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The Causal Relationship between Financial Development and Economic Performance in Tanzania
(SSRN Electronic Journal, 2015-09) Aikaeli, Jehovaness; Mbellenge, Costantine Richard
This study determines causal relationship between financial development and economic performance in Tanzania. The study employs cointegration and vector error correction model techniques. Granger causality test was applied to ascertain causation between financial development and economic performance. Overall economic performance is measured by the GDP out-turn; and proxies of financial development are: the ratio of money supply to nominal GDP; and growth of credit to private sector. The results show that there is a stable long-run relationship between financial development and economic performance in Tanzania. Granger causality test indicates that the causality runs from financial development to economic performance.
Commercial Banks Efficiency in Tanzania
(SSRN Electronic Journal, 2006-12) Aikaeli, Jehovaness
Efficient banking system reflects a sound intermediation process and hence the banks' due contribution to economic growth. If commercial banks are functioning efficiently, monetary policies are likely to be effective. This study is motivated by the fact that, though banking sector is the largest part of the financial system in Tanzania, little is known about its efficiency status. Secondary time series data are used in empirical analysis of banks' efficiency. Non-parametric Data Envelopment Analysis (DEA) model is utilised in estimation of technical and scale efficiency, while x-inefficiency is estimated using multi-product translog cost function. Though banks were not full efficient in all respects, they performed fairly well during the 1998-2004 period. Nevertheless, the major conclusions show that banks still have the reasons to improve their performance.
Determinants of Excess Liquidity in Tanzanian
(2011-01) Aikaeli, Jehovaness
Among the current concerns in Tanzania is that banks are awash with liquidity notwithstanding the private sector high demand for credit. Excess liquidity constrains banks’ productivity/efficiency; and on the other hand, strangles the share of credit allocated to the private sector, thereafter upsetting economic growth. To determine the causes of excess liquidity, autoregressive distributed lag model is employed. The findings suggest that high cost of funds, credit risks, volatility of deposit holders’ cash preference, inter alia, perpetuated accumulation of excess liquidity in commercial banks. Important policy implications on price stability, risks minimization, proper supervision and optimal liquidity management are highlighted.
Determinants of Excess Liquidity in Tanzanian Commercial Banks
(SSRN Electronic Journal, 2006-05) Aikaeli, Jehovaness
Among the current concerns of policymakers, economists, and analysts in Tanzania is that banks are awash with liquidity despite the high private sector credit demand. On one hand, excess liquidity constrains banks' productivity/efficiency; while on the other hand, it strangles the share of credit allocated to the private sector therefore upsetting economic growth. To determine the causes of excess liquidity, autoregressive distributed lag model is employed in this study. The findings suggest that high cost of funds, credit risks, volatility of deposit holders' cash preference, and the rate of required reserves perpetuated accumulation of excess liquidity in commercial banks in Tanzania. The main empirical findings and conclusions have important policy implications on price stability, risks minimisation, proper supervision and optimal liquidity management by the commercial banks.
Determinants of Informal Employment: A Case of Tanzania Construction Industry
(SSRN Electronic Journal, 2013-04-20) Aikaeli, Jehovaness
This paper analyses the determinants of informal employment in Tanzania’s construction industry. A Logit regression model is employed in estimating factors that influence the choice of type of employment (formal versus informal) for micro and small entrepreneurs. The results reveal that higher earnings in the informal compared to the formal settings – given the professional status of the micro and small practitioners – is among the major reasons for workers in this industry to choose informal rather than formal employment. The other factors that contribute to choosing informal employment include; lack of capital, which deters micro and small entrepreneurs from starting large formal firms, and low education. For firms, the possibility of paying the workers low salaries, and being female are factors that increase the possibility of informal employment. Policies suggested that can enhance creation of decent employment are; improving financial services through risk mitigation, credit information dissemination and outreach to MSEs; enhancing and rationalizing earnings in the economy; and improving the quantity and quality of education as an enabling instrument.
The Determinants of Interest Rate Spreads in Developing Countries: Evidence on Tanzania, 1991-2009
(2011) Aikaeli, Jehovaness; Mugizi, Francisco M. P.; Ndanshau, Michael O. A.
The now market based financial system in Tanzania is characterized by relatively high interest rate spreads. This paper sought to establish relative importance of macroeconomic and regulatory factors in explaining persistence of interest rate spread in Tanzania during the period 1991:I - 2009:IV. A Cointegration and Error Correction Model (ECM) was used to fit the data for Tanzania. The results revealed the interest rate spreads in Tanzania were strongly influenced by net government borrowing from commercial banks, development of the banking sector, statutory minimum reserve requirement and the discount rate. Among others, the results suggest the importance of low discount rate and reduced or total dispense with reserve requirement as a monetary policy strategy to reduce interest rate spreads in Tanzania. Importance of price stability in financial deepening is also underscored by the results.
