Technology, Financial Innovations and Bank Behavior in a Low Income Country

Alex Bara and Pierre LeRoux

Journal of Economics and Behavioral Studies, 2018, vol. 10, issue 4, 221-234

Abstract: Technology has enabled banks to introduce new products that integrate markets, simplify operations and enable expansion of business at low cost, expand to new markets, take new risks and deepen their markets. Zimbabwe registered significant growth in adoption and diffusion of financial innovations over the past two decades, which coincided with a shift in the structure of credit portfolios of banks, and growth in credit as well as risk appetite. This study empirically evaluates the impact of financial innovations in influencing bank behaviour, specifically, portfolio structure risk appetite and delivery channels of banks in Zimbabwe. The study applied co-relational analysis, Fully Modified OLS and the Dynamic OLS estimation models as well as Autoregressive Granger causality approaches. Empirical results show that technology has the capacity to influence activities of banks in risk management, credit and delivery of banking service in lowincome countries. Precisely, financial innovation influences increase in credit towards previously high-risk areas, compositions of credit portfolios in banks and support growth in number of bank accounts. Causality was found to run from financial innovation to bank behaviour, and only in the long run.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:rnd:arjebs:v:10:y:2018:i:4:p:221-234

DOI: 10.22610/jebs.v10i4(J).2423

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