Income Diversification in Low Income Sub-Saharan African Countries’ Commercial Banks: A “Blessing” or “Curse”?

Olarewaju Odunayo Magret ()
Additional contact information
Olarewaju Odunayo Magret: Durban University of Technology, Faculty of Accounting and Informatics, Department of Management Accounting, P.O. Box 1334, 7 Ritson Road, Ritson Campus, Durban4000, South Africa

Folia Oeconomica Stetinensia, 2018, vol. 18, issue 2, 90-105

Abstract: Dynamics in economic trend and banks’ creditors’ expectation have directed banks to search the innovative means of income generation. It is with this view that this study examines the relationship between the income diversification and financial performance of banks in SSA low income countries. A panel data of 1,280 observations were extracted from the financial profile of 160 commercial banks from 19 purposively selected countries from 2009 to 2016. The findings from the empirical analysis indicate that non-interest income accounts for 95% of operating income in Low Income countries’ commercial banking sector. Also, it was found that income diversification in SSA banks enhanced financial performance as affirmed by the finance theory because both interest and non-interest income sources are indeed blessings as they increase the financial performance significantly. Therefore, low income SSA countries’ commercial banks are urged to strive to ensure proper investment with their income diversification so that better performance of their economies is enhanced.

Keywords: interest income; fees and commission income; endogeneity; low-income economies; Herfindahl Hirschman Index; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: G10 G21 G28 L21 L22 L25 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/foli-2018-0021 (text/html)

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:vrs:foeste:v:18:y:2018:i:2:p:90-105:n:7

DOI: 10.2478/foli-2018-0021

Access Statistics for this article

Folia Oeconomica Stetinensia is currently edited by Waldemar Tarczyński

More articles in Folia Oeconomica Stetinensia from Sciendo
Bibliographic data for series maintained by Peter Golla ().