Financial inclusion and bank stability: evidence from capital buffer and capital adequacy ratio

Ozili, Peterson K (2025): Financial inclusion and bank stability: evidence from capital buffer and capital adequacy ratio. Forthcoming in:

Abstract

The study examines the effect of financial inclusion on bank stability, and the effect of bank stability on financial inclusion from 2011 to 2020. The study analyses 33 countries which are divided into Asian countries, African countries, European countries, and countries in the region of the Americas and using the panel regression method. It was found that high levels of financial inclusion have a significant positive impact on bank stability. The regional results show that financial inclusion improves bank stability in African countries and in countries in the region of the Americas while financial inclusion impairs bank stability in European countries. The analysis for the impact of bank stability on financial inclusion shows that bank stability has a significant effect on financial inclusion. The regional analysis shows that greater bank stability decreases financial inclusion in European and African countries while greater bank stability increases financial inclusion in countries in the Americas region. The results suggest that the effect of financial inclusion on bank stability, and the effect of bank stability on financial inclusion, depends on how financial inclusion and bank stability are measured and the region examined.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial inclusion, bank stability, capital adequacy ratio, capital buffer, financial inclusion index, automated teller machines, deposits, commercial banks
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages

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