Determinants of Rural Income in Tanzania: An Empirical Approach
(RESEARCH ON POVERTY ALLEVIATION (REPOA), 2010) Aikaeli, Jehovaness
Despite many initiatives to reduce rural poverty in Tanzania in the last ten years, rural incomes have not improved significantly. Rural poverty remains a critical economic problem. To better inform rural policies and interventions, this study conducted an econometric analysis of data from the 2005 Tanzania Rural Investment Climate Survey to assess the impact of selected socio-economic and geographic factors on the income of rural households and communities. The analysis found that improvements in four variables had a significant positive impact on the incomes of rural households the level of education of the household head, size of household labour force, acreage of land use and ownership of a non-farm rural enterprise. The study also found that income was lower in female-headed households than male-headed households
Efficiency of Botswana Meat Commission An Empirical Approach
(SSRN Electronic Journal, 2013-01) Nkombeledzi, Geraldine; Aikaeli, Jehovaness
This paper investigates the efficiency status of Botswana Meat Commission (BMC), which is a public company. It employs transcendental logarithmic Stochastic Production Frontier to estimate efficiency, and ordered Logit model to ascertain determinants of the efficiency of BMC. Estimation data for the period of study (1979-2009) were accessed from the Bank of Botswana, Central Statistics Office and the BMC. The findings indicate that there were inefficiency in BMC of up to around 22%, and the main reasons for this include material inputs constraints (livestock availability), and insufficient penetration into the global market owing to low exchange rate competitiveness. The paper ends with some policies implications to deal with these constraints.
Fiscal Dividend from Saving, Investment and Per Capita Income Growth in Sub-Saharan Africa: Panel Data Analysis
(Canadian Center of Science and Education, 2014) Aikaeli, Jehovaness
Most of sub-Saharan Africa countries (SSA) have recorded impressive rates of growth and remained resilient to shocks especially during the recent past. Nevertheless, the status of social welfare has remained low as manifested by poor quality of standard of living and short longevity of life. In cognisance of the role of public sector to wellbeing through the fiscal arrangement, the objective of this study was to unearth the extent to which SSA have taken advantage of the achieved saving, investment and growth performance to enhance fiscal gains. Panel data analysis of 40 countries was done and results indicated that per capita income growth, total investment and gross national saving bolstered governments’ revenue and thus reduced budget deficits in SSA, except in the global economic crisis during which, only saving yielded significant fiscal dividend in terms of cushioning the revenue. In view of this, enhancing national savings (both public and private) in SSA can appropriate surpassing return to fiscal stance.
Improving Competitiveness for SMEs to Harness Available Trade and Investment Opportunities: The Case of Tanzania
(SSRN Electronic Journal, 2007-01) Aikaeli, Jehovaness
Less developed countries capability to face global economic challenges depends so much on the stage of development of their small and medium enterprises (SMEs). Nevertheless, SMEs competitiveness in Tanzania and other developing countries face a number of encumbrances hindering their success in both local and international markets. This paper undertakes a thorough review of the factors affecting SMEs competitiveness in Tanzania. Appropriate existing literature is reviewed through library research by which constraints facing SMEs such as: bureaucracies in the legal and regulatory framework, poor infrastructures, inadequate business skills, and limited access to finance are identified, inter alia. The study looks also at the other developing countries' performance, specifically, with a brief illustration of the export success case of Jamaica. Based on the findings accentuated in the literature and the data analysis, policy recommendations for the improvement of SMEs competitiveness are made accordingly. Among the several implicated policies are: the government should continue to institute environment conducive for businesses, promote the use of research and development outputs, emphasise business agglomerations and sharing of capacities, and continually propagate entrepreneurial attitudes and skills.
Informal Construction Employment, Earnings and Activities: A Boon or Bane for Tanzania?
(SSRN Electronic Journal, 2015-02) Mkenda, Beatrice K.; Aikaeli, Jehovaness
This paper assesses whether the growth of informal construction employment and activities in Tanzania are a boon or bane for informal workers. It examines the importance of employment and income provision, employment conditions, and linkages between formal and informal firms. It also examines the determinants of earnings of workers and the challenges faced by the informal construction sector. The study finds that informal construction activities are important in providing employment and income to people, although a significant number of employees work without contracts and pensions. The level of informal sector earnings is also lower than that of the formal sector. The statistically significant results from regression analysis of the determinants of earnings, which are positively related to earnings are; age, education level, and number of years of experience. The policy implications of this study include: the need for informal construction employees to be affiliated to pensions and health insurance benefits; requirement of a mechanism to enable them to formalize easily in order for them to access credit and to expand their operations; improvement in their skills is also important to enhance their income levels so as to reduce poverty; and to empower them to share in the growth of construction activities is important.
