Development Assistance and Ghana's Long Term Growth.: December 2019

See discussions, stats, and author profiles for this publication at: https://www.researchgate.
net/publication/341495104
Development assistance and Ghana's long term growth.
Research · December 2019

DOI: 10.13140/RG.2.2.33327.56485
CITATIONS READS
0 427
1 author:
Benjamin Osei Gyamfi

Garden City University College
1 PUBLICATION 0 CITATIONS
SEE PROFILE
Some of the authors of this publication are also working on these related projects:
International Trade and Business View project
The role of external capital in determining growth in ante/post-covid Ghana. View project
All content following this page was uploaded by Benjamin Osei Gyamfi on 19 May 2020.
The user has requested enhancement of the downloaded file.

The International Journal of Business and
Management Research
A refereed journal published by the International Journal of Business and Management

Research “IJBMR”
2019
The International Journal of Business and Management Research (IJBMR) is published annually on
December of every year via digital media and available for viewing and/or download from the
journal’ s web site at http://www.ijbmr.org
Volume 12, Issue 1
The International Journal of Business and Management Research (IJBMR) is a peer reviewed
publication, USA. All Rights Reserved
www.ijbmr.org
ISSN: 1938-0429
DOI: https://doi.org/10.32893/IJBMR.2019.12
Editorial Review Board
Editor-In-Chief: Dr. John Phillips
Deputy Editor: Dr. Firend Al. Rasch,

Dr. C. Abid Dr. S. M. Safaei
Dr. F. Albayati Dr. R. Singh
Dr. H. Badkoobehi Dr. M. Shaki
Dr. A. Ben Brik Dr. B. Swittay
Dr. A. Caplanova Dr. R. Wilhelms
Dr. I-Shuo Chen Dr. Jui-Kuei Chen
Dr. Firend Al R. Dr. R. Sergio
Dr. F. Castillo Dr. R. Tahir
Dr. J. Fanning Dr. D. Wattanakul
Dr. K. Harikrishnan
Dr. Anthea Washington
Dr. Ahmad Jaffar
Dr. M Al Kubaisy
Dr. M. Khader
Dr. M. Lakehal-Ayat
Dr. B. Makkawi
Dr. Mona Mustafa
Dr. P. Moor
Dr. P. Malyadri
Dr. R. Pech
Dr. N. Maruti Rao
Dr. J. Ryan
Dr. K. Rekab
Dr. I. Rejab
Dr. M. Shaki
Dr. P. Moore
Table of Content
Financial inclusion and economic growth: the role of commercial banks in West Africa
Jiang Hong Li, Prince Asare Vitenu-Sackey ………………………………….…………………………4
Development Assistance and Ghana’s Long Term Growth

Benjamin O. Gyamfi ……………………………………………………………………………………22
The strategic advantages of moving upstream by telecommunication operators: The case of Asiacell
Firend Al. R., PhD., Jwan N. Abbas ……………………………………………………………….………30
Studying the reflection of psychological hardiness in leadership effectiveness: A survey in the cities and villages
Development Bank
Bakir Ahmad AlRahamnah, Hasan Ali Al-Zu’bi ……………………………………………………… 41
Strategizing Indian management education: need of the hour

Aravind Mallik, Dr(Hc). D.M. …………………………………………………………………………51
Assessment of monitoring and evaluation strategies on youth livelihood program in Isingiro district, Southwestern
Uganda
Johnson Atwiine ………………………………………………………………………59
Assessing the effectiveness of commercial bank loans as sources of funding/ capital formation for Small and Medium
Enterprises (SMEs) in Southeast, Nigeria
Ugwu-Oju Monica Obiageri, Vincent A. Onodugo, Mbah, Paulinus Chigozie….…………………………………68
Relationship between business education students’ perception and achievement in acquired basic computer skills and
its operation in colleges of education in Nigeria
A. Magaji., P.S. Yaduma, V.E. Okereke (Mrs) …..………………………………………………………79
An analytical study on performance of commercial banks for agricultural loan disbursement with special reference to
lead bank credit plan in Ahmednagar District
Dr. Mohasin A. Tamboli, Dr. Nilesh U. Bankar …………………………………………………………91
Learning experience: A mediator between self-determination and financial well-being

Soepding Benard Alkali, John C. Munene, Ernest Abaho, Waswa Balunywa ……………………………100
The mediating effect of entrepreneurial skills on the relationship between supportive environment and entrepreneurial
career preference
Yakubu Abdullahi Yarima ………………………………………………………………………119
Role of Repo Rate in Indian Monetary Policy Since 2014

Dr. Chetana Asbe ……………………………………..……………………………………………130
Financial inclusion and economic growth: the role of commercial
banks in West Africa
Jiang Hong Lia, Prince Asare Vitenu-Sackey

Jiangsu University, E-mail address: pavsackey@gmail.com
Abstract
The economic growth of a country depends on how the units of the economy are financially included to be economically active and
viable. This paper examines the role commercial banks play in financial inclusion on economic growth by using panel data on 10
West African countries from 2004 to 2015. Four econometric models are used to statistically infer on the outcome of the study and
to find out the long run relationship between financial inclusion and economic growth. The empirical results infer that there is a long
run impact of financial inclusion on economic growth and also have a strong positive relationship or impact on economic growth
with an effective role played by the commercial banks. The study recommends that commercial banks should be innovative and also
reach out to the unbanked populace with enticing products and services. Moreover, governments should create an enabling
environment for high financial literacy in education and awareness creation.
"Keywords: Financial inclusion; Economic growth; West Africa; Robust least square; Generalised linear model"
1. Introduction
West Africa is a continent in the Sub-Saharan African continent with 16 countries and a population of 362,261,579
million (est. 2016). It has an area of approximately 6.1 million square kilometers and population density of 49.2 per
kilometer square (127.5 per square meters). The 16 countries that constitute West Africa, with their high population
densities, their various trading and monetary union blocs, their natural resources, including oil, and the sheer dynamism
of their businesses, form one of the most attractive groupings in the continent. But the development of the industry has
been uneven in the region, with some countries left out of the circle of new technology and connectivity while others
have developed state of the art systems (Firend Alan Rasch, 2018). Perhaps, the region is becoming gradually integrated
with local- and foreign-owned multinational banks greatly easing the flow of trade and investment in the sub-region
(African Business Magazine, 2011).
In order to reduce income disparities and poverty which is among the top global problems; it is imperative for
governments to ensure financial inclusion in their respective countries. Perhaps, in the avoidance of inclusive financial
systems, poverty threat can emerge and jeopardize economic development since access to financial tools allows people
to invest in their education, finance projects and become entrepreneurs as well as economically independent
(Demirgüç-Kunt and Klapper, 2012b). Being a man, richer, more educated and older contribute positive to financial
inclusion with a higher influence of education and income; mobile banking is driven by the same determinants than
traditional banking (Alexandra and Laurent, 2016; Firend Al R., & Araghi, 2015). Alexandra and Laurent (2016)
observed that the determinants of informal finance differ from those of formal finance; from the observation of their
study it could be established that the poor is left in financial inclusion in Africa, which is a dire problem to solving or
bridging the gap between the poor and the rich (Firend Al. R., & Wang Q., 2018). The motivation of this study is
derived from the urgency of financial inclusion as a key global priority and governments, international development
agencies, academics, and the private sector, have all brought financial inclusion to the top of the agenda. The World
Bank has culminated universal financial access by 2020 as one of its pertinent goals, and expressed that more than 50
countries are strongly and seriously developing financial inclusion plans and policies (Firend Al R., 2015). The
emergency surrounding financial inclusion is not amazed, given that 50% of the global adult population remained
unbanked (Financial Access Initiative, 2010). Governments and businesses can be more efficient, and unbanked
populations will find a better quality of life if financial products are extended to them (MasterCard Analysis, 2012).
Apparently, this motivates the study to ascertain how financial inclusion impact economic growth and how commercial
banks have played their roles to ensure no one is left behind in the economic emancipation and financial liberalization
efforts to bridge the gap between the rich and the poor.
The contribution of this study is to add up to the already existing literatures on financial inclusion (Alexandra and
Laurent, 2016; Firend Al R. 2015; Demirgüç-Kunt and Klapper, 2012b; Fungácová and Weill, 2015, Kim et al. 2018)
for policy direction and academic perusal. To contribute immensely to the literatures on financial inclusion, this study
adopts robustness analysis to make statistical inference. This study intends to examine the role and impact that the
commercials banks in West Africa play in financial inclusion that propel economic growth in the long run. The
objectives of this study are to; examine the long run and robust impact of commercial banks in financial inclusion on
economic growth in West Africa, find the correlation among the role of commercial banks, financial inclusion and
economic growth and to ascertain the impact of financial inclusion on economic growth in the high gdp per capita and
low gdp per capita countries. The study adopts panel data methodologies thus robust least squares regression and
generalized linear models to confirm the robustness of the study to make statistical inference.
2. Review of Literatures
Financial inclusion has been considered and caught the attention of policy makers and researchers since the 1990s (Kim
et al. 2017; Leyshon and Thrift, 1993, 1994, 1995; Collard, 2010; Kempson and Whyley, 1999; Treasury HM, 2004b
and Allen et al., 2012). Financial Inclusion is intended to connect people to banks (financial services) with
consequential benefits and ensuring that the financial system plays its due role in promoting inclusive growth is one of
the biggest challenges facing the emerging economies. Access to safe, easy and affordable groups, disadvantaged areas
and lagging sectors is recognized as a precondition for accelerating growth, reducing income disparities and poverty
(Firend Al R., & Hashim, 2015). Access to a well-functioning financial system, by creating equal opportunities, enables
economically and socially excluded people to integrate better into the economy and actively contribute to development
and protects themselves against economic shocks (Vighueswara, 2014). Financial inclusion is a system through which
a developing country like India can attain inclusive growth by connecting the contribution of weaker or rural population
of the country with the main stream (Sewata and Rahul, 2017). Financial inclusion is the key promoter of development
hence governments have made it their top most priority (Thankom and Rajalaxmi, 2015). Financial inclusion is a
government policy used by developing and emerging countries to grow their economies. According to Massomeh et al.
(2017), financial inclusion is said to be effective by gathering resources previously unaccounted for and repurposing
them as resources for investment. The mechanisms to achieve this include the use of mobile or otherwise accessible
banking, availability of affordable financial services, wider credit availability, and having reliable savings tools
(Mehrotra & Yetman, 2015).
Some studies find that the impact of financial inclusion on growth depends on firms’ access to credit rather than
households; most notably by reducing the ‘‘financing gap” faced by small- and medium sized firms and industries
(GPFI, 2011; Beck, Buÿu¨kkarabacak, Rioja, & Valev, 2012). Lisa and Luc (2017) found out that there is a positive
impact of financial inclusion on firms’ growth and performance. Financial inclusion reduces liquidity constraints and
encourages investment. The distribution of credit across firms at the sectoral level therefore has important effects on
the industrial structure, competition, or the degree of informality in the sector, particularly in low income countries
(Beck, Demirguc-Kunt, & Maksimovic, 2005). Franklin et al. (2016) examined the foundations of financial inclusion:
understanding ownership and use of formal accounts; they found out that the closeness of financial services and the
cost of owing account have a greater impact on financial inclusion. Badar and Shaista, (2017) assessed the role of banks
in financial inclusion in India and they found a positive and significant impact of financial inclusion on economic
growth. Antonia et al. (2018) opined that an improved financial inclusion has welfare effects that go beyond the benefits
in the financial sector to economic benefits (Firend Al R., 2016).
Kim et al. (2018) studied the impact of financial inclusion on economic growth in the OIC countries, they employed
dynamic panel estimation methodologies thus GMM for 57 countries and their conclusion is that financial inclusion
has a positive effect or impact on economic growth and also have a mutual causality. Steel et al. (1997) shared
information about informal finance in four African countries (Ghana, Malawi, Nigeria and Tanzania) with data covering
1992 and 1993. They elaborated on African economies and made a pronouncement that African economies constitute
2019 The International Journal of Business and Management Research, Vol.12 Number 1 5
dualistic financial systems in the form of formal banks and informal financial agents. They explain the informal
financial sector by two main reasons; firstly, financial repression and secondly, the systems inefficiency of the formal
banks to contribute to low access to credit. They conclude that, in the medium term, informal financial agents have a
positive impact by deepening the access to financial services for the broader population. In spite of this, this study
would like to focus on the role the formal banks play in financial inclusion to propel economic growth and financial
liberation.
Upon review of the above literatures, financial inclusion has caught the attention of policy makers and researchers, but
there are a few studies into the area. This study has leveled on the gap to assess the impact financial inclusion has on
economic growth in the West African region with the emphasis on the role that commercial banks play.
3. Methodology and Data
3.1 Methodology
The study applies a panel regression models by using panel unit root tests, correlation matrix, Pedroni and Kao
cointegration test, Censored or Truncated data (Including Tobit), Robust least squares and homogeneous causality test
methods in this paper to study the role commercial banks play in financial inclusion to economic growth in 10 West
African countries. By using these models, it can examine the driven factors of financial inclusion in West African
countries in the long run estimations. Testing for cointegration implies testing for the existence of such a long-run
relationship between economic variables.
Equation 1
Error! Objects cannot be created from editing field codes.
Where, gdppc represents gross domestic product per capita, no_banks represent the total number of commercial banks,
banks_branches represent the total number of branches per 1000 km square, Atm represent the number of Automated
teller machines in the whole country, deposits_gdp represent total deposits with commercial banks as percentage of
gdp and loans_gdp represent total loans granted by commercial banks as percentage of gdp. However, the data used in
logarithmic and the econometric model is written in the following model.
Equation 2
Where β0 is the intercept, i=1 …. I represent the cross section of the countries, t =1……t represents the time period and
μit represents error term (disturbances and other factors that were not considered). The study commences with the
analysis by testing the panel data, and in order to avoid spurious regression, a group unit root test is conducted. However,
for using robust least square and censored or truncated data methodologies, the study ensures possibility of the long-
run equilibrium among the variables examined. Firstly, the unit root tests are computed in order to check for stationarity
among the variables. Therefore, the following methods are adopted; Levin-Lin Chu (LLC) Levin et al. (2002), Im-
Pesaran Shim (IPS) Im et al. (2003), Fisher Augmented Dickey-Fuller (ADF) and Fisher Philips-Perron (PP) tests
(Maddala and Wu, 1999). The study restricts itself to these three panel unit root test because Levin et al. (2002) test
statistic for the homogeneity, Im et al. (2003), Fisher ADF and Fisher PP (Maddala and Wu, 1999) test statistic for
heterogeneity. However, the specification proposed by Im et al. (2003) is as follows:
Equation 3
In the equation, xit represents the combination of all the explanatory variables; ρ i represents the autoregressive
elasticities, εit denotes the residual term whilst ᵢ and t represents the time period. Im et al. (2003) make way for different
order of serial correlation (Apergis and Payne, 2010) and subsequent the normal averaging of augmented dickey Fuller
(Inglesi-Lotz, 2016) given as: the equation is adopted from (Maji and Sulaiman, 2019).
Equation 4
Substituting Eq. (3) into Eq. (4) yield the following:
Equation 5
In the resulting eqn. (5), ρi denotes the number of lags in the ADF regression. The null hypothesis of the panel unit
root tests is that each variable has a unit root and the alternate hypothesis reports that at least one of the variables in the
panel is stationary in series.
Secondly, after the estimation of the unit root test and all the variables prove stationary then it allows for the
cointegration test. The regression of time series panel data requires either stationarity or cointegration. Cointegration
tests investigate the residuals of spurious regressions of non-stationary variables. In Eqn. (6) below, the dependent
variable y is regressed on x to obtain the residual eit. The parameter σi is the individual effect and θi is the deterministic
trend. To ascertain the Null hypothesis, Ho of no cointegration, the variables are not cointegrated and the residuals will
be an I(1) process. To conclude, if the variables are cointegrated then the
residuals in the alternative hypothesis H1 is an I(0) process. Kao (1999) test and approach allows more than one
exogeneous variable, the long run estimation or model can be derived as (Maji and Sulaiman, 2019): Equation (6)
Model 1 - 5……:
…………………………………Model 1
……………………………………Model 2
…………………………………….Model 3
…………………………………….Model 4
……………………………..………Model 5
In the equation (6) (Model 1 – 5), i = 1,…N represents the cross sectional observation, t = 1,……,T represents the time
period. gdppc refers to gross domestic product per capita, no_banks represents number of commercial banks, ATM is
termed from the total of number of ATMs countrywide, Deposits_gdp refers to total deposits with commercial banks,
banks_branches termed as number of branches of commercial banks and loans_gdp connotes loans granted by
commercial banks, inf refers to inflation, Sep stands for school enrolment in primary, ume refers to unemployment rate,
Pop means population growth and trade stands for trade openness. The symbol 𝜋 represents the elasticities that will be
estimated, yit and 𝜕 it enable the specific effects and deterministic trend effects for each country. The error term is
expected to be normally and identically distributed with zero mean and constant variance, therefore, the symbol μ it
represents the error term.
After the cointegration test has been done and evidenced that the variables are cointegrated; the next step is to run the
long run equilibrium model in Eqn. (6) Model 1 to 5, to estimate the dynamics among the variables. At this stage, the
main models for the study thus Robust least squares and Censored or Truncated data (including Tobit) models are used
for the robustness of the study to make statistical inference. Robust least square regression is used to overcome the
parametric and non-parametric methods.
3.2 Data
The study variables consist of panel data of gross domestic product per capita, number of commercial banks, number
of commercial banks branches, number of ATMs, total deposits with commercial banks and total loans granted by
commercial banks in 10 West African countries. The 10 countries sample was drawn from 16 countries based on
availability of data. The countries for the study come in three categories; all 10 countries, high GDP per capita countries
and low gdp per capita countries. The study’s data was gathered from IMF financial access survey and World Bank
development indicators from 2004 – 2015. Table 1 depicts the specification and description of the variables used in the
study. Financial inclusion is measured by proxies of number of automated teller machines countrywide, commercial
bank branches per 1000 km2, number of commercial banks, total loans granted by commercial banks in a year and total
deposits mobilized by commercial banks in a year. As financial inclusion harnesses economic growth, GDP per capita
is considered as proxy to measure economic growth and also as the dependent variable. To control economic growth
variable in the study the following variables are considered to measure the impact of financial inclusion on economic
growth with an emphasis on the role commercial banks play, they are; inflation (annual %) for consumer prices,
population growth rate, unemployment rate, school enrolment for primary education and trade openness (% of GDP),
in line with literatures of Bjork (1999), Mankiw (2012), Firend Al R., (2015) and Kim et al., (2018).
Table 1 Variables and descriptions
variables variable description source
LnLoans_gdp Use of Financial Services: Outstanding loans from commercial banks (% of GDP), Percent IMF Financial access survey
No_Banks Geographical Outreach, Number of Commercial banks, IMF Financial access survey
Banks_Branche
s Geographical Outreach: Number of commercial bank branches per 1000 km2, Number IMF Financial access survey
LnDeposits_gd Use of Financial Services: Outstanding deposits with commercial banks (% of GDP),
p Percent IMF Financial access survey
LnAtm Geographical Outreach, Number of Automated Teller Machines (ATMs), Country wide, IMF Financial access survey
World Development
Inf Inflation, consumer prices (annual %) Indicators
World Development
Pop Population growth (annual %) Indicators
World Development
LnSep School enrollment, primary, male (% gross) Indicators
World Development
LnTrade Trade (% of GDP) Indicators
World Development
Ume Unemployment, total (% of total labor force) (modeled ILO estimate) Indicators
World Development
LnGdppc GDP per capita ppp constant 2011 Indicators
Note: Loans % of GDP, Deposit % of GDP, Automated teller machines, School enrolment in primary education, Trade openness and Gross
domestic product per capita are transformed in natural logarithms in order to help minimize the fluctuation in data series. Source: Prepared by
Author
Table 2 List of countries and their categories
Categories High GDP per capita Low GDP per capita
1 Nigeria 6 Benin
2 Ghana 7 Guinea
3 Ivory Coast 8 Mali
4 Senegal 9 Burkina Faso
5 The Gambia 10 Niger
Source: Prepared by Author
Table 3 Summary Statistics
Banks_
No_ Loans Deposit
Branch Lngdpp
Banks es Lnatm _Gdp _Gdp Inf Lnsep Lntrade Pop Ume c
Mean 16.142 2.052 3.574 17.649 24.908 5.962 4.321 4.084 2.825 5.412 7.604
Median 13 0.981 4.102 17.720 23.814 4.070 4.432 4.113 2.808 5.041 7.507
Maximum 89 9.585 9.705 37.064 47.470 34.695 4.886 4.602 3.843 11.710 8.646
Minimum 6 0.021 0.000 1.217 5.642 -3.100 0.000 3.066 1.785 0.299 6.630
Std. Dev. 8.909 2.409 3.040 7.434 9.641 6.642 0.722 0.289 0.470 2.985 0.484
Skewness 4.705 1.484 0.133 0.046 0.282 1.602 -5.397 -0.585 0.246 0.128 0.056
Kurtosis 38.291 4.313 1.807 3.406 2.784 6.312 32.634 3.436 2.902 2.085 2.755
Jarque-
Bera 6669.787 52.688 7.469 0.869 1.820 106.159 4973.394 7.804 1.260 4.512 0.363
Table 3 summarizes the statistics of the variables adopted for the study. According to the table, the mean and median
of the variables are very close and the standard deviations of all the variables are homogeneously related. Moreover,
the statistical results posit that the variables are in normal distribution.
4. Results and Discussion
4.1 Correlation Matrix
Table 4 shows the correlation matrix among the variables; from the table it can be ascertained that there is no
multicollinearity in the variables. The rule of thumb states that the correlation coefficient among the independent
variables should not be more than -/+ 0.70 for two independent variables to be considered free from multicollinearity.
The highest value in the table is 0.628 and the second highest is 0.609. Perhaps, there is no multicollinearity in the
independent variables; no two independent variables have strong correlation with the dependent variable. No_banks,
banks_branches, lnatm, loans_gdp, deposit_gdp, inf, ume and lnsep have positive correlation with the dependent
variable whiles pop and lntrade have negative correlation with the dependent variable.
Table 4 Correlation matrix
LNGDPP NO_BA BANKS_BR LNAT LOANS_ DEPOSI LNTR UM

C NKS ANCHES M GDP T_GDP INF LNSEP ADE POP E
LNGDPPC 1
NO_BANKS 0.628 1
BANKS_BR
ANCHES 0.442 0.279 1
LNATM 0.507 0.264 0.442 1
LOANS_GD
P 0.311 0.208 0.110 0.242 1
DEPOSIT_G
DP 0.220 0.068 0.542 0.262 0.766 1
INF 0.241 0.192 0.189 0.134 -0.476 -0.368 1
LNSEP 0.100 0.085 0.188 0.201 0.127 0.197 0.096 1
LNTRADE -0.064 -0.080 -0.169 -0.126 -0.108 -0.007 0.077 -0.154 1
POP -0.609 -0.317 -0.042 -0.150 0.123 0.131 -0.441 0.153 -0.300 1
UME 0.237 0.030 0.310 -0.056 0.256 0.470 -0.081 0.017 0.210 -0.071 1
4. 2 Panel unit roots test
This study applied IPS test, Fisher tests (including Fisher-ADF test and Fisher-PP test) and Levin, lin & chu test to
conduct the panel unit root tests, and the results are shown in Table 5. It indicates lngdppc and banks_branches are
stationary with Levin test and, lnATM and No_Banks are stationary with Fisher PP test, inf, sep, pop and trade are all
stationary at level with all the tests but the other tests of the other variables with the tests adopted are non-stationary.
Thus, it can be concluded that all the variables became stationary after taking first differences. These results lay the
foundation for the panel data regression analysis.
Table 5 Panel Unit root test
Variable Form Method T-stat P-value sig. conclusion
lngdppc Level Levin -1.596 0.055 ** stationary
IPS 2.194 0.986 non-stationary
ADF-Fisher 9.574 0.975 non-stationary
PP-Fisher 16.353 0.695 non-stationary
First difference Levin -6.118 0.000 *** stationary
IPS -2.421 0.008 ** stationary
ADF-Fisher 41.037 0.004 ** stationary
PP-Fisher 61.358 0.000 *** stationary
no_banks Level Levin 2.064 0.981 non-stationary
IPS -18.102 0.000 *** stationary
ADF-Fisher 91.666 0.000 *** stationary
Banks_branches Level Levin -3.767 0.000 *** stationary
lnatm Level Levin -1.247 0.106 non-stationary
PP-Fisher 32.803 0.036 ** stationary
loans_gdp Level Levin 0.944 0.828 non-stationary
deposit_gdp Level Levin 0.387 0.650 non-stationary
IPS 4.985 0.000 *** stationary
inf Level Levin -7.802 0.000 *** stationary
IPS 6.156 0.000 *** stationary
ume Level Levin 0.544 0.707 non-stationary
sep Level Levin -13.841 0.000 *** stationary
First difference Levin 4.663 0.000 *** stationary
pop Level Levin -5.283 0.000 *** stationary
Trade Level Levin -3.780 0.000 *** stationary
PP-Fisher 29.005 0.088 * stationary
Notes: “***” indicates statistical significance at the 1% level. “**” indicates statistical significance at 5% level, “*” indicates statistical
significance of 10% level. Source: Prepared by Author
4.3 Cointegration tests
In table 6, Pedroni (1999, 2004) and Kao and Chiang (2000) conitegration tests were used for the three groups that the
study considered thus all 10 countries, high gdp per capita countries and low gdp per capita countries; the result
confirms the existence of cointegration between the dependent and independent variables. Therefore, the null
hypothesis that there is no cointegration between the variables is rejected. The results from seven tests performed four
out of the seven were statistically significant at 1%, 5% and 10% respectively.
Table 6 Pedroni and Kao Cointegration tests
All 10 countries High GDP per capita countries Low GDP per capita countries
statistics p-value sig. statistics p-value sig. statistics p-value sig.
V-stat -0.849 0.802 -0.702 0.759 -0.490 0.688
Rho-stat 2.445 0.993 1.631 0.949 1.834 0.967
PP-stat -3.149 0.001 *** -2.362 0.009 ** -2.080 0.019 **
ADF-stat -2.856 0.002 ** -2.146 0.016 ** -1.886 0.030 **
Group rho-stat 3.608 1.000 2.503 0.994 2.599 0.995
Group PP-stat -7.058 0.000 *** 4.471 0.000 *** -5.510 0.000 ***
Group ADF-stat -5.326 0.000 *** -2.920 0.002 ** -4.612 0.000 ***
Kao -2.936 0.002 ** -1.396 0.081 * -3.267 0.001 ***
Notes: “***” indicates statistical significance at the 1% level. “**” indicates statistical significance at 5% level, “*” indicates statistical
significance of 10% level. Source: Prepared by Author
4.4 The Impact of financial inclusion on economic growth: Robust least square method (All 10 countries)
Table 7 depicts the results of the impact of financial inclusion on economic growth in all the 10 West African countries
for all the 5 models adopted; all the financial inclusion variables thus No_banks, Banks_branches, lnatm, Loans_gdp,
and deposit_gdp have positive and statistical significant impact on economic growth with coefficient of 0.050, 0.216,
0.055, 0.029 and 0.011 respectively; a percentage change in the financial inclusion variables will change economic
growth by 0.050%, 0.0216%, 0.055% and 0.011% precisely. Moreover, inf and lnsep showed statistically insignificant
impact on economic growth. Ume consistently showed positive and statistical significance with economic growth
confirming its strong impact on economic growth in all models. Lntrade and pop showed negative and significant
impact on economic growth.
Table 7 The impact of financial inclusion on economic growth: Robust least square method (All 10 countries)
All 10 countries
Variables model 1 model 2 model 3 model 4 model 5
Inf -0.004 -0.011 -0.006 0.005 0.001
(-1.204) (-4.553)*** (-1.135) (1.471) (0.197)
Ume 0.033 0.048 0.039 0.027 0.025
(5.601)*** (9.149)*** (3.970)*** (4.795)*** (2.062)**
Lnsep 0.039 0.016 0.069 0.042 0.076
(1.577) (0.790) (1.632) (1.809)* (1.637)
Pop -0.444 -0.420 -0.741 -0.483 -0.748
(-9.803)*** (-11.780)*** (-10.060)*** (-11.881)*** (-9.538)***
Lntrade -0.428 0.010 -0.442 0.347 -0.440
(-6.676)*** (0.183) (-4.103)*** (5.808)*** (-3.807)***
No_banks 0.050 - - - -
(24.116)*** - - - -
Banks_branches - 0.216 - - -
- (32.588)*** - - -
LnAtm - - 0.055 - -
- - (5.570)*** - -
Loans_gdp - - - 0.029 -
- - - (11.260)*** -
Deposit_gdp - - - - 0.011
- - - - (2.572)**
Cons. 9.496 0.216 10.847 6.561 10.779
(27.278)*** (32.588)*** (19.099)*** (20.472)*** (17.711)***
Notes: “***” indicates statistical significance at the 1% level. “**” indicates statistical significance at 5% level, “*” indicates statistical significance
of 10% level. Z-statistics are in parentheses. High GDP per capita countries are Nigeria, Ghana, Ivory Coast, Senegal and The Gambia. Low GDP
per capita countries are Benin, Guinea, Mali, Burkina Faso and Niger. Source: Prepared by Author
4.5 Impact of financial inclusion on economic growth: High GDP per capita countries (Robust least square
method)
Table 8 portrays the results of the impact of financial inclusion in the high gdp per capita countries; it can be evidenced
that no_banks and inf have insignificant impact on economic growth whiles banks_branches, deposit_gdp, ume, pop
and lntrade have negative and statistically significant impact on economic growth. Furthermore, loans_gdp and lnsep
have consistent and strong positive impact on economic growth statistically significant. The number of banks and their
branches do not positively increase economic growth in the high gdp per capita countries but more ATMs and loans
tremendously increase economic growth. Therefore, financial inclusion increases economic growth in the high gdp per
countries by the adoption of innovative banking products like the ATMs.
Table 8 Results from High GDP per capita countries: Robust least square
High GDP per capita countries
Inf -0.000 0.004 0.000 0.004 -0.001
(-0.069) (0.763) (0.041) (0.878) (-0.239)
Ume -0.042 -0.044 -0.024 -0.037 -0.041
(-2.564)** (-2.770)** (-1.639) (-2.612)** (-2.443)**
Lnsep 0.103 0.084 0.072 0.085 0.101
(2.734)** (2.311)** (2.350)** (2.610)** (2.752)**
Pop -0.651 -0.495 -0.656 -0.643 -0.616
(-5.364)*** (-3.857)*** (-6.787)*** (-6.317)*** (-4.788)***
Lntrade -0.636 -0.715 -0.528 -0.581 -0.629
(-7.083)*** (-8.075)*** (-6.978)*** (-7.529)*** (-7.190)**
No_banks -0.001 - - - -
(-0.305) - - - -
Banks_branches - -0.035 - - -
- (-2.636)** - - -
LnAtm - - 0.032 - -
- - (4.003)*** - -
Loans_gdp - - - 0.012 -
- - - (3.343)*** -
Deposit_gdp - - - - -0.002
- - - - (-0.466)
Cons. 12.176 12.250 11.587 11.667 12.099
(22.634)*** (25.419)*** (27.558)*** (26.053)*** (24.424)***
4.6 Impact of financial inclusion on economic growth: Low GDP per capita countries (Robust least square)
In the table 9, it can be ascertained that lnatm does not contribute to the increase in economic growth in the low gdp
per capita countries. The financial inclusion variables showed positive and significant results or impact on economic
growth except lnatm which exhibited negative and significant impact on economic growth in model 3. Inf has
insignificant impact on economic growth, even though it showed negative and significant in model 3; it is only one out
of the five model which the study can’t reliably infer on that. In addition, pop and lntrade showed negative and
significant impact on economic growth. Ume has positive and statistical significant impact on economic growth in all
model whiles lnsep has statistical significant impact on economic growth in model 1&3 but insignificant in the other
models.
Table 9 Results from low GDP per capita countries: Robust least square
Low GDP per capita countries
Inf -0.002 -0.002 -0.002 -0.003 0.001
(-0.811) (-0.770) (-1.656)* (-0.112) (0.493)
Ume 0.032 0.064 0.043 0.039 0.042
(4.835)*** (12.230)*** (19.223)*** (7.081)*** (9.250)***
Lnsep 0.101 0.019 0.954 0.036 0.031
(3.391)*** (0.795) (89.877)*** (1.370) (1.415)
Pop -0.387 -0.220 -0.160 -0.403 -0.318
(-8.601)*** (-5.314)*** (-9.864)*** (-10.581)*** (-9.539)***
Lntrade -0.010 0.215 -0.083 0.288 0.217
(-0.103) (2.894)** (-2.056)** (3.563)*** (3.227)**
No_banks 0.073 - - - -
(6.470)*** - - - -
- (8.367)*** - - -
LnAtm - - -0.019 - -
- - (5.697)*** - -
Loans_gdp - - - 0.022 -
- - - (8.089)*** -
- - - - (9.960)***
Cons. 7.065 6.536 3.758 6.633 6.607
(16.041)*** (18.638)*** (21.895)*** (17.284)*** (20.745)***
4.7 Robust check: Generalized linear model (GLM)
To statistically infer on the findings of the study, the generalized linear model was adopted for robust check to confirm
the outcome of the main methodology considered for the study. Table 10 reports that the financial inclusion variables
have positive and statistical significant impact on economic growth in all models. Inf showed inconsistent results in
model 2, it depicted negative and significant impact but positive and significant in model 4; in this case the study
consider it to be insignificant which is in line with the results from table 7. Ume portrayed positive and significant
impact on economic growth in all models. Pop and lntrade showed strong negative and statistically significant impact
on economic growth. Lnsep on the other hand, exhibited positive and statistical significance in model 1, 2 and 5 but
insignificant in model 3&4.
Table 10 Results from Generalized linear model: (Robust check)
All 10 countries
Inf -0.005 -0.009 -0.005 0.011 0.003
(-0.254) (-1.905)** (-1.029) (2.023)** (0.655)
Ume 0.036 0.018 0.042 0.025 0.022
(4.052)*** (1.734)* (4.536)*** (2.506)** (1.853)*
Lnsep 0.081 0.083 0.058 0.065 0.075
(2.160)** (2.035)** (1.476) (1.590) (1.676)*
Pop -0.592 -0.750 -0.667 -0.688 -0.741
(-8.588)*** (-10.496)*** (-9.734)*** (-9.617)*** (-9.694)***
Lntrade -0.377 -0.366 -0.410 -0.420 -0.488
(-3.853)*** (-3.368)*** (-4.097)*** (-4.005)*** (-4.333)***
No_banks 0.023 - - - -
(7.342)*** - - - -
- (5.137)*** - - -
LnAtm - - 0.061 - -
- - (6.636)*** - -
Loans_gdp - - - 0.025 -
- - - (5.500)*** -
- - - - (3.007)**
Cons. 9.929 10.675 10.450 10.336 10.932
(18.724)*** (19.105)*** (19.872)*** (18.351)*** (18.425)***
4.8 Homogeneous causality test
The null hypothesis that independent variables do not homogeneously cause the dependent variable is rejected in this
section because the results from table 13 postulate that there is homogeneous causality relationship between the
dependent variable and the independent variables. Form the table, in the all 10 countries group, banks_branches
homogeneously cause lngdppc, lnatm also causes lngdppc whiles lngdppc causes loans_gdp. These relationships signal
unidirectional linkage from the first to the latter. Bank_branches homogeneously causes No_banks and loans_gdp
confirming a unidirectional linkage from Bank_branches to No_banks and loans_gdp respectively. Lnatm has a
bidirectional linkage with bank_branches or homogeneously causes each other; in other words, a change in one variable
affects the other variable. Report from the high gdp per capita countries depicts that bank_branches homogeneously
causes lngdppc, no_banks and loans_gdp confirming a unidirectional linkage from bank_branches to lngdppc,
no_banks and loans_gdp concurrently; lngdppc causes loans_gdp. Lnatm and bank_branches have bidirectional linkage
with each other and homogeneously cause each other. In the low gdp per capita countries, lnatm homogeneously causes
lngdppc and bank_branches causes deposit_gdp confirming a unidirectional linkage from the first to the latter.
Table 11 Homogeneous causality test
High GDP per capita Low GDP per

All 10 countries countries capita countries
W- Zbar- Zbar- W- Zbar-

Null Hypothesis: Stat. Stat. sig. W-Stat. Stat. sig. Stat. Stat. sig.
BANKS_BRANCHES does not
homogeneously cause LNGDPPC 9.93 2.80 ** 12.06 2.62 ** 7.80 1.34
LNGDPPC does not homogeneously

cause BANKS_BRANCHES 2.51 -0.35 1.916 -0.43 3.09 -0.07
LNATM does not homogeneously cause

LNGDPPC 63.77 25.64 *** 116.80 34.04 *** 10.74 2.22 **
LNGDPPC does not homogeneously
cause LOANS_GDP 7.61 1.81 * 12.01 2.60 ** 2.39 -0.28

homogeneously cause NO_BANKS 7.52 1.78 * 9.51 1.85 * 5.54 0.66
LNATM does not homogeneously cause

BANKS_BRANCHES 8.00 1.98 ** 13.76 3.13 ** 2.25 -0.33

homogeneously cause LNATM 8.20 2.07 ** 13.26 2.98 ** 3.14 -0.06
LOANS_GDP does not homogeneously

cause BANKS_BRANCHES 1.69 -0.70 1.317 -0.61 7.00 1.10

homogeneously cause LOANS_GDP 16.0 5.40 *** 18.77 4.63 *** 6.03 0.81

homogeneously cause DEPOSIT_GDP 5.02 0.72 4.00 0.20 13.34 3.00 **
5. Conclusion and Recommendation
This study examined the impact of financial inclusion on economic growth considering the role of commercial banks
for a panel of 10 West African countries from 2004–2015. The study’s empirical analysis utilized panel data
methodologies for robustness of the study such as unit root tests, correlation matrix, cointegration test, Robust least
squares, generalized linear model and homogeneous causality test.
The outcome of the results evidenced that all the variables are cointegrated. The long run estimates and findings from
the study confirm that there is a direct or positive impact of number of commercial banks, the number of commercial
banks branches per 1000 km2, Number of Automated teller machines and total loans granted by commercial banks on
economic growth and total deposits with commercial bank. Furthermore, in the high GDP per capita countries, the
number of commercial banks have statistically insignificant impact on economic growth but the number of ATMs and
the total amount of loans granted by commercial banks have a strong and direct impact on economic growth; unlike the
amount of deposits with commercial banks and commercial banks branches which do not have a direct impact on
economic growth. In the low GDP per capita countries, the role of commercial banks in financial inclusion have positive
and significant impact on economic growth except the number of ATMs which showed negative and significant impact
on economic growth. In conclusion, the study thereby infers that financial inclusion has a positive and statistical
significant impact on economic growth.
From the outcome of the study, some policy recommendations are proposed, the policy recommendation comes in two
forms:
Policy recommendation for industry: Commercial Banks should be widened their scope of operation and increase their
reach to attract the rural-urban population as well as the unbanked population. They should design microcredit, micro-
enterprise and safe savings products to attract the unbanked population to inculcate the habit of savings and credit
access to ensure economic growth. They should employ strategies to retain and acquire customers with traditionally
acquired knowledge systems on positive social cultural norms within their reach with ultimate aim of reaching out to
the poor and vulnerable. Innovative ways of doing business should also be employed to ensure high productivity on the
part of the commercial banks and their customers.
Policy recommendation for governments: There should be an effective financial literacy education and awareness by
the governments to ensure the design of family-based and community-based education and awareness creation to build
the knowledge of investment and wealth creation among the population.
The study recommends more researches into the areas of financial inclusion because the study has some limitations.
As the study showed that the number of commercial banks and the number of branches in high GDP per capita countries
do not have impact on economic growth and in the low GDP per capita countries, number of ATMs do not also have
positive impact on economic growth; the study recommends for further study to unravel the true impact in these
economies.
References:
African Business Magazine (2011). Banking in West Africa. Retrieved from: https://africanbusinessmagazine.com/company-
profile/ecobank/banking-in-west-africa/
Allen, F., Demirguc-Kunt, A., Klapper, L., Peria, M.S.M. (2012). The foundations of financial inclusion: World Bank Policy Res. Work. Pap. Ser
(6290).
Alexandra, Z., Laurent, W. (2016. Determinants of financial inclusion in Africa. Review of Development Finance 6 (2016) 46–57.
Antonia G., Theres K., Lukas M. (2018). Does financial literacy improve financial inclusion? Cross country evidence. World Development 111
(2018) 84–96.
Apergis, N., Payne, J.E. (2009b). Energy conumption and economic growth: evidence from the common wealth of independent states. Energy
Economics 31 (5), 641 – 647.
Badar, A. I., Shaista S. (2017). Role of banks in financial inclusion in India. Contaduría y Administración 62, 644–656.
Beck, T., Buÿu¨kkarabacak, B., Rioja, F. K., Valev, N. T., et al. (2012). Who gets the credit? And does it matter? Household vs firm lending
across countries. The BE Journal of Macroeconomics, 12(1), 1–46.
Beck, T., Demirguc-Kunt, A., & Maksimovic, V. (2005). Financial and legal constraints to growth: Does firm size matter?. Journal of Finance,
60(1), 137–177.
Bjork, G.C. (1999). The Way It Worked and Why It Won’t: Structural Change and the Slowdown of US Economic Growth. Greenwood Publishing
Group.
Collard, S. (2010). Toward financial inclusion in the UK: progress and challenges. Public Money Management 27 (1), 13 – 20.
Demirgüç-Kunt, A., Klapper, L. (2012b). Measuring Financial Inclusion. The Global Findex Database (Policy Research Working Paper No.
6025). The World Bank, Washington, DC.
Financial Access Initiative Research Brief (2010). Half the world is unbanked.
Firend, Al R. (2016) Performance variation, training, and outcome in SE-Asian manufacturing sector, International Journal of Innovative Science,
Engineering & Technology. Volume 3, Issue1, October 2016
Firend, Al R. (2015) Government pricing policy and behavioral consumption of Tobacco, International Journal of Innovative Science, Engineering
& Technology. Volume 2, Issue10, October 2015
Firend, Al R., Mohd.Taib Hashim (2015) Post-Arab Spring Institutional Encumbrance and Economic Development: A Preliminary Analysis, The
International Journal of Innovation and Business Strategy. Volume 3, Number 1, 2015
Firend Al. R., Wang Q. (2018) Marketing strategies of services and purchasing incentives in Asia. 7 th global conference on business and social
science. 20-21 August. Colombo, Sri Lanka.
Firend, Al R. (2015) Contextual examination of TQM practices and competitive advantage in the Malaysian manufacturing sector. Proceedings of
the 2nd World Virtual Conference on Social and Behavioral Sciences, 28-30 November 2015, Kuala Lumpur, Malaysia.
Firend, Al R. Araghi, M. (2015) Critical factors in competitive advantage of Islamic banking. Proceedings of the 6 th IIUM International
Accounting Conference INTAC VI, 28-29 October 2015. Kuala Lumpur, Malaysia
Firend Alan Rasch (2019) Strategic Mistakes: Examples on how global companies go wrong. ISBN-13: 9781696163811. DOI:
https://doi.org/10.32893/IJBMR.2019/AMII.10.2
Firend Alan Rasch (2018) Asian Case Studies: Lessons from Malaysian Industries, CreateSpace ISBN: 9781539370161. DOI:
Firend Alan Rasch (2018) Business Model: Simplifies with examples from Global Companies. ISBN-13: 978-1721060603. DOI:
Franklin A., Asli D., Leora K., Maria S., Martinez P. (2016). The foundations of financial inclusion: Understanding ownership and use of formal
accounts. Journal of Financial Intermediation 27, 1 -30.
Fungácová, Z., Weill, L. (2015). Understanding financial inclusion in China.China Economics Revision 34, 196–206.
GPFI, Global Partnership for financial inclusion. (2011). SME Finance Policy Guide. IFC, Washington, DC.
Im, K.S., Pesaran, M.H., Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Economics 115, 53 – 57.
Inglesi-Lotz, R. (2016). The impact of renewable energy consumption to economic growth: A panel application. Energy Econ. 53, 58 – 63.
International Monetary Fund, (2015). Global Financial Access Survey
Kao, C., 1999. Spurious regression and residual-based tests for cointegration panel data. J. Econ. 90 (1), 1 – 44.
Kao, C., Chiang, M.H. (2000). On the estimation and inference of a cointegrated regression in panel data. Adv. Econ. 15, 179 – 222.
Kempson, E., Whyley, C. (1999). Kept Out or Opted Out? Understanding and Combating Financial Exclusion. The Policy Press.
Kim, D., Yu, J., Hassan, M.K. (2018). Financial Inclusion and Economic growth in OIC countries. Research in International Business and Finance
43, 1 - 14.
Leyshon, A., Thrift, N. (1993). The restructuring of the U.K. financial services industry in the: a reversal of fortune? Journal of Rural Studies 9
(3), 223-241.
Leyshon, A., Thrift, N. (1994). Access to financial services and financial infrastructure withdrawal: problems and policies. Area 26, 268 – 275.
Leyshon, A., Thrift, N. (1995). Geographies of financial exclusion: financial abandonment in Britain and the United States. Trans. Inst. Br. Geogr.
20 (3), 312 – 341.
Maddala, G.S., Wu, S. (1999). A comparative study of unit root tests with panel data and a new simple test. Oxford Bullet of Economics and
Statistics 61, 631 – 652.
Massomeh H., Donna Y. S., Massoud M. (2017). Financial market inclusion, shadow economy and economic growth: New evidence from
emerging economies. The Quarterly Review of Economics and Finance 66 (2017) 149–158.
Maji, I. K., Sulaiman, C. 2019. Renewable energy consumption and economic growth nexus: A fresh evidence from West Africa. Energy Report 5,
384 – 392.
Mankiw, N.G. (2012). Principles of Macroeconomics. South-western Cengage Learning.
MasterCard Analysis. (2012), cited in “A Progressive Approach to Financial Inclusion”, Amit Jain, Olga Zubenko and George Carotenuto, Global
Insights, MasterCard, 2014.
Mehrotra, A., & Yetman, J. (2015). Financial inclusion issues for central banks. BIS Quarterly Review, (March), 83–96.
Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and
Statistics 61, 53 -70.
Pedroni P. (2004). Panel cointegration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP
hypothesis: New results. Economic Theory 20, 597 – 627.
Steel, W.F., Aryeetey, E., Hettige, H., Nissanke, M., (1997). Informal financial markets under liberalization in four African countries. World Dev.
25,817–830.
Sweta G., Rahul S. (2017). Developing a Financial Inclusion Index for India. Procedia Computer Science 122 (2017) 949–956.
Thankom A., Rajalaxmi K. (2015). Financial inclusion: Policies and practices. IIMB Management Review (2015) 27, 267 –28.
Treasury, H.M. (2004b). Promoting Financial Inclusion. HM Treasury London.
Vighneswara S. (2014). Financial inclusion, Gender Dimension and Economic Impact on Poor households. World Development, Vol 56, pp, 1-15.
World Bank (2012). World Development Indicators.
World Bank (2017). World Development Indicators.
Development Assistance and Ghana’s Long Term Growth
Benjamin O. Gyamfi
Garden City University College, Kumasi-Ghana
Email: gyamfi.benjamin@gcuc.edu.gh
Abstract
This paper examines development assistance inflows and Ghana’s long term growth. Specifically, the study investigates the long
run effect of development assistance inflows on economic growth using Johansen cointegration approach to establish the presence
of long run cointegration relationship among the variables. The fully modified ordinary least squares is then used to estimate the
long run effect of development assistance inflows on economic growth. Results of the long run analysis showed that there exists a
statistically significant positive relationship between development assistance and economic growth in Ghana. Therefore, the
government of Ghana must ensure stable political environment in order to attract more of such assistance and also ensure that
development assistance inflows are put into judicious use.
Keywords: Development assistance inflows; Economic Growth; FM-OLS; Ghana
1. Introduction
Over the years, sub-Saharan Africa has been associated with incidence of diseases, regional instability, civil wars,
environmental degradation etc. due to poverty and corruption. Stagnant growth and economic hardship have
encouraged migration of the indigenous people to developed countries in search of greener pastures and better living
conditions. Meanwhile, poverty and inequality can be a catalyst for terrorism, money laundering, drug and child
trafficking, child labor among others. The developed world is greatly affected by these happenings and provides enough
justification to help the less developed ones. It is against this background that the Pearson Commission in 1969 urged
all industrialized countries to make provision of 0.7 percent of their gross national income (GNI) as Official
Development Assistance (ODA); which plays a very significant role in the growth of developing economies (Firend Al
R., & Hashim, 2015; Hynes and Scott, 2013).
Recently, funding for official development assistance has been growing substantially with net ODA disbursement to
developing countries reaching US$94,212.35 million (at constant 2015 prices) in 2015 and US$160.780 million in 2017
(OECD, 2019). In 2011, official development assistance flows to sub-Saharan Africa amounted to US$26,240.6 million;
which is the highest in recent times.
Nomenclature
DF-GLS Dickey-Fuller Generalized Least Squares
FM-OLS Fully Modified Ordinary Least Squares
GNI Gross National Income
IDA International Development Association
IMF International Monetary Fund
ODA Official Development Assistance
OECD Organization of Economic Co-operation & Development
WDI World Development Indicators
1.1 Development Assistance inflows to sub-Saharan Africa

