Financial innovations and bank performance in Kenya: evidence from branchless banking models

PhD (Finance), School of Economic and Business Sciences, UNIVERSITY OF THE WITWATERSRAND, JOHANNESBURG 8th June, 2016This study examines the relationship between financial innovation and financial performance of commercial banks in Kenya, as well as the drivers of financial innovations at both firm and macro levels. The financial innovations covered are the branchless banking models, which represent a departure from the traditional branch-based banking. More specifically, the financial innovations covered are: Mobile banking, agency banking, internet banking and Automated Teller Machines (ATMs). The study uses 10-year panel (secondary) data for the period spanning year 2004 to 2013. The study conducts an empirical analysis of the four types of financial innovations using three econometric models. The models have been specified using Koyck distributed lag models and estimated using dynamic panel estimation with System Generalised Method of Moments (GMM). The speed of adjustment of bank financial performance to financial innovation as well as the speed of adjustment of financial innovation to the financial innovation drivers has been tested using Koyck mean and median lags. The empirical results provide strong evidence of the link between financial innovations and bank financial performance with respect to Kenyan commercial banks. The study makes a number of other findings. Firstly, financial innovations significantly contribute to firm financial performance and that firm-specific factors are more important to the firm’s current financial performance than industry factors. Secondly, firm-specific variables significantly drive financial innovations at firm level with firm size being the most significant driver of financial innovation at firm level. The firm specific factors include firm size, transaction costs, agency costs, and technological infrastructure at firm level. Thirdly, macro level variables significantly drive financial innovation at firm level with regulation being the most important driver at macro level. The macro level drivers reviewed include: Regulation and taxes, incompleteness in financial markets, technological infrastructure at macro level and globalisation. Lastly, the existence of reverse causation between firm financial performance and firm financial innovation is established. The speed of adjustment of firm financial performance to financial innovation has been determined. The results show that it takes on average 1.179 years for bank financial performance to adjust to the four financial innovations studied. Secondly, it takes less than a year (0.368 years) to accomplish 50% of the total change in firm performance following a unit-sustained change in the financial innovations. Moreover, mobile banking has the shortest mean lag (2.849) while ATMs have the longest mean lag (4.926). Therefore, it takes approximately three years for mobile banking to adjust to financial innovation drivers at firm level and on average five years for ATMs to adjust to the financial innovation drivers. By and large, the speed of adjustment of financial innovations to macro level drivers is higher than the speed of adjustment of financial innovations to firm level drivers. This study has made significant contribution to the body of knowledge in the field of financial innovations. The study has developed an econometric model which captures four financial innovations in a single study and empirically used the model to test their link to firm financial performance. The second and third econometric models have also captured the drivers of financial innovations at firm and macro levels. The reviewed literature observes that previous studies have largely focused on financial products in developed countries at the expense of emerging financial innovations in developing countries. In addition, previous studies have also largely ignored empirical approaches to the study of financial innovations. This study has empirically established the link between financial innovations and firm performance by modelling the four innovations in single model in a developing country (Kenya) context. One of the major contributions of this study is the establishment of the speed of adjustment of firm performance to financial innovations and the speed of adjustment of financial innovations to financial innovation drivers at both firm and macro levels. Lastly, the study has developed an original conceptual financial innovation value model (Fig. 6.1), which will be used in future financial innovation studies. This study has a number of managerial and policy implications which have been reviewed in the study.MT201

Dissecting the role of Plasmodium sporozoite curvature in gliding motility

Plasmodium parasites are unicellular, mosquito-borne pathogens that cause malaria in vertebrates such as mammals, birds and reptiles. These Plasmodium parasites undergo a complex lifecycle, necessitating their adaptation to different environmental niches. Transmission of Plasmodium begins, when an infectious bite from a female Anopheles mosquito delivers sporozoites in the skin. While in the skin, sporozoites rely on a substrate dependent mode of locomotion known as gliding to actively penetrate host tissue, find and enter blood vessels. Next, sporozoites are passively transported within the bloodstream to the liver where they differentiate into liver stage parasites. Liver stage parasites release merozoites into the bloodstream and start the blood stage phase of infection. Subsequently, mixed bloodstage parasites are ingested by mosquitos and differentiate into various forms before becoming infectious sporozoites again. Infectious sporozoites are polarized crescent shaped cells that typically move in circles on two-dimensional substrates in vitro and in helices in three-dimensional substrates or in vivo. In this thesis, the hypothesis that the curvature/crescent shape of the sporozoites is important for energy efficient corkscrew gliding motility and aids in recognition of blood vessels is investigated. To test the hypothesis two approaches were adopted. The first approach was to use micropillar arrays made of PDMS a plastic polymer, as blood vessel shape mimics. The aim of using pillar arrays was to understand how sporozoite shape guides their physical interactions. Here the results show that sporozoites associate with pillars that have diameters approximately similar to blood vessels. This suggests sporozoite curvature evolved in part to permit their association to blood vessels. The second approach was to generate a genetically manipulated parasite with altered curvature. In studies done in Toxoplasma gondii, PhIL1 a protein of the parasite pellicle was found to be important in maintaining parasite morphology. Here, PhIL1 was found to be essential in the blood stages of the parasite. Also, overexpressing PhIL1, IMC1h and IMC1l showed the sporozoite pellicle was very stable and yielded no curvature change. Although a change in curvature was elusive, the proteins considered here could be used in discovery of other curvature related proteins

