Industry sign banking hawaii work order now
[Music] you we are now in Dafoe of this residential school and a lot has been said about governance for development indeed today River and Vina have said it all so what do I have to add perhaps not not a lot I just don't want to build on what you have covered since Monday and look at governance for development by being able to distinguish between two functional dimensions of governance the first dimension is the political governance and I think that has been covered very well and the lecture after me we were also cover important eye dimensions of how to measure that governance indeed if you look at the developments my friend here our GD has been mentioning some developments in the Soudan these are very important dimension of governance developments in breaks it was an important dimension of political governance but there are some other aspects dimensions of governance for example corporate governance corporate governance in the way corporate bodies which could be companies which could be organizations like central banks which could be international organizations like the World Bank IMF and other region organizations how they govern themselves and Gavin to deliver the best products they deliver the best services at the lowest affordable prices for the population we would enhance live rules that governance is also particularly important here and for example look at the governance of central banks I've just completed a paper which is on my website they will say that when I show you in a moment which is about central bank independence showing central bank in your country you have the governor of the central bank but sometimes the same governor of the central bank is not really chairman the board over the central bank they also very few countries where the governor of the Central Bank is not the chairman of the board of the central bank and so the decisions can be tossed around and buried baited quick decisions like how much currency should we print next year okay how shall we manage our reserves foreign exchange reserves domestically or give it to an external organization to manage okay if an external organization is it gonna be a huge asset management fund or is there gonna be any other international organization who decided those those that important decisions for the brockman and the key issue for example why should we borrow so heavily coming the beta T issue borders when we have enough reserves to build infrastructure in Africa in Africa the reserves of all central banks in Africa is much higher about by our noble about 900 million higher than the result that the money we need to build infrastructure so some of these decisions are part of the corporate governance some of these are provoking a lot of fights in the media and maybe they seem so simple but not easy to resolve for example emails your question if you have a big company in Abidjan you have a CEO who makes the decisions and then you have the chairman of the board who is more senior than the other battles have been fought over this both for government organizations and for companies I am a senior I'm the chairman of the board I am the CEO of this organization you are micromanaging of my organization the and they'll not fight do they go to the minister they got the president the president McCrory it's a simple issue of corporate governance who is much higher than the other who can tell me have you think about it I come to this question by the end of the election I want to know who is higher than the other the CEO or the chairman of the board the simple corporate governance is part of the governance is it they were so in addition to these the governance is about institutions we are working now on a part of the issues we are looking at is an institutional proximity and institutional proximity the fact that if you have good institutions say in Cote d'Ivoire these same institutions will nurture the brought Vinson in next country like Ghana or the other way around it's the different from externalities externalities and the activities you take and they have an impact on the other this suite is that they actually there is a copycat of the growth of institutions the way they are managed and that proximity so you look in a region like that what I am going to look at and see how the remoteness or the closeness proximity of institutions can actually never that institutions grow together so a lot of corporate governance issues although my paper doesn't have corporate governance in the title okay the NGO is in the details I didn't say the devil now the angel is in the details the details have a lot of relevance for corporate governance so what we have here is a joint paper with industry kanga who is important and based here to the initial mission since they're still affiliated but a works Mirage Delta as a postdoctoral fellow with the lemon celibate with at the University of Maryland in the US and is listening to this conversation from Washington and is of Somali who is at the very University in Canada but he's also a visiting ambition so he may walk in anytime during my presentation and I'll make him take over the presentation and the work is a part of the projects that Farida kindly introduced to us here and basically it focuses on the West African economic and monetary union but it also focuses on a substantial very important development in Africa in the last 20 years you see Africa inherited a banking system banking systems from many countries especially the colonial powers in West Africa here where we are now inherited banks from France in many other countries in Africa inherited commercial banks from Britain and some came up from the US indeed many other European countries have banks in Africa something dramatic happened in the last 20 years and this is the growth of indigenous banks started by local Africans some of them which that it adds occurs small savings organizations some of which started as microfinance organizations and over the last 20 years they have grown so phenomenally that they have actually won by one out competed or the global conglomerates in Africa the time of the pan-african banks on the rise has given in the title these fine African banks are huge banks that have grown on the African Cody they go from small bases and they are going global some have established branches in London and some in New York they are unstoppable it's a new development in Africa now shall we