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The impact of financial inclusion on bank performance: The case of Jordan

Article  in  International Journal of Economics and Business Research · September 2020

DOI: 10.1504/IJEBR.2020.111096

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Int. J. Economics and Business Research, Vol. 20, No. 4, 2020 483

The impact of financial inclusion on bank

performance: the case of Jordan

Abdul Razzak Al-Chahadah

Department of Accounting,
College of Business,
Al Zaytoonah University,
P.O. Box: 130, Amman, Jordan
Email: abdulrazzaqsh@zuj.edu.jo

Ghaleb A. El Refae
Department of Accounting,
College of Business,
Al Ain University,
P.O. Box: 64141, Al Ain, UAE
Email: ghalebelrefae@aau.ac.ae

Amer Qasim*
Department of Accounting,
College of Business,
Al Ain University,
P.O. Box: 112612, Abu Dhabi, UAE
Email: amer.qasim@aau.ac.ae
*Corresponding author

Abstract: This study aims to examine the impact of financial inclusion on the
financial performance of Jordanian banks listed in the Amman Stock Exchange.
The study empirically tested the impact of five main indicators of financial
inclusion on bank performance. Using a simple regression analysis, findings of
the study showed statistically significant impact of two indicators of financial
inclusion (i.e., financial access and enterprise financing) and bank financial
performance (i.e., bank profitability) of Jordanian banks. The study
recommends Jordanian financial institutions to move toward increasing
innovative access to financial services as well as enhancing IT infrastructure
and the development of financial services to raise the level of digital banking
services which is currently considered relatively low when compared to other
middle-income countries.

Keywords: financial inclusion; banks performance; emerging economies;

Jordan; bank profitability.

Reference to this paper should be made as follows: Al-Chahadah, A.R.,

El Refae, G.A. and Qasim, A. (2020) ‘The impact of financial inclusion on
bank performance: the case of Jordan’, Int. J. Economics and Business
Research, Vol. 20, No. 4, pp.483–496.

Copyright © 2020 Inderscience Enterprises Ltd.

484 A.R. Al-Chahadah et al.

Biographical notes: Abdul Razzak Al-Chahadah is a Professor of Accounting

at Al-Zaytoonah University of Jordan. He received his PhD in Accounting from
Moscow Institute of Finance. His research interests are accounting information
systems, accounting theory, financial markets efficiency, and quality of higher
education.

Ghaleb A. El Refae is a Professor of Financial Economics and Accounting in

the College of Business at the Al Ain University, UAE. He has published
in various journals, books, and journal proceedings. His research interests
include corporate governance, risk management, contract theory, data quality,
data analytics in accounting, artificial intelligence in accounting, and
blockchain technology in accounting and finance.

Amer Qasim is an Associate Professor of Accounting at Al Ain University

in UAE. He obtained his PhD in Accounting from the University of Aberdeen,
UK. His research interests are financial accounting, business data analytics,
artificial intelligence in accounting, financial reporting, audit committee
effectiveness, corporate governance, and goodwill accounting.

1 Introduction

Financial inclusion, in general, is defined as a process of engaging all social groups and
disadvantaged groups in having access to formal financial systems (Pham et al., 2019).
Similarly, Koker and Jentzsch (2012) defined financial inclusion as ensuring access to
formal financial services at an affordable cost in a fair and transparent manner. In a
broader perspective, Oz-Yalaman (2019) defined financial inclusion as “individuals and
businesses have access to useful and affordable financial products and services that meet
their needs e-transactions, payments, savings, credits and insurance delivered in a
responsible and sustainable way”. These definitions entail that financial inclusion
includes accessibility, availability and the usage of financial systems. Financial inclusion
has been extensively recognised as a major policy priority, given its significance in
fostering economic development (Pham et al., 2019). Access to credit has been identified
as one of the main obstacles to the development of private sector in developing countries
(Chauvet and Jacolin, 2017; Naumenkova et al., 2019). Prior literature indicated that
financial inclusion is linked to country economic development and sustainability. In this
regard, Grohmann et al. (2018) indicated that financial inclusion, measured as access to
and use of financial services, is an important goal of economic and, in particular,
financial development. Consequently, it has been claimed to be a significant policy
instrument that can help to achieve the sustainable development goals (SDGs). Financial
inclusion, also known as a financial exclusion, is one of the main policy tools to increase
welfare, reduce poverty and enhance macroeconomic stability (Oz-Yalaman, 2019;
Lee et al., 2019).
Notwithstanding the growing literature conducted on this area, less studies are done
to find the impact of financial inclusion on banks profitability. This study fills this gap by
understanding the effect of financial inclusion on banks profitability in a developing
country with ambitious economic reform plans (i.e., Jordan). The Jordanian government
 The impact of financial inclusion on bank performance: the case of Jordan 485

