Financial Inclusion and the Performance of Banking Sector in Palestine
Abstract
:1. Introduction
2. Literature Review and Hypotheses Development
3. Research Methodology
3.1. Sample Population
3.2. Variable Measurements
3.2.1. Dependent Variable
3.2.2. Independent Variables
3.2.3. Control Variables
3.3. Model Specification
4. Empirical Results and Discussion
4.1. Descriptive Statistics
4.2. Correlation Matrix
4.3. Regression Results
4.4. Additional Analysis
5. Conclusions and Recommendation
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Variable | Measurement | Symbol | Dimension |
---|---|---|---|
Dependent variables | |||
Return on assets | Net income/total assets | ROA | |
Net interest margin | Net interest income/earning assets | NIM | |
Return on equity | Net income/total equity | ROE | |
Independent variables | |||
Number of branches | Number of branches per 100,000 adults | FIN_BRANCH | Access |
Number of ATMs | Number of ATMs per 100,000 adults | FIN_ATM | Access |
Number of POS terminals | Number of POS terminals per 100,000 inhabitants | FIN_POS | Access |
Credit for SMEs | Credit for SMEs/total outstanding loans | FIN_SME | Usage |
Number of customer deposit accounts | Number of customer accounts per 1000 adults | FIN_DEPOSIT | Usage |
Average cost of maintaining a basic current bank account (annual fees) | Logarithm of the amount of annual fees | FIN_COST | Quality |
Control variables | |||
Nonperforming loan ratio | Nonperforming loans/total loans | NPLR | |
Liquidity ratio | Liquid assets/total assets | LAT | |
Cost efficiency ratio | Cost-to-income ratio | CIR | |
Capital adequacy ratio | Tier 1 capital and tier 2 capital/risk-weighted assets | CAR |
Variable | Obs. | Min | Max | Mean | St. Dev. |
---|---|---|---|---|---|
Profitability measurements (dependent variables) | |||||
ROA | 99 | –0.01 | 0.02 | 0.0089 | 0.00494 |
NIM | 99 | 0.03 | 0.09 | 0.0506 | 0.01577 |
Independent variables | |||||
FIN_BRANCH | 99 | 0.23 | 3.21 | 1.0245 | 0.63561 |
FIN_ATM | 99 | 0.38 | 5.90 | 2.1138 | 1.39870 |
FIN_POS | 99 | 199.00 | 232.00 | 219.6667 | 14.63330 |
FIN_SME | 99 | 0.00 | 0.25 | 0.1176 | 0.04858 |
FIN_DEPOSIT | 99 | 1104.00 | 1234.00 | 1177.5000 | 49.24765 |
FIN_COST | 99 | 11.51 | 15.73 | 13.9068 | 1.14972 |
Control variables | |||||
NPLR | 99 | 0.01 | 0.08 | 0.0365 | 0.01846 |
LAT | 99 | 0.21 | 0.57 | 0.3781 | 0.06809 |
CIR | 99 | 0.49 | 0.99 | 0.7238 | 0.10526 |
CAR | 99 | 0.11 | 0.34 | 0.1829 | 0.06580 |
Valid N (listwise) | 99 |
Variable | (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) |
---|---|---|---|---|---|---|---|---|---|---|---|---|
ROA (1) | 1 | |||||||||||
ROE (2) | 0.523 | 1 | ||||||||||
FIN_BRANCH (3) | 0.489 | 0.398 | 1 | |||||||||
FIN_ATM (4) | −0.331 | −0.423 | −0.416 | 1 | ||||||||
FIN_POS (5) | 0.065 | −0.142 | 0.089 | 0.160 | 1 | |||||||
FIN_SME (6) | −0.417 | −0.579 | −0.375 | 0.244 | 0.216 | 1 | ||||||
FIN_DEPOSIT (7) | 0.021 | −0.058 | −0.041 | 0.135 | 0.014 | −0.026 | 1 | |||||
FIN_COST (8) | 0.473 | 0.464 | 0.394 | −0.298 | 0.138 | −0.407 | −0.061 | 1 | ||||
NPLR (9) | −0.309 | −0.507 | −0.411 | 0.392 | 0.146 | 0.513 | 0.065 | −0.302 | 1 | |||
LAT (10) | 0.063 | 0.044 | 0.066 | −0.114 | 0.039 | −0.116 | −0.033 | 0.158 | −0.013 | 1 | ||
CIR (11) | −0.216 | 0.096 | −0.083 | 0.147 | −0.126 | 0.217 | −0.096 | −0.088 | −0.066 | −0.201 | 1 | |
CAR (12) | −0.381 | 0.258 | 0.094 *** | −0.122 ** | 0.213 * | −0.191 ** | −0.313 ** | −0.057 ** | 0.196 ** | 0.065 | −0.126 | 1 |
Diagnostics of multicollinearity | ||||||||||||
VIF | - | - | 1.26 | 1.29 | 1.16 | 1.62 | 1.02 | 1.39 | 1.53 | 1.04 | 1.87 | 1.63 |
Tolerance | - | - | 1.51 | 0.77 | 0.86 | 0.61 | 0.97 | 0.71 | 0.65 | 0.95 | 0.67 | 0.66 |
