Research Articles (Economics and Finance)

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Open Access
The effect of financial literacy confidence on financial risk preference confidence. a lab experiment approach
(SAGE Publications, 2024) Mudzingiri, Calvin
The study experimentally investigated the impact of financial literacy confidence (FLC) on financial risk preference confidence (FRPC) constructed from objective and subjective measures of financial literacy and risk preferences. Seven hundred seventy-two responses from 193 subjects were analyzed using the Random Effect Panel Regression (REPR) technique. The study reveals that FLC significantly impacts FRPC differently for overconfident and underconfident individuals. Specifically, the results show that an increase in FLC increases FRPC for overconfident individuals but decreases FRPC for underconfident individuals. Hierarchical Random Effect Panel regressions confirm that financial literacy residuals significantly impact risk preference residuals. The findings entail that cognitive abilities errors on subjective and objective measures of financial literacy correlate with risk preference errors on subjective and objective risk preference measures. Interestingly, the results show that increased financial literacy residuals lead to reduced risk preference residuals for individuals with high financial literacy. The results suggest that individuals with higher financial literacy can better align their subjective and objective measures of risk preferences. The study findings help to explain how FLC shapes the financial behavior of individuals making risky financial choices. The policy implications of these findings are that investing in financial literacy programs can assist individuals in making well-informed investment or saving decisions and can better manage financial risks.
Open Access
Economic inclusion: green finance and the SDGs
(MDPI, 2024) van Niekerk, Arno J.
Persistent economic exclusion and the high levels of natural resource depletion are alarming. The Sustainable Development Goals (SDGs) are among a few global initiatives aimed at bringing a turnaround in both of these areas of concern. Giving action to productive economic inclusion and transitioning towards a circular, regenerative economy is challenging for countries, particularly because of a lack of economic incentives. Green finance has emerged in the last few decades as a valuable mechanism that has the potential to meet this challenge. In answering the question of how to facilitate the necessary transition to a green, inclusive economy, the paper attempts to bring green finance and economic inclusion together as a possible means (like a bridge) to address economic exclusion and resource degeneration. That is the primary aim of the study, and it is investigated through an analysis of theoretical literature. The key findings include: a strong synergy exists between green finance and economic inclusion; different forms of green finance are able to facilitate economic inclusion; and green finance can be instrumental in attracting investors to fast-track SDG attainment. A key conclusion is that green finance can play a vital role in activating and prolonging broad-based benefit sharing in an eco-conscious way.
Open Access
Economic Inclusion: green finance and the SDGs
(MDPI, 2024) van Niekerk, Arno J.
Persistent economic exclusion and the high levels of natural resource depletion are alarming. The Sustainable Development Goals (SDGs) are among a few global initiatives aimed at bringing a turnaround in both of these areas of concern. Giving action to productive economic inclusion and transitioning towards a circular, regenerative economy is challenging for countries, particularly because of a lack of economic incentives. Green finance has emerged in the last few decades as a valuable mechanism that has the potential to meet this challenge. In answering the question of how to facilitate the necessary transition to a green, inclusive economy, the paper attempts to bring green finance and economic inclusion together as a possible means (like a bridge) to address economic exclusion and resource degeneration. That is the primary aim of the study, and it is investigated through an analysis of theoretical literature. The key findings include: a strong synergy exists between green finance and economic inclusion; different forms of green finance are able to facilitate economic inclusion; and green finance can be instrumental in attracting investors to fast-track SDG attainment. A key conclusion is that green finance can play a vital role in activating and prolonging broad-based benefit sharing in an eco-conscious way.
