Asongu, Simplice; Odhiambo, Nicholas M.
A icle
In o ma ion o banking e iciency in A ica: E idence om
income le els and legal o igins
The Eu opean Jou nal o Compa a i e Economics (EJCE)
P o ided in Coope a ion wi h:
Uni e si y Ca lo Ca aneo (LIUC), Cas ellanza
Sugges ed Ci a ion: Asongu, Simplice; Odhiambo, Nicholas M. (2022) : In o ma ion o banking
e iciency in A ica: E idence om income le els and legal o igins, The Eu opean Jou nal o
Compa a i e Economics (EJCE), ISSN 1824-2979, Uni e si y Ca lo Ca aneo (LIUC), Cas ellanza, Vol.
19, Iss. 2, pp. 251-274,
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Fi s published online: 16/12/2022
In o ma ion o banking e iciency in A ica: e idence
om income le els and legal o igins
Simplice A. Asongu*, Nicholas M. Odhiambo** ***
Abs ac
The s udy assesses how in o ma ion sha ing h ough mobile phones a ec s banking sys em e iciency in
A ica wi h pa icula emphasis on income le els (middle-income e sus low-income coun ies) and legal
o igins (English Common law e sus F ench Ci il law coun ies). The ocus is on 53 A ican coun ies
wi h da a o he pe iod 1996-2019, and he empi ical e idence is based on Quan ile eg essions which
enable he s udy o assess he nexus h oughou he condi ional dis ibu ion o banking sys em e iciency.
The ollowing indings a e es ablished: (i) mobile phone pene a ion p omo es banking sys em e iciency
in he 25 h quan ile and he median o banking sys em e iciency in low-income coun ies, while o
middle-income coun ies, i is signi ican exclusi ely in he bo om quan ile (i.e., 10 h quan ile). (ii) Excep
o he highes (i.e., 90 h) quan ile in which he e ec o he mobile phone is no signi ican in English
Common law coun ies, he impac is signi ican h oughou he condi ional dis ibu ion o banking
sys em e iciency in Common law coun ies. (iii) As o F ench Ci il law coun ies, he nexus is only
signi ican in he median and highes (i.e., 90 h) quan ile o he condi ional dis ibu ion o banking sys em
e iciency. Policy implica ions a e discussed.
JEL classi ica ion: G20, G29, L96, O40, O55
Keywo ds: Alloca ion e iciency, In o ma ion asymme y, Mobile phones
1. In oduc ion
The e a e h ee main mo i a ions o a s udy on he ele ance o mobile phone
pene a ion in mi iga ing he asymme y o in o ma ion o inancial alloca ion e iciency
in he A ican con inen
1
. They a e: (i) he scope o in o ma ion and communica ion
echnology de elopmen ; (ii) a s a egic need o in e nal sou ces o in es men o
complemen ex e nal capi al lows and (iii) spa se inancial alloca ion e iciency due o
asymme y o in o ma ion
2
be ween lende s and bo owe s in he banking sec o on he
* (Co esponding au ho ) Depa men o Economics, Uni e si y o Sou h A ica. P. O. Box 392, UNISA
0003, P e o ia, Sou h A ica. E-mails: [email protected] / as[email p o ec ed]
** Depa men o Economics, Uni e si y o Sou h A ica. P. O. Box 392, UNISA 0003, P e o ia, Sou h
A ica.Emails: [email protected] , [email protected]
*** Acknowledgemen : The au ho s a e indeb ed o he edi o and e e ees o cons uc i e commen s.
Con lic o in e es : The au ho decla es no con lic s o in e es .
1
Financial access and banking sys em e iciency a e used in e changeably h oughou he s udy, no leas
because banking sys em e iciency is he ans o ma ion o mobilized deposi s in o c edi which is a
synonym o inancial access.
2
Unless s a ed o he wise, ‘in o ma ion asymme y’ e e s o in o ma ion asymme y be ween lende s and
bo owe s. Fo he pu pose o simplici y, we may simply use ‘in o ma ion asymme y’ wi hou u he
e e ence o co esponding pa ies, i.e., lende s and bo owe s.
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one hand and on he o he , subs an ially documen ed conce ns abou excess liquidi y in
A ican inancial ins i u ions. The mo i a ions a e engaged he e in ch onological o de .
Fi s , on he scope o mobile phone pene a ion on he A ican con inen ,
Mu phy and Ca mody (2015) and Asongu (2017) ha e ecen ly shown ha compa ed
wi h ma ke s in de eloped and Asian coun ies; he e is much oom le in he A ican
ma ke o he de elopmen o mobile phones. Acco ding o he na a i e, whe eas
high-end ma ke s a e eaching sa u a ion, low-end ma ke s in A ica a e o e ing
compa a i ely subs an ial in es men oppo uni ies.
