Papers by ASHENAFI BEYENE FANTA
Journal of Industry, Competition and Trade, 2022
The paper examines whether increased bank concentration and lack of competition lead to inefficie... more The paper examines whether increased bank concentration and lack of competition lead to inefficiency within the East African Community (EAC) banking sector. Bank efficiency is decomposed into technical, pure technical, scale, cost, and profit efficiency unlike previous studies which have examined bank efficiency in a more generic manner. A two-step system generalized method of moments (GMM) and a sample of 149 banks with 1805 observations over the period 2001–2018 are employed. The findings reveal that the effect of bank concentration and competition is dependent on the type of efficiency. In particular, bank concentration has a positive significant effect on technical, pure technical, and profit efficiency. However, it has a negative significant effect on cost and scale efficiency. In addition, greater competition is found to foster technical, scale, cost, and profit inefficiency. These results are robust to alternative market power measures and an array of control variables. The paper reveals important policy implications to the regulators that a trade-off between bank concentration and competition through anticompetitive policies should be ensured in the banking sector as they play a significant role on bank efficiency.
International Journal of Consumer Studies
Cogent Economics & Finance
African Journal of Economic and Management Studies, 2021
PurposeThe study measured quality financial inclusion, a more comprehensive measure of financial ... more PurposeThe study measured quality financial inclusion, a more comprehensive measure of financial inclusion, and examined its determinants at a consumer level in South Africa.Design/methodology/approachThis study leveraged on FinScope 2015 survey data to compute a quality financial inclusion index using polychoric principal component analysis. Subsequently, a heteroscedasticity consistent ordinary least squares regression model was employed to assess determinants of quality financial inclusion.FindingsThe empirical findings indicated that gender, education, financial literacy, income, location and geographical proximity determine quality financial inclusion. These findings could inform policymakers and financial services providers on how quality financial inclusion can be promoted through tailoring financial products for various socio-demographic groups.Research limitations/implicationsDue to data limitations, the study was confined to South Africa and did not capture digital financi...
The Journal of Accounting and Management, 2015
The Journal of Accounting and Management, 2015
Small and medium enterprises (SMEs) are financially constrained due to de-mand side and supply si... more Small and medium enterprises (SMEs) are financially constrained due to de-mand side and supply side factors. Most studies emphasize on the supply side con -straints, paying less attention to the demand side constraints that arise from SME inherent characteristics. This paper aims at describing characteristics of SMEs and identifying attributes that hinder their access to external finance. To this end, sur-vey of 102 randomly selected firms from the Ethiopian manufacturing sector was conducted. We find that most SMEs are characterized by having a few or no colla-teralizeable fixed assets. Examination of owner’s willingness to admit a new par-tner as a means of expanding capital base revealed that most SME owners exhibit aversion towards selling ownership control. This shows that, contrary to conventi-onal view, aversion towards relinquishing ownership interest increases with size. In terms of financial transparency, we found that most small firms are not accusto-med to keeping books ...
Small and medium enterprises (SMEs) are financially constrained due to demand side and supply sid... more Small and medium enterprises (SMEs) are financially constrained due to demand side and supply side factors. Most studies emphasize on the supply side constraints, paying less attention to the demand side constraints that arise from SME inherent characteristics. This paper aims at describing characteristics of SMEs and identifying attributes that hinder their access to external finance. To this end, survey of 102 randomly selected firms from the Ethiopian manufacturing sector was conducted. We find that most SMEs are characterized by having a few or no collateralizeable fixed assets. Examination of owner’s willingness to admit a new partner as a means of expanding capital base revealed that most SME owners exhibit aversion towards selling ownership control. This shows that, contrary to conventional view, aversion towards relinquishing ownership interest increases with size. In terms of financial transparency, we found that most small firms are not accustomed to keeping books of accou...
Journal of Risk and Financial Management, 2021
Efforts are being exerted in many developing countries to promote financial inclusion by increasi... more Efforts are being exerted in many developing countries to promote financial inclusion by increasing individuals’ access to financial products and services. However, literature suggests that increasing the supply of financial products and services per se may not help in expanding financial inclusion unless concerted efforts are exerted in enhancing financial literacy. This is because financially literate individuals are more likely to appreciate the value of financial services and hence take up financial products. This paper reports the link between financial literacy and inclusion using data from a demand side financial inclusion survey conducted in Kenya and Tanzania in 2016 covering a total of 6029 individuals. Results from our instrumental variable regression analysis confirmed that financial literacy is a strong driver of financial inclusion. This implies that efforts to promote financial inclusion need to be accompanied with financial literacy campaigns in both countries.
