Sound Institutional Framework Research Articles

Contextualizing institutional capacity in water governance framework: a literature review

Abstract Reliable water governance will ensure the strength and sustainability of an institution. The rising needs for water warrant a thorough study of critical variables of water governance. These variables are crucial for the development of a sound institutional framework. However, there were still insufficient studies that systematically review the existing literature in this field. Hence, the current study aims to examine the key components of the institutional framework for water governance. This study was guided by PRISMA 2020 in its systematic searching strategy on three databases, namely Web of Science, Scopus, and ScienceDirect. Articles for the period of 2018–2022 were screened. The process resulted in the selection of 20 related studies which were then assessed using the Mixed-Method Appraisal Tool (MMAT). Thematic analysis was employed and three themes were identified, namely stakeholders engagement, policy and practices, and water resource management. Based on the pattern of previous studies, the study offered significant contributions to practical purposes and the body of knowledge.

The Green Climate Fund and private sector climate finance in the Global South

ABSTRACT Governments and international organizations are increasingly using public funds to mobilize and leverage private finance for climate projects in the Global South. An important international organization in the effort to mobilize the private sector for financing climate mitigation and adaptation in the Global South is the Green Climate Fund (GCF). The GCF was established under the UNFCCC in 2010 and is the world’s largest dedicated multilateral climate fund. The GCF differs from other intergovernmental institutions through its fund-wide inclusion of the private sector, ranging from project design and financing to project implementation. In this paper, we investigate private sector involvement in the GCF through a qualitative exploratory research approach. We ask two main questions: Do private sector projects deliver on their ambitious goals? What are the tensions, if any, between private sector engagement and other principles of the GCF (most importantly the principles of country ownership, mitigation/adaptation balance, transparency, and civil society participation)? This paper argues that private sector involvement does not provide an easy way out of the financial constraints of public climate financing. We show that the GCF fails to deliver on its ambitious goals in private sector engagement for a number of reasons. First, private sector interest in GCF projects is thus far underwhelming. Second, there are strong tradeoffs between private sector projects and the Global Partnership for Effective Development Co-operation (GPEDC) principles of country ownership, transparency, and civil society participation. Third, private sector involvement is creating a mitigation bias within the GCF portfolio. Fourth, while the private sector portfolio is good at channeling funds to particularly vulnerable countries, it does so mostly through large multi-country projects with weak country ownership. Fifth, there is a danger that private climate financing based on loans and equity might add to the debt burden of developing countries, destabilize financial markets, and further increase dependency on the Global North.

Financial Inclusion and Income Inequality in Sub-Saharan Africa: Taking Socio-Cultural Particularities into Account

AbstractAccording to the United Nations 2030 Agenda for Sustainable Development, financial inclusion has a crucial role to play in achieving sustainable development goals in this case, reducing inequalities and reducing poverty. Certain cultures can be at the root of financial system imperfections and therefore influence financial inclusion and its effect on income inequality. This work analyzes the effect of financial inclusion on income inequalities in sub-Saharan African countries, taking into account cultural particularities. The data cover the period from 2002 to 2015 and are analyzed by the dynamic panel method generalized method of moments (GMM). Our overall sample is made up of 27 countries of sub-Saharan Africa grouped into 4 sub-groups: countries with predominantly Christian obedience, countries with obedience dominated by Islam, countries with French as the official language, and countries with English as official language. The first two are distinguished by the fact that Islam forbids interest-bearing savings and loans. The latter two have known different colonial systems which have forged their attitude to public life differently. Our results show that financial inclusion contributes to reducing income inequality in all the SSA countries considered, and also in the Christian-dominated and French-speaking countries. We found no effect of financial inclusion in Islamic-dominated and English-speaking countries. Similarly, we found evidence of an inverted U-shaped relationship in all the Sub-Saharan African countries considered and in Christian-dominated countries only. These results suggest on the one hand that the socio-cultural aspect has an influence on the relationship between financial inclusion and income inequality and the other hand that financial inclusion may be essential to reduce income inequality in SSA countries, but that it is important to tailor it taking into account the cultural, religious, political, institutional, and structural specificities of each country’s economy to have even more significant effects. Given this interference of socio-cultural and political factors on financial inclusion and its effect on income inequality, in addition to ensuring an effective regulatory system and a sound institutional framework, financial and public authorities should capitalize on the cultural and religious fiber to raise awareness on the use of financial products and services in order to improve financial access and its effect on wealth redistribution.