Second, he li e a u e on A ican business is consis en wi h he impe a i e o
imp o e domes ic inancial de elopmen (Tchamyou, 2019; Taiwo, 2021), especially
a e ailed a emp s by p i a isa ion policies o a ac o eign capi al (Fasakin, 2021).
The need o domes ic sou ces o in es men aligns wi h he pos -2015 inclusi e and
sus ainable de elopmen agenda in he sense ha ex e nal sou ces o inance like loans
(Asongu e al., 2015) and o eign di ec in es men (Asongu and Tchamyou, 2015) a e
associa ed wi h exclusi e human de elopmen and inequali y espec i ely, in A ica.
Thi d, he e is a ecen s eam o A ican inance li e a u e documen ing ha
inancial alloca ion ine iciency in he con inen is subs an ially aceable o in o ma ion
asymme y be ween lende s and bo owe s (see T iki and Gajigo, 2014; Lussuamo and
Se asquei o, 2020). Fu he mo e, he in oduc ion o in o ma ion sha ing mechanism
(ISM) has buil on he idea ha inancial alloca ion ine iciency in he con inen can be
explained by in o ma ion asymme y, no ably in e ms o conce ns abou : a o dabili y,
physical access and bank lending eligibili y (Moyo and Sibindi, 2022; Machoko o, 2021).
Hence, in addi ion o media ing be ween bo owe s and lende s, ISM also enhances
ma ke compe i ion, educes cons ain s in c edi a ailabili y and boos s e iciency in he
alloca ion o capi al (Jappelli and Pagano, 2002). Un o una ely, despi e he heo e ical
ad an ages o ISM, A ican inancial ins i u ions a e s ill being con on ed wi h s a k
conce ns o su plus liquidi y (Saxegaa d, 2006; Fouda, 2009; Asongu, 2014a, p.70) and
ISM un a ou able a ec ing inancial de elopmen (Asongu e al., 2016). The unexpec ed
nega i e impac subs an ia es he na a i e ha he e ec o ISM on lending is di icul
o es ablish: “On he whole, all h ee models ag ee on he p edic ion ha in o ma ion sha ing (in one
o m o ano he ) educes de aul a es, whe eas he p edic ion conce ning i s e
ff
ec on lending is less clea -
cu ” (Jappelli and Pagano, 2002, p. 2020).
Asongu, Odhiambo, In o ma ion o banking e iciency in A ica: e idence om income le els and legal o igins
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253
In esponse o he e idence o alloca ion ine iciency, he li e a u e has ailed o
emphasise he impo ance o inancial sec o e iciency om he pe spec i e o he
undamen al goal o inancial in e media ion, which is o ans o m deposi s o liquid
liabili ies in o c edi o economic ope a o s (Kablan, 2010; Kiya o, 2009; Al-Obaidan,
2008; A aullah e al., 2004). In acco dance wi h Asongu and Tchamyou (2014), he main
inancial e iciency measu emen s in A ican li e a u e ha e ocused on Da a
En elopmen Analysis (DEA) o echnical e iciency (Kablan, 2009); cos e iciency
(Chen, 2009; Mensah e al., 2012) and p o i e iciency (Haune and Pei is, 2005).
No iceably, in he ligh o he objec i es o he cu en s udy, he li e a u e on
he nexus be ween inancial de elopmen and in o ma ion asymme y lea es space o
imp o emen in ou main dimensions; namely, he impe a i e o: (i) ocus on egions
whe e conce ns abou inancial access a e compa a i ely mo e se e e; (ii) in es iga e he
impac on inancial access by app ecia ing inancial de elopmen in he ligh o he
undamen al ole o banks in ans o ming deposi s in o c edi ; (iii) examine he
unde lying complemen a i y h oughou he condi ional dis ibu ions o inancial
alloca ion e iciency and ( ) pu emphasis on undamen al ea u es such as income le els
and legal o igins in o de o imp o e space o policy implica ions. The highligh ed gaps
a e subs an ia ed in he discou se which ollows.
Fi s , his s udy concen a es on A ica because, despi e he publicized issues o
excess liquidi y in he con inen ’s banking sec o , minimal li e a u e on in o ma ion
sha ing has been de o ed o add essing his issue. To ou knowledge, he con inen has
no ecei ed he schola ly a en ion i dese es ega ding he unde lying anxie y. This
subs an ially con as s wi h he e idence ha i is a con inen whe e inancial access
conce ns a e mos se e e (Asongu e al., 2016). We subs an ia e his by a icula ing he
neglec o alloca ion e iciency and limi ed ocus on A ica in he in o ma ion sha ing
(he ea e IS) li e a u e.
