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Reducing information asymmetry with ICT: A critical review of loan price and quantity effects in Africa

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  • Simplice Asongu
  • Sara le Roux
  • Jacinta Nwachukwu
  • Chris Pyke

Abstract

Purpose - The purpose of this paper is to investigate loan price and quantity effects of information sharing offices with information and communication technology (ICT), in a panel of 162 banks consisting of 42 African countries for the period 2001–2011. Design/methodology/approach - The empirical evidence is based on a panel of 162 banks in 42 African countries for the period 2001–2011. Misspecification errors associated with endogenous variables and unobserved heterogeneity in financial access are addressed with generalized method of moments and instrumental quantile regressions. Findings - The findings uncover several major themes. First, ICT when integrated with the role of public credit registries significantly lowered the price of loans and raised the quantity of loans. Second, while the net effects from the interaction of ICT with private credit bureaus (PCBs) do not improve financial access, the corresponding marginal effects show that ICT could complement the characteristics of PCBs to reduce loan prices and increase loan quantity, but only when certain thresholds of ICT are attained. The authors compute and discuss the policy implications of these ICT thresholds for banks with low, intermediate and high levels of financial access. Originality/value - This is one of the few studies to assess how the growing ICT can be leveraged in order to reduce information asymmetry in the banking industry with the ultimate aim of improving financial access in a continent where lack of access to finance is a critical policy syndrome.

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  • Simplice Asongu & Sara le Roux & Jacinta Nwachukwu & Chris Pyke, 2019. "Reducing information asymmetry with ICT: A critical review of loan price and quantity effects in Africa," International Journal of Managerial Finance, Emerald Group Publishing, vol. 15(2), pages 130-163, April.
  • Handle: RePEc:eme:ijmfpp:ijmf-01-2018-0027
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    Cited by:

    1. Boateng, Agyenim & Asongu, Simplice & Akamavi, Raphael & Tchamyou, Vanessa, 2018. "Information asymmetry and market power in the African banking industry," Journal of Multinational Financial Management, Elsevier, vol. 44(C), pages 69-83.
    2. Adeabah, David & Asongu, Simplice & Andoh, Charles, 2021. "Remittances, ICT and pension income coverage: The international evidence," Technological Forecasting and Social Change, Elsevier, vol. 173(C).
    3. Benlagha, Noureddine & Hemrit, Wael, 2020. "Internet use and insurance growth: evidence from a panel of OECD countries," Technology in Society, Elsevier, vol. 62(C).
    4. Simplice A. Asongu & Nicholas M. Odhiambo, 2019. "Testing the Quiet Life Hypothesis in the African Banking Industry," Journal of Industry, Competition and Trade, Springer, vol. 19(1), pages 69-82, March.
    5. Kusi, Baah Aye & Agbloyor, Elikplimi Komla & Gyeke-Dako, Agyapomaa & Asongu, Simplice Anutechia, 2020. "Financial Sector transparency and net interest margins: Should the private or public Sector lead financial Sector transparency?," Research in International Business and Finance, Elsevier, vol. 54(C).
    6. Simplice A. Asongu & Sara Le Roux & Vanessa S. Tchamyou, 2019. "Essential information sharing thresholds for reducing market power in financial access: a study of the African banking industry," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(1), pages 34-50, March.
    7. Asongu, Simplice & Batuo, Enowbi & Nwachukwu, Jacinta & Tchamyou, Vanessa, 2018. "Is information diffusion a threat to market power for financial access? Insights from the African banking industry," Journal of Multinational Financial Management, Elsevier, vol. 45(C), pages 88-104.
    8. Dianhui Mao & Zhihao Hao & Fan Wang & Haisheng Li, 2018. "Innovative Blockchain-Based Approach for Sustainable and Credible Environment in Food Trade: A Case Study in Shandong Province, China," Sustainability, MDPI, vol. 10(9), pages 1-17, September.

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    More about this item

    Keywords

    ICT; Information asymmetry; Financial access; O55; G20; G29; L96; O40;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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