CEEG Seminar Series: Bankruptcy prediction model for the banking sector in Mozambique

On Wednesday 1 June 2022, Reis Castigo Intupo, PhD candidate at the Faculty of Economics of the University of Eduardo Mondlane (UEM), will present his recent study entitled ‘Bankruptcy prediction model for the banking sector in Mozambique’.

The seminar is part of the CEEG Seminar Series, organized under the Inclusive growth in Mozambique (IGM) programme. The seminars offer a forum to share and discuss ongoing research on topics related to the work of the IGM programme and to foster a culture of research at the faculty and at UEM in general.

The seminars take place at the Faculty of Economics of the University of Eduardo Mondlane (UEM). It is a public event open to everyone. The presentation will be given in Portuguese.

About the study

There is a lack of studies on bankruptcy prediction models adapted to the Mozambican context. Meanwhile, the national banking sector has gone through turbulence during the last decade, resulting in the intervention of the Bank of Mozambique in two banks (Moza Banco, S.A and Nosso Banco, S.A).

This study contributes to improving methods of predicting bankruptcy risk in the Mozambican banking sector and thereby minimizing their occurrence by proposing a model of bankruptcy risk forecast for the banking sector in Mozambique. Four commercial banks were identified as a sample (Moza Banco, S.A, Nosso Banco, S.A, Barclays Bank Moçambique, S.A and Banco Terra, S.A), two considered ‘healthy’, two requiring intervention. Three financial ratios considered in the literature as good predictors of bankruptcy risk in the banking sector were identified (capital structure, return on assets and concentration of assets) and used to determine three classification zones (zone of high risk of bankruptcy, zone of uncertainty and zone of lower risk of bankruptcy). Six additional commercial banks were identified to test the model (Banco Único, S.A, FNB Moçambique, S.A, African Banking Cooperation (Mozambique), S.A, Ecobank Moçambique, S.A, Capital Bank (Mozambique), S.A and Société Générale Moçambique, S.A). The model proposed an accuracy level of 75%, which indicates a good ability to predict the risk of bank failure.