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The Impact of Stokvel and Banking Sector Efficiency: an Econometrics Model using (ARDL) Approach to Cointegration

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  • Lindiwe Ngcobo

    (University of South Africa)

Abstract

Background. Despite playing second fiddle to formal banking institutions, stokvel are community-based savings schemes aimed at improving the lives of low- and middle-income earners. Aim. The aims are to attempts to capture the relationship between stokvel and banking sector development across its proxy of banking sector efficiency. The aim is to determine the relative attractiveness of the needs of low- and middle households saving with banking sector/financial institutions. Methods. Using Autoregressive Distributed-lag (ARDL) Bounds Testing Approach using quarterly time series secondary data ranging from 2009Q4 to 2020Q2 collected from the South African Reserve Bank and Old Mutual South Africa. Results. The Bounds F-tests integration statistics of the combined cointegration test revealed a long-run association between stokvel and banking sector efficiency. Additionally, using the error correction model, a short-run relationship was observed between stokvel savings and banking sector efficiency. The negative and statistically significant coefficient of the error correction model (ECM) also confirmed the prevalence of a causal relationship between stokvel and banking sector efficiency. The standard diagnostics tests confirmed that ARDL results are significant and serially correlated. Stability tests were carried out using the cumulative sum of recursive residuals (CUSUM) and the cumulative sum of the squares of recursive residuals (CUSUMSQ) measures of model stability and the results showed that the models were highly stable over the sample period. Thus, it can be said that including stokvel in the banking system does not help with the development of the banking sector. Recommendation. A similar study can be conducted with the inclusion of all banks that make up the banking sector and their impact on South Africa’s economic growth.

Suggested Citation

  • Lindiwe Ngcobo, 2024. "The Impact of Stokvel and Banking Sector Efficiency: an Econometrics Model using (ARDL) Approach to Cointegration," ACTA VSFS, University of Finance and Administration, vol. 18(2), pages 127-140.
    • Handle: RePEc:prf:journl:v:18:y:2024:i:2:p:127-140
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    References listed on IDEAS

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    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Lindiwe Ngcobo & Joseph Chisasa, 2018. "Characteristics of Credit Instruments Issued by Stokvels in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 10(6), pages 240-250.
    3. H.S. Nuhu & A.O. Donye & P.M. Bzugu & A.O. Ani, 2015. "The Relationship between Savings Mobilization Techniques and Livelihood Activities of Rural Women in Borno State, Nigeria," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 5(3), pages 479-496, March.
    4. Lindiwe Ngcobo & Joseph Chisasa, 2018. "Success Factors and Gender Participation of Stokvels in South Africa," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 14(5), pages 217-228, OCTOBER.
    5. Sajid Haider & Munir Ahmed & Carmen de Pablos & Aasma Latif, 2018. "Household Characteristics and Saving Motives: Application of Multinomial Logistic Regression to Examine Maslow's Hierarchy of Needs Theory," International Journal of Applied Behavioral Economics (IJABE), IGI Global Scientific Publishing, vol. 7(1), pages 35-52, January.
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    Keywords

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    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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