The Impact of Financial Inclusion on Banking Stability: A Case Study of ASEAN- 5

Abstract

The study uses the SGMM estimation technique from 2007 to 2021 of 53 banks to examine the role of financial inclusion (financial inclusion – FI) on banking stability (Bank stability – BS) in ASEAN countries-5. The results all show that financial inclusion impacts banking stability in the case of countries in the ASEAN-5 region, depending on each variable measuring financial inclusion. Financial inclusion proxies represent access (number of automated teller machines (ATMs) per 100,000 adults; value of money transactions via the Internet) and usage variables (Number of accounts deposits at commercial banks per 1,000 adults) has a positive impact on banking stability. The financial inclusion variable represents accessibility (with the number of bank branches per 100,000 adults) having a negative impact on banking stability (Z-score), which implies that when the number of bank branches increases, it will contain many risk factors. Hence, bank managers need to be very careful when adjusting policies. This research has important implications for management in the banking industry in ASEAN-5 countries, especially in emerging and developing countries, thereby orienting the economies of countries in the region.