Second, ‘ inancial de elopmen ’- and IS-speci ic s udies ha e ailed o ecognise
inancial e iciency om he pe spec i e o banks’ abili y o ans o m mobilised
liquidi ies in o c edi o economic ope a o s. Bo h A ican-speci ic and gene al IS
li e a u e ha e no concei ed inancial de elopmen wi hin he amewo k o alloca ion
e iciency. Whe eas he IS li e a u e has al eady been discussed in he p eceding
pa ag aph, wo mains eam indica o s ha e been used in he A ican inancial
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de elopmen li e a u e, no ably, he: (i) employmen o DEA o examine he e iciency
o decision-making uni s
3
and (ii) assessmen o cos and p o i -linked e iciencies
4
as
well as economic e iciency in e ms o scale and echnical e iciencies
5
. Con a y o he
mains eam li e a u e, we use an indica o o inancial de elopmen e iciency ha is in
acco dance wi h he policy synd ome o su plus liquidi y. The mo i a ion o employing
his indica o is ha in o ma ion sha ing wi hin he banking sec o is necessa y o
imp o e banking alloca ion e iciency. The e o e, he inancial measu emen employed
is he a io o bank c edi o bank deposi s because ISM educes in o ma ional en s and
boos s compe i ion in he banking sec o which esul in alloca ion e iciency and highe
le els o inancial lending (Pagano and Jappelli, 1993, p. 2019).
Thi d, on he impe a i e o accoun ing o exis ing le els o inancial
de elopmen , he s udy a gues ha blanke inancial alloca ion e iciency policies may
no be e ec i e unless hey a e con ingen on ini ial le els o inancial de elopmen and
ailo ed di e en ly ac oss coun ies wi h low and high ini ial le els o inancial access.
The in ui ion o his es ima ion app oach is ha ce ain le els o inancial de elopmen
may be equi ed o achie e posi i e alloca ion e iciency ex e nali ies om ISM. Hence,
all he condi ional dis ibu ions a e conside ed wi h pa icula emphasis on coun ies
wi h low, medium and high le els o inancial access. The employmen o quan ile
eg essions is dis inc om ecen s udies which ha e been based on mean alues o he
dependen a iables, namely: T iki and Gajigo (2014) and Tchamyou and Asongu
(2017a) who ha e espec i ely employed he Gene alised Me hod o Momen s (GMM)
and P obi models.
3
The DEA has been employed by A aullah e al. (2004) and Kablan (2009) espec i ely in Pakis an
and A ica o assess he scale and echnical e iciencies.
4
This is in acco dance wi h a s and o A ican li e a u e on inancial e iciency (Kiya o, 2009;
Kablan, 2010). Fou main inancial e iciency measu emen s ha e been used in he li e a u e (see Demi güç-
Kun and Beck, 2009): “They include: he a io o bank deposi s (which measu es he ex en o which
sa ings can und p i a e c edi ), he ne in e es ma gin (which is he accoun ing alue o a bank’s
ne in e es e enues as a sha e o i s o al asse s), o e head cos (o he accoun ing alue o he
bank’s o e head cos as a sha e o i s o al asse s) and, cos /income a io (which assesses o e head
cos s ela i e o e enues)” (Asongu, 2013a, p.665). Whe eas he las h ee a e conce ned wi h he
p o i abili y concep o e iciency, he concep ion adop ed by his s udy is he i s .
5
The in e es ed eade may e e o Al-Obaidan (2008), who has ecen ly employed a composi e
measu emen o banking sys em e iciency in in es iga ing he nexus be ween echnical e iciency
and globaliza ion.
Asongu, Odhiambo, In o ma ion o banking e iciency in A ica: e idence om income le els and legal o igins
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255
Fou h, he inclusion o legal o igins and income le els enables he s udy o
p o ide mo e oom o policy implica ions be ween he nexus be ween in o ma ion
sha ing by means o mobile phones. Mo eo e , banking alloca ion e iciency can also be
con ingen on he weal h o na ions as well as hei legal adi ions om colonial
legacies. Such undamen als ha e been documen ed in he compa a i e de elopmen
li e a u e o elici c oss-coun y di e ences in economic de elopmen (Beck e al., 2003;
La Po a e al., 2008; Mlachila e al., 2017). The compa a i e impo ance o income le els
and legal o igins is pu in mo e pe spec i e in wha ollows.
In e ms o income le els, ela i e o low-income coun ies, coun ies wi h
highe income a e mo e linked wi h ins i u ions ha p o ide mo e access o how people
can ealise he maximum o hei po en ial, especially in e ms o , in e alia, inancial
access and equi able dis ibu ion o he ui s o economic p ospe i y (Asongu and
N ing, 2021). Acco ding o he ex an s udies, highe income le els a ail mo e ma ke
oppo uni ies which include oppo uni ies o inancial access (Blanco and Ram, 2019)
which a e connec ed o a highe deg ee by which banks ans o m mobilized deposi s
in o c edi oppo uni ies o households and economic ope a o s.