Open Access
Peroxidase application reduces microcrystalline cellulose recalcitrance towards cellulase hydrolysis in model cellulose substrates and rooibos biomass
(Elsevier, 2024) Mohotloane, Mamosela Marriam; Alexander, Orbett; Adoons, Vanthini Nelson; Pletschke, Brett Ivan; Mafa, Mpho Stephen
We have identified a HRP enzyme with microcrystalline cellulose activity, which has not yet been explored. The current study investigated the effect of HRP pretreatment on the microcrystalline cellulose substrates, Avicel and filter paper. SEM findings showed that HRP pretreatment catalysed the para-microcrystalline regions of Avicel, cracking and opening the pores on the surface. On filter paper, HRP removed the para-microcrystalline regions exposing fibres. Crystallinity index (CrI) analysis confirmed that HRP increased the CrI of Avicel from 49 % to 54.19 % and filter paper from 42 % to 47 %. The cellulose crystallite sizes increased from 45 to 47 nm at the 002 lattices in Avicel, suggesting a reduction of crystalline cellulose. In addition, endoglucanase displayed 1.15-fold increased activity on HRP-pretreated Avicel, confirming reduced crystalline cellulose. These findings showed that HRP pretreatment changed the structural and chemical properties of Avicel, i.e., loosening crystalline cellulose to make the substrate accessible to enzymes during hydrolysis. Finally, these findings were supported by rooibos microcrystalline cellulose modification post-HRP pretreatment, resulting in a 95 % yield of soluble sugars at 25 mg enzyme cocktail/g biomass.
Open Access
Economic sustainability of small mining towns: a case study in South Africa
(SAGE Publications, 2023) Meggersee, Angelien; Guvuriro, Sevias
Small mining towns are often single-industry towns that turn to ghost towns or face negative socio-economic impacts upon mine closure. This study qualitatively explores the roles that mining companies and other key stakeholders (should) play in the development of local economies of the small mining communities to bring about economic sustainability, employing a constant comparative analysis. A small mining town in South Africa is the case study. Legislative and policy frameworks were scrutinized for their effectiveness in promoting economic sustainability. In-depth interviews with key stakeholders were carried out. Key factors limiting the effective implementation of developmental strategies were also explored. The study finds that weak community involvement, lack of trust, poor collaboration, poor municipal capacity, and legislation and policy flaws impact economic sustainability. Sustainable local economic development efforts are reported though. However, such efforts are insufficient because of the legislation and policy frameworks that are promoting short-term growth. Also, the town’s overdependence on the mining company, local government not optimally fulfilling their roles and responsibilities, and minimal community members’ participation on local economic development are other hindrances. However, the fact that the mining company and local municipality do acknowledge the shortcomings in their efforts towards promoting economic sustainability is a promise in minimizing the socio-economic effects of mine closures.
Open Access
Fiscal space, governance quality and inclusive growth: evidence from Africa
(Emerald, 2023) Katuka, Blessing; Mudzingiri, Calvin; Ozili, Peterson K.
𝗣𝘂𝗿𝗽𝗼𝘀𝗲 This study aims to examine the impact of fiscal space and governance quality on inclusive growth in African countries. 𝗗𝗲𝘀𝗶𝗴𝗻/𝗺𝗲𝘁𝗵𝗼𝗱𝗼𝗹𝗼𝗴𝘆/𝗮𝗽𝗽𝗿𝗼𝗮𝗰𝗵 In total, 28 African countries were analyzed from 2000 to 2020 using the generalized method of moment regression method. An inclusive growth index was developed using the principal component analysis (PCA) method. The PCA-derived index incorporates factors such as poverty, income inequality, economic participation and per capita income. 𝗙𝗶𝗻𝗱𝗶𝗻𝗴𝘀 The main findings suggest that fiscal space availability (de facto fiscal space and fiscal balance) promotes inclusive growth. The study also showed that lagged inclusive growth, digitalization and governance indicators positively influence inclusive growth. The study concludes that fiscal space availability fosters inclusive growth, but this effect is mediated by governance quality in Africa. 𝗢𝗿𝗶𝗴𝗶𝗻𝗮𝗹𝗶𝘁𝘆/𝘃𝗮𝗹𝘂𝗲 Several studies examined the role of fiscal policy on inclusive growth. However, it is crucial to assess the fiscal space, that is, the financial capacity of the government to implement its fiscal policy without harming its financial stability. This paper, therefore, contributes to the existing literature by using de facto fiscal space indicator to comprehend fiscal dynamics contributing to inclusive growth. In addition, the paper uniquely constructs an inclusive growth index by including poverty severity, which considers both the incidence and depth of poverty and inequality in society.
