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Is financial inclusion good for bank stability International evidence SRO-version.pdf (621.69 kB)

Is financial inclusion good for bank stability? International evidence

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posted on 2023-06-09, 07:41 authored by Mostak AhamedMostak Ahamed, Sushanta Mallick
Financial inclusion has become an important public policy priority following the recent global financial crisis. Yet, we know very little of how it impacts soundness of the providers of financial services. Using an international sample of 2600 banks in 86 countries over the period 2004–12, we find that higher level of financial inclusion contributes to greater bank stability. The positive association is particularly pronounced with those banks that have higher customer deposit funding share and lower marginal costs of providing banking services; and also with those that operate in countries with stronger institutional quality. The results are robust to instrumental variables analysis, controlling for bank fixed effects, alternative measures of financial inclusion, among several other robustness tests. Our results highlight that the importance of ensuring inclusive financial system is not only a development goal but also an issue that should be prioritised by banks, as such a policy drive is good for their stability.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Journal of Economic Behavior & Organization

ISSN

0167-2681

Publisher

Elsevier

Volume

157

Page range

403-427

Department affiliated with

  • Accounting and Finance Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2017-09-13

First Open Access (FOA) Date

2019-02-01

First Compliant Deposit (FCD) Date

2017-09-13

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