DOES DIGITAL FINANCIAL INCLUSION MATTER FOR BANK RISK-TAKING? EVIDENCE FROM THE DUAL-BANKING SYSTEM
This paper examines the nexus between digital financial inclusion (DFI) and levels of bank risk-taking, using a sample of 283 commercial banks (Islamic and conventional) from six countries over the period 2011 to 2019 and deploying panel-corrected standard errors, two-stage least squares-instrumenta...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Bank Indonesia
2021-04-01
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| Series: | Journal of Islamic Monetary Economics and Finance |
| Subjects: | |
| Online Access: | https://jimf-bi.org/index.php/JIMF/article/view/1320 |
| _version_ | 1827990023911243776 |
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| author | Hasanul Banna Md Rabiul Alam |
| author_facet | Hasanul Banna Md Rabiul Alam |
| author_sort | Hasanul Banna |
| collection | DOAJ |
| description | This paper examines the nexus between digital financial inclusion (DFI) and levels of bank risk-taking, using a sample of 283 commercial banks (Islamic and conventional) from six countries over the period 2011 to 2019 and deploying panel-corrected standard errors, two-stage least squares-instrumental variables and dynamic panel two-step generalized method of moments estimators. The findings suggest that Islamic banks take more risks than their counterpart conventional banks. The empirical evidence also indicates that an increase in the DFI index score reduces the overall level of bank risktaking and increases that of banking stability for commercial and conventional banks compared to Islamic ones. A strong association between DFI and bank risk-taking suggests that DFI not only reduces the default risk, leverage risk and portfolio risk of banks, but also increases financial mobility in the sample countries. Consequently, an inclusive digitalised banking industry ensures sustainable economic growth, which is likely to help maintain financial sustainability in times of crisis such as the Covid-19 pandemic. Our results are shown to be robust by various robustness checks. The study contributes to both the Islamic and conventional banking, as well as the digital financial inclusion, literature. The findings of the study provide various policy implications for policymakers and standard-setters in the countries examined. |
| first_indexed | 2024-04-10T00:30:28Z |
| format | Article |
| id | doaj.art-007223516bf641318f7fdbbe7e355bcf |
| institution | Directory Open Access Journal |
| issn | 2460-6146 2460-6618 |
| language | English |
| last_indexed | 2024-04-10T00:30:28Z |
| publishDate | 2021-04-01 |
| publisher | Bank Indonesia |
| record_format | Article |
| series | Journal of Islamic Monetary Economics and Finance |
| spelling | doaj.art-007223516bf641318f7fdbbe7e355bcf2023-03-15T04:25:34ZengBank IndonesiaJournal of Islamic Monetary Economics and Finance2460-61462460-66182021-04-017240143010.21098/jimf.v7i2.13201320DOES DIGITAL FINANCIAL INCLUSION MATTER FOR BANK RISK-TAKING? EVIDENCE FROM THE DUAL-BANKING SYSTEMHasanul Banna0Md Rabiul Alam1UAC, Universiti Malaya, MalaysiaUniversiti Malaya, MalaysiaThis paper examines the nexus between digital financial inclusion (DFI) and levels of bank risk-taking, using a sample of 283 commercial banks (Islamic and conventional) from six countries over the period 2011 to 2019 and deploying panel-corrected standard errors, two-stage least squares-instrumental variables and dynamic panel two-step generalized method of moments estimators. The findings suggest that Islamic banks take more risks than their counterpart conventional banks. The empirical evidence also indicates that an increase in the DFI index score reduces the overall level of bank risktaking and increases that of banking stability for commercial and conventional banks compared to Islamic ones. A strong association between DFI and bank risk-taking suggests that DFI not only reduces the default risk, leverage risk and portfolio risk of banks, but also increases financial mobility in the sample countries. Consequently, an inclusive digitalised banking industry ensures sustainable economic growth, which is likely to help maintain financial sustainability in times of crisis such as the Covid-19 pandemic. Our results are shown to be robust by various robustness checks. The study contributes to both the Islamic and conventional banking, as well as the digital financial inclusion, literature. The findings of the study provide various policy implications for policymakers and standard-setters in the countries examined.https://jimf-bi.org/index.php/JIMF/article/view/1320digital financial inclusion indexdual-bankingbank risk-takingcovid-19 |
| spellingShingle | Hasanul Banna Md Rabiul Alam DOES DIGITAL FINANCIAL INCLUSION MATTER FOR BANK RISK-TAKING? EVIDENCE FROM THE DUAL-BANKING SYSTEM Journal of Islamic Monetary Economics and Finance digital financial inclusion index dual-banking bank risk-taking covid-19 |
| title | DOES DIGITAL FINANCIAL INCLUSION MATTER FOR BANK RISK-TAKING? EVIDENCE FROM THE DUAL-BANKING SYSTEM |
| title_full | DOES DIGITAL FINANCIAL INCLUSION MATTER FOR BANK RISK-TAKING? EVIDENCE FROM THE DUAL-BANKING SYSTEM |
| title_fullStr | DOES DIGITAL FINANCIAL INCLUSION MATTER FOR BANK RISK-TAKING? EVIDENCE FROM THE DUAL-BANKING SYSTEM |
| title_full_unstemmed | DOES DIGITAL FINANCIAL INCLUSION MATTER FOR BANK RISK-TAKING? EVIDENCE FROM THE DUAL-BANKING SYSTEM |
| title_short | DOES DIGITAL FINANCIAL INCLUSION MATTER FOR BANK RISK-TAKING? EVIDENCE FROM THE DUAL-BANKING SYSTEM |
| title_sort | does digital financial inclusion matter for bank risk taking evidence from the dual banking system |
| topic | digital financial inclusion index dual-banking bank risk-taking covid-19 |
| url | https://jimf-bi.org/index.php/JIMF/article/view/1320 |
| work_keys_str_mv | AT hasanulbanna doesdigitalfinancialinclusionmatterforbankrisktakingevidencefromthedualbankingsystem AT mdrabiulalam doesdigitalfinancialinclusionmatterforbankrisktakingevidencefromthedualbankingsystem |