Open Access
Unveiling the role of investment tangibility on financial leverage: insights from African-listed firms
(MDPI, 2023) Vengesai, Edson
The asset structure of a firm plays a pivotal role in determining its leverage. A higher proportion of physical assets is often associated with high debt ratios. This study explores the impact of investment tangibility on financial leverage, examining both tangible and intangible investments. Using a dynamic panel data model estimated through the two-step system generalized method of moments (GMM), we analyse a dataset encompassing 815 non-financial listed firms from 22 African stock markets. The results show that African firms have higher inclinations to invest in physical assets. We found a statistically significant negative relationship between leverage and tangible and intangible investments. The findings indicate that African firms tend to maintain lower leverages regardless of whether they invest in tangible or intangible assets. The observed relationship aligns with the hypothesis that high-growth firms, in their expansion efforts, strategically tend to opt for low debt to mitigate the agency costs associated with debt and to help prevent underinvestment. This outcome underscores the interconnected nature of financing and investment decisions. This research contributes to the literature on financial leverage and investment by dissecting investments into tangible and non-tangible components and highlighting their distinct impacts on leverage. Moreover, it provides empirical evidence for previously unexplored African firms, shedding light on the reasons behind the relatively low leverage levels observed in African firms.
Open Access
A systematic literature review on migration and remittances in mountainous regions: key takeaways for Phuthaditjhaba, Free State, South Africa
(MDPI, 2023) Sunge, Regret; Mudzingiri, Calvin
Remittances are essential to the sustainability of economies in mountainous regions that face massive labour migration due to limited income generation and employment opportunities. In 2021, the share of remittances in GDP in the top 10 mountainous economies in the world was over 20%. Nonetheless, most are characterised by relatively lower GDP per capita and high poverty levels. Drawing a comparison with other mountainous areas, Phuthaditjhaba, an emerging mountainous city of South Africa on the border with Lesotho, faces similar out-migration and inferior socio-economic parameters. A global systematic literature review on the impact of remittances on livelihoods, specifically targeting mountainous areas, is missing. We, therefore, interrogate the role that remittances can play in Phuthaditjhaba. To inform our intended research, we seek to draw lessons from evidence on how migration and remittances affect mountainous communities globally. Accordingly, we carry out a systematic literature review (SLR) based on an updated Preferred Reporting Item for Systematic Reviews and Meta-Analysis (PRISMA) 2020 statement supported by bibliometric (co-word) analysis (BA) in VOSViewer. We collected data from the Scopus and Dimensions websites and drew 165 publications, of which only 88 were included after exclusion and inclusion assessments. The PRISMA results show that Mountain Research and Development, Russell King, and Nepal are the most productive and cited journal, the most productive and cited author, and the most researched country, respectively. The bibliometric analysis on keyword co-occurrences revealed that women, agriculture, labour migration, land management, forest, and poverty are the research hotspots. In light of these findings, we proffer important recommendations for future researchers and policymakers and identify thematic research areas for Phuthaditjhaba.
Open Access
Impact of output gap, COVID-19, and governance quality on fiscal space in Sub-Saharan Africa
(MDPI, 2023) Katuka, Blessing; Mudzingiri, Calvin
This study examined the determinants of fiscal space within the Sub-Saharan Africa (SSA) region, utilising a panel of 33 countries from 2005 to 2021. The paper applied the panel threshold, difference, and system generalised method of moments (GMM) regression techniques. The empirical results found evidence of constrained fiscal space and poor governance in Central, Western, and Eastern Africa. The results further unveiled that an enhancement in governance indicators beyond −0.23 for the governance index, −0.15 for control of corruption, −0.98 for the rule of law, −0.37 for regulatory quality, −0.15 for voice and accountability, +0.36 for political stability, and −0.61 for government effectiveness, respectively, increase fiscal space. Moreover, the study concluded that the output gap, COVID-19, trade openness, and economic growth impact fiscal space availability in Central, Western, Southern, and Eastern Africa. The paper investigated whether the COVID-19 pandemic and governance quality significantly influenced fiscal space within SSA. We strongly recommend enhancement in all facets of governance through comprehensive restructuring of governance policies across all SSA countries. Another key recommendation is fostering trade openness to expand tax revenue generation and broaden the tax base, thereby providing the continent with greater fiscal space and improved resilience to unforeseen shocks.
