Bank Product Development in Non-Bank Based Economy
Chapter One
Statement Of Objectives
The aim of this study is to investigate the effect of non-bank-based economy on the development of bank products. The following objectives will guide this study
- To develop an empirical model that would investigate the effect of financial development on bank product development.
- To ascertain the effect bank product development on non-bank-based economy
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Conceptual review
The Banking System
In his work on financial intermediation by banks and economic growth, Badun (2009) notes that there might be some confusion with the terms used in existing research on financial intermediation and growth. He noted that different terms like financial intermediation, finance, financial development, financial system, financial markets and so on, have been used by different authors. However, in almost all papers same indicators are used and all refer to financial intermediation by banks.
According to Otto et al. (2012), there are four vital components of a financial system. These include; financial institutions, financial markets, the regulatory authorities and financial instruments. The study also noted that the system in Nigeria has undergone remarkable changes in terms of ownership structure, the depth and breadth of instruments employed, the number of institutions established, the economic environment and the regulatory framework within which the system operates currently. The Nigerian financial system include banks, capital markets, insurance, pension asset managers and other financial institutions with the Central Bank as the apex institution. The banking industry in Nigeria is dominated by the commercial banks. The commercial banks dominate in both size and profitability
In Nigeria, the financial system is the hub of productive activity, as it performs the vital roles of financial intermediation and effecting good payments system, as well as assisting in monetary policy implementation. Ofanson et al. (2010) note that the process of financial intermediation involves the mobilization and allocation of financial resources, through the financial (money and capital) markets by financial institutions (banks and non-banks) and by the use of financial instruments (savings, securities and loans). They also suggest that the efficiency and effectiveness of financial intermediation in any economy depend critically on the level of development of the country’s financial system. In effect, the underdeveloped nature of the financial system in most developing countries accounts largely for the relative inefficiency of financial intermediation in those economies. In these countries the financial system is dominated by banks, which are typically oligopolistic in structure and tend to concentrate on short-term lending as against investments with long-term gestation period. The alternative/complementary source for financing development projects is the development of debt or equity markets which at best, is at the rudimentary stage of development. It is in this regard that specialized financial institutions, including government owned development banks have been established in Nigeria to bridge the gap.
An efficient and reliable payments system is important for promoting economic efficiency and the proper functioning and integration of financial markets. The payments system acts as a conduit through which financial and non- financial firms and other economic agents can impact the overall financial stability, as well as accelerate the pace of financial deepening and efficiency of financial intermediation. Over the course of history the payments system has evolved from trade by barter to the use of commodity money, cheques to electronic money. As the repository of the economy’s immediate liquidity, the financial system, especially banks, constitute the backbone of the payments system.
Efforts to improve the efficiency and soundness of the financial system are often geared towards supporting macroeconomic and monetary performance. That is because a reasonably sound, competitive and responsive financial system is critical to the effective conduct of monetary policy and efficiency of the transmission mechanism. In this regard, the maintenance of financial sector stability is complementary to monetary and price stability. Both go hand in hand and are key ingredients for economic confidence upon which investment, growth and prosperity depend. Recent experiences have established the importance of financial sector stability from the perspective of macroeconomic performance. Such experiences illustrate the extent to which unsound and uncompetitive financial systems resulting from inadequate regulatory frameworks can weaken efficient credit allocation, distort the structure of interest rates, disrupt monetary policy signals and impose significant financial costs, with adverse consequences for macroeconomic stabilization and balance (Ofanson et al., 2010).
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine bank product development in non bank based economy. CBN, Lagos form the population of the study.
SAMPLE SIZE DETERMINATION
A study sample is simply a systematic selected part of a population that infers its result on the population. In essence, it is that part of a whole that represents the whole and its members share characteristics in like similitude (Udoyen, 2019). In this study, the researcher adopted the convenient sampling method to determine the sample size.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain bank product development in non-bank base economy. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing an investigation of bank product development in non-bank base economy
Summary
This study was on bank product development in non-bank base economy. Two objectives were raised which included: To develop an empirical model that would investigate the effect of financial development on bank product development and to ascertain the effect bank product development on non-bank-based economy. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from CBN in Lagos state. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
This study started by identifying the various NBFIs operating in Nigeria. It went further to highlight the roles they play in economic development. In so doing the functions of various NBFIs were examined and their contributions to economic development x-rayed. It was discovered that despite the enormous contribution of NBFIs to the economy that most of its potentials in this direction remains untapped. Based on this, recommendations were made which implementation is expected to strengthen the NBFIs, improve their competitiveness and increase their contribution to economic development
Recommendation
The CBN should organize a clearing system for microfinance banks. This will enable them play more active role in the money market and not continue to operate at the mercy of their correspondent commercial banks. Some of these correspondent banks are known to slow down the microfinance banks with conditionalities, commissions and other charges in order to boost their own profitability and reduce competition from these banks.
Primary Mortgage Institutions should be made to play a more robust role in housing delivery to Nigerians. A situation where PMIs are forced to operate in the short-term financing market due to the paucity of long term funds is unacceptable. To encourage them to play their main role of providing long-term funds for housing development, long term funds should be made available to them. The pension deductions made from workers’ salaries could be a veritable source of mortgage financing.
The restructuring and consolidation as done in the insurance industry should be extended to the other NBFIs if they are to remain competitive. The recapitalization in the insurance industry is a step in the right direction. Other NBFIs should follow the cur. Recapitalization will bring about consolidation through mergers and acquisition this will strengthen the NBFIs and position them for better service delivery.
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