Financial inclusion in Egypt: the road ahead

PurposeThe literature review stated that financial inclusion (FI) influences economic growth through different channels. Hence, this paper aims to investigate the underlying process of FI in Egypt theoretically, and to derive some policy implications for promoting the process and achieving more improvement in different financial and economic aspects, that is basically through discussing the opinions of FI's main stockholders in Egypt.Design/methodology/approachThe analysis used secondary data from the Global Findex and FAS Database, namely, automated teller machines, outstanding deposits and loans with commercial banks, debit and credit cards ownership. The research particularly used scientific methods as method of deduction, methods of graphical and tabular representation of data, comparative analysis and synthesis of partial knowledge. The paper is also based on a descriptive approach in addition to in-depth interviews with the main stakeholders of the financial inclusion process in Egypt.FindingsThe analyzed results of interviews revealed that new FI vision should have a deep understanding of the financial lives of the poor and low-income groups, including how they acquire, manage and use their money. However, the impact is becoming more prominent for the efficiency of the banking system and hence economic growth rather a regulatory and sound institutional framework enhances it. This finding supported the fact that Egypt can design an appropriate FI strategy, but the main challenge is how to implement it with the required speed and outreach capacity, especially in underprivileged communities.Research limitations/implicationsThe result of this study has interesting implications for Egypt's ability to attain effective FI initiatives that promote sound financial choices and behavior which in turn help to stimulate financial and economic growth.Originality/valueThe study contributes to the literature by assessing the FI level in Egypt, its implications and how it should be enhanced for better performance and results in the future. It addresses the deep fact of this process through inclusive surveys and interviews that help in determining the road ahead.

Education and Economic Growth in the Economic Community of West African States (ECOWAS)

The declining level of economic growth in the Economic Community of West African States (ECOWAS) has been attributed to the poor level of educational development in the bloc. Consequently, this study aims to assess the effect of primary, secondary and tertiary educational development on economic growth in the ECOWAS bloc. The study adopted an extended literature review/ desktop research methodology to address three research questions. Findings based on the extended literature review indicated negative and insignificant relationships between primary educational development and economic growth in the ECOWAS bloc. Secondly, findings also established largely positive relationships between secondary educational development and economic growth in the bloc. Lastly, the relationship between tertiary educational development and economic growth was largely mixed in the ECOWAS bloc. The three specific conclusions were, therefore, validated by both the institutional fitness theory and the new theory of growth. Consequently, to improve the contributions of primary, secondary and tertiary educational development to economic growth in the ECOWAS bloc, the present study recommends the promotion of enhanced social programs, integration of existing policies and creation of societal culture executed within a sound institutional framework, reduction in unemployment, regional disparities, defining the active role of non-governmental organizations (NGOs) and other independent institutions, as well as even distribution of political and financial power, especially in Nigeria, the largest country in the bloc.

Regional financial integration, financial development and industrial sector growth in ECOWAS: Does institution matter?

Regional economies seek to promote growth through industrialisation and literature suggests that developing the financial system, integrating the financial system within a sound institutional framework can promote industrial output. This study fills the gap by examining the impact of financial development and regional financial integration on ECOWAS’ industrial sector. This study assesses whether regional financial integration and financial development have a stronger effect on the growth of the industrial sector of ECOWAS member countries that have high level of institutional quality than it does in countries with lower level. Major findings from the study reveals that deepening regional financial integration can only enhance the industrial output of ECOWAS member countries that has sound institutional quality framework; this is important and is a strong enhancing factor for member countries experiencing low industrial sector output. Credit to the private sector alone both for countries with low industrial output and countries with high industrial output does not improve the level of industrial performance. However, for countries that have low industrial output with a stronger institutional quality framework, increases in credit to the private sector will increase the level of industrial output compared to countries with a higher level of industrial output. Increasing the level of money in circulation alone does not improve industrial sector performance; the quantum channeled as credit to the private sector does. An improved institutional framework must be set in place together with an enhanced flow of credit to the private sector in ECOWAS.

