How does Fintech Innovation Matter for Bank Fragility in SSA?

Christian Nguena

No 576, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: There is a momentous debate on the role played by financial technology (fintech) innovation in the fragility of the banking sector. Considering the importance of financial solidness, contradictory theoretical predictions and empirical evidence, the in-depth re-investigation of this relation is needed. Using data of 690 banks across 34 Sub Saharan African countries for the period 1999-2015 along with FGLS, GMM, Panel Threshold regression and PCA econometric method, this paper empirically examines the influence of fintech innovation on bank fragility. Mainly the destabilizing impact of fintech innovation is confirmed for our baseline investigation but later relativized with a stabilizing impact after a certain threshold. Moreover, the results highlight also that the macroeconomic environment is important in explaining bank fragility and suggested that public policy should take into account some specific destabilizing consequences on the banking system. Besides, the simultaneous hypothesis test of the innovationfragility nexus conditional to some relevant variables reveals that financial openness does matter while investment, commercial openness and monetary policy do not. Lastly, the comparative analysis validates our heterogeneity hypothesis; countries with the high size banking sector, colonialized by France and members of monetary union performs better than the others in terms of bank solidness. These results indicate that suitable fintech innovation policy even between the same regions could be rather different. Financial instability appeared also to increase bank fragility. This paper contributes to the limited literature on fintech innovation at both the macro and micro levels in sub-Saharan Africa.

Keywords: Fintech innovation; Bank fragility; Threshold regression; Technology transformation; FGLS; GMM; PCA (search for similar items in EconPapers)
JEL-codes: G15 G21 G28 O31 O33 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-afr, nep-fdg, nep-ino and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/219986/1/GLO-DP-0576.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:576

Access Statistics for this paper

More papers in GLO Discussion Paper Series from Global Labor Organization (GLO) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().