Extending Financial Inclusion in Africa, 2019
Abstract The chapter investigates the relationship between financial inclusion and technology. It... more Abstract The chapter investigates the relationship between financial inclusion and technology. It examines whether technological developments in information and communication technologies (ICT) are contributing to wider access to and usage of financial services. Proxies for technology utilized are internet access as well as mobile phone and telephone usage. Using cross-sectional data of 168 countries, of which 48 are African, we report a significant positive relationship between financial inclusion and technology, in particular the internet access and ATMs. Thus, there is evidence that technology is fostering both access to and usage of financial services.
Journal of African Business, 2020
While literature is clear on the role of finance in small business survival and growth, the relat... more While literature is clear on the role of finance in small business survival and growth, the relative importance of formal and informal credit in small business growth remains contentious. While earlier studies report the importance of formal credit in driving growth of firms of all sizes, recent studies find informal credit to drive the growth of only small businesses. The aim of this paper is therefore to contribute to the debate by bringing the context of four developing economies in the Southern African Developing Community (SADC) using the FinScope surveys on 10,830 Micro Small and Medium Enterprises (henceforth MSMEs). To address selection bias caused by various factors affecting small business participation in the formal/informal credit market, we used propensity score matching (PSM) where we paired small businesses from the two groups. We examined the effect of access to formal/informal credit on business performance using Average Treatment Effect (ATE) as well as Average Treatment effect on the Treated (ATT). Our results suggest that firms accessing formal credit tend to exhibit better performance in Zimbabwe but a similar performance gain was not observed in the rest of the countries. For informal credit, our results show that firms accessing informal credit tend to perform less than those without access, suggesting value depletion effect of informal credit.
Journal of Economics and Behavioral Studies, 2015
The finance growth literature ignores the role of bond markets in financing private investments. ... more The finance growth literature ignores the role of bond markets in financing private investments. Moreover, the impact of bank crisis on the finance growth link has been largely overlooked. This paper aims at casting light at the finance growth link in emerging economies by accounting for bond markets and controlling for banking sector crises. Data on economic growth and financial development indicators for 15 emerging economies (drawn from Africa, Asia, Latin America, and Europe) were analysed using a system generalized-method-of-moments (GMM) technique. It is observed that while banking sector development is related to economic growth (albeit negatively), no statistically significant relation is observed between stock markets and or bonds markets and economic growth. Moreover, a banking crisis is found to affect the finance growth link in such a manner that the link weakens when a banking crisis is introduced to the model. Our results are robust to omitted variable bias, simultanei...
Journal of African Business, 2016
ABSTRACT Despite their contribution to job creation, small and medium enterprises (SMEs) are fina... more ABSTRACT Despite their contribution to job creation, small and medium enterprises (SMEs) are financially constrained. Lenders view SMEs as high risk borrowers and hence demand collateral, but lack of collateral inhibits SMEs access to credit. Relationship lending is believed to lessen collateral requirement and increase SMEs access to credit. However, recent studies question substitutability of relationship lending and collateral. The present study adds to the debate by drawing on the survey of 102 randomly selected manufacturing SMEs in Ethiopia. Our binary logistic regression results suggest that banks in Ethiopia are cautious in extending credit to SMEs, evidenced by simultaneous usage of relationships, collateral and other criteria, suggesting complementarity between collateral and relationship lending.
Corporate Ownership and Control, 2015
To curb SME financing difficulty, various schemes were suggested as alternative financing techniq... more To curb SME financing difficulty, various schemes were suggested as alternative financing techniques that include, among others, relationship lending, factoring, credit scoring, leasing, and credit guarantees. This paper aims at examining the viability of each of the schemes by considering the institutional and legal conditions in developing countries. Critical analysis of extant body of literature revealed that not all pro-SME financing schemes are suitable for SMEs in developing countries. This is because they demand development of legal, informational, and financial frameworks that the countries acutely lack at the moment. This, however, does not rule out the utility of schemes such as credit scoring that can be effectively used to ease SME access to finance if well designed credit offices are in place. Similarly, credit guarantee schemes are crucial as an interim solution if they are allowed to run without government subsidy as it aggravates moral hazard
Journal of Governance and Regulation, 2015
This paper aims at providing a detailed account of economic significance of small and medium ente... more This paper aims at providing a detailed account of economic significance of small and medium enterprises by drawing on the extant body of empirical literature. It has been noted that studies on the link between SME development and economic growth are inconclusive. While modeling growth in the SME sector and its impact on economic development is a matter of ongoing scientific investigation, we emphasized on the most conspicuous economic benefits of SMEs that includes, among others, job creation, contribution to national output, reducing income inequality and poverty. We believe this may help researchers frame their future investigations in line with the benefits discussed in the paper.