actually I interviewed one of the CEOs of these banks and I said why is it that your bank has grown phenomenally and coming from a small microfinance organization which is widespread the organization was well spread across the country across Kenya and so you have a lot of groundwork covered they are responding to the needs of small companies and everyday businesses and householders mccurry explain awareness Singh will give me one single span issue of why this has grown he gave me one word passion so I'm writing the paper about the psychology of passion on African banking passion the commitment the drive achievers do what if it sucks it takes and in the African continent we now have four hubs in Africa for hubble's for these pan-african banks the first hub in Nigeria and colleagues from Nigeria will serve - happy Nigeria where Nigerian banks have basically spawned the entire continent but business in Nigeria the second half is Morocco Moroccan banks that have cut across North Africa and recently they were actually in Tanzania trying to establish a bank in Tanzania the FATA hub is Nakia where King and banks have actually spawned the entire Eastern African and Central African region and the other half is in south africa south african banks are huge competing with a number even with some of the more multinational banks doing both investment and commercial banking and being able to go to whether other banks cannot go they are heavily present in say for example DRC ok so these are what we call the pan-african banks and we've got a number series of papers I shall see on the website addressing military missions of these pan-african banks on the right cross-border pan-african banks but I would like to skip very quickly and distinguish between what we have known a say over the last 50 years we had foreign banks if I could make this category because very important to understand really this category with the foreign banks by definition in finance we classify a bank as foreign if 50 past 51 percent of the equity is held by foreign residents so there might be some domestic residents but 51 percent by for non-resident then it's a foreign bank and again a domestic Bank mostly for those cuts by domestic banks are mainly almost a hundred percent owned by domestic residents but you see a pan-african Bank and I bought a coach in Cote d'Ivoire or Ivorian back operating next door in Ghana is by definition a foreign bank okay so we need to distinguish between foreign banks and pan-african bands pan-african banks are looking at the countries the 54 countries on the African continent they are a category of foreign banks the only distinguishing feature is a a we are indigenous they are indigenous banks and they are mainly operating cross-border so this is to distinguish between foreign and pan-african banks now I can take in a question on this to be able to distribute because it's going to be important in our discussions this afternoon so if we take a country a region like West African economic monetary union where we are now okay this has eight member countries okay it's a very a very unique economic and monetary unit perhaps the best example of regional integration on the African continent well let's look at what has happened since a the year 2000 this is on a lot since the year 2000 to 2015 in the last 15 for a period of 15 years what you see the blue are basically the foreign bonds the foreign banks grew from being about 60% in assets total as percentage of total assets and by 2015 growing up almost 80% so really if you fit this using a what in economic terms we call trend analysis just along trend the gross has only been trained trained really driven out on trend but look at pan-african bands in the 2000 they were less than 30 percent terms of asset a total but by 2015 they had grown up to almost 60% you see these these they you know the that color as you can see the cross-border pan-african banks have grown phenomenally at the same time when actually domestic banks have been declining the suggestion that some of these global banks have actually grown from being simply domestic and expanded to the global to be very important global players and this is the phenomenon and in this paper we are looking basically only at a West African monetary union and I will explain why in a moment we we do this so what I'm going to cover with you is they they the output of our research and I just go say why are we interested in this area that is our motivation a whatever such question that we are trying to answer or trying to understand so we asked the the main questions of our investigation okay we do some empirical analysis using statistical chronometric methods I'll show you with some of the findings and then we try to see how these are important for policy but also for the practice by people who manage these bands but to just explain the motivation I just want to cover a little bit about what we know in terms of existing research that has been carried out over the last 50 years in trying to understand the behavior of foreign banks from which the pan-african banks are actually starting and the work on foreign banks has been extending in 2003 myself and a couple of colleagues did the world investment report for acted which basically reports the ownership of every bank in the world the person in terms of assets as it's owned by foreigners and assessed by domestic and in some countries you find that there is there was at that time a hundred percent ownership of banks say by foreign residence and we also covered a debate that has been going on for some time especially in Africa a couple of my papers in 2000 2003 2006 2007 would explain the debate which was about Sam a African countries trying to block opening up the banking sector to world investment okay so all that literature I want to point out five key points each and one thing of your hand the first one is that the evidence shows especially with respect Africa there has been a high degree of market segmentation in the banking sector segmentation which you have institutions that say our financing informal sector and this could be circles could be microfinance organizations some of them registered some of them maybe not and then you have another set of institutions which are serving businesses that's one type of segmentation but there is even a more serious type of segmentation which is where you buy you have banks that feed the locals businesses small and medium enterprises