DOES FINANCIAL INCLUSION AFFECT PROFITABILITY OF COMMERCIAL BANKS?

Purpose: The objective of this study is to investigate the impact of financial inclusion on commercial banks profitability in 60 countries between 2017 and 2021. Design/Methodology/Approach: The study used 300 observations from countries with developed and undeveloped banking systems. The paper applies estimation methods including Pooled OLS, FEM, REM and GLS related to panel data as well as multicollinearity, heteroscedasticity tests for model selection. Research findings: Similar to previous papers, this research proved that most financial inclusion indicators have positive correlation with commercial banks profitability. In addition, this research suggested 3 new variables and pointed out: “Institutions of commercial banks”; “Outstanding-loans with commercial banks” positively impact banks profitability whereas “Outstanding-deposits with commercial banks” has negative influence on banks profitability. Theoretical contribution/Originality: The majority of previous papers have explored the effect of financial inclusion at the national level, for example, the relationship between financial inclusion and economic growth. Meanwhile, this paper investigated the impact of financial inclusion on commercial bank profitability, an issue concerned recently. Policy implication: This study can assist countries achieve a higher level of financial inclusion to raise commercial banks profitability, thereby boosting economic growth.