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The impact of African agriculture production on bank stability through bank risk and profit

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  • Jean-Petit Sinamenye

    (School of Management, Huazhong University of Science and Technology, Wuhan 430074, China.)

  • Changjun Zheng

    (School of Management, Huazhong University of Science and Technology, Wuhan 430074, China.)

Abstract

The African farming sector suffers from insufficient finance. Climate changes and socio-political issues hold down the required production level while food on the continent is still inadequate, with more vulnerable people on the one side. On the other side, credit institutions need reasons and guarantees to raise their risk-taking level (financial benefits). Then, this study tries to conciliate those two sides with new shreds of evidence by demonstrating the short and long-run effects of agricultural production on bank sustainability in 40 Sub-Saharan African countries. The study used different agro-production factors (Food and Cereal production factors), bank stability proxies (Liquidity Ratio, NPLs, LLRs), and bank profitability proxies (ROA and ROE). The GMM, DFE, and FMOLS models were used for short (with the 2010-2019 dataset) and long-run analysis (with the 1970-2018 dataset). The results demonstrated that agricultural production increases bank stability and profitability but reduces bank risks. The study concludes that farming finance increases agro-production and stabilizes banks (win-win). Governments, via central banks, should encourage commercial banks to increase bank risk-taking levels to sustain their banking system, increase farming production, and improve food security. Key Words:Agriculture, Production, Bank Stability, Risk, Profitability; SSA.

Suggested Citation

  • Jean-Petit Sinamenye & Changjun Zheng, 2022. "The impact of African agriculture production on bank stability through bank risk and profit," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 11(10), pages 119-139, December.
    • Handle: RePEc:rbs:ijbrss:v:11:y:2022:i:10:p:119-139
    DOI: 10.20525/ijrbs.v11i10.2245
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    References listed on IDEAS

    as
    1. de la Croix, David & Gobbi, Paula E., 2022. "Population homeostasis in sub-Saharan Africa," Economics & Human Biology, Elsevier, vol. 45(C).
    2. Thomson,Henry, 2019. "Food and Power," Cambridge Books, Cambridge University Press, number 9781108476812.
    3. Esther Gehrke, 2019. "An Employment Guarantee as Risk Insurance? Assessing the Effects of the NREGS on Agricultural Production Decisions," The World Bank Economic Review, World Bank, vol. 33(2), pages 413-435.
    4. Loka Ashwood & Andy Pilny & John Canfield & Mariyam Jamila & Ryan Thomson, 2022. "From Big Ag to Big Finance: a market network approach to power in agriculture," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 39(4), pages 1421-1434, December.
    5. Loka Ashwood & Andy Pilny & John Canfield & Mariyam Jamila & Ryan Thomson, 2022. "Correction: From Big Ag to Big Finance: a market network approach to power in agriculture," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 39(4), pages 1435-1435, December.
    6. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    7. Thomson,Henry, 2022. "Food and Power," Cambridge Books, Cambridge University Press, number 9781108701594.
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