Journal of Governance and Regulation, 2015
The problem of SME financing has received attention of policy makers and academics in recent year... more The problem of SME financing has received attention of policy makers and academics in recent years owing to the role of the sector in reducing unemployment, narrowing income gap and alleviating poverty. Alternative financing schemes were suggested but their success depends to a large extent on the development of legal, informational, and institutional frameworks. Existing body of literature grossly undermines SME ability in reacting towards financial restraint and generally assumes they are passive participants in the credit market. Through a survey of 102 randomly selected firms across 10 industrial sectors in the manufacturing sector, we examined how the Ethiopian manufacturing SMEs reacted to acute shortage of formal credit. We found that SME owners actively react towards financial restraint by resorting to alternative schemes such as iqqub(variant of rotating saving and credit association), customer advances, and trade credit. Although the alternative financing schemes are not t...
Global Business and Economics Review, 2017
Empirical studies on the finance-growth nexus largely focus on banks and stock markets to the exc... more Empirical studies on the finance-growth nexus largely focus on banks and stock markets to the exclusion of bond markets. Furthermore, such important events as bank crisis are neglected in most finance-growth models. The major aim of this paper is therefore to throw light at the finance growth link by accounting for bond markets and controlling for banking sector crisis using data on economic growth and financial development indicators of 36 economies comprising 21 advanced and 15 emerging economies. Applying a system generalised-method-of-moments (GMM) technique, the study revealed that bond markets rather than banks and stock markets are related to economic growth in advanced economies, and the same relationship is not found for emerging economies. It is further observed that the finance-growth link depends on the specific measures used to gauge financial development. This study also confirms previous findings that crisis dampens the finance-growth link. Two important inferences could be made from the results of this study. First, the often reported positive link between finance and growth might be caused by aggregation of countries of different economic growth and financial development. Second, the finance growth link depends on the measures of financial development used.
Comparative Economic Research, 2016
This paper examines the finance growth link of two low-income Sub-Saharan African economies – Eth... more This paper examines the finance growth link of two low-income Sub-Saharan African economies – Ethiopia and Kenya – which have different financial systems but are located in the same region. Unlike previous studies, we account for the role of non-bank financial intermediaries and formally model the effect of structural breaks caused by policy and market-induced economic events. We used the Vector Autoregressive model (VAR), conducted impulse response analysis and examined variance decomposition. We find that neither the level of financial intermediary development nor the level of stock market development explains economic growth in Kenya. For Ethiopia, which has no stock market, intermediary development is found to be driven by economic growth. Three important inferences can be made from these findings. First, the often reported positive link between finance and growth might be caused by the aggregation of countries at different stages of economic growth and financial development. Se...
Journal of Finance and Accounting, 2013
This study aims at examining the corporate governance mechanisms and their impact on performance ... more This study aims at examining the corporate governance mechanisms and their impact on performance of commercial banks in the absence of organized stock exchange. The study assessed the relationship between selected internal and external corporate governance mechanisms, and bank performance as measured by ROE and ROA. The study used structured review of documents, and commercial banks financial data were collected covering a period 2005 to 2011. The findings indicated that board size and existence of audit committee in the board had statistically significant negative effect on bank performance; whereas bank size had statistically significant positive effect on bank performance. Similarly, capital adequacy ratio, as a measure of external corporate governance mechanism, had statistically significant positive effect on bank performance. In addition, absence of organized stock exchange; high government intervention; lack of corporate governance awareness, absence of national standards of corporate governance, as well as accounting and auditing; and weak legal framework to protect minority shareholder rights are the major factors with adverse impact on corporate governance and bank performance in Ethiopia.
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Papers by ASHENAFI BEYENE FANTA