Browsing by Author "Mukorera, Sophia Zivano Elixir."

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Financial sustainability, liquidity and outreach of deposit-taking microfinance institutions: evidence from low income Sub-Saharan Africa.
(2020) Moyo, Zibusiso.; Mukorera, Sophia Zivano Elixir.; Nyatanga, Phocenah.
The United Nations’ Sustainable Development Goals regard microfinance provision as a developmental tool in fighting poverty and financial exclusion which are particularly rife in Low-Income Sub-Saharan Africa (LISSA). Therefore, this study analysed the financial sustainability, liquidity and outreach of LISSA Deposit-taking Microfinance Institutions (DTMFIs) through three objectives. The first objective investigated why the LISSA DTMFIs fall short in achieving financial sustainability despite having commendable deposit volumes. Panel data spanning 2006 to 2017 obtained through desk research from the Microfinance Information Exchange of 64 DTMFIs sampled across 18 LISSA countries was utilized. Through probit regression, the study found that the likelihood of attaining financial sustainability is reduced by small scale deposits, loan loss provisions, deteriorating loan portfolio quality and costly branch coverage. The study recommends low cost, large scale deposit operations; efficiency in managing operating expenses; credit enhancements; and restrictive deposit-taking licencing. The second objective assessed the relationship between liquidity and deposit insurance as the LISSA DTMFIs default in meeting withdrawals on deposits. The fixed panel of 64 DTMFIs was utilized. The estimated random effects results showed that explicit deposit insurance is positive and significantly related to liquidity. The study concluded that designing and implementing explicit deposit insurance schemes mitigates liquidity risk in depository microfinance. Therefore, the LISSA regulators ought to include microfinance deposits in formulating deposit insurance policies. The third objective examined whether pursuing outreach and financial sustainability in depository microfinance exhibit a trade-off or mission drift, as this is not yet clear for deposits. The System Generalized Method of Moments was adopted, using the fixed panel of 64 DTMFIs. No significant relationship was found between financial sustainability and the average deposit balance (outreach depth); but financial sustainability was negative and significantly related to number of depositors (outreach breadth). The study concluded that in the LISSA’s depository microfinance sector, there is neither a mission drift nor trade-off in outreach depth, but a trade-off exists in outreach breadth. Therefore, it is recommended that the DTMFIs segment their markets and develop appropriate deposit products for each market segment and also leverage on cost-efficient deposit-taking methods such as the use of agents and mobile phones.
Fiscal policy and public debt implications on household consumption: a case of Kenya.
(2021) Muind, Naomy Nthenya.; Mukorera, Sophia Zivano Elixir.
Fiscal policy can be applied with a stabilisation intention if government finance choices are capable of influencing household consumption behaviour. After the great depression of the 1930s, Keynes ascertained expansionary fiscal policy as the best economic stabilisation tool during a recession as it can crowd in household consumption. Empirical studies dealing with fiscal policy and public debt implications on household consumption have concentrated more on developed nations and more so, the studies conducted have been based on the assumption of an obvious symmetric relationship between household consumption and fiscal policy. The study objective was to examine if fiscal policy crowds in/crowds out household consumption, and if the Ricardian Equivalence hypothesis holds in Kenya. An empirical analysis was conducted using secondary data for the period between 1971 and 2018. The Nonlinear Auto-regressive Distributed Lag (NARDL) bounds test was used to evaluate the existence of an asymmetric relationship between household consumption (dependent variable) and government expenditure, tax revenue, public debt, real GDP, and inflation (independent variables). In the short run, both expansionary and contractionary fiscal policies were found not to affect household consumption; only negative changes in inflation significantly impacted household consumption. However, expansionary fiscal policy (through the negative changes in tax revenue) was found to crowd in household consumption, while positive changes in government expenditure were found to crowd out household consumption in the long run. Positive changes in public debt were found to crowd out household consumption as well. For contractionary policies, lowering government expenditure or increasing revenue was found not to affect household consumption in the long run. Using the Wald test criteria, the independent variables were found to show an asymmetric impact on the dependent. The research findings of this study disclosed that, in the short run, fiscal policy and public debt do not affect household consumption. However, in the long run, fiscal policy and public debt were found to have a significant effect on household consumption, and therefore it was concluded that REH does not hold in the long run.
Impacts of military expenditure and institutional quality on inclusive growth in BRICS countries.