Development assistance flows come in many forms ranging from social infrastructure, economic infrastructure,
production, program assistance and multi-sector support. “The true test of aid effectiveness is improvements in people’s
lives”; OECD (2007). Development aid flows has over the years contributed significantly towards the fight against
abject poverty, especially in sub-Saharan Africa. The improvement in the lives of people has over the years been seen
as one of the major solutions to terrorism, corruption and civil wars. Dangerous diseases like HIV/AIDS, measles,
tetanus and Ebola outbreak have been minimized, especially in sub-Saharan Africa, through aid. In 2015, the
International Development Association of the World Bank’s fund mobilized US$1.17 billion to support the most Ebola
affected countries (Guinea, Liberia and Sierra Leone) and also supported the government of the Democratic Republic
of Congo in the fight against the severe Ebola outbreak in 2018; World Bank (2019). These flows have contributed
immensely towards ensuring the growth of economies.
Ensuring sustainable growth is the major policy indication of any government in the world. This is because sustainable
growth ensures that the needs of the present generation are met whiles securing that of the future generation and
development assistance flows is seen as one of the major contributing factors towards the growth of developing
countries.
Theoretically, the Neoclassical growth model (based on Solow’s growth model) have emphasized the importance of
investment while endogenous growth theory has focused on the role human capital and innovation capacity plays in
the growth of an economy. According to both theories, the rate of economic growth is said to increase as capital and
natural resources increase in quantity and quality. Investment in infrastructural development by the government serve
as complementary to private investment and therefore increases the marginal product of private capital which enhances
the growth of the domestic economy.
1.2 Trends in Economic Growth of Ghana

In Ghana, financing economic growth has been an important objective of government since independence. It is required
of the government to embark on large expenditures in order to improve the human capital, the domestic market,
technology and other social and economic activities to boost the economy. If the government’s budget is insufficient
to cater for all these, an outside financial muscle is needed, hence the need for development assistance inflows. In the
latter part of 2010, the country was re-categorized as a lower middle-income country (Firend Al R., 2015). However,
the economy of Ghana experienced very challenging moments especially between 1970 and 1983 where real GDP (at
market prices) fell by 11 percent while per capita income recorded more than 11 percent fall, and did not recover until
1985. Though the economy of Ghana has had its challenging moments, in recent years, the economy has had a
commendable growth trajectory, especially between 2000 and 2017 where annual growth rate averaged 6.84%, reaching
an all-time high of 25% in the first quarter of 2012. The gross international reserve position of the Bank of Ghana
recorded an all-time high of US$8,289.71 million in April 2017.
After a significant decline in the economy, Ghana’s economic performance ameliorated in the first half of 2017. During
this period, the country recorded a fiscal deficit of 2.7 percent of GDP-significantly close to the target rate of 3.5 percent
of GDP. Though revenues underperformed (14.9% below target), the government was able to cut its capital and
recurrent expenditure to meet the requirement of the fiscal consolidation program. Through the World Bank’s technical
assistance, the country was able to reverse this underperformance in the second half of 2017. Ghana’s total debt
decelerated (the country’s debt increased from US$29.2 billion, 73.1% of GDP, to US$31.7 billion, 68.1% of GDP) in
the rate of external debt accumulation. There was an expansion of the Ghanaian economy for the third successive
quarter in March 2017 to 6.6%, a rise of 2.2% from the previous year. The industry and agriculture sectors grew by
11.5% and 7.6% respectively, compared to 1.8% and 5% growth from the previous year (2016). The Central Bank was
able to reduce its policy rate by a cumulative 450 basis points to 21.5% in July due to the continued moderation of the
rate of inflation. Also, the 91-day and 182-day Treasury bill rates declined from 16.81% and 18.5% respectively in
December 2016 to 12.1% and 13.28% respectively over the same period. This is by far the longest sustained economic
revival in the history of the Ghanaian economy since independence.
Development assistance flows have contributed significantly to Ghana’s growth in agriculture, education, health etc.
over the years; Osei (2012). The country has been able to embark on improvements in infrastructure, human capital etc.
which was made possible by the development assistance received throughout the years. However, development
assistance seems to be declining and has therefore proven inadequate in financing the growth of the Ghanaian economy;
hence the need to investigate the effects of development assistance inflows on the long term growth of the country
(Firend Al R., 2015).
The purpose of the study is to estimate the long term effect of development assistance inflows on economic growth in
Ghana. The study then proceeds to test the following null hypotheses; there is no long term effect of development
assistance inflows on economic growth in Ghana.
2. Literature Review
Economic growth models postulate that the main factors that account for sustainable growth and development are
capital, effective labour and technological progress. Since there is low rate of domestic savings in developing countries
accompanied with current account deficit which restricts them from importing capital goods for investment, official
development assistance is said to be the tool that resolve this issue and increase growth in these countries (Firend Alan
Rasch, 2019).
In the two-gap theory developed by Chenery & Strout (1966), developing countries can bridge the gap between savings
(the savings gap) and foreign exchange (the foreign exchange gap) through development assistance inflows. Thus,
development assistance inflows to these countries will help supplement not just domestic savings and foreign exchange
but also lead to higher investment which will influence long term growth. Achieving long term growth is very
important for the development of every economy. Endogenous growth theories that postulate technological change
(discovery of new ideas and methods) in production process are very essential to achieving growth in the long term.
Empirically, various authors such as Levy (1988) and Hadjimichael et al. (1995) have shown that official development
assistance is an important source of development finance for sub-Saharan African countries, and for the Ghanaian
economy, Osei (2012) provides evidence that these inflows finance development in the short term, since in the short
term, it increases government expenditure (especially on infrastructural development), and ease some of the debt of the
country. However, its true effect in the long term is ambiguous. The effect of development assistance on economic
growth is seen via increase in public investment spending, control of diseases and poverty alleviation (Firend Alan
Rasch, 2019; Durbarry, Gemmell & Greenaway, 1998; Osei et al., 2005; Morrissey, 2012).
In Ghana, the International Development Association (IDA), World Bank’s fund for the poorest contributes the highest
share of development assistance flows into the country. It contributes US$104 million to social infrastructure, US$166
million to economic infrastructure, US$36 million to production and US$21 million to multi-sector development
(Firend Al R., 2014). The UK, United States of America, Global fund and Canada are the other major contributors of
development aid flows in the country. Germany, France, Switzerland, Denmark, Japan, Netherlands, Belgium, Korea,
Italy and EU institutions (whose contributions are summed up as all other development partners) also form a significant
part of development assistance flows to Ghana, as depicted in the figure below.
Figure 2.1: Development Assistance Flows to Ghana in 2017

Development Assistance by Donor and Sector (US$)
All Other…
Canada
Global Fund Social Infrastructure
United States of… Economic

Infrastructure
United Kingdom Production
World Bank Multi-Sector
0
500000000
1E+09
Source: OECD (2019)
Sakyi (2011) found that foreign aid and trade openness has a significant contribution to the growth of the Ghanaian
economy both in the short and long run in the post-liberation period in an autoregressive distributed lag bounds test
approach to cointegration. However, there are other authors such as Quartey (2005) and Lensink & Morrissey (2006)
who found evidence of a negative long run relationship between development assistance on economic growth.
Quartey (2005) sought to find innovative ways of ensuring aid (development assistance inflows) effectiveness in Ghana
and concluded that since the multi-donor budgetary support reduces transaction costs, the government of Ghana must
capitalize on donor accounting systems to build domestic capacity, make good judicious use of funds, reduce the
national debt and improve the predictability of aid inflows in the country. He further suggested that since the multi-
donor budgetary support is in tandem with other forms of project aid, synchronizing the two will ensure the
effectiveness of foreign aid.
3. Methodology
This section discusses the empirical modeling in order to ascertain the long term effect of development assistance
inflows as captured in the hypothesis.
3.1 Empirical Model

The choice of the FM-OLS method is as a result of its property of introducing appropriate correction to overcome
inference problems, thereby validating the t-test for long run estimates (Himanshu & Leste, 2007). Another property of
the FM-OLS technique is that it provides reliable estimates for small sample size analysis and the robustness check of
the model.
The Kernel (qs) estimators of parameter nuisance are fully utilized by the FM-OLS technique.
To examine the long run effect of official development assistance on economic growth, the FM-OLS model is specified
as:
𝑙𝑛𝑌𝑡 = 𝜓0 + 𝜓1 𝑙𝑛𝑂𝐷𝐴𝑡 + 𝜓2 𝑙𝑛𝑋𝑡 + 𝜇𝑡 … … … … … … … … … … … (3.27)
Where:
𝑌𝑡 denotes economic growth at time t, 𝑂𝐷𝐴𝑡 is net official development assistance at time t, 𝑋𝑡 is a set of controls
(exchange rate, public investment, gross national savings and gross fixed capital formation), 𝜇𝑡 denotes white noise
error, 𝜓0 denotes the intercept or constant term, 𝑡 denotes time period, 𝜓𝑖 , 𝑓𝑜𝑟 𝑖 = 1 𝑎𝑛𝑑 2, represents the coefficients
of the regressors. The coefficients of development assistance inflows, gross fixed capital formation, labour stock, total
investment and gross national savings are expected to affect growth positively whiles exchange rate is expected to have
a negative effect on growth.
3.2 Data and Methodology

In pursuance of the objective (estimating the long term effect of development assistance inflows on economic growth),
the Fully Modified-Ordinary Least Squares (FM-OLS) was used. Real GDP growth rate, official development
assistance, gross fixed capital formation, labour stock, total investment, exchange rate, and gross national savings were
adopted in a time series data covering 1980 to 2018 for Ghana. The data was sourced from the IMF’s World Economic
Outlook (2019) and the World Bank’s WDI (2019) whiles Eviews 9 was used for the statistical analysis.
3.2 Testing Time Series Properties

Cointegration analysis is the specific model used in this study to test for the presence of long term relationship between
development assistance inflows and economic growth. The cointegration concept, which was introduced by Granger
(1983) and Engle & Granger (1987), is used in testing for the validity of economic theories and models. It is applied
when time series data is found to be non-stationary, thus I(0). Since it is imperative to establish the existence of long
run equilibrium relationship among the variables in this study, the Johansen cointegration approach (1991) is adopted.
3.3 Stationarity Test

Before a cointegration regression can be estimated, the unit root test has to be conducted first to reveal the order of
integration for the series. The order of integration for the variables must be one, thus 𝐼(1).
There are various tests available in econometrics to test for the stationarity of the series but the Dickey Fuller
Generalized Least Squares method was used in this study.
The DF-GLS is a unit root test which has a different inference, null hypothesis of stationarity, as against the ADF test,
and is touted as an improvement on the ADF test (ERS, 1996; Frimpong & Oteng-Abayie, 2008). It was developed by
Elliott, Rothenberg and Stock (ERS) in 1996. They modified the Dickey-Fuller test statistic using a generalized least
squares (GLS) rationale and showed that the DF-GLS has the overall best performance when it comes to small sample
size and more effective power in the presence of unknown mean or trend (ERS, 1996).
The basic intuition behind this test statistic is formulated as:
Let 𝑥𝑡 = (1, 𝑡). For time series, 𝑦𝑡 , regress
[𝑦1 , (1 − 𝜋𝐿)𝑦2 , (1 − 𝜋𝐿)𝑦3 , … . , (1 − 𝜋𝐿)𝑦𝑇 ] … … … (3.15)
On
[𝑥1 , (1 − 𝜋𝐿)𝑥2 , (1 − 𝜋𝐿)𝑥3 , … . , (1 − 𝜋𝐿)𝑥𝑇 ] … … . . (3.16)
Yielding 𝜌̃𝐺𝐿𝑆 , where 𝜋 = 1 + 𝑐̅⁄𝑇 𝑢0 = 0 and 𝑐̅ = −13.5 for the detrended statistic.
Detrending 𝑦̃𝑡 = 𝑦𝑡 − 𝑧′𝑡 𝜌̃𝐺𝐿𝑆 is then applied to the Dickey-Fuller regressions without trend or intercept.
The t-statistic on 𝑦̃𝑡−1 is the Dickey Fuller generalized least squares statistic while the t is omitted from 𝑧𝑡 , and 𝑐̅ = −7.
The null hypothesis of DF-GLS is that 𝑦𝑡 is a random walk (with a drift).

3.4 Cointegration Test
In conducting the stationarity test, if the series depict the presence of unit root, thus non-stationarity at the levels but
stationarity after first difference, the cointegration relationship among the variables can be determined. The linear
association between the variables can be estimated by using either the Johansen-Juselius approach (Johansen, 1988;
Johansen-Juselius, 1992, 1999) or the Engle-Granger (1987) in order to eliminate spurious correlation and making wrong
inferences. Finding the presence of cointegration relationship among the variables can be interpreted as a long run
equilibrium relationship (Antwi & Zhao 2013).
4. Empirical Results
This section deals with the analysis of data on macroeconomic variables; real GDP per capita growth, official
development assistance, gross national savings, gross fixed capital formation, labour force and exchange rate from the
period 1980 to 2018.
4.1 Unit Root Test

To ascertain the order of integration, a Dickey Fuller-Generalized Least Squares (DF-GLS) approach was used to test
for stationarity. The results of the unit root are illustrative in Table 4.1. As indicated in the table, all the series are non-
stationary in their levels. However, all the variables showed stationarity in their first difference, according to the DF-
GLS.
Therefore, the series is integrated at order one, 𝐼(1), as depicted in table 4.1 below.
Table 4.1: Unit Root Test Results

Panel 1: Level
Variable Dickey Fuller-Generalized Least Squares (DF-GLS)
Constant Constant
No Trend Trend
Date Period: 1975 - 2014
𝑙𝑛𝑟𝑒𝑎𝑙_𝑔𝑑𝑝 -0.604086 -2.360460

𝑙𝑛𝑂𝐷𝐴 -0.870643 -2.724401
𝑙𝑛𝑠𝑎𝑣𝑖𝑛𝑔𝑠 -2.794180 -2.747253
𝑙𝑛𝑖𝑛𝑣 -1.203669 -2.529564
𝑙𝑛𝑔𝑓𝑐𝑓 0.129787 -2.627945
𝑙𝑛𝑒𝑥𝑟𝑎𝑡𝑒 0.152553 -0.872939
𝑙𝑛𝑙𝑎𝑏𝑜𝑢𝑟 0.254802 -0.282639
Panel 2: First Difference
Variable Dickey Fuller-Generalized Least Squares (DF-GLS)

Constant Constant
No Trend Trend
𝑙𝑛𝑟𝑒𝑎𝑙_𝑔𝑑𝑝 -6.632977 I(1)* -7.520376 I(1)*

𝑙𝑛𝑂𝐷𝐴 -7.998778 I(1)* -1.347757
𝑙𝑛𝑠𝑎𝑣𝑖𝑛𝑔𝑠 -8.394489 I(1)* -7.740407 I(1)*
𝑙𝑛𝑖𝑛𝑣 -8.163426 I(1)* -6.140658 I(1)*
𝑙𝑛𝑔𝑓𝑐𝑓 -2.858190 I(1)** -5.818663 I(1)*
𝑙𝑛𝑒𝑥𝑟𝑎𝑡𝑒 -1.651974 I(1)*** -6.272829 I(1)*
𝑙𝑛𝑙𝑎𝑏𝑜𝑢𝑟 -1.335567 -2.142503 I(1)**
Note: I(1) denotes integration of order one, and *, **, and *** denote 1%, 5% and 10% respectively. The null hypothesis for the ADF is
nonstationarity and DF-GLS is stationary.
4.2 Cointegration Test

In the Johansen multivariate cointegration test, panel 1 of the table presents the results based on the trace test while
panel 2 presents the results based on the maximum eigen-value test to determine the number of co-integrating vectors
(r) for this specification. In the trace test, the coefficients for the null hypothesis of no cointegration (𝑟 = 0 𝑎𝑛𝑑 𝑟 =
1) are 153.1008 and 77.52510 respectively; which are greater than their critical values of 95.75366 and 69.81889 at the
5% significance level, respectively. Therefore, the null hypothesis of no cointegration is rejected. Hence, the test shows
that there are two cointegrating vectors, therefore, there exist positive cointegrating relationship among real GDP per
capita growth, development assistance inflows, savings, investment, exchange rate and gross fixed capital formation.
The Maximum Eigen value test reinforces the fact that cointegrating relationship exists among the variables. Similar
to the result obtained in the trace test, rank 1 and 2 passed the 5% significant level. Therefore, the null hypothesis of
no cointegration in rank 0 and 1 is rejected. This result provides additional evidence in favor of the above conclusion
that there exists long run cointegrating relationship among the variables under consideration.
Table 4.2 Estimated Long Run Coefficients of the Johansen Cointegration Test
Panel 1: Trace Test 39 Observation Sample 1980-2018
Maximum rank Eigen value Trace statistic 5%Critical value
r = 0* 0.919475 153.1008 95.75366

r = 1* 0.678845 77.52510 69.81889
r=2 0.545215 43.45016 47.85613
r=3 0.299224 29.79707 29.79707
r=4 0.251772 9.145208 15.49471
r=5 0.014684 0.443793 3.841466
Panel 2: Maximum Eigen Value Test
Maximum rank Eigen value Max. Eigen value 5%Critical value
r = 0* 0.919475 75.57570 40.07757
r = 1* 0.678845 34.07494 33.87687
r=2 0.545215 23.63792 27.58434

r=3 0.299224 10.66703 21.13162
r=4 0.251772 8.701415 14.26460
r=5 0.014684 0.443793 3.841466
r indicates the number of co-integrating vectors. *denotes rejection of null hypothesis at 5% significance level.
Probability** are obtained from Mackinnon- Haug-Michelis (1999)
4.3 The Long Run effect of Aid on Economic Growth

Since the results of the Johansen cointegration approach indicated the presence of long run equilibrium relationship,
the Fully Modified Ordinary Least Squares method is used to estimate the long run effects of development assistance
on economic growth. The optimal lag length was obtained using the vlag (lag of VAR model). The coefficients are
long run elasticities.
The results indicate that development assistance inflows has statistically significant positive effect on economic growth
in the long run; as depicted in table 4.3 below. A 1 percent increase in development assistance inflows will cause
economic growth to increase by 0.32 percent. This concurs to the theoretical expectation of the growth-effect of
development assistance inflows, especially for developing countries (Fasanya & Onyakoya, 2012; Karras, 2006;
Papanek, 1973). Development assistance inflows to Ghana has being relatively stable, the past decade, due to stable
political environment and improvement in the macroeconomic indicators of the country.
Table 4.3 Estimated Coefficients of the Long Run Cointegration Regression (FM-OLS)
Dependent Variable: 𝑙𝑛𝑟𝑒𝑎𝑙_𝑔𝑑𝑝 38 Observations Sample 1980-2018
Regressor Coefficient Standard Error t-Statistics
𝑙𝑛𝑂𝐷𝐴 0.320548** 0.129666 2.472098
𝑙𝑛𝐼𝑛𝑣 -0.040477 0.383019 -0.105679
𝑙𝑛𝑆 -0.306645*** 0.166310 -1.843819
𝑙𝑛𝐺𝐹𝐶𝐹 0.034274 0.289184 0.118521
𝑙𝑛𝐸𝑋𝑅 0.287378 0.320094 0.897793
𝑙𝑛labour -2.006652 2.517213 -0.797172
Constant 1.547772 7.066398 0.219033
Long run S.E.= 0.289789 𝑅2 = 0.629841 R2 = 0.598265 Bandwith(Newey-West)=4.0000

*, **, and *** denote 1%, 5% and 10% respectively.
Also, the results indicate a statistically significant negative relationship between level of savings and growth for Ghana.
However, investment, gross fixed capital formation, exchange rate and labour shows a statistically insignificant
relationship with economic growth.
The coefficient of the R2 also gives an indication of a good fit since 63 percent of the variation in economic growth is
jointly explained by changes in development assistance inflows and the other variables.
5. Conclusion
This paper examined the long term effect of development assistance inflows on economic growth for Ghana.
Specifically, the study looked at how to finance growth in the long run by adopting the Johansen cointegration approach
after the series was integrated of order one, 𝐼(1) to test for the presence of cointegrating relationship in the long run.
The study further examined the long run effect of development assistance inflows on economic growth using the fully
modified ordinary least squares (FM-OLS) method. The statistically significant positive effect of development
assistance inflows on growth is a wakeup call to the government of Ghana to put into judicious use the development
assistance inflows since its true effect on economic growth can be seen via increase in public investment spending,
control of diseases and poverty alleviation (Morrissey, 2012; Osei et al., 2005; Durbarry, Gemmell & Greenaway,
1998). Also, clear policies to increase the savings rate of the economy must be implemented in order to induce the
citizenry to save more so as to increase the capital level of the country to aide both the government and private firms
in infrastructural development.
References
Antwi, S., & Zhao, X., (2013). Impact of Foreign Direct Investment and Economic growth in Ghana. International Journal of Business and Social
Research (IJBSR), Volume -3, No.-1, January 2013.
Chenery, H., & Strout, A., (1966). Foreign Assistance and Economic Development. American Economic Review, Vol. 66(4), pp. 679-733.
Durbarry, R., Gemmell, N., & D., Greenaway, (1998). New evidence on the impact of foreign aid on economic growth. CREDIT Research Paper
No. 98/8, Centre for Research in Economic Development and International Trade, University of Nottingham.
Elliott, G., Rothenberg, T. J., & James H. Stock, (1996). Efficient Tests for an Autoregressive Unit Root. Econometrica, 64:4, 1996, 813-836.
Engle, R. F., & Granger, C. W. J., (1987). Cointegration and error correction: Representation, estimation and technique. Econometrica 55(2), pp
251-276.
Fasanya, O. I., & Onakoya, A. B. O. (2012). Does Foreign Aid Accelerate Economic Growth? An empirical analysis for Nigeria. International
Journal of Economics and Financial Issues, Vol. 2, No. 4, pp. 423-431.
Firend, Al R. (2015) The phenomenon of economic Inertia. The International Journal of Business and Management Research. Vol. 8, No.1
Firend, Al R., (2014) Malaysian Economic Inertia: A Self-Inflicted Limitation to Future Growth. Procedia - Singapore
Firend Alan Rasch (2019) Basic Economic Principles: The short guide, everything you need to know about economics. ISBN-13: 978
1082342622. DOI: https://doi.org/10.32893/IJBMR/2019.AMII.10.0
Firend Alan Rasch (2018) Business Model: Simplifies with examples from Global Companies. ISBN-13: 978-1721060603. DOI:
Frimpong, J. M, & Oteng-Abayie, E. F. (2008). Bivariate Causality Analysis between FDI Inflows and Economic Growth in Ghana. International
Research Journal of Finance and Economics, Issue 15.
Granger, C. W, (1988). Some Recent Developments in a Concept of Causality. Journal of Econometrics, 39, 199 – 211.
Hadjimichael, M. Ghura, D., Muhleisen, M., Nord, R. & Ucer, E. (1995). Sub-Saharan Africa: Growth, Saving, and Investment, 1986-93. IMF
Occasional Paper No. 118, IMF, Washington D.C.
Himanshu, A. A & Leste, C. H, (2007). Electricity Demand for Sri Lanka: A Time Series Analysis. Surrey Energy Economics Discu ssion Paper
Series, No.118.
Hynes, W. & S. Scott (2013). The Evolution of Official Development Assistance: Achievements, Criticisms and a Way Forward. OECD Development
Co-operation Working Papers, No. 12, OECD Publishing. http://dx.doi.org/10.1787/5k3v1dv3f024-en.
Johansen, S., & Juselius, K. (1992). Testing Structural Hypotheses in a Multivariate Cointegration analysis at the Purchasing Power Parity and the
Uncovered Interest Parity for the UK. Journal of Econometrics, 53: 211 – 244.
Johansen, S. (1991). Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models. Econometrica, 59,
1551-1580.
Karras, G., (2006). Foreign aid and long-run economic growth: Empirical evidence for a panel of developing countries. Journal of International
Development, 18, 1551-1580.
Lensink, R. & Morrissey, O. (2006). Foreign Direct Investment: Flows, Volatility, and the Impact on Growth. Review of International Economics
14, 478-493.
Levy, V. (1988). Aid and Growth in Sub-Saharan Africa: The Recent Experience. European Economic Review, Vol. 32, pp. 1777-1795.
Morrissey, Oliver (2012). Aid and government fiscal behaviour: What does the evidence say? WIDER Working Paper, No. 2012/01, ISBN 978-929-
230-464-5.
OECD (2019). Development aid at a glance: Statistics by Region – Developing countries 2019 edition.
OECD (2007). Development Co-operation Directorate, DAC’s glossary.
Osei, R., Darko, (2012). Aid, growth and private capital flows to Ghana. WIDER Working Paper, No. 2012/22, ISBN 978-92-9230-485-0.
Osei, R., Morrissey, O. & Lloyd, T., (2005). The Fiscal Effects of Aid in Ghana. Journal of International Development, Vol. 17, Pages 1–17.
Papanek, G.F., (1973). Aid, Foreign Private Investment, Savings and Growth in LDC. Journal of Political Economy, vol. 81, No.1, Pp 120-130.
Quartey, P., (2005). Innovative ways of making aid effective in Ghana: tied aid versus direct budgetary support. Journal of International Development,
vol.17, p.1077-1092.
Sakyi, D., (2011). Trade openness, foreign aid and economic growth in post-liberalisation Ghana: An application of ARDL bounds test. Journal of
Economics and International Finance, Vol. 3(3), pp. 146-156. ISSN 2006-9812.
World Bank, (2019). World Development Indicators. Retrieved on 10 June 2019 from http://data.worldbank.org.
The strategic advantages of moving upstream by telecommunication
operators: The case of Asiacell
Firend Al. R., PhD., Jwan N. Abbas

Email: drfirend@gmail.com
Abstract
This paper examines development assistance inflows and Ghana’s long term growth. Specifically, the study investigates the long
run effect of development assistance inflows on economic growth using Johansen cointegration approach to establish the presence
of long run cointegration relationship among the variables. The fully modified ordinary least squares is then used to estimate the
long run effect of development assistance inflows on economic growth. Results of the long run analysis showed that there exists a
statistically significant positive relationship between development assistance and economic growth in Ghana. Therefore, the
government of Ghana must ensure stable political environment in order to attract more of such assistance and also ensure that
development assistance inflows are put into judicious use.
Keywords: 3G, 4G, 5G, Asiacell, Telecommunications, Iraq, upstream, competitive advantage
1. Background of the study
The need for a new, and faster networks and the move towards 5G is nothing new to telecom operators. Such need is
fueled by an ever-increasing demand by consumers; being organizations and subscribers for more and faster data. The
increase in smartphones and mobile devices usage, and wider usage of applications, increases the demand for a faster
network. The growth of Facebook, YouTube, online banking, and numerous other Media portals caused a call for
higher-speed data. Over-the-Top Services (OTT) or commonly known as data services, are the game changer for
telecom operator and ISPs. Customers (subscribers) are the most significant driver behind moving upstream and moving
from 2G to 3G to 4G and now 5G. OTT is transparent to network infrastructure, or technology used as a medium; they
only need access to data, which enables them to communicate via applications that usually shared between different
users or the OTT service owner and customer. In the other hand, the network providing the data access has no control
over the content which is transferred digitally through the network(s) (Firend Alan Rasch 2017; Jacobson & Smetters,
2016). Most popular examples of applications that need OTT services to function are; Skype, Facebook, YouTube,
WhatsApp, and Twitter to name a few.
Asiacell
Asiacell is the first and largest amongst three telecommunications network operators in Iraq. The company services
covered over 500,000 subscribers within first year of operation (Albawaba, 2003). However, revenue for all operators
in Iraq declined because of growth in use of voice and text applications such as Viber, WhatsApp, Skype, etc. Asiacell
was pushing hard to get the 3G up and running, but the call for upgrade, requires regulatory approvals by the Iraqi
government. The GSM slow data speed and high cost per Gigabyte of data stems from the fact that technology such as
UMTS, and later LTE is more efficient, and much faster than GSM. UMTS and LTE are designed to satisfy the hunger
to extra high speeds of data, which enables all subscribers to be connected (Hwang, et. al., 2007). As internal statistics
by Asiacell constantly reveals a surge in data traffic, particularly in the southern region of Iraq, this is derived by the
fact that ISPs in southern Iraq was not meeting the growth in consumer demand in terms of data rates and network
availability.
While revenues at Asiacell generated by data services was rising, the voice and text revenue were declining daily. This
phenomenon was not limited to Asiacell, but it was experienced by operators across the globe (Khan, et. al., 2009)
since subscribers were moving seamlessly towards Internet Protocol (IP). Data is generally needed by customers for
voice, text, streaming or gaming. Figure 1. shows the percentage of Internet usage in Iraq, and indicates the launch of
3G service during 2013-2014, which allowed more customers to access the World Wide Web.
Fig. 1. Percentage of customers using the Internet in Iraq (Source: ITU)
Asiacell’s internal key performance indicators generated by business intelligence department consistently reveals an
increasing growth in the utilization of data across Iraq since inception. Internal analysis also reveals another finding,
which is the increasing need for data, however, such demand varies from city to another, and more precisely in southern
Iraq. Asiacell enjoys wider network coverage, better network effect, and it can reach more consumers, while ISPs are
limited to land cables, short distance microwave dishes and limited number of towers. This is largely because of the
business nature of small companies with limited CAPEX/OPEX.
The graphs below show Region 5 (cities of Basrah, Nasiriya, Amara and Samawa) were data volumes jumped
exponentially (around seven times) right after the 3G launch. While in region 1 (cities of Sulymaniah, Kirkuk, and
Diyala) the data volumes up to quadruple of data volume prior to 3G launch.
Fig 2. 3G data volume upon introduction of 3G (North Iraq)
Fig 3. 3G data volume upon introduction of 3G (South Iraq)
2. Research problem
Moving from 3G to 4G is an expensive affair, telecommunications operators need clear indication of consumer demand
and revenues to justify such investments in new infrastructure. This is also true in the move towards 5G networks.
Moreover, the need for data prior to the introduction of 3G service was essential to the existence of telecommunication
operators globally, but is it the same in the case of Iraqi telecommunication operators? The problem for Asiacell, is to
meet the growing demand for more and faster data. An upgrade to 4G services, requires enormous investment by
Asiacell in equipment and infrastructure. Yet, an upstream upgrade seems to be an inevitable investment. So, did such
investment pay off?
2.1 Significance
Examining historical internal data, investments made and business decisions may reveal number of lessons for
telecommunication operators. This is especially important in the eve of 5G network and the pressure to move upstream.
Lessons learnt from the case of Asiacell may be of significance for other operators around the world.
3. Literature review
The telecommunication industry over the past three decades had to cope with continuous changes in technology, that
significantly impacts the foundation of existing business models (Hui & Yeung, 2003). Statistics show global mobile
data ramping around 40% on annual bases (Firend, R., & Al-Emadi, 2007; Khan, et. al., 2009; Ken Research, 2019).
Increasing acceptance of smart devices and adoption of mobile phones, computer PDAs by consumers led to increasing
connectivity (Mahmood & Ismeal, 2019). This is anticipated to grow even more in the era of the Internet of things that
links home appliances, pets tracking devices and transportation vehicles to the world wide web (Salih, et. al., 2019).
Traditionally, the primary revenue stream for telecom have been a voice and messaging (SMS). With data coming in
the picture, this added a disruption to an established business model since the invention of telecommunications (Mzory
& Firend, 2016). However, while the telecommunications industry fast to respond to game-changing technology, as in
the case of the emergence of mobile communication in the 1990s and the explosion of the Internet. The industry seems
to be caught off guard in the face of their newest revenue challenges (Salih, et. al., 2019).
Over the Top Services (OTT) is a data service, such as the provision of video, audio and other media content using
Internet provided by a network operator, but not necessary directly from that provider's business (Abbassi, 2013; Firend
R., 2006)). Internet service provider does not control the distribution of the content. The ISP only provides content
packages and generally receives no revenue from the delivery of this content from third-party online providers. The
increasing impact of OTT services on the voice and message revenue of telecommunications is a broadly accepted
phenomenon today (Al-Salami et. Al, 2015; Firend R., & Masoumeh, 2014). Their effect on mobile data traffic and
data revenue from telecommunications are also parts that have been recognized as critical. The market for wireless
telecommunications is increasing driven by consumer convergence and enlarged wireless integration in the business
segment.
North vs. South telecom players
The Kurdish region of Northern Iraq has always been viewed as a success story. This is primarily because of the relative
political stability of the region that managed to avoid the sectarian violence that swept the rest of the country (Zorpette,
2006). The Kurdish political leadership played a critical role in attracting businesses, reforming old investment
regulations, lobbying international firms, and legislating new visa system that facilitated business mobility. Such steps
helped in advancing the private telecommunication sector in the Northern Kurdistan region of Iraq, which at later stages
had a spill-over effect to the rest of Iraq (Mzory & Firend, 2016). Up till the introduction of (licensing) small operators
to provide OTT in Northern Iraq only, ISPs in Kurdistan region were, and still, doing a good job in terms of data speed,
reliability, and availability (Broadband Networks in the Middle East and North Africa). The major ISP provider in the
Northern Kurdistan region is Newroz Telecom and its affiliated companies such as Allai Newroz and Fastlink operating
in the norther cities of Duhok and Erbil (Ken Research, 2019; Zorpette, 2006). These small operators have wireless and
wired Internet service. DSL and high-speed broadband FTTH services (fiber to homes), are all accessible to users in
these two cities. Later Newroz Telecom became the first LTE network owner in Iraq. In the norther city of
Sulaymaniyah. Small operators such as Goran Net, Tishek Net, IQ Networks and some other small companies are
running similar business model. ISP also have an external connection to the world fibre optics cable through Turkey,
and later in 2013, another link to the Gulf states, through the city of “Faw” in southern Iraq, which is bordering Kuwait
(Broadband Networks in the Middle East and North Africa; Ken Research, 2019). In middle and southern Iraq, the
situation is seen to be chaotic (TeleGeography, 2011; Zorpette, 2006). The Iraqi government represented by ITPC (Iraq
Telecoms and Post Company) does not have plan for fibre-infrastructure and information infrastructure in general
(CMC, 2019; ITU, 2017). Old fibre networks were either damaged by hostile actions or poorly maintained (CMC, 2019;
TeleGeography, 2011). In the capital city of Baghdad, a hybrid network of fibre and microwave are used to reach end-
user and connect them to the Internet (Abiresearch.com, 2019).
4. Methodology
This paper was conducted as an exploratory research with qualitative techniques applied. The conceptual framework
of this case study is based on a deductive method of a positivism paradigm. Primary data was collection by researchers
directly from Asiacell. Primary data was compared with secondary data and available literature. Interviews were
conducted with number of Asiacell employees over a timespan of 14 month to verify data and analysis. Interviews were
conducted in an open-ended question with various department heads, including technical, engineering, marketing, sales,
and legal department. Interaction with partners and cross-departmental technical teams was critical in the assessment
gathering of data assessment of findings. Data presented in graphs in this study included first-hand data gathered from
Asiacell, such as Key Performance Indicators (KPI) before and after the 3G launch. Interviews were conducted in
Kurdish, Arabic and English languages. A triangulation approach was administered to compare and verify interview
findings with internal reporting’s. Analysis and findings from Asiacell internal reports, were compared to industry
reports, which confirmed numerous findings. Secondary data was collected from the Iraqi ministry of communications
reports, telecommunication industry reports, and scholarly academic literature concerned with both the industry of
telecommunications in Iraq, and Asiacell. Analysis conducted was to determine the impact of technology changes, such
as OTT on Asiacell business model and market share. Exploring any critical factors to the company, to highlight
elements that is perceived to be of importance to the company in relation to their long-term position in the industry,
and their related competitive advantage issues.
5. Analysis
Mobile Service Providers
Internet service providers in Iraq are small to medium size businesses, in terms of size, capital investment, service area
and number of subscribers. This in turn, contribute to lower capital expenditure and operational expenditure (CAPEX
and OPEX). Most Internet Service Providers (ISPs) have been established by Iraqi entrepreneurs with IT industry
experience. As such, decision making at smaller companies is relatively faster, including adaptation to market changes.
This poses a threat to large and established Cellular companies such as Asiacell, Zain and Korek. OTT traffic by the
big Cellular companies has dropped notably in the northern Kurdistan region, affected by new smaller companies
providing OTT data such as Newroz Telecom and Goran Net. Most of the ISP own fibre network or parts of it, gave
smaller data providers the needed leverage over large established cellular operator, that usually lease the dark fibre that
leads to a ramp in the dollar per gigabyte rate. The fiber network is in essence an Internet provider, since it encompasses
the means of transferring data reliably and securely.
Iraq took its first step out of its isolation in 2003 when the Iraqi government media and telecommunication regulator
body CMC (The Commission of Media & Communications) awarded three GSM licenses to Asiacell, Atheer Telecom
and Orascom-Iraqna. The licenses extended in 2007 on different bid terms replacing the old temporary agreement with
new 15-years long contract, Orascom withdrew from Iraq for Korek Telecom (Telecoms.com, 2019). The
telecommunication infrastructure in Iraq was significantly damaged after decades of wars and international sanctions.
According to ITU (International Telecommunication Union), the Iraqi mobile communication service penetration is
over 90% (Ken Research, 2017). The mobile phone penetration year-to-year jump in figure 4 shows the thirst for more
broadband, an awaited service in Iraq.
Fig. 4 Mobile subscriber’s growth in Iraq
Source: International Telecommunication Union link
GSM network limitations

The GSM networks running today in Iraq by the three operators are using the highest GSM available technology.
However; the GSM itself, no matter how advanced is, cannot deliver the required data speeds or provide another feature
that 3G and 4G are capable of. The GSM uses a technology called TDMA (Time Division Multi Access), which is
mature and active, but limited in the capacity of users and data they can upload or download (Dan Wheeler, 2019).
More users coming to network need more infrastructure to build, in many cities’ hot spots areas the distance between
neighboring towers reached few hundred feet made it impossible to offer better services to the already congested
network.
Fig. 5 Voice vs. data usage
Source: Ericsson https://mybroadband.co.za/news/cellular/130652-mobile-traffic-data-vs-voice.html )
3G is the answer to 2G limitations

3G technology is actually UMTS, which stand for Universal Mobile Telecommunications System. 3G is a broadband
system that offers higher capabilities for mobile wireless connectivity, when compared to GSM 2G system. The
upgraded network, which first officially launched in 1998 by NTT DoCoMo (Reuters). The response to a shortage in
network capacity was a newer technology that can take more subscribers and have a better quality of service or what
call (QoS). The logical upgrade to 2G GSM is the UMTS 3G as they both administrated by same organization 3GPP
(The 3rd Generation Partnership Project) making both technologies able to interact and create a seamless transfer and
service consistency. In addition, it is essential to go with 3G so the operator can still use the same backbone of its
mature GSM network (Cognitel Admin, 2014). Investments in better network upgrades, which costs billions of dollars
in ground infrastructure and R&D is the answer for companies where GSM couldn’t offer high quality service to
customers, UMTS has better capacity and high-speed data rates (x200 faster compared to GSM), the way to 4G LTE
goes through 3G, and technology availability and readiness at affordable prices.
As such, when 3G is faster and high quality than 2G, the same goes for 4G and 5G technologies. An upward streaming
can better serve the consumer when high data speeds are needed. Such demand is driven by wider utilization of
smartphone and smart devices with extensive capabilities and software developments during the last decade.
Development in IOS and Android as main platforms for users has contributed to such demand. As such demand for 5G
is a pressing necessity for telecommunication providers. Particularly in the case of Asiacell. However, competition
from smaller and newer OTT providers Such as Newroz Telecom, is posing a tremendous threat to Asiacel’s ability to
provide 4G (a service offered by competitors) and to maintain their existence in the long-run.
The role of Iraqi Regularity body CMC in shaping the competitive landscape
GSM licenses was first offered in 2003 to secure voice call and SMS texting; it was all needed for a country that just
broke walls of silence and chains of isolation (ITU, 2017). The first three companies first started to operate in separate
regions; Orascom in central Iraq, Asiacell North, and ATC-Atheer (rebranded later as Zain) in the south with no
interconnection between any two of them at the beginning (Zorpette, 2006). In 2007, new licenses offered, forced the
three operators to cover the entire country geography and allowed for incoming and outgoing connections. The new
situation enhanced the network effect principle and offered a fair market competition, which later led to levelling the
customer market share between Asiacell and Zain. The introduction of new licenses that can potentially disrupt business
models of large cellular operators is attributed to governmental bureaucracy and corruption, which has reached an all
levels (Doing Business World Bank Group, 2019) discouraging start-ups and investments. Iraq ranks 171 out of 190,
and scores 44 in a scale of 0 to 100, where 0 is the worst. Iraq is currently viewed as one of the worse countries in the
Middle East to do business with. The Doing Business Group ranking takes into consideration several factors such as
getting credit, solving insolvency, getting electricity, registering property and so on. Figure 4 below shows Iraq ranking
among other Middle-Eastern countries in ease of doing global business scale. Another factor that can decide the ISP
success is the political aspect of doing business in Iraq. Political connections placed a preference of some companies
over others. This is evident from the geographic areas of operations of each ISP in correlation to a dominant political
faction in that region.
Fig. 4. Ease of Doing Business Score in Iraq in 2019 (Source: World Bank link)
Such difficulties, that discouraged foreign operators from entering the local ISP business in Iraq are anticipating lower
profitability because of a crowded market (many licenses in the same region). This in turn, presented a greater chance
for local operators to capitalize on this opportunity (Zorpette, 2006). Since local operators owns most of the ISP, they
could break through Iraqi market barriers, and take on market offering to the next level.
The biggest challenge for Asiacell was not to start 3G service in Iraq, but it was the crucial approvals of governmental
entities that allows for telecommunication and media service to be introduced in the country. The Iraqi CMC (The
Commission of Media & Communications) was established in 2004 by The Coalition Provisional Authority (CPA) led
by the United States and is engaged in all decisions regarding telecom network licenses, frequency bands, technologies
used and more details of cellular business (CMC About us). It took the CMC over five years to finalize the 3G service
use, and subsequently allowed the Iraqi service providers to launch UMTS 3G in 2014. The slow response from CMC
to the market need had a negative role on the entire business. Many in Iraq telecommunication industry relate such
mishap to the political environment and inter-sectarian tensions. The Iraqi CMC was reluctant to give the green light
to operators to run 3G service. This was ubiquity across telecommunication industry, and hampered Asiacell from
moving to 4G, which might affect their core existence in the marketplace. No telecommunication operator of any size
today is able to provide 4G service in central and southern Iraq, where the majority of the market exist. 4G services is
only available in the Kurdish northern region of Iraq, where about 12% to 13% of the population resides by small new
operators. Non-of the big operators, which constitute the competition of Asiacell, namely Korek Telecom and Zain are
able to provide 4G services.
5. Conclusion
Analysis reveals that Asiacell had to move to 3G technology to maintain competitive advantage, however, because of
regulatory, infrastructure, technological, managerial and general business environment in Iraq, Asiacell is unable to
move towards 4G anytime soon. This will lead to a loss of market share. 3G guarantees data speed that was sufficient
for those used to 2G, enough to stream videos at acceptable quality, making calls via VoIP application and many other
capabilities, yet this is not enough anymore for consumers with more need for 4G streaming that is provided by
competitor ISP provider in the Northern Kurdistan region, namely Newroz Telecom and affiliated companies. As
customers get accustomed to more and faster bandwidth, the move from 4G to 5G is something Newroz Telecom is
capable of, given their ability to deal directly with 5G infrastructure provider such as Huawei Telecommunications.
For the very first time, Iraq 3G allowed network operators to offer portable internet through phones and external hotspot
devices. Such devices like USB Modem and other devices that make it possible to connect computers and PDAs to the
internet. The internet mobility put network operators back on track after losses to ISPs. Analysis further shows that the
exclusive features that Asiacell, Zain and Korek have over ISPs in terms of service quality and market share leverage
are as following; better coverage backed by established country-wide network, mobile phones with geo-location
services such as GPS, maps, and other applications on iOS and Android platforms. In order for Asiacell and another
mobile service operator to win larger market share and gain competitive advantage, constant upgrading of their services
and upstream move towards 4G and ultimately 5G is a necessity. ITU (2017) and Amazon subsidiary, Amazon Alexa
concerned with internet traffic analysis (Bohac & Keck, 2018) shows that top 3 sites in Iraq are Google.com, YouTube
and Facebook. Such websites require high traffic for video streaming and social networking. Majority of this data
streaming are originating indoor, which require enormous investment in indoor connectivity (Abiresearch.com, 2019).
Analysis further reveals that open cap data limit, or near to unlimited, is a necessity for operators in Iraq, as well as
other markets to gain customer satisfaction and maintain market share growth (Householder, & Firend, R., 2006; Firend
R., & Al-Emadi, 2007).
References
Abbassi, J. (2013). Arab Telecom Markets: Present & Potential. Arab Advisors Group, Jordan.
Abiresearch.com. (2019). ABI Research Anticipates In-Building Mobile Data Traffic to Grow by More Than 600% by 2020. [online]
Available at: https://www.abiresearch.com/press/abi-research-anticipates-building-mobile-data-traf/
Al-Salami, K. H., Sawadi, Z. T., & Saadi, I. A. (2015). An Empirical Study for Competition Case between Iraqi Telecommunication Companies
Using Game Theory. International Journal of Scientific and Research Publications.
Albawaba, 2003. "Wataniya Telecom-led Consortium Signs License for Northern Iraq." Al Bawaba, www.albawaba.com/business/wataniya
telecom-led-consortium-signs-license-northern-iraq . Retrieved on 27 Feb. 2019.
Bohac, A., & Keck, M. (2018). Amazon Alexa: The Best Personal Assistant or an Eavesdropping Witch.
Cognitel Admin (2014). Need For 3G Technology Over 1G and 2G Technology. https://www.cognitel.com/blog/students-articles/need-3g
technology-1g-2g-technology/. Retrieved on 20 Feb. 2019
CMC. About u. http://www.cmc.iq/en/aboutcmc.html . Retrieved on 25 Feb. 2019
Dan Wheeler. The Advantages and Disadvantages of GSM. https://www.techwalla.com/articles/microwave-radio-communications-

