The Impact of Financial Inclusion on Banking Financial Performance, Banking Financial Stability and Economic Growth of Ethiopia
| dc.contributor.advisor | Andualem Goshu | |
| dc.contributor.author | Mohammed Jatoro | |
| dc.date.accessioned | 2026-08-10T10:24:29Z | |
| dc.date.available | 2026-08-10T10:24:29Z | |
| dc.date.issued | 2025-12-01 | |
| dc.description.abstract | Financial inclusion (FI) conceived as increasing the availability, usage, and quality of formal financial services, is essential to sound monetary and fiscal policy. Yet, despite its immense importance, Ethiopia’s banking sector remains under explored in the literature on FI’s impact across performance, stability, and economic growth. Thus, this dissertation seeks to accomplish four objectives. First, the study constructed a multidimensional FI index, combining ten traditional and five digital indicators employing a two-stage Principal Component Analysis to capture the availability, accessibility and usage of formal financial services from 2015 to 2023. Second, the study examines the impact of traditional and digital dimensions of inclusion on bank performance using a nonlinear two-step system Generalized Method of Moments (GMM) on panel data of 17 commercial banks, uncovering that while traditional FI increase returns, digital channels with high start-up costs depress short-term profitability. Third, employing linear and nonlinear two-step system GMM the study investigates the nexus between FI and bank stability, revealing an inverted-U relationship. The FI improves stability up to a threshold (30.3), beyond which risks from cost overload and adverse selection emerge. Finally, the study employs a Nonlinear ARDL framework on annual macro data from 1991–2023 to analyze asymmetric effects of inclusion on economic growth. The results show a clearly asymmetric relationship, with advantages for economic growth from positive shocks in FI outweighing the disadvantages of negative shocks. In addition, the study used Toda-Yamamoto nonlinear causality tests to confirm bidirectional causation between inclusion and growth. Collectively, these studies demonstrate that a carefully managed through supportive regulation, targeted initiatives, and ongoing data-driven monitoring of FI can significantly strengthen Ethiopia’s banking sector (both performance and stability) and catalyze inclusive economic growth. | |
| dc.identifier.uri | https://etd.aau.edu.et/handle/123456789/8835 | |
| dc.language.iso | en | |
| dc.publisher | Addis Abeba University | |
| dc.subject | Financial inclusion (FI) conceived as increasing the availability | |
| dc.subject | usage | |
| dc.subject | and quality of formal financial services | |
| dc.subject | is essential to sound monetary and fiscal policy. | |
| dc.title | The Impact of Financial Inclusion on Banking Financial Performance, Banking Financial Stability and Economic Growth of Ethiopia | |
| dc.type | Thesis |