<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Dynamics in economic trend and banks’ creditors’ expectation have directed banks to search the innovative means of income generation. It is with this view that this study examines the relationship between the income diversification and financial performance of banks in SSA low income countries. A panel data of 1,280 observations were extracted from the financial profile of 160 commercial banks from 19 purposively selected countries from 2009 to 2016. The findings from the empirical analysis indicate that non-interest income accounts for 95% of operating income in Low Income countries’ commercial banking sector. Also, it was found that income diversification in SSA banks enhanced financial performance as affirmed by the finance theory because both interest and non-interest income sources are indeed blessings as they increase the financial performance significantly. Therefore, low income SSA countries’ commercial banks are urged to strive to ensure proper investment with their income diversification so that better performance of their economies is enhanced.</p></abstract>

Dynamics in economic trend and banks’ creditors’ expectation have directed banks to search the innovative means of income generation. It is with this view that this study examines the relationship between the income diversification and financial performance of banks in SSA low income countries. A panel data of 1,280 observations were extracted from the financial profile of 160 commercial banks from 19 purposively selected countries from 2009 to 2016. The findings from the empirical analysis indicate that non-interest income accounts for 95% of operating income in Low Income countries’ commercial banking sector. Also, it was found that income diversification in SSA banks enhanced financial performance as affirmed by the finance theory because both interest and non-interest income sources are indeed blessings as they increase the financial performance significantly. Therefore, low income SSA countries’ commercial banks are urged to strive to ensure proper investment with their income diversification so that better performance of their economies is enhanced.

Income Diversification in Low Income Sub-Saharan African Countries’ Commercial Banks: A “Blessing” or “Curse”?

Faculty of Accounting and Informatics, Department of Management Accounting

Folia Oeconomica Stetinensia

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Dynamics in economic trend and banks’ creditors’ expectation have directed banks to search the innovative means of income generation. It is with this view that...

Income Diversification in Low Income Sub-Saharan African Countries’ Commercial Banks: A “Blessing” or “Curse”?

Published Online: Dec 31, 2018

Page range: 90 - 105

Received: Jul 22, 2018

Accepted: Nov 17, 2018

DOI: https://doi.org/10.2478/foli-2018-0021

Keywords
interest income, fees and commission income, endogeneity, low-income economies, Herfindahl Hirschman Index, Sub-Saharan Africa

© 2018 Odunayo Magret Olarewaju, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Income Diversification in Low Income Sub-Saharan African Countries’ Commercial Banks: A “Blessing” or “Curse”?

Published Online: Dec 31, 2018

Page range: 90 - 105

Received: Jul 22, 2018

Accepted: Nov 17, 2018

DOI: https://doi.org/10.2478/foli-2018-0021

Keywordsinterest income, fees and commission income, endogeneity, low-income economies, Herfindahl Hirschman Index, Sub-Saharan Africa

© 2018 Odunayo Magret Olarewaju, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
interest income, fees and commission income, endogeneity, low-income economies, Herfindahl Hirschman Index, Sub-Saharan Africa