Year: 2025
Type: article
Abstract: Evidence shows that financial inclusion plays a key role in driving economic growth and social development by strengthening the financial system and reducing poverty and income inequality. However, its impact on the financial performance of banks remains inconclusive. This paper explores the relationship between financial inclusion and the financial performance of commercial banks in Ethiopia, using a sample of 16 banks. We analyse 10 years of data (2013–2022) collected manually from the National Bank of Ethiopia (NBE) and the annual reports of commercial banks. A two-step system Generalized Method of Moments (GMM) is employed, alongside other linear panel data model estimators. The findings reveal that increased financial inclusion has a significant positive impact on the financial performance (ROA and ROE) of commercial banks in Ethiopia. The GMM estimation result also shows that bank performance indicators (ROA and ROE) are positivelyassociated with their past realizations. Regarding bank-specific control variables, the cost-efficiency ratio has a significant negative impact on bank profitability. The study recommends that banks improve accessibility by expanding branch networks and ATMs and by offering innovative financial products to enhance profitability.
Institutions: Debre Markos University, Panjab University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4409654913