Financial Inclusion Indicators Affect Profitability of Jordanian Commercial Banks: Panel Data Analysis

Abstract

Previous literature supports the view that the financial inclusion leads to economic growth and helps alleviate poverty; however, it is still unclear whether financial inclusion increases bank profitability. The study assumes that financial inclusion is significant in enhancing the economy and minimizing loan accounts, and along with this assumption, the deposit size decreases the Jordanian banks’ profitability despite the fact that the financial services and access to them have no significant influence upon such profitability. The major profitability drivers examined in this study comprised financial inclusion and financial leverage. In this study, 13 Jordanian banks’ data from 2009 to 2019 were examined to determine the above issue. The study applied fixed effects on a panel data regression model. The findings indicated that the number of loan accounts and size of deposits negatively and significantly impacted the profitability of the commercial banks in Jordan. However, the number of branches and ATMs had no significant effect on the bank’s profitability. In sum, both leverage and bank size were the top two determinants of commercial banks’ profitability in Jordan. Based on the findings, Jordanian policymakers can shift their focus to offering affordable financial services that support SMEs’ loans and start-ups.

Financial Inclusion and Bank Profitability: Evidence from Indonesia

“…The findings of these studies showed the significant impact of financial inclusion in enhancing a bank's profit. However, the related studies highlighted that the relationship between financial inclusion and bank profitability is unclear as it depends on the different measurements of financial inclusion (Issaka Jajah et al, 2020;Kumar et al, 2022;Al-eitan et al, 2022). In contrast, this present study measures financial inclusion with the three dimensions of access, availability, and usage, following Erlando et al (2020).…”

“…Furthermore, previous studies have focused on determining the impact of financial inclusion on bank profitability, such as Al-eitan et al (2022) and Shihadeh et al (2018), which conducted a study in Jordan, Issaka Jajah et al (2020) in Sub Sub-Saharan Africa, and Kumar et al (2022) in Japan. The findings of these studies showed the significant impact of financial inclusion in enhancing a bank's profit.…”

“…Meanwhile, a negative association can be observed in a study by Al-eitan et al (2022). Similar to Shihadeh et al (2018), they used a sample of 13 Jordanian commercial banks to determine the significant role of financial inclusion on bank revenue.…”

Macro and Micro Determinants of Bank’s Profitability: Evidence from United States

“…Specifically, the total assets' logarithm was applied to estimate the size of the bank. The results of their study differed a lot -some of them believed the bank size hurt the profitability [12], and some of them believed the size has a beneficial influence on profitability.…”

Financial Inclusion and Financial Performance of Deposit Money Banks in Nigeria

“…Several studies were carried out analyzing and comparing the determinants of financial inclusion among regions (Sarma & Pais, 2011;Gupte et al, 2012;Akudugu, 2013;Hassan, 2015;Park & Mercado, 2015;Lotto, 2016;Hillary, 2016;Uddin et al, 2017;Abel et al, 2018;Hussaini & Chibuzo, 2018;Neaime and Gaysset, 2018;Anyanwu et al, 2018;Mdasha et al, 2018;Ojwang & Otinga, 2019;Kapaya, 2019;Kinyua & Omagwa, 2020;Al-Chahadah et al, 2020;Koomson et al, 2020;Singh, 2020;Anastesia et al, 2020;Kamal, 2021;Eze & Alugbuo, 2021;Johnpaul & Patience, 2021;Maity & Sahu, 2021;Naser & Alabassi, 2022;Al-Eitan et al, 2022;Winful et al, 2022). However, most of the previous studies focused on the determinants of financial inclusion in the developing countries of Asia, South America, Europe, North Africa, Sub-Saharan Africa or in countries such as Bangladesh, India, China and Indonesia.…”