advantages disadvantages. Retrieved on 22 Feb. 2019
Doing Business - World Bank Group , Ease of Doing Business in Iraq. , 2019, www.doingbusiness.org/en/data/exploreeconomies/iraq# . Retrieved
22 Feb. 2019
Firend, R., Al-Emadi, M. (2007) Perception of Electronic Government Utilization in State of Qatar Proceeding: The Academy for Global Business
Advancement, Penang, Malaysia. May 21-25, 2007. www.agba.us
Firend, R., Masoumeh, F. A. (2014) Impact of service quality, trust, and perceived value on customer loyalty in Malaysia services
industries. Proceeding: International Conference on Accounting Studies (ICAS). Kuala Lumpur, Malaysia August 19, 2014 Journal:
Procedia -Social and Behavioral Sciences. Reference: SBSPRO20285. PII: S1877-0428(14)05900-X DOI:
10.1016/j.sbspro.2014.11.080 http://www.sciencedirect.com/science/journal/18770428/164
Firend, R. (2007) Examination of the IT Projects Failure Within the Public Sector: State of Qatar. Proceeding: The Academy for Global Business
Advancement, Penang, Malaysia. Volume 4, Issue 1. May 21-25, 2007. www.agba.us
Firend Alan Rasch (2017) Critical success factors in project management: A comparative study between the GCC and the U.K. (2017) ISBN
13: 978-1977560728. DOI: https://doi.org/10.32893/IJBMR.2017/AMII.3.1
Gelvanovska, Natalija; Rogy, Michel; Rossotto, Carlo Maria. 2014. “Broadband Networks in the Middle East and North Africa, CH.3 , Page 68”,
http://www.worldbank.org/content/dam/Worldbank/document/MNA/Broadband_report/Broadband_MENA_Chapter3.pdf Retrieved on
22 Feb. 2019.
Hui, S. Y., & Yeung, K. H. (2003). Challenges in the migration to 4G mobile systems. IEEE Communications magazine, 41(12), 54-59.
Householder, J., Firend, R. (2006). Post-Implementation Assessment of Knowledge Management Programs at Government Organizations: The
GSA Case. Proceeding: Second Annual Conference on Applied Management and Decision Sciences. Dallas, Texas, USA January 20,
2006. http://www.ijamt.org/ijamt/IJAMT/AMDSJan2006.pdf
Firend, R. (2006) The Impact of Investments in Network Security on Business Performance. Proceeding: International Business
Information Management Association 7th IBIMA Conference. Brescia, Italy. December 14 – 16, 2006
http://www.ibima.org/Italy2006/papers.html
Hwang, J. S., Consulta, R. R., & Yoon, H. Y. (2007). 4G mobile networks–Technology beyond 2.5 G and 3G. PTC (Pacific Telecommunications
Council) Proceedings, Hawaii.
ITU: International Telecommunication Union (2017)
https://www.google.com/publicdata/explore?ds=emi9ik86jcuic_&ctype=l&strail=false&bcs=d&nselm=h&met_y=i99H&scale_y=lin
nd_y=false&rdim=country&idim=country:IQ&ifdim=country&tstart=1140847200000&tend=1424844000000&hl=en_US&dl=en&in
=false&icfg
Jacobson, V. L., & Smetters, D. K. (2016). U.S. Patent No. 9,456,054. Washington, DC: U.S. Patent and Trademark Office.
Ken Research (2019). Iraq, Telecoms, Mobile, Broadband and Digital Media, Statistics and Analyses https://www.kenresearch.com/technology
and-telecom/telecommunications-and-networking/iraq-telecoms-mobile-broadband/7100-105.html. Retrieved on 22 Feb. 2019.
Khan, A. H., Qadeer, M. A., Ansari, J. A., & Waheed, S. (2009). 4G as a next generation wireless network. In 2009 International Conference on
Future Computer and Communication (pp. 334-338). IEEE.
Mahmood, N. A. S., & Ismeal, S. M. (2019). Indicators the Leadership of the Ocean Blue in the two companies Asia cell and Zain communications
in Iraq. Tikrit Journal Of Administrative and Economic Sciences, 4(44), 346.
Mzory, H., Firend, Al R. (2016). Marketing e-solution services and cultural readiness in the KRG. International Journal of Business and
Management Research, Issue 9, Vol. 1
Reuters. “NTT DoCoMo Happy With 3G Launch.” Wired, Conde Nast, 5 June 2001, www.wired.com/2001/06/ntt-docomo-happy-with-3g
launch/.
Salih, A. A., Saeed, A. T., & Saber, Z. R. (2019). A Study on the Effects of Cellular Mobile Networks on People in Tikrit City Based on Power
Density Measurements and Calculations. Engineering, Technology & Applied Science Research, 9(3), 4265-4270.
Telecoms.com. (2019). Three Iraq GSM licenses awarded. http://telecoms.com/634/three-iraq-gsm-licences-awarded/ Retrieved on 22 Feb. 2019.
TeleGeography. “Zain Inks USD650 Million Iraq Network Deal with Ericsson., 24 Nov. 2011,
www.telegeography.com/products/commsupdate/articles/2011/11/24/zain-inks-usd650-million-iraq-network-deal-with-ericsson/
Zorpette, G. (2006). Iraq goes wireless [Iraq telecommunications industry]. IEEE Spectrum, 43(3), 32-36.
Studying the reflection of psychological hardiness in leadership
effectiveness: A survey in the cities and villages Development Bank
Bakir Ahmad AlRahamnaha, Hasan Ali Al-Zu’bib

aConsultant, Cities and Villages Development Bank
bProfessor of Business Administration, Amman Arab University, E-mail address: zubi1963@yahoo.com
Abstract
The objective of the study was to test the effect of the dimensions of psychological hardiness (Commitment, control, and challenge)
in Leadership Effectiveness. The study was carried out at the Cities and Villages Development Bank of Jordan.A questionnaire was
developed to collect secondary data for the purpose of testing the hypotheses of the study. It was distributed to all managers in senior
management and middle management who have an impact on the development of the Bank's strategies, where the number was (83).
Four questionnaires were excluded for incomplete data. The number of questionnaires analyzed was (79). The results showed that
the control did not have a positive impact on achieving organizational objectives and team building as the dimensions of the
leadership effectiveness. One of the main recommendations of the study is that the senior management works to develop the
psychological hardiness of managers because of their positive impact on the effectiveness of leadership.
Keyword: Psychological Hardiness, Leadership, Leadership Effectiveness, Jordan.
1. Introduction
Psychological hardiness is one of the personality traits that help the individual properly deal with the pressure, Mental
Psychological health, and non-exposure to psychophysiological disorders, characterized by a hardiness personality with
optimism and emotional calm, dealing effectively and directly with the pressure. Therefore, they are successful in
dealing with pressure.
It also helps the psychological hardness of the individual to deal with the pressures effectively. Gucciardi et. al. (2015)
points out that an individual who has psychological rigidity uses assessment and coping strategies effectively, this
indicates that the individual has a high level of psychological trust. Thus, the individual perceives the compressed
position as less threatening and then reconstructs it into something more positive. The result has been the economic
crises of the Jordanian organizations, especially during the past two decades, as their traditional administrative problems,
where these conditions reflected the reality of progressive organizations, and the resulting crises faced, and the
psychological status of managers and the strength of their bearing (Firend R., Shaki, 2008).
The current study attempts to determine how well managers can manage, commit, and challenge in the face of stressful
events towards the success of their organizations by increasing the effectiveness of leadership (Firend Alan Rasch,
2017; 2019). And the scarcity of studies to the knowledge of researchers that dealt with psychological hardiness in
relation to the effectiveness of leadership, especially in the Arab environment, this study seeks to reveal this relationship
with managers in the cities and villages Development Bank in Jordan.
2. Theoretical Framework
2.1. Psychological Hardiness
The concept of psychological hardiness is a relatively modern concept in the Jordanian environment; it is one of the
important psychological characteristics of the individual to face multiple life pressures successfully.
Kobasa (1979) was the first to lay the foundation for the term psychological hardiness, where I noticed that some people
can achieve their own potential and potential despite the many frustrations and pressures, so she felt that the focus
should be on the normal people who feel valued and self-fulfilling, not sick. Kobasa (1996) derived the term
psychological rigidity influenced by the existential philosophical thought that sees that man in the state of continuous
process, which focuses on his interpretation of human behavior on the future rather than on the past, and considers that
the motivation of the individual stems mainly from the constant research that is developing about the meaning and
purpose of life (Maddi, 2004). Lang believes that psychological hardiness is a personal trait, He says that each
individual shows some levels of hardness, and depends on the rise or decline on the situation and time passes by the
individual, and may be that difference to the way and practice learned by the individual, Which affect each form of
their experiences and ultimately reflected on their health, so the rigidity of an educated ability can change, that is,
hardness is a personal source and not a personal trait of the individual (Abbas,2010).
The Hannah & Morresse (1978) study indicates that psychological hardiness supports the processes of cognition,
assessment and confrontation that the individual performs to deal correctly with stressful situations through several
ways:
1. Psychological hardiness adjusts from the perception of events and makes their negative impact less severe.
2. The psychological hardiness leads to flexible coping styles that vary according to the compressor position.
3. Psychological hardiness increases the capacity of social support as a coping technique.
4. The individual's psychological hardiness tends to change his lifestyle, such as his diet or his sports and health
practices, thus avoiding physical illness.
In terms of the concept of psychological hardiness, it has been defined Kobasa (1979) It is a set of personal traits that
act as a source or as a hurdle to the events of hard life. It represents a general belief or tendency in the individual to be
able to exploit all of his sources, psychological potential, and available environment to realize the events of hard life
with a clear and objective understanding and coexist with them in a positive way. . It includes three main dimensions:
commitment, control and challenge. It is defined by Funk (1992) as a general feature of the personality. Various
environmental experiences work on its formation and development in the individual since childhood.
Kosaka (1996) supports psychological hardiness as a measure of a person's tendency to make the relationship between
him and the outside world as not just stress and stress, but self-understanding, and the ability to make self-decision.
2.2. The Dimensions of Psychological Hardiness
Psychological hardiness dimensions showing through the study carried out by Kobasa (1979) which indicated that
individuals who have psychological hardness trying to have influence through some of the events that pass them, these
dimensions are (commitment, control, and challenge). Kobasa believes that these three components are linked with
higher individual's ability to challenge environmental pressures and life events, and turn the events of stressful life
opportunities for personal growth. One of the three components of hardness is not enough to provide us with courage
and motivation to shift stress and anxiety to more positive things, Psychological hardiness is a composite of three
independent, measurable dimensions.
1. Commitment: The commitment component is one of the most powerful components of psychological
hardiness in relation to the protective role of hardness as a source of resistance to stress triggers. The absence
of this component is linked to the detection of some mental disorders such as anxiety and depression (Hydon,
1986). Kobasa indicated that commitment is the ability to recognize an individual's value and goals and to
assess his potential to have a goal to achieve as well as to make decisions that support balance and internal
structures. Commitment is self-commitment by the individual towards himself, his goals, values and others. It
represents the individual's commitment to positively deal with stressful events and to see them as purposeful
and meaningful positions (Firend Al R., 2014). The individual who has a strong sense of commitment is
integrated with the people and the events that revolve around him.
2. Control: Control is the individual's belief that the events of stress are likely to occur and that they are seen as
strong, manageable and controllable situations or events (Wiebe, 1991). Kobasa sees control as an individual's
belief in the extent, to which he can control events, The ability to take personal responsibility for what is
happening to him, the perception of control is the direction of the individual towards a sense of effectiveness
and influence in the various conditions of life, control is the direction of feeling and act as if the individual
ability to influence the face of diverse positions of life rather than surrender and the sense of helplessness in
the face of disasters and emergencies of life (Kobasa, 1979).
3. Challenge: The challenge is those organized responses that arise in response to environmental requirements.
These responses are on a cognitive, physiological or behavioral nature and may be combined and described as
effective responses (Tomaka et al., 1993). Kobasa defines it as the individual's belief that a renewed change
in the events of life is a natural, but inevitable, imperative for his survival, rather than a threat to his security
and self-confidence and psychological integrity (Kobasa, 1979). It is clear that the challenge is the ability of
the individual to adapt to new life situations and accept them with all the pleasant or harmful developments,
as natural things that must occur for his growth and uplift, with his ability to effectively confront problems.
2.3. Leadership Effectiveness
There is no reason to doubt that the leadership is very important in all elements of the administrative function, Effective
leadership is also one of the main advantages by which successful and unsuccessful organizations can be distinguished.
It is the process of inspiring individuals to do their best to achieve the desired results, as well as to direct individuals to
move in the right direction, get their commitment, and motivate them to achieve their goals (Abboudi, 2010). Uddin &
Alam stated that leadership is the process of influencing others and supporting them to work enthusiastically towards
achieving goals (Uddin & Alam, 2014). The leadership role in communication and coordination emerged as Koontz
defined leadership as the ability to personally influence by communication to achieve a goal. Fiffner defined it as the
art of coordinating individuals and groups and raising their morale to reach specific goals (Al-Emeaan, 2010; Firend
Al. R., Chun, 2018).
To emphasize that leadership is a process of influencing others and not coercive coercion, Kotter (1988) has defined
leadership as the process of transferring groups (or groups) of people in the right direction using non-coercive means,
so the leadership is essentially non-coercive (Barker, 2001). But effectiveness is the highest value in the level of
administrative life, Effectiveness is the degree of achievement in which the objectives or level at which the target issues
are resolved. The effectiveness of the administrative leadership is the degree to which the leader is able to achieve the
objectives of his administration with the available resources and capabilities within the framework of the general
policies set for him. Effective leadership is carefully working carefully to choose the right direction for a change (Firend
Al R., Sofyan, 2015). Manning & Curtis define effective leadership as a pathway to help their followers achieve their
goals and make the path easier by reducing barriers and pitfalls (Al-Raisi, Firend R., 2012; Manning & Curtis, 2005).
The effectiveness of leadership is not only about increasing production and achieving productivity goals, but also about
achieving satisfaction and conviction, raising the morale of individuals, testing their renewal and growth, and
revitalizing and revitalizing the underlying motives and efforts within Individuals themselves and enable them to use
them to achieve objectives. Since the leadership effectiveness is the leader's efforts to achieve the organization's goals,
the effectiveness of the leadership is strongly linked to the policies, methods, procedures and decisions taken by the
leader during the leadership process (Al-Qahtani, 2006; Firend R., Shaki, 2008; Firend Al R., 2015).
2.4. The Dimensions of Leadership Effectiveness
Several of the researchers in addressing their contributions and to determine the dimensions of effective leadership.
There has been little agreement in diagnosing these dimensions. Effective leadership requires a set of factors whose
presence leads to the success of the leadership in performing the leadership tasks entrusted to it (Firend Alan Rasch,
2019). These factors are related to the effectiveness of the performance of the leader in addition to his skills. Redick et
al. (2014) identified four main dimensions (self-leadership, leadership of others, environment, attitude, and knowledge
of psychology) each consists of sub-dimensions as follows: Self-leadership includes the ability to communicate,
positive evaluation, empowerment and empowerment. The leadership of others involves motivating employees,
building cohesive task forces and resolving conflicts. And environmental factors including: strategic thinking, vision,
strength and influence in others and knowledge of psychology and related to tension types.
Akins et. al. (2013) identified ten characteristics of leadership effectiveness: Learning: creates opportunities for positive
growth, empowerment, flexibility and resilience to change, development, training, participation, interaction,
sustainability, humility, integrity and practice. We note that both Khan & Ahmad (2012) identified the dimensions of
leadership effectiveness: the ability to motivate and communicate and build teams. The dimensions of the leadership
effectiveness addressed by Abed (2010) in her study: achieving organizational objectives, vision guidance, Motivate
Workers, influence others, develop and empower them, to resolve conflicts, objective decision-making, and team
building.
3. Importance of study
The importance of the study may be in the scarcity of studies and research that dealt with the relationship between
psychological hardiness and leadership effectiveness, and according to the study of studies related to the subject of
research, where no study was observed combining these variables.
4. Study Problem
The availability of requirements and requirements of the effectiveness of the leadership needs to provide several
elements of the most prominent leadership that can withstand the pressures and stress in the work, Organizations need
a new type of leadership that can provide effectiveness in organizations, But the leader needs to have the psychological
hardiness to achieve leadership effectiveness in the 21st century business environment. The availability of
psychological hardiness is a prerequisite for the success of the leader in the organization, and to respond in a proactive
manner to rapid changes in the environment, which in itself is a strong research motivation in particular in light of the
scarcity of Jordanian studies in the field of psychological hardiness.
In light of this, the problem of the study can be posed by the following main question: What is the effect of the
availability of psychological hardiness among managers at the Cities and Villages Development Bank in achieving
leadership effectiveness?
5. Study Objectives
In light of the problem of study and its importance, the main objective of this study is to define the role played by the
dimensions of psychological hardiness in achieving the effectiveness of leadership, This study also seeks to determine
the level of availability of the psychological hardiness dimensions of the managers of the Cities and Villages
Development Bank, namely commitment, control and challenge.
6. Study Model
Figure (1) illustrates the model of the study, which shows the nature of the impact between the variables of the study,
noting that the dimensions of psychological hardiness impact in the effectiveness of leadership, as follows:
7. Study Hypotheses
Based on the study problem, its objectives and questions, the study seeks to test the following hypotheses:
Ho1-1: The commitment dimension of psychological hardiness negatively impact in the achieving organizational
objectives.
Ho1-2: The commitment dimension of psychological hardiness negatively impact in motivate workers.
Ho1-3: The commitment dimension of psychological hardiness negatively impact in objective decision-making.
Ho1-4: The commitment dimension of psychological hardiness negatively impact in the team building.
Ho2-1: The control dimension of psychological hardiness negatively impact in achieving organizational objectives.
Ho2-2: The control dimension of psychological hardiness negatively impact in motivate workers.
Ho2-3: The control dimension of psychological hardiness negatively impact in the objective decision-making.
Ho2-4: The control dimension of psychological hardiness negatively impact in team building.
Ho3-1: The challenge dimension of psychological hardiness negatively impact in achieving organizational objectives.
Ho3-2: The challenge dimension of psychological hardiness negatively impact in the motivate workers.
Ho3-3: The challenge dimension of psychological hardiness negatively impact in objective decision-making.
Ho3-4: The challenge dimension of psychological hardiness negatively impact in team building.
8. Methodology of the Study

8.1. Study Approach
The curriculum reflects the "mental vision in the mind of the researcher", and the interest of the current study to deepen
knowledge between multiple topics, and to achieve their goals. The study is based on the analytical descriptive approach.
This approach is suitable for the studies that adopt the cognitive approach in the survey of the phenomenon that was
shaped by the problem of the study, and then the analysis, interpretation, comparison and evaluation according to
scientific methodology. It also includes the interpretation of the data and information obtained in order to get results.
8.2. Population and Sample
Due to the developmental role of the Cities and Villages Development Bank in Jordan, it has been selected as an applied
area for study.
The sample of the respondents was chosen from the Managers in senior management and middle management,
according to the criterion of experience in the field of management, and the influential role of each of them in drawing
the strategy of the bank in which they work. Their number was from both levels (83) respondent. Were distributed (83)
questionnaires to the total number of administrators. After retrieving the questionnaires, (4) questionnaires were
excluded for incomplete data. The number of valid questionnaires is (79).
8.3. Measures
In measuring the dimensions of the independent variable, the following studies were based on: (Ferreira, 2012),
(Kalantar , 2013), (Kobasa, 1979).
To measure the dependent variable, the following studies were based :( Redick et al., 2014), (Akins et al., 2013), (Khan
& Ahmad, 2012), (Abed, 2010).
8.4. Data Collection
Secondary Data: Based on references from books, published papers, articles and websites, through which the theoretical
framework of the study was covered.
Preliminary Data: has been collected through the development of a questionnaire distributed to the study sample, which
was based on the test hypotheses of the study.
8.5. Instrument validity and reliability
Conducted several tests on the questionnaire, the purpose of which was to verify its validity and stability, and to build
models of the main variables of the current study and as follows:
8.6. Instrument validity
Test the validity of the paragraphs of the questionnaire after the preparation of the presentation by a group of experts
and specialists who have experience in this area to verify the validity of the paragraphs and the validity of the test
hypotheses of the study.
8.7. Instrument reliability
By measuring the internal consistency between the paragraphs of the questionnaire using the test Cronbach's Alpha
coefficient, whose results indicated that the Cronbach's Alpha coefficient for all the paragraphs of the scale was greater
than (0.70), and this indicates the availability of internal consistency between the paragraphs of scale.
9. Results and Discussion
After running the analysis, The RMSEA value was 0.023, which indicated rich fit. Also, CMIN/DF indicated a rich fit
model with a value of (1.108). In contrast, GFI values were 0.956, respectively, GFI values were within acceptable
limits. In addition, NFI and CFI values were 0.951 and 0.985. Both values were within the acceptable limits, the Fit
indices of Structural Model, as shown in Table 1.
Table 1: Fit indices of Structural Model
Χ2 21.049
Χ2 /df 1.108
Normed fit index (NFI) 0.951
Tucker-Lewis 0.929
Comparative fit index (CFI) 0.985
Goodness of fit index (GFI) 0.956
root mean square error of approximation(RMSEA) 0.023
From Figure (2) and Table (2), it shows that the hypothesis test, in determining the significance of each path coefficient,
estimate of regression weight, standard error of regression weight, and the critical ratio of regression weight, (C.R=
dividing the regression weight estimated by the estimate of its standard error gives) were used.
Table (2) presents each parameter's C.R., Estimate and S.E. Hence, commitment has a significant positive and direct
impact on achieving organizational objective, motivate workers, objective decision-making, and team building (β =
0.2169, 0.4610, 0.3023, and 0.4255), (C.R=4.633, 5.792, 3.421, and 4.765), (P-value = ***, ***, ***, and ***) or H1-
1, H1-2, H1-3, and H1-4 is supported. In the same analysis, control has a significant negative and no direct impact on
achieving organizational objective (β = 0.0910, C.R = 1.279, P-value = 0.1983) or H2-1 is not supported. Analysis has
a significant positive and direct impact on motivate workers and objective decision-making (β = 0.3555and 0.3340),
(C.R = 4.169 and 4.260), (P-value = *** and ***) or H2-2 and H2-3 is supported. However, Analysis has a significant
negative and no direct impact on Team Building (β = 0.1255, C.R = 1.476, P-value = 0.1387) or H2-4 is not supported.
Finally, Challenge has a significant positive and direct impact on achieving organizational objective, motivate workers,
objective decision-making, and team building (β = 0.2858, 0.3021, and 0.3320), (C.R= 3.432, 3.006, 4.176, and4.255),
(P-value = ***, ***, ***, and ***) or H3-1, H3-2, H3-3, and H3-4 is supported.
Table 2: Testing Result
Regression Weights
Hypothesis Estimate SE C.R. P value Result
From To
Achieving Organizational Not

Ho1-1 C Commitment 0.2169 0.0460 4.633 ***
Objectives Accepted
Not
Ho1-2 Commitment Motivate Workers 0.4610 0.0899 5.792 ***
Accepted
Not
Ho1-3 Commitment Objective Decision-Making 0.3023 0.0858 3.421 ***
Accepted
Not
Ho1-4 Commitmentt Team Building 0.4255 0.0875 4.765 ***
Accepted
Achieving Organizational
Ho2-1 Control 0.0910 0.0716 1.279 0.1983 Accepted
Objectives
Not
Ho2-2 Control Motivate Workers 0.3555 0.0833 4.169 ***
Accepted
Not
Ho2-3 Control Objective Decision-Making 0.3340 0.0810 4.260 ***
Accepted
Ho2-4 Control Team Building 0.1255 0.0841 1.476 0.1387 Accepted
Achieving Organizational Not

Ho3-1 Challenge 0.2858 0.0872 3.432 ***
Objectives Accepted
Not
Ho3-2 Challenge Motivate Workers 0.3021 0.0843 3.006 ***
Accepted
Not
Ho3-3 Challenge Objective Decision-Making 0.3580 0.0860 4.176 ***
Accepted
Not
Ho3-4 Challenge Team Building 0.3320 0.0780 4.255 ***
Accepted
10. Conclusions
Based on the results of the statistical analysis to test the hypotheses of the study, we conclude that the Commitment as
one of the dimensions of psychological rigidity has had a direct impact on all dimensions of driving effectiveness
(achieving organizational objectives, motivate workers and objective decision-making, and team building).
The analysis also showed that control as one of the dimensions of psychological hardiness was a negative impact on
the achieving organizational objectives as one of the dimensions of leadership effectiveness, and also had a negative
impact on the team building. While the impact of control as one of the dimensions of psychological hardiness was
positive and direct on both motivate workers and objective decision-making as dimensions of leadership effectiveness.
It is also concluded that the challenge as a dimension of the variable psychological hardiness has had a positive and
direct impact on all dimensions of the leadership effectiveness (achieving organizational objectives, motivate workers
and objective decision-making, and team building).
11. Recommendations and Future research

We recommend that the senior management of the Cities and Villages Development Bank focus on the development
of the psychological hardiness of managers, especially in the field of control, because some of the results were negative
in their impact on the effectiveness of leadership. The study also recommends that researchers conduct further studies
in the field of psychological hardiness, whether linking the variable with other variables not covered by the current
study such as crisis management, business environment disorders, etc. and applying the study in other business sectors.
References
Abbas, Medhat (2010). Psychological rigidity as a sign of reducing psychological stress and aggressive behavior among teachers in the preparatory
stage. Journal of the Faculty of Education, 26 (1): 168-233.
Abed, Heba Mahmoud Masoud (2010) The Effect of Emotional Intelligence on the Effectiveness of Administrative Leadership in Ministries in the
State of Kuwait, Analytical Study, Unpublished Master Thesis, University of Jordan, Amman, Jordan.
Aboudi, Zaid (2010). The role of educational leadership in making administrative decisions. Dar Al Shorouk For Distribution & Publishing,
Amman, Jordan.
Al-Raisi, A., Firend, R. (2012) Cultural Impact on e-Performance in Government Organizations in the United Arab Emirates, The International
Journal of Business and Management Research. Vol.5, No.1
Akins ,Rene , Bright, Bert , Brunson ,Tracey, & Wortham, Woody (2013). Effective Leadership for Sustainable Development. Journal of
Organizational Learning and Leadership, 11 (1).
Al-Emeaan, Mahmoud Salman (2010). Organizational Behavior in Business Organizations. Dar Wael for Publishing & Distribution, Amman,
Jordan.
Al-Qahtani, Ahmed bin Yahya (2006).Ways to improve the effectiveness of the field leadership in the border guards centers (a study on the
workers led by border guards in Asir region), unpublished master thesis, Naif Arab University for Security Sciences.
Barker, Richard A.( 2001). The nature of leadership, Human Relations, 54(4): 469– 494.
Ferreira, N. (2012). Hardiness in relation to organizational commitment in the Human Resource Management field. SA Journal of Human
Resource Management, 10(2): 1-10.
Firend Al. R., Chun, C. C. (2018) Managerial practices, employee satisfaction and firm’s competitiveness in Asian small and medium enterprises
(SME): The case of Malaysia. International Journal on Recent Trends in Business and Tourism. Volume 2 Issue 3.
Firend, Al R., Sofyan, P. (2015) Technical executive’s organizational commitment at Malaysian Oil & Gas Industry. International Conference on
Accounting Studies (ICAS) 2015 17-20 August 2015, Johor Bahru, Johor, Malaysia
Firend, Al R. (2014) The Problem Solving Model “PSM”, The International Journal of Business and Management Research. Vol.7, No.1
Firend, R., Shaki, M., (2008). Corporate restructuring and agency theory, The International Journal of Business and Management Research.
Vol.1, No.1
Firend Alan Rasch (2019) Learning Theories, for educators teaching in higher education. DOI:
https://doi.org/10.32893/IJBMR.2019/AMII.19/10.19
Funk, S. C. (1992). Hardiness: A review of theory and research. Health Psychology, 11(5): 335-345.
Gucciardi, D. F., Hanton, S., Gordon, S., Mallett, C. J., & Temby, P. (2015). The concept of mental toughness: tests of dimensionality, nomological
network, and traitness. Journal of Personality, 83(1), 26-44.
Hannah, T.E, and Momissey. C, (1978). Correlates of Psychological hardiness in Canadian adolescents. Journal of Social Psychology, 127(4): 339-
344.
Hydon, S (1986). The Pleasures of Psychological Hardiness. New York: New American Library.
Kalantar , J., Khedri L.,Nikbakht A.,& Motvatvalion M. (2013). Effect of psychological hardiness training on mental Health of students. International
Journal of academic research in Business and social sciences, 3 (3): 68-73.
Khan, Aamir & Ahmad , Wisal (2012) .Leader’s Interpersonal Skills and Its Effectiveness at different Levels of Management. International Journal
of Business and Social Science, 3(4): 296-305.
Kobasa S.C. (1979). Stressful life events. Journal personality and Social Psychology, 37(1): 1-11.
Kosaka , M., (1996). Relationship between hardiness and psychological stress response. Journal of performance studies, 65: 35-38.
Maddi. S. R. (2004). Hardiness: An operationalization of Existential Courage, Journal of Humanistic Psychology 44(3): 279-298.
Manning, George & Curtis, Kent (2005). The Art of Leadership. 2nd Ed, McGraw-Hill/Irwin.
Redick, Abigail, Reyna, Idalia, Schaffer, Cynthia & Toomey, Deborah (2014). Four-Factor Model for Effective Project Leadership Competency.
Journal of IT and Economic Development 5(1): 21-35.
Tomaka J, Blascovich J, Kelsey RM, Leitten CL. (1993). Subjective, physiological, and behavioral effects of threat and challenge appraisal. J
Pers Soc Psychol, 65:248–60.
Uddin, Mohammad Nashir & Alam, Muhammad Shafiul (2014). Effectiveness of Leadership Behavior among Academicians: A Study at Shahjalal
University of Science and Technology. Journal of Emerging Trends in Educational Research and Policy Studies (JETERAPS) 5(6): 695-704.
Strategizing Indian management education: need of the hour
Dr(Hc). D.M. Aravind Mallik
Email- aravind.mallik@gmail.com
Abstract
Growth of Management Institutions in India in most recent 20 years has been rapid. Information on number of business colleges
established India from 1995 propose a 'mushrooming' development and generally influenced the result of value addition. The thriving
Indian economy is making a genuine interest for quality chiefs to administer country's developing business that makes securing
MBA a profitable proposition. The methodology of this paper is conceptual paper being advocated in understanding the Procedure
of globalization not just changed customary methodology of the framework with a more effective expert yet in addition presented
new age courses which have more financial incentive. Findings suggest that management Institutions has become extensively in the
course of the most recent 45 years to keep up the race and need to rethink about what India will require in 2025. Conclusion is that
management instructions in India in 2018 isn't what it was in 1950s and hence time has come to strategize Indian Management
Education.
Keywords: Management Education, Management Institutions, Business Schools in India, Globalization, Strategies
1. Introduction
21st century India experienced an intense change in its instructive framework (Firend Alan Rasch, 2017). Procedure of
globalization not just changed conventional methodology of the framework with a more productive expert methodology;
yet in addition presented new age courses which have more financial incentive in today's' time. Management training
is one among those which got another measurement with this evolving time, Over the most recent twenty years, the
development of management teaching in India has been Phenomenal. The primary full-time MBA in India began in
1957, the All India Institute of Management and Social Welfare, Kolkata and Delhi University at that point tailed it in
1958. It is in 1960 with the establishment of the primary Indian Institute of Management in Ahmedabad laid. From that
point, forward India has seen a steady development in this circle of exercise. The vast majority of the management
teaching in India is as MBA (Master of Business Administration) and in PGDM (Post Graduate Diploma in
Management) or PGDBM (Post Graduate Diploma in Business Management) and they are accessible at fulltime, low
maintenance, removed or online mode (Firend, Al R. Araghi, 2015).
By and by there are in excess of 4000 management schools exists over the India and numerous among them like Indian
Institute of Management (IIM) are considered as a part of the best of the world. India's entrance in the globalization
procedure additionally acted like an impetus in this administration instruction blast. On account of the expanding
number of worldwide and Indian multinationals, prepared administration graduates are popular and this interest too
effectively fueling the enthusiasm of more number of understudies each day. Accordingly, of this developing interest,
private segment additionally entered in Indian management state and contributed a powerful sum for this. An extensive
number of private management universities alongside government helped administration schools came into the
presence in a decade ago as it were. (Sarita Chaudhary,2011). Peter Drucker anticipated, quite a while from now the
enormous colleges will be leftover. His forecast set a worldwide discussion on the fate of advanced education inside
University System. Many trust that in this thousand years, except if there is an intense change in the methodology and
structure of colleges, they are up to despair and fate. It calls for vital advancement in measures, decentralized structure,
framework conveyance in consonance with evolving times. Amid the most recent decade Indian Business saw
extraordinary change because of globalization of economies, move from de-direction to control, from state control to
private activity, from residential concentration to worldwide core interest. This change filled by IT, Internet and
authentic acknowledgment of human capital as the driver of new economy has set off the change in perspective in
administration training.
2. Classifications of Business Schools in India
Management exercise gives an all-encompassing picture to the substitutes about how to deal with the four 'M's of any
association i.e. money, material, man and machine. Regardless of whether the information about management standards
is acquired through formal examination programs at Universities or inside through at work preparing or through outside
workshops or projects, it is absolutely critical for any individual in any activity throughout everyday life;
notwithstanding for the independently employed, business people. In expansive terms, the administration
establishments in India can be characterized into six classes (Firend Alan Rasch, 2019; Mathew 2006), as pursues:
Classification 1: Top 50 government and private business colleges, including IIMs and Indian School of Business,
which contrast positively and the universally perceived business colleges.
Classification 2: University bureaus of management contemplates, both in government and private part, for example,
Faculty of Management Studies-Delhi University and School of Business of Alliance University, would be around 250.
It incorporates establishments that are proclaimed as "regarded colleges".
Classification 3: University subsidiary private schools, whose courses are planned and checked by the particular
colleges and the MBA degrees are granted by them. The nature of the courses offered by these schools would for the
most part rely upon the quality of the concerned college. The biggest quantities of the management establishments –
viz. around 1350 – are in this classification.
Classification 4: Private self-governing business colleges endorsed by the AICTE, with no alliance to any college, are
numbering around 275. The precedents of such foundations are Management Development Institute (MDI), Gurgaon
and IMT, Ghaziabad.
Classification 5: These are private administration foundations that are neither associated to any college nor endorsed
by the AICTE, for example, Xavier Labor Relations Institute, Jamshedpur and Great Lakes Institute of Management,
Chennai. It is hard to land at the correct number of business colleges, yet the number would associate with 50.
Classification 6: There are roughly 25 coordinated efforts of private organizations with remote colleges, where the
degree is granted by the outside college. For example, UK based WLC College offering 6 MBA in India and TASMAC
Management foundation offering MBA from the University of Wales, U.K., at Bangalore, Pune and Kolkata grounds.
3. Present Scenario of Management Education in India
In India the management education courses start at undergraduate level, as a three-year Bachelor Degree in Business
Administration (BBA), offered in some colleges in the country. This course provides basic knowledge about
management concepts and business structure and follows a yearly / semester -wise examination system. This is followed
by two years’ Postgraduate MBA / PGDBM program. MBA and PGDM education is currently available through
residential, full-time, and distance education modes. Most B-Schools follow a semester or trimester examination system.
The object of this course is to train the graduates to become managers in corporate sectors in different fields such as
marketing, human resource, finance, operations, foreign trade and selected sectoral areas etc. Table No -1 and 2 gives
us the details of Number of PGDM Institutions in India during 2016-17
The curriculum first gives more emphasis on general subjects in various areas of management such as business law and
ethics, managerial economics, finance, OB-HR, principles of management, marketing, quantitative methods, IT in
management etc. In the second year students can opt to specialize in selected functional areas in which they have had
foundation courses in their first year. The use of case studies in management education is now universal and ubiquitous.
So much so, this pedagogy is now taken for granted by the B-Schools. With ready availability of instructor accessories
such as test banks, case teaching notes, and slides, instructors often miss out on the philosophical and scientific
foundations of this important teaching pedagogy. They continue to emphasize the rational strategic analysis dimensions
of case studies and end up in making the session a ‘do-it-yourself’ programmable kit. Postgraduate full time
management program invariably requires students to undertake seven- eight weeks’ summer internship and final MBA
project work. Increasingly, the programs also emphasize behavioral and soft skills. The institutions usually have strong
placement cells (Firend Alan Rasch, 2019). Admissions to post-graduate programs in various schools are done through
different entrance tests like CAT, MAT. ATMA, XAT, ICET and own tests conducted by universities. Apart from
formal degree programs in management / business administration, a variety of short-term postgraduate diploma and
certificate programs are being offered for aspirants unable to access the formal full time degree programs. These part-
time programs are mostly being offered by distance education institutes or through evening/ weekends based programs
by private / autonomous institutions. Several universities are well-known autonomous institutions and offer three-five
year Doctoral and equivalent Fellow programs in management. Admission is based on performance at master’s level
and Doctoral admission tests and interviews.
Table.1- Number of PGDM Institutions in India (AICTE Handbook 2016-17)
Table.2- Number of MBA Institutes in India (AICTE Handbook 2016-17)
4. Literature Review
Panandiker, V. A (1991) called attention to that Knowledge and learning creation will be significantly more vital to the
management exercise of things to come instead of innovation. He additionally included that people will live not by
bread or auto alone but rather undeniably by learning, shrewdness and opinions. This crucial change of management
teaching is both inescapable and essential in light of the fact that the present utilization examples of humanity can just
take him so far in its advancement and no further (Firend, R., 2010). We are thusly going to involvement in the
following decade by and large extraordinary focal point of associations and administration frameworks. It will, in this
manner, be important to envision and concentrate a portion of their shapes with the goal that we configuration suitable
arrangement of administration instruction as ahead of schedule as could reasonably be expected. Sahu K.C(1991)
underscored that qualities are of most extreme significance and are indistinguishable independent to any type of
instruction Management training should create people with such esteem introduction, who, through case of committed
diligent work in a soul of administration, can change the disposition of the general population they oversee towards
work, and towards one another to guarantee personal satisfaction and of work life.
Sarita Chaudhary et. al. (2011) are of the feeling that if administration calling and practice are figured and shaped as a
"workmanship" instead of as "science", its instructive programming gets away from the traps of structure, formalism
and institutionalization, imagination, subjectivity, adaptability and the casualness supplant the recruited method of
preparing and advancement in administration. Adarsh Preet Mehta (2014) has worried on absence of corporate
management framework in management organizations is one of the significant purposes behind fall of value
administration instruction corporate administration must be made a piece of accreditation. He has inferred that
Management training should be thorough, directed and modified with mean to expel the hole that exist between industry
necessities and scholarly educational programs concentrating on disposition, prepping, corporate mindfulness and
creating administrative abilities. Kumar K Ashok et. al. (2013) and Al-Raisi, & Firend, R. (2012) has made reference
to that the software engineers offered by the colleges and post-graduate projects offered by the establishments of
administration to the youthful contestants don't give the members adequate useful presentation. These understudies
gain encounter just when the total their degree and join an association.
Sanjeev Kumar et al (2011) and Firend Al R., & Noorazah (2013) has presumed that Management Institutions should
be incorporated, directed and altered with intend to expel the hole that exist between industry prerequisites and scholarly
educational modules concentrating on corporate mindfulness, prepping, mentality and creating administrative abilities.
Margaret MacNamara and et al (1990) underscored on activity learning in management education as management
organizations are frequently reprimanded for concentrating more on hypothesis and on quantitative investigation while
disregarding relational relationship and quantitative finding. It is by and large expressed that administration training
ought to be encounter based, issue arranged, dynamic and altered by criticism and activity learning fills the need.
Gautam G Saha (2012) has presumed that we are in third thousand years; India's Management training is experiencing
a noteworthy change. Internationalization, vital collusions, cross societies, association and mergers are the new patterns
in administration instruction. Yet, compared to US and Japan where do we stand? One of the essential reasons of Japan's
Climbing to the best stepping stool of Industrial world is that they have confidence in "creating individuals before items
are produced", so it is critical for Indian administration education.
5. Major Issues
The management education in India emphasizes mostly on theory, not on practical education. When you look at
engineering education, there are laboratories to experiment and verify the theoretical aspects. However, the same is not
possible in the management education. Hence, the management educators emphasize on case study driven education to
ensure takeaways to the students (Firend Al R., 2015). They are supposed to create case studies as per the profile of
students to share their knowledge. It is also essential for students to have some industry experience to enable them to
relate what is taught in the classroom. Unfortunately, students in India pursue from KG to PG without any break. Hence,
they don’t have any industry exposure and find it tough to digest the management education in the classroom.
Most of the management education across the globe is case study driven and the management educators are a blend of
industry, teaching, training, research and consultancy experience. They are able to leverage their experience and share
their knowledge with students who already have some years of industry experience. Such management education helps
ensure effective takeaways in the students. The students will be able to relate the theoretical aspects with their practical
knowledge. When such students hit the industry, they will be able to leverage their management education in the
corporate world. They will be able to customize their knowledge as per their verticals, sectors and industry. On the
other hand, when you look at management education in India, it is mostly faculty-centric, not student-centric. It is not
customized as per the aspirations of the students. It doesn’t cater to students as per the industry expectations resulting
in a huge gap between industry and academia. Some of the major or key issues that will be discussed and analyzed with
respect to the various categories of business schools are:
1. Quality of faculties, students and facilities
2. Accreditation, rankings, and pedagogy
3. Research outputs
4. Placements and brand equity
These key issues need to be discussed for better understanding in terms of how these are measured with respect to the
various categories of management institutes
6. New Breed of Institutions: Thinking Forward
Just as the IIMs in the 1960s started a brand of managers with knowledge, skills and aptitudes appropriate to the
country’s industrial development, and became a role model for many other educational organizations, we need today a
new wave of management institutions that will launch India on to the global arena, without the legacy associated with
operating in a protected environment. These new wave institutions would build on the fundamentals of management
but focus on values of Entrepreneurship, Leadership and Innovation appropriate for the global arena (Firend Al. R., &
Chun, 2018; Firend, Al R., 2016). They should set new standards and become new role models for those private and
public educational institutions that have the urge and the leadership to tune into the global market place, a segment that
is likely to grow, both nationally and internationally. The new wave institutions will spur a new level of activity in
management education that would help meet the large future demand for managers. A large number of our students
feel attracted by foreign universities and this means that there is a motivation to seek international standards. Hopefully,
with foreign universities setting up campuses in India, students will be able to avail of such international standards at
home. The establishment of a “new wave” of institutions within the stipulated governance and regulatory architecture
that the Group has outlined above would raise the quality of management education in India. These institutions would:
a) Have autonomy and an independent status subject to minimum requirement of registration (governance rules
and physical infrastructure norms);
b) Be competitively rated in the market by independent agencies; and
c) Be required to adhere strictly to the transparency guidelines mentioned above. And it is recommended that
7. Challenges and Opportunities in Management Education

The face to face classroom sessions needs to utilize time for case discussions and facilitating discussions among
students. Decision-making skills, connection with people (Emotional Intelligence) are going to be extremely crucial
for managers in future. Machines are devoid of these skills. Managers who could demonstrate these skills could get an
edge. Thought leadership and application of technology as the core of the business system and the process will make
all the difference (Firend Al R., 2014; 2019). Below are noteworthy challenges may impact the organic growth of
Management Education and some of them are-
a) Establishment of New IIMs
b) Significant teaching loads/faculty in most Management Institutes/business schools is constantly raising

upward
c) Institute/Management having Limited time and scope for research by majority of B-School educators
d) Most Management Institutes/business schools in India don’t have a strong PhD program Curriculum
e) Breadth and depth of skills of our graduates is low
f) Testing for leadership potential, communication skills is not at par with standard set up various Universities
g) Technological advances – such as Massive Online Open Courses is reshaping current Education set up
h) Lack of teaching innovation – Do we encourage critical thinking and out of box?
8. Strategies for Success of Management Education- Changing Scenario

