Financial inclusion and banks' performance: Evidence from Palestine

  • Received November 19, 2020;
    Accepted February 1, 2021;
    Published February 8, 2021
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  • Article Info
    Volume 18 2021, Issue #1, pp. 126-138
  • Cited by
    10 articles

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This work is licensed under a Creative Commons Attribution 4.0 International License

This study aims to examine the relationship between financial inclusion indicators and bank performance in Palestine. The study population and its sample include all 15 banks operating in Palestine and cover the period 2006 to 2016 with panel data from 162 observations. To interpreter the variables, the study uses the volume of loans to SMEs (usage), banking penetration, number of ATMs and branches (access), and online banking, the latter if it is a dummy variable. Further, the study uses operational profits, total revenues and ROE as bank performance indicators and dependent variables. Using empirical analysis, the results indicated that banking penetration tools, branching and ATMs, could enhance bank performance. Despite the decline in lending to SMEs, this factor could positively improve the performance of banks in Palestine. In general, financial inclusion helps banks improve their performance and increase their revenues. This study recommends that government organizations can use the obtained results to formulate their strategies and agendas for improving financial inclusion in Palestine and other developing countries.

The author is thankful to Bo Liu and Azzam Hanoon for their comments and suggestions to improve this paper. The author discloses that funding for the writing of this paper comes from the TAAWON research fund.

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    • Table 1. Heteroscedasticity
    • Table 2. Variable definitions and descriptive statistics
    • Table 3. Correlation matrix
    • Table 4. Variance inflation factor
    • Table 5. GLS estimation results
    • Table 6. Hausman test
    • Table 7. Fixed-effect and GMM estimation results
    • Investigation
      Fadi Shihadeh
    • Validation
      Fadi Shihadeh
    • Writing – original draft
      Fadi Shihadeh
    • Writing – review & editing
      Fadi Shihadeh