has strongly committed to increasing financial inclusion in recent years, with the Central
Bank of Jordan (CBJ) playing a pioneering role in implementing this commitment
according to the CBJ vision statement, and therefore the opportunity to use financial
inclusion as a tool to promote economic development to ensure individual access to
various financial products and services (payment, savings, credit, remittances and
insurance) in a reliable and sustainable way to improve living conditions, combat poverty
and unemployment, promote equality, financial stability and integrity (CBJ, 2016).
The CBJ took several steps toward improving and activating a convenient environment
for financial inclusion in Jordan. Hence, the ‘microfinance enterprises act’ has been
issued to constitute a legal reference for the regulatory and supervisory framework of the
Central Bank over this sector; thus, enhancing the opportunities for micro and small
businesses to obtain funding. The Central Bank will also consider expanding its
supervision to include other non-banking financial institutions, in addition to enhancing
the financial consumer protection and spreading financial and banking literacy in the
community. In this regard, and in collaboration with the ministry of Education and
Injaz-institution, societal financial literacy has been included as a separate course
amongst the Ministry of Education’s curriculum form the 7th grade till the 12th grade.
Furthermore, the Central Bank has also played an important and pivotal role represented
in the development of the national payments system by developing payment systems such
as the electronic system of presenting and paying bills (eFAWATEERcom) as well as the
mobile payments system (JoMoPay). Such systems have great respect as they can be
accessed by people in remote areas and provide key financial services without incurring
the trouble and cost of accessing and using traditional financial methods, and; therefore,
effectively contributing to raising the financial efficiency, reducing costs, and providing
service for non-bank customers.
This study is structured as follows: Section 2 will discuss prior literature examining
financial inclusion. Section 3 will overview the research methodology of the paper,
statistical model employed, and variables definition. Section 4 will discuss the results of
the study, and finally Section 5 will highlight the conclusion of the study.

2 Literature review

Several studies were carried out to examine the impact of financial inclusion on several
corporate aspects. Chauvet and Jacolin (2017) studied the impact of financial inclusion
and bank concentration on the performance of firms in developing and emerging
countries. The results showed that financial inclusion, measured as the distribution of
financial services across firms, has a positive impact on firm growth. In another study,
Grohmann et al. (2018) explained that financial literacy has an impact on improving
financial inclusion. Shen et al. (2020) investigated the channels through which financial
inclusion can be achieved in China. The study showed that the direct impact comes from
the use of digital financial products and the level of financial literacy. Ahmed and
Mallick (2019) found that higher levels of financial inclusion contribute to greater bank
stability.
The AFI (2019) indicated three dimensions of financial inclusion:
• access, which is the ability to use the services and products offered by formal
financial institutions
486 A.R. Al-Chahadah et al.

• usage, which is the depth or extent of financial services and product use
• quality which is a dimension that evaluates how financial services fulfil the needs of
its users from different angles, including affordability, convenience, fair treatment,
choice and other aspects related to consumer protection, financial education and
other areas.
Similarly, Pham et al. (2019) noted that financial inclusion includes a set of dimensions
represented in accessibility, usage and availability. Accessibility refers to the extent to
which financial services are penetrated and accessible among potential users. Availability
measures the extent to which the services are made available. While the usage indicates
whether those available and available services are utilised.
Several indicators have been used to assess the extent of financial inclusion. The most
commonly used indicator is the number of bank accounts (per 1000 adult persons). Some
other indicators are number of bank branches (per million people), number of ATMs (per
million people), amount of bank credit and amount of bank deposit (Sarma, 2010;
Kabakova and Plakenkov, 2018), and the amount of loans and credits granted to micro,
small, and medium enterprises. The Alliance of Financial Inclusion (AFI) introduced a
core set of financial inclusion indicators in 2019. The AFI core set addresses the two
basic dimensions of financial inclusion: access and usage of financial services (AFI,
2019).
The following provides discussion of the main indicators of financial inclusion used
in this study.