According to S. Akilandeswari K. P. Anish Kumar (2012) There is a changing scenario in Management Education due
to globalization. It has caused B-schools to look at International Business, focus on producing graduates with global
mindsets and to develop links with schools overseas. Some of Strategies can be implemented for Management Institutes
to sustain the 4th Industrial Revolution are as follows-
8.1 Emergence of Disruptive Technology
Progresses in PC innovation, web and correspondence stage have pretentious on business training. New learning stages
have offered ascend to more viable showing teaching method by incorporating sound, video and online instruction. The
information Economy has conveyed to the front line the significance of human capital. Authority, cooperation,
enterprise, chance taking, peacemaking, demeanor and inspiration, benefit introduction and change in outlook are rising
as a component of new educational modules for giving administration instruction in this quick evolving world. Building
a solid collusion and association with corporate India and utilizing Education Technology to make administration
instruction comprehensive.
• Apply Market Driven Approach to be offset with Market Driving Approach.
• Understand reality and adapt up to corporate for win-win desires and methodologies.
• Mutual Collaboration is a consistent procedure and need while B-schools who don't pursue how to team up should
die.
• Benchmark global standards, decent variety management, overseeing crosswise over societies, business history over
the method for working
• Altering the current DNA for future development, simply ahead and embrace the most recent Best Practices and
innovation to shape an ecosphere which gives plentiful chance to sustain future administrators
Enough care must be taken whilst as Technologies like Artificial Intelligence, Machine learning, Augmented Reality,
Virtual Reality, faster broadband, mobile internet and Mobile Apps are going to affect the future of management
education as Such capabilities may include expertise in the areas of leadership, strategy, innovation, people
management and delivery/customer service. These represent different kinds of skills, organizational systems, routines
and so on
8.2 Changing Business Landscape to meet Future Demands
It has brought about a noteworthy move from assembling to benefit economy. The legislatures' bureaucratic procedure
in managing accreditation and quality confirmation has made it a controller as opposed to controller and facilitator.
Management education becoming a worldwide acceptable in this progressively multinational business environment.
Students should come in contact with business practices in several countries by spending time in them, learning at least
one foreign language and learning to feel comfortable and adapt to situation across cross culture. Management
education should include inculcating in a knowledge of humanities and appreciation of other cultures.
8.3 Invite Entrepreneurs locally available and create inside out
States welcome Indian business people to set up administration establishments of perfection either all alone or as a
team with respectable remote colleges. States may consider motivating forces that they may offer to such business
visionaries. Straightforward and smooth framework for gifts – tax cuts and other such motivating forces to givers must
be considered. Creating pool of Entrepreneurial culture in campus eventually ignite young minds to create new and
would be better suited to smaller Management Institutes as they offer courses on bootstrapping businesses, but it should
become a core part of the education system. Integration with industry would help target curriculums to suit the needs
of employers, too. Differentiation is essential: the task force recommends attaching boosters to the best 150 business
schools to compete on a global market by improving faculty and facilities, and repositioning the remaining 4,600 or so
schools better to serve businesses on a national or regional level.
8.4 Invite BIG Corporates to build up Management Institutes
The corporate private part ought to be urged to set up foundations of administration of greatness. It would pursue
enrollment and every single other measure of administration as indicated. To boost corporates to set up such
establishments, either all alone or in a joint effort with high caliber remote colleges, the corporates might be allowed
150% weighted finding on every one of the costs they acquire on setting up such an Institute for a time of ten years.
On costs for compensations of educators and use on research, 150% weighted conclusion be taking into consideration
initial five years, from date of beginning of the Management Education.
8.5 Partnership with industry
Corporate expectations from students graduating from management schools and what educational institutions deliver
is at variance primarily on account of following factors. Corporate continue to lament that the students are NOT
READY finished products. This large gap between demand expectations and supply delivery is likely to get bridged
with Sector specific curriculum — Custom designed for one sector and not multiple sectors. (Surya Mahadevan,2018)
8.6 Shifting in different Government Policy
Recently Government has woken up because of proceeded with feedback of its methodology of spontaneous
development of Management Education in India. The All India Council of Technical Education (AICTE) which is
accused of arranging, development and control of administration training, has not possessed the capacity to give careful
consideration to it. It has set up models for directing business however scarcely possessed the capacity to guarantee its
effective usage.
8.7 Permit Foreign Universities
Rumored outside colleges be allowed to set up their own grounds (with 100% value) and offer their very own degrees.
These remote colleges excessively should enlist with the Council. The Council will give endorsement of enlistment
just in the event that they are viewed as trustworthy and meet the base criteria. They ought to be treated keeping pace
with the "new wave" of Indian MEEs. Extra rivalry at quality levels furnished by the outside colleges with a decent
notoriety in their nations of origin, is required to goad the Indian framework to accomplish more elevated amounts of
value and to add another appreciation for the calling of administration instructing
9. Conclusion
In this cutting edge world where slant changes every now and again, If the present float proceeds with the administration
instruction then certainly its eventual fate looks extremely somber a less chance to develop and manage at this pace of
rivalry. This supports findings by Firend, Al R. (2014;). So all the administration foundations should adapt to meet
Industrial Revoluition-4 and for the progressions that should be presented regarding educational modules, teaching
method, and numerous different parts of the administration training so more number of understudies do come and join
the administration courses and turn into the best administrators with great reasonable, logical and specialized aptitudes
who might add to the advancement of the organizations and thus would keep on ending up great subjects with qualities
who might serve the general public through their organization's corporate social obligation initiatives (Firend Alan
Rasch, 2017;Sridhar, Bharath Bhushan, 2015). This is an immense challenge to the educators that requires innovative
management education thinkers. The fatigue in not recognizing the need of the modern day. Those who recognize are
going ahead with vigor.
References
Chaudhary, Sarita et al., (2011) Emerging Issues in Management Education in India. VSRD International Journal of Business & Management
Research, 1(3).
Firend, Al R. (2016) Performance variation, training, and outcome in SE-Asian manufacturing sector, International Journal of Innovative Science,
Engineering & Technology. Volume 3, Issue1, October 2016
Firend, R., Hussien, Noorazah (2013) Quality and Change Management at the Malaysian Public School System. The case of SIGS, The
International Journal of Business and Management Research. Vol.6, No.1
Firend, Al R. Araghi, M. (2015) Critical factors in competitive advantage of Islamic banking. Proceedings of the 6 th IIUM International
Accounting Conference INTAC VI, 28-29 October 2015. Kuala Lumpur, Malaysia
Firend Alan Rasch (2017) Employability and learning: strategies to improve students’s capacity: Essay of educator’s reflections. ISBN-13: 978-
1976135514. DOI: https://doi.org/10.32893/IJBMR.2017/AMII.8.1
Future of Management Education in India, https://www.tapmi.edu.in/others/future-of-management-education-in-india/ , accessed on 6.12.2018
Internet Source
Kumar k. Ashok, Rao Bala Nageswara and Mohan j. Madan., (2013) Management Education in India, Role of the Institutes of Management, Past,
Present and Future Trends. Journal of Educational Research (Jer) 1(1), 1-16.
Kumar Sanjeev, M. K. Dash., (2011) Management Education in India: Trends, Issues and Implications. Research Journal of International
Studies;(18).
MacNamara,M., Meyler,M.& Arnold,A.,(1990) Management Education and the Challenge of Action Learning, Higher Education, 19(4), 419-433.
Mathew J. Manimala (2006), “Management Education in India: A perspective on Quality Improvement”, Journal of Management and
Entrepreneurship, 1(3), September 2006
Mehta Adarsh Preet., (2014) New Paradigms in Contemporary Management Education in India. Indian Journal of Research, 3(5).
PaiPanandiker, V.A.,(1991)"Management Education: A Long-Term View", Economic and Political Weekly ,Vol.26,No.48,pp.M131-M132
S. Akilandeswari K. P. Anish Kumar(2012), “Managing Turbulence and Uncertainties in Management Education: New Landscapes and
Roadmaps, Ninth AIMS International Conference on Management January 1-4, 2012 , 732
Saha G Gautam.,(2012) Management Education in India: Issues and Concerns. Journal of Information Knowledge and Research in Business
Management and Administration, 2(1), 35-40
Sahu,K. C.,(1991)"Reorienting Management Education", Economic and Political Weekly,Vol.26,No.48,pp.M133-M136
Sridhar.K, .Bharath Bhushan(2015), PAST, PRESENT AND FUTURE OF MANAGEMENT EDUCATION IN INDIA, IJBARR Vol.1, Issue.9,
Jan- March, 2015. Page143
Thirty Years from Now the Big University Campuses Will Be Relics. Universities Won’t Survive ,
https://quoteinvestigator.com/2017/09/17/university/ accessed on 25.11.2018
Assessment of monitoring and evaluation strategies on youth
livelihood program in Isingiro district, Southwestern Uganda
Johnson Atwiine
Department of Economics and Environmental Management, Bishop Stuart University Uganda
Email: jatwiine@bds.bsu.ac.ug
Abstract
This study set to conduct an assessment of monitoring and evaluation strategies on Youth Livelihood Programme in Isingiro District.
The study assessed the appropriate strategies for improving the monitoring and evaluation of YLP, challenges and procedures
undertaken in the process of monitoring and evaluation. The study adopted both descriptive and case study research designs with
both qualitative and quantitative approaches for data collection and analysis. The study employed 20 respondents who were leaders
in the district. Both interview and questionnaire methods of data collection were used. The study established that the Monitoring and
Evaluation process of YLP is engulfed with a number of challenges including poor transport facilities, lack of coordination between
financial institutions and stakeholders, inadequate funding of the M&E process, lack of transparency and accountability in the entire
program as well as the originality of the YLP as a top-down approach in its design. The study identified a number of procedures
undertaken during the process of M&E including group assessment and approval at the initial stage, joint coordination between local
councils and the ministry, field visits to the projects, intelligence information from security agencies, periodic reports as well as
submission of the M&E report to the CAO and subsequently to MGLSD. The study recommends that the whole program be
overhauled and be operated directly by the Ministry of Gender, Labour and Social Development through CBOs, CSOs and financial
in order to bypass political interference and influence peddling.
Keywords: Monitoring, Evaluation, Strategies, Youth, Livelihood, Program
1. Introduction
1.1 Background of the study

Programs to actively support young people's employment prospects have existed for decades in industrialized countries;
however, they are relatively new in developing nations (AfDB, OECD dev, UNDP, UNECA. 2012). In a broad sense,
youth livelihood interventions support young people's means to earn a living, and include training, public service, youth
entrepreneurship, and financial services (Firend Alan Rasch, 2017). More narrowly, many practitioners define youth
livelihood programs as activities targeting particularly vulnerable and marginalized groups in the informal economy,
with a specific focus on self-employment (ILO, 2012).
The high level of unemployment among the youth is a concern worldwide, as it is a recipe for organized crime,
lawlessness, political instability and social conflicts. In Uganda, the Youth Employment Report (UBOS September
2012), indicated that the total labor-force in the country was comprised of 4.4 million youth. About 32% of the estimated
6.5 million youth in the country were jobless, about 2 million of which were literate; and 2 million were under-employed.
Fifty-percent 50% of the economically active youth were not engaged in income-generating employment (MFPED,
2012). Youth self-employment is by far the most important form of youth work. The survey revealed that 60% of
employed young people were self-employed, while 70% of the employed youth in rural areas were engaged in
agriculture. Seventy-percent (70%) of the youth in urban areas were engaged in the service sector. Informal
employment accounts for the highest proportion of the employed youth outside agriculture.
Youth unemployment is more pronounced in urban areas than in rural areas, as a result of rural –urban migration. It is
estimated that 67% of the youth get engaged in some form of employment by the age of 18 years. This large number
of youth that enter the labor market at an early age is associated with the high school dropout rates. There are strong
linkages between unemployment, underemployment, shortage of decent jobs and poverty. Eradication of poverty
requires sustained macro-economic stability coupled with an enabling environment for investments that contributes to
productive employment creation (Firend Alan Rasch, 2019; Gemma, 2014).
Knowing of the overwhelming rate of un-employment the government of Uganda came up with Youth Livelihood
Programs as a means to promote youth entrepreneurship and create employment. To date, many of youth projects have
been funded in all the 112 districts in the country and Isingiro District has not been left out. The government expected
that all the youth projects will continue with their operations and thus achieve the objective of employment creation
and self-reliance among the youth (Ahaibwe, 2014). However, statistics reveals that only 25% of the projects that were
funded since 2012 are operational while 75% are non-operational (MGLSD, 2016). Despite the fact that advocacy in
favor of development work continues to increase with new tools, techniques and advances in project management
methodologies, many youth projects continues to fail due to lack of proper monitoring and evaluation. Information on
the extent of application of monitoring and evaluation of Youth Livelihood Programs has not had a comprehensive
empirical study in Uganda. This study assessed this phenomenon with specific reference to Isingiro District of
Southwestern Uganda.
Relevance
In Uganda, youth livelihood program is a strategy is almost a decade and has been emphasized by the government for
all this period. However, the program is less popular amongst as trends of unemployment are still going high. This
study chose monitoring and evaluation strategies used by stakeholders in this program to ascertain whether the
challenges emanate from the way the program is management or the underlying factors failing. Thus, the study came
with policy recommendation to inform key stakeholders and policy makers on what ought to be done in order to revamp
youth livelihood program.
2.1 Literature Review

Like any change implemented in an institution, implementing monitoring and evaluation comes with certain challenges
and opportunities. If the opportunities to establish an effective monitoring and evaluation framework are not met,
challenges arise, making the organizational environment hostile to monitoring and evaluation. Challenges for
implementing an effective monitoring and evaluation framework can be either internal or external. According to
Schiavo-Campo (2005), implementation challenges may include: poor management, lack of capacity, lack of focus and
lack of financial support. External factors on the other hand may include: a weak political system and a lack of sufficient
government cooperation and coordination.
The project budget should provide a clear and adequate provision for monitoring and evaluation activities. The M&E
budgetary allocation should clearly be delineated from the main project budget so that M&E unit is accorded some
autonomy in utilization of its resources (Firend, Al R., 2015; Gyorkos, 2003). M&E budget should be about 5 to 10
percent of total projects’ budget which will give the M&E unit adequate resources to ensure its effectiveness (Kelly
and Magongo, 2004). However, according to Gitonga (2012), there is no specific percentage to be allocated for M&E
but normally varies between 2.5% and 10% depending with the overall budget and the project. Gitonga further states
that the more participatory M&E is, the higher its budget. Frankel and Gage (2007) concur with Gitonga by stating that
there is no set formula for proportion of project’s budget to be allocated to M&E. Most donors and organizations
recommend between 3 to 10 percent of the project’s budget. The general rule of thumb is that the M&E budget should
not be too little as to affect the accuracy and credibility of results and neither should it consume much resources to the
extent of interfering with other projects activities.
Communication of information and results is the responsibility of the senior management with the support of project
managers (Nyonje, Kyalo & Mulwa, 2015). The M&E process should be committed to improving the lateral linkages
among project and program staff, including feedback processes, for learning purposes. Analysis of the existing or
possible linkages across programs and projects should be as critical, objective and exhaustive as possible. Managers,
including at the senior level, must be involved in the entire process (Hunter, 2009).
3.1 Methodology
The study used both descriptive and case study research designs, where both qualitative and quantitative approaches
for data collection and analysis were used. The study targeted 20 respondents who comprised mainly leaders in the
district. These include CAO, RDC, District Community Development officer, District Youth Councilor, Town Clerks
(3) and community development officers from sub counties and town councils. Both interview and questionnaire survey
methods of data collection were used to collect data. Data from questionnaires was analyzed using the descriptive and
inferential statistics with the help of data analysis software - Statistical Package for Social Sciences Package (SPSS).
Analysis of qualitative data was done manually using content analysis, notes were written and scripts were analyzed
by coding; where information of similar code categories was assembled together meaningfully.
4.0 Results
4.1 Appropriate strategies for improving monitoring and evaluation of youth fund
The analysis was done using the percentages, mean and the standard deviation. Data was collected using a five point
Likert scale. The mean above 3 indicates an agreement of respondents, a mean of 3 shows undecided and a mean of
below 3 shows disagreement by respondents. The standard deviation (Std.) of close to 1 show agreement, while the
standard deviation of close to Zero show the disagreement of the respondents. The analysis grouped strongly agree and
agree to mean agree; and strongly disagree and disagree to mean disagree. The elicited responses were presented in
table 1.
Table 2: Descriptive statistical results on appropriate strategies for improving monitoring and evaluation of youth fund (n=14)
Responses Strongly Agree Not sure Disagree Strongly Mean Std.
agree disagree
Is there any existing data base at the DLG 3 7 2 1 1 3.87 .73
(21.4%) (50%) (14.3%) (7.1%) (7.1%)
DLG has competent staff to manage data 1 3 3 5 2 2.52 .11
base for the youth (7.1%) (21.4%) (21.4%) (35.7%) (14.3%)
Staff are often taken for refresher courses 4 6 2 1 1 3.97 .83
(28.6%) (42.9%) (14.3%) (7.1%) (7.1%)
The resources are given to right 2 9 1 2 0 4.11 .86
beneficiaries (14.3%) (64.3) (7.1%) (14.3%) (0.0%)
Officers are clearly managing entries of 7 4 1 2 0 4.07 .87
youth taking funds (50%) (28.6%) (7.1%) (14.3%) (0.0%)
DLG fast internet for upgrading information 0 0 2 7 5 .33 .18
(0.0%) (0.0%) (14.3%) (50%) (35.7%)
There is clear record of defaulters since the 5 4 2 2 1 3.87 .78
inception of the program (35.7%) (28.6%) (14.3%) (14.3%) (7.1%)
The program involves many stakeholders in 6 7 1 0 0 4.52 .91
monitoring the process (42.9%) (50%) (7.1%) (0.0%) (0.0%)
A complaint desk has been created at the 2 2 1 5 3 2.97 .33
district to handle grievances (14.3%) (14.3%) (7.1%) (35.7%) (21.4%)
Youth representatives are oriented and 1 3 0 5 4 2.11 .36
taught conflict resolution (7.1%) (21.4%) (0.0%) (35.7%) (28.6%)
Officers are empowered to deal with non- 2 3 1 5 3 2.07 .24
complaint beneficiaries (14.3%) (21.4%) (7.1%) (35.7%) (21.4%)
The M&E system is linked to the 1 2 2 4 5 2.33 .13
Management Information System (MIS) of (7.1%) (14.3%) (14.3%) (28.9%) (35.7%)
Social Development Sector
Table shows that majority of the respondents (71.4%) agreed with the statement put to them that there is an existing
data base at the District Local Government. This is confirmed by the mean of 3.87 which is greater than 3 and the
standard deviation of 0.73 which is close to zero. This is an indication that the District Local Government has a clear
record for Youth Livelihood Program Funds’ beneficiaries which guarantees improved monitoring and evaluation of
the program.
It was also found out that majority of the respondents (50%) disagreed with the statement put to them that the District
Local Government has competent staff to manage data base for the youth. This is proved by the mean of 2.52 which is
below 3 and the standard deviation of 0.11 which is close to zero. This implies that the District Local Government lacks
competent staff to manage database for the youth which may lead to compromised monitoring and evaluation process.
The study found out that majority of the respondents (71.5%) agreed with the statement put to them that staff are often
taken for refresher courses. This is confirmed by the mean of 3.97 which is greater than 3 and the standard deviation
of 0.83 which is close to 1. This implies that there are measures being taken to improve the management of Youth
Livelihood Programs particularly training of staff on management issues through refresher course which may empower
them with sufficient skills to handle the program more efficiently and lead to its success.
From the study, results show that majority of the respondents (81.6%) agreed with the statement put to them that
resources are given to the right beneficiaries. This is proven by the mean of 4.11 which is greater than 3 and the standard
deviation of 0.86 which is close to zero. This is an indication that to a larger extent resources of Youth Livelihood
Programs are given to the right beneficiaries drawing evidence from the present findings herein. The study also found
out that majority of the respondents (78.6%) agreed with the statement put to them that officers are clearly managing
entries of youth taking funds. This is confirmed by the mean of 4.07 which is greater than 3 and the standard deviation
of 0.87 which is close to 1. This shows that from the disbursements, officers in charge of handling the distribution of
youth fund properly manages the entries into the databases for easy tracking.
Findings further show that majority of the respondents (85.7%) disagreed with the statement put to them that District
Local Government has fast internet for upgrading information. This is clearly showed by the mean of 1.33 which is
greater than 3 and the standard deviation of 0.18, which is close to zero. This implies that Isingiro District Local
Government has not internet connectivity a factor that makes monitoring and evaluation of youth livelihood programme
somehow difficult as this creates loopholes in terms of information sharing between the local government and the
central government particularly Ministry of Gender Labour and Social Development.
The study found out that majority of the respondents (64%) agreed with the statement put to them that there is clear
record of defaulters since the inception of the program. This is proven by the mean of 3.87 which is greater than 3 and
the standard deviation of 0.78 which is close to zero. This implies that the list of defaulters since the beginning of the
program exists but what is not clear is how these defaulters are handled.
It was further found out that majority of the respondents 92.9% agreed with the statement put to them that the program
involves many stakeholders in monitoring the process. This is confirmed by the mean of 4.52 which is greater than 3
and the standard deviation of 0.91 which is close to 1. This is implies that program in monitored by different
stakeholders but what is not clearly present is the efficiency and coordination of these stakeholders.
Findings show that majority of the respondents (57.1%) disagreed with statement put to them that a complaint desk has
been created at the district to handle grievances. This is pointed out by the mean of 2.97 which is less than 3 and the
standard deviation of 0.33 which is close to zero. This shows that the complaint desk for handling grievances of youth
livelihood programme is not properly defined in Isingiro District Local Government.
Results also revealed that majority of the respondents (64.3%) disagreed with the statement put to them that youth
representatives are oriented and taught conflict resolution. This is approved by the mean of 2.11 which is less than 3
and the standard deviation of 0.36 which is close to zero. This is a clear indication that there is no streamlined
mechanism in place to handle conflicts and grievances that may arise from the program at any given step since the
inception of this program.
It was also found out that majority of the respondents (57.1%) disagreed with the statement put to them that officers
are empowered to deal with non-complaint beneficiaries. This is confirmed by the mean of 2.07 which is less than 3
and the standard deviation of 0.24 which is close to zero. This clearly stipulates that the youth livelihood programme
lacks a mechanism to handle issues of deviation especially emanating from the beneficiaries at different stage in the
process ranging from the initial up to payback period.
The study revealed that majority of the respondents (64.6%) disagreed with the statement put to them that the M&E
system is linked to the Management Information System (MIS) of Social Development Sector. This is evidenced by
the mean of 2.33 which is less than 3 and the standard deviation of 0.13 which is close to zero. This implies that there
is high possibility that the M&E system at the district is not linked to the Social Development Sector. This ultimately
compromises the whole process of monitoring and evaluation of youth livelihood program, which begins from the
grassroots by the local government.
4.2 Challenges facing monitoring and evaluation team

The analysis was done using the percentages, mean and the standard deviation. Data was collected using a five point
Likert scale. The mean above 3 indicates an agreement of respondents, a mean of 3 shows undecided and a mean of
below 3 shows disagreement by respondents. The standard deviation (Std.) of close to 1 show agreement, while the
standard deviation of close to Zero show the disagreement of the respondents. The analysis grouped strongly agree and
agree to mean agree; and strongly disagree and disagree to mean disagree. The elicited responses were presented in
table 1.
Table 2: Descriptive statistical results on the challenges facing monitoring and evaluation team (n=14)
Responses Strongly Agree Not sure Disagree Strongly Mean Std
Agree disagree
Monitoring team face many challenges during 4 6 2 2 0 3.89 .87
M&E process (28.6%) (42.9%) (14.3%) (14.3%) (0.0%)
Transport facilities affect the technical team 5 4 3 2 0 3.68 .81
(35.7%) (28.6%) (21.4%) (14.3%) (0.0%)
Failure of loan officers in other financial 3 6 2 1 2 3.51 .72
agencies, to be facilitated at national and district (21.4%) (42.9%) (14.3%) (7.1%) (14.3%)
levels to properly monitor the YLF
Officers are not empowered to compel 6 5 1 2 0 3.48 .79
defaulters to pay back the fund (42.9%) (35.7%) (7.1%) (14.3%) (0.0%)
There is inadequate funding to monitor the 6 5 3 0 0 4.12 .85
youth fund (42.9%) (35.7%) (21.4%) (0.0%) (0.0%)
There is lack of transparency and accountability 3 7 2 2 0 4.41 .93
in the entire program (21.4%) (50%) (14.3%) (14.3%) (0.0%)
The program design was developed using a top- 4 6 1 1 2 3.67 .87
down approach (28.6%) (42.9%) (7.1%) (7.1%) (14.3%)
Results from table 2 indicate that majority of the respondents (71.5%) agreed with the statement put to them that
monitoring team face many challenges during Monitoring and Evaluation process. This is confirmed by the mean of
3.89 which is greater than 3 and the standard deviation of 0.87 which is close to 1. This clearly shows that the monitoring
team face a myriad of challenges in the youth livelihood program monitoring process which compromises the whole
process.
The study found out that majority of the respondents (64.3%) agreed with the statement put to them that transport
facilities affect the technical team. This is evidenced by the mean of 3.68 which is greater than 3 and the standard
deviation of 0.87 which is close to 1. This shows that transport facilities are one of the challenges hindering monitoring
and evaluation of the youth livelihood program in Isingiro District Local Government.
It was also found out that majority of the respondents (64.3%) agreed with the statement put to them that failure of loan
officers in other financial agencies, to be facilitated at national and district levels to properly monitor the youth
livelihood programme. This is proved by the mean of 3.51 which is greater than 3 and the standard deviation of 0.72
which is close to 1. This is an indication that there is lack of coordination between financial institutions who are partners
in the youth livelihood programme and the district local government, which compromises monitoring evaluation
process of this program in the long run.
The findings also found out that majority of the respondents (78.6%) agreed with the statement put to them that officers
are not empowered to compel defaulters to pay back the fund. This is proven by the mean of 3.48 which is greater than
3 and the standard deviation of 0.79 which is close to 1. This is an indication that there is inadequate motivation towards
officers enabling them ‘to follow up the defaulters and this greatly compromises the whole process of monitoring the
program.
Findings further show that majority of the respondents 78.6% agreed with the statement put to them that there is
inadequate funding to monitor the youth fund. This is confirmed by the mean of 4.12 which is greater than 3 and the
standard deviation of 0.85 which is close to 1. This attests that the District Local Government lacks sufficient funding
to conduct the monitoring process of Youth Livelihood Programme Monitoring and Evaluation.
The study also found out that majority of the respondents (71.4%) agreed with the statement put to them that there is
lack of transparency and accountability in the entire program. This is evidenced by the mean of 4.41 which is greater
than 3 and the standard deviation of 0.93 which is close to 1. This is an indication that the program lacks ethical
standards that guarantees effective monitoring and evaluation of this program.
The study revealed that majority of the respondents (71.5%) agreed with the statement put to them that the program
design was developed using a top-down approach. This is confirmed by the mean of 3.67 which is greater than 3 and
the standard deviation of 0.87 which is close to 1. This is an indication that the populace was not involved in policy
formulation which makes its implementation difficult to handle as there is little familiarity of the program features with
the youth’s needs in rural communities making it hard for the overall program to catch the interest of the general public
in Isingiro District even before the monitoring and evaluation takes course.
4.3 Procedures undertaken during the process of monitoring and evaluation

Table 3: Descriptive statistical results on procedures undertaken during the process of monitoring and evaluation (n=6)
Procedures of M&E Frequency Percentage
Group assessment and approval 5 83.3
Joint coordination between lower local councils, district and the 3 50
ministry
Field visits to the projects 2 33.3
Intelligence information through PISO, GISO and DISO is generated 1 16.7
Periodic reports (weekly, monthly and quarterly) are made by relevant 4 66.7
authorities
Submission of the M&E report to the CAO and subsequently to 3 50
MGLSD
Table 3 indicate that majority of the respondents 83.3% revealed that group assessment and approval is one of the most
apparent steps taken in the monitoring and evaluation process. This was followed by 66.7% of the participants who
reported periodic reports (weekly, monthly and quarterly) are made by relevant authorities whereas the least 16.7%
mentioned intelligence information through PISO, GISO and DISO is generated. This implies that there are various
procedures undertaken while conducting monitoring and evaluation processes of youth livelihood programme in
Isingiro District Local Government.
5.0 Discussion of the findings
The study found out that (71.4%) of the respondents agreed that there is an existing data base at the District Local
Government. This is an indication that the District Local Government has a clear record for youth livelihood programme
funds’ beneficiaries, which guarantees improved monitoring and evaluation of the program. Existence of data base
helps in information generation that helps in overall performance evaluation of the youth livelihood programme. This
finding is in line with Hunter, (2009) who expressed that the M&E process should be committed to improving the
lateral linkages among project and program staff, including feedback processes, for learning purposes. Analysis of the
existing or possible linkages across program and projects should be as critical, objective and exhaustive as possible.
Managers, including at the senior level, must be involved in the entire process. This facilitates quick decision and policy
adjustments in case of loopholes in the whole system.
It was found out that (78.6%) of the respondents reported that there is inadequate funding of the monitoring and
evaluation the youth livelihood programme. This leads to lack of motivation and limited resources followed of the
monitoring and evaluation process something that renders the whole process idle in the long run. This is finding is
confirmed by Gyorkos (2003) who reported that the project budget should provide a clear and adequate provision for
monitoring and evaluation activities. In the same vain Kelly and Magongo (2004) added that the M&E budgetary
allocation should clearly be delineated from the main project budget so that M&E unit is accorded some autonomy in
utilization of its resources. M&E budget should be about 5 to 10 percent of total projects’ budget which will give the
M&E unit adequate resources to ensure its effectiveness. This clearly shows that monitoring and evaluation is a
significant aspect of project that requires to be fully funded in its fullest potential. In an event of lack of sufficient funds,
there is a high likelihood of overall poor performance of the whole program.
Findings further stressed that (71.5%) reported monitoring team face many challenges during M&E process. It was
found out that most of these challenges are both structural and technical in nature. It was revealed that there are
numerous loopholes in the whole system of monitoring and evaluation ranging from inadequate facilities to lack of
moral support that has made it practically impossible for the monitoring and evaluation process to take its course. This
finding concur with prior findings by Schiavo-Campo (2005) who expressed that implementation challenges may
include: poor management, lack of capacity, lack of focus and lack of financial support. External factors on the other
hand may include: a weak political system and a lack of sufficient government cooperation and coordination. A
combination of these challenges may not allow the process of monitoring and evaluation to take its course if not
properly address and catered for at the beginning of the project.
5.1 Conclusion
The present study identified that there a number of strategies meant for improving monitoring and evaluation of Youth
Livelihood Fund are not followed and even the few which are followed are not done up to the standard required to
enable successful operation of the youth livelihood programme. The study revealed that District Local Government has
no competent staff to manage data base for the youth, fast internet for upgrading information gathered during
monitoring and evaluation process, no complaint desk has been created at the district to handle grievances, youth
representatives are not oriented and taught conflict resolution, officers are empowered to deal with non-complaint
beneficiaries and that the M&E system is not linked to the Management Information System (MIS) of Social
Development Sector. The study established that the absence of these key strategies in the Monitoring and Evaluation
process of Youth Livelihood renders it idle and less significant. However, the study found out that there exit data base
at the District Local Government, staff are often taken for refresher courses, resources are given to right beneficiaries,
officers are clearly managing entries of youth taking funds, there is clear record of defaulters since the inception of the
program and that the program involves many stakeholders in monitoring the process. It can be concluded that the
absence of some strategies compromises the whole process of Monitoring and Evaluation of Youth Livelihood Fund in
Isingiro District.
The study established that the Monitoring and Evaluation process of youth livelihood programme is engulfed with a
number of challenges including poor transport facilities, lack of coordination between financial institutions and
stakeholders at the District Local Government, inadequate of the M&E process, lack of transparency and accountability
in the entire program as well as the originality of the youth livelihood programme as a top-down approach in its design.
The study concludes that majority of these challenges are structural and are embedded in the ‘architectural design’ of
the Youth Livelihood Fund programme making it hard to allow smooth monitoring and evaluation of the whole process.
The study identified a number of procedures undertaken during the process of monitoring and evaluation including
group assessment and approval at the initial stage, joint coordination between lower local councils, district and the
ministry, field visits to the projects, intelligence information through PISO, GISO and DISO is generated, periodic
reports (weekly, monthly and quarterly) are made by relevant authorities as well as submission of the M&E report to
the CAO and subsequently to MGLSD. The study concluded that the existence of these program is just formality as
most of these procedures are politically motivated with less technical input and outputs associated with them. This
predicts compromised monitoring and evaluation process which in-turn yield compromised results at the end of the
whole process.
5.2 Recommendations
The study found out that there is lack of transparency and accountability in the whole program of youth livelihood
programme. This calls for an overhaul of the whole system and design a new mechanism of extending Youth Livelihood
Funds either through established financial institutions or community based organizations on a direct approach. This can
help to minimize cases of political interference and influence peddling.
The study found out that there is lack of internet connectivity in the District Local Government to share database
resources with the MGLSD. This can be done by introducing government system that will not only help to solve issues
of Youth Livelihood Funds but also other issues of service delivery under decentralization system of government.
Inadequate funding of Monitoring and Evaluation process under youth livelihood programme was sighted as a challenge
in this policy. This can be dealt with through the approach of dealing with civil society organization and public servants
at the sub county level. Civil society organization by default conduct monitoring and evaluation of government
programs. This requires a simple approach of integrating them in the system through mutual agreement.
Local leaders particularly the youth need to be trained and empowered with the skills to advocate and sensitize fellow
youth on effective utilization of youth livelihood programme through profitable projects that brings about quick returns.
Failure of youth projects is another compromising factor to the monitoring process of these projects.
Put in place a strong institutional and M&E framework: An effective M&E framework with measurable indicators
should be designed to monitor performance of the YLP. Government through relevant ministries like the Ministry of
Gender, Labour and Social development should take the lead in the design, promotion, fundraising, supervision, and
evaluation of the YLP as opposed to being the implementers. Government involvement in implementation of the youth
funds increases the risk of failure as beneficiaries tend to look at the program as a political tool. The implementing
agencies who are key to the success of the program should design appropriate and youth friendly lending mechanisms
and products, empower the youth clients through entrepreneurship, business and management training and ongoing
counseling and mentoring.
5.3 Researchers’ contribution to the body of knowledge

The study unearthed the existing nature of monitoring and evaluation strategies used on Youth Livelihood Programme
in Isingiro District Local Government The study revealed the fact that Monitoring and Evaluation is undertaken for
formality reasons as a measure to fulfil a policy requirement and give a report as prescribed in the youth livelihood
programme. Not tangible impact upon which a reflection can be drawn to make a difference in the process and the
entire process of monitoring and evaluation. The study brought to light that most appropriate strategies that would be
adopted to improve monitoring and evaluation of the youth livelihood programme are completely absent in Isingiro
District Government, an indication that the programme operates under closed ‘curtains’. This raises a need to assess
the operation of the whole programme not only in Isingiro District but also other areas of Uganda.
References
AfDB, OECD dev, UNDP, UNECA (2012). Africa Economic Outlook: Promoting Youth Employment.
Ahaibwe(2014). Creating Youth Employment through Entrepreneurship Financing:

Is the Uganda Youth Venture Capital Fund on course?
Firend Alan Rasch (2017) Employability and learning: strategies to improve students’s capacity: Essay of educator’s reflections. ISBN-13: 978
1976135514. DOI: https://doi.org/10.32893/IJBMR.2017/AMII.8.1
Gyorkos, T. W. (2003). Monitoring and evaluation of large scale helminth control programmes. Acta tropica report, 86(2), 275-282.
Hempel, Kevin; Fiala, Nathan. (2012). Measuring Success of Youth Livelihood Interventions: A Practical Guide to Monitoring and Evaluation.
World Bank, Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/23991 License: CC BY 3.0 IGO.”
Hunter, J. (2009). Monitoring and evaluation: are we making a difference? Namibia Institute for Democracy John Meinert Printing, Windhoek,
Namibia.
Kelly, K., & Magongo, B. (2004). Report on assessment of the monitoring and evaluation capacity of HIV/AIDS organizations in Swaziland.
National Emergency Response Council on HIV/AIDS.
Ministry of Finance, Planning and Economic Development (MoFPED) (February, 2012): Press statement: Government, Commercial banks create
Youth Venture Capital Fund, Kampala Uganda.
Schiavo-Campo, Salvatore (2005) Building Country Capacity for Monitoring and Evaluation in the Public Sector: Selected Lessons of
International Experience. Operations Evaluation Department ECD working paper no. 13. Washington, D.C.: Operations Evaluation
Department, The World Bank.
Uganda Bureau of Statistics (2012): The National Labour Force and Child Activities Survey 2011/12: Youth Employment Report.
Assessing the effectiveness of commercial bank loans as sources of
funding/ capital formation for Small and Medium Enterprises
(SMEs) in Southeast, Nigeria
Ugwu-Oju Monica Obiageri
University of Nigeria
Associate Professor Vincent A. Onodugo

University of Nigeria,
Mbah, Paulinus Chigozie

Enugu State University of Science and Technology
Email: dovegroupp@gmail.com
Abstract
The paper assesses the effectiveness of commercial bank loans as sources of funding Small and Medium Enterprises (SMEs) in
Southeast, Nigeria. A cross-sectional survey method wherein structured questionnaire was used to collect data was adopted. A
sample of 500 respondents was randomly selected from the five industrial hubs in the five states of Southeast, namely Nnewi, Aba,
Enugu, Abakiliki, and Owerri. The results of the analysis reveal that SMEs and commercial banks are highly indifferent to the loans
facilities; strict collateral requirements, high interest rates, and the nature of requirements for guarantors dissuade SMEs from
accessing loans; and government interventions provided palliative measures but failed to address the problems associated with the
loans. Therefore, this paper recommends policy reforms to reduce interest rate, collateral and guarantor requirements. Further
research on how to modernise and harmonise other external sources of SME funding such as ‘daily contribution’ and ‘Isusu’ systems
is required.
Keywords: SME, commercial banks, loans, southeast Nigeria, Interest rate, profit
1. Introduction
The establishment, growth and survival of small and medium enterprises (SMEs) depend on funding and its
management. It enables entrepreneurs to undertake productive investments, expand existing investments, and acquire
necessary technologies and requirements to sustain the enterprise (Ijaiya and Abdulraheem, 2000; Ijaiya, 2003; Firend
Al. R., Chun, 2018). Entrepreneur as used here refers to one who possesses the inclination for self-development, “ability
to innovate, nurtures an enterprise and having means of and access to finance in both formal and informal financial
sub-sectors to achieve a successful investment towards sustainable economic growth‖” (Somoye, 2011, p. 9). Majority
of them are found in the SMEs sector due to paucity of capital. Currently, SMEs represent about 90% of firms in the
Nigerian industrial sector.
Thus, SMEs dominate the industrial sector with overwhelmingly contribution to individual and national economic
growth. They exhibit huge potential for employment generation and wealth creation, ensures greater utilization of raw
materials, encourage rural development and the mobilization of local savings, create linkages and lead to the emergence
of bigger industries, contribution to national output and exports, provide avenue for self-employment and provision of
opportunity for training managers and semi-skilled workers, poverty alleviation, economic participation, strengthening
the industrial base and local production structure (Oluwarotimi and Adamu, 2017; Kadiri, 2012; Firend, Al R., 2015;
Imoughele and Ismaila, 2014).
In spite of these contributions, entrepreneurs have continued to face stiff hindrances in raising the required fund for
establishing and investing in SMEs in Nigeria (Beck et al, 2006; Abereijo and Fayomi, 2005). They suffer from scarcity
of funds, limited access to capital markets, and debt funding opportunities (Ukpong 2002, Beck et al, 2006). This is
because the Nigeria financial system contributes poorly to entrepreneurship and SMEs sector (CBN, 2009). The
maturity of credits extended to SMEs by the system is often limited to a very short period of repayment with exorbitant
interest. With bias in favor of lending to governments due to higher returns and low risks than SMEs (Levitsky, 1997),
the system applies tougher screening measures and tend to charge SMEs commission for assuming risk.
To ameliorate this, the federal government of Nigeria embarked on the policy of providing loan guarantees and credit
subsidy programs such as Small Scale Industries Credit Scheme (SSICS), Nigerian Bank for Commerce and Industry
(NBCI), and the National Economic Reconstruction Fund (NERFUND) among others. These interventions provide
long term credit, interest ceilings, and/or specialized services to the SMEs (Eniolaa and Entebanga, 2015). The term
credit as used here was aptly defined by the Central Bank of Nigeria (CBN) Prudential Guidelines of 1990 as the
aggregate of all loans, advances, overdrafts, bills discounted banks guarantees, banks acceptances, commercial papers,
leases and indemnities. Credits are advanced for purposes of making profit (Firend, R., & Al-Emadi, 2007; Essang and
Olajide, 1974).
Nevertheless, four factors are posing serious threat or challenge to the policy. First systemic sabotage and corruption
tend to prevent the loans from reaching the target group and individuals. Second, some beneficiaries of such loans fail
to repay them. Third, most beneficiaries of the loans failed to achieve financial self-sustainability. Fourth, banks lacked
the incentive to develop their capacity for risk assessment and monitoring of loans. This failure recently led to the
introduction of Small and Medium Industries Equity Investment Scheme (SMIEIS). Therefore, this paper examines the
level of commercial banks funding of SMEs in the Southeast Nigeria under the SMIEIS regime.
1.1 Objectives of the Study

The main purpose of this study is to examine commercial banks funding of small and medium enterprises in Nigeria
through credits/loans. However, the specific objectives are to:
i. Examine if entrepreneurs of SMEs rely on commercial bank loans for investments and expansion.
ii. Assess the impact of government policy on small and medium enterprises procurement of loans from
commercial banks in Southeast Nigeria.
iii. Examine the factors hindering small and medium enterprises procurement of loans from commercial
banks in Southeast Nigeria.
iv. Proffer solutions to the identified problems hindering small and medium enterprises procurement of loans
from commercial banks in Southeast Nigeria.
1.2 Research Questions

The following research questions were formulated to guide the research:
1. Has entrepreneurs of SMEs relied on commercial bank loans for investments and expansion?
2. Has government policy improved the rate of small and medium enterprises procurement of loans from
commercial banks in Southeast Nigeria?
3. What are the major factors militating against small and medium enterprises procurement of loans from
4. What are the solutions to the problems hindering SMEs access to commercial banks loans?
2. Literature/Theoretical underpinning
Small and Medium Scale Enterprises (SMEs) and its role in national economic development, management/dynamics,
funding, and problems have been well documented (Firend, Al R., 2015; Eniola and Ektebang, 2014; Terungwa, 2012;
Mukhtar, 2009; Fadahunsi, 1997). This review groups this documentation into two major parts, namely: conceptual
and empirical reviews.
2.1 Conceptual Review
2.1.1 Small and Medium Scale Enterprises (SMEs)
Although the literature is littered with definitions of Small and Medium Enterprises (SMEs), these definitions
significantly differ. This is due to the inclusion or exclusion and valuation of variables such as number of employee,
number and value of fixed assets, production capacity, nature of technology used, management, economic development,
and the environment, in the conceptualization of SMEs (Firend Alan Rasch, 2018; Enquobahrie, 1997; Harabi, 2005).
Thus, there is no generally accepted or universal definition of SME. However, the Central Bank of Nigeria adopted
asset base, turnover, and number of staff employed as primary factors that defines SMEs.
Nevertheless, a synthesis of available definitions reveals a popular acceptance of certain variables as characterisation
of SMEs. These variables include asset values and the number of employees (Nwakoby, 2012; Oteh, 2010; Udechukwu,
2003; Ositayo 2001; OECD, 2000). For instance, USAID (2004) defined enterprises as informal businesses employing
five or fewer workers including unpaid family labor; small enterprises as those operating in the formal sector with five
to twenty employees; and medium enterprises as those employing 21 to 50 employees. According to the views of
scholars, small businesses have fewer than 100 employees, while medium-sized business has fewer than 500 employees,
while the total assets of any SME does not exceed N200million. Thus, the conceptualization of SMEs by the National
Council of Industries (2009) as business enterprises (with fewer than 100 employees and) whose total costs excluding
land is not more than two hundred million naira (N200, 000, 000. 00) only is adopted for this paper.
In its review of over fifty definitions of SMEs obtainable in 75 countries including Nigeria, the United Nations
Industrial Development Organization (UNIDO) identified the major variables that characterize SMEs as capacity
utilization, output, employment, capital, and type of country or other criteria. In addition, ownership structure or base,
which is characteristically one-man, family or partnership business; Labor-intensive production processes;
concentration of management on the proprietor; limited access to long term funds; high interest rates and bank charges
to credits; over-dependence on imported raw materials; poor intra and inter-sectorial linkages characterize SMEs
(Firend, Al R., 2014). This is particularly true in Southeast Nigeria (Ngwu, 2005).
Generally, SMEs display a distinct set of identifying characteristics and these include:
a. Capital and output, which do not exceed 50 million naira.
b. Employment power that does not exceed 100 employees.
c. Serve small market area such as a street, community, and/or particular business operation.
d. The character of its ownership is sole proprietorships, partnerships or limited liability companies.
e. It can be found only in a limited area.
2.1.2 SME and Sources of Financing

Sources of funding or financing business enterprises are classified as Internal and external sources (Pretorius and Shaw,
2004). Internal sources include entrepreneurial provision of the capital on their own, debt trading, retaining of business
profits, and price depreciation. On the other part, external sources include financial banks, individual fund investors,
venture capital, and crowd-funding. While internal source determines the stating of SMEs, external sources of funding
are key to the expansion and rapid growth of SMEs. The external source normally provides credit facility (Firend Alan
Rasch, 2019; Eisenhardt and Martin, 2000; Shepherd, 1997).
In their quest to expand in the midst of fund raising difficulty, SMEs do resort to apply for and/or access short-term
and medium-term sources of financing at high costs through bank overdraft, trade credit, credit cards, leases and bank
loans (Keasey and Watson, 1994; Bates and Hally, 1982). In Nigeria, funding SMEs through the external sources is
difficult because government economic and financial policies are skewed against the informal sector (Claessens, 2006;
Ekpenyong and Nyong, 1992). Due to these policies, commercial bank loans to SMEs have been decreasing over the
years (CBN survey bulletin, 2014; Ogbuabor, Malaolu, and Elias, 2013). For instance, it declined drastically from
N41.1 billion in 2007 to N13.5 billion in 2008.
Commercial banks are reluctant to lend money to SMEs because such credits are considered non-commercially viable
(Odife, 2002). They regard lending to SMEs as a high risk and unprofitable business (Adejoh, 2013) because weak
management and information technology, and weak business plan drives their financial transactions, while their
financial condition and performance are not available (Firend Al R., 2014). In addition to these factors, SMEs in Nigeria
suffer from lack of focus, inadequate market research, inexperience, lack of proper book keeping practices, irregular
power supply, infrastructural inadequacies, lack of proper records or lack of any records at all, inability to separate
business and family or personal finances, lack of business strategy, inability to distinguish between revenue and profit,
inability to procure the right plant and machinery, and cut-throat competition (Basil, 2005). According to Rudjito (2003),
this scenario leads to commercial banks reluctance to issue credits to SMEs, an act that is sustained by the availability
of other investments with high rate of profit and turnover; higher overhead cost; and higher interest rate on the loans
from the informal lending market. On their part, SMEs are unable to access available commercial bank credits
successfully due to stringent conditions set by financial institutions especially banks (Solola, 2006); majority of their
projects are not bankable projects; high interest rates; paucity of information required to accelerate the processing of
their credit or loan request; none provision of the price of equipment and machinery required by SMEs (Akabueze,
2002).
2.2 Empirical Review

