Are financial inclusion and bank stability friends or enemies? Evidence from MENA banks

This study investigated the effect of financial inclusion on bank stability in the Middle East and North Africa (MENA) region. To achieve this goal, we used a sample of MENA banks for the 2004-2017 period, and we performed system-generalized method of moments (SGMM) as an empirical approach. Overall, the empirical findings indicate that greater financial inclusion significantly increases bank stability. As bank specifics, we found that bank stability is more sensitive to an increase in the non-performing loans (NPLs) ratio and bank size. However, a sufficient level of liquidity significantly increases bank stability. Finally, the results show that bank stability could benefit from a stable macroeconomic environment.