Does bank competition promote financial inclusion? A cross-country evidence

ABSTRACT

The idea of financial inclusion has recently been discussed as one of the key strategies to enhance economic development (World Bank 2014). We move this discussion forward by examining if bank competition is a crucial component enforcing financial inclusion, which is arguably a finance supply-side driven process. In this study, we compute the financial inclusion index built on Sarma (2008) approach to better reflect banks’ willingness and capability to provide financial services. Applying System Generalized Method of Moments to the panel of 93 countries, we find that bank competition promotes financial inclusion.

KEYWORDS:

• Financial inclusion
• bank competition
• SGMM

JEL CLASSIFICATION:

• G21
• G41
• O16

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This research is funded by the Vietnam National Foundation for Science and Technology Development (NAFOSTED) [502.01- 2016.21].