Wi h espec o legal o igins, he compa a i e ele ance o F ench ci il law
e sus English common law is consis en wi h he ex an au ho i a i e li e a u e on
compa a i e economic de elopmen (La Po a e al., 1998, 1999), which has been
con i med wi hin he emi o A ica (Asongu, 2012a, 2012b; Agbo , 2015). In he ligh
o he a endan li e a u e, compa ed o English common law coun ies, F ench ci il law
coun ies a e less e ec i e in e ms o openness and adjus ing o challenges in he
economic en i onmen , such as he abili y o le e age in o ma ion echnologies o
be e inancial access oppo uni ies, no leas , because compa ed o English common
law coun ies in A ica, mos F ench ci il law coun ies ha e mone a y sys ems ha a e
no comple ely independen on he one hand and on he o he , ha e p e e ed inancial
s abili y and mone a y dependence o mone a y expe ience. By pu ing emphasis on
inancial s abili y, ins ead o alloca ing c edi o economic ope a o s, economic
ope a o s in F ench ci il law coun ies a e, on a e age, less associa ed wi h
oppo uni ies o c edi access (Fouda, 2009; Asongu, 2016).
The es o he s udy is s uc u ed as ollows. Theo e ical unde pinnings a e
p o ided in Sec ion 2, while he da a and me hodology a e discussed in Sec ion 3.
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Sec ion 4 p esen s he empi ical esul s, while Sec ion 5 concludes wi h policy
implica ions and u u e esea ch di ec ions.
2. Theo e ical amewo k
We discuss he heo e ical unde pinnings mo i a ing he s udy in wo main
s ands, namely: (i) he link be ween inancial alloca ion e iciency and in o ma ion
sha ing and (ii) he in ui ion o he ele ance o mobile phones in he sha ing o
in o ma ion o inancial alloca ion e iciency.
On he i s ela ionship, acco ding o Claus and G imes (2003), he e a e wo
main iews in he li e a u e on he heo e ical nexus be ween he sha ing o in o ma ion
and inancial de elopmen . While he second is conce ned wi h mechanisms by which
liquidi y is p o ided o banks, he i s ocuses on he ans o ma ion o asse s’ isk
ea u es by banks. Howe e , bo h s ands a e consis en wi h he ac ha he main ole
o inancial in e media ion is o boos alloca ion e iciency ia (i) op imal channelling o
inancial esou ces o bo owe s om lende s and (ii) educ ion o cos . Mo eo e , he
acco ding o he na a i e, ISM is impo an in sha ing in o ma ion o be e inancial
access and alloca ion e iciency.
In he second ela ionship, ICT has been documen ed o di use in o ma ion
be ween a ious pa icipan s in he ma ke s o de eloping coun ies. Some o he
accep ed ad an ages ha e included (i) p o iding in o ma ion o mo e posi i e
engagemen be ween lende s and bo owe s (Aminuzzaman e al., 2003) and (ii)
inc eased ma ke pa icipa ion and educed ma ke ing cos (Mu o and Yamano, 2009, p.
1887). In summa y, he in ui ion mo i a ing he complemen a i y o mobile phones wi h
ISM wi hin he amewo k o his s udy is sound because mobile phones ha e been
shown o educe issues su ounding he lack o in o ma ion be ween lende s and
bo owe s (Andono a, 2006; Ejemeyo wi e al., 2021).
Wi h he abo e insigh s, he mobile phone can enable in o ma ion sha ing o
educe ma ke powe enjoyed by ce ain inancial ins i u ions. Such educ ion in ma ke
powe is acili a ed by enhancing openness, anspa ency, and he ee low o
in o ma ion. The e o e, mobile phones enable he (i) ee low o in o ma ion be ween
a ious s akeholde s, clien s and banks and (ii) di ec in ol emen o bo owe s a e he
lending p ocess. I is impo an o no e ha a e he lending p ocess, in o ma ion
Asongu, Odhiambo, In o ma ion o banking e iciency in A ica: e idence om income le els and legal o igins
A ailable online a h ps://ejce.liuc.i
257
sha ing by means o mobile phones can s ill be ele an in ma ke discipline by
cons aining bo owe s no o conceal inancial ac i i ies o which hey ha e been
g an ed loans, no leas because accu a e in o ma ion can be ob ained by means o a
mobile phone. This is essen ially because bo owe s may be emp ed o limi compliance
wi h hei inancial obliga ions owa d banks in he hope ha hey may ul ima ely ely
on he in o mal inancial sec o as a pe manen sou ce o inance.
In ligh o he abo e, he ad an ages associa ed wi h he mobile phone can be
used by ISM o keep inancial ins i u ions up- o-da e as well as encou age hem o
pa icipa e mo e in he lending p ocess. In essence, when banks ecei e imely
in o ma ion on he c edi his o ies o clien s, hey a e mo e p edisposed o educe
unnecessa y isk a e sion ha is linked wi h highe loan cos and lowe loan quan i y.
