Determinants of bank adoption of branchless banking innovations: evidence from Malawi

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Phiri, Y.A., 2022. Determinants of bank adoption of branchless banking innovations: evidence from Malawi. PhD, Nottingham Trent University.

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Abstract

The research investigates the drivers of bank adoption of branchless banking innovations (BBI) in Malawi. The interest in this investigation stems from the potential of BBI to contribute to solving some of the barriers to financial inclusion, a significant challenge for most African countries. However, due to data accessibility challenges in developing countries, much of the existing empirical literature on the financial services providers' side of BBI has focused on developed and emerging economies. Leveraging a unique dataset of Malawi's banking sector made available by the financial sector regulator, the research examines more dimensions of BBI than have most previous studies. The study digs further into the drivers of BBI by drawing a distinction between physical and remote BBI, a novel distinction in this field of research.

The study adopts multiple econometric models and establishes regulation and bank size as the key drivers. Firstly, given the dynamic nature of innovation and risk, bolstering the relevance of regulation of BBI in helping institutions to manage innovation related risks requires an understanding of the unique risks that are faced in the local context. As BBI transcends many sectors, policy recommendations hinge on increased collaboration between the different sectoral regulators of BBI and the regulated institutions in the BBI ecosystem. Secondly, small banks are found to be rapid adopters of both physical and remote BBI. Scaling up BBI in the face of financial stability considerations therefore requires re-opening the banking sector to smaller financially sound institutions.

Divergent findings on the impact of branch intensity on adoption of different forms of BBI are another crucial finding with important lesson for bank strategy. The positive association between branch intensity and physical BBI indicates that banks with extensive networks of branches can leverage their branding and physical presence to enhance financial inclusion among low-end retail consumers using physical BBI. On the other hand, banks with a small network of branches would benefit more from remote BBI strategies.

In terms of bank ownership, the findings that government ownership in banks has a positive impact on the adoption of only some forms of BBI and a negative impact on other forms do not provide strong support for scaling up BBI strategy through the ownership channel. The findings that foreign ownership and BHC membership’s beneficial effects on BBI adoption emanates from the proliferation of small banks, that are rapid adopters, strengthens the case for further opening the sector to bolster competition.

Item Type:	Thesis
Creators:	Phiri, Y.A.
Date:	May 2022
Rights:	The copyright in this work is held by the author. You may copy up to 5 percent of this work for private study, or personal, non-commercial research. Any re-use of the information contained within this document should be fully referenced, quoting the author, title, university, degree level and pagination. Queries or requests for any other use, or if a more substantial copy is required, should be directed to the author.
Divisions:	Schools > Nottingham Business School
Record created by:	Linda Sullivan
Date Added:	17 May 2023 09:45
Last Modified:	17 May 2023 09:45
URI:	https://irep.ntu.ac.uk/id/eprint/48998