Open Access
Impact of money supply in different states of inflation and economic growth in South Africa
(MDPI, 2023) Buthelezi, Eugene Msizi
This paper investigates the impact of the money supply in different states of inflation and economic growth in South Africa from 1990 to 2021. The term “states” defines periods of low and high rates of economic variables of interest. Markov-switching dynamic regression (MSDRM) and time-varying parameter structural vector autoregression (TVP-VAR) are used in this paper. The contribution of this paper is not only based on the long run but also on the examination of the impact of the money supply in different states of inflation and economic growth. Moreover, the use of shock accounts for time-varying elasticity. It is found that there is a 0.70% decrease in the gross domestic product for a 1% increase in money supply in state 1, while in state 2, the money supply was insignificant. The money supply had a negative and a positive impact on inflation in states 1 and 2, with rates of 0.05% and 0.35% in the respective states. The money supply had a high multiplier effect on gross domestic product and inflation. More than 5 years were spent in each state for both gross domestic product and inflation, while the transition probability of moving and returning to each state is significant. The trade-off of using the money supply for economic growth and inflation is evident in South Africa. It is recommended that the state of the economy be considered when using the money supply in an effort to stimulate economic growth or stabilise inflation.
Open Access
The impact of microfinance institutions on poverty alleviation
(MDPI, 2022) Chikwira, Collin; Vengesai, Edson; Mandude, Petronella
Microfinancing has been targeted as a tool to address Poverty through the provision of credit to the poor and marginalised economic functions. However, the main objective upon which these institutions are founded is yet to manifest primarily in developing economies. This study examined the role of microfinancing in poverty alleviation by employing a Vector Error Correction Model on quarterly time-series data. The results reveal a significant long-run relationship among the variables poverty, microfinancing, SMEs, and agricultural growth. Contrary to expectations, Microfinancing was found to increase poverty in the long run. SMEs and agricultural development were found to reduce the level of poverty in the long run. In the short run, regression results reveal that SMEs’ growth alleviates poverty, and poverty increases the growth of microfinance loans in the country. The increase in SMEs is a tool for alleviating poverty, and the growth in microfinance institutions is also being driven by poverty. This suggests that continued improper microfinancing can escalate the poverty levels to undesired heights. The findings imply that the growth of microfinance loans is not being put to its intended and efficient use. These findings bring to the fore that it is not only the provision of funds that matters.
Open Access
On the predictors of loan utilization and delinquency among microfinance borrowers in Zimbabwe: A Poisson regression approach
(Taylor & Francis, 2022) Chamboko, Richard; Guvuriro, Sevias
Microfinance institutions (MFIs) are a prominent financial inclusion initiative in many developing countries. In Zimbabwe, however, less is known about microfinance borrowers, determinants of loan utilisation and borrowers’ repayment behaviour. Demonstrating that MFIs serve those who are economically marginalised and traditionally excluded from the formal financial system is useful in a country where most of the economic activities are in the informal sector. This study investigated the factors associated with the utilisation of microfinance loans and delinquency among microfinance borrowers using the Poisson, logit and the zero-truncated Poisson regression models on 6165 unique borrowers in Zimbabwe. The study findings revealed that microfinance loans were significantly more likely to be accessed by low-income individuals, who took small loans with relatively high instalments. Women were less likely to access microfinance loans, and reliable borrowers were more likely to access repeat loans. The level of income, number of previous loans and loan terms explained the delinquency among borrowers. Largely, the findings suggest that microfinance in Zimbabwe serves the needs of the low-income group. However, policies that seek to improve access to credit for women and youth remain a priority.