The Rise of Sovereign Wealth Funds in the Global Economy: Can South Africa Establish a Sovereign Wealth Fund?

ABSTRACT Establishing a sovereign wealth fund is one of the instruments the governing party has considered to give expression to the idea of a developmental state. Such an instrument would largely draw on natural resource windfalls to build an intergenerational store of wealth while also responding to longstanding developmental challenges. This makes sense given South Africa’s mineral endowments and future prospects in natural gas, as shown recently by the abortive attempt of Royal Dutch Shell to undertake geological surveys along the country’s wild coast. A sovereign wealth fund could underpin a developmental state and act as alternative resource for achieving legitimate social goals. South Africa presently lacks fiscal space and does not have the conditions necessary for a viable sovereign wealth fund. These need to be created. Certain resources and institutional qualities are vital to building a functional sovereign wealth fund, including a high-performing economy, current account surpluses or resource windfalls, sound institutional framework, good corporate governance, and strong state capabilities. The effects of the Covid-19 global pandemic, and its devastating impact on the South African economy, could further constrain the options of setting up a sovereign wealth fund, which is why the country needs to develop a long-term path for inter-generational equity.

The role of institutions at the nexus of logistic performance and foreign direct investment in Asia

Foreign Direct Investment (FDI) plays an important part in the economic growth of developing Asia and logistics capability is a crucial factor in FDI location choice. Till today, research investigating Logistics Performance (LP) and FDI in Asia are still lacking and rather inconclusive and not standardised. Using a total of 31 Asian countries covering 2007 through 2017, the study critically investigates the impact of LP on FDI using static panel regression method. The results demonstrate that while LP significantly impact FDI, there is a threshold effect of institutional quality in the LP-FDI relationship. Specifically, this paper found that the impact of LP on FDI varies across the perceived level of institutional quality i.e., the effect is positive only before certain threshold level of institutional quality, after which the effect of LP on FDI is reversed. This finding suggests that the LP-FDI nexus is contingent on the perceived level of institutional quality, thus supporting the idea that innovations (i.e., creativity and flexibility embedded within a sound institutional framework) is potent in delivering long-run LP-FDI development in Asia.

Financial development and entrepreneurship

We empirically investigate the effect of financial development on entrepreneurship for a panel of 136 countries between 2004 and 2017. We add to existing research on the nexus between financial development and entrepreneurship by (1) constructing a novel index of financial development to account for the various dimensions of financial development, (2) using an instrumental-variable approach that exploits the presence of heteroskedasticity in regression residuals to provide causal estimates of the effect of financial development on entrepreneurship and (3) examining the role of the quality of economic and political institutions in mediating this latter effect. As our main result, we show that higher levels of financial development cause higher levels of entrepreneurial activity, especially when economic and political institutions are sound. Our empirical results suggest that financial development beneficially contributes to entrepreneurial activity by satisfying the demand for accessible, cheap and extensive credit on the part of entrepreneurs as well as the demand for the efficient and cost-effective management of risk and information on the part of investors. At the same time, our results speak to the notion that national financial systems need to be imbedded into a sound institutional framework for the economic benefits of financial development to be fully realizable.

The Impact of Government Policies on the Growth and Development of SMEs interprises in Bauchi State Nigeria