Financial innovations and bank performance in Kenya: Evidence from branchless banking models

Background: Kenya has become the epicentre of branchless banking financial innovations in the last decade, effectively attracting global research interest. Aim: This article examines the relationship between financial innovation and the financial performance of 42 commercial banks in Kenya. Setting: The financial innovations covered are the branchless banking models, which represent a departure from the traditional branch-based banking. More specifically, the financial innovations covered are: mobile banking, agency banking, internet banking and automated teller machines. Methods: We use the Koyck dynamic distributed lag model to estimate the relationship between financial innovations and bank financial performance. The model has been using dynamic panel estimation with system generalised method of moments. Results: The results show that financial innovations significantly contribute to bank financial performance, and that firm-specific factors are more important in determining the firm’s current financial performance than industry factors. Conclusion: We provide evidence that financial innovations generate good results for the shareholders, suggesting that shareholders are the primary beneficiaries of financial innovations used by commercial banks

Financial innovation, firm performance and the speeds of adjustment: New evidence from Kenya’s banking sector

This article examines the speed of adjustment of firm performance to financial innovations usage and the speed of adjustment of financial innovation to financial innovation drivers for banks in Kenya. We used the Koyck distributed lag model, which is estimated using dynamic panel estimation with System Generalised Method of Moments. We find that it takes on average 1.179 years for bank financial performance to adjust to the four financial innovations studied. Secondly, it takes less than a year (0.368 years) to accomplish 50% of the total change in firm performance following a unit-sustained change in the financial innovations. Moreover, mobile banking has the shortest mean lag (2.849), while Automated Teller Machines (ATMs) have the longest mean lag (4.926). Notably, it takes approximately three years for mobile banking to adjust to financial innovation drivers at firm level and on average five years for ATMs to adjust to the financial innovation drivers

Microstructured blood vessel surrogates reveal structural tropism of motile malaria parasites

Plasmodium sporozoites, the highly motile forms of the malaria parasite, are transmitted naturally by mosquitoes and traverse the skin to find, associate with, and enter blood capillaries. Research aimed at understanding how sporozoites select blood vessels is hampered by the lack of a suitable experimental system. Arrays of uniform cylindrical pillars can be used to study small cells moving in controlled environments. Here, an array system displaying a variety of pillars with different diameters and shapes is developed in order to investigate how Plasmodium sporozoites associate to the pillars as blood vessel surrogates. Investigating the association of sporozoites to pillars in arrays displaying pillars of different diameters reveals that the crescent-shaped parasites prefer to associate with and migrate around pillars with a similar curvature. This suggests that after transmission by a mosquito, malaria parasites may use a structural tropism to recognize blood capillaries in the dermis in order to gain access to the blood stream

An exploration of the genetics of the mutant Huntingtin (mHtt) gene in a cohort of patients with chorea from different ethnic groups in sub-Saharan Africa

Background: Africans are underrepresented in Huntington\u27s disease (HD) research. A European ancestor was postulated to have introduced the mutant Huntingtin (mHtt) gene to the continent; however, recent work has shown the existence of a unique Htt haplotype in South-Africa specific to indigenous Africans. Objective: We aimed to investigate the CAG trinucleotide repeats expansion in the Htt gene in a geographically diverse cohort of patients with chorea and unaffected controls from sub-Saharan Africa. Methods: We evaluated 99 participants: 43 patients with chorea, 21 asymptomatic first-degree relatives of subjects with chorea, and 35 healthy controls for the presence of the mHtt. Participants were recruited from 5 African countries. Additional data were collected from patients positive for the mHtt gene; these included demographics, the presence of psychiatric and (or) cognitive symptoms, family history, spoken languages, and ethnic origin. Additionally, their pedigrees were examined to estimate the number of people at risk of developing HD and to trace back the earliest account of the disease in each region. Results: HD cases were identified in all countries. Overall, 53.4% of patients with chorea were carriers for the mHTT; median tract size was 45 CAG repeats. Of the asymptomatic relatives, 28.6% (6/21) were carriers for the mHTT; median tract size was 40 CAG. No homozygous carries were identified. Median CAG tract size in controls was 17 CAG repeats. Men and women were equally affected by HD. All patients with HD-bar three who were juvenile onset of \u3c21 years-were defined as adult onset (median age of onset was 40 years). HD transmission followed an autosomal dominant pattern in 84.2% (16/19) of HD families. In familial cases, maternal transmission was higher 52.6% (10/19) than paternal transmission 36.8% (7/19). The number of asymptomatic individuals at risk of developing HD was estimated at ten times more than the symptomatic patients. HD could be traced back to the early 1900s in most African sites. HD cases spread over seven ethnic groups belonging to two distinct linguistic lineages separated from each other approximately 54-16 kya ago: Nilo-Sahara and Niger-Congo. Conclusion: This is the first study examining HD in multiple sites in sub-Saharan Africa. We demonstrated that HD is found in multiple ethnic groups residing in five sub-Saharan African countries including the first genetically confirmed HD cases from Guinea and Kenya. The prevalence of HD in the African continent, its associated socio-economic impact, and genetic origins need further exploration and reappraisal

