Regulation and competition in German banking: an assessment

In Germany a public discussion on the "power of banks" has been going on for decades now with power having at least two meanings. On the one hand it is the power of banks to control public corporations through direct shareholdings or the exercise of proxy votes - this is the power of banks in corporate control. On the other hand it is market power - due to imperfect competition in markets for financial services - that banks exercise vis-à-vis their loan and deposit customers. In the past, bank regulation has often been blamed to undermine competition and the working of market forces in the financial industry for the sake of soundness and stability of financial services firms. This chapter tries to shed some light on the historical development and current state of bank regulation in Germany. In so doing it tries to embed the analysis of bank regulation into a more general industrial organisation framework. For every regulated industry, competition and regulation are deeply interrelated as most regulatory institutions - even if they do not explicitly address the competitiveness of the market - either affect market structure or conduct. This paper tries to uncover some of the specific relationships between monetary policy, government interference and bank regulation on the one hand and bank market structure and economic performance on the other. In so doing we hope to point to several areas for fruitful research in the future. While our focus is on Germany, some of the questions that we raise and some of our insights might also be applicable to banking systems elsewhere. Revised version forthcoming in "The German Financial System", edited by Jan P. Krahnen and Reinhard H. Schmidt, Oxford University Press

The Influence of Bank-Based and Capital Market-Based Impact Investments on SME Financing in Ghana: Governance, Strategy Change and Impacts

Impact investing, defined as direct investments into funds, small and medium-sized enterprises (SMEs) and viable non-profit social enterprises with intentionality to simultaneously realise social impact and financial returns is increasingly attracting the attention of academics and industry practitioners. A contentious claim is that impact investment, as transformational in its approach to entrepreneurial financing, is a panacea to SME financing constraints and solutions to intractable societal problems, is contestable considering the myriad of developmental challenges in Bottom-of-the-Pyramid (BoP) communities in the developing world. Based on an empirical investigation of the influences of finance first and impact first investments into bank-based and capital market-based funds on SMEs in Ghana, this thesis interrogates this claim. Specifically, the thesis argues that though impact investing represents an innovation in private sector approaches to development, the extent to which it can achieve the much-hyped societal transformation in BoP communities cannot be substantiated. This research contributes to the above debate by critically investigating the influences of impact investment funds on investee SMEs through an integrated theoretical framework. The framework draws on the literature from different disciplines including impact investing, social entrepreneurship, strategic management, financial intermediation, economics, SME management and concepts of governance, strategy change and impacts, which was then applied within the research setting of Ghana. Empirically, the thesis develops two case studies of bank-based and capital market-based funds into SMEs, respectively. Qualitative research was employed with data collection comprising in-depth interviews, rapid participant observation complemented by documentary evidence. Findings reveal that the distinctiveness of finance and impact first investors reflect their choices of bank and capital market-based intermediary used resulting in pluralistic, entrepreneurial financing options for categories of SMEs targeted for social impact and financial returns. These findings have implication for fund managers, SME owner-managers and policymakers due to private sector-driven developmental model by impact investors

Financing Small and Medium-Sized Enterprises and the Role of Private Banks: an Exploratory Study in Dhi-Qar Province

Purpose: The research aims to shed light on the financing of Small and Medium-Sized Enterprises (SMEs) in Dhi-Qar province and the role of private banks in that.   Theoretical framework: The theoretical framework of study focuses on the defining of (SMEs), the method of financing the (SMEs) which included the operating loans and investment loans, the obstacles to financing, and the factors of success and failure in SMEs also included in theoretical framework.   Design/methodology/approach: The study tool for the practical side was a questionnaire, and the study relied on the descriptive analytical approach, where the questionnaire was distributed (335) questionnaire on the owners of (SMEs) represented (Chamber of Commerce, The Business Federation, and the Chamber of Industry) and the number of questionnaires valid for analysis was (300) and the statistical program was used (SPSS.v.23), Research, Practical & Social implications:   Findings: The study reached the most important conclusions, including the inability of owners of (SMEs) to provide the required guarantees from private banks, and the weak ability to Submit the required financial statements for which the loan is granted, and the amount of loans granted by the banks is not compatible with the capital and operational needs of the owners of (SMEs).   Originality/value: Highlight in the necessity of finding a mechanism to financially support (SMEs) and urge banks and financial institutions to encourage them to support these enterprises

