Measuring the Effects of Financial Inclusion on the Profitability of the Banking Sector in Iran: A System Generalized Method of Moments approach

Document Type : Original Article

Authors
ali kamali far 1
Amir Mohammadzadeh 2
farzad rahimzadeh 3
Mohsen Mohammad Nourbakhsh Langroudi 4
1 Ph.D. Candidate, Department of Financial Management, Faculty of Management and Accounting, Qazvin Islamic Azad University, Qazvin, ‎Iran.
2 Associate Professor, Department of Financial Management, Faculty of Management and Accounting, Qazvin Islamic Azad University, ‎Qazvin, Iran
3 Assistant Professor, Department of Economics and Accounting, Faculty of Management and Economics, Guilan University, Rasht, Iran.
4 Assistant Professor, Department of Financial Management, Faculty of Management and Accounting, Qazvin Islamic Azad University, ‎Qazvin, Iran
10.30495/jik.2024.76191.4449
Abstract
The banking system has a key role in the Iranian economy and is the most important institution for financing the economic activity of enterprises and capital allocation. As economic enterprises, banks are looking for profit and explaining the factors affecting their profitability is particularly important. Therefore, in this research, the effects of financial inclusion on the profitability of selected banks listed in the Tehran Stock Exchange have been studied in the period from 2006 to 2022. Also, dynamic panel data method and systematic GMM estimators have been used to estimate the model.

The results of model estimation showed that the components of financial inclusion have a positive effect on the profitability of the studied banks. The high number of these variables indicates that more people own a bank account, deposit in the bank and receive facilities. Therefore, banks have enough funds to lend and invest in profitable opportunities, and this has a positive effect on banks' profitability. The cost-to-income ratio and the amount of non-performing loans also have a significant negative effect on the bank's profitability and reduce it. The effect of capital adequacy and bank size on the profitability of banks is positive but not statistically significant. In addition, GDP growth and inflation have a positive and significant effect on the profitability of the studied banks
Keywords
Financial Inclusion
Banking Profitability
Systematic Generalized Method of Moments
Banking sector
          آل عمران، رویا، رحیم زاده، فرزاد & شکوهی فرد، سیامک.(1398). اثر اینترنت بر بازدهی سیستم بانکی (مطالعه موردی بانک‌های منتخب ایران). اقتصاد مالی. دوره 13. شماره47. صص 39-62.
-           اسدزاده، احمد و هیوا کیانی (1391)، تاثیر به کار گیری دستگاه های خودپرداز، پایانه فروش و شعب بر سودآوری بانک های منتخب ایران، فصلنامه اقتصاد و تجارت نوین، شماره های 29و 30، صص 206-181.
-           خادمی، سید رضا و همکاران.(1399). بررسی اثرات متغیرهای خاص بانکی و کلان اقتصادی بر سودآوری بانک‌ها(مقایسه مکاتب نئوکلاسیک و پست کینزین). اقتصاد مالی. سال14. شماره54. صص 213-252
-           فرهنگی علی اکبر، بهرامی حمیدرضا و حمزه زارع علمی (1394)، بررسی تاثیر خدمات بانکداری الکترونیک در افزایش منابع بانک ملت استان لرستان، مجله مدیریت توسعه و تحول، دوره 1394، شماره 21، صص 61-68.
-           عزتی و همکاران.(1395) . عوامل موثر بر سودآوری بانک های اسلامی (کشورهای عضو سازمان کنفرانس اسلامی). مجله اقتصاد و بانکداری اسلامی . پیاپی15. صص139-153.
-           مهربان پور، محمد رضا و همکاران.(1396). عوامل مؤثر بر سودآوری بانک ها. مطالعات تجربی حسابداری مالی.سال14. شماره54. صص119-140
-           نجفی شریعت زاده و همکاران.(1395). بررسی مولفه های موثر بر سودآوری بانک های تجاری ایران با استفاده از الگوی پنل ARDL . نشریه مهندسی مالی و مدیریت اوراق بهادار . شماره29 . صص47-71
 