The ac ha banks can simul aneously ac on clien s’ in o ma ion p o ided by ISM is
consis en wi h ecen li e a u e on he ele ance o In o ma ion and communica ion
echnology (ICT) in educing he abuse o powe by big banks (Boulianne, 2009;
Diamond, 2010; G ossman e al., 2014) and engagemen in collec i e ac ions (Pie skalla
and Hollenbach, 2013; Weidmann and Shapi o, 2015; Manaco da and Tesei, 2016).
3. Da a and Me hodology
3.2. Da a
The pape assesses a panel o 53 A ican coun ies wi h da a o he pe iod
1996-2019
6
. The inancial a iable is ob ained om he Financial De elopmen and
S uc u e Da abase (FDSD) o he Wo ld Bank, whe eas o he a iables a e om he
Wo ld De elopmen Indica o s (WDI) o he Wo ld Bank and he Wo ld Go e nance
Indica o s (WGI) o he Wo ld Bank. The inancial e iciency a iable is p oxied in
e ms o alloca ion e iciency, no ably, he abili y o banks o ans o m mobilised
deposi s in o c edi (Tchamyou e al., 2019). In acco dance wi h he li e a u e om
Asongu (2017) and Tchamyou (2017), he mobile phone pene a ion a e is used as an
ins umen o in o ma ion di usion.
Se en con ol a iables om ecen inancial de elopmen li e a u e a e used o
accoun o a iable omission bias, namely: in la ion, ade openness, emi ances,
6
53 o he 54 exis ing A ican coun ies a e chosen because da a on Sou h Sudan a e no a ailable
be o e 2011.
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o eign di ec in es men , GDP g ow h and poli ical s abili y (Huang, 2005; Osabuohein
and E obi, 2013; Asongu, 2014b; Owosu and Odhiambo, 2014; Nyasha and Odhiambo,
2015a, 2015b; Tchamyou, 2020; Tchamyou e al., 2019).
We discuss expec ed signs. Fi s , Huang and Temple (2005) and Do and
Le chenko (2004) a e suppo i e o he link be ween inancial de elopmen and ade
openness. Second, Huang (2011) has es ablished a ela ionship be ween in es men and
inancial de elopmen . Thi d, bo h heo e ical (Huybens and Smi h, 1999) and empi ical
(Boyd e al., 2001) au ho s ag ee ha e y high in la ion is linked o less e icien , less
ac i e, and smalle banks. Fou h, he posi i e connec ion be ween inancial de elopmen
and economic g ow h has been subs an ially documen ed bo h in he heo e ical and
empi ical li e a u e (G eenwood and Jo ano ic, 1992; Sain -Paul, 1992; Le ine, 1997;
Asongu, 2017). Economic g ow h is e y likely o lowe he cos o inancial
in e media ion because o he a ailabili y o mo e unds o in es men pu poses and
in ensi e compe i ion. Fi h, emi ances can con ibu e owa ds imp o ing inancial
alloca ion e iciency i hose o whom unds a e emi ed a e less in ol ed in he
in o mal economic sec o , while he e ec o poli ical s abili y is con ingen on whe he
he a iable is posi i ely skewed o nega i ely skewed (Tchamyou, 2021). In ligh o he
abo e, he expec ed signs a e con ingen on bo h he na u e o he con ol a iable as
well as on he undamen al cha ac e is ics being examined. To pu he la e in mo e
pe spec i e, he e ec is con ingen on whe he he sub-sample in ol es middle-income
o low-income coun ies and, by ex ension, English Common law o F ench Ci il law
coun ies.
Six h, he classi ica ion o coun ies in o income g oups is consis en wi h Asongu
(2014c, p. 364)
7
, while he dis inc ion be ween Common law and Ci il law coun ies is
in o med by La Po a e al. (2008, p. 289). Acco ding o ecen A ican inance li e a u e
(Asongu, 2012a), highe -income coun ies a e associa ed wi h highe le els o inancial
de elopmen compa ed wi h hei lowe -income coun e pa s. This na a i e aligns wi h
Ja ee and Le onian (2001), who ha e es ablished a posi i e ela ionship be ween
income le els and he s uc u e o banking sys ems. As shown by Beck e al. (2003) om
7
The e a e ou main Wo ld Bank pe capi a income g oups: low income, $1,005 o less; lowe middle
income, $1,006-$3,975; uppe middle income, $3,976-$12,275; and high income, $12,276 o mo e.
Asongu, Odhiambo, In o ma ion o banking e iciency in A ica: e idence om income le els and legal o igins
A ailable online a h ps://ejce.liuc.i
265
We u he discuss he esul s in h ee main s ands, namely: (i) he ele ance o
he mobile phone and he nexus wi h exis ing li e a u e, (ii) implica ions o heo y, and
(iii) implica ions o p ac ice.
