Financial inclusion and non-performing loans in MENA region: the moderating role of board characteristics

This paper investigates how financial inclusion affects credit risk in the MENA region. It also checks whether board characteristics can moderate this relationship. We use a sample of MENA banks from 2004 to 2017 and perform the system generalized method of moment approach. Through the usage and access dimensions, we find that financial inclusion reduces the level of non-performing loans. These results are robust using an index of financial inclusion. For board characteristics, findings indicate that only board size, duality, and independent directors significantly affect the level of NPLs. Our findings prove that MENA banks benefit from an interaction between greater financial inclusion and board characteristics. These insights are consistent with theorists and scholars who are working on each dimension separately. As an extension of their work, we find that the interaction significantly affects the NPLs ratio.