Open Access
COVID-19 shock and sectorial index response in South Africa: a cross-sector analysis
(EconJournals, 2022) Vengesai, Edson
The prime objective of this study was to examine the impact of COVID-19 shock on sector returns of the South African Stock market. The study employed the Autoregressive Distributed Lag (ARDL) model estimated with a Pooled Mean Group estimator on a sample of daily stock returns of 10 Johannesburg Stock Exchange (JSE) sectors. The results indicate a heterogeneous behaviour in sector stock return response to COVID-19 shock. The study shows that the Pandemic negatively impacted the majority of the sectors. However, some sectors were positively affected by the outbreak, while some were resilient to the shock. The pooled ARDL panel results show a negative relationship between COVID-19 and stock market returns in the short run. The study found an insignificant relationship between stock market returns and COVID-19 cases in the long run. The study also shows that sector and stock return response to different factors is time-varying. The results imply that COVID-19 shock is short-lived, the negative impact of the Pandemic is corrected in the long run. Stock market investors should thus focus on the long-run behaviour of stock returns. The results evidence the significance of diversification in different stock market sectors for investors
Open Access
Food insecurity and health outcomes during the coronavirus pandemic in South Africa: a longitudinal study
(BMC, 2022) Nwosu, Chijioke O.; Kollamparambil, Umakrishnan; Oyenubi, Adeola
Background Given that South Africa experienced significant food insecurity even before the COVID-19 pandemic, it is not surprising that the pandemic would result in even greater food insecurity in the country. This paper provides additional evidence on the relationship between food insecurity and health. Methods Data came from the National Income Dynamics Study-Coronavirus Rapid Mobile Survey, a longitudinal survey of adult South Africans. Health was a self-reported indicator of general health, while food insecurity was measured by household hunger, the frequency of household hunger, and households running out of money to buy food. We performed descriptive and econometric analyses. Results Food insecurity has remained high even in the face of greater re-opening of the economy. Moreover, among hunger-affected households, between a quarter and a third struggled with hunger almost daily or daily. Belonging to a hunger-affected household was associated with a 7-percentage point higher probability of worse health compared to not experiencing hunger. Compared to being unaffected by hunger, being hungry everyday was associated with a 15-percentage point higher probability of worse health in wave 1, an effect that became statistically insignificant by wave 4. Conclusions These results show the enormity of the hunger problem in South Africa and its adverse effects on health. In the face of economic uncertainty and the removal of COVID-19 palliatives like the grant top-ups, we enjoin policy makers to protect the vulnerable from food insecurity by continuing the implementation of anti-hunger policies and other measures that enhance food security in the country.
Open Access
Gender differences in intra‐household financial decision‐making: an application of coarsened exact matching
(MDPI, 2021-10) Booysen, Frederik; Guvuriro, Sevias
Most studies that explore collective models of intra‐household decision‐making use economic outcomes such as human capital, earnings, assets, and relative income shares as proxies of the relative distribution of bargaining power. These studies, however, fail to incorporate important measures of control over and management of the economic resources within households. In the current study, a direct measure of financial decision‐making power within the household is used to directly assess the distribution of bargaining power. Coarsened exact matching, an identification strategy not yet applied in studies of this nature, is applied to couple‐level observational data from South Africa’s longitudinal National Income Dynamics Study. The influence of gender differences in intra‐household decision‐making on resource allocations to per capita household expenditure is assessed. In the case of greater financial decision‐making power in couples being assigned to wives rather than husbands, per capita household expenditure on education increases significantly. The empowerment of women with financial decision‐making power therefore holds the promise of realizing the benefits of investments in human capital.
Open Access
Exploring association between self-reported financial status and economic preferences using experimental data
(MDPI, 2021-05) Mudzingiri, Calvin; Guvuriro, Sevias; Gomo, Charity
Research on economic behaviour of individuals in different financial statuses such as being in a good financial standing or in a threatening financial situation are inconclusive. Some evidence suggest that the culture of poverty may shape and dominate the economic preferences of those who are poor and even make them being prone to trembling and making mistakes thereby making decisions that do not maximize their utility. Other evidence suggest that the poor exercise extra caution and fail to maximize utility. This study investigates the association between self-reported financial status and economic preferences in a developing country setting using data from an incentivized experiment and a survey. Extended random effects panel probit regression models are employed as an analytical strategy. The study established a positive association between being financially broke or very broke and being risk averse. In addition, a positive association is found between being financially ‘very broke’ and impatient. Such findings illustrate the importance of psychology of poverty in economic preferences and in decision-making in general, even as poverty is temporary as represented by self-reported financial status.