Military Expenditure and Economic Growth in Africa: A Cross Country Study of 48 States
(SSRN Electronic Journal, 2010-11) Aikaeli, Jehovaness; Mlamka, Bonaventura
This study sought to explore the impact of military spending on Africa’s economic growth through an investigation of the status quo across 48 African states. OLS estimation technique is used to analyze cross sectional data; with a view to the two scenarios: low military spending and high military spending contexts. In both cases it is consistently found that high military spending is counter economic growth in Africa, this implying that African countries have to minimize military spending for pro-growth sectors finance.
Money and Inflation Dynamics: A Lag between Change in Money Supply and The Corresponding Inflation Response in Tanzania
(SSRN Electronic Journal, 2007-04) Aikaeli, Jehovaness
The price of money is "the goods and services" it can buy, which means, if money is plenteous will chase fewer or less amount of goods and services than it could actually do. Under normal conditions, money-inflation relationship is not instantaneous and so we should not expect all outcomes of currently implemented monetary policy actions to happen in the same current period. What is not clearly known for Tanzania is the time it takes a change in money supply to start impacting on inflation. The main objective of this paper is therefore to determine this time lag. Seasonally adjusted monthly data for the period 1994-2006 are used in the analysis and a GARCH model is applied in investigating inflation-money relationship. Estimation results indicate that a current change in money supply would affect inflation rate significantly in the seventh month ahead. They show further that the impact of money supply on inflation is not a sort of one-time strike on inflation but a kind of persistent shock. The main policy implication is that if we want to influence inflation in a certain future month, then we should take a policy action seven months before the targeted period. On the other side, if we want to evaluate the effectiveness of a monetary policy action taken in any previous month, we have to assess it in the seventh month ahead.
Reflections on Tanzania’s Economic Growth
(Oxford University Press, 2010) Aikaeli, Jehovaness
Relationship between Profitability and Voluntary Disclosure: A Case of Banks in Kenya
(SSRN Electronic Journal, 2015-11-20) Aikaeli, Jehovaness; Rashid, Zuleikha
The purpose of this article was to examine the relationship between profitability and voluntary disclosure practices in the Kenyan banking sector. To measure the extent of disclosure, an un-weighted disclosure index consisting of 40 items was applied. The study employed ordinary least squares technique to analyse the data. On average, voluntary disclosure level of the Kenyan banks was found to be at 62.8%. Results show that profitability, listing status and size of the bank are positively and significantly associated with voluntary disclosure levels. In order to improve the general level of banks disclosure, there is a need for regulatory agencies in Kenya to strengthen compliance to the existing disclosure requirements.
What Growth Pattern is needed to achieve the Objective of Tanzania’s Development Vision–2025?
(2014) Rutasitara, Longinus; Aikaeli, Jehovaness
Tanzania Development Vision (TDV) 2025 (or Vision 2025) envisions Tanzania that is “transformed from a low productivity agricultural economy to semi-industrialized one led by modernized and highly productive agricultural activities, which are integrated and buttressed by supportive industrial and services activities in the rural and urban areas. The development indicators in TDV 2025 comprise: (i) high quality livelihood; (ii) peace, stability and unity; (iii) good governance; (iv) a well-educated and learning society; and (v) a competitive economy capable of producing sustainable growth and shared benefits (URT, 1999). Tanzania has attained a good average annual growth rate of GDP of 7 percent in the past 10 years or so. However, the indicators of poverty, as recent as 2011/12 Household Budget Survey show that basic needs poverty stands at 28.2 percent, with food poverty headcount at 9.1 percent. The rural areas are most hit although rising unemployment among the youth and urban poverty are becoming thorny. This paper analyzes the growth pattern of Tanzania over the past decade or so (13 years of data points) and makes forward-looking policy options for a faster economic growth. In view of the widely-held notion of a strong two-way relationship between economic growth and human development (Boozer, Ranis, Stewart and Suri, 2003), it is maintained that economic growth can be sustained where human development elements are upgraded, particularly the human capital aspect through education and training, other elements of human development including health, sanitation, civil freedoms, participation etc. The human capital aspect is upheld as the foremost factor since it organizes the rest of the factors, innovation and competitiveness. Section 2 describes Tanzania’s growth pattern and casts an impression of what it should be to attain the objectives of the country’s Vision 2025 and beyond and basic requirements for the required growth momentum. The “current growth pattern” as (i) sector growth rates and (ii) sector shares of GDP is described for the past 13 years depending on the availability of comparable data for major sector categories and respective sub-sectors as identified and classified by the NBS. Section 3 presents an outlook for the growth pattern towards 2025 with emphasis on physical infrastructure and human capital (skills) development. Section 4 provides short concluding remarks.

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