Every business or start-up was e-ray by the government official ranging from local, state and federal level in Nigeria. Therefore, for SMEs to operate it’s a perquisite to follow the due process from registration by ministry of commerce and industry at state level and the various agencies responsible for registration. This challenge represents both widespread personal misfortune for individuals and a lost opportunity for critical national and global economic development. This study examines the challenges that affect the growth and development of small and medium enterprises in Bauchi state, Nigeria .The study was guided by an epistemological research philosophy adopting a positivist research paradigm. The research design was cross-sectional survey design using both quantitative and qualitative approaches. The target population for this study was 754 registered small and medium scale owned enterprises registered with the Bauchi state government by December 2019 and the sample size was 172 respondents derived using Fisher’s formulae. This study used a self-administered, closed, and open-ended questionnaire to obtain quantitative data. The study used descriptive statistics such as mean, standard deviation, median and proportions using the Statistical Package for Social Sciences (SPSS) version 24 and Microsoft Excel. Regression analysis and correlation analysis were used to determine the direction and strength of the relationship between the independent and the dependent variables.. The questionnaires were administered among the seventy (70) management staff members of the one hundred and seventy two (172) selected SMEs in Bauchi state Nigeria through purposive sampling method, and this was done personally by the researcher. Descriptive and inferential statistics was use to analyze and interpret the data use in this research. The study reveals that government policies is a major challenges that help SMEs to grow and achieve its stated objectives in global competitive environment. On same vain this study is so keen and motivated to established evidence on these challenges ascertain especially, in a context of current phenomena SMEs face in Bauchi state. Finally, the study will utilize the element of contingency theory, as these SMEs require sound institutional framework to mitigate these challenges. However, anecdotal evidence shows that SMEs in developing countries like Nigeria are faced with a lot of challenges that have hampered their growth in recent times. Among these challenges are: intermittent power supply, indiscriminate tax levies government policy, low accessibility to loans from financial institutions and inability to keep proper financial records. The study reveals that Government policies have a significant impact on the growth and development of SMEs in Bauchi State, Nigeria. Subsequently, the study recommends that management of SMEs should adopt good strategy in order to overcome these challenges.

The Impact of Institutional Factors and IFRS on the Value Relevance of Accounting Information: Evidence from Chinese Ah- Shares

This study investigates whether institutional factors affect the value relevance of accounting information in Chinese cross-listed firms during the years from 2000 to 2013. Specifically, the study concentrates on whether the IFRS convergence is associated with incremental improvement on the value relevance of accounting information, and how institutional factors affect the value relevance of these cross-listed firms. We find that the IFRS convergence could indeed promote higher quality of accounting information, as the value relevance increases when firms switched from complying with the China GAAP to the IFRS-based accounting standards. Besides, the impact of institutional factors on the value relevance has been proved to be varied between Mainland China and Hong Kong stock market. This result suggests that regions with a strong and sound institutional framework and thus earning higher scores in the Worldwide Governance Indicators further support and enhance the neutrality of accounting information. Accordingly, such regions would correspond to a lower interventionist power in the financial reporting system and would therefore attract more investments.

Sustainable Development at Saudi Arabian Universities: An Overview of Institutional Frameworks

For the past three decades, sustainable development (SD) at higher education institutions (HEIs) has been receiving increasing global attention based on the recognition of their vital roles in fostering sustainability teaching and practices on their campuses and influencing the larger society to embrace sustainable behaviors. As one of its key dimensions, an institutional framework is a fundamental step and indicator of commitment to advancing SD at universities. However, some universities, especially in the countries of the Global South, are either missing this dimension or have inefficient institutional frameworks due to the lack of standard practice or guidance. This study assesses the extent of establishing an institutional framework for SD in Saudi Arabian universities (n = 44). Data were from a desk study and a survey of university websites and analyzed using content analysis and descriptive statistics. The study found that 72.7% of the universities have shown a commitment to campus sustainability by having sustainability visions; 52.3% have established a dedicated office for SD governance, 68.2% are involved in community outreach and 63.6% collaborate with external agencies in SD efforts. Although there is no evidence of specific campus sustainability plans in the universities, 45.5% of them have SD coverage in their campus development plans or strategic plans. Sustainability assessment and reporting are generally lacking. The findings can improve our understanding of the extent of the commitment of the universities to SD and how they communicate their SD efforts through their websites, which can foster engagement in campus sustainability. The study concludes that a sound institutional framework is vital to implementing SD at universities.

