Impact of digital financial inclusion on ASEAN banking stability: implications for the post-Covid-19 era
Studies in Economics and Finance
ISSN: 1086-7376
Article publication date: 31 May 2021
Issue publication date: 7 June 2021
Abstract
Purpose
This paper aims to investigate how digital financial inclusion (DFI) can be a potential factor to maintain banking stability in Association of Southeast Asian Nations (ASEAN) countries and whether the relationship could bring a possible implication for the post-Covid-19 pandemic era.
Design/methodology/approach
Using an unbalanced panel data of 213 banks of 4 ASEAN countries, the study has deployed principal component analysis, ordinary least square, two-step dynamic system generalised method of moments and panel corrected standard errors techniques.
Findings
The empirical study finds that the full-fledged application of DFI accelerates the ASEAN banking stability which not only decreases the default risk of the banks but also upturns the financial mobility in the region. The results also suggest that ASEAN banks are, with the implementation of DFI, likely to uphold the banking sector stability by reducing liquidity crisis and non-performing loans during and in the post-Covid-19 era. Therefore, accelerating digital finance in ASEAN countries is considered as one of the significant means for the banking sector stability that subsequently leads to economic and financial resilience even in the face of any crises.
Originality/value
Prevailing studies have mostly investigated the association between financial inclusion and banking stability in different contexts. However, this study is unique to empirically investigate the association between DFI and the ASEAN banking stability.
Keywords
Acknowledgements
The earlier version of this paper was presented at the 14th BMEB conference organised by the Bank Indonesia. The authors acknowledge helpful comments from the guest editor Prof Paresh Narayan and three anonymous referees, as well as helpful discussions with Dr Mohsin Ali, Prof M. Kabir Hassan, Prof M. Niaz Asadullah, APAEA and Bank Indonesia team. This study was partially funded by the Faculty of Business and Accountancy, Universiti Malaya, Malaysia (Grant Number: GPF043A-2020). The usual disclaimer applies.
Citation
Banna, H. and Alam, M.R. (2021), "Impact of digital financial inclusion on ASEAN banking stability: implications for the post-Covid-19 era", Studies in Economics and Finance, Vol. 38 No. 2, pp. 504-523. https://doi.org/10.1108/SEF-09-2020-0388
Publisher
:Emerald Publishing Limited
Copyright © 2021, Emerald Publishing Limited