The ele ance o he mobile can be unde s ood wi h espec o he manne in
which i imp o es in o ma ion sha ing and, by ex ension, educes in o ma ion
asymme y ha is necessa y o imp o e he ans o ma ion o mobilised deposi s in o
c edi o economic s akeholde s (go e nmen s, households and ope a o s). Mobile
phones a e ins umen al in his p ocess om h ee main pe spec i es: (i) dec easing
in o ma ional en s; (ii) making c edi ma ke s con es able; and (iii) disciplining
bo owe s. In essence, he mobile phone is used by ISM o acili a e he di usion o
in o ma ion ha mi iga e in o ma ional en s and educe da a p i ileges ha a e enjoyed
by big inancial ins i u ions. La ge inancial ins i u ions can use such p i ileged
in o ma ion o ix p ices abo e ma ginal cos in o de o enhance hei p o i ma gins
and limi c edi access. Consis en wi h dominan iews in he li e a u e, ma ke powe
lowe s in es men s, educes sa ings, augmen s inancial in e media ion ine iciency and
educes possibili ies o economic g ow h (see S igli z and Weiss, 1981; Djanko e al.,
2007; Boa eng e al., 2017). The in ui ion o he educ ion o in o ma ional en s by
means o he mobile phone aligns wi h Be gemanny e al. (2015) who ha e main ained
ha he in e ac ion be ween in o ma ion and ma ke powe is essen ial in de e mining
ma ke quan i ies and p ices.
D awing on he insigh s p o ided in Sec ion 2, om he es ablished o e all
posi i e nexus, i can be in e ed ha he mobile phone is being used as an in o ma ion
sha ing mechanism o educe di e ences in in o ma ion de iciency be ween lende s and
bo owe s in he banking indus y. I ollows ha con empo a y conce ns abou su plus
liquidi y (Fouda, 2009; Asongu, 2014a) and in es men challenges o A ican business
(Fasakin, 2021; Ikeanyibe, 2021) can be pa ly add essed by he use o mobile phones as
an in o ma ion-sha ing ins umen since doing so imp o es oppo uni ies o c edi
alloca ion needed o in es men pu poses.
Building on he na a i e in Sec ion 3, while he s udy con i ms he compa a i e
ele ance o English Common law coun ies in le e aging mobile phones o d i e
banking sys em alloca ion e iciency, compa ed o hei F ench Ci il law coun e pa s,
such compa a i e edge is no appa en o middle-income coun ies when compa ed o
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hei low-income coun e pa s. Acco dingly, such edge o low-income coun ies
especially in coun ies whe e ini ial le els o banking sys em alloca ion e iciency a e
low, can be aceable o he ac ha low-income coun ies in A ica a e in he d i e ’s
sea in le e aging mo e on mobile echnologies o connec wi h banks (Mosheni-
Che aghlou, 2013). I is impo an o no e ha , as cla i ied in he in oduc ion, he edge
o English Common law coun ies can be aceable o he ac ha hese coun ies ha e
legal sys ems ha a e mo e lexible o le e age ex an echnologies o imp o e inancial
and economic pe o mances. Mo eo e , English common law coun ies, o he mos
pa , ha e con ol o e hei mone a y sys ems and ha e no sac i iced mone a y
expe ience o mone a y s abili y, unlike mos F ench ci il law coun ies in A ica which
s ill ha e hei cu encies p in ed in F ance, wi h co esponding cen al banks mo e
conce ned abou con olling o in la ion by limi ing c edi access han by p omo ing
c edi access o economic p ospe i y. Acco dingly, su plus liquidi y issues, which a e
associa ed wi h less ans o ma ion o mobilised deposi s by banks in o c edi o
economic ope a o s, a e mo e appa en in F ench ci il law coun ies han in English
common law coun ies in A ica (Fouda, 2009; Asongu, 2014d, 2016).
5. Conclusion and u u e esea ch di ec ions
The s udy has assessed how in o ma ion sha ing h ough mobile phones a ec s
banking sys em e iciency in A ica wi h pa icula emphasis on income le els (middle-
income e sus low-income coun ies) and legal o igins (English Common law e sus
F ench Ci il law coun ies). The ocus is on 53 A ican coun ies wi h da a o he
pe iod 1996-2019, and he empi ical e idence is based on Quan ile eg essions. The
choice o he es ima ion s a egy in modelling he complemen a i y be ween
in o ma ion-sha ing o ices and mobile phones h oughou he condi ional dis ibu ion
o inancial access indica o s is because s udies ha a e based on a e age alues (o he
condi ional mean) o inancial access p o ided blanke policies. Such ex ensi e policies
a e unlikely o adequa ely in o m beha iou unless he modelling exe cise is con ingen
on ini ial le els o inancial access and ailo ed di e en ly ac oss coun ies wi h low,
in e media e, and high ini ial le els o inancial access.
