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An Analysis of the Impact of Digital Financial Inclusion on Financial Stability

Author

Listed:
  • Pardon Tshuma

    (National University of Science and Technology, Bulawayo Zimbabwe.)

  • Nothando Tshuma

    (National University of Science and Technology, Bulawayo Zimbabwe.)

  • Sindiso Mpofu

    (National University of Science and Technology, Bulawayo Zimbabwe.)

  • Emily Sango

    (National University of Science and Technology, Bulawayo Zimbabwe.)

Abstract

Over the last few years the world at large have witnessed a rapid development in digital ï¬ nance providing a promise to accelerate ï¬ nancial and economic inclusion. This has led to an inclusive growth focused on financial inclusion as a policy issue. Digital financial services have allowed governments to disburse funds to those in need quickly and have opened up new opportunities to many households and firms that had limited or no access to formal ï¬ nancial services. The major objective of the study was to examine the impact of digital ï¬ nancial inclusion on financial sector stability. The study adopted a quantitative research design and used two-step Generalized Method of Moments for dynamic panel data to explore such a relationship in twelve selected banking institutions for the period 2013 to 2023. An index of digital ï¬ nancial inclusion, z-score, real GDP, loans to asset ratio as well as inflation were used as data variables. The results of this study suggest that digital ï¬ nancial inclusion has a signiï¬ cant positive relationship with bank stability (z-score). Economic growth has a marginal positive effect with bank stability. In order to achieve sustainable digital financial inclusion, the study calls for policymakers to ensure digital ï¬ nancial literacy for all since it feeds into bank stability and also reduces bank insolvency. They should also ï¬ nd ways of enhancing depositor confidence and trust in the banking industry.

Suggested Citation

  • Pardon Tshuma & Nothando Tshuma & Sindiso Mpofu & Emily Sango, 2023. "An Analysis of the Impact of Digital Financial Inclusion on Financial Stability," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(4), pages 994-1006, April.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:4:p:994-1006
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    References listed on IDEAS

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