Variables | Panel A | Panel B | ||
---|---|---|---|---|
ROA | NIM | |||
(1) | (2) | (1) | (2) | |
Fixed Effect | GMM | Fixed Effect | GMM | |
Constant | 0.000 *** | 0.021 ** | 0.009 *** | 0.083 * |
(2.205) | (3.244) | (1.598) | (4.347) | |
L_ROA | 0.002 *** | 0.089 * | ||
(1.067) | (2.087) | |||
FIN_BRANCH | 0.003 *** | 0.049 ** | 0.024 ** | 0.081 * |
(0.1429) | (0.1273) | (0.1921) | (0.7691) | |
FIN_ATM | 0.002 *** | 0.001 *** | 0.081 * | 0.1563 |
(0.1573) | (0.1231) | (0.1343) | (0.2823) | |
FIN_POS | 0.140 | 0.132 | 0.4398 | 0.2367 |
(0.07314) | (0.0482) | (0.1096) | (0.4398) | |
FIN_SME | 0.341 | 0.154 | 0.3671 | 0.9521 |
(0.1031) | (0.1598) | (0.0156) | (0.2671) | |
FIN_DEPOSIT | 0.642 | 0.3273 | 0.3761 | 0.6341 |
(0.1173) | (0.2854) | (0.1041) | (0.4129) | |
FIN_COST | 0.064 * | 0.123 | 0.0710 * | 0.093 * |
(0.1061) | (0.3154) | (0.1485) | (0.6132) | |
NPLR | 0.007 *** | –0.082 * | 0.0031 *** | 0.0412 ** |
(−0.3244) | (0.2210) | (−0.2901) | (0.2319) | |
LAT | 0.024 ** | 0.039 ** | 0.5419 | 0.1634 |
(0.1342) | (0.6132) | (0.3861) | (0.6598) | |
CIR | 0.026 ** | –0.076 * | 0.002 *** | –0.058 * |
(−0.2910) | (0.3121) | (−0.2387) | (0.3992) | |
CAR | 0.069 * | –0.1834 | 0.6123 | –0.2671 |
(−0.022) | (0.8653) | (−0.0923) | (−0.1527) | |
R-squared | 0.706 | 0.406 | ||
Adj R-squared | 0.565 | 0.304 | ||
F-stat | 13.945 | 3.963 | ||
Prob F-stat | 0.000 | 0.007 | ||
Durbin–Watson | 1.932 | 1.884 | ||
Year Fixed Effects | Yes | Yes | ||
AR1 (p-value) | 0.003 | 0.005 | ||
AR2 (p-value) | 0.380 | 0.414 | ||
Sargan Test (p-value) | 0.414 | 0.521 | ||
Difference-in-Hansen Test (p-value) | 0.829 | 0.560 |
Variables | Panel A | Panel B | |
---|---|---|---|
ROA | NIM | ROE | |
(1) | (1) | (1) | |
Fixed Effect | Fixed Effect | Fixed Effect | |
Constant | 0.000 *** | 0.000 *** | 0.031 ** |
(3.505) | (1.819) | (2.515) | |
FIN_BRANCH | 0.062 * | 0.036 ** | 0.004 *** |
(0.9153) | (0.2104) | (0.3831) | |
FIN_ATM | 0.001 *** | 0.032 ** | 0.0971 * |
(0.731) | (0.435) | (0.1473) | |
FIN_POS | 0.201 | 0.3982 | 0.4543 |
(0.735) | (0.2196) | (0.257) | |
FIN_SME | 0.152 | 0.6810 | 0.1624 |
(0.321) | (0.1665) | (0.0643) | |
FIN_DEPOSIT | 0.417 | 0.4121 | 0.7662 |
(0.738) | (0.4011) | (0.6241) | |
FIN_COST | 0.041 ** | 0.0611 * | 0.0814 * |
(0.283) | (0.2451) | (0.8523) | |
NPLR | 0.005 *** | 0.0022 *** | 0.0001 *** |
(−0.472) | (−0.981) | (−0.3201) | |
LAT | 0.018 ** | 0.4181 | 0.9263 |
(0.4220) | (0.6122) | (0.1234) | |
CIR | 0.035 ** | 0.001 *** | 0.002 *** |
(−0.9101) | (−0.8712) | (−0.7543) | |
CAR | 0.045 * | 0.3312 | 0.2783 |
(−0.143) | (−0.1731) | (−1.2876) | |
B_SIZE | 0.0710 * | 0.000 *** | |
(0.1485) | (0.289) | ||
B_AGE | 0.081 * | 0.049 ** | |
(0.1343) | (0.031) | ||
Year Fixed Effects | Yes | Yes | Yes |
R-squared | 0.1206 | 0.4326 | 0.606 |
Adj R-squared | 0.551 | 0.464 | 0.6234 |
F-stat | 12.451 | 3.7131 | 4.963 |
Prob F-stat | 0.000 | 0.004 | 0.000 |
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Khatib, S.F.A.; Hendrawaty, E.; Bazhair, A.H.; Rahma, I.A.A.; Al Amosh, H. Financial Inclusion and the Performance of Banking Sector in Palestine. Economies 2022, 10, 247. https://doi.org/10.3390/economies10100247
Khatib SFA, Hendrawaty E, Bazhair AH, Rahma IAA, Al Amosh H. Financial Inclusion and the Performance of Banking Sector in Palestine. Economies. 2022; 10(10):247. https://doi.org/10.3390/economies10100247
Chicago/Turabian StyleKhatib, Saleh F. A., Ernie Hendrawaty, Ayman Hassan Bazhair, Ibraheem A. Abu Rahma, and Hamzeh Al Amosh. 2022. "Financial Inclusion and the Performance of Banking Sector in Palestine" Economies 10, no. 10: 247. https://doi.org/10.3390/economies10100247