Does financial inclusion reduce non-performing loans and loan loss provisions?

Peterson Kitakogelu Ozili and Ahmed Adamu

MPRA Paper from University Library of Munich, Germany

Abstract: We examine whether countries that have high levels of financial inclusion have fewer non-performing loans and loan loss provisions in their banking sectors. The fixed effect panel regression methodology was used to analyse the effect of financial inclusion on bank non-performing loans and loan loss provisions. Using data from 48 countries, we find that greater formal account ownership is associated with high non-performing loans. Bank loan loss provisions are fewer in countries that have high levels of financial inclusion only when financial inclusion is achieved through the combined use of formal account ownership, bank branch supply and ATM supply. Also, non-performing loans are fewer in countries that experience economic boom and high levels of financial inclusion.

Keywords: financial inclusion; non-performing loans; loan loss provisions; financial stability; bank stability; ATM; formal account ownership; credit risk; access to finance. (search for similar items in EconPapers)
JEL-codes: G00 G20 G21 G23 G28 G29 O31 (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-acc, nep-ban, nep-cfn, nep-cwa, nep-fdg, nep-fle, nep-fmk, nep-isf and nep-pay
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