATIONS OF NATIONAL ECONOMIES IN RESPONSE TO THE GLOBALIZATION OF FINANCE AND CREDIT

The study's relevance is determined by the fact that the global economy is a chaotic system composed of millions of interconnected elements (economies of individual countries). In this context, it is emphasized that each national economy experiences periods of growth and decline. These cycles have an irregular nature and can be triggered by intermittenсies in the finance and credit sectors in globalized economies, specifically phenomena of sudden, unpredictable surges in activity or volatility that cause their transformation, while in periods of relative stability, they ensure their sustainability. Thus, the article's aim is a comprehensive analysis of typical transformations of national economies as a response to the globalization of the finance and credit. The study emphasizes that the globalization of the finance and credit creates a highly dynamic and complex environment where the economies of various countries are closely interconnected. As a result of globalization, financial crises, technological innovations, and geopolitical events can rapidly spread across the globe, triggering significant changes in the economies of different nations. These processes are quite chaotic, but they exhibit certain recurring patterns. The transformations of national economies, driven by core intermittent events, manifest in the liberalization of financial markets, the development of financial innovations, the strengthening of central banks, and the reinforcement of international cooperation. Most countries have liberalized their financial markets by lowering barriers for foreign investors and expanding access to financial services. National economies are actively developing financial innovations such as fintech, blockchain, and cryptocurrencies to adapt to the new conditions of global competition. Central banks are playing an increasingly important role in stabilizing financial systems and mitigating the effects of financial crises. Countries are collaborating internationally to develop common rules and standards in the financial and credit sectors, aiming to minimize the risks of global financial crises. The transformations of national economies affect developed and developing countries, bringing about positive and negative consequences.

Towards sustainable agricultural development and food security in East Asia: The role of broad money and banking credits

The existing literature has extensively explored the role of financial development in boosting agricultural output. However, there is a lack of empirical research on the effects of broad money and banking credits on food production in East Asian countries. This study addresses this gap by examining the relationship between financial variables and agriculture in selected East Asian economies from 1995 to 2019, focusing on food security. Our findings indicate that increases in broad money and financial sector credit significantly enhance long-term food security by 0.216% and 0.846%, respectively. Additionally, we observed positive correlations between food security and agricultural inputs: a 1% increase in agricultural land, fertilizer use, and renewable energy adoption improves food security by 0.219%, 0.049%, and 0.146%, respectively. Robustness checks and Granger causality tests further validate these results. This study underscores the critical role of financial resources and agricultural inputs in food security and calls for a reassessment of credit systems to mitigate any adverse effects. These findings provide important insights for policymakers aiming to strengthen food security in East Asia.

FINANCIAL DEEPENING AND ECONOMIC GROWTH: EVIDENCE FROM BANGLADESH

The present study investigated the causal impact of financial deepening on economic growth in Bangladesh for the period of 1990 to 2022 applying cointegration analysis. The ratio of broad money to GDP, private sector credit to GDP and stock market capitalization to GDP used as proxies for financial deepening indicators in this study. Using Johansen co-integration test, the result of the study explored a positive and statistically significant relationship in the long run among the broad money to GDP, private sector credit to GDP, stock market capitalization to GDP and economic growth. Moreover, the error correction term supported the long-run association, and the variables adjust to their long-run equilibrium. The findings suggested that policymakers should promote policies that increase the money supply and market capitalization and ensure the private sector credit is channeled to the more productive sector which would help to support and boost economic growth in Bangladesh.

Long-run Relationship between Power Consumption and Manufacturing Sector Output in Nigeria

Power remains the engine of growth of every economy while the manufacturing sector remains the key driver of a transformed modern economy. Despite several power sector reforms, Nigeria’s manufacturing sector continued to underperform. This study focused on examining the long-run relationship between power consumption and manufacturing sector output in Nigeria. We estimated an ARDL model based on the bounds-testing approach to cointegration. Our results indicate that manufacturing sector output and electricity consumption are cointegrated and that short-run deviations from equilibrium are corrected up to 83 per cent annually. The result showed that power consumption is positively related to manufacturing sector output. This implies that improved power sector will stimulate manufacturing sector growth. Our result also showed that capital formation, labour force and private sector credit are positively related to the manufacturing sector while the monetary policy rate is negatively related to the manufacturing sector. Given our findings, we recommend that the government should implement a sustainable power sector reform that prioritizes the manufacturing sector. This will stimulate growth, reduce the cost of energy and indirectly reduce price of manufactured products. We equally recommend creating a conducive environment for investment in the manufacturing sector through favourable monetary policy rates to allow manufacturers access to credit.

