Kofi A. Osei

Outreach and profitability of microfinance institutions: the role of governance

Purpose - This paper aims to examine how selected governance indicators impact on performance measures of outreach and profitability in microfinance institutions (MFIs). Design/methodology/approach - The paper adopts a quantitative approach based on both primary and secondary data from conveniently sampled 52 microfinance institutions. A panel data technique is employed as the key analytical framework. Findings - It is shown that governance plays a critical role in the performance of MFIs and that the independence of the board and a clear separation of the positions of a CEO and board chairperson have a positive correlation with both performance measures. Research limitations/implications - It would have been appropriate to have a larger number of MFIs for the study. This limitation however does not compromise on the validity of the conclusions based on the findings of the study. Practical implications - In the context of multi-dimensional and sometimes conflicting objectives facing MFIs, a clear balancing act of social objectives and institutional sustainability to ensure effective performance of MFIs is recommended. Originality/value - Studies on governance and its relationship with firm behaviour is limited especially in Sub-Saharan Africa. Its application in the microfinance sector with its peculiar characteristics is the added value of this paper.

Poverty profile and correlates of poverty in Ghana

Purpose - This papers purpose is to examine the nature and correlates of poverty in Ghana. Design/methodology/approach - Using the most recently published household living standards survey; the paper computes poverty indicators using the Foster Findings - Most households rely on wood fuel, do not have access to tap water and live in rooms rather than full apartments. Expenditure inequality is high and greater in the rural areas compared to the urban areas. Inequality within locations appears to be the main source of national inequality. A household is less likely to be poor if the head is educated, as well as if the household is urban based. Again, households with heads employed in the clerical, sales, services, and agricultural sectors are more likely to be poor compared with those employed in the administrative and managerial sectors. Research limitations/implications - The paper is based on a static analysis of poverty; the absence of a panel household survey makes it difficult to examine the dynamics of poverty. Originality/value - This paper provides a comprehensive and holistic examination of the nature of poverty in Ghana. It looks at poverty within various sectors of an economy by simultaneously examining the issues both from quantitative and qualitative perspectives

Foreign exchange risk exposure of listed companies in Ghana

Purpose - The purpose of this research is to examine the foreign exchange exposure of listed companies on the Ghana Stock Exchange over the period January 1999 to December 2004. The research uses different exchange rate measures namely; the cedi to US dollar, the cedi to UK pound sterling, the cedi to the euro and a trade-weighted exchange rate index to determine the degree of exposure. Design/methodology/approach - The Jorion (1990) two-factor model which regresses the return on a firm against changes in the exchange rate and return on the market is used to estimate the exchange rate exposure for the sample of twenty firms used in this study Findings - About 55 per cent of firms in the sample have a statistically significant exposure to the US dollar whilst 35 per cent are statistically exposed to the UK pound sterling. Sector specific exposure results show that the manufacturing and retail sectors are significantly exposed to the US dollar exchange rate risk. The financial sector did not show any risk exposure to any of the international currencies. The most dominant source of exchange rate risk exposure is the US dollar. Most firms are also negatively exposed to the cedi to US dollar exchange rate changes, implying that the cedi depreciation Originality/value - The study reveals the extent of foreign exchange exposure of firms in Ghana and also adds to the limited body of empirical literature on exchange rate exposure of firms in Africa. Results of this study serve as a useful guide to corporate managers and investors on the degree of foreign exchange exposure and the need to effectively manage firm exposure.

The demand for micro insurance in Ghana

Purpose - The purpose of this paper is to identify the factors which influence the demand for micro-insurance services among the informal sector workers of Ghana who are quite vulnerable to various risks in the economy. Design/methodology/approach - The study adopts a quantitative technique based on primary data sampled randomly from 100 informal sector workers from four major market centers in Accra, Ghana. The probit regression model was used for the empirical investigation. Findings - Empirical investigation using the probit model indicates that premium flexibility, income level and nodal agency are significant determinants of micro-insurance demand. Insurance knowledge, expectation (trust) and marital status were also found to have positive and significant impact on the demand for micro insurance. Interestingly, the empirical analysis shows that formal education is not a significant determinant; rather ones level of insurance knowledge has a positive and significant impact on micro-insurance demand. Social implications - Insurers must consider the nature of the cash-flow of informal workers in the design of premiums. The government must integrate micro insurance into its poverty reduction program. Originality/value - The micro-insurance market is very new and unresearched in Ghana. This foundational study is, therefore, very original and a most valuable guide to commercial insurance companies which want to venture into this huge untapped opportunity in the Ghanaian informal sector.

Stock prices and exchange rate dynamics in selected African countries: a bivariate analysis

Purpose - The paper aims to investigate the relationship between stock prices and exchange rate movement in seven African countries. Design/methodology/approach - It uses vector autoregressive (VAR) cointegration and impulse response analysis to determine the long- and short-run linkages between stock prices and exchange rates. Findings - Cointegration analyses indicate a long-run relationship between stock prices and the exchange rate in Tunisia, where exchange rate depreciation drives down stock prices. A short-run error-correction model also shows similar results. Impulse response analyses for other countries show that stock returns in Ghana, Kenya, Mauritius and Nigeria reduce when induced by exchange rate shocks but increase in Egypt and South Africa. Shocks induced by either stock prices or the exchange rate are more protracted in Ghana, Kenya, Mauritius and Nigeria than in South Africa and Egypt. Originality/value - This is one of the few studies on Africa which tests for long-run dynamics and impulse response shock dynamics within a VAR framework. Again unlike other studies it also concentrates on more countries in the sample.

Risk exposure and corporate financial policy on the Ghana Stock Exchange

Purpose - The purpose of this paper is to examine the extent to which corporate managers alter their capital structure in response to risk exposures on the Ghana Stock Exchange (GSE). Design/methodology/approach - A panel data covering the period from 2002 to 2007 was employed under the framework of the seemingly unrelated regression approach. Findings - The paper finds that the direction and magnitude of the impact of risk exposures depends on capital structure measurement variables; namely, financial leverage, debt ratio, or short-term debt to equity. The paper also finds that corporate managers adjust their capital structure differently in response to different kinds of risk exposures namely business risk or financial risk. Specifically, operating risk, bankruptcy risk, and bankruptcy cost in addition to other firm level characteristics such as asset structure, firm size and profitability are found to be significant driving factors in shaping corporate financial policy on the GSE. Originality/value - The main value of this paper is to analyze the relationship between risk exposures and corporate financial policy from a developing country perspective.