Financial Inclusion in Egypt: Does It Affect Banks’ Profitability and Liquidity?

Abstract

The purpose of this study is to investigate the association between financial inclusion and levels of profitability and liquidity of Egyptian banks. Two hypotheses are tested; the first is about whether financial inclusion has an impact on the Egyptian banks’ profitability, and the second is about whether financial inclusion has an impact on the Egyptian banks’ liquidity. Data of Egyptian banks for the period from 2012 to September 2018 are used to test the hypotheses of the study. Financial inclusion is measured by the access and usage measures derived from the G20 summit “Global partnership for Financial Inclusion”, profitability and liquidity are measured by multiple agreed-upon measures. The study which employed various regression models reveals that 53% of the variance in the Egyptian banks’ profitability can be explained by the variance in the financial inclusion measures, and that the various measures of banks’ liquidity are significantly affected by financial inclusion.