Impact of financial inclusion on financial performance a study of Pakistan banking industry
Description
The purpose of this study is to explore the relationship between indicators of financial inclusion and the banking performance in Pakistan. The sample population encompasses all 16 banks operating in Pakistan and encompasses the time frame from 2009 to 2020, drawing from 192 observations obtained from panel data. The study examines the impact of financial inclusion (FI), credit risk (CR), size, and leverage as independent variables on the financial performance of banks, as measured by return on assets (ROA) and return on equity (ROE). The white test was performed to detect heteroscedasticity, with a significance level greater than 0.05. The Hausman test was conducted for ROA and ROE separately, revealing that financial inclusion has a negative and significant impact on financial performance, as indicated by the fixed effects model for ROE and random effects model for ROA. Therefore, the study concludes that greater financial inclusion does not necessarily lead to better financial performance for firms in Pakistan. The study suggests that the findings could guide the development of strategies and initiatives to improve financial inclusion in Pakistan and other developing countries. Methodology” This study manually collected data from the annual reports of all banks operating in Pakistan between 2009 and 2020, which can also be obtained through the State Bank of Pakistan, the Pakistan Stock Exchange, and the Pakistan Banks' Association. The study included 16 banks in total, but due to variations in their financial statements, the annual reports of the PBA were utilized instead. The PBA's reports also reclassified some categories of Islamic banks to conduct a more comprehensive analysis and discussion. Our study involved a sample of 16 scheduled banks in Pakistan, observed over an 11-year period from 2009 to 2020. Panel data was used for 192 observations, covering a time frame of 11 years. The data on the number of branches, ATMs, bank assets, ROE, and online banking services were collected from the annual reports of banks operating in Pakistan. While some banks have complied with this directive and included the required classification in their annual reports, most banks have not yet provided such information in their annual reports. This study faces a primary challenge in evaluating the impact of financial inclusion on bank performance, which stems from the limited availability of data. As several studies have sought to conduct empirical analyses on various aspects of the banking sector, access to data sources can pose difficulties for this type of research (Frame & White 2004). The study holds significance for bank managers, credit managers, financial and monetary policy makers in developing countries like Palestine, Jordon, etc, as its results can be applied to inform their decisions. Therefore, it is crucial to set up a banking agenda and lending strategies that are in line with both the requirements of underprivileged people and the performanc
Files
Institutions
- Hamdard University - Islamabad Campus