Does Bitcoin Hedge Industry Credit Risk? A Comparison with Gold

Credit default swaps are considered indicators of default probability and used to measure credit risk in different sectors of the US industry. This study examines the effectiveness of hedging and safehaven options for US sectoral credit default swap indices, focusing on whether Bitcoin or gold can serve as effective assets for mitigating credit risk in US industries. The GARCH model with dummy variables and quantile regression are employed to estimate the hedging and safe-haven properties of Bitcoin and gold. The findings indicate that both Bitcoin and gold can be utilized as effective hedging and safe haven assets for US industry credit risk. Furthermore, the study highlights the superior hedging potential and safe-haven properties of Bitcoin compared to gold. Overall, the results suggest that investors and portfolio managers can effectively utilize Bitcoin and gold to protect against credit risk in different US sectors, regardless of market and economic conditions.

THE ROLE OF DIGITALIZATION IN THE FORMATION OF THE COMPETITIVE ENVIRONMENT OF THE FINANCIAL AND CREDIT SECTOR OF THE ECONOMY OF UKRAINE

The purpose of the article is to formalize the genesis of digital financial technologies (DFT), identify: the impact of its stages on the competitiveness of representatives of the financial and credit sector (RFKS), the features of digital competition; quantitative assessments of the specified impacts. Achieving this goal has scientific and practical significance, in particular, for the formation of an effective digital strategy of the RFKS. It is noted that the genesis of digitalization was not uniform and took place in stages, which are a consequence of the level of development of the DFT, the need to adapt the RFKS ​​to them and determine the peculiarities of the competition of the RFKS. The dynamics of changes in the market share by types of digital financial services of fintech companies were studied, and a significant fluctuation in their competitive positions was noted. It is indicated that the complex application of DFT by fintech companies gives them the opportunity to strategically gain a significant competitive advantage over traditional RFKS. The prospects of mutually beneficial cooperation in the market of digital services of fintech companies and banks are indicated. It is noted that a new phenomenon is manifested on the example of fintech companies - mutual multiplicative strengthening of the development of DFT, which leads to increased competition. According to the results of the study of the effects of digitalization on the PFKS, the factors of the formation of threats to the competitiveness of banks in a strategic plan are determined and the directions of actions of institutional structures that will contribute to the strengthening of the market competitiveness of non-bank financial structures are indicated.

Guardians of the Digital Realm: Mapping Key Stakeholders in Data Privacy and Digital Credit Universe

In Nigeria’s rapidly evolving digital economy, data privacy and digital credits emerge as critical areas demanding robust stakeholder engagement and strategic oversight. This study examines the intricate web of key stakeholders in digital data privacy and digital credit sectors, their interrelations, responsibilities, and impacts. These stakeholders include governmental regulatory bodies, financial technology firms (fintechs), consumers and international organizations. Through a systematic literature review, the study navigates the complexities of these relationships, particularly in the wake of Nigeria's Data Protection Act and the burgeoning digital credit market. Data is synthesized from policy documents, digital credit transaction trends, and organizational repositories to underscore the growing significance of stakeholder actions and interactions. The findings illuminate the current landscape and forecast the trajectory of digital data governance and credit practices, emphasizing the necessity for a harmonious and secure digital economy that serves all stakeholders equitably.

Impact of Financial Development on Economic Growth of Nepal

This study examines the impact of financial development on economic growth of Nepal. The dependent variables are real gross domestic product and per capita income. The independent variables are money supply, stock market capitalization, private sector credit, financial access and net foreign direct investment inflows. The study is based on time series data for the period by Ministry of Finance and Central Bureau of Statistics of Nepal. The correlation coefficients and regression models are estimated to test the significance and importance of financial development on economic growth in Nepal. The study showed that stock market capitalization has a positive impact on real gross domestic product and per capita income. It indicates that higher the stock market capitalization, higher would be the real gross domestic product and per capita income. Similarly, there is a positive impact of private sector credit to GDP on real gross domestic product and per capita income. It indicates that increase in private sector credit leads to increase in real gross domestic product and per capita income. In addition, broad money supply has a positive impact on real gross domestic product and per capita income indicating that higher the broad money supply, higher would be the real gross domestic product and per capita income. Similarly, financial access has a positive impact on real gross domestic product and per capita income. It indicates that increase in financial access leads to increase in real gross domestic product and per capita income. Likewise, net foreign direct investment inflow has a positive impact on real gross domestic product and per capita income. It indicates that increase in net foreign direct investment inflow leads to increase in real gross domestic product and per capita income of Nepal.