The literature is perverse with empirical investigations into commercial bank funding of SMEs. For instance, in an
investigation of the challenges facing commercial banks in Africa in adequately funding SMEs, Gibson (2008) observed
that pure equity increases investors' risk and reduces their current income. Babafemi, Adesheye, and Akure (2015)
investigated the funding arrangements that are available to SMEs and their contributions to finance and development
needs of the SMEs in Nigeria. They observed that the Federal Government established many programmes to enhance
SMEs access to finance while financial institutions, non-financial institution and NGOs have also made considerable
efforts to solve the financial challenges confronting SMEs development with little or no positive result. The study
recommended that commercial banks should provide more funds to SMEs.
Imoughele and Ismaila (2014) explored the impact of commercial bank credit on Nigeria's Small and Medium Scale
enterprises (SMEs) between 1986 and 2012. The study reveals that commercial bank credit to SMEs, total government
expenditure and bank density has direct but insignificant impact on the country SMEs output. This was attributed to
the stringent policy associated with SMEs accessing of credit facility and the crowd out effect of government
expenditure in the economy. It reveals also that interest rate has adverse effect on SMEs output. Among others, It
recommended a drastic reduction of the interest rate on credit facility granted to SMEs, granting of soft loan to SMEs,
alteration of the stringent policy in supply of credit to SMEs.
Imoughele and Ismaila (2014) Ayeni-Agbaje and Osho (2015) investigated the role of commercial banks in financing
small scale enterprises in Ado Ekiti, Ekiti State, and observed that there is a positive correlation between loans grants
by banks and the growth and development of SMEs in Ekiti State. it therefore recommended a flexible commercial
banks guidelines/schemes to finance SMEs. Similarly, Oke and Aluko (2015) examined the impact of commercial
banks in financing small and medium scale enterprises (SMEs) in Nigeria between 2002 and 2012. The study observed
that commercial bank credit has significant impact on SMEs’ financing and has led to substantial proportion of changes.
Thus, commercial banks are capable of making SMEs to grow through their financing.
However, the investigation carried out by Aliyu and Bello (2013) that examined the contribution of commercial banks
to the growth of SMEs in Nigeria from 1980 to 2009 equally discovered that although commercial banks contribute to
financing SMEs, their credit facilities to them have continued to decline after Central Bank of Nigeria abolished the
policy of mandatory bank credit allocations to SMEs. Ekpenyong (1997) reveals that commercial banks extend little
financial supports or loans to SMEs. Further, Mamman and Aminu (2013) evaluated the effect of 2004 banking reforms
on loan financing of SMEs in Nigeria. Analysis of responses from a sample size of 500 respondents reveals that there
is no significant effect of 2004 banking reform on loan financing of SMEs in Nigeria. Equally, the investigation by
Omah, Duruwoju, Adeoye and Elegunde (2012) on the impact of banking reforms on the performance of SMEs in
Nigeria using Lagos State as area of study reveals that SMEs do not have better access to finance through banks. Thus
the reforms did not provide solutions to various challenges facing entrepreneurs in financing SMEs through credits or
loans.
Many other scholars such as Benson (2017), Oluwarotimi and Adamu (2017), Richard (2016), Okey (2016), Imoisi and
Ephraim (2015), Bello and Mohammed (2015), John and Olorunfemi (2014), Nwosa and Oseni (2013), and Imoughele
and Ismaila (2014) among others examined the impact of commercial banks credit on the growth of small and medium
scale enterprises, and national economy in different periods; and the intervening factors that hinder its positive
relationship in Nigeria. These empirical investigations did not substantially cover the scope of this inquiry. Little or no
attention was devoted to the rate or level of commercial banks credits to SMEs particularly in Southeast Nigeria. this
necessitated this current inquiry.
3. Theoretical Framework
This paper adopts the pecking order theory (POT)/hypothesis of Lending as its framework of analysis. The foundation
of this theory or framework of analysis is that only the firm manager is aware of the true value of the firm and that the
market is unaware of the true distribution of the firm’s income. The theory therefore holds that these prevail, firms are
likely to fund themselves primarily internal sources such as retained earnings, and secondarily from bank credits.
Further, the theory holds that firms can only succeed in this state through the mixture of debt and equity, which is the
cumulative result of hierarchical financing decisions over time. Although SMEs do not issue equity they incur debt if
their retained earnings are insufficient to fund them. This comes in a hierarchical fashion with internal funds first,
external debt and external equity as a last resort (Myers, 1984). These credit options are directly or indirectly linked
with commercial banking operations. Thus, commercial banks remain the known formal source of raising credits or
loans for enterprises (World Bank survey, 2001; Agumagu, 2006; Firend, Al R., & Hashim, 2015).
4. Methodology
The study adopted a cross-sectional survey of 500 small and medium enterprises located in the industrial hub of each
of the five states of Southeast, Nigeria. 100 firms each were randomly selected from Aba in Abia state, Nnewi in
Anambra state, Enugu in Enugu state, Abakiliki in Enpbonyi state, and Owerri in Imo state. The choice of these cities
was guided by the fact that large clusters of small and medium enterprises were located in these five cities within
Southeast, Nigeria. Structured questionnaires were administered and used to generate responses from owners of
different categories of SMEs and/ or their representatives. A total of 2 evaluators comprising of 2 lecturers from the
Department of Marketing and Business Administration, University of Nigeria validated the questionnaire instrument.
Any item in the questionnaire that did not receive 80% acceptance by the evaluators was discarded. Further, Test re-
test method was used to test its reliability. 10 copies of the questionnaires were administered to similar respondents and
setting at Awka and Obosi both in Anambra state. After an interval of two weeks, the questionnaires were re-
administered to the same respondents and the two set of responses obtained correlated using the Pearson Product
Moment Correlation (r) and a co-efficient of reliability of 0.95 was obtained. This shows that the instrument is reliable
for data collection. The categories of SMEs studied are garment/fashion firms, ICTs and Communication firms, shoe
and textile firms, transport firms, entertainment/events firms, and educational firms. Five research assistants were
employed and in four weeks, all the 500 questionnaires distributed were returned. Each was checked for plausibility,
honesty and completeness. In pursuit of central tendencies, mean, and deviations, the data generated was analysed
percentage formula, and SPSS version 20 (SPSS Inc., Chicago, IL). Decisions were taken on the premise that mean
difference is significant at >0.05.
5. Results/Findings
5.1. Respondents’ Demographic information
Table 1: Socio-demographic data of respondents’ Gender and Age
s/ Type of SMEs Total Gender Age in years Education

n
Male Female 18-27 28-37 38-47 48 & WAEC/ First Higher
above ND degrees
Degree
1 Aba 100 48 52 22 36 30 12 43 48 9
2 Nnewi 100 57 43 30 34 20 16 56 38 6
3 Enugu 100 42 58 29 40 18 13 23 61 16
4 Abakiliki 100 52 48 37 38 20 5 55 41 4
5 Owerri 100 45 55 30 38 21 11 30 59 11
Total 500 244 256 148 186 109 57 207 247 46
Source: Field Work, 2018
Table 1 reveals 244 male respondents (48.8%), 256 females (51.2%), age bracket of 18-27(29.6%), 28-37(37.2%), 38-
47(21.8%), and 48 and above (11.4%), while the levels of respondents certificate possession shows WAEC and ND
(41.4%), First degrees (49.4%), higher degrees (9.2%). Therefore, majority of the respondents are both literate, and
matured in mind to respond to the research questions objectively and reasonably too. With reference to the gender ratio
of 48.8%:51.2%, the sample reflects the growing dominance of the female population in all profession. Thus, the sample
is highly objective for the present study. Similarly, the age distribution in the table shows that majority of the sample
belongs to the societal productive age that need credit or capital to invest and/or expand for growth and development
purposes.
5.2 Findings from responses to questions:

Table 2: Results of SPSS Analyses of responses to questions
S/n Research questions Grand Stand. Standar Tests of Between- Sig. Pairwise
Mean Deviat. d Error Subjects Effects Comparisons
You raised your initial business @ 95%
1 capital from your personal 1.86 .767 .013 1674.652 .001 & confidence
account .023 Interval, no
adjustments
Your initial business capital was @ 95%
2 raised by your parents, relations, confidence
friends and/or business master 4.44 .445 .087 870.206 ..006 Interval, no
adjustments
You have increased or expanded @ 95%

3 your capital base through trade confidence
credit/debt system. 4.21 .109 .106 102.003 .000 Interval, no
adjustments
You have increased or expanded @ 95%
4 your capital base through bank 2.32 1.245 .076 100.007 .000 confidence
loans/credit Interval, no
adjustments
Commercial banks demand Land @ 95%
5 property, building, and confidence
Educational certificate as Interval, no
collateral and condition for adjustments
issuing credits 4.64 .018 .556 634.520 .004
Commercial banks’ high @ 95%

demand for collateral, guarantor, confidence
6 nature of business, and business Interval, no
registration discouraged you 4.18 1.352 .082 491.467 .004 adjustments
from applying for credit
7 You applied for credit but was @ 95%
not granted because of lack of .002 confidence
collateral, guarantor, and 2.02 1.245 .076 416.907 & Interval, no
business registration certificate .000 adjustments
8 High interest rates for @ 95%
commercial banks’ credit confidence
facilities and risk of non- 4.42 .721 .022 519.111 .000 Interval, no
repayment due to bad economy adjustments
discourage you from applying
for loans
9 You have not applied for loans . @ 95%
due to lack of confidence
information/knowledge about 2.81 154 .011 1036. 006 .016 Interval, no
banking reforms and commercial adjustments
banks loan activities.
10 Availability of government’s @ 95%
poverty and business or market confidence
intervention funds provided 2.09 .415 .081 109.312 .004 Interval, no
alternative source of funding adjustments
your business.
11 Reducing the cost of procuring @ 95%
short term fund (i.e. interest rate) confidence
from the commercial banks will 4.03 .857 .058 163.839 .000 Interval, no
enable you apply for loan adjustments
12 Relaxation or reduction of the @ 95%
listing requirements for SMEs confidence
and conditions given to 4.04 1.264 .038 127.021 .001 Interval, no
guarantors will enable them adjustments
apply for soft credits will enable
apply for loan
Source: SPSS analysis of responses to questions
6. Discussion
6.1. Research Question 1: Has entrepreneurs of SMEs relied on commercial bank loans for investments and
expansion?
The SPSS Univeriate analysis of responses to questions’ results in table 2 above reveals that majority of the respondents
did not rely on their personal individual account in establishing their firms. Their responses grand mean of 1.86
representing ‘Disagreed’ in our likert scale and whose sig. difference of .001 & .023 confidence interval were not
subject of modification led to this conclusion. However, majority of the respondents agreed (a grand mean of 4.44)
with no sig. difference (i.e. .006) that their initial business capital was raised by their parents, relations, friends and/or
business master. The table also reveals that majority of the respondents (i.e. a grand mean of 4.21) agreed with no sig.
difference (i.e. .000) that they have being increasing or expanding their capital base through trade credit/debt system.
This finding is supported by earlier findings made by scholars such as Eisenhardt and Martin (2000), Keasey and
Watson (1994), which holds that external sources of funding are key to SMEs’ expansion. However, the finding made
by this paper to the effect that majority of the respondents generated their initial investment capital from extended
family and business masters – external sources - is at variance with earlier findings made by such scholars like Keasey
and Watson (1994), and Shepherd (1997). This finding highlights the importance or role of social structure and socialist
family system in the promotion and sustenance of SMEs in Southeast Nigeria.
The result of the analysis to question 4 in table 2 further reveals that majority of the respondents (i.e. a grand mean of
2.32 representing disagreed) noted that they have not been relying on bank loans/credits to increase or expand their
capital base or investments. Thus, entrepreneurs of SMEs in Southeast Nigeria have not relied on commercial bank
loans for investments and expansion. This finding is at variance with earlier findings made scholars like Claessens
(2006) and Bates and Hally (1982), and is validated by prevailing position in the literature that commercial banks are
indifferent to providing credits to SMEs due to high risks and unprofitability (Odife, 2002; Adejoh, 2013).
6.2. Has government policy improved the rate of small and medium enterprises procurement of loans from
The results of SPSS analysis of responses to question 5 in table 2 further reveals that commercial banks are still
demanding land property, building, and educational certificate as collateral and condition for issuing credits to SMEs.
Majority of the respondents i.e. a grand mean of 4.64 representing ‘agreed’ in our likert scale and whose sig. difference
of .004 confidence interval were not subject of modification led to this conclusion. The result of analysis in question 6
further reveals that as a consequence of the high demand for collateral, guarantor, nature of business, and business
registration, majority of the respondents (i.e. a grand mean of 4.18 representing ‘agreed’ in our likert scale and whose
sig. difference of .004 confidence interval were not subject of modification) are discouraged to applying for commercial
bank credits. This finding was supported by earlier conclusion reached by Solola (2006) and others.
Thus, the result of analysis of responses to question 7, which seeks to find out if respondents applied for credit but was
not granted because of lack of collateral, guarantor, and business registration certificate, reveals a grand mean of 2.02,
which represents ‘disagreed’ in Likert scale measure. The differences in their responses are < .05 at .002 & .000 and
therefore insignificant with no adjustment to the mean. Thus, the rate or level of commercial loans to SMEs cannot be
determined effectively because entrepreneurs were not applying for it. Therefore, government credit policy did not
improve the rate of small and medium enterprises procurement of loans from commercial banks in Southeast Nigeria.
this finding was supported by earlier findings made by Mamman and Aminu (2013).
This finding can be explained by the fact that government credit policy was not aimed at reducing and/or eliminating
any of the requirements for obtaining commercial banks credits or loans. Rather, according to earlier research findings
made scholars like Eniolaa and Entebanga (2015), and Essang and Olajide (1974), the policy pursued the provision of
palliative measures to cushion the effects of the requirements.
6.3. What are the major factors militating against small and medium enterprises procurement of loans from
According to the results of analysis of responses to question 8, majority of the respondents (i.e. 4.42 representing
‘agreed’ in our likert scale measure whose level of differences in their response is < .05 at .000 and therefore
insignificant) agreed that high interest rates for commercial banks’ credit facilities and risk of non-repayment due to
bad economy are major factors militating against their application for loans. This finding is supported by earlier findings
made by Ngwu (2005) and others.
However, the results of analysis of responses to question 9 reveals that majority of the respondents (i.e. 2.81
representing ‘disagreed’ in our likert scale measure whose level of differences in their response is < .05 at .016 and
therefore insignificant) observed that lack of information/knowledge about banking reforms and commercial banks
loan activities is not a major factor limiting them from applying for their loans. However, the literature demonstrated
that it is a major that discourage commercial banks from approving and/or advancing loans to SMEs.
Similarly, the results of analysis of responses to question 10 reveal that majority of the respondents (i.e. 2.09
representing ‘disagreed’ in our likert scale measure whose level of differences in their response is < .05 at .016 and
therefore insignificant) noted that the availability of government’s poverty and business or market intervention funds
does not provide alternative source of funding their business. Therefore, government intervention schemes do not
militate against SMEs’ access to commercial bank loans.
6.4. What are the solutions to the problems hindering SMEs access to commercial banks loans?
The results of analysis of responses to statements seeking to find out if reducing the cost of procuring short term fund
(i.e. interest rate) from the commercial banks will enable SMEs apply for loan reveal a grand mean of 4.03 representing
‘agreed’ in Likert scale measure with differences that is < .05 at .000 and therefore insignificant with no adjustment to
the mean. Therefore, the grand mean of 4.03 is upheld and implies that reducing the cost of procuring short term fund
(i.e. interest rate) will motivate and enhance SMEs application for loans.
Similarly, the analysis of response to the statement that the relaxation or reduction of the listing requirements for SMEs
and conditions given to guarantors will enable them apply for soft credits reveals a grand mean of 4.04 representing
‘agreed’ in our likert scale measure with differences that is < .05 at .001 and therefore insignificant with no adjustment
to the mean. Therefore, the grand mean of 4.04 is accepted and implies that the relaxation or reduction of the listing
requirements for SMEs and conditions given to guarantors will also motivate and enhance SMEs application for loans.
These findings are supported by earlier findings or conclusions reached by some scholars such as Solola (2006) and
Firend, Al R. & Hashim (2015), which holds that reducing the cost of procuring short term fund, and the reduction of
the listing requirements for SMEs and conditions given to guarantors promotes SMEs access to commercial bank loans.
7. Implication to Research and Practice
The findings made by this paper have many implications for research and practice. As the primary goal of commercial
banks, which is the fundamental source of fund generation for SMEs, is profit maximization and SMEs are threatened
by it researchers should investigate or examine further ways of using the socio-traditional structure and socialist
approach to fund and sustain SMEs. This requires the exploration of other none commercial but external sources of
funding SMEs. These have practical policy implication as government shall be required to develop social policies for
collective rural empowerment.
Secondly, the inability of government’s banking policy reforms to positively drive SMEs’ access to commercial bank
credits/loans suggests high level weakness and ineffectiveness of such policy. The implication for researchers is that
further assessment of the policy to determine its shortcomings is required, while policy makers should as a matter of
urgency redirect their attention from establishing palliative programs to the actual reduction of interest rate,
requirements for accessing loans, and conditions given to loan guarantors. This has great implication for the capitalist
economy and requires general economic review, workshops, and seminars with stakeholders.
Finally, the weakness that characterize SMEs, which generate confidence crisis on the part of commercial banks against
granting them loans require scientific study, analysis, and recommendations on restructuring or modernizing SMEs.
This has practical implication for policy and economic review. New set of guidelines for registering and operating
SMEs is required. This will cause systemic upgrade for all existing SMEs.
8. Conclusion
This study evaluated the effectiveness of commercial bank loans as sources of funding/capital formation for Small and
Medium Enterprises (SMEs) in Southeast, Nigeria. The empirical results suggest that commercial banks loans are
ineffective sources of funding SMEs n Southeast Nigeria. Both SMEs and commercial banks shy away from the credit
due to different reasons or factors. On the part of SMEs, high interest rate, strict collateral, conditions for guarantor,
and bad economic condition, which makes it difficult to attain reasonable business turnover discourages them from
applying for the loans. For commercial banks, the character of SMEs in Southeast Nigeria with high risk of instability
and low rate of profit turn-up, together with the availability of more profitable government clients, discourage them
from granting loans to SMEs.
Government intervened to sustain SMEs because of their principal contributions to general economic growth. However,
their intervention was focused on establishing palliative institutions and programs such as SSICS, NBCI, NERFUND,
and SMIEIS, instead of addressing the core issues responsible for SMEs’ very low access to commercial bank loans.
To resolve the current scenario, government should embark on reforming its economic and banking policies to allow
for actual reduction of loan interest rate, requirements for accessing loans, and conditions given to loan guarantors.
Such reforms should equally establish a new set of guidelines for registering and operating SMEs in Southeast Nigeria.
8.1 Future Research

Further research is required in the area of funding SMEs through group or community self-help, which is now growing
in the Southeast Nigeria. These include group thrift system popularly known as ‘isusu’ and ‘daily contribution’. The
nature, effectiveness, and challenges of these popular systems of raining funds in Southeast Nigeria should be examined
for purposes of standardization, harmonization, and formalization.
References
Abereijo, O. and Fayomi, I. (2005). Innovative Approach to SME Financing in Nigeria: A Review of Small and Medium Industries Equity
Investment Scheme (SMIEIS). Journal of Social Sciences, 11(3): 219-227.
Adejoh, A. U (2013). Financing of small scale business in Nigeria: Challenges and opportunities: A case study of F.C.T.: A Post-graduate (MBA)
Project Submitted to the Department of Business Administration and Entrepreneurship, Bayero University, Kano, Nigeria.
Agumagu, A.C. (2006). Finance for industry and commerce: The Business of Banking. Lectures and Proceedings at the 26th International Banking
Summer School, Oxford Honourary Presidential Advisory Council on Investment in Nigeria.
Akabueze, B. (2002). Prospectus on Nigeria SMEs under the small and medium industries investment scheme (SMIEIS). Accessed August 14
2009 from http//www.nigerianbusinessinfor.com/nigerian-smes2009.html
Aliyu, S.M. and Bello, G.B. (2013). An Assessment of the Contribution of Commercial Banks to the Growth of Small and Medium Scale
Enterprises in Nigeria. International Journal of Research in Social Sciences, 2(4): 47-55
Ayeni-Agbaje, A.R. and Osho, A.E. (2015). Commercial banks role in financing small scale industries in Nigeria (a study of First Bank Plc, Ado-
ekiti, Ekiti state). European Journal of Accounting Auditing and Finance Research, 3(8): 51-76
Babafemi, I.D.; Adesheye, I.M; and Akure, Z.Bank Plc. (June 2015). Small and Medium Scale Enterprises Financing and Development in Nigeria:
A Critical Assessment. Journal of Finance and Bank Management, 3(1): 190 - 198. URL: http://dx.doi.org/10.15640/jfbm.v3n1a17
Basil, A.N. (2005). Small and Medium Enterprises (SMES) in Nigeria: Problems and Prospects. Ph.D. Thesis presented to St. Clements University
Bates, J.A. and Hally, D.L. (1982). The financing of small business (3rd ed ed.). London: Sweet & Maxwell
Beck, T.A.; Demirgüç-Kunt, L.L.; and Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and
Finance, 25:932–952.
Bello, A. and Mohammed, Z. (2015). Impact of banking sector credit on the growth of small and medium enterprises in Nigeria. International
Journal of Resource development and Management, 15:1-9
Benson, M.O. (2017). Bank credits and its impact on Nigerian economic growth. International Journal of Development Strategies in Humanities,
Management and Social Sciences, 7(3): 39-52
CBN (2014). 2013 Statistical Bulletin: Financial Statistics: Annual Statistical Bulletin. Abuja: Central Bank of Nigeria
Central Bank of Nigeria (2009). Statistical Bulletin. Central Bank of Nigeria Publication, (20):1-513.
Claessens, S. (2006). Access to Financial Services: A Review of the Issues and Public Policy Objectives. World Bank Research Observer, 21(2):
207-240
Eisenhardt, K.M. and Martin, J.A. (2000). Dynamic capabilities: what are they? Strategic Management Journal, 21(10-11): 1105 - 1121
Ekpenyong, D.B. (1997). Problems of small business and why they Fail. Journal of General Studies, Bayero, University, 3(1).
Ekpenyong, D.B. and Nyong, M.O. (1992). Small and medium-scale enterprises in Nigeria: Their characteristics, problems, and sources of
finance. Nairobi: African Economic Research Consortium.
Eniola, A.A. and Ektebang, H. (2014). SME firms performance in Nigeria: Competitive advantage and its impact. International Journal of
Research Studies in Management, 3(2): 75-86
Enquobahrie, A. (1997). Promoting Entrepreneurship and Small Business in Cameroon. Journal of Finance and Bank Management, 3(1)
Fadahunsi, O. (1997). The Challenge of Promoting Entrepreneurship and Small Business: The Commonwealth Experience. In O. Fadahunsi & T.
Daodu (Eds.). Small and Medium Enterprises Development: Policies, Programmes and Prospects (pp. 170 - 186). Lagos: West African
publishers
Firend Al. R., Chun, C. C. (2018) Managerial practices, employee satisfaction and firm’s competitiveness in Asian small and m edium enterprises
Firend, R., Al-Emadi, M. (2007) Perception of Electronic Government Utilization in State of Qatar Proceeding: The Academy for Global Business
Advancement, Penang, Malaysia. May 21-25, 2007. www.agba.us
Firend, Al R., (2014) Malaysian Economic Inertia: A Self-Inflicted Limitation to Future Growth. Procedia - Singapore
Harabi, N. (2005). Determinants of Firm Growth: An Empirical Analysis from Morocco. WEMA Bank Training School, Oba Akran Avenue, Ikeja,
Lagos, Nigeria
Ijaiya, G.T. and Abdulraheem, A. (2000). Commercial Banks Credits to the Agricultural Sector and Poverty Reduction in Nigeria: A Calibration
Analysis‖. Nigeria Journal of Agric Business and Rural Development, 1 (1): 43-57
Ijaiya, M.A. (2003). Commercial Banks Credits to the Agricultural Sector and the Nigeria Economy: An Analysis of the Future Trend‖. Advances
in Management, 3(1): 86-93
Imoisi, A. I. and Ephraim, J. (2015). Small and medium scale enterprises and economic growth in Nigeria. International Journal of Business and
Management, 10(3): 203-216
Imoughele, L.E. and Ismaila, M. (2014). Impact of commercial bank credit on the growth of small and medium scale enterprises: An econometric
evidence from Nigeria. Journal of Educational Policy and Entrepreneurial Research, 1(2): 251-261
John, A. and Olorunfemi, Y.A. (2014). Small and medium scale enterprises financing and economic growth in Nigeria. European Journal of
Globalization and Development Research, 11(1): 639-652
Kadiri, I.B. (2012). Small and Medium Scale Enterprises and Employment Generation in Nigeria: The Role of Finance. Kuwait Chapter of
Arabian Journal of Business and Management Review, 1(9): 79-94
Keasey, K. and Watson, R. (1994). The bank financing of small firms in UK: Issues and evidence. Small Business Economics, 6(5): 349–362. doi:
10.1007/bf01065138
Levitsky, Jacob (1997). Guarantee Schemes for SMEs – an International Review. Small Enterprise Development, 8(2): 4-17
Mamman, A. and Aminu, K.S. (2013). Effect of 2004 Banking Reforms on Loan Financing of Small and Medium Scale Industries in Nigeria.
International Journal of Small Business and Entrepreneurship Research, 1(3): 44-53
Mukhtar, S.M. (2009). ICT-driven human and knowledge capital development: in search of a new economic development model and policy.
Journal of Finance and Bank Management, 3(1)
Myers, S.C. (1984). Capital structure puzzle. Journal of Finance, 39, 572-592
Ngwu, B.A. (2005). Small and Medium Enterprises (SMEs) In Nigeria: Problems and Prospects. Dissertation submitted to the St. Clements
University in partial fulfilment of the requirements for the award of the degree of doctor of philosophy in management
Nwakoby, C. I. N. (2012). A Financial Characteristic of Bank Financing of SMEs: The Anambra State Experience. Journal of Finance and Bank
Management, 3(1)
Nwosa, P.I. and Oseni, I.O. (2013). Impact of banks loan to SMEs on manufacturing in Nigeria. Journal of Social and development Sciences, 4(5),
212-217
Odife, D.O. (2002). Implementing the new partnership for African development (NEPAS) by promoting the development of the SME sector in the
context of capital markets in Africa in promoting growth in African capital market, UNITAR Document, No. 18
OECD (2000). Financing Newly Emerging Private Enterprises in Transition Economies. Paris: OECD Publications
Ogbuabor, J.E.; Malaolu, V.A.; and Elias, T.I. (2013). Small Scale Enterprises, Poverty Alleviation and Job Creation in Nigeria: Lessons from
Burnt Bricklayers in Benue State. Journal of Economics and Sustainable Development, 4(18)
Oke, M.O. and Aluko, O.A. (2015). Impact of commercial banks on small and medium enterprises financing in Nigeria. IOSR Journal of Business
and Management, 17(4): 23-26
Okey, O.O. (2016). Commercial bank credit and the growth of small and medium scale enterprise: the Nigerian experience. IOSR Journal of
Economics and Finance, 7(6): 23-30
Oluwarotimi, A.O. and Adamu, N. (2017). Deposit money bank credit to small and medium enterprises, socio-economic performance and
economic growth in Nigeria. International Journal of Development and Sustainability, 6(10): 1400-1417
Omah, I.; Durowoju, S.T.; Adeoye, A.O. and Elegunde, A.F. (2012). Post Bank Consolidation: A Debacle in the Survival of SMEs in Nigeria:An
Empirical Study. Australian Journal of Business and Management Research, 2(8): 1-6
Oteh, Arunma (2010). Making Capital Markets Work For Smes In Africa. Paper presented during 2010 Kikonyogo Capital Markets Awards
Kampala, Uganda, 6th May
Richard, Z. (2016). Small and medium enterprises financing and economic growth in Malawi. Research Gate, 1-14
Shepherd, W.G. (1997). The economics of industrial organization. Englewood Cliffs, NJ: Prentice-Hall
Solola, I.A. (2006). Problems and prospects of small scale business in Nigeria. Available @ idlbnc.idrc.ca/../78669.pdf
Somoye, R.O.C. (2011). The Role of Financial Intermediation in Entrepreneurship Financing in Nigeria. Thesis in partial fulfilment of the
Business School, Faculty of Business and Creative Industries
Terungwa, A. (2012). Risk Management and Insurance of Small and Medium Scale Enterprises (SMEs) in Nigeria. International Journal of
Finance and Accounting, 1(1): 8–17. doi: 10.5923/j.ijfa.20120101.02
Udechukwu, F.N. (2003). Survey of Small and Medium Scale Industries and their Potentials in Nigeria. Being a paper presented at the Central
Bank of Nigeria (CBN) Seminar on Small and Medium Industries Equity Investments, August, Lagos. CBN, No.4: 6-18
USAID (2005). Micro, Small and Medium Enterprises Financial Services Demand Survey Nigeria [2014). Crowd-funding: an alternative financing
option for SMEs. Available @ Error! Hyperlink reference not valid.
World Bank (2001). Nigeria Firm Survey
Relationship between business education students’
perception and achievement in acquired basic computer
skills and its operation in colleges of education in Nigeria
B. Magaji 1., P.S. Yaduma2 and V.E. Okereke (Mrs)3
1Business Education Department, School of Undergraduate Studies, Aminu
Saleh College of Education, Azare, Bauchi State, Nigeria
2,3Faculty of Technology Education, Abubakar Tafawa Balewa University, Bauchi State, Nigeria
E-mail: abdullahmg18@yahoo.com
Abstract
The research focused on comparing Business Education Students’ Perception and Achievement in Acquired Basic Computer Skills
in determining their effectiveness in computer operation in Colleges of Education in North-Eastern Nigeria. The design adopted for
this study was a correlation design. The population of the study consisted of Six hundred and fifty one (651) NCE III business
education students drawn from seven (7) Colleges of Education offering business education programs. Two hundred and forty two
(242) students were sampled using proportionate sampling technique. Two instruments were used for collecting data for the study:
Business Education Students’ Opinion Questionnaire (BESOQ) and Business Education Students Achievement Test (BESAT).
Findings of the study showed that a cluster of 19 basic computer skills were acquired at moderate extent by the respondents, and
that a discrepancy exists between what the students perceived and their achievement in computer test in acquired basic computer
skills. The findings also revealed that there is no significant relationship between respondents’ perception and their achievement in
computer test in acquired basic computer skills in determining their effectiveness in computer operations.
Keywords: Business Education, Achievement, Perception, Computer Skills, Operation.
1. Introduction
Education is an industry that depends largely on the quality of its manpower. In view of this, Ukeje (1991) and Firend
Alan Rasch (2019) argue that the quality of education provided in any society and the nature of the change effected by
that education are both dependent on the quality of teachers and the effectiveness of their teaching in the schools.
According to Ibrahim (2008) and Firend Alan Rasch (2017), Business education is an important segment of vocational
education. It is wide in scope because it provides the skills and knowledge needed for a particular job such as accounting,
marketing and secretarial occupation. He further stressed that business education provides the foundation for many of
our accountants, business executives, salesmen, data processing analysts, secretaries, stenographers and typists.
Therefore, if business education is properly nurtured, it will play a very important role in the economic vision of the
nation as the course deals with skills acquisition for self-reliance.
However, rapid innovations in Information and Communication Technology (ICT) are gradually altering and redefining
how business organizations are operating across the globe (Al-Raisi, & Firend, Al R. 2012). The trend has equally
forced educational institutions that trained and produced business education graduates to expose their students to new
technological tools and skills needed to cope with the present realities. Okoro and Okoro (2009) stated that business
education that is not based on ICT will be classified as outdated and not in tune with the present realities because
education is globalized and many nations agree to standardize their business rules, regulations and practices. In the
same vein, Comfort, Madu and Bonaventure (2012) and Firend, Al R., & Noorazah (2013) stressed that business
education programs of tertiary institutions therefore should strive to educate and train properly its graduates in line with
the business skills and needs of the work place and business environment of the modern time. Possession of requisite
computer skills will make them to flourish after graduation.
Statement of the Problem
The National Policy on Education (2004) states that teacher education shall continue to take cognizance of changes in
methodology and in curriculum and that teachers shall be regularly exposed to innovations in their profession.
According to the Minimum Standard for NCE (Vocational and Technical Education, 2008), one of the objectives of
business education is to equip graduates with the right skills that will enable them to engage in a life of work as well
as for self-employment. Equally, the same Minimum Standard for NCE (2008) stipulates computer courses as part of
business education curriculum to be offered by students.
Hall (2009) and Firend, Al R., & Abu Altiman (2011) stated that it is in the best interest of business education students
to be computer literate both for the world of work and in enriching themselves as the world is changing. It therefore
becomes necessary that business education students should be equipped with computer literacy and competencies in
order to exploit information resources that the electronic age produces as well as compete favorably in the labor market.
This study is therefore; aim at determining basic computer skills acquired and the extent of their acquisition by business
education students during their studies in Colleges of Education as well as their effectiveness in computer operations.
Purpose of the Study
The main purpose of this study is to determine the extent to which basic computer skills are acquired by business
education students and their effectiveness in computer operation in Colleges of Education before graduation.
Specifically, the objectives of this study are to:
1. Identify basic computer skills acquired and the extent of their acquisition by business
education students in the sampled Colleges.
2. Compare students’ perception and their performance in achievement test in acquired basic computer skills
on the basis of gender, area of specialization and College type.
Research Questions
This study was guided by the following research questions:
1. What computer basic skills do business education students acquired and the extent of
their acquisition in the sampled Colleges?
2. What is the difference in the mean responses on perception and test performance in acquired basic computer
skills among business education students on the basis of gender, area of specialization and College type?
Hypotheses
The following null hypotheses were tested at 0.05 level of significance in the study:
Ho1 There is no significant difference in the mean response on perception in
acquired basic computer skills among business education students based on
gender, area of specialization and College type.
Ho2 There is no significant difference in the mean score in test performance in
acquired basic computer skills among business education students based on
gender, area of specialization and College type.
Ho3 There is no significant relationship between respondents’ perception and their
test performance in acquired basic computer skills.
2 Methodology
Research Design
The design used in this study was correlation design. “Correlation study seeks to establish relationship between two or
more quantifiable variables for making prediction” (Yalams and Ndomi, 2000; Al-Raisi & Firend, Al R., 2012). In the
same vein, Sambo (2005) opines, “ In a correlational study, measures of two or more variables are compared. In view
of the above, this research therefore is a correlational study. Business education students’ perception of basic computer
skills acquired was correlated against their test performance in determining their effectiveness in computer operation.
Population of the Study
The population for this study comprised of 651 NCE III level students of Colleges of Education in the six (6) states of
North-Eastern Nigeria running business education program.
Sample and Sampling Technique

From the population of 651 NCE III business education students, the sample size of 242 current NCE III business
education students was drawn using a proportionate random sampling technique. Krejcie and Morgan in Kolo (1992)
table of sampling was adopted in obtaining the sample size.
Instrument for Data Collection

Two research instruments were developed and used to collect data from the subjects of the study. Business Education
Students’ Opinion Questionnaire (BESOQ) and Business Education Students Aptitude Test (BESAT). BESOQ
consisted of a cluster of 19 expected basic computer skills NCE III business education students should have acquired
before graduation drawn by the researchers using the NCCE Minimum Standard (2008) as a guide. The questionnaire
has two (2) sections. Section A deals with the demographic characteristics of the respondents, section B contained
statements requesting the respondents to rate the extent of acquiring basic computer skills in the course of their studies.
The measuring scale is ordinal and was structured using a five points Likert scale measure of Very High Extent (VHE),
High Extent (HE), Moderate Extent (ME), Low Extent (LE) and Very Low Extent (VLE), and the scale was assigned
the values of 5,4,3,2,1 respectively.
BESAT is a 25 items multiple-choice type of test. The same NCCE minimum standard was used as guidance for
drawing up the expected basic computer skills the respondents should have acquired by the end of their three (3) years
of NCE program. These basic computer skills where translated into test items, and the marks awarded to a correctly
answered question was 2 marks. The test scores were converted to a five grade points as follows: 41 – 50 marks = A (5
points: Very High Performance), 31 – 40 marks = B (4 points: High Performance), 21 – 30 marks = C (3 points:
Moderate Performance), 11 – 20 marks = D (2 points: Low Performance) and 1 – 10 marks = E (1 point: Very Low
Performance).
Validation of the Instruments

Five experts, two from business education department, one from Psychology (Test and Measurement) department,
College of Education and Azare and two from Vocational and Technology Education and Educational Foundation
departments of Abubakar Tafawa Balewa University (ATBU), Bauchi face validated the instruments.
Reliability of the Instruments

The two instruments were pilot tested at College of Education Azare and Federal College of Education (Technical)
Gombe with a sample of 50 NCE III business education students. Split–half method for testing reliability was adopted.
Pearson Product Moment Correlation was used in calculating the split – half reliability index of the halves of the
instruments, and Spearman – Brown formula was finally used in calculating the reliability of the whole instruments.
The reliability of BESOQ was found to be 0.67 and for BESAT was 0.72. This shows a strong reliability of the research
instruments (Saunders, Lewis and Thornhill, 2000; Householder & Firend, Al R., 2006).
Data Collection
The instruments for data collection were administered to the selected respondents by the researchers with the help of
research assistants. All the research assistants were lecturers selected from business education departments in the study
area and have made adequate arrangement for the administration of the instruments in their respective departments.
Out of 242 instruments that were administered to the respondents, 224 were retrieved representing 93% return rate.
Data Analysis
The Statistical Package for Social Sciences (SPSS) was used to analyze the returned BESOQ and BESAT instruments.
Information collected on BESOQ was converted to frequency distribution and mean to describe the extent of basic
computer skills acquired by the respondents. Mean was used to describe the pattern of respondent’s performance in
BESAT. One-way Analysis of Variance (ANOVA) and Correlation were used for answering the research questions
and testing the hypotheses at 0.05 level of significance.
3. Results and Discussions
The results obtained from the analysis of the data collected were presented as follows:
Research Question 1
What computer basic skills do business education students acquired and the extent of their acquisition in the sampled
Colleges?
Table 1: Mean responses of business education students’ perception in acquired basic

computer skills. Source: Field Survey, 2015.
S/N Basic Computer Skills N ̅

𝑿 Remark
1. Start up and shut down a computer successfully 224 4.23 HE
2. Understanding the hard-ware and soft-ware components of a computer 224 3.99 ME
3. Knowlegde of keyboard, speed and accuracy while typing 224 3.87 ME
4. Create, copy, save or delete file or a folder 224 3.81 ME
5. Ability to search for a file or a folder using a computer and accessories system 224 3.74 ME
6. Using simple editing e.gbold, italics, font size, etc 224 3.71 ME
7. Generate and update records using database 224 3.44 ME
8. Ability to create and or query existing data 224 3.33 ME
9. Using spreadsheet package very well 224 3.42 ME
10. Using spreadsheet to prepare sales analysis, Trading, Profit and Loss Account 224 3.56 ME
11. Ability to use an internet service to access a website address 224 3.64 ME
12. Ability to use search engines e.g google very well 224 3.71 ME
13. Ability to use ICT facilities to transact on-line business 224 3.41 ME
14. Create, check and send a reply to e-mail 224 3.37 ME
15. Search, download and save a file from the internet 224 3.72 ME
16. Using internet to search advertising strategies, job and or career opportunities 224 3.41 ME
17. Ability to evaluate number of opportunities for both rntreprenuers and existing businesses 224 3.29 ME
available on the World Wide Web
18. Ability to use USB cables to share resources 224 3.51 ME
19. Using computers to interact within an office or organization 224 3.50 ME
KEY: N= Number of Respondents, X= Mean, HE= High Extent, ME= Moderate Extent
The above table shows a cluster of 19 basic computer skills acquired and the extent of their perceived acquisition by
business education students. The table indicates that business education students perceived the acquisition of the first
skill as high extent with a mean value of 4.22 while the remaining 18 skills as moderate extent with a mean ranging
from 3.29 to 3.99.
Research Question 2
What is the difference in the mean responses on perception and achievement test of business education students on
acquired basic computer skills on the basis of Gender, Area of Specialization and College type?
Table 2: Comparison of male and female respondents’ perception and achievement test on acquired basic computer skills in the sampled Colleges
S/N COLLEGES MR FR
N1 BESOQ1 BESAT1 RMK N2 BESOQ2 BESAT2 RMK
1. COE AZARE 25 3.68 2.84 PhT 13 3.73 2.54 PhT
2. COE GASHUWA 07 3.81 2.29 PhT 10 4.01 1.60 PhT
3. COE JALINGO 15 3.62 2.13 PhT 08 3.55 2.25 PhT
4. COE MAUDUGURI 14 3.40 2.71 PhT 13 3.62 3.15 SL
5. FCE(T) GOMBE 40 3.57 3.02 SL 49 3.67 3.04 SL
6. FCE(T) POTISKUM 12 3.65 3.17 SL 08 3.42 3.50 SL
7. FCE YOLA 04 3.21 2.84 PhT 06 3.03 3.00 SL
GM 3.56 2.77 PhT 3.58 2.73 PhT
Source: Field Survey, 2015.
KEY: MR=Male Respondents:N1= Number of Male Respondents

FR= Female Respondents:N2= Number of Female Respondents
PhT=Perception higher than Test, SL= Same Level of perception and test
Table 2 from above, revealed that male and female business education students from state Colleges of Education (COEs)
have higher perception against their test performance except in COE Maiduguri where female respondents have the
same level of mean responses on perception and test score. However, male and female respondents from Federal
Colleges of Education (FCEs) have the same level of perception and test score in acquired basic computer skills except
in FCE Yola where male respondents have higher perception compared with their test performance. However, the
Grand Mean revealed that perception of male and female business education students is higher than their actual test
performance in acquired basic computer skills in the sampled Colleges.
Table 3: Comparison of Accounting and Secretarial business education students’ perception and achievement test in acquired ba sic computer skills
in the sampled Colleges.
S/N COLLEGE AS SS
N1 BESOQ1 BESAT1 RMK N2 BESOQ2 BESAT2 RMK
1. COE AZARE 27 3.70 2.74 PhT 11 3.69 2.73 PhT
2. COE GASHUWA 11 3.98 1.91 PhT 06 3.83 1.83 PhT
3. COE JALINGO 12 3.63 2.33 PhT 11 3.57 2.00 PhT
4. COE MAIDUGURI 21 3.48 2.95 PhT 06 3.59 2.83 PhT
5. FCE(T) GOMBE 61 3.61 3.05 SL 28 3.66 3.00 SL
6. FCE(T) POTISKUM 14 3.57 3.43 SL 06 3.53 3.00 SL
7. FCE YOLA 06 2.95 3.00 PLT 04 3.33 2.75 PhT
GM 3.56 2.77 3.60 2.59 PhT
KEY:AS= Accounting Students:N1= Number of Accounting Respondents,

SS= Secretarial Students:N2= Number of Secretarial Respondents
PhT= Perception higher than Test, PLT= Perception Lower than Test,
SL= Same Level perception and test
Table 3 revealed that Accounting and Secretarial business education students from state Colleges of Education (COEs)
have higher perception against their test performance. Accounting and Secretarial students from Federal Colleges of
Education (FCEs) have the same level of perception and test score in acquired basic computer skills except in FCE
Yola where Accounting respondents’ mean score on achievement test is higher than their perception. Equally,
Secretarial respondents’ perception is higher compared with their test performance. However, the Grand Mean revealed
that perception of Accounting and Secretarial business education students is higher than their actual test performance
in acquired basic computer skills in the sampled Colleges.
Table 4: Comparison of perception and achievement test of business education students from State and Federal Colleges of Education in acquired
basic computer skills
S/N COLLEGES N BESOQ BESAT REMARK
1. COEs 105 3.66 2.52 PhT
2. FCEs 119 3.57 3.07 SL
GRAND MEAN 224 3.62 2.80 PhT
KEY:COEs = State Colleges of Education, FCEs = Federal Colleges of Education
Table 4 revealed that respondents from State Colleges of Education have higher perception against their test
performance while respondents from Federal Colleges of Education have the same level of perception and test score
in acquired basic computer skills. However, the Grand Mean indicates that respondents’ perception in the sampled
Colleges is higher than their actual test performance in acquired basic computer skills.
Hypothesis 1
There is no significant difference in the mean response on perception of business education students in acquired basic
computer skills based on gender, area of specialization and College type.
Table 5: Summary of One-way Analysis of Variance (ANOVA) of difference of mean response on perception of business education students on
acquired basic computer skills based on gender, area of specialization and College type.
Variable Source SS Df MS Fcal Fcrit Decision
Gender BG 12.191 50 .224 .965 1.41 Ho
Accepted
WG 43.698 173 .253
Total 55.888 223
Area of BG 10.109 50 .202 .903 1.41 Ho
Specialization Accepted
WG 38.748 173 .224
Total 48.857 223
College Type BG 178.473 50 3.569 1.204 1.41 Ho
Accepted
WG 512.884 173 2.965
Total 691.357 223
In the above table, results of the analysis of variance for Gender showed that the calculated value (Fcal) of .965 is less
than the table value (Fcrit) of 1.41, for area of specialization the calculated value (Fcal) of .903 is less than the table
value (Fcrit) of 1.41, and for College type the calculated value (Fcal) of 1.204 is less than the table value (Fcrit) of 1.41
at 0.05 level of significance and 50/173 degree of freedom (df).
Hypothesis 2
There is no significant difference in the mean response on the achievement test of business education students in
acquired basic computer skills based on gender, Area of specialization and College type.
Table 6: Summary of One-way Analysis of Variance (ANOVA) of difference of mean score on the achievement test of business education students
in acquired basic computer skills based on gender, area of specialization and College type.
Variable Source SS Df MS Fcal Fcrit Decision
Gender BG .990 4 .248 .988 2.42 Ho
Accepted
WG 54.898 219 .251
Total 55.888 223
Area of BG 1.008 4 .252 1.154 2.42 Ho
Specialization Accepted
WG 47.849 219 .218
Total 48.857 223
College Type BG 67.642 4 16.910 5.938 2.42 Ho
Rejected
WG 623.716 219 2.848
Total 691.357 223
From the above table, results of the analysis of variance for gender showed that the calculated value (Fcal) of .988 is less than the table value (Fcrit)
of 2.42, for area of specialization the calculated value (Fcal) of 1.154 is less than the table value (Fcrit) of 2.42, and for College type the calculated
value (Fcal) of 5.938 is greater than the table value (Fcrit) of 2.42 at 0.05 level of significance and 4/219 degree of freedom (df).
Hypothesis 3
There is no significant relationship between business education students’ perception and their achievement test in acquired basic computer skills in
the sampled Colleges.
Table 7: Summary of 2 tailed correlation results between business education students’ perception and their achievement test on acquired basic
computer skills.
Variables N ̅
𝑿 SD Df r-cal r-crit Decision
BESOQ 224 3.61 .609 222 -0.093 0.138 Ho Accepted
BESAT 224 2.81 .820
The result of the correlation shows that statistically there is no significant relationship between the respondents’
perception and their achievement test. The Pearson Product Moment Correlation Coefficient (rcal) calculated of -0.093
is less than the table value (rcrit) of 0.138 at 0.05 level of significance (2 tailed) and 222 degree of freedom (df). The
null hypothesis stated is therefore accepted.
4. Major Findings of the Study
1. A cluster of 19 basic computer skills (according to this study) were acquired by business education students
in the sampled Colleges. However, the respondents perceived the acquisition of the first skill as high extent
(above average) while the remaining 18 skills as moderate extent (average).
2. The findings of this study showed a difference in the students’ perception and their actual test performance.
3. A negative and weak relationship exists between the respondents’ perception and their actual performance in
the test in acquired basic computer skills.
Discussion of Findings
Discussion of the findings was made based on the research questions raised and research hypotheses formulated in the
study presented as follows:
The result of the data analysis on research question one revealed that students acquired a cluster of 19 basic computer
skills. However, with the exception of the first skill whose acquisition was perceived as high extent (above average),
the remaining 18 skills were perceived to be acquired moderately (averagely). This finding is in agreement with the
study of Donna, Elisha and Marianne (2009) which reveals that majority of business students (81%) perceived at least
an average level in basic computer skills.
The result of the data analysis regarding research question two showed that perception of male and female business
education students was higher than their test performance in acquired basic computer skills in the sampled Colleges.
The results also revealed that Accounting and Secretarial business education students’ perception was higher than their
test performance across the sampled Colleges. Also, the perception of students from Federal and State Colleges of
Education was found to be higher than their test performance in acquired basic computer skills. This finding agrees
with the finding of Donna, Alisha and Marianne (2009), which revealed that business students had a level of perception
that did not match their performance in computer operations.
The result obtained from testing of the first null hypothesis revealed that the null hypothesis was accepted. The overall
One-way ANOVA results showed that the results of the analysis of variance for Gender showed the calculated value
(Fcal) of .965 is less than the table value (Fcrit) of 1.41, for area of specialization the calculated value (Fcal) of .903 is
less than the table value (Fcrit) of 1.41, and for College type the calculated value (Fcal) of 1.204 is less than the table
value (Fcrit) of 1.41. This supports the findings of Ude (2010), which reported no significant difference between male
and female respondents on ICT competencies of pre-service teachers of University of Nigeria. However, the finding of
this study differs with the findings of Ofoegbu and Asagwa (2013), which indicated that there is a significant difference
in the ICT competence of male and female Basic Science and Technology teachers in Enugu State. Female teachers
have higher ICT competencies than male teachers.
The findings on hypothesis two revealed that the null hypothesis was accepted on gender and area of specialization but
rejected based on College type. Results of the analysis of One-way ANOVA for gender showed that the calculated
value (Fcal) of .988 is less than the table value (Fcrit) of 2.42, for area of specialization the calculated value (Fcal) of
1.154 is less than the table value (Fcrit) of 2.42. However, for College type the calculated value (Fcal) of 5.938 is
greater than the table value (Fcrit) of 2.42. This indicates that students that were taught the same course by the same
educator using the same facilities and in the same environment could demonstrate the same level of performance when
examined. This view is consistent with the findings of Sani (2014) which revealed that the overall ICT literacy skills
and competence acquired by Social Studies pre-service teachers in Federal College of Education Katsina after attending
computer course in GSE department was found to be low. However, the ability of teacher training institutions in Nigeria
to be effective is dependent mostly on the availability of fund provided for them. Therefore, since federal owned teacher
training institutions (FCEs) were more funded there is every tendency for their students to be trained with the necessary
facilities and be able to acquire the requisite skills and performed better than their counterparts in the state owned
teacher training institutions (COEs). In line with this, Ukor (2009) stressed that the possession of required competencies
that will enable business education graduates to function in their place of work can be frustrated if the required lecturers
and facilities are not adequately provided in the Universities and Colleges.
The finding of hypothesis three revealed that the null hypothesis was accepted. The Pearson’s Product Movement
Correlation coefficient (r calculated) of -.093 is less than the table value (r critical) of 0.138. The result indicates that
the respondents were not effective in computer operations. This finding is in agreement with the findings of Yusuf
(2005), which reveals that most teachers in Nigerian secondary schools do not have the needed experience and
competence in the use of computers either for educational or industrial purposes. Neither do they have the needed
competence in basic computer operations, skills and knowledge in the use of common computer software.
5. Conclusion
The findings from this study revealed that a cluster of 19 basic computer skills were acquired by business education
students at moderate extent with the exception of the first skill which was acquired at high extent. This supports finding
by Firend Alan Rasch (2017; 2019). However, based on the result obtained it was concluded that business education
students’ exposure to basic computer skills was found to be inadequate in helping them to acquire needed computer
skills to become effective in computer operations.
Recommendations
In the light of the findings of this study, the following recommendations are made:
1. Business teacher educators must design means of finding out the computer skills fresh students possessed in
order to adjust the contents of computer courses to adequately prepare students for today’s global economy.
2. Continuous evaluation of students’ perception and actual performance in computer skills is necessary in order
to identify possible gaps that may exist for necessary measures to be taken at the right time before students
graduated from the Colleges.
3. The lecture method of teaching computer courses where students sit and listen to the explanations provided
by the course lecturer at the conventional lecture halls should be de-emphasized. Instead computer courses
should be taught at computer rooms or laboratories where students will be involved in manipulating the
computers as lectures goes on.
4. Government must ensure that teacher training institutions in Nigeria were adequately funded and relevant
training facilities and equipment be provided to enable pre-service teachers acquire life-long skills before
graduation.
References
Comfort, O.C., Madu, I.C. and Bonaventure, O.C. (2012). Business Educators Familiarity
with the Utilization of Hi-Tech Tools in the Preparation of Graduates for Modern
Business/Marketing in Nigeria. International Refereed Research Journal, 2(3),
151-162.
Donna, M.G., Alisha, D.M. and Marianne, C.M (2009). A Comparison of Student
Perceptions of their Computer Skills to their Actual Abilities. Journal of Information
Technology Education, 8, 141-160 Retrieved October 19, 2014 from
http://jite.org/documents/Vol8/JITEv8p141-160Donna59.pdf
Federal Goverment of Nigeria ( 2004 ). National Policy on Education. NERDC Press, Lagos.
Federal Goverment of Nigeria (2008). Minimum Standard for N.C.E., NCCE, Abuja.
Firend, R., Abu Altiman (2011) Purchasing Behaviour in Multi-Ethnic Society, Computer Brand Preferences, The International Journal of
Business and Management Research. Vol.4, No.1
Hall, B. (2009). E-learning: IT competencies, computer literacy and students attitudes to e-

learning. Available at http/www.findarticles.com. Retrieved on 4th Jan, 2013.
Householder, J., Firend, R. (2006). Post-Implementation Assessment of Knowledge Management Programs at Government Organizations: The
GSA Case. Proceeding: Second Annual Conference on Applied Management and Decision Sciences. Dallas, Texas, USA January 20,
2006. http://www.ijamt.org/ijamt/IJAMT/AMDSJan2006.pdf
Ibrahim, M.Y. (2008). Towards Fuctional and Qualitative Business Education in Tertiary
Institutions in Nigeria. Journal of Teacher Perspective, 2 (2), 12-23.
Kolo, I.A. (1992). Essentials of Research in Education ( a hand book for students and
Beginning Researchers in Education). Text and Leisure Publishers, Ikeja, Lagos.
Majid, M., Firend Al. R. (2017) Social media, online shopping activities and perceived risks in Malaysia, International Journal of Economics and
Financial Management
Mzory, H., Firend, Al R. (2016) Marketing new e-solution services and cultural readiness in the KRG, The International Journal of Business and
Management Research. Vol.9, No.1
Ofoegbu, T.O., Asogwa, D.U. (2013). ICT Conpetencies of Lower and Middle Basic Science
and Technology Teachers in Enugu State. Journal of Educational media and
Technology, 17 (1), 19-32.
Okoro, J. & Okoro, P.E. (2009). Information and Communication Technology (ICT) skills
required of office education graduates as perceived by Managers and Supervisors.
Delta Business Education Journal, 1(15), 147-158.
Sani, A.G. (2014). Impact of ICT course on pre-service teachers acquisition of ICT literacy
skills and competence in Nigeria. International Journal of Modern Education Research,
1(2): 37- 42. Retrieved on July 20, 2014 from http://www.aascit.org/journal/ijmer.
Sambo, A.A (2005). Research Methods in Education. Stirling – Horden Publishers –

