Applying Bayesian methods to measure the impact of financial inclusion on banking performance: An empirical analysis for selected countries in Asia

This study investigates the impact of financial inclusion on the performance of commercial banks in 10 Asian countries (including both developed and developing countries) from 2008 to 2021 by measuring the probability of impact using Bayesian methods. Financial inclusion is processed through PCA (Principal Component Analysis). The results show that financial inclusion has a negative impact on bank performance in the studied group of countries. However, when analyzing specific groups of countries based on per capita income criteria below $5,000 and above $5,000, the results indicate that in countries with per capita income below $5,000, expanding branch networks negatively affects the performance of commercial banks, but increasing the number of ATMs helps improve the performance of commercial banks. In contrast, in countries with high per capita income such as Japan, South Korea, and Singapore, expanding branches or increasing the number of ATMs negatively impacts ROE (Return on Equity), while the number of bank branches positively affects ROA (Return on Assets), and the number of ATMs negatively affects ROA. These findings suggest some policy implications for making financial inclusion more effective in impacting commercial banking performance, tailored to the economic and social characteristics of each country.