The role of loan commitment terms in credit allocation on the UK small firms loan guarantee scheme

In this paper we provide empirical evidence concerning the nature of loan commitment contracts as reflected by individual loan contract parameters in influencing the size of bank commitments. Specifically, we consider how the quantitative allocation of credit, the loan amount, is affected or altered by changes to other components of the total loan package. By doing so we shed some more light on the types of real world trade-offs that credit constrained firms might face when approaching banks for funds, using the UK governments loan guarantee programme. Our results point at the importance of relationship lending in the UK.N/

Entrepreneurial borrowing : do entrepreneurs seek and receive enough credit?

This work reviews the literature on entrepreneurial borrowing. The dynamic concept of the “entrepreneurial credit journey” is developed to frame the discussion of supply and demand side issues affecting entrepreneurial borrowing. The entrepreneurial credit journey follows the entrepreneur from the development of credit needs, through application and lending decisions and, beyond, to the consequences of these earlier decisions for firm performance. The literature has traditionally focussed on the lending decision stage, including: problems of credit rationing which may arise due to asymmetric information; and lending technologies to reduce information issues. However, on the demand side, discouraged borrowers, who decide not to apply for fear of rejection, have received increasing attention. There is also greater attention to issues of entrepreneurial cognition (e.g., over-optimism, illusion of control) which may adversely affect borrowing decisions. In terms of the firm performance effects of credit access, the review highlights the widely used internal finance approach to testing financial constraints is unidentified because it is unable to disentangle financial from cognitive constraints. An alternative, more direct, external funding gaps test of underinvestment is therefore proposed. The policy literature is also reviewed which suggests that assistance in the form of loan guarantees has been both finance and economic additional (i.e., providing entrepreneurs with credit they cannot get elsewhere and helping to create jobs that would not otherwise have been created) especially following the Great Financial Crisis. A discussion of the literature relating to underrepresented groups in the entrepreneurial credit market highlights that female and ethnic minority entrepreneurs may receive less credit, and/or pay a higher rate on the credit they receive, than their male or white counterparts. This speaks to ongoing issues of gender stereotypes and ethnic discrimination in the credit market. The increasing role of peer-to-peer lending following the Great Financial Crisis, and its potential for ‘democratizing entrepreneurial finance’, is discussed. This literature highlights that, while peer-to-peer lending is helping to fill credit gaps following the Great Financial Crisis, there are issues relating to the performance of small business peer-to-peer loans and possible issues of ethnic discrimination. The review concludes with proposals for future research on entrepreneurial borrowing, including: collecting more data relating to entrepreneurial credit journeys; developing tests for the presence of information asymmetries and the nature of selection in entrepreneurial credit markets; testing relationships between stages of the entrepreneurial credit journey (e.g., to shed light on the causes of discouragement); developing tests which disentangle financial from cognitive constraints; and researching entrepreneurial and bank learning over recurrent entrepreneurial credit journeys

Summer workshop on money, banking, payments and finance: an overview

The 2010 Summer Workshop on Money, Banking, Payments and Finance met at the Federal Reserve Bank of Chicago this summer, for the second year. The following document summarizes and ties together the papers presented.Payment systems

The role of microfinance institutions on entrepreneurship development: the case of Swaziland

