Does Financial Inclusion Influence the Banks Risk and Performance? Evidence from Global Prospects

Fadi Shihadeh, Bo Liu

Abstract

The aim of this study to examine whether financial inclusion influences banks' performance and risks. The study examined the relationship between enhancing the financial inclusion and banks performance and risk. The study used data from BankScope, World Bank economic development, and financial development databases for 189 countries and 701 banks. The study used the empirical approach to testify to the study hypothesis. The study presents global evidence that enhancing financial inclusion, with branches as the main tool for banking penetration, and other financial inclusion indicators could help the banks to achieve more return and decrease the risks. This evidence not only supports the global agenda to enhance financial inclusion but also encourages banks to invest in more branching and penetration. Therefore, policymakers can use these findings to develop their strategies in the expansion of the branches networks. Also, governments can play a vital role in developing the laws and procedures to enhance the banking penetration to reach more disadvantaged people. This study presents global evidence that enhancing the financial inclusion will positively affect the bank's activities as well as the disadvantaged life. Furthermore, this study covers the financial inclusion topic from the new novel, thus open a new field of research for further research.