Ibadan
Saunders, M., Lewis, P., & Thornhill, A. (2000). “Research Methods for Business Studies”.
(2nd Edition). Harlow: Printice Hall.
Ude, M.S. (2010). ICT Competencies of Pre-service Teachers of University of Nigeria,

Nsukka. Unpublished B.Ed. Thesis, University of Nigeria, Nsukka.
Ukeje, B.O. (1991). The Education of Teachers for a New Social Order. The Nigerian
Teacher Today. 1(1), 4-12.
Ukor, L.O. (2009). Competencies needed to run a successful business enterprise. Delta
Journal o f Business Education, 1 (4), 26-33.
Yalams, S.M & Ndomi, B.M. (2000). Research Project: Writing and Supervision. A
Guide to Students in Education, Engineering, Science and Technology. League of
Researchers in Nigeria (LRN) Bauchi, Nigeria.
Yusuf, M.O. (2005). “An Investigation into Teachers’ Self-Efficacy in Implementing

Computer Education in Nigerian Secondary Schools”. Meridian. A middle School
Computer Technologies Journal. Vol. 8, Issue 2. Retrieved September 17, 2014 from
hppt://www.nesu.edu/meridian/sum2005.
An analytical study on performance of commercial banks for
agricultural loan disbursement with special reference to lead bank
credit plan in Ahmednagar District
Dr. Mohasin A. Tambolia , Dr. Nilesh U. Bankarb
a Assistant Professor, PIRENS Institute of Business Management and Administration, Loni Bk.(MH),413736, India
bAssociate Professor, PIRENS Institute of Business Management and Administration, Loni Bk.(MH),413736, India
Abstract
Indian banking sector is an important constituent of the Indian financial system. Banking in India has a very old origin. It started in
the Vedic period where literature shows the giving of loans to others on interest. India has over the last decades experienced different
degree of responsive policies in the banking sector. The banking sector plays a vital role through promoting business in urban as
well as in rural areas in recent years. It helps to develop economy of the country. India is primarily an agriculture based country.
Agriculture contributes nearly one fifth of the gross domestic product in India. Therefore, it is always said that rural development
cannot be completed without agricultural development. Hence, this researches work especially emphasis an agriculture credit and
credit plan prepared by Central Bank of India which is the lead bank of Ahmednagar district.
Keywords: agriculture, crop, loan.
1. Introduction
Ahmednagar district has vast network of commercial banks. The geographical spread of all type of banks over the
Ahmednagar district is studied. Core part of this research paper is concern with Lead Bank Scheme, Reserve Bank of
India (RBI) guidelines regarding district Credit Plan and allocation of lead bank responsibility. RBI has assigned lead
bank responsibility to Central Bank of India for Ahmednagar district through which entire credit activities like
allocation of targets for credit disbursement of various sectors of the economy like priority sector and non-priority
sector is monitor. This research paper mainly focuses on credit plan prepared by Central Bank of India as a lead bank
of Ahmednagar district for agricultural sector of priority sector lending for the period 2010-11 to 2017-18. The
agricultural credit disbursement is further divided into two categories i.e. crop loan and agricultural term loan. In this
research paper performance of commercial banks including public sector and private sector banks for agricultural credit
disbursement with reference to lead bank credit plan in Ahmednagar district is studied (Firend Al. R., Chun, C. C., 2018).
Need of the Study
There is an urgent need in the era of liberalization and globalization to fully exploit available natural, material and
human resource in the most efficient and effective way. In order to exploit all these resources, it is essential to have a
sound financial or banking system. In the rural areas, the rural oriented banks like Regional Rural Banks, Cooperative
Banks and Lead Banks etc. are not effectively responding to the problem of rural clients, rural industries and customers
by providing timely and adequate credit (Firend, R., Abu Altiman, 2011; Firend, R., 2010). Therefore, it is essential to study
the performance of formal credit institutes in providing rural credit to the rural client in general and agriculture in
particular.
Objectives of Study
1. To study Lead Bank system in India.

2. To study scenario of agricultural finance in Maharashtra.
3. To study agricultural loan disbursement through Commercial Banks in Ahmednagar district.
4. To suggest practical measures.
2. Research Methodology
Descriptive research method is used for the present study. The required data is collected through ‘Annual Credit Plan’
reports of the study period i.e. 2010-11 to 2017-18 under ‘Service Area Approach’ of Central Bank of India which is
the lead bank of Ahmednagar district.
Lead Bank System in India
The financial system plays a crucial role in the functioning of the economy because it allows a more efficient transfer
of resources from savers to investors as well as facilitates the use of funds by households, business, traders and
governments. Indian financial sector is expanding rapidly and is diversified. It comprises commercial banks, non-
banking financial companies, cooperatives, insurance companies, pension fund, mutual funds and other financial
entities. In short, Indian Financial System is product oriented. Therefore, there is a strong need of regulatory framework
for financial system and as a result to regulate credit system at district level the concept of ‘Lead Bank’ came into
existence.
The origin of Lead Bank Scheme (hereafter it is called as LBS) can be traced to the Study Group headed by Prof. D. R.
Gadgil (Gadgil Study Group) on the organizational framework for implementation of the social objectives. This study
group submitted its report in October 1969. The Study Group drew attention to the fact that commercial banks did not
have satisfactory presence in rural areas and also lacked the required rural orientation. As a result, the Study Group
suggested the adoption of an 'Area Approach' to develop plans and programs for the growth of a sufficient banking and
credit organization in the rural areas (Firend, Al. R., 2010; 2018).
A Committee of Bankers on Branch Expansion Programme of public sector banks appointed by Reserve Bank of India
under the Chairmanship of Shri F. K. F. Nariman (Nariman Committee) endorsed the idea of area approach in its report
(November 1969) recommending that in order to enable the public sector banks to discharge their social responsibilities,
each bank should concentrate on certain districts where it should act as a Lead Bank.
In accordance with the above recommendations, the Lead Bank Scheme was introduced by Reserve Bank of India in
December 1969. The Scheme aims to coordinate the activities of banks and other developmental agencies through
various forms in order to get the aim of enhancing the flow of bank finance to priority sector and other sectors and to
promote banks' role in growth of the rural area. To coordinating the activities in the district, a particular bank is assigned
the leadership role called lead bank.
Agricultural Finance in Maharashtra
Agriculture is a part of the human development, since the origin of human life on the earth. Our early ancestors lived
as nomads. As soon as their population grew, providing food to everybody became more and more difficult and they
chose to stay in groups and the initial societies were formed. In this way agriculture was started by our initial ancestors
as the way of providing food for themselves. Therefore, the place of agriculture in the development of human history
is very important. The most significant segment of Indian Economy is Agriculture. According to Ministry of Statistics
and Program Implementation, Government of India, "Contribution of Indian agriculture sector in India's gross domestic
product (GDP) was around 18 percent which provides employment to approximately 55% of the India’s workforce1.”
The importance of agriculture can be explained with the help of following points:
1. Main Source of Livelihood
2. Contribution in Gross Domestic Product
3. Supply of Food
4. Source of Raw Material for Various Industries
5. Huge Employment Opportunities
6. Market for industrial products
Therefore, by considering the importance of agriculture in economic development, it is necessary to provide adequate
and on time credit for the purpose of agricultural development and ultimately the rural economy. The agricultural credit
mainly provided by two main sources of credit i.e. institutional sources of credit for agriculture and non-institutional
sources of credit for agriculture. Institutional credit is provided by the government through various agencies like banks,
cooperative banks, cooperative societies, government departments etc. As far as agriculture sector is concern NABARD
is the apex institute for rural and agriculture credit and development in the India. Financial assistance by the way of
loans are provided through District Central Cooperative Banks (DCCB), Maharashtra State Cooperative Bank (MSCB),
Land Development Banks (LDB), Commercial Banks (CB) including nationalized and cooperative banks and Regional
Rural Banks (RRB).
Following table shows the status and performance of agricultural finance in Maharashtra. 1 India economic survey 2018
Table 1: Agriculture Loans disbursed in Maharashtra

(Amount Rs. Crore)
Loan Type
Bank Type Year Agriculture Term
Crop Loan Total
Loan
2011-12 8871 4358 13229
2012-13 11776 544 17220
Commercial Banks 2013-14 16461.61 14217.96 30679.57
(Including
2014-15 17987 20356 38343
Nationalized Banks)
2015-16 22758 20910 43668
2016-17 3064176 2184520 5248696
2017-18 3357506 1880106 5237612
2011-12 788 150 938
2012-13 1404 87 1488
Regional Rural 2013-14 1610.90 643.77 2254.67
Banks 2014-15 1690 111 1801
2015-16 2032 106 2138
2016-17 304455 88813 393268
2017-18 305515 85094 390609
Maharashtra State 2011-12 9519 740 10259
Coop. Bank / District
2012-13 11076 883 11959
Central Coop.
2013-14 13354 794 14148
Banks/Land
Development Bank 2014-15 14423 1394 15817
2015-16 15791 11268 27059
2016-17 1754880 348917 2103797
2017-18 1759077 333360 2092437
(Source: State Level Banker‟s Committee, Maharashtra State)
The above table it is clearly observed that Commercial Banks and Cooperative banks including Land Development
Banks consistently performing well but there is a serious indicator for Regional Rural Banks that they are not
performing at par as compare to Commercial Banks and Other Cooperative Banks including Land Development Banks
in case of agricultural term loan. In real sense as far as objective behind establishment of Regional Rural Bank is
concern, it has to be performing leadership role in rural development through agriculture development by providing
credit to agriculture. Therefore, there is a time to take some policy decision regarding underperformance of RRBs.
Bank Wise Performance Report In Regards To Crop Loan
In this section researcher would be interested in understanding the performance of banks whether commercial, public
sector or private banks. It would be more precise to investigate the performance of all banks in the Ahmednagar district.
The performance of banks is reported in the following table.
Table 2: Bank Performance in Crop Loans on Year on Year Basis
(Amt. in Rs. '000)
Bank 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Ahmednagr District Central

4610610 4995817 6135912 7595488 9812852 7655129 16851196 17174058
Cooperative Bank
Allahabad Bank 3758 9879 11068 9805 18072 32496 35996 112903
Andhra Bank 660 145 200 1800 2841 19334 51695 91196
Axis Bank 18671 349 199 24312 1230 2965 43196 166449
Bank of Baroda 227599 376206 396967 91231 634305 117046 983102 883413
Bank of India 159823 313743 36284 228973 464158 753096 701730 456105
Bank of Maharashtra 251999 611703 533223 411033 2635485 1109883 2286471 2374138
Canara Bank 3632 2509 16392 866 77708 652435 156684 387004
Central Bank of India 185840 183212 247734 312913 698042 815481 2049595 3252039
Corporation Bank 6846 800 0 0 68109 16687 154685 282690
Dena Bank 1597 18099 36600 24178 90415 62122 164284 261808
HDFC Bank 3219 18031 1425 239191 122729 0 788021 1196407
ICICI Bank 0 15800 26610 0 182650 276275 1559944 703895
Indian Bank 0 0 316393 1035 0 2687 9399 108200
Indian Overseas Bank 102998 171440 0 75006 120474 148654 230177 366781
IDBI Bank 53715 224300 208577 77388 49500 18234 126887 558616
Punjab National Bank 23610 20067 28006 49998 15380 27885 47595 180178
State Bank of Hyderabad 200 2943 3638 95705 5107 2893 31797 256402
State Bank of India 90409 187223 1016542 1693045 2808609 3734805 2744326 2907380
Syndicate Bank 230 395 5317 0 14906 8158 77892 160393
UCO Bank 2474 0 0 882 14814 18047 26897 141403
Union Bank of India 30126 452188 192075 443818 393054 337505 1456854 1071393
TOTAL 5778266 7608711 9388600 11385547 18237791 15850205 30864394 33655759
(Source: ACP, CBI, Ahmednagar, 2010-18)
Analysis
Table 3 : Year on Year Change in Market Share of Banks in Crop Loan
Bank 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

79.79 65.66 65.35 66.71 53.81 48.30 54.60
Cooperative Bank
Allahabad Bank 0.07 0.13 0.12 0.09 0.10 0.21 0.12
Andhra Bank 0.01 0.00 0.00 0.02 0.02 0.12 0.17
Axis Bank 0.32 0.00 0.00 0.21 0.01 0.02 0.14
Bank of Baroda 3.94 4.94 4.23 0.80 3.48 0.74 3.19
Bank of India 2.77 4.12 0.39 2.01 2.55 4.75 2.27
Bank of Maharashtra 4.36 8.04 5.68 3.61 14.45 7.00 7.41
Canara Bank 0.06 0.03 0.17 0.01 0.43 4.12 0.51
Central Bank of India 3.22 2.41 2.64 2.75 3.83 5.14 6.64
Corporation Bank 0.12 0.01 0.00 0.00 0.37 0.11 0.50
Dena Bank 0.03 0.24 0.39 0.21 0.50 0.39 0.53
HDFC Bank 0.06 0.24 0.02 2.10 0.67 0.00 2.55
ICICI Bank 0.00 0.21 0.28 0.00 1.00 1.74 5.05
Indian Bank 0.00 0.00 3.37 0.01 0.00 0.02 0.03
Indian Overseas Bank 1.78 2.25 0.00 0.66 0.66 0.94 0.75
IDBI Bank 0.93 2.95 2.22 0.68 0.27 0.12 0.41
Punjab National Bank 0.41 0.26 0.30 0.44 0.08 0.18 0.15
State Bank of Hyderabad 0.00 0.04 0.04 0.84 0.03 0.02 0.10
State Bank of India 1.56 2.46 10.83 14.87 15.40 23.56 8.89
Syndicate Bank 0.00 0.01 0.06 0.00 0.08 0.05 0.25
UCO Bank 0.04 0.00 0.00 0.01 0.08 0.11 0.09
Union Bank of India 0.52 5.94 2.05 3.90 2.16 2.13 4.72
From the above table it can be seen that,
1. The total credit disbursement by all banks in the period 2011-2018 for crop loan purpose has gain from
5778266 thousand to 33655759 thousand and such a gain is 5 times.
2. Among the PSU banks Andhra bank has shown highest growth in crop loan from 660 thousand to almost
91196 thousand which is almost 138 times followed by Canara bank which has also registered a growth of
100 times the original crop loan disbursement in period of 7years.
3. Leading private bank like HDFC has lead the pack of private banks by crop loan clocking an impressive
growth of 370% in crop disbursement from its disbursement in 2011.
4. If the share of banks in total disbursement is compared it can be observed that in case of ADCC bank which is
the largest amongst all cooperative banks in Ahmednagar, the share of this bank has decreased substantially
from 80% to 50% of the total crop loan disbursement.
5. Though the share of banks like Dena Bank and State Bank of Hyderabad seems to be lower, these banks
have shown an impressive jump in their crop loan disbursement share where they have shown 18 and 28 times.
6. Amongst PSU banks Syndicate bank and Canara bank have shown huge growth in their crop loan
disbursement and this growth is 62 times and 7 times their share in 2011 of total disbursement for crop loan.
7. Amongst the private bank, Axis bank has shown a negative trend in its share of total crop loan whereas in
case of Public Sector Banks like Indian Bank, Punjab National Bank has shown a negative growth which is
17% and 19% respectively.
Bank Wise Performance In Regards To Agriculture Term Loan
In this section unlike previous section where in researcher tried to observe the banks performance in regards to crop
loan researcher would like to inquire the bank performance in case of term loan. The performance of the banks on this
count is reported in the following table.
Table 4: Bank Wise Performance in Regards to Agriculture Term Loan on Annual Basis
(Amt. in Rs. '000)
Bank 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Ahmednagr District
Central Cooperative Bank 262204 492411 327063 205043 434437 700699 616265 1528105
Allahabad Bank 3745 2785 853 1586 1696 5132 2500 19086
Andhra Bank 850 4587 0 112421 158514 18151 258479 41224
Axis Bank 210534 1738 27829 29482 0 15204 0 64129
Bank of Baroda 240986 262232 162694 25976 242115 80866 584410 285000
Bank of India 168697 24900 49705 63653 48189 114012 42105 104344
Bank of Maharashtra 134217 221134 143170 91577 671133 237380 943584 741788
Canara Bank 5148 2324 546 115 64779 72740 80020 76342
Central Bank of India 170585 126092 134919 167557 354044 382184 689945 760889
Corporation Bank 110281 22154 5578 0 0 0 0 34610
Dena Bank 1088 5427 25495 30588 43426 28277 39555 58785
HDFC Bank 49637 440817 850 349276 260505 0 1559875 198499
ICICI Bank 4386 59638 416068 0 0 240491 0 218341
Indian Bank 0 3127 44502 0 2384 110 855 11452
Indian Overseas Bank 14703 14514 1930 16604 16630 182450 5860 33081
IDBI Bank 602345 14225 33052 24450 36065 13264 38445 110700
Punjab National Bank 16038 19351 12461 38509 2637 875 9060 19087
State Bank of Hyderabad 1400 9705 10130 5329 1875 0 0 71254
State Bank of India 219775 230248 319223 223204 746878 160453 220805 499062
Syndicate Bank 17348 23350 16968 3475 10478 4980 6925 11454
UCO Bank 0 0 0 3567 10541 10948 43705 49624
Union Bank of India 11595 28956 78560 89304 107307 75428 173830 187040
TOTAL 2262797 2026987 1825790 1501004 3242706 2361676 5571078 5346496
(Source: ACP, CBI, Ahmednagar, 2011-18)
Analysis
Table 5: Year on Year Change in Agriculture Term Loan Bank Wise
Bank 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Ahmednagr District Central 87.80 -33.58 -37.31 111.88 61.29 -12.05 147.96
Cooperative Bank
Allahabad Bank -25.63 -69.37 85.93 6.94 202.59 -51.29 663.44
Bank of Baroda 8.82 -37.96 -84.03 832.07 -66.60 622.69 -51.23

Bank of India -85.24 99.62 28.06 -24.29 136.59 -63.07 147.82
Bank of Maharashtra 64.76 -35.26 -36.04 632.86 -64.63 297.50 -21.39

Canara Bank -54.86 -76.51 -78.94 56229.57 12.29 10.01 -4.60
Central Bank of India -26.08 7.00 24.19 111.30 7.95 80.53 10.28
Dena Bank 398.81 369.78 19.98 41.97 -34.88 39.88 48.62
Indian Overseas Bank -1.29 -86.70 760.31 0.16 997.11 -96.79 464.52
IDBI Bank -97.64 132.35 -26.03 47.51 -63.22 189.84 187.94
Punjab National Bank 20.66 -35.61 209.04 -93.15 -66.82 935.43 110.67
State Bank of India 4.77 38.64 -30.08 234.62 -78.52 37.61 126.02
Syndicate Bank 34.60 -27.33 -79.52 201.53 -52.47 39.06 65.40
Union Bank of India 149.73 171.31 13.68 20.16 -29.71 130.46 7.60
TOTAL -10.42 -9.93 -17.79 116.04 -27.17 135.90 -4.03
Table 6: Year on Year Bank Share in Total Agriculture Term Loan Disbursement.
Bank 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

11.59 24.29 17.91 13.66 13.40 29.67 11.06
Cooperative Bank
Allahabad Bank 0.17 0.14 0.05 0.11 0.05 0.22 0.04
Bank of Baroda 10.65 12.94 8.91 1.73 7.47 3.42 10.49
Bank of India 7.46 1.23 2.72 4.24 1.49 4.83 0.76
Bank of Maharashtra 5.93 10.91 7.84 6.10 20.70 10.05 16.94
Canara Bank 0.23 0.11 0.03 0.01 2.00 3.08 1.44
Central Bank of India 7.54 6.22 7.39 11.16 10.92 16.18 12.38
Dena Bank 0.05 0.27 1.40 2.04 1.34 1.20 0.71
Indian Overseas Bank 0.65 0.72 0.11 1.11 0.51 7.73 0.11
IDBI Bank 26.62 0.70 1.81 1.63 1.11 0.56 0.69
Punjab National Bank 0.71 0.95 0.68 2.57 0.08 0.04 0.16
State Bank of India 9.71 11.36 17.48 14.87 23.03 6.79 3.96
Syndicate Bank 0.77 1.15 0.93 0.23 0.32 0.21 0.12
Union Bank of India 0.51 1.43 4.30 5.95 3.31 3.19 3.12
From the above table it can be observed that,

1. The agriculture term loan disbursement of banks has increased from 2262797 thousand to 5346496 thousand and
this increase is 136%.
2. ADCC bank which is the largest cooperative bank has clocked an impressive performance and the year on year
growth of this bank is nearly 5 times.
3. Amongst the Public Sector Banks State Bank of Hyderabad has shown impressive year on year growth in
their performance and this growth is 49 times the original credit disbursement by these banks.
4. ICICI bank in contrast to HDFC bank which has shown impressive crop loan disbursement growth has shown
over whelming performance in term loan disbursement and is almost 48 times its original term loan
disbursement in 2011.
8. Selected Public Sector Banks like Bank of India and IDBI has shown negative growth in their term loan
disbursement.
9. If the share of each bank in total term loan disbursement is observed it can be seen that in the year 2018, Bank
of Maharashtra followed by Central Bank and ADCC bank have highest share in total term loan disbursement
and is 16%, 12% and 11% respectively.
10. The lowest share is reported by Indian Bank and Syndicate bank who have less than 0.5% share of the total
term loan disbursement.
11. If the present share of bank in total term loan disbursement is compared to their initial share in 2011, it can
be seen that amongst Public Sector Banks, Dena bank has shown highest improvement in terms of percentage
and this improvement is almost 13 times.
12. Public Sector Banks like IDBI and Punjab National Bank have reported a dismal performance in terms of their
share in total term loan disbursement and their share has declined by 70-90% in comparison to their original
disbursement in 2011.
3. Suggestions
1. One of the important objectives of lead bank scheme is fulfillment of credit requirement of priority sectors
and hence the bankers especially the District Consultative Committee (DCC) should ensure that the increase
in credit allocation to non-priority sector does not come at the cost of priority sector especially agriculture.
2. The credit outlay for agriculture crop loan has shown a decline in its annual growth in comparison to growth
clocked in previous year and hence the DCC and other concerned authorities need to address this falling
growth in credit outlay towards crop loan.
3. The farmers should be encouraged to attend training programs especially related to agriculture training and
credit utilization.
4. The long term credit requirements of farmers in the form of term loans seems to be overlooked as there is
systematic drop in the percentage of term loan to total credit disbursement to agriculture sector. The policy
makers in this regard needs to address this aspect as term loan is a critical component of credit requirement by
priority sector.
5. Bankers needs to address the huge variations observed on year to year basis in case of credit disbursement
towards agriculture sector.
4. Conclusion
If the credit outlay is observed, it can be seen that there seems to be Lack of specific pattern or policy regarding the
same. The Lack of policies, sporadic rise in credit outlay for certain regions, year on year huge deviations together
point out to the anomaly in the present credit planning. These findings are also in support of Firend, Al R. findings
(2010; 2018; 2019).
Reference
Annual Credit Plan, Central Bank of India, 2010-11 to 2017-18
Anupama Sharma, Sumita Kukreja, An Analytical Study: Relevance of Financial Inclusion for Developing Nations, Research Inventy:
International Journal of Engineering And Science, Vol.2, Issue 6 March 2013, ISSN: 2278- 4721, Pp 15-20
Anurag B. Singh, Priyanka Tandon, Financial Inclusion in India: An Analysis, International Journal Of Marketing, Financial Services &
Management Research, Vol.1 No. 6, June, ISSN 2277 3622, Pp. 41-54
Divya Joseph, A Study On Financial Inclusion and Financial Literacy, International Journal of Business and Administration Research Review,
Vol.2, Issue.4, Jan-March, 2014, ISSN No. 2347 – 856X, Pp. 126-134
Firend Al. R., Chun, C. C. (2018) Managerial practices, employee satisfaction and firm’s competitiveness in Asian small and medium
enterprises (SME): The case of Malaysia. International Journal on Recent Trends in Business and Tourism. Volume 2 Issue 3.
Al-Raisi, A., Firend, R. (2012) Cultural Impact on e-Performance in Government Organizations in the United Arab Emirates, The
Firend, R., Abu Altiman (2011) Purchasing Behaviour in Multi-Ethnic Society, Computer Brand Preferences, The International Journal of
Business and Management Research. Vol.4, No.1
Firend, R. (2010). Strategic approach to outsourcing the research and development function, The International Journal of Business and
Firend, R. (2010) Business Model: Simplifies with examples from Global Companies. ISBN-13: 978-1721060603 Click here DOI:
Firend, R. (2018) Asian Case Studies: Lessons from Malaysian Industries, (2016) CreateSpace ISBN: 9781539370161 Click here DOI:
Firend, R. (2019) Strategic Mistakes: Examples on how global companies go wrong. ISBN-13: 9781696163811 Click here DOI:
Firend, R. (2019) Basic Economic Principles: The short guide, everything you need to know about economics. ISBN-13: 978-1082342622
Click here DOI: https://doi.org/10.32893/IJBMR/2019.AMII.10.0
Fulwinder Pal Singh, Role of Rural Credit in Indian Agriculture, International Journal of Advance Research in Science and Engineering, Vol.
5, Issue 3, March 2016, ISSN 2319-8354, Pp. 550-555
High Level Committee to Review Lead Bank Scheme, RBI, 2009
RBI Master Circular – Lead Bank Scheme July 1, 2017
Sadhik. Sayyed, Dr. S. Anitha Devi, Prof. Noorbasha Abdul, Growth And Performance of Syndicate Bank: A Lead Bank in Selected Districts
of Andhra Pradesh, International Journal of Creative Research Thoughts (IJCRT), Volume 5, Issue 4, December 2017, ISSN: 2320-2882,
Pp. 1947-1958
Learning experience: A mediator between self-determination and
financial well-being
among retirees in Nigeria
Soepding Benard Alkalia , John C. Muneneb, Ernest Abahoc, & Waswa Balunywad
a University of Jos-Nigeria
b, c, & d Makerere University Business SchoolKampala-Uganda, Email- talk2benco@yahoo.co.uk
Abstract
The purpose of this paper is to examine the mediating effect of learning experience in the relationship between self-determination
and financial well-being. A cross-sectional survey was adopted using 224 retirees drawn from North Central Nigeria. The structural
equation model (SEM) through the use of Bootstrap was used in Analysis of Moment Structures (AMOS) software version 23. A
significant positive mediating effect of the learning experience in the relationship between self-determination and financial well-
being of retirees in North-central Nigeria was revealed. A Bootstrap sample of 5000 was selected from the AMOS sub-menu to
ensure sample adequacy. Additionally, the findings also indicated that both self-determination and learning experience exhibited
significant individual effects on financial well-being. According to the study findings, we conclude that self-determination is
paramount explaining financial well-being among retirees, and this will depend on the learning experience that the retirees possess.
Keywords: self-determination, retirees, financial well-being, learning experience.
1. Introduction
This paper account for the results of a study carried out to establish the association between self- determination and
financial well-being with the learning experience as a mediator among retirees in north-central Nigeria. Globally
financial well-being of retirees is an issue of concern and more prominent in developing countries (Adam, Frimpong,
& Opoku-Boadu, 2017; Al-Raisi, Firend, R. 2012). This is because pension benefits are not adequate to meet the basic
needs of the retirees at old age (Social Security and National Investment Trust, 2015). Besides, it becomes difficult to
access the gratuity and pension at retirement which has been identified as a key obstacle for a good life at old age. This
barrier is further seen in the pension payment procedure which is often tedious, takes months and years to be processed
before accessing it, with most people dying before accessing their gratuity and pension (Garba & Mamman, 2014,
Akhuemonkhan, Raimi, & Sofoluwe, 2013; Odia & Okoye, 2012). Consequently, the lack of access to gratuity and
pension affects the retiree's ability to meet their current obligations at old age, therefore, affecting their financial well-
being.
According to (Bruggen, Hogreve, Holmlund, Kabadayi, and Lofgren, 2017; Firend, Al. R., 2016; 2018; 2019; Firend
Al R., 2015), the concept of financial well-being refers to the individual perception of being able to sustain current and
anticipated desired living standards and financial freedom. Similarly, learning experience means physical and mental
action that an individual participated to gain, strengthen new information, behavior, and skills that will be used to make
informed financial decisions. Indeed, the learning experience is important to prepare individuals in active service on
how to manage their post-retirement financial obligations at old age (Mutlu., 2013; Mzory, Firend, Al R., 2016). One
of the keys to achieving favorable learning outcomes is by actively involving individuals in the learning process
(Fayombo, 2012). Serdenciuc, (2015) asserts that in order to sustain the functional structure of appropriate behavior,
based on flexibility and on the capability to notice the existing alternatives in a horizon of many opportunities. Learning
experiences of individuals generate a state of consciousness as a dynamic transition from the inside perception of their
own professional behavior to the outside feedback and vice versa. Accordingly, Self-determination is a concept
reflecting the belief that all individuals have the right to direct their own lives (Bremer, Kachgal and Schoeller, 2003;
Firend, Al R., 2015). This includes concepts such as free will, freedom of choice, independence, personal agency, self-
direction, and individual obligation. This suggest that for an individual to be referred to as a self-determined, he/she
must possess the attitudes and abilities vital to act as the primary causal agent in life. It allows them to make choices
concerning their actions free from undue external interference. Withnall (2009), asserts that older adults appreciated
learning because it helped them to be receptive to new ideas, to advance appreciative and keep a positive outlook. This
assertion implies that learning experience can help older adults to keep their minds active and to gain a sense of
enjoyment and self-satisfaction with their financial well-being at retirement.
Prior studies have examined the effect of self-determination on the financial well-being of retirees worldwide. For
instance, Nota, Ferrari, Soresi, & Wehmeyer (2007); Shogren, Wehmeyer, Palmer, Rifenbark, and Little (2015);
Wehmeyer and Palmer (2003); O'Neill, Sorhaindo, Xiao and Garman (2005) and Firend, Al R., & Masoumeh (2014).
However, these studies did not examine the mediating role of the learning experience in the relationship between self-
determination and financial well-being. Furthermore, there is a failure by the government through pensions and gratuity
schemes to attain financial well-being of retirees especially in Nigeria with about 8.2% of the civil servants retiring
annually. Therefore, since government efforts through pensions and gratuity have not achieved the desired result for
the financial well-being of the retirees, this study looks at individual efforts towards financial well-being by identifying
learning experience and self-determination constructs to be basic attributes of the individual that may enhance the
financial well-being of retirees at old age.
Thus, the main purpose of this study is to examine the financial well-being of retirees, especially in developing countries
with data obtained from North-central Nigeria. The study's contribution to knowledge is entrenched in the development
of a theoretical model that explains financial well-being in Nigeria from an individual viewpoint. Besides, the study
also contributes to the body of knowledge through the mediating role of learning experience in the relationship between
self-determination and financial well-being among retirees in Nigeria. However, existing theoretical assumption
indicates that self-determination and learning experience is related in literature, empirical evidence examining the
mediating role of the learning experience in the relationship between self-determination and financial well-being is
lacking, especially among retirees in north-central Nigeria. Moreover, the need to comprehend the role of the learning
experience in the relationship between self-determination and financial well-being is the drive for the study. The results
are expected to enlighten scholars and policymakers on the importance of learning experience in enhancing taking
informed financial decisions among retirees to enable them to meet their financial obligations as and when due at old
age (Firend Alan Rasch, 2019). Thus, a more detailed discussion of the indirect impact of self-determination through
learning experience is covered in the subsequent sections of this study.
Therefore, this study was carried out using a sample of 376 retirees in the African context and with focus on north-
central Nigeria while individual retirees form the unit of inquiry. Indeed, retirees are a vulnerable set of people in the
society due to decline in their physical, mental, and financial powers that limit their ability to work and earn income in
retirement (Abdulazeez, 2015; Firend Al R., 2019; Shultz and Adams, 2007). Also, there is a need to explore better
ways of ensuring that this group of people in society continue to live well in terms of ability to meet their needs at old
age. The design of this study permits for the consideration of more than just the main effects of self-determination on
financial well-being, rather also the inclusion of the indirect effects of the learning experience as well. This is important
as a more precise and more thorough description of the relationships, improved explanatory power and possible for
important results as asserted by Friedrich (1982). Thus, the study indicates that the predictive power of the main effects
(self-determination and learning experience) accounts for 64 percent of the variance and the indirect effects accounted
for 12 percent. This, therefore, suggests that considering the main effects alone results in models being under-specified
particularly those comprising other indirect variables that can improve the predictor variables. Hence, the study also
reports the difference obvious in those studies employing only the direct effect and ignoring the indirect effects. The
remainder of the paper is organized as follows: section 2 covers the theoretical and literature review; section 3 presents
the methodology used in this study; section 4 indicates the findings from this study; section 5 discusses the findings;
section 6 presents the conclusion while section 7 includes policy implications. The paper ends with the limitation of
the study and suggestions for further research.
2.Theoretical and literature review
2.1 Self-determination theory:
Self-Determination Theory (SDT) assumes that individuals are inherently proactive with their potential and the
mastering of their drives and emotions (Deci & Ryan, 1985). That individual’s attitude has the tendency towards growth,
development and integrated functioning. Furthermore, SDT assumes that optimal development and actions are inherent
in individuals, but they don't happen automatically. In addition, SDT assumes that People have three inherent
psychological needs that are considered as common necessities and these include autonomy, competence, and
relatedness (Deci and Ryan, 2015). Also, self-determination theory (SDT) suggests that the social environment
influences intrinsic motivation through its impact on need satisfaction or perceptions of competence, autonomy, and
relatedness (Grouzet et al., 2004). These needs are seen as universal necessities and prior studies suggest that they are
among the most relevant needs and those most closely related to event-based effect (Sheldon et al., 2001). Furthermore,
SDT is a motivation theory based on the premise that people are growth-oriented and therefore actively seek
opportunities to develop their fullest potential. As such, SDT suggests that people seek out interactions, connections,
and tasks that help people's growth and develop the authentic self (Ryan et al., 2008). The three inherent psychological
needs are commonly essential for both Psychological health and financial well- being (Deci and Ryan, 2015). More so,
the theory presumes that human beings want to know the outcomes and results of their actions due to the desire to
control and master the environment and outcomes (Ryan and Deci, 2000). This explains that when individuals are
motivated, they control their actions in order to achieve their financial goals in life. The desire to control actions also
promotes effective engagement with the world (Ryan and Deci, 2000). Individuals who are autonomously driven, gain
self-support and self-advocacy thereby pushing them to make decisions that enhance their financial well-being.
Similarly, the theory further posits that autonomy, relatedness, and competence must be satisfied within a relationship
in order for it to be of high quality and truly satisfying (Deci and Ryan, 2015, Ryan and Deci, 2017). This implies that
individual that possess the three components of self-determination may become satisfied with the financial decisions
taken that may enable them to enjoy financial freedom at retirement.
Consequently, SDT is a motivation theory based on the proposition that people are growth-oriented and so actively
pursue opportunities to improve their fullest potential. SDT advocates that individuals pursue relationships,
connections, and tasks that help their growth and improve the true identity (Ryan et al., 2008). Besides, SDT states that
best performance is improved when a person has an abundance of financial- wellbeing (Deci and Ryan, 2000; Ryan et
al., 2008; Greguras and Diefendorff, 2009; Vansteenkiste et al., 2007) that is added through financial needs fulfillment
(Deci and Ryan, 2000).
Additionally, Financial needs satisfaction is vital to SDT. As a person has their needs for autonomy (freedom to decide),
competence (improvement of one's capabilities and proficiency) and relatedness (important connections with others)
met, financial wellbeing is improved. (Deci and Ryan, 2000). Hence, SDT asserts that people who pursue aspirations
and goals that allow or support their financial needs will benefit from enhanced wellbeing. (Vansteenkiste et al., 2007).
Thus, Civil servants who have self-determination skills have a stronger chance of being successful in making a
successful financial transition to retirement (Wehmeyer & Schwartz, 1997). A person's actions are self-determined
he/she acts autonomously, controls his/her own behavior, initiates and responds to events in a manner showing
psychological empowerment, and acts in a way that is self-realizing. That is, the person acts in ways that make positive
use of knowledge leads to making a sound financial decision. (Wehmeyer, Kelchner, & Richards, 1996). Furthermore,
in order to "explain" SDT in this study, we studied potential sources of need satisfaction by investigating an individual's
autonomy, opportunity competence, and relatedness. This was to establish their relationships with financial well-being
among retirees. Thus, the study intention is to test hypotheses derived from SDT, not to test the theory itself. Hence,
the hypotheses derived from SDT is discussed below at the global level of self-determination.
2.2 Self-determination and financial well-being: the mediating role of the learning experience
The abilities required to become self-determined are most efficiently learned through real-world experience, which
involves taking risks, making mistakes and reflecting on outcomes. These experiences aid individuals to test their
strengths and limitations and recognize appropriate short- and long-term goals to achieve financial well-being (Bremer,
Kachgal, and Schoeller, 2003). However, in order to direct their future financial goals, individuals must know
themselves and comprehend financial issues that placed them better to develop plans, make choices, and learn from
experience. This implies that for an individual to enjoy financial well-being at old age, he/she needs learning experience
to take good financial decisions.
Self-determination is further a significant predictor of perceived quality of life, especially with respect to personal
development and personal fulfillment, therefore, higher levels of self-determination may lead to improved financial
wellbeing (McDougall, Evans, & Baldwin, 2010). Indeed, retirees with higher financial well-being will experience less
stress, more motivated in financial activities, have a better family relationship, and are physically and mentally healthier
(O'Neill, Sorhaindo, Xiao and Garman, 2005).
Consequently, supporting individuals in becoming self-determined is not about simply removing limits and structure.
It is, rather, about providing opportunities for learning that people can make meaningful decisions about their own
future financial well-being. Hence, when making financial decisions, self- determined individuals mostly rely on their
existing knowledge and previous experiences. This suggests that an individual who is self-determined can enjoy
financial well-being at retirement, the situation can be better when the learning experience is integrated with self-
determination. Therefore, here we hypothesize that:
H1: Learning experience positively mediates the relationship between self-determination and financial well-being of
retirees.
2.2 Self-determination and financial well-being
Self-determination is considered to constitute one of the most critical factors in individual empowerment. It refers to a
state of autonomy in one's decisions and circumstances. Self-determination reflects an individual's sense of having a
choice in originating and regulating action (Deci et al., 1989). For older people, self-determination is connected
positively with the capabilities of activity, mental agility, and self-esteem, (Hellström and Sarvimäki, 2007). Therefore,
individuals who are self-determined, set financial goals, makes wise financial decisions, recognize what supports are
needed for success, and knows how to estimate outcomes.
Scholars like Guntert (2015); Gillet et al. (2013); Baard et al. (2004); Deci and Ryan, (2000), suggest that individuals
are more fulfilling with autonomy, competence, and relatedness. These elements are built upon the dialectical relation
between people and the social environment in which they attempt to satisfy their basic needs, specify the conditions
under which they can fully realize their optimal performance and financial well-being.
Gagne and Deci (2005) further argued that the fulfillment of these basic psychological needs provides the nutrients for
intrinsic motivation to function optimally. Therefore, the fulfillment of autonomy, competence, and relatedness is
necessary to realize human potential, and these needs should interact positively in yielding need fulfillment like
financial well-being. (Gagne and Deci, 2005). Furthermore, autonomy, competence, and relatedness guide people
toward being more competent, vital and socially integrated into the form of behavior, which enables them to plan for
future financial well-being (Deci and Ryan, 2000).
Thus, self-determination involves acting on one's values, the full advancement of potentials, self-control of behaviors
and psychological empowerment (Firend, Al R., Shaki 2008; Shogren, et al., 2015). This suggests that individuals are
able to make informed financial decisions for a better future in terms of financial freedom to meet needs. Empirically,
results from a study that investigated adult outcomes of individuals in the area of financial independence after leaving
school in the first or second year showed that self-determined individuals predicted more positive outcomes (Wehmeyer
et al., 2012, Shogren, et al., 2015). Consequently, this implies that a person originates his/her own actions, has high
aspirations and perseveres in the face of obstacles, learns from failures in order to enjoy the quality of at retirement
(Little, Hawley, Henrich and Marsland, 2002, Shogren, et al., 2015). Indeed, individuals making conscious choices
implies intentional actions that are deliberate and occur without external influence. These actions are most times
proactive in nature in order to achieve a financial goal. Therefore, here we hypothesize that:
H2: There is a positive relationship between self-determination and financial well-being of retirees.
2.3 Learning experience and financial well-being
Lave and Wenger (1991) argue that learning occurs through engagement in communities of practice. This means that
individuals learn through acting and doing activities that are common to the community. The transition to retirement
requires the acquisition of new cultures, skills, and competencies. According, to Maxwell (2006), observation,
modeling and doing of everyday activities is a mean by which individuals are able to learn and become knowledgeable
in order to gain the cultural capital of the new community through assumed attitude, customs, and protocols. According
to studies by Gayawali et al. (2017), Scheneieret al., (1989), improved business performance is based on learning and
different types of knowledge. Thus, empirical efforts give support to the impact of learning on business performance
(Gorelick and Tantawy-Monsou, 2005). Additionally, learning also contributes to the capability that is essential to
nurture other knowledge-based capabilities required to build and maintain competitive advantages (Zollo and Winter,
2002). This can be linked to economic and financial success such as financial well-being.
Consequently, Dorsett et al., (2010)., Stenberg (2010) argue that the general financial benefits of learning, in terms of
higher earnings lead to financial well-being. Therefore, through the learning experience, individuals are able to acquire
the expected financial knowledge and skills, which changes their behavior and ability to meet their financial obligations
as and when it's due (Ramsden and Moses, 1992). This denotes that self-directed learners like retirees are more likely
to be in control of their lives to enable them to attain financial well-being at retirement. Therefore, when
people/individual such as retirees have learning experiences, which helps them to make wise financial decisions and
choices, they become self-determined to achieve their financial goals at old age. Hence, here we hypothesize that:
H3: There is a positive relationship between the Learning experience and financial well-being of retirees.
3. Methodology
Research design, population, and sample
The study used a cross-sectional because it enabled us to collect data at a single point in time. Bryman, Bell, and Teevan,
(2012) and Firend, Al R. (2015) suggested that this research design is useful in studies involving the collection of data
(whether quantitative or qualitative). It was quantitative in nature and it entailed examining two or more variables in
order to establish patterns of association. 224 out of 250 copies of the questionnaires distributed to retirees in north
central Nigeria were found usable for analysis. These 224 usable questionnaires accounted for 89.6% response rate.
According to Fox and Bayat (2007), the choice of sample size is regulated by four parameters: first, the level of certainty
of the collected data to be representative of the total population. Secondly, the accuracy required as the basis for the
estimates made for the sample. Thirdly, the type of analysis that will be used as many statistical techniques have a
minimum threshold of data cases for every variable and lastly, the size of the total population from which the sample
will be drawn. As a rule of thumb, most research methods scholars recommend a minimum sample size of 30 as
adequate for social research (Saunders et al. 2009). Therefore, the sample for our study is considered adequate based
on the recommendation of the above scholars.
3.1 Sampling method and procedures