Effect of Institutional Quality and Wealth from Oil Revenue on Economic Growth in Oil-Exporting Developing Countries

This article investigates the role of institutional quality in the oil wealth–economic growth nexus for 35 oil-exporting developing countries between 1984 and 2016. To achieve this objective, an empirical model was employed with linear interaction between oil wealth and institutional quality, and estimated by means of panel autoregressive distributed lag (ARDL) with a dynamic fixed effect estimator. From the results, a contingent effect of oil wealth on economic growth, both in the long run and in the short run, was established. Specifically, institutional quality was found to mitigate the negative effect of oil wealth on economic growth in the long run, while in the short run, institutional quality was found to enhance the positive effect of oil wealth on economic growth. Furthermore, the results provide the threshold levels of institutional quality, beyond which oil wealth enhances economic growth, both in the long run and in the short run, for the sampled countries. These results suggest that in order for oil-exporting developing countries to benefit from an increase in oil wealth, they must adopt appropriate policy measures to improve their levels of institutional quality and embed their entire oil wealth-generating mechanism in a sound institutional framework. Also of importance is that governments must ensure sustainable development through the benefits of wealth from oil.

FINANCIAL LIBERALIZATION AND STOCK MARKET EFFICIENCY: MEASURING THE THRESHOLD EFFECTS OF GOVERNANCE

This study takes the initiative to make a link between empirical aspect of an economy and theoretical part of it. Investigating econometric findings, the current study has taken advantages of profound analytical discussions to justify which school of thought describe liberalization phenomena and its relevant side effects. This paper presents an investigation into the effects of financial openness on stock market efficiency in emerging markets after controlling for certain level of institutional development. The results demonstrate that there is a threshold effect in the liberalization–efficiency relationship. Specifically, we found that the impact of financial liberalization on informational efficiency of the stock market was positive and significant only after a certain threshold level of institutional development had been attained. Below this level, the effect of financial liberalization on stock market efficiency was negative. This finding suggests that the positive effects of financial liberalization on informational efficiency are contingent on the level of institutional development, thus supporting the idea that financial liberalization embedded within a sound institutional framework has the capacity to enhance stock market efficiency. The conclusion that the governance concept, emphasized in econometric findings, is implicit in the definition of neoliberalism can be considered as one of the contributions of the study.

Pakistan’s Economy and Regional Challenges

Pakistan was one of the top 10 fastest growing developing countries between 1960 and 1990 recording an annual average growth rate of 6 per cent. The structure of the economy was also transformed during this period with the share of agriculture coming down from 50 per cent to 20 per cent. The subsequent 25 years have, however, brought about a significant decline in growth rates and in more recent seven years, it has lagged behind other South Asian countries. A combination of political instability and disruption of evolving democratic process, lack of continuity in policies and poor governance have contributed to this outcome. Pakistan has also not utilized its geographic location to take advantage of intra-regional trade and investment. Many promising opportunities were lost due to lingering tension with India. The future potential can only be realized if Pakistan is able to position itself for meeting the future challenges of integration into the regional and global economy, reaping demographic dividends because of youthful population and moving up the ladder of technology. The realization of these goals will depend upon sound macroeconomic policies, strong institutional and governance framework, investment in infrastructure and human development and political stability.

DOES DEMOCRATIC INSTITUTIONS AND FOREIGN DIRECT INVESTMENT AFFECT ECONOMIC GROWTH? EVIDENCE FROM NIGERIA

A reciprocally re-enforcing relationship exists between institutions, foreign direct investment and economic growth. Sound institutional framework which supports foreign direct investment is significant for driving rapid Economic growth. An important factor that has undermined rapid and sustained economic growth is the weak institutional structure, decrepit state capacity and low level of foreign direct investment in Nigeria. Democratic structures reflected in the rule of law, effectiveness and predictability of the judiciary and enforceability of contracts proceedings is imperative for accelerating economic growth. Employing the Generalized Method of Moments (GMM) estimation techniques on annual time series data covering the period from 1981 to 2015, the relationship between these variables was empirically investigated. The empirical findings reveal that democratic institutions and foreign direct investment are significant variables influencing economic growth in Nigeria. In particular, the results, using Nigerian data, show that weak institutions have a destabilizing impact on growth. The impact of FDI on the other hand is found to be positive and significant. Therefore, sound institutional framework, as well as appropriate and consistent macroeconomic policies that encourage foreign direct investment to propel rapid economic growth in Nigeria needs to be put in place.

