Foreign banks, profits, market power and efficiency in PICs: some evidence from Fiji

Studies on bank profitability vis-à-vis market power and efficiency span a number of years, many countries, regions and methods. Yet, the experiences of the Pacific’s small states – where foreign banks are widespread and bank profits relatively high – remain unknown, leaving policy-makers ill-informed regarding relevant policy development. This study fills a huge gap in literature by providing some evidence on the issue in a Pacific Island context. Two market power hypotheses – the structure-conduct-performance (SCP) and the relative market power (RMP) hypotheses together with two measures of the efficient structure (ES) hypothesis – X and scale efficiencies are estimated. The nonparametric data envelopment analysis (DEA) technique is used to estimate efficiency scores for banks in Fiji over the period 2000 to 2010 and the dynamic GMM to estimate the relationships between market power and efficiency vis-à-vis profitability. Results show that the RMP and ES hypotheses might hold, but not the SCP. Profits appear to persist over time. Policy implications are considerable including that any suggestions to limit further mergers and acquisitions of banks in the region may have to be properly debated

Obstacles to bank financing of micro and small enterprises: empirical evidence from the Pacific with some policy implications

In recognizing on one hand the importance of the micro and small enterprise (MSE) sector for the growth and development of economies in the Pacific subregion and on the other, the financing constraints of the sector, the authors surveyed a group of MSEs in a Pacific island country and found that the sector may be particularly constrained by bank interest rates, fees and charges, and collateral requirements. This situation holds implications for policy, and the authors propose an initiative led by the banking sector to improve the situation. Keeping in mind an economy's specific financial, regulatory, economic and other structures and circumstances, voluntary or mandatory, it seems as if direct or indirect bank involvement appears vital. The implications for economic growth and development are considerable.Griffith Business School, Department of Accounting, Finance and EconomicsNo Full Tex

Supply side obstacles to financing the private sector: empirical evidence from a small island developing state

In light of the positive growing finance–private sector–economic growth findings, this article examines, from a supply side perspective, obstacles to private sector financing in Fiji, a growth deprived, small island developing state in the Pacific region. A survey of 80 percent of formal financial institutions reveals that, contrary to popular belief, financing the private sector may not be a major problem. However, the prevalent relationship – lending practices, good profits and well-managed risks, together with moderate growth in private sector credit – also suggests that suppliers may be concentrating on a systematically selected small group of connected borrowers, resulting in the wider private sector, including many SMEs, being left out. Growth and development implications extend to developing economies across the Pacific

2012-11: Financial development and economic growth in Fiji: New empirical evidence (Working paper)

This paper examines whether financial development promotes economic growth in Fiji over the period 1970 to 2005. The methods applied are cointegration and the error correction model to test the long run equilibrium and short run relationship among the key variables relevant for this study. Cointegration test results support the existence of a long run relationship. The short term dynamic behaviour of the relationship between financial development and growth show that financial development has made a modest contribution to output.Griffith Business SchoolFull Tex

2012-05: The determinants of household consumption and poverty in Fiji (Working paper)

This paper uses household survey data to model the determinants of household consumption and poverty in Fiji. A multivariate analysis is conducted to ascertain those household characteristics that correlate with household welfare and poverty. The ordinary least squares (OLS) estimation results suggest that higher levels of education, supporting agricultural growth policies in rural areas and reallocation of labour to the formal sector of the economy are likely to be effective in reducing poverty at the household level. The robustness of the results is checked by estimating a probit model. The probit estimates show the coefficients are robust to an alternative empirical approach.Griffith Business SchoolFull Tex

Trade Liberalization and Poverty in Fiji: A Computable General Equilibrium - Microsimulation Analysis

The aim of this thesis is to examine whether trade liberalization, in terms of complete tariff reductions, will contribute to poverty reduction in Fiji. Whilst poverty reduction is the ultimate goal of trade reforms, and if trade liberalization does promote growth, then will the poor benefit from this trade liberalization? Previous studies on trade liberalization on Fiji are based on partial equilibrium as well as general equilibrium analysis. These studies have shown that trade liberalization will have positive impacts on the Fijian economy. Trade liberalization is unlikely to produce equivalent results of its impact on poverty across households and regions. Thus even within a country or geographic regions, households and individuals are likely to be differently impacted. However, none of the existing studies focus on the impact of trade liberalization on poverty at the household level. This, according to my knowledge, is thus the first study using a computable general equilibrium combined with a microsimulation approach for analysing the impact of trade liberalization on poverty in Fiji. This research will therefore further our understanding of the impact of trade liberalization on poverty in a small island developing country. It will also fill the gap in the literature on Fiji which lacks the impact of macroeconomic policies such as the impact of trade liberalization on poverty.Thesis (PhD Doctorate)Doctor of Philosophy (PhD)Griffith Business SchoolGriffith Business SchoolFull Tex