Proceedings of The 8th International Conference on Business, Management and Economics
Year: 2023
DOI:
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Financial Inclusion and Bank Profitability: Evidence from Japan
Dr. Vijay Kumar, Dr. Sanjeev Acharya, Dr. Sujani Thrikawala
ABSTRACT:
The literature provides evidence of the impact of bank-specific and macroeconomic variables on the credit risk of the banks; however, it is still unclear whether or not a high level of financial inclusion reduces credit risk. Using a sample of 68 banks from Japan for the years 2011, 2014, and 2017, we investigate the impact of financial inclusion on the credit risk of banks in Japan. We find the banks that provide more financial services have lower credit risk than their counterparts. Our results suggest that an increase in borrowing from a financial institution leads to a reduction in the credit risk of the banks in Japan. We found that an increase in the number of branches does not affect bank profits. In terms of control variables, our results suggest that large banks and the banks with high capital ratios are less exposed to credit risk than their counterparts.
Keywords: Financial inclusion, credit risk, branches, non-performing loans