and some of the global conglomerates which are on refinancing their large multinationals coca-cola and others so that segmentation teams have persisted for quite a long time and still questions with now at the bunker International Settlement good for mine has been looking at this own signature for quite a long time and things that actually the behavior of foreign banks seem to be heterogeneous over time but they have still exhibited the persistent segmentation in African banking the second now here this literature I should now put point some of the gap this literature does not address how the arrival of pan-african banks is changing that scene of segmentation and in this paper we are about that actually is very the ability of those pan-african banks to bring it to break down those barriers of market segmentation the second observation we get from literature of a long time of a long time and again and said the papers by on my good friend steel classes and also by sheer akka is the view in this literature that foreign banks are more efficient than the mystic banks are they the efficiency is based on this total factor productivity models we have any concern friends for a long time which tend to rely more on technological input here's the full banks of technology some of which the small banks in my rural in my own neck of the woods some of those bannermen have never seen that kind of technology that's not the basis if you have look at officials in terms of financing or delivery of financial services to the lowest part of the population I would beg to differ it may not be efficient okay now it's pan-african the banks going to change the story I think the story they were they are you employed notorious highly intractable and efficiency of the phone banks will break down the third conclusion that we get from the resulting literature is to see foreign banks enhance competition and foreign banks enhance lending but the preliminary work on cross-border banks pan-african banks especially bike dango dango at a twits we talk about this as being one of the centers of Exodus it is this what I show that actually the cross-border banks are effecting a landing positively they are increasing lending they may therefore increase competition but the gap remains a Christian lending is okay but whom are you learning - are you lending to the small companies that she owns are you landing - those I'm talking about Financial Inclusion so I don't use the word financial crucial in this paper we don't use but this book is about financial closure so is it at the laning will group so that's the gap there on the literature the research is also very clear that foreign banks may increase concentration the concentration literature in banking and finance whenever concentration is mentioned think about concern about competition concern if you have a number of banks could be even three banks concentrating all they are lending and taking of the posts that mean the structure is not competitive so if I go back the researcher is pointing out it's basically the behavior fern banks has been so different variation from country to country and you know over time but the gaps that this literature appearance in the need to invest get the behavior of the new pan-african banks so basically we have two research questions when whether this new breed of banks the cross-border pan-african
bands how they affect competition and how this affects lending that's number one because that's the whole roar of intermediation of that and so specifically say does corporate banking increase banking competition over increase banking concentration what about the effect on bank lending but more specifically we go granular we then want to take the one enterprise survey data in fact we started with two databases we take the world enterprise survey but we also took a word bank innovation survey whenever companies to innovate in two senses innovation in terms of new products innovation in terms of new processes but alas we found that the word bank enterprise survey covers under 14 countries and the data was well anyway inadequate so we've concentrated on the word bank enterprise survey and that part is going to be whether actually the growth in problem has translated into a being able to address the credit constraints of small and medium enterprises and increase lending to these enterprises basically those are our research questions I may be a lefty children but us that's why everyone is not you news is why you are in a ivory coast here they are eight countries and the first thing he noticed and I think my friend from when Rhonda was right a is this enough to have that region integration a oh is it part of the colonial legacy you know definitely is the part of the cornea legacy everything on the demarcation of boundaries in Africa you will know and I know that it's part of the colonial legacy the question has been for many years what is the viable solution what did the bio solution where sovereignty of individual countries are concerned that has been 1 million question and the people are looking at my good friend leonid once checkin at princeton spends sleepless nights working on this and we talk to london almost into the wee hours of the morning on this particular question of the national sovereignty versus development of the continent and there are people's three are three working on this issue 24/7 okay and yes new new new issues are coming up new you know ideas but we still media the thing i want to the observationally want to make about who i am in the fact that seemingly is homogeneous eight countries but I also want to observe some degree of heterogeneity where they are different okay you know for example over the eight countries on record over here and Senegal raw middle income highly highly advanced in terms of economic activity compared to say to be mean Coquina far so he never saw Mali Niger and told what it enables us to do instead of is phenomenal pan-african balance as if we are looking at one country because it's kind of a region what do I mean by one country it share the same governance structure of alliteration of banks it has one central bank and the best central bank has been so generous in a generating the data or giving us the data for for this work initially we had thought of covering also the Central African a franc zone candidate Cordia to the West African franc zone and the second essential African but it was extremely difficult