Research
Below you'll find short descriptions of my research projects. I've provided links to the manuscripts or articles if you'd like to read further.
My research interests are, primarily, competition and industrial organisation. Expect research in that vein. But random topics that interest me may pop up every now and then.
Regulation and bank lending in South Africa - A narrative index approach
2025
Xolani Sibande, Dumakude Nxumalo, Keaoleboga Mncube, Steve Koch, Nicola Viegi
This article is the result of a successful proposal to the South African Reserve Bank following a call for papers on the impact of prudential regulation on financial services.
Abstract:
The extension of affordable credit is a key component of financial inclusion but it could reduce the stability of the financial sector. Prudential policies, on the other hand, are designed to mitigate financial sector risk. Thus, policies aimed at the extension of credit and prudential regulations may be in opposition. This study estimates and contrasts the impact of these potentially contradictory regulations on the bank lending volumes of South Africa's largest banks. We find that announcements of prudential regulation are associated with an increase in secured lending, while the implementation of prudential regulation is associated with an increase in unsecured lending. Despite tighter implementation of prudential reforms, we observe an increase in unsecured lending that is driven by unsecured lending to corporates. Our results also indicate the contractionary effects of prudential regulation on mortgage lending. Furthermore, the estimated effects of efforts aimed at extending credit to households have no impact on bank lending to households but increase secured lending to corporates. The two regulatory approaches overlap with regard to lending to corporates.
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Link to published article: see here
Estimating Bank Substitutability in the Personal Transactional Account Market in SA
2025
Dumakude Nxumalo and Steve Koch
This article is a component of my doctoral dissertation and is also the product of a successful proposal to a call for proposals by the Competition Commission of South Africa's 2023/2024 Multidisciplinary Research Grant Programme. Please do not cite as it is still in the draft stage.
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Abstract:
Research into South African retail banking has sought to assess the level of competition in banking markets without accounting for the degree of substitutability between banks. We combine consumer survey data with a constructed dataset of bank prices to estimate South African customer demand for personal transactional accounts using a flexible choice model. We find evidence of consumer responsiveness to price increases, as well as evidence of bank substitutability between a relatively recent entrant and the incumbent banks. These results, when constrasted with insight from an 2006-2008 banking inquiry which found limited evidence of competitive outcomes, suggests an improvement in competition in the personal transactional account market over time.
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Link to working paper: see here
Estimates of Banking Competition in SA Loan Markets
2025
Dumakude Nxumalo and Steve Koch
This article is a component of my doctoral dissertation. Please do not cite as it is still in the draft stage..
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Abstract:
This paper estimates the extent of competition between South African banks for the provision of loans between 2008 and 2022. This is achieved through the estimation of loan-specific Lerner Indices for 6 South African banks. We use accounting data and estimate multi-output translog cost functions to estimate bank marginal costs. Our results reveal differences in the evolution of market power, with half the banks in our sample experiencing increases in market power while the remainder experienced decreases. We construct a weighted average Lerner Index to approximate national market power. Our results indicate a general decline in bank market power over time -which is inferred to indicate increased competition for loan products in South Africa. We contrast this estimate with a structural measure of competition for loan provision over the same period. The Lerner Index and the structural measure trend in the same direction although the correlation between the two measures is low.
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Link to working paper: see here