Browsing by Author "Muvingi, Jacob"

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Application of DEA in the evaluation of bank efficiency in Zimbabwe: A comparative analysis of multi-currency era and Zimbabwean dollar period (2004- 2010)
(International Conference on Information and Financial Engineering (ICIFE ), 2012) Muvingi, Jacob; Muvingi, Jacob
Banks are very important intermediaries in the economy. They eliminate the informational problems between surplus economic units and deficit economic units by monitoring the latter and ensuring a proper use of the depositors’ funds. An efficient financial sector should reduce transaction costs and thus increases the share of savings channelled into productive investments. In the past eight years Zimbabwe’s economy recorded negative growth rates, but measures put in place in the past two years were highly targeted on the achievement of positive growth rates. Attainment of the set economic targets relies so much on a well functioning financial sector. The main objective of the study was to ascertain bank efficiency scores of Zimbabwean banks for the two currency periods understudy, that is the Zimbabwe dollar era and multicurrency era. Furthermore an analyses on the degree of improvement required for each bank to be efficient was carried-out. The study utilised the financial intermediation approach based on data envelopment analysis. The methodology had two inputs and two outputs; total deposits , interest expenses , total loans and advances, and interest income. Adoption of multi-currency in 2009 was associated with a drop in bank efficiency. All private owned banks, both foreign and locally owned banks, recorded higher efficiency scores as compared to the publicly owned banks, both foreign and locally owned banks .Bank efficiency of seven of the banks understudy improved under the multi-currency regime, whilst six banks recorded a decline of bank efficiency in multi-currency. Year 2004 had four banks with efficiency scores of 100%, whereas 2009 had three banks and lastly 2010 has two banks. Under this criteria year 2004 is more efficiency than the two periods in multi-currency, however year 2004 had four banks with efficiency scores below 50%, 2009 has three banks and lastly 2010 has one bank. Migration of an entity from one banking type to another, resulted a drop on bank efficiency .Size of a bank in terms of deposits does not translate to high bank efficiency. The low efficiency of foreign owned banks during the Zimbabwean dollar era was attributed to restrictive credit creation policies. The bank inefficiency in 2009 was mainly caused by high interest expenses emanating from liquidity challenges associated with the use of foreign currencies in place of the domestic currency. Banks with the least requirement adjustment for interest expense during year 2010 were expected to increase their loans and advances in order to achieve efficiency, in an environment characterised by liquidity improvements.
An Assessment of Zimbabwean Merchant Banks Conformity to International Best practices in risk management
(IACSIT Press, 2011) Muvingi, Jacob
A study on the assessment of Zimbabwean Merchant banks conformity to international best practices in risk management was driven by the new trend in the form of the globalization of financial markets and the recent move by Zimbabwean financial institutions to expand regionally. The specific risk management practices which were considered include, risk capital determination approaches, risk infrastructure and stress-testing practices. A survey research design was used to carry out the research through use of questionnaires and interviews; additionally the Basic Indicator approach was used to quantitatively assess the adequacy of the risk capital. The main objective of the research was to check if Zimbabwean Merchant bank practices are in conformity with international best practices in risk management, covering the above mentioned areas. There is a lack of momentum towards Basel II implementation despite calls by the Central Bank since 2006. Risk management infrastructure of Merchant Banks in the form of operational and credit risk technology lacks capabilities recommended by the BIS ,operational risk capital set-aside by Merchant banks is insufficient to cover operational risk, less benefits are being derived from risk management investments and this retard their desire by banks to conform to international best practices in risk management, majority of banks’ ORM practices are placed between foundation and intermediate stage of capco framework, whereas CRM practices are placed on the intermediate stage, stress testing approach on credit risk is disastrous considering the integrated nature of risk exposures. Basel II implementation challenges were identified and their magnitude explains non-conformity to international best practices in risk management.
