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The role of financial exclusion in weakening the performance of banks: dynamic panel data analysis in Algeria and Tunisia

Authors:
Nesrine Bettioui at Université de ain Témouchent
Nesrine Bettioui
Ali Bendob at Arab Monetary Fund
Ali Bendob
  • Arab Monetary Fund
Hasnia Douma at Université de ain Témouchent
Hasnia Douma
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Abstract

In East and North Africa region nearly 70 percent of adults (168 million) do not report any ownership of the account in the Arab world, which is lagging behind other regions. The importance of financial inclusion lies in its impact on the economy of countries, economic growth, financial sector development, improving financial sector stability. This study aims to diagnosing the relationship between financial inclusion and performance of banks in Algeria and Tunisia during 2004-2012 by using the panel data and the GMM method. Our results under static or dynamic panel data analysis show the negative impact of financial inclusion on profitability indicators (ROA, ROE and NIM). We conclude that financial inclusion decreases the profitability of banks. This result reinforces the role of lack of financial inclusion or financial exclusion in the non-development of the banking sector and the non-promotion of economic growth in Algeria and Tunisia during the study period.
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The role of financial exclusion in weakening the performance of banks: dynamic
panel data analysis in Algeria and Tunisia
Nesrine Bettioui, PhD Student1
Email: bettioui92nesrine@gmail.com
Ali Bendob*, PhD in finance1
Email: bendobali4@gmail.com
*Corresponding author
Hasnia Douma, PhD Student1
Email: doumahasnia@gmail.com
1Institute of Economic sciences, Commerce and Management Sciences.
LMELSMC Laboratory, University of Ain Temouchent, Algeria
Abstract
In East and North Africa region nearly 70 percent of adults (168 million) do
not report any ownership of the account in the Arab world, which is lagging behind
other regions. The importance of financial inclusion lies in its impact on the economy
of countries, economic growth, financial sector development, improving financial
sector stability. This study aims to diagnosing the relationship between financial
inclusion and performance of banks in Algeria and Tunisia during 2004-2012 by using
the panel data and the GMM method. Our results under static or dynamic panel data
analysis show the negative impact of financial inclusion on profitability indicators
(ROA, ROE and NIM). We conclude that financial inclusion decreases the profitability
of banks. This result reinforces the role of lack of financial inclusion or financial
exclusion in the non-development of the banking sector and the non-promotion of
economic growth in Algeria and Tunisia during the study period.
Keywords: financial inclusion, exclusion, performance of banks, CAMEL, Algeria,
Tunisia, GMM.
JEL Codes: C33, G20, G21, E44
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Appendixes list:
Appendix (01): The following table exposes the list of banks and their
countries
Tunisia
Algeria
1. The Tunisian Central Bank
2. Arab International Bank of
Tunisia
3. The National Bank of cropland
management
4. The Society Tunisian Bank
5.Security Bank
6. Bank HABITAT
7.Commercial Bank
8. The Arab Tunisian Bank
9. The International Union of
banks
10. The Banking Union traders
11. The international bank of
North Africa
12. Fund for the support of local
communities
13. The Libyan Tunisian Bank
Appendix (02): Description of dependent variables
Definitions
Labels
Variable
Net income /Assets
Net income / Equity
total income benefits - the
total benefits of deposits) /
Total Assets
Return on Assets
(ROA)
Return on the
Equity (ROE)
Margin Interest
Net(NIM )
Profitability
Appendix (03):Description of Independent variables
DESCRIPTIONS
Labels
Variable
Equity/ Tot Assets
CA1
Capital
Adequacy
Operating Income / average
assets
MG2
Management
Net Loans / tot Assets
LQ1
Liquidity
Gross Domestic Products (
annual %)
GDP
Gross
Domestic
Inflation (%)
INF
FIN
Inflation
Financial
Inclusion
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