Financial inclusion and Financial Performance: The interplay role of capital adequacy requirements in Egyptian Banks
Abstract Purpose Financial inclusion aims to provide affordable financial services, including banking, loans, equity, and insurance products, to underserved populations. This study aims to examine the moderating effect of a bank’s capital adequacy ratio (CAR) on the nexus between financial inclusion...
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| Format: | Article |
| Language: | English |
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SpringerOpen
2024-08-01
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| Series: | Future Business Journal |
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| Online Access: | https://doi.org/10.1186/s43093-024-00383-9 |
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| author | Yousra R. Obiedallah Asmaa H. Abdelaziz |
| author_facet | Yousra R. Obiedallah Asmaa H. Abdelaziz |
| author_sort | Yousra R. Obiedallah |
| collection | DOAJ |
| description | Abstract Purpose Financial inclusion aims to provide affordable financial services, including banking, loans, equity, and insurance products, to underserved populations. This study aims to examine the moderating effect of a bank’s capital adequacy ratio (CAR) on the nexus between financial inclusion (FI) and a bank’s financial performance (FP) in the Egyptian setting. Design/methodology/approach The study uses two empirical linear mixed models (LMM) to test the moderation effect of a bank’s CAR on the association between FI and FP. The study sample comprises 360 bank quarter-observations of 10 listed banks in the Egyptian Stock Exchange (EGX) from 2013 to 2021. Findings The findings show that the bank’s CAR strengthens the association between FI dimensions, namely, deposit growth, loan growth, and the number of employees, and the bank’s FP with contradicted directions. Research limitations/implications This study provides policymakers insights into the crucial role of complying with banking regulation, namely, the capital adequacy ratio (CAR) and expanding financial inclusion practices to enhance and improve the bank’s FP. Thus, encouraging more strategies and facilities toward financial inclusion. Originality/value Due to the scarcity of financial inclusion literature in emerging economies, this paper extends FI literature by highlighting the moderation impact of a bank’s CAR on the relationship between FI dimensions and FP in the Egyptian banking sector. Consequently, this study clarifies this beneficial relationship, which may have significant implications for restoring the challenges faced by the Egyptian economy following the critical events it went through, which, in turn, impacted the country’s poor and vulnerable. |
| format | Article |
| id | doaj-art-8a82e7f8a49d479d97fc2aaa849469f2 |
| institution | OA Journals |
| issn | 2314-7202 2314-7210 |
| language | English |
| publishDate | 2024-08-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Future Business Journal |
| spelling | doaj-art-8a82e7f8a49d479d97fc2aaa849469f22025-08-20T02:31:58ZengSpringerOpenFuture Business Journal2314-72022314-72102024-08-0110111310.1186/s43093-024-00383-9Financial inclusion and Financial Performance: The interplay role of capital adequacy requirements in Egyptian BanksYousra R. Obiedallah0Asmaa H. Abdelaziz1Faculty of Commerce, Sohag UniversityFaculty of Management Sciences, Modern Sciences and Arts University (MSA)Abstract Purpose Financial inclusion aims to provide affordable financial services, including banking, loans, equity, and insurance products, to underserved populations. This study aims to examine the moderating effect of a bank’s capital adequacy ratio (CAR) on the nexus between financial inclusion (FI) and a bank’s financial performance (FP) in the Egyptian setting. Design/methodology/approach The study uses two empirical linear mixed models (LMM) to test the moderation effect of a bank’s CAR on the association between FI and FP. The study sample comprises 360 bank quarter-observations of 10 listed banks in the Egyptian Stock Exchange (EGX) from 2013 to 2021. Findings The findings show that the bank’s CAR strengthens the association between FI dimensions, namely, deposit growth, loan growth, and the number of employees, and the bank’s FP with contradicted directions. Research limitations/implications This study provides policymakers insights into the crucial role of complying with banking regulation, namely, the capital adequacy ratio (CAR) and expanding financial inclusion practices to enhance and improve the bank’s FP. Thus, encouraging more strategies and facilities toward financial inclusion. Originality/value Due to the scarcity of financial inclusion literature in emerging economies, this paper extends FI literature by highlighting the moderation impact of a bank’s CAR on the relationship between FI dimensions and FP in the Egyptian banking sector. Consequently, this study clarifies this beneficial relationship, which may have significant implications for restoring the challenges faced by the Egyptian economy following the critical events it went through, which, in turn, impacted the country’s poor and vulnerable.https://doi.org/10.1186/s43093-024-00383-9Financial inclusionBank performanceBank regulationLinear mixed model (LMM)EGX |
| spellingShingle | Yousra R. Obiedallah Asmaa H. Abdelaziz Financial inclusion and Financial Performance: The interplay role of capital adequacy requirements in Egyptian Banks Future Business Journal Financial inclusion Bank performance Bank regulation Linear mixed model (LMM) EGX |
| title | Financial inclusion and Financial Performance: The interplay role of capital adequacy requirements in Egyptian Banks |
| title_full | Financial inclusion and Financial Performance: The interplay role of capital adequacy requirements in Egyptian Banks |
| title_fullStr | Financial inclusion and Financial Performance: The interplay role of capital adequacy requirements in Egyptian Banks |
| title_full_unstemmed | Financial inclusion and Financial Performance: The interplay role of capital adequacy requirements in Egyptian Banks |
| title_short | Financial inclusion and Financial Performance: The interplay role of capital adequacy requirements in Egyptian Banks |
| title_sort | financial inclusion and financial performance the interplay role of capital adequacy requirements in egyptian banks |
| topic | Financial inclusion Bank performance Bank regulation Linear mixed model (LMM) EGX |
| url | https://doi.org/10.1186/s43093-024-00383-9 |
| work_keys_str_mv | AT yousrarobiedallah financialinclusionandfinancialperformancetheinterplayroleofcapitaladequacyrequirementsinegyptianbanks AT asmaahabdelaziz financialinclusionandfinancialperformancetheinterplayroleofcapitaladequacyrequirementsinegyptianbanks |