Department of Financial Engineering

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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.
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.
Comparison of the lee-carter and arch in modelling and forecasting mortality in Zimbabwe.
(2014) Taruvinga, Rodney
This paper aim to determine which model best fit the mortality profile of Zimbabwe. The model that were being compared were the LEE-CARTER and ARCH and the period under review was from 1983-2004 using mortality rates of five years age interval. The parameter of the LEE-CARTER model were estimated using singular value decomposition. The box Jenkins approach was used to determine the order of lags for the ARIMA. An ARIMA (1, 1, 1) was used to forecast the overall mortality levels. To determine which model best fit the mortality profile of Zimbabwe goodness of fit using the Kolmogorov-Simonov and root mean square error was used. The result suggested that the LEE-CARTER model provided a better fit as compared to ARCH. However both models failed to fit for ages between 50-59 years. Both models were used to forecast but selecting the one that had the best fit of the two model on a particular age group interval for the period 2005-2014.This paper concludes that generally the LEE-CARTER model provided a better fit for mortality profile of Zimbabwe.
A Comparison Between The Egarch Model and Multifactor Risk Modelin Predicting VaR: The Case of The Zimbabwe Stock Exchange.
(2014) Rwodzi, Ephania
Following the latest global financial crisis and the ongoing sovereign debt crisis, accurate measuring of market losses has become a very current issue not only in developed markets but in less developing markets like Zimbabwe. One of the most popular risk measures is Value-at-Risk (VaR); the Basel committee has encouraged the use of VaR as a measure of credit risk and market risk (thus the breakthrough of Basel 111 after the Eurozone debt crisis). In this research two predictive models have been used for estimating VaR for the ZSE. The two models are compared in terms of their ability in giving an accurateVaR estimate which does not underestimate the market risk of the Zimbabwe Stock Exchange (ZSE). The EGARCH model used the actual stock returns of the ZSE indices and the Multifactor Risk model assumed stock returns to be a function of four risk factors in predicting VaR. Applying the Kupiec test and the Basel Traffic light approach EGARCH model was found to be more accurate in estimating VaR for the ZSE as compared to the Multifactor Risk model.Due to the fact that the EGARCH model was able to capture not only volatility clustering and leptokurtosisbut it was also able to capture leverage effects in stock returns. A recommendation was made for further studies that the Multifactor Risk Approach explained in this document can be combined with the EGARCH model in VaR estimation. To allow for the inclusion of the risk factors in estimating VaR at the same time taking into consideration the volatility clustering, leptokurtosis and leverage effects in stock returns. Basing on the research findings a recommendation was also made to the investors and the stakeholders of the stock market to use a predictive model that can capture volatility clustering, leverage effects and risk factors in predicting VaR for the stock market. Lastly a VaR program was designed to answer one of the research questions using PHP; a lower level programming language that allows for many more functions than other programming language, such as login functions and graphical displays. This program was named VaR-Estimator.
Working Capital Management and The Profitability of Non- Financial Firms Listed on the Zimbabwe Stock Exchange (ZSE
(European Journal of Business and Economics, 2014-05-01) Gachira, Walter; Chiwanzwa, Washington; Nkomo, Dingilizwe Jacob; Chikore, Runesu
Working capital is essential for the day-to-day operations of a firm. The study examines the impact of working capital management on the profitability of non-financial firms listed on the Zimbabwe Stock Exchange (ZSE). Using panel data methodology, the direction and extent of the impact of working capital management on profitability is scrutinised. The regression analysis is based on a panel sample of 39 non-financial firms listed on the ZSE from 2009 to 2013, the period under which the Zimbabwean economy has been operating under the multicurrency system. It was found that there is a positive relationship between debtors’ days and firm’s profitability, a negative relationship between creditors’ days and profitability and a positive relationship between firm’s cash conversion cycle and its profitability. There is some negative relationship between current ratio and profitability, while inventory turnover days and profitability are positively related. Debt to asset ratio as a control variable has a significant negative relationship with firm value and profitability. The results of the study show that for the companies included in the sample, there are mixed effects of the components of working capital on firm performance. Managers can thus create value for shareholders by taking note of the existence of such relationships and take measures that enhance firm profitability.
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.
Mobile money usage in rural areas of Zimbabwe - case of Mudzi District
(nternational Journal of Scientific & Engineering Research,, 2015-02-03) Chinakidzwa, More; Mbengo, Pinigas; Nyatsambo, Marcelene
Mobile money is increasingly becoming popular in Zimbabwe. Availability of mobile money agents in rural areas is increasingly improving. This had dramatically simplified banking to the majority of the rural poor unbanked Zimbabweans. Consumers now enjoy much convenience offered by these mobile money services. However mobile money usage is still higher in urban areas than in rural areas although significant penetration levels can be witnessed. Most people in rural areas use mobile money more to receive money than any other service. About 69% of respondents in this survey have used mobile money. This figure shows a significant growth in mobile money usage. Convenience is the major driver to mobile money usage in rural areas. This survey was done in Mudzi and used face to face interviews as well as questionnaires. Financial services providers need to open more outlets in rural areas if they wish to reduce the unbanked population
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.
Causal Relationship between financial sector development and economic growth: a case of Zimbabwe
(IOSR Journal of Business and Management, 2015-04-20) Chisunga, David
This paper aims to investigate the impact of financial sector development on economic growth in Zimbabwe, the reason being that no such research has been carried out in Zimbabwe. The research utilized secondary data for the period 1995 to 2008.Granger causality test is used to test the causality between economic growth and four financial sector development indicators. Johansen co-integration approach is used to test the long run relationship between economic growth and financial sector development indicators. The paper found out that granger causality runs from economic growth to financial sector development. The results support some empirical evidence that postulates that the granger relationship runs from economic growth to financial development and is there is a positive relationship in the long run. The study provides empirical evidence that economic growth granger causes financial sector development and there are positively related in the long run. Therefore, it is important that the government of Zimbabwe should implement policies that fosters economic growth and this will subsequently promotes financial sector development
A stakeholder founded business model for strategic management of innovation hubs: A case of Zimbabwe universities innovation hubs
(Journal of African Education (JAE), 2022-08) Simuka, Joshua; Moyo, Michael; Chinoperekweyi, Justine; Jakazi, Victoria; Makoko, Gaone Nikki; Nyagumbo, Dorothy Rudo; Nyausaru, Paul; Bajilla, Winnie; Mutenherwa, Menard
This article presents a synergistic framework for Organization Development (OD) practitioners, drawing insights from the Regenerate 2025 International OD Conference. The framework centers on Strategic Foresight, Regeneration, and Transformation as interconnected pillars for organizational evolution. It emphasizes the critical interplay of foundational elements knowledge, skills, and use of self - with key regenerative practices. Crucially, Nature-inspired Wisdom, Group Coaching, Storytelling, Appreciative Inquiry, embracing Artificial Intelligence, and Indigenous Paradigms, with Ubuntu as a cornerstone, are highlighted as profound influences that inform OD work and manifest regenerative potential in social systems. This framework equips practitioners to foster adaptive capacity, relational capital, and generative learning, guiding organizations toward flourishing, purpose-aligned, and resilient futures. It directly amplifies both the Sustainable Development Goals (SDGs) and the Inner Development Goals (IDGs), demonstrating how inner transformation catalyzes outer growth, directly impacting the day-to-day lives of people and the health of the planet.