(2019) Anifowose, Oladotun Larry.; Omolade, Adeleke.; Mukorera, Sophia Zivano Elixir.; Nyatanga, Phocenah.
This study investigated the relationship between military expenditure, institutional quality and inclusive growth in BRICS countries from 1970 to 2017. The increase in military expenditure by BRICS and the worsening inclusive growth indices such as unemployment, inequality, poverty, among others, necessitated the assessment of the relationship between military expenditure, institutional quality and inclusive growth in the BRICS countries. The study was carried out under three modular themes, which also form the objectives of the study, namely; the determinants of military expenditure, computation of inclusive growth index for the BRICS and the effects of military expenditure and institutional quality on the inclusive growth index of the BRICS countries. Panel data analysis was applied for the first objective, the Z-score technique was used for the second objective, which involved the computation of inclusive growth index for BRICS. The third objective was analysed using the Auto-Regressive Distributed Lags ARDL for BRICS countries by using times series data. The results obtained on the first objective revealed that BRICS military expenditure was significantly and majorly determined by Gross Domestic Product (GDP), trade balance, security web and inflation rate for the period under analysis. The results on Objective 2 revealed that the average inclusive growth index for Russia was the highest among the five BRICS countries, followed by China and Brazil. However, South Africa and India fell below the average inclusive growth index computed for BRICS. The results on Objective 3 showed that the impacts of military expenditure and institutional quality on inclusive growth varied among the BRICS countries. From the literature, the most effective way of assessment is to focus on the impact of the interactive form of military expenditure and institutional quality. Findings revealed that the interactive form of military expenditure and institutional quality (MCP) only have significant impact on inclusive growth of Russia because the coefficient is positive and significant. The coefficient is negative and significant for China and South Africa while the same coefficient is not significant at all in Brazil and India. This implies that Russia is the only country in the BRICS where the interaction of military expenditure and institutional quality supports inclusive growth. Notwithstanding, other control variables such as education and population have statistically significant effects on inclusive growth in Brazil, China and South Africa. Results on India emerged as a complete outlier among the five as none of the variables, including the control variables was found to have a statistically significant relationship with inclusive growth. Again, the efforts in this study included a comparison of the inclusive growth results with those of economic growth and per capita income which have been used by previous studies to investigate the effect of military expenditure on the BRICS economy. The results showed that findings under the Inclusive Growth Model were the same for that of economic growth and per capita income for Russia, China and South Africa. However, there are some differences firstly; the negative effect of the interaction of military expenditure and institutional quality in Brazil which is significant on inclusive growth is not significant on economic growth and per capita income. This shows that the adverse effect of this variable was more felt on inclusive growth than economic growth in Brazil. Again, military expenditure and institutional quality showed a positive significant impact on India’s economic growth and per capita income, but the effect on inclusive growth was not significant. Finally, levels of investment in all the countries have shown significant positive impacts on economic growth and per capita income, but the current levels of investments in the BRICS fail to drive inclusive growth significantly except in Russia. These results further confirmed that assessment of the impacts of military expenditure and institutional quality using economic growth and not inclusive growth might be misleading. Based on the findings from this study, the following recommendations are made: First, there is the need for improvement of synergy between military expenditures and institutional quality before the challenge of inclusive growth in the BRICS can be tackled effectively. Second, prioritising inclusive growth more than economic growth is more germane to the assessment of the effectiveness of military expenditure.
Monetary policy shocks and macroeconomic performance in regionally integrated common monetary area economies.
(2021) Shumba, Theron.; Mukorera, Sophia Zivano Elixir.
The CMA (Common Monetary Area), comprising of South Africa, Lesotho, Eswatini, and Namibia, has experienced a steady improvement towards economic restructuring. This is due to recent global developments and economic integration where countries are coming together to form regional economic integration initiatives and coordinate their economic policymaking effectively. Just like the CMA countries, many countries, such as Germany, Spain, Italy, Austria, Greece, Luxembourg, the Netherlands, Ireland, Portugal, Finland, France, Belgium, Slovenia, Cyprus, Latvia, Slovakia, Lithuania, Malta, and Estonia, have come together to form a strong monetary union for the purpose of having a sound and effective monetary policy.This study traces how a shock or an unanticipated change in the central bank's policy instrument of South Africa (SA_REPO) affects the selected macroeconomic variables, such as the Real Gross Domestic Product Growth (RGDP_G), inflation (INF), money supply (MS), and lending rates (LRATE), in the entire CMA region. Employing a Panel Structural Vector Autoregressive model (Panel-SVAR) and annual data from 1980–2019, the findings show that a shock in the South African repo rate (SA_REPO) significantly affected the macroeconomic variables, such as RGDP_G, INF,LRATE and MS, in the entire CMA region. The results indicate that a shock in the South African repo rate is followed by a significant decline in the economic growth (RGDP_G), a decrease in inflation, a decrease in money supply and an increase in lending rates in the entire CMA region. The study recommends that CMA monetary authorities and policymakers need to formulate policies toward cushioning the effects of unanticipated monetary policy shocks from the anchor country as well as global shocks.