Thesis (M.M. (Finance & Investment)--University of the Witwatersrand, Faculty of Commerce, Law and Management, Wits Business School, 2016.The primary aim of the microfinance initiative is to eradicate poverty especially in developing countries. This is possible through the provision of micro-loans, microsavings and insurance to previously disadvantaged communities. Entrepreneurship is the role that individuals undertake to create, an organization, product from an idea to implementation. With high unemployment and poverty levels, Swaziland is engaging the Microfinance Institutions and entrepreneurship to help drive employment, and poverty alleviation. The study assessed several issues: Does microfinance contribute to Improvements in the economic welfare of borrowers’ households, enterprise growth, diversification or stability? Do entrepreneur development programs; like training workshops have an impact on participant’s attitude and behavior in conducting entrepreneurship activities. Is there a relationship between microfinance institution growth and entrepreneurship development? Results indicated that microfinance institutions were still sorely focusing on providing credit and credit facilities, which meant that it had positive effects on capital assets but not the overall welfare of entrepreneurs. The behaviors that programs influenced were also in relation to credit, and not other aspects of entrepreneurship like innovation and technology. This meant that there’s a gap in the effect of microfinance institutions on entrepreneurship growth as indicated chisquare was significant at 9.43 indicating no effect on the sampled population. Therefore it is important that Microfinance institutions focus on the primary objective of developmental finance. They need to prioritize training programs that will cultivate a culture of building sound businesses, with proper risk management, and are willing to adapt to change. As currently the key focus seems to be on credit facilitation which could be profit driven?GR201

Financial inclusion

Financial inclusion has been noted as a key driver of poverty alleviation and growth. Yet, most of the scholarly work that exists lacks a comprehensive discussion of how the poor interact with financial services and the channels through which such services can affect their livelihoods. This book offers researchers who focus on financial inclusion and African economies a one stop resource for understanding the channels of transmission for financial inclusion as well as an application of these channels through original country specific empirical papers. The book provides a back-to-basics presentation of the transmission of financial services to growth and poverty. This theoretical discussion is complemented by an empirical presentation of the various services used by the poor, with a focus on Africa. Case studies of financial inclusion in six African countries cover a broad range of topics most important to African countries and highlight the unique African setting. These empirical papers provide important learning points. Firstly, hybrid financial institutions such as cooperative financial institutions and financial social entrepreneurs are the best way to increase financial inclusion in Africa. They provide important vehicles to circumventing the restrictive and exclusive bank-based financial markets typical of African economies. Secondly, digital finance is a potent tool in improving financial access and usage in Africa, and its impact on poverty operates through both traditional and nontraditional financial instruments. Thirdly, investment in infrastructure which supports complementary markets is critical and is likely to have a greater effect on credit rationing than direct provision of credit to small businesses

Assessment of Financial Risk and Its Impact on an Informal Finance Institutions Profitability

This study examined the connection between financial risk and the profitability of informal financial institutions in Ondo state, Nigeria. Theory assumes risk to have a negative relationship with profitability; however, some studies have proved otherwise. This study used Anuoluwapo cooperative society located in Akure, over a quarterly 5-year period spanning 2015Q1 to 2020Q4. To assess the relationship between financial risk & profitability, the study employed the Pearson correlation to analyse the level of correlation. In assessing the relationship between financial risk & profitability, a data regression model was also used. The correlation coefficients for the variables were positive (+1) & negative (-1). The significance showing a clear indication that there is a strong correlation between financial risk & profitability in Anuoluwapo Cooperative Society. The data regression model shows that P value (0.00) is greater than 0.05; there is an insignificant but positive relationship between the profitability & the financial risk of Anuoluwapo Cooperative Society. This implies that the test considered the random effect model as the most appropriate estimator. The study found out that a unit increase in financial risk would lead to an increase in profitability. From the finding, the study concludes that financial risk positively affects profitability of Anuoluwapo Cooperative Society. The study suggests that since a high level of risk, yield high returns, the process of dealing with risk should be continuous & developing with time

Productive Development Policies in Latin America and the Caribbean: The Case of Mexico

While Mexico has potential to grow rapidly, its economic growth has remained low for the past three decades. There is no consensus on the country’s development path or on how to achieve specific goals. Since the policy debate remains ideological and lacks pragmatism, productive development policies (PDPs) are often uncoordinated, redundant or even incongruent with each other. It is therefore important to understand the process whereby PDPs are designed and the institutional setting in which they are are implemented. This paper consequently examines whether PDPs respond to market failures and/or government failures. When PDPs are not designed to address specific market failures they can produce unwanted results or prove completely ineffective. When PDPs do address government failures, it is important to determine the reasons why the failure cannot be corrected in the first place and whether PDPs will be effective at addressing the problem in a second-best manner.Industrial Policy, Institutions, Policymaking, Mexico