The study used multi-stage sampling whereby: Stage one- States in North Central Nigeria: These comprise of Plateau,
Nasarawa, Benue, Kogi, Niger, Kwara States and Abuja the Federal Capital were taken into consideration for proper
representation of the region. Stage two- Retirees Categories in North Central Nigeria: The different Retirees strata
across these states mentioned, include Federal Government Retirees, State Government Retirees, and Local
Government Retirees. Stage three -Selection of Retirees.
In doing this, the study used a systematic random sampling technique to select from each stratum. Systematic sampling
is a probability sampling method where the elements are chosen from a target population by selecting a random starting
point and selecting other members after a fixed ‘sampling interval'. The sampling interval is calculated by dividing the
entire population size by the desired sample size. Systematic sampling consumes the least time as it requires selection
of sample size and identification of the starting point for this sample which needs to be continued at regular intervals
to form a sample (Firend, Al R., & Hashim, 2015). This approach was adopted to have a sample from the population
of the respective retirees' category. Under this method, respondents were drawn from a sampling frame by means of an
interval k which is equal to N/n, where N is the number of units in the target population and n is the number of units of
the sample. The first retirees were selected using the simple random technique, and the rest were selected using the
respective intervals. The questionnaire was issued to them to fill and returned to the researcher. This technique was
employed to ensure that correct samples were drawn from all the stratum of the population to minimize sampling error
and simultaneously have appropriate representation (Field, 2009; Amin, 2005). In this study, a semi-structured
questionnaire was used, which was developed using the guidelines outlined by Sekaran (2000) in order to suit the
context in which the current study was conducted. The semi-structured questionnaire had both open-ended and closed-
ended questions to investigate the variables under study in Nigeria. This is also to elicit both determined and pre-
determined responses from the respondents. Hence, the open-ended responses provided useful information and insights
for the purpose of triangulation.
3.2 Measures of research variables

Self-determination was split into three constructs of Autonomy, Opportunity competence and Relatedness. Overall, the
total number of six items were used in measuring self- determination. Each of the constructs had a maximum of two
items. Autonomy was measured based on individuals needs of self-dominance regarding choice, decisions, and actions
without the consent of others. (Deci and Ryan, 2000). While Opportunity competence was measured as individuals
need of recognizing and developing market opportunities through various means (Man et al., 2002) Furthermore,
relatedness was measured as individual belongingness and closeness with others that leads to growth and self-
accomplishment (Deci and Ryan, 2000).
On the other hand, the Learning experience was also split into three constructs of Financial knowledge, Financial
Planning, and Financial self-efficacy. Generally, the total number of seven items were used in measuring learning
experience. The constructs of financial knowledge and financial self-efficacy had a maximum of two items each while
financial planning had three items. Consequently, financial knowledge was measured as individual awareness of basic
financial ideas (Atkinson and Messy, 2012; Lusardi and Mitchell, 2013), while Financial planning was measured as
individuals' ability to save for investment and subsequent financial growth (Tang, 2010; Domar, 1946) and Financial
self-efficacy was measured as individuals' self-confidence to have control over activity (Lown, 2012; Amatucci &
Crawley, 2011).
Financial well-being was measured as individuals control over his/her finances, the capacity to absorb a financial shock,
being on track to meet financial goals, the perception of current finances, financial future, and financial freedom of
choice (CFPB, 2015). More still, all the questionnaire variables were anchored on a six-point scale ranging between
Not at all true of me to Extremely true of me developed by previous scholars to suit the context of the research, few
modifications were made on the questionnaire items. This was considered to provide adequate measures as prescribed
by Chomeya (2010).
3.3 Common method Bias

Common method bias or variance in survey data could be a potential threat to validity that could result in Types I & II
errors. This was addressed by taking into consideration the recommendations outline by Podsakoff et al. (2003).
According to Podsakoffet al. (2003), it is observed that one alternative means of controlling common method bias is to
collect responses on measures of both predictors and outcome variables from different sources in order to avoid biases.
This is addressed by administering the questionnaires on the dependent variable (DV) at a different period time with
that of the dependent variable (IV). Besides, all negatively worded questions were reverse-coded, and hard questions
were amended to suit the final study. Similarly, questionnaire items were made simple and clear, "double-barreled"
questions were avoided.
3.4 Test for parametric data

From the start, data brought from the field were entered into SPSS version 23 and checked for errors. The data were
cleaned and we checked for missing values and outliers. This was done by running frequencies for all the items that
were in the questionnaire. The problem of missing values in the data set was solved by linear interpolation data
replacement method as recommended by (Field, 2005; Hair et al., 2010). The central purpose of cleaning the data was
to solve the problem of reduced sample size and inflated means and standard deviation.
Consequently, a test to establish whether the data were normally distributed was carried out. Checks for normality,
Linearity, and the homogeneity of variance were performed. The normal distribution in our data was tested using
Kolmogorov – Smirnov, and Shapiro – Wilk tests, Linearity was tested using scatter plots, while homogeneity of
variance was checked using Levene's test statistics. The results were achieved and tenable since the normal p–p plots
had all observed values falling along the straight line as indicated in figure 4, while the Kolmogorov – Smirnov, and
Shapiro – Wilk tests, Levene's test results were non-significant with p-value<0.05 (Field, 2005) as shown in table 3 and
4 respectively.
Figure 4: Scatter plot test with best line of fit results for normality
Table 3: Kolmogorov-Smirnov and Shapiro-Wilk test results for normality
Kolmogorov-Smirnov Shapiro-Wilk
Statistics df Sig. Statistic df Sig.
Self-determination 0.220 224 0.200 0.862 224 0.101
Learning experience 0.205 224 0.200 0.895 224 0.222
Financial well-being 0.250 224 0.110 0.736 224 0.440
Note: Lilliefors significance correlation
Table 4: Homogeneity of variances test results for normality
Variables Levene’s Statistic df1 df2 Sig.
Self-determination 0.028 1 222 0.868
Learning experience 0.154 1 222 0.695
Financial well-being 3.394 1 222 0.067
Testing for mediation using structural equation modeling (SEM) bootstrap approach
The existence of mediation must show that the independent variable should have an indirect effect on the dependent
variable through the mediator variable. Accordingly, to test for the presence of mediation effect, Baron and Kenny
(1986) recommended four conditions that need be met. One, there must exist a significant relationship between the
independent variable and the dependent variable; next, there must exist a significant relationship between the
independent variable and mediator dependent variable; subsequently, there must be a significant relationship between
mediator variable and dependent variable and lastly, the independent variable should reduce and become insignificant
when the mediator variable is entered into the structural model to show a condition of full mediation.
Besides, if the independent variable reduces and remains significant when the mediator is entered into the model, a
partial type of mediation is revealed. Furthermore, if the independent and the mediator variables remain significant,
together will have an effect on the dependent variable. Consequently, under such a condition, the independent variable
will exert both direct and indirect effects on the dependent variable. Hence, the indirect effect means some impact of
the independent variable on the dependent variable goes through the mediator variable.
Certainly, to establish the presence of mediating effect of the learning experience in the relationship between self-
determination and financial well-being, SEM through bootstrap approach was used as suggested by Preacher and Hayes
(2010) and Hair et al. (2010). The SEM approach was used because of not only its capability to test different regression
equations concurrently but also due to the information it delivers on the degree of "fit" for the entire model after
controlling for measurement errors (MacKinnon et al., 2002). Besides, the use of SEM can measure the influence of
each indicator variable in demonstrating its associated construct and measure how well the collective set of indicator
variables represents the construct (reliability and validity) as specified by Hair et al. (2010. Equally, Preacher and Hayes
(2010) propose that the application of SEM through bootstrapping for establishing the presence of mediation makes it
possible to test more complex path models involving a number of variables. The SEM program offers bootstrapped
confidence intervals and associated statistical significance test for indirect paths, which are observed as the best
methods for testing the statistical importance of indirect effects, mainly when assumptions of normality may be violated.
Indeed, Preacher and Hayes (2010) specify that the p-value should be significant at p<0.05 for full mediation, whereas
Hair et al. (2010) advocates for excellent model-fit-indices between the competing models. Besides, SEM can assess
both measurement properties and test key theoretical relationships in one model.
Consequently, a two-phase approach using SEM was useful to assess the mediating role of the learning experience in
the relationship between self-determination and financial well-being as suggested by Anderson and Gerbing (1988).
The number one phase involved estimation of confirmatory factor analysis (CFA) measurement models and the second
phase involved the estimation of the structural model. Analysis of Moment Structures (AMOS/23) software was
adopted to construct the measurement and SEM models (see for e.g. Arbuckle, 2009), and absolute values and
goodness-of-fit indices were used to display that the measurement model and the structural model fit well to the
observed data. These, measurement models are shown below in figure 1, 2, 3 respectively for financial well-being, self-
determination and learning experience. Though Schreiber et al. (2006) advocate that the use of Tucker Lewis Index
(TLI) and Comparative Fit Index (CFI) are most preferable indices. They further recommend that the CFI should be
⩾0.90, and TLI should be set at ⩾0.95, while Incremental Fit Index (IFI) should be set at ⩾0.95, for a good model fit.
Figure 3:
4. Results
4.1 Sample characteristics

The results from the study revealed that from a target sample of 250 retirees in Nigeria, 89.6 percent was achieved.
Also, the data collected is a representation of views of both males (65.6%) and females (34.4%) which showed a fair
distribution of the data set across gender. Most (79.9%) of the respondents were married and that age ranges between
(61-70) which constituted (64.7%), with 84.4% of them retiring at the age 60 years. This is in line with the retirement
law in Nigeria where civil servants are expected to retire at the age of 60 years except professors and High court Judges
who are allowed to retire at 70 years. Also, 72.3% of our respondents which form the majority were members of the
cooperative societies while in active service. This explains their level of planning for retirement through savings. The
academic attainment of the respondents was high at 80.4% holding either a diploma, first Degree or Master's Degree.
This implies that the target respondents were knowledgeable enough to understand the questionnaire before responding
which accounted for a good response rate of 89.6%. Finally, the number of retirees' dependents ranging between 1-3 to
11 and above. This indicates that all our respondents had a number of dependents that they cater for with the highest
having 4-6 dependents which represent (46.9%). This also showcases the African culture where individuals with
financial strength extend their financial hand of fellowship to other extended family members who look up to them for
financial assistance.
Mediating effect using SEM Bootstrap approach

This study used SEM through bootstrap approach to testing for the mediating role of the learning experience in the
relationship between self-determination and financial well-being. A SEM model joining the predictor, mediator, and
outcome variables were constructed with direct paths from predictor to mediator, and outcome variable as shown in
figure 5. Therefore, the total, direct, and indirect effects of self-determination on financial well-being was established
as presented in Table1 (Preacher and Hayes, 2010).
Figure 5: SEM mediated model
Additionally, two models (competing models) with a direct path from self-determination to financial well-being and
indirect path from self-determination through learning experience to financial well-being were generated to test the
hypothesis that learning experience mediates the relationship between self-determination and financial well-being as
presented in Table 2 (Hair et al., 2006).
Moreover, the non-mediated SEM model 1 was constructed based on the assumption that learning experience does not
mediate the relationship between self-determination and financial well-being (H3). While the mediated SEM model 2
was constructed on the assumption that learning experience mediates the relationship between self-determination and
financial well-being. However, this showed a condition of the indirect effect of self-determination on financial well-
being through learning experience (H1). Consequently, in this study, the non-mediated SEM model 1 (direct model)
estimated the direct effect of self-determination on financial well-being with no path leading to learning experience
from self-determination, and no path from a learning experience to financial well-being.
The mediated SEM model 2 (mediated model) with both direct and indirect path was drawn from self-determination
through learning experience to financial well-being, and from self-determination to financial well-being to establish
the indirect effect of self-determination on financial well-being. The outcomes from the SEM models shown that model
2 was better than model 1 as indicated by the good-fit-indices. The findings showed that when the indirect path is added
into the SEM model, the outcomes improved with perfect good-fit-indices as indicated in Table 2. Therefore, this
showed that self-determination had both significant direct and indirect effects on financial well-being. This is in line
with H1 and H3 stated under this study. Additionally, learning experience also had a significant and positive effect on
financial well-being. This is consistent with the hypothesis H2 of the study.
Accordingly, the findings revealed that learning experience mediates the relationship between self-determination and
financial well-being. In reference to SEM model 1, self-determination (β=0.783, p<0.001) is significantly related to
financial well-being, thus, confirming a partial nature of mediating effect. Lastly, the SEM model 2 also indicated that
self-determination and learning experience as exogenous variables predicted 30 percent of the variation in the
endogenous variable of financial well-being with bootstrap results (β=0.078, p<0.05) as shown in Table 2. Hence, we
can conclude that self-determination through learning experience explains 12 percent variation in financial well-being.
To establish the relationship between self-determination and learning experience, a path was drawn from self-
determination and learning experience. The results have shown that there was a significant relationship between the
predictor variable and the mediator variable. Hence, there was evidence for the existence of mediation for the
intervening effect. Morgan and Hunt (1994), criteria were examined in the SEM model comparison. These included:
overall model fit as measured by CFI, percentage of hypothesized significant paths, amount of variance explained as
measured by squared multiple correlations, and parsimony (model simplicity) assessed by NFI. The comparison of the
results based on non-mediated (direct) and mediated (direct and indirect) models revealed that the mediated model had
a better representation of the model fit based on good-fit-indices as shown in Table 2.
Table 1: Total, Direct and Indirect effects
Standardized total effects Self-determination Learning experience
Learning experience 0.894 0.000
Financial well-being (FWB) 0.801 0.013
Standardized Direct effects
Standardized indirect effects
Bootstrap Mediation results
Path Point Estimates SE Lower bounds Upper bounds P-Value
Self-determination ←FWB o.783 0.837 0.500 1.316 0.000
Learning experience ←FWB 0.013 0.224 -0.529 0.308 0.001
Notes: n=224, *p<0.05, ***p<0.0001
Table 2: Structural model results for competing models
Model Elements Non-Mediated Model 1 Mediated Model 2
CMIN 228.843 10.850
Degree of Freedom (DF) 5 4
Probability 0.000 0.0028
NFI 0.579 0.980
IFI 0.159 0.950
TLI 0.589 0.987
CFI 0.162 0.968
RMSEA 0.581 0.088
Squared Multiple correlations
Financial well-being - 0.641
Notes: n=224, **p<0.01., ***p<0.0001
5. Main findings
The findings from the study indicated that learning experience significantly and positively mediates the relationship
between self-determination and financial well-being of retirees. This confirms our hypothesis 1 of this study. This
corresponds with the argument that learning experience among the older adults is one of the main mechanisms through
which they can improve and retain their proficiency in literacy and problem-solving in preparation to enjoy financial
well-being at retirement. Previous studies also indicated that participation in formal education among older adults
significantly relate to their earnings (Bureau of Labor Statistics, 2015). Hence, it showed that, though self-determination
can lead to financial well-being when learning experience mediates the relationship between self-determination and
financial well-being, it gives a better result.
The findings from the study also revealed that self-determination significantly and positively affects the financial well-
being of retirees. This finding supports our hypothesis 2 of this study. According to Floyd et al. (1992), Fouquereau et
al. (2005) and Stephen et al. (2008) who found that there is a positive relationship between self-determination and
satisfaction with life at retirement. Furthermore, this empirical support originates from a sample of individuals in a
certain context (e.g retirement transition) which covers the areas demonstrating the beneficial properties of self-
determination. This also indicates that individuals who are proactive in life at a younger age tend to have a smooth
transition through deliberate actions from active service to retirement in terms of financial well-being.
Finally, the findings from this study showed that learning experience significantly and positively affects the financial
well-being of retirees. This lends support to hypothesis 3 of this study. Scholars like (Ramsden and Moses, 1992)
suggest that through the learning experience, individuals are able to acquire the expected financial knowledge and skills,
which changes their behavior and ability to meet their financial obligations as at when due. This infers that learning
experience of self- determined civil servants leads to a transition to financial well-being at retirement. Hence,
individuals learning experience through the acquisition of financial knowledge enable them to make informed financial
decisions that have a positive outcome in the future.
6. Discussion
The main purpose of this study is to examine the mediating effect of learning experience in the relationship between
self-determination and financial well-being of retirees in developing countries with data collected from Nigeria. Thus,
the discussions are drawn from the hypotheses developed in this study. The result indicated that there was a partial
mediating effect of the learning experience in the relationship between self-determination and financial well-being.
This shows the relevance of learning experience as a catalyst for enhancing financial well-being among older adults.
The current study undertook a SDT approach in order to understand how people strong internal drive towards the future
is related to financial well-being. Generally, the self-determination dimensions were all significantly related to financial
well-being. These findings support the view that the nature of life objectives, either intrinsic and positive or extrinsic
and negative, can influence the financial well-being of people. Thus, this study lends support to the prior studies of
Deci and Ryan (2000), who argued that the quest of the objective (intrinsic objective) provide greater enhancement of
psychological well-being and this study stretched this to comprise financial wellbeing among retirees.
Accordingly, the findings indicated that learning experience significantly and positively mediates the relationship
between self-determination and financial well-being. This supports our H1 of the study, which stated that learning
experience mediates the relationship between self-determination and financial well-being. The abilities required to
become self-determined are most efficiently learned through real-world experience, which inherently involves taking
risks, making mistakes, and reflecting on outcomes. With this knowledge, they are better placed to develop plans, make
choices, and learn from experience. This also implies that for an individual who is self- determine to enjoy financial
well-being at old age, he/she also need learning experience to enable him/her take good financial decisions (Bremer,
Kachgal, and Schoeller, 2003).
Furthermore, the findings also revealed that self-determination significantly and positively affects financial well-being.
This finding suggests that the existence of self-determination increases the likelihood of financial well-being of retirees
at old age. This supports our H2 of the study, which stated that self-determination significantly affects the financial
well-being of retirees. Self-determination is considered to constitute one of the most critical factors in individual
empowerment. It refers to a state of autonomy in one's decisions and circumstances. Self-determination reflects an
individual's sense of having a choice in originating and regulating action (Deci et al., 1989). For older people, self-
determination is connected positively with the capabilities of activity, mental agility, and self-esteem. Therefore,
individuals who are self-determined sets financial goals, make financial decisions, recognizes what supports are needed
for success, and knows how to estimate outcomes. individuals are more fulfilling when autonomy, competence, and
relatedness which are built upon the dialectical relation between people and social environment in which they attempt
to satisfy their basic needs, specify the conditions under which they can fully realize their optimal performance and
financial well-being.
Lastly, findings showed that learning experience significantly and positively affects financial well-being. The transition
to retirement requires the acquisition of new cultures, skills, and competencies. Maxwell, (2006) points observation,
modeling and doing of everyday activities is a mean by which individuals are able to learn and become knowledgeable
and gain the cultural capital of the new community through assumed attitude, customs, and protocols. Dorsett et al.
(2010)., Stenberg (2010) argue that the general financial benefits of learning, in terms of higher earnings leads to
financial well-being. Therefore, through the learning experience, individuals are able to acquire the expected financial
knowledge and skills, which changes their behavior and ability to meet their financial obligations as at when due
(Ramsden and Moses, 1992).
7. Conclusions
The main purpose of this study is to examine the mediating effect of learning experience in the relationship between
self-determination and financial well-being of retirees in developing countries with data collected from Nigeria. The
findings from the study showed that learning experience significantly and positively mediates the relationship between
self-determination and financial well-being of retirees. This confirms our hypothesis 1 of this study, which says
Learning experience significant mediates the relationship between self-determination and financial well-being of
retirees.
Further, the findings from the study also revealed that self-determination significantly and positively affects the
financial well-being of retirees. This finding supports our hypothesis 2 of this study which states that Self-determination
significantly affects the financial well-being of retirees. Besides, the findings from this study indicated that learning
experience significantly and positively affects the financial well-being of retirees. This lends support to hypothesis 3
of this study which states that Learning experience significantly affects the financial well-being of retirees. According
to the study findings, we conclude that self-determination is paramount explaining financial well-being among retirees,
and this will depend on the learning experience that the retirees possess.
8. Policy implications
Governments and financial well-being advocates in developing countries should ensure the existence of learning among
the old-age population to promote the financial well-being of retiring citizens. This can be done by offering to learn in
financial matters and welfare among the retirees. Besides, a community-based approach of sensitization through
financial literacy and awareness should be extended to the retirees living in both the urban and rural settings in
developing countries. Overall, the critical role of learning experience should be considered in promoting financial well-
being among retirees.
9. Limitations and further research directions
This study collected data mainly from retirees located in North-central Nigeria, thus, the data may be difficult for
generalization purpose to other section of the population. Furthermore, data were collected only through a semi-
structured questionnaire. Future studies could adopt the use of interviews to obtain responses from the retirees. More
so, the study adopted the use of cross-sectional research approach, hence, ignoring longitudinal study approach.
Therefore, future studies could examine the sample over a longer period of time through a longitudinal research
approach.
References
Abdulazeez, N. (2015). Pension scheme in Nigeria, problems, and prospects. Arabian Journal of Business and Management Review. Vol. 5,
Issue 2. ISSN:2223-5833 AJBMR.
Adam, A. M., Frimpong, S., & OpokuBoadu, M. (2017). Financial literacy and financial planning: Implications for the financial well-being of
retirees. Business and Economic Horizons, 13(2), 224-236, https://doi.org/10.15208/beh.2012.17
Akhuemonkhan, I. A., Raimi, L., & Sofoluwe, A. (2013). Entrepreneurship Education and Employment Stimulation in Nigeria. Journal
of Studies in Social Sciences. 3(1), 55-79
Amatucci, F., & Crawley, D. C. (2011). Financial Self-Efficacy among Woman Entrepreneurs. International Journal of Gender and
Entrepreneurship Vol.3 No.1, 23-30.
Amin, M. (2005). Social Sciences Research: Conception, Methodology and Analysis, Makerere University Printery, Kampala
Anderson, J.C., & Gerbing, D.W. (1988). Structural equation modeling in practice: a review and recommended two-step approach,
Psychological Bulletin, Vol. 103 No. 3, pp. 411- 423.
Arbuckle, J.L. (2009). Amos 18.0 User's Guide, Amos Development Corporation, Crawfordville, FL.
Atkinson, A., & Messy, F.A. (2012). Measuring Financial Literacy: Results of the OECD/International Network on Financial Education
(INFE) Pilot Study OECD Working
Baard, P. P., Deci, E. L., & Ryan, R. M. (2004). Intrinsic need satisfaction: A motivational basis of performance and well-being in two work
settings. Journal of Social Psychology, 34, 2045–2068.
Baron, R.M., & Kenny, D.A. (1986). The moderator-mediator variable distinction in social psychological research: conceptual, strategic and
statistical considerations, Journal of Personality and Social Psychology, Vol. 51 No. 6, pp. 1173-1182.
Bremer, C.D., Kachgal, M., & Schoeller, K. (2003). Self-determination: Supporting a successful transition. Research to practice brief. Improving
secondary Education and transition services through research. Vol.2, Issue 1
Bruggen, E.C., Hogreve, J., Holmlund, M., Kabadayi., S., & Lofgren, M. (2017). Financial well-being: A conceptualization and research agenda:
Journal of Business Research 79, 228–237.
Bryman, A., Bell, E. A., & Teevan, J. J. (2012). Social research methods. Don Mills, Ont: Oxford University Press.
Bureau of Labor Statistics (2015). Earnings and unemployment rates by educational attainment, 15 March, available at
www.bls.gov/emp/ep_chart_001.htm
CFPB (2015). Financial well-being: The goal of financial education (Rep.). Iowa City, IA: Consumer Financial Protection Bureau.
Chomeya, R. (2010). Quality of Psychology Test between Likert scale 5 and 6 points, Journal of Social Science, 6 (3), 399-403.
Deci, E. L., & Ryan, R. M. (1985), Intrinsic motivation and self-determination in human behavior. New York: Plenum.
Deci, E.L., & Ryan, R.M. (2000). The what and why of goal pursuits: human needs and the self- determination of behavior", Psychological
Inquiry, Vol. 11, pp. 227-68
Deci, E.L., & Ryan, R.M. (2015). Self-Determination Theory: University of Rochester, NY, USA, Elsevier Ltd. A revision of the previous edition
article by E.L. Deci, volume 11, pp. 7886–7888, 2001, Elsevier Ltd.
Deci, E.L., Connell, J.P., & Ryan, R.M. (1989). Self-determination in a work organization”, Journal of Applied Psychology, Vol. 74 No. 4, pp.
580-590
Dorsett, R., Lui, S., & Weale, M. (2010). Economic benefits of lifelong learning. NIESR Discussion Paper No 352. (London: National Institute of
Economic and Social Research).
Domar, E. D. (1946). Capital expansion, rate of growth, and employment. Econometrica, Journal of the Econometric Society, 137-147.
Fayombo, G.A. (2012). Active learning strategies and student learning outcomes among some university students in Barbados. J. Educ. Soc. Res. 2
(9), 79–90. https://doi. org/10.5901/jesr. 2012.v2n9p79.
Field A. P. (2005). Discovering statistics using SPSS. 2nd edition. London: Sage.
Field, A. (2009). Discovering Statistics Using SPSS third edition. SAGE publications
Floyd, F. J., Haynes, S. N., Doll, E. R., Winemiller, D., Lemsky, C., & Burgy, T. M. (1992). Assessing retirement satisfaction and perceptions of
retirement experiences. Psychology and Aging, 7, 609-621.
Firend, Al. R., Al-Emadi, M. (2007) Perception of Electronic Government Utilization in State of Qatar Proceeding: The Academy for Global
Business Advancement, Penang, Malaysia. May 21-25, 2007. www.agba.us
Firend Al. R., Wang Q. (2018) Marketing strategies of services and purchasing incentives in Asia. 7th global conference on business and social
science. 20-21 August. Colombo, Sri Lanka.
Firend, R., Masoumeh, F. A. (2014) Impact of service quality, trust, and perceived value on customer loyalty in Malaysia services industries.
Procedia - Social and Behavioral Sciences, Volume 164, Pages 1-666 (31 December 2014).
Firend, R., Masoumeh, F. A. (2014) Impact of service quality, trust, and perceived value on customer loyalty in Malaysia services industries.
Proceeding: International Conference on Accounting Studies (ICAS). Kuala Lumpur, Malaysia August 19, 2014 Journal: Procedia
Social and Behavioral Sciences. Reference: SBSPRO20285. PII: S1877-0428(14)05900-X DOI: 10.1016/j.sbspro.2014.11.080
http://www.sciencedirect.com/science/journal/18770428/164
Firend, Al. R., Al-Emadi, M. (2019) Timeless Business Lessons: What you need to know to succeed in the new economy. Click here DOI:
Firend, Al. R., (2019) Strategic Mistakes: Examples on how global companies go wrong. ISBN-13: 9781696163811 Click here DOI:
Firend, Al. R., (2019) Basic Economic Principles: The short guide, everything you need to know about economics. ISBN-13: 978-1082342622
Firend, Al. R., (2016) Asian Case Studies: Lessons from Malaysian Industries, (2016) CreateSpace ISBN: 9781539370161 Click here DOI:
Firend, Al. R., (2018) Business Model: Simplifies with examples from Global Companies (2018) ISBN-13: 978-1721060603 Click here DOI:
Firend Alan Rasch (2019) Learning Theories, for educators teaching in higher education Click here DOI:
Firend Alan Rasch (2019) Learning Theories, for educators teaching in higher education Click here DOI:
Firend Alan Rasch (2019) Basic Economic Principles: The short guide, everything you need to know about economics. ISBN-13: 978-1082342622
Firend, R., Shaki, M., (2008). Corporate restructuring and agency theory, The International Journal of Business and Management Research. Vol.1,
No.1
Fouquereau, E., Fernandez, A., Fonseca, A. M., Paul, M. C., & Huotinen, V. (2005). Perceptions of and satisfaction with retirement: A comparison
of six European Union countries. Psychology and Aging, 3, 524-528.
Fox, W., & Bayat, M.S. (2007). A guide to managing research. Lansdowne-Juta and company limited.
Friedrich, R.J. (1982). In defense of multiplicative terms in multiple regression equations", American Journal of Political Science, Vol. 26 No. 4,
pp. 797-833.
Gagné, M., & Deci, E.L. (2005). Self-determination theory and work motivation, Journal of Finance, 29 (4), 246-267
Garba, A. and Mamman, J. (2014). Retirement challenges and sustainable development in Nigeria. European Journal of Business and
Management, 6(39), 94-98
Gayawali, D.R., Stewart, A.C., and Grant, J.H. (2017). Creation and utilization of organizational knowledge: An empirical study of the roles of
organizational leaving on strategic decision making. Academy of management proceedings. Vol.1997, No. 1
Greguras, G. J., & Diefendorff, J. M. (2009). Different fits satisfy different needs: Linking person-environment fit to employee commitment and
performance using self-determination theory. Journal of Applied Psychology, 94, 465–477
Gillet N., Gagne, M., Sauvagere, S., & Fouquereau, E. (2013). The role of supervisor autonomy support, organizational support, and
autonomous and controlled motivation in predicting employees' satisfaction and turnover intentions. European Journal of Work and
Organizational Psychology, Vol. 22, No. 4, 450- 460.
Grouzet, F.M.E., Vallerand, R.J., Thill, E.E., & Provencher, P.J. (2004). From environmental factors to outcomes: a test of integrated motivational
sequence, Motivation and Emotion, Vol. 28 No. 4, pp. 331-46.
Gorelick, C., & Tantany-Monsou, B. (2005). For performance through learning, Knowledge management is the critical practice. Browse Journals
and Books/ The learning organization /vol.12, issue 2.
Guntert, T.S. (2015). The impact of work design, autonomy support, and strategy on employee outcomes: A differentiated perspective on self
determination at work. Motiv. Emot. 39:74–87 DOI 10.1007/s11031-014-9412-7
Hair, J.F., Anderson, R.E., Tatham, R.L., & Black, W.C. (2010). Multivariate Data Analysis, Prentice Hall, Englewood Cliffs, NJ. 7th edition.
Hair, J.F., Jr, Black, W.C., Babin, B.J., Anderson, R.E., & Tatham, R.L. (2006). Multivariate Data Analysis, Pearson, New Delhi.
Hellström, U.W., & Sarvimäki, A. (2007). Experiences of self-determination by older persons living in the sheltered house, Nursing Ethics, Vol.
13 No. 3, pp. 413- 424
Lave, J., & Wenger, E. (1991). Situated Learning: Legitimate Peripheral Participation. Published by Macat International Limited. ISBN.978
1.912281.03.
Little, T. D., Hawley, P. H., Henrich, C. C., & Marsland, K. (2002). Three views of the agentic self: A developmental synthesis. Handbook of self-
determination research (pp. 389– 404). Rochester, NY: University of Rochester Press.
Lown, J. (2012). Development and validation of a financial self-efficacy scale, 2011 Outstanding AFCPE Conference Paper
Lusardi, A., & Wallace, D. (2013). Financial literacy and quantitative reasoning in the high school and college classroom. Numeracy, 6(2).
MacKinnon, D.P., Lockwood, C.M., Hoffman, J.M., West, S.G., & Sheets, V. (2002). A comparison of methods to test mediation and other
intervening variable effects, Psychological Methods, Vol. 7 No. 1, pp. 83-104.
Man, T. W.Y., Lau, T., & Chan, K.F. (2002). The competitiveness of small and medium enterprises a conceptualization with a focus on
entrepreneurial competencies. Journal of Business Venturing. 17, 123–142.
Maxwell, J. A. (2006). Literature reviews of and for educational research: Scholars before researchers. Educational Researcher, 35(9), 28-31.
McDougall, J., Evans, J., & Baldwin, P. (2010). The importance of self-determination to perceived quality of life for youth and young adults with
chronic conditions and disabilities. Remedial and Special Education, 31(4), 252–260.
Mzory, H., Firend, Al R. (2016) Marketing new e-solution services and cultural readiness in the KRG, The International Journal of Business and
Morgan, R.M., & Hunt, S.D. (1994), The commitment-trust theory of relationship marketing. Journal of Marketing. 58 (July), 1994.
Mutlu, M.E. (2013). Creating Three Dimension Learning Model and Learning Experiences, 22 UlusalEğitimBilimleriKurultayı,
EskişehirOsmangazi Üniversitesi, 5-7 September 2013. (In Turkish)
Nota, L., Ferrari, L., Soresi, S., & Wehmeyer, M. L. (2007). Self-determination, social abilities and the quality of life of people with intellectual
disabilities. Journal of intellectual disability Research,51(11),850–865
Odia, J.O., & Okoye, A.E. (2012). Pensions Reform in Nigeria: A comparison between the old and new Scheme. Afro Asian Journal of Social
Sciences, Volume 3, No. 3.1 Quarter1 ISSN:2229-5313.
O'Neill, B., Sorhaindo, B., Xiao, J. J., & Garman, E. T. (2005). Financially distressed consumers: Their financial practices, financial well-being,
and health. Financial Counselling and Planning, 16(1), 73-87.
Podsakoff, P. M. MacKenzie, S. B., Lee, J. Y., & Podsakoff, N. P. (2003). Common Method Biases in Behavioral Research: A Critical Review of
the Literature and Recommended Remedies. Journal of Applied Psychology, 88, 879-903
Preacher, K.J., & Hayes, A.F. (2010). Quantifying and testing indirect effects in simple mediation models when the constituent paths are nonlinear,
Multivariate Behavioral Research, Vol. 45 No. 4, pp. 627-660.
Ramsden, P., & Moses, I. (1992). Associations between research and teaching in Australian higher education, Higher Education, Vol. 23 No. 3, pp.
273-295.
Ryan, R., & Deci, E. (2000). Self-determination theory and the facilitation of intrinsic motivation, social development, and well-being, American
Psychologist, Vol. 55, pp. 68-78
Ryan, R. M., & Deci, E. L. (2017). Self-determination theory: Basic psychological needs in motivation, development, and wellness. New York,
NY, US: Guilford Press.
Ryan, R.M., Huta, V., & Deci, E.L. (2008). Living well: a self-determination theory perspective on eudaimonic wellbeing", Journal of Happiness
Studies, Vol. 9, pp. 139- 170.
Saunders, M., Lewis, P., & Thornhill, A. (2009). Research Methods for Business Students.
Scheneier, C.E., Rusell, C.J., & Beauty, R.W. (1989). The training and development sourcebook. Human Resource Development press Inc.
Amherst Massachusetts 01002. 1-800.822-2801
Schreiber, J.B., Nora, A., Stage, F.K., Barlow, E.A., & King, J. (2006). Reporting Structural equation modeling and confirmatory factor analysis
results: a review, The Journal of Educational Research, Vol. 99 No. 6, pp. 323-337
Sekaran, U. (2000). Research Methods for Business: A Skill Building Approach, John Wiley & Sons, New York, NY.
Serdenciuc N.L. (2015). Shaping Learning Experiences of the Future Teachers. Procedia - Social and Behavioral Sciences 180 (2015) 966 – 971
Sheldon, K.M., Elliot, A.J., Kim, Y., & Kasser, T. (2001). What is satisfying by satisfying events? Testing 10 candidate psychological needs,
Journal of Personality and Social Psychology, Vol. 80, pp. 325-39.
Shogren, K. A., Wehmeyer, M.L., Palmer, S.B., Forber-Pratt, A.J., Little,T.J., & Lopez. S. (2015). Causal Agency Theory: Conceptualizing a
Functional Model of Self- Determination. Education and Training in Autism and Developmental Disabilities 50 (3): 251–263.
Shogren, K. A., Wehmeyer, M.L., Palmer, S.B., Rifenbark, G.G., & Little, T.J. (2015). "Relationships Between Self-Determination and Post
School Outcomes for Youth with Disabilities." The Journal of Special Education 48 (4): 256–267.
Shultz, K., & Adams, G. (2007). Aging and Work in the 21st Century, 1st Edition New York, NY: Psychology Press.
SSNIT (2015). SSNIT pension review. Social Security and National Insurance Trust. Retrieved February 10, 2016, from
http://www.ssnit.org.gh/news/2016-ssnit-pension-review.
Stenberg, K. (2010). Identify work as a tool for promoting the professional development of student's teachers. Journal of reflective practice.
international and multidisciplinary perspective vol. 11, issue 3
Stephen, Y., Fouquereau, E., & Fernandez, A. (2008). The relation between self- determination and retirement satisfaction among active retired
individuals. International Journal of Aging
Tang, C. F. (2010). Savings-led growth theories: A time series analysis for Malaysia using the bootstrapping and time-varying causality
techniques. MPRA Paper 27299, University Library of Munich, Germany.
Vansteenkiste, M., Neyrinck, B., Niemiec, C.P., Soenens, B., Witte, H.D., & Broeck, A.V. (2007). On the relations among work value
orientations, psychological need satisfaction and job outcomes: A self-determination theory approach. Journal of Occupational and
Organizational Psychology, 80, 251–277
Wehmeyer, M. L., & Palmer, S.B. (2003). Adult Outcomes for Students with Cognitive Disabilities Three Years After High School: The Impact
of Self-determination." Education and Training in Developmental Disabilities 38 (2): 131–144.
Wehmeyer, M., & Schwartz, M. (1997). Self-determination and positive adult outcomes: A follow- up of students and youth with mental
retardation or learning disabilities. Exceptional Children, 63, 245–255.
Wehmeyer, M. L., Kelchner, K., & Richards, S. (1996). Essential characteristics of self- determined behavior of individuals with mental
retardation. American Journal on Mental Retardation,100, 632–642.
Wehmeyer, M. L., Shogren, K. A., Palmer, S. B., Williams-Diehm, K. L., Little, T. D., & Boulton, A. (2012). The impact of the self
determined learning model of instruction on student self-determination. Exceptional Children, 78(2), 135–153.
Withnal, A. (2009). Improving Learning in Later Life (Routledge)
Young, L.E., & Paterson, B.L. (2007). Teaching Nursing: Developing a Student-centered Learning Environment. Lippincott Williams & Wilkins,
Philadelphia
Zollo, M., & Winter, S.G. (2002). Deliberate learning and the evolution of dynamic capabilities. Journal of organization science. Vol.13,
No.3. doi/abs/10.1287/0rsc.13.3.339.2780.
The mediating effect of entrepreneurial skills on the relationship
between supportive environment and entrepreneurial career
preference
Yakubu Abdullahi Yarima
Aminu Saleh College of Education Azare Bauchi State
Email: yakubuyerima318@yahoo.com
Abstract
Enterprise and entrepreneurial activities are seen as a most important factors for economic growth and development in the post-war
era which is term here as the “New Era”. However, entrepreneurship education and training enhance individuals’ entrepreneurial
skills and attitude, hence promote entrepreneurial career preference. The study was designed to explore the mediating effect of
entrepreneurial Skills on the relationship between supportive environment and entrepreneurial career preference among university
students in Nigeria. The population of the study consist of a total of 36, 798 final year students from five faculties across six
universities in northern Nigeria. The study used structural equation modelling Smart-PLS (2.0) to analysis the data obtained from a
sample of 395 final year students cross six universities to test the hypotheses. The study established a significant positive association
between internal supportive environment and the students’ entrepreneurial career preference. However, the study found no
significant association between external supportive environment and the students’ entrepreneurial career preference. In addition, the
study established that entrepreneurial skills significantly mediate the association between internal supportive environment, external
supportive environment and students’ entrepreneurial career preference. The study provided suggestion for future research.
Keywords: Entrepreneurial career preference, internal supportive environment, external supportive environment.
1. Introduction
Entrepreneurial career has been recognized as an integral part for the economic growth and development of any nation
(Firend Alan Rasch, 2017; Carland & Carland, 2010). It is an essential element for national development, through the
economic growth across the world absolutely impacted by the emergence entrepreneurial activities (Fayolle, Benoit &
Narjisse, 2006; Hattab, 2014). Accordingly, supportive environment plays an essential role in promoting
entrepreneurial skills, competencies and attitudes in several ways which in turn encourages potential entrepreneurial
career preference. Equally, supportive environment is considered as the most effective means of implanting
entrepreneurial culture by developing students’ entrepreneurial skills; and thereby increasing the supply of future
graduate entrepreneurs (Firend Alan Rasch, 2019; Jones, Miller, Jones, Packham, Pickenell, & Zbierowski, 2011; Sesen,
2013).
In the recent years, attention has been focused on entrepreneurial career as leading economic factor for creating job
opportunities, economic growth, wealth creation, poverty reduction, and positive social development (Ethugala, 2011;
Kelley, Singer, & Herrington, 2012). However, Rae, Penaluna and Dhaliwal (2011) argue the need for universities to
develop in their graduates an entrepreneurial mind-set, skills and experience as part of their program of study.
Consequently, many countries to introduced policy structures to support entrepreneurial career choice (Pittaway and
Cope, 2007) and to promote entrepreneurial activity (Cheung, 2008). Government and other stakeholders embrace a
range supporting programs toward encouraging entrepreneurial career choice such as career guidance, funding, skill
building courses, business, incubator and alike (Solomon et al., 2002); as well as the improvement in instructional
quality. Similarly, the number of entrepreneurship programs offer by universities world over has dramatically increased
in the past years (Firend Alan Rasch, 2018; Kuratko, 2005; Brockhaus et al., 2001).
Moreover, there is growing interest by governments, universities, and other stakeholders in entrepreneurship education
calls for further studies in the area. Although number of studies have already established link between entrepreneurship
education, entrepreneurial attitudes and entrepreneurial intention (Souitaris et al., 2007). Nevertheless, relatively little
direct evidence occurs concerning machineries through which entrepreneurship education encourages individuals
toward entrepreneurial career preference. There is a lack of study on some areas of entrepreneurship education research
including regional variations and cross-country comparisons (Firend Al. R., & Chun, 2018; Matlay, 2006). Nabi and
Holden (2008) argued that there is need for more studies in different regional and international contexts to better
understanding of students’ entrepreneurial attitudes and developing more relevant education programs.
Hence, the aim of this study is to empirically investigate the mediating role of entrepreneurial skills on the relationship
between supportive environment and students’ entrepreneurial career preference among university graduates. The study
also provides statistical inference on the direct relationships supportive environment and students’ entrepreneurial
career preference and makes suggestions for future research.
2. Literature review
Entrepreneurial career preference is described as a mental process that orientates the individual’s decision to become
an entrepreneur (Firend Alan Rasch, 2018; Boyd & Vozikis, 1994; Gupta & Bhawe, 2007). It is seen as conscious and
precise decision made for preference of entrepreneurship as an alternative career option (Moriano, Gorgievski, Laguna,
Stephan & Zarafshani, 2012). Accordingly, entrepreneurial career preference is frequently influenced by various factors
such as the dynamic career environment, individual traits, financial aspects, educational elements, family related issues
and role models (Liñán, Rodríguez-Cohard, & Rueda-Cantuche, 2011; Kroon & Meyer, 2001; Zhang, Duysters &
Cloodt, 2013).
On the other hand, entrepreneurship education is seen as sequence of activities which targets to empower individual to
promote and improve entrepreneurial skills, knowledge, values and indulgent that allow a wide variety of problems to
be defined, analysed and resolved (Neck & Greene, 2011; Peterman & Kennedy, 2003). Subsequently, entrepreneurial
skills promote entrepreneurial intentions and stimulates entrepreneurial awareness, which can be leveraged to discourse
numerous subjective norms and resource barricades to entrepreneurial activities (Firend Alan Rasch, 2019; Draycott &
Rae, 2011; Jones, et al., 2011; Packham, Jones, Miller, Pickernell, & Brychan, 2010; Verheul, Thurik, Grilo, & van der
Zwan, 2012). In fact, there are substantial evidences supporting the positive link between entrepreneurial skills and
new venture creation (Gorman, Hanlon & King, 1997; Martin Cruz, Rodriguez Escudero, Barahona & Leitao, 2009;
Peterman & Kennedy, 2003; Pittaway & Cope, 2007; Seet & Seet, 2006).
Supportive environment is described as a combination of factors surrounding the business atmosphere that play a
significant part in the promotion of entrepreneurial activities and entrepreneurial career preference (Franke & Luthje,
2004; Valliere & Peterson, 2009). Several studies reported that supportive environment in form of favourable regulatory,
cognitive and normative institutions positively influence the rate of business start-ups and entrepreneurial career
activities in an economy (Bruton, Filatotchev, Chahine, & Wright, 2010; Engle, Schlaegel & Dimitriadi, 2011; Falck,
Heblich & Luedemann, 2012). Hence, this study proposed a model in which entrepreneurial skills play a critical
mediating role (see Figure 1) in relationship between supportive environment and entrepreneurial career preference.
Hence, the development of the following hypotheses:
H1: Internal supportive environment will be positively related to students’ entrepreneurial career preference.
H2: External supportive environment will be positively related to students’ entrepreneurial career preference.
H3: Internal supportive environment will be positively related to entrepreneurial skills.
H4: External supportive environment will be positively related to entrepreneurial skills.
H5: Entrepreneurial skills will be positively related to students’ entrepreneurial career preference.
H6: Entrepreneurial skills mediate the relationship between internal supportive environment and students’
entrepreneurial career preference.
H7: Entrepreneurial skills mediate the relationship between external supportive environment and students’
3. Method
3.1 Participants and procedures
In this study, a stratified random sampling technique was applied to select a sample of 395 final year students from a
variety of academic arena including; agricultural science, business, engineering and technology across six universities
in the Northern Nigeria. The survey was conducted within 2017/2018 academic session using questionnaire forms
which were personally administered to the respondents by the researchers and some faculty members at each of the six
universities. Table 1 presents the demographic profile for the respondents of the study.
Table1: Demographic Profile of the Respondents (n = 432)
Demographic variable Category Frequency Percentage (%)
Age 18-29 327 82.79
30-39 58 14.68
40-49 8 2.03
50 & above 2 0.50
Gender Male 261 66.08
Female 134 33.92
Area of study Business 182 46.08
Agriculture 90 22.78
Engineering 44 11.14
Technology 79
20.00
Occupational experience Self-employed 89 22.53
Civil servant 61 15.44
Working for others 44 11.14
Apprenticeship 42 10.63
Never employed 159 40.25
3.2 Measures
3.2.1 Entrepreneurial career preference
Entrepreneurial career preference is operationalized as the conscious and precise decision made for preference of
entrepreneurship as career (Moriano, et al., 2012). The entrepreneurial career preference was measured using 12 items
adapted from the work of Moy Jane, Vivienne, Luk Philip and Wright (2003). However, the construct was initially
measured using 12 items (Jane, et al., 2003) but here in this study the eleventh item “I prefer entrepreneurial career to
recognize and exploit business opportunities” and twelfth item “I prefer entrepreneurial career to develop new ideas,
innovations and initiatives” were divided into two items each because of their double barrel nature.
3.2.2 Internal Supportive Environment
Internal supportive environment is operationalized as university supported programs that play important roles in the
development of students’ entrepreneurial activities and entrepreneurial career preference as an alternative career option
(Firend R., & Noorazah, 2013; Parnell, Crandall, & Menefee, 1995). In this study, we adapted 5 items of internal
supportive environment from Turker, Onvural, Kursunluoglu, and Pinar, (2005). Though, some items in scale were
slightly modified to reflect the current area of the study (Nigeria) rather than the place of its origin (Turkish). In addition,
the second item in the original measures “my university provides the necessary knowledge and support about
entrepreneurial career” was divided into two separate items to avoid double barrel question.
3.2.3 External Supportive Environment
Operationally, external supportive environment is a combination of external factors surrounding the business
environment which play significant part in the formation and promotion of entrepreneurial career and entrepreneurial
activities in a society. The scales used for measuring external supportive environment in the study were slightly adapted
version used by Turker, et al., (2005). However, items two and three of the original measures “Taking loan from banks
is quite difficult for graduate entrepreneurs” and “state laws are unfavourable for running businesses were modified to
positive questions so as to tally with the other questions and to avoid misleading the respondents (Al-Raisi, & Firend
R., 2012).
3.2.4 Entrepreneurial skills
Entrepreneurial skill is operationalized as individual student’s ability to develop a concept and a business plan, perform
environmental scanning and opportunity recognition; and networking (Chen, Greene & Crick, 1998). In this study,
entrepreneurial skills were measured using six items also which were adapted from Liñán (2008). However, item four
“I have the leadership and communication skills to manage my own business” and item six “I have the networking
skills and professional contracts to establish and manage my business” were divided into two items each because of the
double barrel nature of the items. Table 2 presents the summary of the measures and sources.
Table 2: Summary of Measures of Variables
Variables No. of items Cronbach’s alpha Sources
Entrepreneurial career preference 14 0.78 Jane, et al., (2003)
Internal Supportive Environment 5 0.88 Turker, et al., (2005)
External Supportive Environment 5 0.86 Turker, et al., (2005)
Entrepreneurial skills 8 0.92 Liñán (2008).
Note: All variables were measured on a 5-point Likert scale.
3.3 Data Analysis
A multivariate data analysis was conducted using Smart-PLS (version 2.0) to evaluate the measurement model and to
test the formulated hypotheses of the study. The PLS-SEM technique was used in the study for its ability to evaluate
the entire measurement model as a whole and analyse the association between the independent variables and the
dependent variable; and their measures (Hair, Black, Babin, & Anderson, (2010). The study applied PLS-SEM
algorithm to evaluate the measurement model and the structural model was evaluated using PLS-SEM Bootstrapping;
and the results were reported as such.
4. Results
4.1 Measurement Model
Measurement model was used to assess the validity and reliability of the construct measures using PLS-SEM Algorithm
(see Figure 2). Accordingly, Hair, Hult, Ringle, and Sarstedt, (2013) recommend that validity and reliability index are
the two main standards used in PLS-SEM analysis to evaluate the goodness of measurement model. The results in table
3 indicates the composite reliability of the latent constructs which ranges between 0.81 to 0.84 for the all the latent
constructs; thus fulfilled the suggested level of 0.70 and above (Hair et al., 2010). In addition, the result shows that
average variance extracted (AVE) stands between 0.52 to 0.53 which are all exceeded the threshold level of 0.50,
thereby sustaining the convergent validity for all the latent constructs (Hair et al., 2013).
Figure 2: PLS-SEM Algorithm
Table 3: Indicators Loading, Internal Consistency and Average Variance Extracted (AVE)
Construct Indicator Loading Composite Reliability AVE
Entrepreneurial career preference ECP 09 0.630 0.81 0.52
ECP 10 0.683
ECP 13 0.813
ECP 14 0.744
Entrepreneurial Skills EES 04 0.756 0.82 0.53
EES 05 0.687
EES 06 0.734
EES 07 0.737
Internal Supportive Environment INT 01 0.751 0.82 0.53
INT 02 0.804
INT 03 0.732
INT 04 0.822
INT 05 0.455
External Supportive Environment EXT 01 0.769 0.84 0.53
EXT 03 0.766
EXT 04 0.667
EXT 05 0.707
Furthermore, the result in table 4 displays the AVEs (diagonal side in bold) and the squared of inter-construct
correlations (off the diagonal side). The result established that all the AVEs values are greater than the values of squared
inter-constructs correlations; thus, satisfied the requirement for discriminant validity. Hence the study confirmed the
reliability and validity of the latent variables (Hair, Sarstedt, Ringle, & Mena, 2012).
Table 4: Square Root of AVE and Correlation of Latent Variables