The strategic location of regional headquarters for multinationals in Africa: south Africa as a host country

Multinational enterprises are aiming to strike a balance between local responsiveness and global integration. The establishment of regional offices allows multinational companies to have a local insight of the market, competition landscape and customer preferences. With such detailed insight, multinational companies are then able to formulate effective and responsive regional strategies. The importance and value of regional headquarters in the academic literature has generally focused on them in industrialized countries. The result is that we do not yet fully possess an overall framework for understanding how value and decisions are devolved, how location decisions are made and how their structures and strategies are evolving to accommodate the growth in emerging markets. The study examines the dominant criteria used by multinational enterprises to choose their locations for regional headquarters in Africa by examining South Africa as a host country for the continent. We find that the main criteria are linked to the advantages of agglomeration and the accompanying economies of scale, and a sound institutional framework which provides a predictable economic climate. In emerging markets which often suffer from institutional voids and thus higher country risk profiles, multinationals choose to locate in the environment which is most familiar to its home rules and use it as a springboard to do business in more ‘hostile’ milieus. The implications for managers looking to do business in Africa is to recognize that this is a continent still consolidating its transition to a sounder institutional environment. Given the unique business environment it will be a difficult region to manage successfully from centralized headquarters and thus using regional headquarters with local knowledge has real advantages.

Institutional Drivers of Capital Flows

This paper empirically analyzes the role of institutional factors in shaping the dynamics of gross capital flows. We build an institutional quality index and test its relevance for both gross capital inflows and outflows using a panel of 56 countries, differentiating between high-income and low-income economies, over the period 1996-2012. We find that institutional quality is a significant factor affecting the behavior of both foreign and domestic investors. Countries with better governance and public sector credibility tend to attract more flows. Causality is confirmed through IV estimates for a sub-sample of 25 countries. In addition, we show that some governance features matter more than others. Specifically, the most relevant institutional indicators are Government Effectiveness and Regulatory Quality, which capture the government’s ability to implement adequate, sound and credible policies. Finally, we assess the role of institutional quality during periods of financial stress. The analysis suggests that domestic investors in countries with a sound institutional framework tend to retrench more capital, mitigating the negative effects of declining gross capital inflows. Therefore, sound institutions incentivize the build-up of external assets in high-income countries by promoting larger outflows in normal times. They also facilitate the repatriation of such assets during crises.

Institutions and the finance–growth nexus: Empirical evidence from MENA countries

This paper investigates the effect of institutional quality on the finance–growth nexus. To this end, an empirical model with linear interaction between financial development and institutional quality is estimated. Our main findings show that, while most indicators of financial development have a significantly negative effect on economic growth, the sign of the coefficients of interaction variables are significantly positive. This provides strong evidence that institutional quality mitigates the negative effect of financial development on economic growth. Looking to the subcomponents of our institutional index, our findings show a development of the banking sector in a country with an important score in Law and Order, Bureaucracy and Investment Profile facilitate growth. Also, countries, with an important score of investment profile, can benefit from stock market development in terms of economic growth. These results suggest that, in order to benefit from financial development, financial systems in MENA countries must be embedded within a sound institutional framework.

Review on Problems, Prospects and Economic Contribution of Wildlife Management and Ecotourism in Ethiopia

Ethiopia contains one-fourth of Africa’s wildlife and is comprised of 277 terrestrial mammals, 861 birds, 201 reptiles, 65 species of amphibians, 150 freshwater fish, and over 1,225 arthropods with a high rate of endemism, but It’s Wildlife populations and their management are constrained by different factors. Habitat destruction, fragmentation, poaching, and lack of clear national and international policies, lack of commitment from government officials, scarcity of funds, expansion of large scale agriculture, illegal exploitation of natural resources, and lack of skilled staff are the main ones. In addition to these, Ethiopia’s Ecotourism potential is huge and unmatched but the sector is in its infancy stage due to lacks of effective and sound institutional framework and legal bases for ecotourism development in related to the less emphasis and recognition given to ecotourism and also lack of cohesiveness, integrity and cooperation among the stakeholder. Most of the national parks and protected areas of the country are under pressure from the surrounding communities in search of cultivable land, grazing land, or wood for different purposes. These seminar papers give a highlight, not only on the problems of wildlife management and ecotourism in Ethiopia, but also the economic contribution and prospects of wildlife management and ecotourism in Ethiopia. It also give an over view on ecology, ecosystem and biodiversity in the area.