Relationship Between Financial Deepening Indicators and Stock Market Performance in Kenya

The purpose of this study was to find out the relationship between financial deepening indicators and the stock market performance in Kenya. The selected financial deepening indicators were; financial savings, private sector credit, broad money supply and intermediation ratio on the stock market performance. Johansen cointegration test was done indicating that the variables co-move towards a long-run equilibrium, a multivariate vector error correction model was run and the estimates obtained. The error correction term was also computed. Empirical results showed that all variables are adequately explained by their own lags and the lags of the other variables, the coefficients are also significant. The error correction model indicated that an increase in private sector credit by one unit in the previous quarter causes the stock market performance to increase by 48% in the current quarter. Variance decomposition tests and impulse response functions indicated how other variables respond to shocks in the other variables and the forecast errors for each of the predicted quarters. The implication of this study is that the policy makers who are; the Government, the Central bank of Kenya and the Capital Markets Authority ought to make policy decisions while considering the effect of the full market. This study concluded that private sector credit is the financial indicator variable that affects the stock market performance the most with a bidirectional relationship.

Inflation and Stock Market Performance in a Developing Country: The Bangladesh Outlook

This research adds empirical evidence from a developing country to the research topic: how does inflation impact stock market performance? Stock market performance is measured by the all-stock index (DSEX) of the premiere bourse in Bangladesh – Dhaka Stock Exchange (DSE). A multivariate regression model is used to investigate the relationship between inflation and stock market performance in Bangladesh. Evidence from previous literature exists of positive and negative relationships between these two variables. By examining monthly data from June, 2012 until March, 2024. It is found that inflation is negatively related to stock market performance in Bangladesh. The research paper also uses three control variables: private sector credit growth, remittance, and exchange rate. Two of them are negatively related to the stock market index, and the other is positively related.

Credit in agrarian India: narrative policy struggles over farmer surplus

Debt is fundamental to agrarian life across the world. In India, over half of agricultural households are indebted and borrow from myriad credit sources. Formal institutional credit (e.g., bank loans) has historically, and up to the present day, been proposed as a tool for rural development and to eliminate exploitative informal moneylenders. This is true in India, where despite decades of state policies to displace informal lending using formal credit, informal lending persists and increasing debt is an ever-present symptom of the agrarian crisis. Informal lending made up 30% of farmers’ credit sources in 2019; for farmers who owned less than 0.01 ha of land, this was 71.8%. In this paper we provide an historical examination of the numerous state responses to the proliferation of agrarian debt, surveying lending policy as a state development tool in India. We analyze how moneylending has been treated in different historical periods and the increasing participation of the state (from colonial to present times) in agrarian debt and use a Narrative Policy Analysis to synthesize the underlying “narratives” that characterize evolving policy forms. In the process, we reveal not only a consistent narrative assuming the displacement of informal credit with formal credit, one contradicted by the situation on the ground: an absolute increasing trend in borrowing, and a crucial propagation of the number and variety of credit sources. This we observe to be precisely a result of the largely fruitless state effort to formalize credit and to eliminate informal lending. This persistent discourse that posits formality as a solution to informality, we further conclude, is not only a cultural project of the colonial, post-colonial, and modernization state, but one essential for the circulation and accumulation of capital, enhancing its urgency. The failed effort to eliminate informal lending has resulted, furthermore, in a decline in farmer autonomy and the creation of a state-underwritten struggle − between multiple actors in the credit sector − over the redistribution of agrarian surplus.

A Review on Climate Change, Credit Risk and Agriculture

Abstract Climate change poses a significant threat to agricultural productivity, necessitating a comprehensive understanding of its implications for both agricultural firms and capital lenders. This systematic literature review aims to elucidate emerging trends in addressing climate-related risks in agriculture and credit sectors. Drawing from a rigorous analysis of 39 articles sourced from Scopus and Web of Science databases, three key thematic dimensions have emerged: (i) agricultural lending and credit risk, (ii) green principles and sustainability, and (iii) the context of developing countries. From the impact of climate change on the recoverability of loans to the imperative of transitioning towards a greener and more sustainable economy, alongside the nuanced challenges faced by agriculture in developing countries, we analyzed prominent and recent literary approaches. The findings underscore the need to integrate climate change considerations into agricultural and credit policies. Policymakers and financial institutions should prioritize climate education for farmers and promote sustainable financial approaches. Anticipated climate risks will impact lenders’ capital reserves, necessitating portfolio adjustments. A deep understanding of climate change’s interplay with agriculture lending and credit risk is vital, urging proactive policy and practice. Addressing climate challenges in agriculture demands a multifaceted strategy encompassing tailored credit policies, improved access to credit, financial empowerment, and the mitigation of social inequalities. This review highlights the urgent need for proactive strategies to mitigate climate risks and ensure a resilient agricultural sector, emphasizing the crucial role of research and policy interventions in navigating the complex landscape of climate change impacts on agriculture.