Boosting quality education with inclusive human development: empirical evidence from sub-Saharan Africa

This study examines the importance of inclusive human development in promoting education quality in a panel of forty-nine Sub-Saharan African countries for the period 2000-2012. The empirical evidence is based on Ordinary Least Squares (OLS), Fixed Effects (FE) and Quantile Regression (QR) estimations. It is apparent from the OLS and FE findings that inclusive human development has a negative effect on the outcome variable. This negative effect implies that inclusive human development improves education quality. This result should be understood in the light of the fact that the adopted education variable is a negative economic signal given that it is computed as the ratio of pupils to teachers. Therefore, a higher ratio reflects diminishing education quality. From QR, with the exception of the highest quantile, the tendency of inclusive human development in reducing poor quality education is consistent throughout the conditional distribution of poor education quality. Policy implications are discussed

Is Information Diffusion a Threat to Market Power for Financial Access? Insights from the African Banking Industry

This study assesses how information diffusion dampens the adverse effect of market power on the price and quantity of loans provided by a panel of 162 banks from 39 African countries for the period 2001–2011. First, from the Generalised Method of Moments results, a mobile phone penetration rate of 54.29, rising to 57 per 100 people are predicted to neutralise the adverse effect of market power on the average loan price and quantity respectively. Second, from the Quantile Regressions, mobile phone penetration rates of 56.20, 52.04 and 42.76 per 100 people is needed to nullify the negative effect of market power on loan quantity at the 10th decile, 25th quartile and 90th decile respectively. Third, a considerably lower internet penetration rate of 9.49 per 100 people is required to counteract the negative impact of market power on loan quantity at the 90th decile. Policy implications are discussed

The Comparative Economics of ICT, Environmental Degradation and Inclusive Human Development in Sub-Saharan Africa

This study examines how information and communication technology (ICT) could be employed to dampen the potentially damaging effects of environmental degradation in order to promote inclusive human development in a panel of 44 Sub-Saharan African countries. ICT is captured with internet and mobile phone penetration rates whereas environmental degradation is measured in terms of CO2 emissions per capita and CO2 intensity. The empirical evidence is based on Fixed Effects and Tobit regressions using data from 2000-2012. In order to increase the policy relevance of this study, the dataset is decomposed into fundamental characteristics of inclusive development and environmental degradation based on income levels (Low income versus (vs.) Middle income); legal origins (English Common law vs. French Civil law); religious domination (Christianity vs. Islam); openness to sea (Landlocked vs. Coastal); resource-wealth (Oil-rich vs. Oil-poor) and political stability (Stable vs. Unstable).Baseline findings broadly show that improvement in both of measures of ICT would significantly diminish the possibly harmful effect of CO2 emissions on inclusive human development. When the analysis is extended with the abovementioned fundamental characteristics, we observe that the moderating influence of both our ICT variables on CO2 emissions is higher in the group of English Common law, Middle income and Oil-wealthy countries than in the French Civil law, Low income countries and Oil-poor countries respectively. Theoretical and practical policy implications are discussed

Basic Formal Education Quality, Information Technology and Inclusive Human Development in Sub-Saharan Africa

This study assesses the relevance of basic formal education in information technology for inclusive human development in 49 countries in sub-Saharan Africa for the period 2000-2012. The question it aims to answer is the following: what is the relevance of basic formal education in the effect of mobile phone penetration on inclusive human development in sub-Saharan Africa when initial levels of inclusive human development are taken into account? The empirical evidence is based on instrumental quantile regressions. Poor primary education dampens the positive effect of mobile phone penetration on inclusive human development. This main finding should be understood in the perspective that, the education quality indicator represents a policy syndrome because of the way it is computed, notably: the ratio of pupils to teachers. Hence, an increasing ratio indicates decreasing quality of education. It follows that decreasing quality of education dampens the positive effect of mobile phone on inclusive development. This tendency is consistent throughout the conditional distribution of inclusive human development. Policy implications for sustainable development are discussed