1 2 3 4
Entrepreneurial career preference 0.721
Entrepreneurial Skills 0.318 0.729
Internal Supportive Environment 0.112 0.203 0.729
External Supportive Environment 0.191 0.172 0.440 0.725
4.2 Structural Model

The structural model was assessed in this study using path coefficient and the R 2 value (Hair, et al., 2010). PLS-SEM
bootstrapping was used at 5000 sub-sample to establish the significance of the path coefficients in the study (see Figure
3). The results in table 6 and 7 display the outcomes of the hypotheses test, path coefficients, t-values and p-values.
Figure 3: PLS-SEM Bootstrapping
Table 5: Path Coefficients and Hypotheses Testing (Direct Relationship)
Hypothesis Path Beta Standard Error T-value P-value Decision
H1 INT-> ECP 0.146 0.060 2.428 0.01** Supported
H2 EXT -> ECP -0.012 0.068 0.177 0.43 Not supported
H3 INT -> EES 0.102 0.054 1.889 0.03* Supported
H4 EXT -> EES 0.158 0.057 2.759 0.00** Supported
H5 EES -> ECP 0.295 0.058 5.087 0.00** Supported
Note: **Significant at 0.01 (1-tailed), *Significant at 0.05 (1-tailed).
Hypothesis 1 predicts a positive relationship between internal supportive environment and entrepreneurial career
preference. Accordingly, the result in table 5 discloses that there is a positive and a significant relationship between
internal supportive environment and entrepreneurial career preference (ß = 0.146, t = 2.428, p < 0.01); hence, H1 is
supported. In contrary, the result shows no significant relationship between external supportive environment and
entrepreneurial career preference (ß = -0.012, t = 0.177, p < 0.43); therefore, H2 is not supported. In addition, the result
also reveals that a positive and significant relationship exist between internal supportive environment and
entrepreneurial skills (ß = 0.102, t = 1.889, p < 0.03); thereby the result indicates support for H3. Similarly, the result
indicates that the relationship between external supportive environment and entrepreneurial skills is positively
significant (ß = 0.158, t = 2.759, p < 0.00); henceforth supporting the H4. Furthermore, the result submits that there is
a positive and a significant relationship between entrepreneurial skills and entrepreneurial career preference (ß = 0.295,
t = 5.087, p < 0.00); therefore, H5 is hereby supported.
Table 6: Path Coefficients and Hypotheses Testing (Indirect Relationship)

Hypothesis Path Beta Std. Error T-value P-value Decision
H6 INT -> EES -> ECP 0.033 0.016 1.99 0.02* Supported
H7 EXT -> EES -> ECP 0.052 0.022 2.34 0.01** Supported
Note: **Significant at 0.01, *Significant at 0.05.
Table 6 above, displays the results of indirect association between independent latent variables and the dependent latent
variable through a mediating variable as assumed in hypothesis 6 and 7 of the study. Hypothesis 6 assumed
entrepreneurial skills mediate the relationship between internal environment and entrepreneurial career preference, the
result discloses the t-value of 1.99 (ß = 0.082, p < 0.00) is higher than threshold of 1.64 and above at 0.05 level of
significance (Hair et al., 2010); hence H6 is supported. The result in relation to H7 shows t-value of 2.34 (ß = 0.052, p
< 0.01) on association between external environment and entrepreneurial career preference using entrepreneurial skills
as mediating variable. This t-value is greater than threshold value of 1.64 and above at 0.05 level of significance (Hair
et al., 2010), demonstrating that entrepreneurial skills mediate the association between external environment and
students’ entrepreneurial career preference.
5. Discussions
The study was designed to empirically test the mediating effect of entrepreneurial Skills on the association between
supportive environment and students’ entrepreneurial career preference. The study was conducted using a sample of
final year students from different faculties across six universities in the northern Nigeria. The descriptive analysis of
the respondents showed that majority were at the age bracket between 18 to 29 years (83%), while those at the age
bracket of 30 and above constituted 17%; male respondents represented about 66% of the total respondents and female
counterpart represented 34%. In this study, 46% of the respondents are studying business, 23% agriculture, 20%
technology and 11% engineering. In addition, 40% of the respondents were never employed; 23% were self-employed;
15% were civil servants while working for others and apprenticeship accounted for 11% each. The descriptive analysis
establishes that the respondents provide sufficient variance for the study of this nature.
As predicted, the result in relation to the H1 was found to be positively significant; hence empirically the result
supported H1. This result coincides with the findings of the previous studies that argue supportive environment
positively influences entrepreneurial career preference (Engle, et al, 2011; Falck, et al., 2012). In contrary, the result
reported no significant association between external supportive environment and students’ entrepreneurial career
preference. In addition, the result demonstrates internal supportive environment impact positively on entrepreneurial
skills; therefore, supporting H3. Similarly, previous studies reported favourable institutional environment promotes
entrepreneurial skills (Firend Alan Rasch, 2017; Engle, Dimitriadi, Gavidia, Schlaegel, Delanoe, Alavarado, He,
Buame, & Wolff, 2010; Manolova, Eunni, & Gyoshev, 2008; Reynolds 2011).
Furthermore, the result submits that entrepreneurial skills positively influence the students’ entrepreneurial career
preference; consequently, H5 is thereby supported. This result is also in line with the several previous studies
demonstrating the influence of entrepreneurial skills on entrepreneurial career preference (Abdulai, 2015; Block,
Hoogerheide & Thurik 2011; Engle, et al, 2010; Giacomin, Janssen, Pruett, Shinnar, Llopis & Toney 2011; Hattab
2014; Hussain & Norashidah, 2015; Iakovleva, Kolvereid & Stephan, 2011; Molaei, Zali, Mobaraki & Farsi, 2014; Rae
& Woodier-Harris, 2013).
Accordingly, the result highlighted on the analysis of the indirect relationships as hypothesized in H6 and H7 of this
study. The finding reveals that entrepreneurial skills can mediate the relationship between institutional supportive
environment and the students’ entrepreneurial career preference; hence H 6 is hereby established. In addition, the finding
also reveals that entrepreneurial skills can significantly mediate the relationship between external supportive
environment and the students’ entrepreneurial career preference; indicating the acceptance of H 7. Therefore, these
suggest that the impact of supportive environment on students’ entrepreneurial career preference can be enhanced by
providing the students with the necessary entrepreneurial skills as an intervening factor.
6. Conclusion
The aim of the study was to empirically investigate the impact of supportive environment and entrepreneurial skills on
students’ entrepreneurial career preference. Empirically, the findings reveal a strong positive association was found
between internal supportive environment and students’ entrepreneurial career preference. These findings are in
covenants with previous studies which also show supportive environment positively influences students’
entrepreneurial career preference. However, in contrary the findings reveal no significant association between external
supportive environment and students’ entrepreneurial career preference.
Furthermore, the findings reveal that associations between supportive environment and entrepreneurial skills; and
entrepreneurial skills and entrepreneurial career preference were found to be statistically significant. In addition,
entrepreneurial skills were statistically found to mediate the association between supportive environment and students’
entrepreneurial career preference. Henceforth, the implications for entrepreneurship researchers and educators are to
find and adopt teaching methods that boots students’ entrepreneurial skills which in turn enhances the students’
References
Abdulai, A., (2015). Entrepreneurship education and its impact on self-employment intention and entrepreneurial self-efficacy. Humanities and
Social Sciences, 3 (1): 57-63.
Block, J. H., Hoogerheide, L., & Thurik, R. (2013). Education and entrepreneurial choice: An instrumental variables analysis. International
Small Business Journal, 31(1), 23-33.
Boyd, N.G. & Vozikis, G.S., (1994). “The Influence of self-efficacy on the development of entrepreneurial intentions and actions”,
Entrepreneurship Theory and Practice, 18(4), 63-77.
Bruton, G. D., Filatotchev, I., Chahine, S., & Wright, M. (2010). Governance, ownership structure, and performance of IPO firms: The impact of
different types of private equity investors and institutional environments. Strategic management journal, 31(5), 491-509.
Carland, J. W. & Carland, J. C., (2010). Entrepreneurship Education: Building for the Future. Journal of Business and Entrepreneurship, 22(2),
40-60.
Chen C.C., Greene P.G. & Crick, A., (1998). Does entrepreneurial self-efficacy distinguish entrepreneurs from managers? Journal of Business
Venturing, 13(4), 295-316.
cultural approach to understanding entrepreneurial intention. Journal of Career
Development, 39, 162–185.
Draycott, M. & Rae, D., (2011). “Enterprise education in schools and the role of competency frameworks”, International Journal of
Entrepreneurial Behaviour & Research, 17 (2), 127-145.
Engle, R. L., Schlaegel, C., & Dimitriadi, N. (2011). Institutions and entrepreneurial intent: A cross-country study. Journal of Developmental
Entrepreneurship, 16(02), 227-250.
Engle, R., Dimitriadi, N., Gavidia, J., Schlaegel, C., Delanoe, S., Alavarado, I., He, X., Buame, S., & Wolff, B., (2010). Entrepreneurial intent: A
twelve country evaluation of Ajzen’s model of planned behaviour. International Journal of Entrepreneurial Behaviour & Research,
16(1), 35–37.
Ethugala, C. V. (2011). Expectations of the Private and Civil Stakeholders Responsiveness of the State Sector: Tea Industry of Sri Lanka. Journal
of APBITM, 1(1), 13-19.
Falck, O., Heblich, S. & Luedemann, E., (2012). Identity and Entrepreneurship: Do School Peers Shape Entrepreneurial Intentions? Small Business
Economics 39 (1), 39-59.
Fayolle, A., Benoit, G. & Narjisse, L.C., (2006). Assessing the Impact of Entrepreneurship Education Programs: A New Methodology, Journal of
European Industrial Training, 30 (8/9), 701-20.
Firend Al. R., Chun, C. C. (2018) Managerial practices, employee satisfaction and firm’s competitiveness in Asian small and medium enterprises
Firend Alan Rasch (2018) Business Model: Simplifies with examples from Global Companies. ISBN 13: 978-1721060603. DOI:
Firend Alan Rasch (2017) Employability and learning: strategies to improve students’ capacity: Essay of educator’s reflections.
ISBN-13: 978-1976135514. DOI: https://doi.org/10.32893/IJBMR.2017/AMII.8.1
Franke, N. & Lu¨thje, C., (2004). “Entrepreneurial intentions of business students: a benchmarking study”, International Journal of Innovation and
Technology Management, 1 (3), 269-288.
Giacomin, O., Janssen, F., Pruett, M., Shinnar, R., Llopis, F., & Toney, B., (2011). Entrepreneurial intentions, motivations and barriers:
Differences among American, Asian and European students. International Entrepreneurship and Management Journal, 7(2), 219–238.
Gorman, G., Hanlon, D. & King, W., (1997). “Some research perspectives on entrepreneurship education, enterprise education and education for
small business management”, International Small Business Journal, 15 (3), 56-77.
Gupta, V.K. & Bhawe, N.M. (2007). “The influence of proactive personality and stereotype threat on women’s entrepreneurial intentions”, Journal
of Leadership and Organizational Studies, 13 (4), 73-85.
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2010). Multivariate data analysis (7th Ed.). Englewood Cliffs: Prentice Hall.
Hair, J. F., Hult, G. T.M., Ringle, C. M., & Sarstedt, M. (2013). An primer on partial least squares structural equation modeling (PLS-SEM).
London: Sage Publication.
Hair, J. F., Sarstedt, M., Ringle, C. M., & Mena, J. A. (2012). An assessment of the use of partial least squares structural equation modeling in
marketing research. Journal of the academy of marketing science, 40(3), 414-433.
Hattab, H.W., (2014). Impact of Entrepreneurship Education on Entrepreneurial Intentions of University Students in Egypt, The Journal of
Entrepreneurship 23(1): 1-18.
Henry C., Hill, F., & Leitch C., (2005). Entrepreneurship education and training: Can entrepreneurship be taught? Part I. Education & Training, 47
(2/3), 98-112.
Hussain, A., & Norashidah, B.H., (2015). Impact of Entrepreneurial Education on Entrepreneurial Intentions of Pakistani Students. Journal of
Entrepreneurship and Business Innovation, 2(1), 43-53.
Iakovleva, T., Kolvereid, L., & Stephan, U., (2011). Entrepreneurial intentions in developing and developed countries. Education + Training,
53(5), 353–370.
Jones, P. Miller, C., Jones, A. Packham, G., Pickenell, D. & Zbierowski, P., (2011). Attitudes and motivations of Polish students towards
entrepreneurial activity. Education þ Training, 53(5), 416-432.
Kelley, D.J., Singer, S. & Herrington, M.D., (2012). “The 2011 Global Entrepreneurship Monitor Report”, available at:
www.gemconsortium.org/docs/2201/gem-2011-global-report (accessed 25 January 2012).
Kroon, J. & Meyer, S. (2001). The role of entrepreneurship education in career expectations of students. South African Journal of Higher
Education, 15 (1), 47-53.
Liñán, F., (2008). Skill and value perceptions: how do they affect entrepreneurial intentions? International Entrepreneurship and Management
Journal 4: 257–272.
Liñán, F., Rodríguez-Cohard, J. C., & Rueda-Cantuche, J. M., (2011). Factors Affecting Entrepreneurial Intention Levels: A Role for Education.
International Entrepreneurship and Management Journal, 7(2), 195-218.
Manolova, T. S., Eunni, R. V., & Gyoshev, B. S. (2008). Institutional environments for entrepreneurship: Evidence from emerging economies in
Eastern Europe. Entrepreneurship Theory and Practice, 32(1), 203-218.
Martin Cruz, N., Rodriguez Escudero, A.I., Barahona, J.H. & Leitao, F.S., (2009). “The effect of entrepreneurship education programs on
satisfaction with innovation behaviour and performance”, Journal of European Industrial Training, 33 (3), 198-214.
Matlay, H. (2009). “Entrepreneurship education in the UK, A critical analysis of stakeholder involvement and expectations”, Journal of Small
Business and Enterprise Development, 16 (2), 355-68.
Molaei, R., Zali, M.R., Mobaraki, M.H. & Farsi, J.Y., (2014)."The impact of entrepreneurial ideas and cognitive style on students’ entrepreneurial
intention", Journal of Entrepreneurship in Emerging Economies, 6 (2): 140 – 162.
Moriano, J. A., Gorgievski, M., Laguna, M., Stephan, U., & Zarafshani, K. (2012). A cross cultural approach to understanding entrepreneurial
intention. Journal of Career Development, 39, 162–185.
Moy, J. W., Luk, V. W., & Wright, P. C. (2003). Perceptions of entrepreneurship as a career: Views of young people in Hong Kong. Equal
Opportunities International, 22(4), 16-40.
Neck, H.M. & Greene, P.G., (2011). Entrepreneurship education: known worlds and new frontiers, Journal of Small Business Management, 49 (1):
55-70.
Packham, G., Jones, P., Miller, C., Pickernell, D., & Brychan, T., (2010). Attitudes towards entrepreneurship education: A comparative analysis.
Education + Training, 52(8/9), 568–586.
Packham, G., Jones, P., Miller, C., Pickernell, D., & Brychan, T. (2010). Attitudes towards entrepreneurship education: A comparative analysis.
Education + Training, 52(8/9), 568–586.
Parnell, J.A., Crandall, W.R. & Menefee, M. (1995). “Examining the impact of culture on entrepreneurial propensity: an empirical study of
prospective American and Egyptian entrepreneurs”, Academy of Entrepreneurship Journal, 1 (1) 39-52.
Peterman, N.E. & Kennedy, J., (2003). Enterprise education: Influencing students’ Perceptions of Entrepreneurship. Entrepreneurship Theory and
Practice 28(2), 129-144.
Pittaway, L., & Cope, J. (2007). Entrepreneurship education—A systematic review of the evidence. International Small Business Journal, 25(5),
477–506.
Rae, D. & Woodier-Harris, N. R., (2013). "How does enterprise and entrepreneurship education influence postgraduate students’ career intentions
in the New Era economy?", Education + Training, 55 (8/9), 926 – 948.
Rae, D., Penaluna, A. & Dhaliwal, H. (2011). “Higher education and graduate enterprise in the new era”, Graduate Market Trends, Winter,
Higher Education Careers Service Unit, Manchester.
Reynolds, P., Bosma, N., Autio, E., Hunt, S., De Bono, N., Servais, I., Lopez-Garcia, P. & Chin, N. (2005). “Global entrepreneurship monitor: data
collection design and implementation 1998-2003”, Small Business Economics, 24 (3), 205-231.
Seet, P.S. and Seet, L.C. (2006), “Changing entrepreneurial perceptions and developing entrepreneurial competencies through experiential
learning: evidence from entrepreneurship education in Singapore’s tertiary education institutions”, Journal of Asia Entrepreneurship and
Sustainability, 2 (2), 143-171.
Sesen, H., (2013). Personality or environment? A comprehensive study on the entrepreneurial intentions of university students, Education +
Training, 55 (7), 624 – 640.
Turker, D., Onvural, B., Kursunluoglu, E. & Pinar, C. (2005), “Entrepreneurial propensity: a field study on the Turkish university students”,
International Journal of Business, Economics and Management, 1 (3), 15-27.
Valliere, D., & Peterson, R., (2009). Entrepreneurship and economic growth: Evidence from emerging and developed countries. Entrepreneurship
& Regional Development, 21(5/6), 459–480.
Verheul, I., Thurik, R., Grilo, I., van der Zwan, P. (2012). Explaining Preferences and Actual Involvement in Self-Employment: Gender and the
Entrepreneurial Personality, Journal of Economic Psychology, 33 (2), 325-341.
Zhang, Y., Duysters, G., & Cloodt, M., (2013). The role of entrepreneurship education as a predictor of university students’ entrepreneurial
intention. International Entrepreneurship and Management Journal. 3 (4), 14-21.
Role of Repo Rate in Indian Monetary Policy Since 2014
Dr. Chetana Asbe
N.L. Dalmia Institute of Management Studies & Research, E-mail address: chetana.asbe@nldalmia.edu.in
Abstract
The Urjit Patel Committee report (2014) had recommended that repo rate should be made the signal of policy stance to address the
issue of high inflationary pressure in India. Since then repo rate as a tool has gained pronounced importance. In the current scenario
where India is amid a growth slowdown, to some extent, the monetary policy is expected to address the situation. The purpose of
this paper is to analyze the role of repo rate in the conduct of Indian monetary policy since the adoption of flexible inflation targeting.
It studies through regression analysis if repo rate has allowed RBI to pass on interest rate signals to the market for the period into
consideration. It concludes that there is scope for adequately transmitting the rate cuts for an augmented monetary policy
transmission mechanism.
Keywords: Reserve Bank of India (RBI); monetary policy; repo rate; consumer price index inflation
1. Introduction
Reserve Bank of India (RBI) is the central monetary authority in India. It began operations on April 01, 1935 and was
nationalized with effect from January 1, 1949. Its responsibility of formulating and implementing the monetary policy
is explicitly mandated under the Reserve Bank of India Act, 1934. In 2014, a panel headed by Dr. Urjit Patel
recommended that India should adopt flexible inflation targeting (FIT) as its monetary policy framework keeping the
headline inflation based on consumer price index-combined (CPI-C) as its target. It also voiced that adopting FIT in
the Indian context would require a higher order of policy discipline and that clarity of communication is a prerequisite
for any successful IT regime given its role in shaping the inflation expectations of economic agents. In keeping with
the committee’s recommendation, RBI began reviewing and announcing its policy on a bi-monthly cycle. And hence,
with the advent of FIT, RBI’s monetary policy communication has improved significantly (Mathur and Sengupta, 2019)
and this would aid in reducing the inside lag of the monetary policy transmission mechanism. Once the monetary policy
framework is in place, the policy needs to have a supporting operating procedure through which it can be implemented.
RBI is, therefore, armed with tools to enable it to influence the money supply in the economy. These instruments have
been under continuous review and changes have been made in response to emerging situations and trends in prices to
combat shocks. The existing framework aims at setting the policy (repo) rate based on an assessment of the current and
evolving macroeconomic situation and modulation of liquidity conditions. The changes in repo rate transmit through
the money market to the entire financial system, which, in turn, influences aggregate demand – a key determinant of
inflation.
Once the repo rate is announced, the operating framework designed by the RBI envisages liquidity management through
anchoring the operating target, the weighted average call rate (WACR), around the repo rate. For Reserve Bank to
attain its policy objective efficiently, it is particularly important that a process referred to as ‘monetary transmission’
works impeccably (Acharya, 2017). Therefore, consequently, the operating procedure is fine-tuned and revised
depending on the evolving financial market and monetary conditions, while ensuring consistency with the monetary
policy stance.
This study, therefore, focusses on assessing the role of repo rate in the conduct of Indian monetary policy after the
adoption of flexible inflation targeting by India in January 2014.
2. Theoretical Background
Monetary policy refers to the policy of a central bank with regard to the use of instruments under its control to achieve
the specified goals. Friedman (2000) and Firend Alan Rasch (2019) explained that it is one of the two primary means
(the other being fiscal policy) by which government authorities can influence the pace and direction of overall economic
activity. It can also impact the level of aggregate output, employment and most importantly the general rate at which
prices rise and fall.
Lately in India, RBI conducts monetary policy with the chief objective of maintaining price stability while keeping in
mind the objective of growth and financial stability. This responsibility is explicitly mandated under the Reserve Bank
of India Act, as amended in 2016. Smitha T.H. (2010) discussed the definite and significant economic impact of
monetary policy on the Indian economy in the post-reform period. Her study advocated that the importance of monetary
policy in attaining the monetary objectives has been gaining relevance year after year. Along that, the use and
importance of monetary policy tools like repo rate, reverse repo rate, bank rate, CRR and SLR have reformed over the
years.
A similar study was carried out by Kanagasabapathy (2001) who captured the historical perspective in respect of
monetary policy underpinnings with particular reference to India. He mentioned that due to the development of interest
rate as an efficient variable in the transmission mechanism, the RBI had begun placing greater dependence on indirect
instruments such as repo rate etc., rather than the earlier practice of greater reliance on direct instruments (like CRR).
This changing role of operating instruments was investigated further by Goyal (2011). According to her, RBI followed
a variety of traditions, practices and rules in the actual implementation of its monetary policy. As observed by her, the
critical instruments of RBI’s monetary policy included policy rates, direct control and market operations. Through these
instruments, the operating procedures directly influenced the demand equilibrium and supply of reserves as well as
deposits held with RBI against the demand deposits of commercial banks.
Figures 1 (a) and 1 (b) depict the changes in the usage of some selected monetary policy instruments since the financial
crisis of 2008. It can be observed that CRR a direct instrument which was widely used until 2013 was kept stagnant in
the post FIT period. SLR is still used by RBI, sometimes in isolation and sometimes in combination. RBI alters SLR
when it does not want to use its stronger monetary policy tools like repo rate. However, over the years, the use of CRR
and SLR as instruments of monetary control has been reduced and the emphasis in the post FIT period has been shifted
towards market-based tools.
Fig. 1. (a) Changes in monetary policy instruments (2008-14); (b) Changes in monetary policy instruments (2014-19)
a b
Source: Data from RBI Website
Thus, it can be inferred that there are several direct and indirect instruments that are used in the implementation of
monetary policy. Some of these instruments and their status as of September 2019 are displayed in table 1. In addition
to these, another important tool that RBI uses is open market operations (OMO) where it sells and purchases
government securities and treasury bills. RBI uses a mix of these tools for attaining its pre-determined objectives.
Table 1. Some Select Indian Monetary Policy Instruments as of September 2019.
Policy Repo Rate 5.40%
Reverse Repo Rate 5.15%

Policy Rates
Marginal Standing Facility 5.65%
Tools
Bank Rate 5.65%
Statutory Liquidity Ratio 18.75%

Reserve Ratios
Cash Reserve Ratio 4.00%
Source: Data from RBI Website
These instruments affect the economy through various mechanisms of transmission to the ultimate policy goals. Ahmad
and Nasrin (2017) and Firend Al R. (2015) indicated that the decision maker needs to understand meticulously the
effect of changes in policies on the affected (targeted) variable. The current framework aims at setting the policy (repo)
rate based on a forward-looking assessment of liquidity conditions. Repo rate changes transmit through the money
market to alter the interest rates in the financial system. Hence, once the repo rate is announced, the operating
framework envisages liquidity management on a day-to-day basis through appropriate actions, which aim at anchoring
the operating target – WACR – around the repo rate.
Monetary policy transmission mechanism can, thus, be comprehended as the process by which direct and indirect tools
affect the general economic conditions as a result of monetary policy decisions. Acharya (2017) in his speech covered
that monetary transmission is the process through which the policy action of the central bank is transferred to its final
objective. He elaborated by saying that the process begins with a change in the policy rate by the central bank and is
transmitted to various money market rates such as inter-bank lending rates, to bank deposit rates, to bank lending rates
and corporate bond yields, and to asset prices, culminating in its impact on the ultimate objective. Any inhibition to
this process impedes the realization of the mandate. The RBI, therefore, closely monitors and analyses the monetary
policy transmission mechanism on a regular basis, and undertakes remedial measures to improve its efficiency, if it
seems impaired.
3. Research Design
The aim of this paper is to study the effect of repo rate on lending rate and deposit rate through a mediation of weighted
average call rate. It covers a period of 66 months from January 2014 to June 2019 mainly focusing on the period after
the adoption of flexible inflation targeting. The work is both descriptive and inferential in nature. This section throws
light upon data collection method, data sources, variables chosen for the study, period of data, sample size, techniques
of data analysis and statistical tools used.
3.1 Data collection method

The research for this study is based on secondary data from published sources. According to Jewel (2001), secondary
data is the data that is collected for purposes other than the original use. It is an analysis of data that have already been
collected for some other purpose. These may be contemporary or historical, qualitative or quantitative and usually need
adjustments and validation before being put to use. This data can include survey data and documentary data.
3.2 Data sources

For this study, the sources used to gather secondary data were published reports on monetary policy, its tools and
inflation, collected from the RBI bulletin, RBI occasional papers, RBI Annual Reports, RBI Speeches, Ministry of
Statistics and Program Implementation (MOSPI) official website, Bloomberg and subject-relevant literature. Frequent
visits to related websites became crucial in collecting recent secondary data as well as publications by renowned authors.
3.3 Period of data

As India informally adopted inflation targeting since January 2014, the study focusses on the period from January 2014
to June 2019. The following data has been collected for a period of 66 months:
• Repo rate
• Monthly Weighted Average Call-money Rate (WACR)
• Monthly Bank Group-wise Weighted Average Lending Rates (WALR)
• Monthly Bank Group-wise Weighted Average Domestic Term Deposit Rates (WADTDR)
• Monthly Consumer Price Index- Combined Inflation (Base Year 2012)
3.4 Sample Size

All the monetary policy reviews encompassing a period of 66 months i.e. from January 2014 to June 2019.
3.5 Variables Chosen for the Study

This study exclusively involves numerical data. The data has been classified under four units for regression analysis as
described in table 2.
Table 2. Variables Used in the Study.
Independent Variable Policy Rate Repo Rate
Moderating Variable Operating Target Weighted Average Call Money Rate
Bank Group-wise Weighted Average Lending Rates and Bank Group-

Moderating Variable Intermediate Target
wise Weighted Average Domestic Term Deposit Rates
Dependent Variable Goal Variable Consumer Price Index Inflation
This paper studies the role of repo rate in the conduct of monetary policy through the following steps of the operating
procedure as explained in figure 2.
Figure 2: Sequence of steps followed for analysis of variables
The first phase studies the relationship between policy rate and the operating target and the second phase studies the
association between the operating target and the intermediate targets and the last phase between the intermediate targets
and goal variable.
3.6 Statistical Tools and Techniques

This study uses descriptive statistics, graphs and inferential data analysis for studying the relationship between the
chosen variables. As part of inferential data analysis, the statistical tools used are correlation and ordinary least squares
(OLS). These tools are used to determine whether a significant relationship exists between the dependent, moderator
and independent variables through the following steps as demonstrated in table 3.
Table 3. Steps Followed for Analysing the Chosen Variables.
Step 1 WACRi = 1 + 2Repo rate2i + i
WALRi = 1 + 2WACR2i + i
Step 2
WADTDRit = 1 + 2WACR2i + i
CPIit = 1 + 2WALR2i + i
Step 3
CPIit = 1 + 2WADTDR2i + i
4. Data Analysis
4.1 Graphical analysis
Figure 3 gives a graphical representation of the relationship between the variables under study in the Post-FIT
Period (January 2014 - June 2019)
Figure 3: Graphical relationship between the variables in the post-FIT period
RBI has been using repo rate as a lever to influence the inflation in the country through the operating procedure in a
pronounced manner since 2014. Figure 4 shows that as intended, WACR has demonstrated a strong relationship with
the policy repo rate. It can also be witnessed that the intermediate targets- lending (WALR) and deposit rates
(WADTDR) have been reasonably synced with the operating target (WACR). Another useful observation that can be
made here is that inflation index has typically reacted inversely to the changes in the repo rate.
4.2 Descriptive analysis
This study has applied descriptive statistics associated with repo rate, WACR, WALR, WADTDR and inflation index
during the sample period. The statistics in table 4 show that the CPI-Combined inflation ranges from a low of 1.46
percent to a high of 8.60 percent with a mean rate of 4.59 percent and a standard deviation of 1.64 percent.
Table 4. Descriptive Statistics of Chosen Variables (January 2014 - June 2019).
Repo Rate WACR WALR WADTDR CPI
Mean 6.77 6.72 11.17 7.34 4.59
Median 6.50 6.41 11.16 7.17 4.51
Mode 6.25 5.90 10.53 6.81 4.28
Standard Deviation 0.73 0.82 0.67 0.77 1.64
Range 2.25 2.64 2.06 2.26 7.14
Minimum 5.75 5.73 10.30 6.34 1.46
Maximum 8.00 8.37 12.36 8.61 8.60
As for the statistics on policy (repo) rate, it has a mean of 6.77 percent with a minimum of 1.46 percent and maximum
of 8.60 percent. As desired, the repo rate mean is very close to the mean of WACR at 6.72 percent. The mean of
WADTDR and WALR stands at 7.34 percent and 11.17 percent respectively. The standard deviation is the least for
WALR (0.67) followed by repo rate (0.73) and WADTDR (0.77). It can be comprehended that the variation in the
inflation index was more than the variation in the policy rate, operating target and intermediate targets.
4.3 Inferential analysis
Table 5 displays the Pearson and Spearman correlation matrices employed in the study to test if an association exists
between repo rate, WACR, WALR, WADTDR and CPI Inflation in the Indian economy. From the table it can be
reinforced that there is a very strong correlation between policy (repo) rate and WACR (0.99).
Table 5. Correlation Between Five Variables (January 2014 - June 2019).
Repo Rate WACR WALR WATDR
WACR 0.99
WALR 0.93 0.93
WATDR 0.96 0.96 0.98
CPI 0.63 0.68 0.69 0.67
This suggests a strong first leg of the operating procedure where the effect of change in policy (repo) rate is transferred
to the operating target (WACR). Also, a reasonably strong relationship exists between WACR and WALR (0.93) and
WACR and WADTDR (0.96). This implies a convincing second leg of the operating procedure where the effect of
change in operating target is transferred to intermediate targets (WALR and WADTDR). Since deposit rates are
expected to have an effect on lending rates, the association between WALR and WALR is also very strong at 0.97.
However, a moderate association is revealed between the intermediate targets and CPI Inflation (0.69 and 0.67)
indicating that the third leg of the operating procedure is weak and the monetary policy transmission mechanism
pertaining to this area needs to be sharpened (Firend Al R., & Hashim, 2015). To further study the results of correlation,
OLS was carried out on the steps elucidated in table 3. The results of OLS are summarised in table 6.
Table 6. Summary of Results of OLS.
Variables R Square t-stat F-statistics (prob>F)
Repo Rate predicting WACR* 0.97 51.49 2651.36
WACR predicting WALR* 0.86 19.54 381.72
WACR predicting WADTDR* 0.92 27.96 782.01
WALR predicting CPI Inflation* 0.47 7.61 57.84
WADTDR predicting CPI Inflation* 0.45 7.19 51.77
Note: p < 0.05 for all regression results
The results of OLS in table 6 reveal that the relationship between policy (repo) rate and WACR was significant and
strong as 97 percent of the changes in WACR were explained by changes in repo rate. Similarly, the relationship of
WACR with both WALR and WADTDR is also significantly strong where 86 percent of changes in WALR and 92
percent of changes in WADTDR are explained by changes in WACR. However, the relationship of WALR and
WADTDR with CPI inflation is quite moderate but significant with only 47 percent of the changes in CPI Inflation
were explained by changes in WALR and 45 percent of changes in CPI Inflation were explained by WADTDR.
Therefore, these results also indicate that the first two legs of the operating procedure are strong since 2014 however
the third leg needs to be worked upon. The scatter plots that define the relation between the chosen variables shown
below.
a b
Repo Rate and WACR WACR and WALR

9 13.00
8.5 12.00
8 11.00
7.5 10.00
7 9.00
6.5 8.00
6 y = 1.1026x - 0.7432 7.00 y = 0.758x + 6.0756
R² = 0.9764 R² = 0.8564
5.5 6.00
5 5.00
5 5.5 6 6.5 7 7.5 8 8.5 5 6 7 8 9
d e
Figures 5 (a)
to (e): Scatter Plots for Chosen Variables
Figures 5 (a) to (e) illustrate the regression line fit between the variables under study. It can be noted that the data points
do not range all over the place. The structured appearance of the scatter plots leads to the conclusion that there is a
moderate to strong, positive correlation between the variables without any outliers. Considering the R square from the
above tables at 95% confidence level, we can conclude that there is a significant relationship between policy (repo) rate
and price stability indicator through a mediation of weighted average call money rate, weighted average lending rate
and weighted average domestic term deposit rates.
5. Conclusion
This paper provides new evidence on the conduct of monetary policy from January 2014 to June 2019, using a three-
step model to estimate the monetary pass-through from (i) changes in the policy rate to the operating target rate, (ii)
from the operating target rate to intermediate targets, and (iii) from intermediate targets to the policy goal variable
(price stability). The main findings are as follows- First, as desired there is a significant pass-through of changes in
policy rates to bank interest rates in India. The extent of pass-through to the deposit rate is larger than that to the lending
rate. Second, the last leg of the operating procedure has still not picked up to the desired level despite adopting FIT and
despite FIT being followed by an improvement in the communication policy of RBI.
Buoyantly, Reserve Bank’s step of embracing social media platforms for disseminating banking-related information to
all the stakeholders will boost the monetary policy transmission mechanism in India. This will help RBI in ensuring a
two-way communication, transparency, timeliness and subsequently anchoring inflation expectations of economic
agents.
References
Acharya, V. V. (2017, November 16). Monetary Transmission in India: Why is it important and why hasn’t it worked well?
Agrawal, A. (2018, May 17). Monetary policy comes full circle in 2018. LiveMint.
Ahmad, M. U., & Nasrin, S. (2017, Summer). An analysis of the effect of monetary policy changes on macroeconomic factors. XXIV (2(611)).
Banerjee, R., & Bhattacharya, S. (2008). The RBI’s Monetary Policy Reaction Function Does monetary policy in India follow an inflation targeting
rule? Annual Conference on Money & Finance. Axis Bank Limited.
Bansal, M. K. (2017). Role of Reserve Bank of India in Indian Economy. International Journal of Business Administration and Management, 7(1).
Bhattacharya, K. (2005, October). Monetary Policy Approaches in India.
Bhattacharya, K. (2012, May). Monetary policy approaches in India. BIS (31).
Bhoi, B. K., Mitra, A. K., Singh, J. B., & Sivaramakrishnan, G. (Vol 10 No 1 2017). Effectiveness of Alternative Channels of Monetary Policy
Transmission: Some Evidence for India. Macroeconomics and Finance in Emerging Market Economies, PP: 19-38.
Firend, Al R., Mohd.Taib Hashim (2015) Post-Arab Spring Institutional Encumbrance and Economic Development: A Preliminary Analysis,
The International Journal of Innovation and Business Strategy. Volume 3, Number 1, 2015
Friedman, M., & Schwartz, A. J. (1982). The Quantity Theory. In Monetary Trends in the United States and United Kingdom: Their Relation to
Income, Prices, and Interest Rates, 1867-1975. University of Chicago Press.
Friedman, B. M. (2000). Monetary Policy. NBER Working Paper No. w8057.
Goyal, A. (2011, October). Monetary Operating Procedures: Principles and the Indian process. Indira Gandhi Institute of Development Research.
Kanagasabapathy, K. (2001). Monetary Policy Underpinnings: A Perspective. Economic and Political Weekly Vol. 36, No. 4, Money, Banking &
Finance, 303-307+309-310.
Mathur, A., & Sengupta, R. (May 2019). Analysing monetary policy statements of the Reserve Bank of India. WP-2019-012 Indira Gandhi Institute
of Development Research, Mumbai.
Mishkin, F. S., & Felman, J. (1997). Monetary Policy and Inflation Targeting. In P. Lowe (Ed.). Alken Press Pty Ltd.
Mohanty, D. (2011). Operating Procedures of Monetary Policy. RBI.
Nachane, D. M., & Lakshmi, R. (2001, April). Measuring Variability of Monetary Policy Lags: A Frequency Domain Approach. European University
Institute Working Paper.
Patel, U. (2014). Report of the Expert Committee to Revise and Strengthen the Monetary Policy Framework. Reserve Bank of India.
Patra, M. &. (2000). Financial Stability: A Survey of the Indian Experience. RBI Occasional Papers, Summer, Vol. 21(1).
RBI. (2004). Monetary Transmission Mechanism (Part 1 of 2).
Reddy, Y. (1999). Monetary Policy in India: Objectives, Instruments, Operating Procedures and Dilemmas. RBI Bulletin, 53(7) .
Smitha, T. (2010, October). Impact of Monetary Policy on Indian Economy in the Post-reform Period.
Subbarao, D. (2013, August). Release of Reserve Bank of India’s History Volume IV. BIS Central Bankers’ Speeches.
Taylor, J. B. (Fall 1995). The Monetary Transmission Mechanism: An Empirical Framework. Journal of Economic Perspectives, Volume 9, Number
4, 11-26.
Textbooks and Reports

Roy, S. 2005. Macroeconomic Policy Environment. TATA McGraw Hill.
Reserve Bank of India Annual Reports (Various Issues)
RBI Annual Policy Statement (Various Years)
RBI Handbook of Monetary Statistics of India
Urjit Patel Committee Report, 2014
List of Reference Websites

www.rbi.org.in
www.mospi.gov.in
www.bloomberg.com
2019 The International Journal of Business and Management Research,
“IJBMR” Vol.12 Number 1
www.ijbmr.org
All Rights Reserved
2019 Issue1
The International Journal of Business and Management Research (IJBMR) is published annually
on December of every year via digital media and available for viewing and/or download from
the journal’s web site at
www.ijbmr.org
The International Journal of Business and Management Research (IJBMR) is a peer reviewed
publication. All Rights Reserved
ALL RIGHTS RESERVED
ISSN: 1938-0429
www.ijbmr.org
Volume 12, Issue 1
Note: The International Journal of Business and Management Research “IJBMR” is not responsible for this content, and the journal does
not accept any responsibility for the content. All responsibility is upon the authors of the papers and research published in this issue, and
the content of their work is considered hereby entirely author’s sole responsibility.
View publication stats

Development Assistance and Ghana's Long Term Growth.: December 2019

Uploaded by

Copyright:

Available Formats

Development Assistance and Ghana's Long Term Growth.: December 2019

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Development Assistance and Ghana's Long Term Growth.: December 2019

Uploaded by

Copyright:

Available Formats

See discussions, stats, and author profiles for this publication at: https://www.researchgate.

Development assistance and Ghana's long term growth.

Research · December 2019

Benjamin Osei Gyamfi

International Trade and Business View project

The user has requested enhancement of the downloaded file.

A refereed journal published by the International Journal of Business and Management

Volume 12, Issue 1

Editor-In-Chief: Dr. John Phillips

Deputy Editor: Dr. Firend Al. Rasch,

Development Assistance and Ghana’s Long Term Growth

Strategizing Indian management education: need of the hour

Learning experience: A mediator between self-determination and financial well-being

Role of Repo Rate in Indian Monetary Policy Since 2014

Jiang Hong Lia, Prince Asare Vitenu-Sackey

Error! Objects cannot be created from editing field codes.

Error! Objects cannot be created from editing field codes.

Error! Objects cannot be created from editing field codes.

Error! Objects cannot be created from editing field codes.

Substituting Eq. (3) into Eq. (4) yield the following:

Error! Objects cannot be created from editing field codes.

variables variable description source

Table 2 List of countries and their categories

Categories High GDP per capita Low GDP per capita

4 Senegal 9 Burkina Faso

5 The Gambia 10 Niger

Source: Prepared by Author

Table 3 Summary Statistics

Source: Prepared by Author

4. Results and Discussion

4.1 Correlation Matrix

LNGDPP NO_BA BANKS_BR LNAT LOANS_ DEPOSI LNTR UM

INF 0.241 0.192 0.189 0.134 -0.476 -0.368 1

LNSEP 0.100 0.085 0.188 0.201 0.127 0.197 0.096 1

LNTRADE -0.064 -0.080 -0.169 -0.126 -0.108 -0.007 0.077 -0.154 1

Source: Prepared by Author

4. 2 Panel unit roots test

Variable Form Method T-stat P-value sig. conclusion

lngdppc Level Levin -1.596 0.055 ** stationary

IPS 2.194 0.986 non-stationary

ADF-Fisher 9.574 0.975 non-stationary

PP-Fisher 16.353 0.695 non-stationary

First difference Levin -6.118 0.000 *** stationary

IPS -2.421 0.008 ** stationary

ADF-Fisher 41.037 0.004 ** stationary

PP-Fisher 61.358 0.000 *** stationary

no_banks Level Levin 2.064 0.981 non-stationary

IPS 1.493 0.932 non-stationary

ADF-Fisher 14.142 0.823 non-stationary

PP-Fisher 50.704 0.000 *** stationary

First difference Levin -45.486 0.000 *** stationary

IPS -18.102 0.000 *** stationary

ADF-Fisher 91.666 0.000 *** stationary

PP-Fisher 114.559 0.000 *** stationary

Banks_branches Level Levin -3.767 0.000 *** stationary

IPS 2.174 0.985 non-stationary

ADF-Fisher 19.902 0.464 non-stationary

PP-Fisher 16.259 0.701 non-stationary

IPS -4.338 0.000 *** stationary

PP-stat -3.149 0.001 * -2.362 0.009 -2.080 0.019 **