 
-        Allen, F., Demirguc-Kunt, A., Klapper, L., & Martinez Peria, M. S. (2016). The foundations of financial inclusion: Understanding ownership and use of formal accounts. Journal of Financial Intermediation, 27(C), 1–30.
-           Athanasoglou, P. P., Brissimis, S. N., & Delis, M. D. (2008). Bank-specific, industry-specific and macroeconomic determinants of bank profitability. Journal of International Financial Markets, Institutions and Money, 18(2), 121–136.
-           Bitar, M., Pukthuanthong, K., & Walker, T. (2019). Efficiency in Islamic vs. conventional banking: The role of capital and liquidity. Global Finance Journal, 46, 1–40.
-           Boot, A. W., & Schmeits, A. (2000). Market discipline and incentive problems in conglomerate firms with applications to banking. Journal of Financial Intermediation, 9 (3), 240–273.
-           Burgess, R., Pande, R., & Wong, G. (2005). Banking for the poor: Evidence from India. Journal of the European Economic Association, 3(2–3), 268–278.
-           Chen, F.-W., Feng, Y., & Wang, W. (2018). Impacts of financial inclusion on non-performing loans of commercial banks: Evidence from China. Sustainability, 10(9), 1–28.
-           Demirgüç-Kunt, A. (2008). Finance for all? Policies and pitfalls in expanding access. Retrieved from https://www.worldbank.org/en/publication/gfdr/gfdr-2016/ background/financial-access.
-           Demirgüç-Kunt, A., & Huizinga, H. (1999). Determinants of commercial bank interest margins and profitability: Some international evidence. The World Bank Economic Review, 13(2), 379–408.
-           Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The global Findex database 2017: Measuring financial inclusion and the fintech revolution (The World Bank).
-          
-           Dietrich, A., & Wanzenried, G. (2011). Determinants of bank profitability before and during the crisis: Evidence from Switzerland. Journal of International Financial Markets, Institutions and Money, 21(3), 307–327.
-           Fadi Shihadeh (2021). Financial inclusion and banks' performance: Evidence from Palestine. Investment Management and Financial Innovations, 18(1), 126-138. doi:10.21511/imfi.18 (1).2021.11
-           Han, R., & Melecky, M. (2013). Financial inclusion for financial stability: Access to bank deposits and the growth of deposits in the global financial crisis (The World Bank).
-           Hong Vo,D.(2020). Financial inclusion and stability in the Asian region using bank-level data. Borsa Istanbul Review. Volume 21, Issue 1, pp. 36-43
-           Hunter, S., & dela Cruz, V., & Dole, D. (2016). Financial inclusion in the digital age. Asian Development Bank. Retrieved from https://www.adb.org/sites/default/files/ publication/219346/adbi-pb2016-7.pdf.
-           Kim, D. W., Yu, J. S., & Hassan, M. K. (2018). Financial inclusion and economic growth in OIC countries. Research in International Business and Finance, 43, 1–14.
-           Klein, P.-O., & Weill, L. (2017). Bank profitability: Good for growth? Universit´e de Strasbourg. Retrieved from https://econpapers.repec.org/paper/larwpaper/2017-02. htm.
-           Kondo, K. (2010). Do ATMs influence bank profitability in Japan? Applied Economics Letters, 17(3), 297–303.
-           Kondo, K. (2015). Cross-prefecture expansion of regional banks in Japan and its effects on lending-based income. Cogent Economics & Finance, 3(1), 1–11.
-           Kumar, V., Acharya, S., & Ho, L. T. (2020). Does monetary policy influence the profitability of banks in New Zealand? International Journal of Financial Studies, 8(2), 35.
-           Kumar.V., et al.(2021). Financial inclusion and bank profitability: Evidence from a developed market. Global Finance Journal. In Press.
-           Le, T.-H., Chuc, A. T., & Taghizadeh-Hesary, F. (2019). Financial inclusion and its impact on financial efficiency and sustainability: Empirical evidence from Asia. Borsa Istanbul Review, 19(4), 310–322
-           Mashamba, T., & Chikutuma, C. N. (2023). Determinants of bank profitability: Evidence from the emerging economy [Special issue]. Corporate & Business Strategy Review, 4(4), 310–323.
-           Mirzaei, A., Moore, T., & Liu, G. (2013). Does market structure matter on banks’ profitability and stability? Emerging vs. advanced economies. Journal of Banking & Finance, 37(8), 2920–2937.
-           Nguyen, T. L. A. (2018). Diversification and bank efficiency in six ASEAN countries. Global Finance Journal, 37, 57–78.
-           Qehaja-Keka, Vese, Skender Ahmeti, and Muhamet Aliu. (2023). BANK PROFITABILITY DETERMINANTS: EVIDENCE FROM KOSOVO AND ALBANIA. Journal of Liberty and International Affairs 9 (2):297-311.
-           Pasiouras, F., & Kosmidou, K. (2007). Factors influencing the profitability of domestic and foreign commercial banks in the European Union. Research in International Business and Finance, 21(2), 222–237.
-           Patwardhan, A. (2018). Financial inclusion in the digital age. In D. L. K. Chuen, & R. Deng (Eds.), Vol. 1. Handbook of Blockchain, digital finance, and inclusion (pp. 57–89). New York, NY: Elsevier.
-           Shihadeh, F., & Liu, B. (2019). Does financial inclusion influence the banks risk and performance? Evidence from global prospects. Academy of Accounting and Financial Studies Journal, 23(3), 1–12.
-           Tan, Y. (2016). The impacts of risk and competition on bank profitability in China. Journal of International Financial Markets, Institutions and Money, 40, 85–110.
-           Tan, Y., Floros, C., & Anchor, J. (2017). The profitability of Chinese banks: Impacts of risk, competition and efficiency. Review of Accounting and Finance, 16(1), 86–105.