The ollowing indings a e es ablished: (i) mobile phone pene a ion p omo es
banking sys em e iciency in he 25 h quan ile and he median o banking sys em
Asongu, Odhiambo, In o ma ion o banking e iciency in A ica: e idence om income le els and legal o igins
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267
e iciency in low-income coun ies, while o middle-income coun ies; i is signi ican
exclusi ely in he bo om quan ile (i.e., 10 h quan ile). (ii) Wi h he excep ion o he
highes (i.e., 90 h) quan ile in which he e ec o he mobile phone is no signi ican in
English Common law coun ies, he impac is signi ican h oughou he condi ional
dis ibu ion o banking sys em e iciency in English Common law coun ies. (iii) As o
F ench Ci il law coun ies, he nexus is only signi ican in he median and highes (i.e.,
90 h) quan ile o he condi ional dis ibu ion o banking sys em e iciency.
The main implica ion o heo y is ha he mobile phone is an in o ma ion-
sha ing mechanism ha can be used o mi iga e po en ial conce ns ela ed o
in o ma ional en s be ween bo owe s and lende s in he banking indus y and, hus, is
an ins umen o in o ma ion di usion o imp o ing inancial access in he banking
indus y. This heo e ical implica ion is consis en wi h Pagano and Jappelli (1993, p.
2019) in he pe spec i e o educing in o ma ion asymme y o cu b in o ma ional en s
and, by ex ension, imp o e banking sys em alloca ion e iciency.
Conce ning he implica ions o p ac ice, i is appa en om he indings ha
enhancing he owne ship o mobile phones, especially in low- and middle-income
coun ies whe e ini ial le els o banking sys em e iciencies a e low, would go a long way
o imp o ing banking sys em e iciency. Howe e , such a policy o enhancing mobile
phones is less e ec i e in coun ies in which ini ial le els o banking sys em e iciency
a e abo e he median in he co esponding low- and middle-income coun ies. Hence,
o he policy ini ia i es and in o ma ion-sha ing channels should be conside ed o he
abo e-median low- and middle-income coun ies. In he same ein, while he policy o
enhancing mobile pene a ion o banking sys em e iciency is b oadly applicable o
English Common law coun ies, complemen a y in o ma ion-sha ing policies should be
conside ed in F ench Ci il law coun ies whe e he incidence o mobile phone
pene a ion on banking sys em e iciency has no been es ablished o be o e whelmingly
signi ican . In o he wo ds, he ecommenda ion o complemen a y policies o sub-
samples and/o quan iles o which he in es iga ed nexus is no signi ican is based on
he ac ha he mobile phone is a necessa y bu no a su icien ins umen o
in o ma ion sha ing in o de o imp o e banking sys em alloca ion e iciency.
Fu u e s udies can also assess whe he es ablished linkages wi hs and u he
empi ical sc u iny wi hin he amewo k o coun y-speci ic s udies. Fu he mo e,
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in es iga ing al e na i e mechanisms by which in o ma ion asymme y can be educed
o enhance o he de elopmen ou comes is wo hwhile. In he sugges ed u u e esea ch
di ec ion, he use o mobile sha ing applica ions should be conside ed because such
applica ions could p o ide mo e insigh s in o wha ype o in o ma ion is sha ed o
imp o e banking sys em e iciency. Mo eo e , while c edi use s o clien s a e no
engaged in his s udy because o i s o ien a ion owa ds mac oeconomic da a owing o
da a a ailabili y cons ain s, i is impo an o u u e s udies o also conside
mic oeconomic da a om which such in o ma ion on clien s can be explo ed.
Mo eo e , in he sugges ed u u e esea ch di ec ions, he classi ica ion ollowing
Geh ing (2013) using middle income should also be conside ed.
Asongu, Odhiambo, In o ma ion o banking e iciency in A ica: e idence om income le els and legal o igins
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269
Appendices
Appendix 1: De ini ion o a iables
Va iables
Signs
De ini ion o a iables
Sou ces
Banking Sys em
E iciency
BcBd
Bank c edi on Bank deposi s
Wo ld Bank
(FDSD)
The Mobile
Phone
Mobile
Mobile phone subsc ip ions (pe 100
people)
Wo ld Bank
(WDI)
Economic
P ospe i y
GDPg
GDP G ow h (annual %)
Wo ld Bank
(WDI)
In la ion
In l
Consume P ice Index (annual %)
Wo ld Bank
(WDI)
Fo eign Di ec
In es men
FDI
Fo eign Di ec In es men , ne
in lows (% o GDP)
Wo ld Bank
(WDI)
T ade openness
T ade
Impo s plus Expo s in commodi ies
(% o GDP)
Wo ld Bank
(WDI)
Remi ances
Remi
Pe sonal emi ances, ecei ed (% o
GDP)
Wo ld Bank
(WDI)
Poli ical S abili y
PolS a
“Poli ical s abili y/no iolence (es ima e):
measu ed as
he pe cep ions o he likelihood ha he
go e nmen will
be des abilized o o e h own by
uncons i u ional and
iolen means, including domes ic iolence
and e o ism”
Wo ld Bank
(WGI)
Middle Income
Middle I
Middle and Uppe Income Coun ies
($1,006 o mo e)
Asongu (2014c,
p. 364)
Low Income
Low I
Low Income Coun ies ($1,005 o
less)
Asongu (2014c,
p. 364)
Common Law
Common
L
English Common Law Coun ies
La Po a e al.