Assessment of the Economic Security of the Credit Sector Using the Ratio of Credit Organizations’ Assets to GDP

Assessment of the Economic Security of the Credit Sector Using the Ratio of Credit Organizations’ Assets to GDP

An Analysis of Current Scenario and Future Prospects for District Central Cooperative Bank Raipur, Chhattisgarh, India

In India, cooperative banks play a crucial role in providing financial services to rural and urban areas. Members of these banks, who are usually from the same community or profession, own and run these institutions. The present study intends to analyse the critical evaluation of the cooperative credit sector in India as well as in Raipur. The study examines progress well and highlights the emerging role and challenges of the cooperative sector. The district-level bank representatives were personally visited to gather the data. The primary sources of secondary data will be the DCCBs' published annual reports, journals, audit reports, and office documents. Cooperatives are considered to have immense potential to deliver goods and services in areas where both the state and the private sector have failed.

Intersecting Dynamics: The Influence of Macroeconomic Factors and Financial Development on Interest Rate Spreads in Uganda

The study investigates the factors influencing interest rate spreads in Uganda's banking sector, focusing on inflation, GDP, Real Effective Exchange Rate (REER), private sector credit, and financial development. Using an Autoregressive Distributed Lag (ARDL) model on data from 2001 to 2022, it examines short and long-term dynamics between these variables and interest rate spreads, within the liquidity preference theory framework. In the short run, inflation and GDP have marginally significant positive impacts on interest rate spreads, indicating that initial increases may widen spreads due to heightened liquidity demand and economic activity. Conversely, in the long run, these factors exhibit significant negative effects, suggesting a stabilizing influence of monetary policy and increased market efficiency. The REER's short-term impact reflects currency value fluctuations affecting risk premium adjustments, which diminish in the long run as markets adapt. The study also explores the interaction between inflation and financial development, represented by private sector credit, on interest rate spreads. Short-term results show a non-significant negative moderation by financial development, while long-term analysis suggests a potential amplification of inflation's effects as the financial sector matures, requiring nuanced financial development policies. Policy recommendations stress the importance of stabilizing inflation and exchange rates to control interest rate spreads in the short term. Long-term strategies include enhancing banking sector efficiency and promoting competitive practices to mitigate the negative effects of economic growth on interest rate spreads.

Impact of agricultural credit on coffee productivity: An analysis of the perceptions of smallholder farmers

Low coffee productivity has been linked to farmers’ limited use of agricultural financing due to credit rationing motivated by moral hazard and information asymmetry. As an intervention, the Kenyan government (GoK) established the Commodity Fund to provide financing to coffee growers to increase coffee productivity, alleviate poverty, and promote economic development. Despite this intervention, credit acceptance remains low; for example, agricultural credit made up only 4.3 percent of total private sector credit in 2016 and 3.62 percent in 2018. This low adoption of agricultural financing raises an important question: does the perception of credit’s influence on coffee output shape the current dismal trend in coffee production? As a result, this study aims to fill a research gap by exploring the impact of agricultural financing on coffee productivity in Kiambu County, Kenya. Primary data was gathered through farmers’ group discussions (FGDs) with twelve farmers’ cooperatives and fifteen key informants from five coffee value chain actors. A subsequent survey of 174 smallholder coffee farmers was conducted. Phenomenological explication and a logistic regression model were used to analyze data from key informants and focus group discussions. According to the study’s findings, farmers perceived agricultural credit as having a positive impact on demand for coffee inputs and returns while having a negative impact on demand for labor and coffee productivity efficiency. As a result, this study recommends that the GoK examine Commodity Fund policies to catalyze credit in order to stimulate increased coffee productivity and economic transformation among coffee producers.

The Impact of Banking Sector Credits on Economic Growth in Western Balkan Countries

The Impact of Banking Sector Credits on Economic Growth in Western Balkan Countries