2.1 Digital financial services

The financial sector in Jordan has witnessed a remarkable development in recent years,
moving towards a comprehensive financial sector that is characterised by its ability to
provide financial services to the largest number of segments of the society, and its ability
to achieve greater benefits for low-income individuals in terms of financing services.
In this regard, the banking system in Jordan witnessed a remarkable growth in the
numbers of banks branches, where the total number reached (808) branches, as revealed
by a report issued by the CBJ, and that the number of automated teller machines (ATMs)
operating in Jordan recorded (1637) ATMs by the end of 2017.
In addition, there is an increasing growth in using smart phones and internet services
as alternatives to cash payments and credit card payments. In high-income economies,
(51%) of adults (55%) of account holders use a mobile phone or the Internet to pay at
least one financial transaction. In 2017, in developing economies (19%) of adults and
(30%) of account owners made at least one direct payment using a mobile phone account
or over the internet (Asli et al., 2017). Online shopping and paying bills are getting
widely used, as 5.5% of adults in Jordan used the internet to buy products online or pay
bills online in 2017, up from 2.5% in 2014. Increased ownership and use of card products
may lead to higher rates of online payments, as well as an increase in the use of online
banking and mobile banking services provided by banks to their account holders (CBJ
and GIZ, 2017). Mobile banking is more common than online banking, although neither
of them has been widely used yet, only (1.4%) of the adults have online banking services
and (2.1%) have mobile banking. Use of these services (at least once a year) was lower
even at (1.2%) and (1.6%) of adults, respectively, according to the CBJ survey. Low
financial and technological knowledge among clients plays a major role in explaining the
 The impact of financial inclusion on bank performance: the case of Jordan 487

limited use of these Services, however, banks can contribute to higher utilisation rates by
adding jobs to m its online and mobile banking scripts, and its design for ease of use and
enhanced with greater power (CBJ and GIZ, 2017).

2.2 Enterprise financing (corporate, medium and small businesses)

The main constraints to the financial inclusion of SMEs are the avoidance of taxes from
SMEs, the limited ability to analyse cash flows by banks, the absence of an insolvency
law or the recording of movable assets (Dabla-Norris et al., 2015). Also, since SMEs are
not obliged by the law to disclose audited financial statements, banks face a difficult
choice either to ignore informal income, which leads to lower loan amounts or the refusal
of the request. Financial analysis for these enterprises is time consuming and
complicated, and this is highly discouraged by the Central Bank of Jordan (CBJ and GIZ,
2017). The level of financial inclusion of adults borrowed from a microfinance institution
in the past year reached 4.2%, which is slightly less than that borrowed from a bank,
which amounted to (4.3%), although they are about three times the number of banks for
microfinance institutions, and microfinance institutions provide.

2.3 Payments, transfers and remittances

Although Jordanians are not extensively use electronic methods of making payments,
the use of these tools is growing over time with the development of payment
infrastructure as financial institutions pay more attention to these services. In general, the
percentage of adults reached for those who sent or received payments through digital
channels in 2017 (18.3%) this indicator includes the receipt of salary or government
transfers directly to the bank account, any payments or transfers received or sent via the
internet or mobile phone, and debit and credit card payments (CBJ and GIZ, 2017).
In Jordan, there is a sound infrastructure to make payments and transfers. The most
important of which is the total settlement in real time, the automatic clearing house for
transfers between banks, the electronic clearing system for the checks, (Jo-Net) system
for transactions from bank to ATM, mobile phone payments (JoMoPay), And MEPS and
EPS payments for retail. A number of international institutions have praised the
Jordanian government for installing these systems, which are ultimately expected to
increase customers' use of fast and convenient digital and portable methods of making
payments, although the utilisation rate remains low at the present time (CBJ and GIZ,
2017). An evidence of the growth in digital payments, the eFAWATEERcom online bill
payment service has witnessed a very strong growth in transactions, as the number of
bills paid through this system increased from (478,281) in 2015 to (2,764,396) during
only the first eight months of the year 2017, indicating the increasing popularity of
new digital banking methods. The rapid increase in internet access and ownership
of smartphones have made online banking, mobile phone banking, and the use of the
electronic wallet more feasible in Jordan. The percentage of mobile phone ownership
(92.1%), and adults who own a smartphone reached (76.5%), of whom (70.7%) has
internet connection, either through a computer or a mobile phone, and this has so far only
translated to (1.4%) of adults who have online banking services and (2.1%) have mobile
banking services. Accordingly, financial institutions will need to increase their efforts to
improve their electronic platforms in the future (CBJ and GIZ, 2017). Globally, it is
found that (23%) of adults received at least one payment from the government in 2016 in
488 A.R. Al-Chahadah et al.