Default Prediction Models a Comparison between Market Based Models and Accounting Based: Case of the Zimbabwe Stock Exchange 2010-2013
(Journal of Finance and Investment Analysis,, 2015-03-20) Muvingi, Jacob; Nkomo, Dingilizwe; Mazuruse, Peter; Mapungwana, Patricia
Default prediction is relevant to equity investors in Zimbabwe. The study examined the performance of two bankruptcy prediction models, the accounting ratio-based (Z-Score) model and the market based (KMV distance to default) model. The Z-Score model developed has two variables, market value to long term debt and EBIT to current liabilities and uniquely describe Zimbabwe’s corporate environment. The research concluded that accounting model (Z-Score) has superior bankruptcy prediction power. The model achieved 0.959 accuracy ratio against the market based model 0.509. Companies that went bankrupt during the period had shown signs of poor financial performance in prior years.
Estimation of Term Structures using Nelson-Siegel and Nelson-Siegel-Svensson: A Case of a Zimbabwean Bank
(Journal of Applied Finance & Banking, 2014-11-01) Muvingi, Jacob; Kwinjo, Tafadzwa
The primary objective of the study was to determine the best parametric model that can be used for fitting yield curves for a bank between Nelson-Siegel model and Nelson-Siegel-Svensson.Nelson-Siegel and Nelson-Siegel-Svensson models using Ordinary Least Squares after fixing the shape parameters to make the models linear models. A t-test conducted is conducted on the adjusted R2 of the two models and results showed that Nelson-Siegel-Svensson model fits better the yield curves of the Bank compared to Nelson-Siegel model. An analysis of the out-of-sample forecasting abilities of the two models using AR(1) conducted using E-views shows that the two parametric models have excellent out-of-sample forecasting abilities on all of their parameters. The time independent of Nelson-Siegel-Svensson model was found to be negative in most of the time and could not be interpreted as a long run yield of the Bank. It is also highlighted that the models produces very low levels of R2 in many cases because of the high volatility that is found in the market interest rates of certificates of deposits. The estimated yield curve may be used as a reference curve for funds transfer pricing systems.
Modelling the Sensitivity of Zimbabwean Commercial Banks’ Non-performing Loans to Shocks in Macro-economic Variables and Micro-economic Variables: (2009-2014)
(World Journal of Operational Research, 2017-06-21) Muvingi, Jacob; Sauka, Kudzai; Chisunga, David; Chirume, Crispen
This paper used complementary panel data models that are fixed effect regression model and panel vector auto regression model. The study was motivated by the hypothesis that both macroeconomic and microeconomic variables have an effect on the loan quality. The first part of the research was to determine the specific macro and microeconomic variables that give rise to the non-performing loans (NPLs) using fixed effect regression model. The empirical findings of this study provide evidence that nonperforming loans depends on macro and micro economic variables, the trend analysis of Zimbabwean commercial banks’ shows an upward movement of over the period of study. The study found out that Gross domestic product (GDP), Inflation, loan deposit ratio and bank size had a statistical significant effect on the level of non-performing loans (NPLs). The second part was mainly to model the dynamic relationship of all the variables that were found to affect nonperforming loans (NPLs); this was done through impulse response analysis based on PANEL VAR model. One standard shock to credit growth will be greatly felt in the sixth year, whereas of size of the bank will have a great negative impulse in the seventh year
Zimbabwe commercials banks efficiency and productivity analysis through DEA Malmquist approach: 2002-2012
(Journal of Data Envelopment Analysis and Decision Science, 2015-01-30) Muvingi, Jacob; Hotera, Suggest
Majority of data envelopment analysis studies have been focused on developed economies and economies in Asia, and very few studies on developing economies particularly African economies. This research aims to determine bank efficiency and productivity change of Zimbabwean commercial banks. The DEA model was used to measure the efficiency of 10 commercial banks working in Zimbabwe. The intermediation approach was used to specify variables. The average scores of technical efficiency under the Constant Returns to Scale (CRS) and Variable Returns to Scale (VRS) assumptions for the commercial banking sector as a whole are 70.95% and 81.5% respectively. The average scale efficiency for commercial banks operating in Zimbabwe was found to be 73.7%.Through applying the Malmquist Productivity Index (MPI) method; it was found that the mean total factor productivity increase for Zimbabwean commercial banks from 2003 to 2012 is 13.8%. The results also showed that the total factor productivity index peaked in 2009 where it reached a value of 121.1% and reached the lowest point in 2005 were it went down to (-52%)