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Financial inclusion and bank profitability: Evidence from a developed market

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  • Kumar, Vijay
  • Thrikawala, Sujani
  • Acharya, Sanjeev

Abstract

Previous literature supports the view that financial inclusion leads to economic growth and helps alleviate poverty; however, it is still unclear whether financial inclusion increases bank profitability. Using a sample of 122 Japanese banks from 2004 to 2018, we investigate this question. We find that financial inclusion is important even in a developed economy; branch contraction reduces the profitability of Japanese banks, although the numbers of loan accounts and automated teller machines (ATMs) do not affect bank profitability. Among bank-specific variables, cost management, credit risk management, and bank size are the key drivers of profitability.

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  • Kumar, Vijay & Thrikawala, Sujani & Acharya, Sanjeev, 2022. "Financial inclusion and bank profitability: Evidence from a developed market," Global Finance Journal, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:glofin:v:53:y:2022:i:c:s1044028321000077
    DOI: 10.1016/j.gfj.2021.100609
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