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

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  • 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)

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.

Suggested Citation

  • Olarewaju Odunayo Magret, 2018. "Income Diversification in Low Income Sub-Saharan African Countries’ Commercial Banks: A “Blessing” or “Curse”?," Folia Oeconomica Stetinensia, Sciendo, vol. 18(2), pages 90-105, December.
    • Handle: RePEc:vrs:foeste:v:18:y:2018:i:2:p:90-105:n:7
    DOI: 10.2478/foli-2018-0021
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    interest income; fees and commission income; endogeneity; low-income economies; Herfindahl Hirschman Index; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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