(2008, p. 289)
Ci il Law
Ci il L
Ci il Law Coun ies
La Po a e al.
(2008, p. 289)
WDI: Wo ld Bank De elopmen Indica o s. FDSD: Financial De elopmen and S uc u e Da abase. WGI: Wo ld
Go e nance Indica o s.
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Appendix 2: Summa y S a is ics (1996-2019)
Va iables
Mean
S.D
Min.
Max.
Obse a ions
Banking Sys em E iciency (BcBd)
71.019
28.897
13.753
196.078
1105
Mobile Phone
Mobile Phone
Pene a ion
38.387
42.910
0.000
184.298
1206
Con ol
Va iables
GDP g ow h
4.575
7.912
-62.075
149.973
1207
In la ion
8.736
27.569
-60.496
513.907
1088
Fo eign Di ec
In es men
4.356
9.233
-8.703
161.824
1191
T ade Openness
72.819
39.722
17.858
347.997
1147
Remi ances
3.799
7.244
0.0001
98.388
1034
Poli ical S abili y
-0.551
0.917
-3.314
1.282
1060
Income Le els
and Legal
O igins
Low Income
Coun ies
0.584
0.492
0.000
1.000
1272
Middle Income
Coun ies
0.415
0.492
0.000
1.000
1272
English Common
Law
0.377
0.484
0.000
1.000
1272
Ci il F ench Law
0.622
0.484
0.000
1.000
1272
S.D: S anda d De ia ion. Min: Minimum. Max: Maximum. BcBd: Bank c edi on Bank deposi s. GDPg: GDP
g ow h.
Sou ce: Au ho s’ calcula ion
Asongu, Odhiambo, In o ma ion o banking e iciency in A ica: e idence om income le els and legal o igins
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271
Appendix 3: Co ela ion ma ix
BcBd
Mobile
GDPg
In l
FDI
T ade
Remi
PolS a
Middle I.
Low I.
Common L.
Ci il L.
BcBd
1.000
Mobile
0.075**
1.000
(0.012)
GDPg
-0.025
-0.060**
1.000
(0.398)
(0.041)
In l
-0.141***
-0.105***
0.073**
1.000
(0.000)
(0.000)
(0.017)
FDI
-0.086***
0.047
0.224***
-0.013
1.000
(0.004)
(0.108)
(0.000)
(0.668)
T ade
-0.158***
0.256***
0.009
-0.086***
0.325***
1.000
(0.000)
(0.000)
(0.738)
(0.005)
(0.000)
Remi
-0.095***
0.006
-0.028
-0.056*
0.057*
0.124***
1.000
(0.001)
(0.846)
(0.367)
(0.082)
(0.069)
(0.000)
PolS a
0.019
0.188***
0.035
-0.173***
0.090***
0.299***
0.066*
1.000
(0.714)
(0.000)
(0.260)
(0.000)
(0.003)
(0.000)
(0.051)
Low I.
-0.057*
-0.293***
-0.023
0.071**
-0.0007
-0.241***
-0.123***
-0.254***
1.000
(0.055)
(0.000)
(0.410)
(0.019)
(0.981)
(0.000)
(0.000)
(0.000)
Middle I.
0.057*
0.293***
0.023
-0.071**
0.0007
0.241***
0.123***
0.254***
-1.000
1.000
(0.055)
(0.000)
(0.410)
(0.019)
(0.981)
(0.000)
(0.000)
(0.000)
Common L.
-0.117***
0.103***
-0.041
0.033
0.022
0.110***
0.106
0.108***
-0.055**
0.055**
1.000
(0.000)
(0.000)
(0.152)
(0.271)
(0.446)
(0.000)
(0.000)
(0.004)
(0.049)
(0.049)
Ci il L.
0.117***
-0.103***
0.041
-0.033
-0.022
-0.110***
-0.106***
-0.108***
0.055**
-0.055**
-1.000***
1.000
(0.000)
(0.003)
(0.152
(0.271)
(0.446)
(0.000)
(0.000)
(0.000)
(0.049)
(0.049)
(0.000)
*,**,***: signi icance le els o 10%, 5% and 1% espec i ely. BcBd: Bank c edi on bank deposi s. Mobile: mobile phone pene a ion. GDPg: G oss Domes ic p oduc g ow h. In l: In la ion. FDI:
Fo eign Di ec In es men . Remi : Remi ances. PolS a: Poli ical S abili y. Middle I.: Middle Income. Low I.: Low Income. Common L.: Common Law. Ci il L.: Ci il Law.
Sou ce: Au ho s’ calcula ion
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