The rise of micro and small-scale entrepreneurial activity in a melting down economy: a case of Zimbabwe.
Mukorera, Sophia Zivano Elixir.; Mahadea, Darma.
Entrepreneurship is viewed as a pertinent vehicle for economic growth, development, employment creation and income generation (entrepreneurial effects). Small-scale, micro and medium enterprises (SMMEs) are the dominant entrepreneurial activity in Africa, but less than 1% of these SMMEs grow to ten or more employees. A lack of homogeneity among SMMEs, making it difficult for common policies to be effective is the problem most often identified as the cause of this lack of growth. In the period 1997 to 2008, Zimbabwe experienced an economic meltdown which plunged many citizens into poverty. On the other hand, a steep growth in micro and small-scale enterprises (MSEs) was also observed in both formal and informal sectors. Following the meltdown these MSEs are still operational but with minimal contribution to the recovery of the economy. This thesis looked at the micro and macro aspects of micro and small-scale entrepreneurship in Zimbabwe in the wake of the economic meltdown. At the macro level, the objective was to develop a model that best describes the relationship between the economic meltdown and the growth of micro and small-scale enterprises (MSEs) in Zimbabwe, by testing for the presence of refugee effects. Understanding the relationship between entrepreneurship and key macroeconomic growth indicators is critical for generating growth and development in both a normal, and a meltdown economy. Using annual data from 1980 to 2010, a multivariate Vector Error Correction Model (VECM) was run, with the total number of MSEs, unemployment rate, inflation rate, liquidity (proxied by money supply) and real GDP as the dependent variables. The main findings of this study indicate the presence of refugee effects from unemployment, albeit minimal, and that the growth in MSEs was significant because of the shortage of liquidity. The relationship between unemployment and entrepreneurship is not linear, but squared and positive in both instances. At the micro level, three objectives underpinned this study. The first objective was to examine whether there were differences in entrepreneurial attributes between formal sector and informal sector firms, using descriptive statistics and non-parametric t-tests. The second objective was to assess the nature of the growth constraints of existing MSEs (formal and iii informal), and compare them across the two sectors. The constraints were examined from two sources: internal and external. The methodology used in this case was factor analysis and principal component analysis. On the basis of the constraints classifications generated from principal component analysis, a regression was done to test whether the constraints are related to the willingness to formalise by informal MSEs. The contribution of need for achievement (N-Ach) on willingness to formalise was also tested in a logistic regression. Relevant data for the micro level analysis was collected by means of a survey in Harare, Zimbabwe. Using a questionnaire, 150 MSEs operating in both formal and informal sectors were interviewed. The questionnaire had 3 sections: the first section characterised the MSEs; the second section looked at the growth constraints of the MSEs and last section measured the need for achievement (N-Ach) of the business owner, using the Mehrabian scale of achieving tendency. The data collected was analysed using SPSS and STATA. The main findings were that the characteristics of the MSEs in the formal sector are different to those of the informal sector. Formal sectors identified internal factors as hindering the growth of their business more than the external factors, whereas the informal MSEs identified more external factors as constraints to their growth. From the logistic regression analysis, ‘regulatory factors’ and ‘technology factors’ were found to have a significant impact on the willingness by informal MSEs to formalise their business. Improving N-Ach may significantly decrease the odds of the informal MSEs formalising their businesses. The study concluded that MSE growth was in response to the economic meltdown, being driven by the refugee effects from a need for liquidity and rising unemployment. Secondly, uniform policies for MSEs in formal and informal sectors fail to address their individual growth needs because of the differences in the dynamics of entrepreneurs operating in the formal sector and informal sector. Thirdly the odds of willingness to formalise by informal MSEs are positively linked to the regulatory framework around the process of business registration.