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Financial Inclusion and Bank Stability in the MENA Region

Author

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  • Awdeh Ali

    (63572 Lebanese University , Beirut, Lebanon)

  • El Moussawi Chawki

    (63572 Lebanese University , Beirut, Lebanon)

  • El Mokdad Ghaithaa

    (Arab Open University – Lebanon, Beirut, Lebanon)

  • Roussel Josse

    (University of Paris 8 Vincennes-Saint-Denis, Saint-Denis, France)

Abstract

This study investigates the impact of financial inclusion on bank stability in the MENA region over the period 2004–2022, using a panel of 201 banks from 15 MENA countries. Three multidimensional proxies for financial inclusion are constructed using data from the IMF Financial Access Survey. The study employs the two-step system generalized method of moments (GMM) and quantile regression to ensure the robustness of results. The findings consistently reveal a negative and statistically significant relationship between financial inclusion and bank stability, suggesting that expanding access to financial services may increase instability when not supported by adequate financial literacy and regulatory safeguards. In addition, the results show that bank-specific factors such as credit risk, cost-efficiency, size, and income diversification significantly affect stability. At the macro level, GDP per capita was found to be negatively associated with stability, while governance indicators showed to have constructive influence. The findings suggest that policymakers should adopt a cautious and sequenced approach to financial inclusion, ensuring that risk mitigation and consumer education mechanisms are in place before scaling up access.

Suggested Citation

  • Awdeh Ali & El Moussawi Chawki & El Mokdad Ghaithaa & Roussel Josse, 2025. "Financial Inclusion and Bank Stability in the MENA Region," Review of Middle East Economics and Finance, De Gruyter, vol. 21(3), pages 215-243.
    • Handle: RePEc:bpj:rmeecf:v:21:y:2025:i:3:p:215-243:n:1003
    DOI: 10.1515/rmeef-2025-0010
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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