getting an information from the Central African they are very highly opaque they exist a high degree of opacity between the what the central bank does and what the individuals who can record and that indeed limits a huge sum investigation so we hooked him because of the single regulatory framework in fact they adopted bath of three in 2016 a bath the rules are the global framework for regulating banks but this being a governance invent I can use this opportunity to criticize the buzzer rules in sense that in the buzzer rules there is no V and a voice an accountability issue the Basil's are framed a no African country part space I had a paper that translated into a book for the g20 summit in Co in 2010 where basically I was integrating the new basis tree and the lack of African voice in from using those rules and yet African central banks have to adopt the bath of three alliterations so for many years many his knife Raqqah where to crossroads on adoption days but June 2016 ym adopts this in actual fact they have gone ahead and laid out the implementation which they did last year in 2018 but still the question remains the region ymo is still dominated by french baths until recently when the pan-african banks are coming but we find that this region is an interesting robbery for us to do the investigation because we're able to access to access exceptional data for example for the last 20 years most of the data on at bank level bank by bank ownership performance aggregates will be jailed from a database called bank score all the countries in the world the world investment report we construct the bits of 22,000 and still constructing it from banks cope by hey is the difference between a bank scope and what the central bank of hawaii mo was able to give us bank scope would only have been able to generate 84 banks and the central bank of Wiremu was able to give us 121 banks which is well open about what you can get from bank scope most central banks have the data absolutely but in nigeria i got a problem when i went to investigate a nigerian bank's performance the Central Bank of Nigeria even when I very well knew was the governor the governor we're never sign of the deaths the data to me wetting agents when they were to give me some of the useful data so it has been a problem for some central banks to be able to cooperate and give some data but here I think I applaud what the vco have been able to give in terms of the the huge coverage of this data at a bank level and so you find that from this database we can be able to establish banks in terms of the nationality of the owners from vairagyam which had initially had three banks but by 2015 had zero band and libyan banks explained it expanded mainly but of course at standstill because of the developments in Libya Libya was expanding very highly in terms of the thing in terms of the number banks and then of course Nigerian banks expanding huge and you can see from one bank in 2002 a little banks in 2015 and so the distribution our trouble tano is undertaking a revolution is anybody from Togo here also question ok so maybe what should she has I'm ready I take a revolution whereby I think is open entry open exit has been able to open up to these international banks and the number of banks with headquarter has expanded mainly from about 2006 the current going up twenty four banks final 2015 want 14 this is a huge Bonanza in terms of GDP experiment in terms of activities having the headquarter there but of course it requires also a huge amount of corporate issues we look at the financial soundness of each of these sectors we see variations we see they share some of the elements on African banking that we have been looking at the last 20 years the persistence of high non-performing loans and so some people ask me sometimes and you may do why loans in Africa so costly why are interest rates notoriously inflexible downwards why are interest rates notoriously rigid downwards why is it possible that you cannot bring interest rates for loans down the answer is about competition as I gonna mention here and the pricing models use the pricing models used are cost plus pricing methods whereby you take the cost of money that's from the deposits you get and borrow from central bank you add the recovery for non-performing loans in the previous period and you add a small backup mark up for yourself the lambda and you are every interest rates so you can't leave the database it's how the market performance until they be able to address non-performing loans the cost is likely to remain so and this is the whole the message you get from this this is what we found what we found where the pan-african banks have increased competition in way m and that's because they don't do much as an acquisition because one way bank are going in to say burkina faso one way of doing it is to merge with a local bank or to acquire it a takeover no they do greenfield investment they go in they set up shop the Gatorland they build they set up a bank and label maybe should always ring well so one that completely quizzes bank lending in wham and in particular that that bank lending actually results in two more access that's where we had a profit model to understand more access of financed by small and medium enterprises the implications is that the central bank of ymo should be consecrated not only the signing now but how to make best work for ymo that requires open above adopting a Basel in particular that the big band pan-african bands have to go further into intermediary because it's what the point was that they don't compete actually on products we have done the science using randomized control trials experiments in the field and found that the banks need new products for example whether insurance ok that doesn't exist in some countries ok so the bank would have to set up with insurance products that they actually used we would address the needs of the local farmers of cocoa in Ghana from Livan kanaeva that requires new products don't have to compete on the old products and financing SM is because they already aware that they would fail how to be have to be accompanied by credit guarantees and the correct grantees can be underwritten by the financial markets ok because you are buying a bond over 10 years fixed at 0% so you can underwrite or fix at 1% so you can underwrite there has to be a better environment but the environment Reed governance that's where we stop [Applause] you [Music]