Open Access
Exploring association between self-reported financial status and economic preferences using experimental data
(MDPI, 2021) Mudzingiri, Calvin; Guvuriro, Sevias; Gomo, Charity
Research on economic behaviour of individuals in different financial statuses such as being in a good financial standing or in a threatening financial situation are inconclusive. Some evidence suggest that the culture of poverty may shape and dominate the economic preferences of those who are poor and even make them being prone to trembling and making mistakes thereby making decisions that do not maximize their utility. Other evidence suggest that the poor exercise extra caution and fail to maximize utility. This study investigates the association between selfreported financial status and economic preferences in a developing country setting using data from an incentivized experiment and a survey. Extended random effects panel probit regression models are employed as an analytical strategy. The study established a positive association between being financially broke or very broke and being risk averse. In addition, a positive association is found between being financially ‘very broke’ and impatient. Such findings illustrate the importance of psychology of poverty in economic preferences and in decision-making in general, even as poverty is temporary as represented by self-reported financial status.
Open Access
The impact of financial literacy on risk seeing and patient attitudes of university students
(Taylor & Francis, 2021) Mudzingiri, Calvin
The study investigates the impact of financial literacy on risk preference and time preference choices of university students. The study collected data using a questionnaire, implemented a multiple price lists experiment, and administered a financial literacy test. A maximum of 7680 risk preference and 7680 time preference choices were elicited from the subjects. The study used a maximum likelihood joint estimation on an expected utility exponential function on homogeneous and heterogeneous preferences of students. Research results show that financial literacy significantly influenced risk and time preferences of university students with low financial literacy. The study also found significant risk aversion and impatience on homogenous preference choices of students. Structural behavioural errors were significant for the risk preference and time preference tasks choices. An increase in financial literacy is associated with risk seeking and patient attitudes among university students. These traits are associated with better life outcomes of citizens.
Open Access
Eliciting risk preferences experimentally versus using a general risk question. Does financial literacy bridge the gap?
(MDPI, 2021) Mudzingiri, Calvin; Koumba, Ur
The study investigates the stability of financial risk preference choices elicited from subjects by way of two methods, namely: experimentally elicited incentivized revealed risk preferences (IRRP) and (self-reported) perceived willingness to take a financial risk (PWTFR). The research further examines whether financial literacy (a human capital aspect) helps in reducing the gap between IRRP and PWTFR choices made by subjects. A total of 193 university students (where 53% were female) participated in the study. The subjects completed IRRP choices from four multiple price list (MPL) risk preference tasks and a financial literacy questionnaire. There is a tendency to anchor at extremes of risk-seeking behavior when subjects self-report their PWTFR choices. A paired t-test analysis of the two methods shows that the average responses from the two methods are significantly different. A random effect (RE) panel regression shows that an increase in financial literacy narrows the gap between IRRP and PWTFR choices. The study’s findings show that responses by subjects from a PWTFR general risk question (GRQ) and IRRP experiment are unstable and inconsistent. What people say in a survey does not always translate into what they do when faced with a risk preference choice dilemma. Financial literacy helps individuals to predict their risk attitudes more precisely.
Open Access
Indecisiveness on risk preference and time preference choices. Does financial literacy matter?
(Cogent OA, 2019) Mudzingiri, Calvin; Mwamba, John W. Muteba; Keyser, Jacobus Nicolaas; Bara, Alex
The aim of this study is to investigate the relationship between financial literacy and decisiveness in making risk preference and time preference choices by university students. The study collected data using a questionnaire, implemented a multiple price list risk preference and time preference experiment, and administered a financial literacy test on 192 university students (female = 53%). A maximum of 7 680 risk preference and 7 680 time preference choices were elicited from the university students. An ordinary least squares regression model shows that multiple switching or indecisiveness on risk preference and time preference choices increase as financial literacy decreases. University students with low financial literacy are more likely to switch back-forth between binary lotteries. Low financial literacy increases behavioural biases and short cuts in making preference choices. Being financial literate helps university students to be decisive in making risk and time preference choices.