Financial Inclusion and Bank Stability: Evidence from Europe

24 Pages Posted: 19 Jun 2020

See all articles by Gamze Ozturk Danisman

Gamze Ozturk Danisman

Kadir Has University

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

Date Written: May 26, 2020

Abstract

The Great Recession of 2007-2009 piqued the interest of policymakers worldwide, prompting various initiatives to stabilize the financial system and advance financial inclusion. However, few studies have considered their interconnectedness or whether any synergies or trade-offs exist between them. This paper investigates how financial inclusion affects the stability of the European banking system. The findings indicate that advancements in financial inclusion through more account ownership and digital payments have a stabilizing effect on the banking industry. A deeper investigation shows that such a stabilizing impact is mainly driven by the targeting of disadvantaged adults who are young, undereducated, unemployed, and who live in rural areas. Hence, along with its known benefits to society as a whole, financial inclusion has the additional benefit of improving the stability of the financial system. Such findings call for policy configurations that are specifically designed to achieve financial inclusion for disadvantaged individuals.

Keywords: Financial Inclusion, Bank Stability, Account Ownership, Digital Payments, Disadvantaged Adults

JEL Classification: G28, G21, G01

Suggested Citation

Danisman, Gamze Ozturk and Tarazi, Amine, Financial Inclusion and Bank Stability: Evidence from Europe (May 26, 2020). Available at SSRN: https://ssrn.com/abstract=3610453 or http://dx.doi.org/10.2139/ssrn.3610453

Gamze Ozturk Danisman (Contact Author)

Kadir Has University ( email )

Istanbul
Turkey

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

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