the form of public sector wages, or government transfers (government transfers include
any type of social benefit such as subsidies, unemployment benefits, educational
payments, or medical expenses). Not surprisingly, the percentage of adults receiving
government payments is nearly twice as high in high-income economies (43%) as in
developing countries and developing economies which is only (19%) (Asli et al., 2017).
According to the Global Findex survey in 2017, 52% of adults or (76%) of account
holders in the world reported making or receiving at least one digital payment last year.
The percentage is higher for individuals in high-income countries (91%) compared to
(44%) for middle income countries individuals (Asli et al., 2017). For governments, a
shift from cash to digital payments can reduce corruption and improve efficiency.
For example, in India the rate of tampering in pension funds decreased by 47% when
these payments were made through smart cards with an electronic fingerprint instead of
being delivered in cash. In Nigeria, digital payments are used to distribute social benefits
which reduced the variable cost by 20% (Asli et al., 2017).

2.4 Access to financial services

Having a bank account is the first step to financial inclusion more broadly, because a
bank account allows people to save money, send and receive payments, and it can also
serve as a gateway to other financial services. That is why it is at the focal point of the
World Bank Group's financial inclusion initiative by 2020 to include more individuals
from all parts of the world to have access to at least a bank account (Shihadeh et al.,
2018).
The average account ownership in Jordan, or the share of adults with an account in a
financial institution, was (33.1%) in mid-2017, according to the results of the (CBJ and
GIZ, 2017) survey, and this indicator rose significantly from the level (24.6%) in 2014.
It is possible to say that this is the most important indicator of financial inclusion which is
used by many countries around the world, which makes the improvement in this indicator
over the past three years a significant achievement for the Jordanian government and
financial institutions (CBJ and GIZ, 2017). Current accounts are the most selected
products owned by (22.5%) of Jordanian adults, followed by savings accounts (7.3%),
term deposits (1.8%) and other types (0.4%), although current accounts usually do not
pay interest, on Unlike savings accounts and time deposits, their flexibility makes them
the best option. Current accounts can be used for transfers, payments and various other
types of transaction services, and usually allow unlimited withdrawals at any time.
There are other financial products, other than bank accounts, used to determine the
progress of financial inclusion, such as credit, deposits, insurance, and transfers. (75.2%)
of adults in Jordan used some form of financial services in 2017, and the most common
channel for obtaining financial services was the official financial institutions, where
(62%) of adults in Jordan were clients of official institutions. This number shows adults
who (CBJ and GIZ, 2017):
• they have a bank account, and they had insurance at the time of the survey
• borrowed from an official financial institution (including leasing)
• send or receive local transfers through an official channel, including bank transfers,
specialised transfer services such as (Western Union) and online services such as
(PayPal).
 The impact of financial inclusion on bank performance: the case of Jordan 489

As indicated by the World Bank report on the rates of financial inclusion for the year
2017 in terms of the percentage of adults who have accounts with financial institutions in
the Arab countries, as shown in Table 1.

Table 1 Adults with bank accounts in the Arab region

Arab Country UAE Bahrain Kuwait KSA Lebanon Algeria Tunisia Jordan Egypt
Percentage of adults who 88% 83% 80% 72% 45% 42% 42% 37% 33%
have bank account
Global rank 35 42 51 59 97 101 103 114 121

Source: Asil et al. (2017)

Prior studies indicated that (59%) of adults do not have any bank account due to
insufficient funds or being unable to save money, indicating that financial services are not
yet accessible to low-income users, due to other obstacles that prevent them from opening
a bank account due to the distance factor and the lack of access to financial services
providers, and the lack of necessary documents for that; in addition to the lack of
confidence in financial service providers (Sarma, 2010). Globally, there are still about
(1.7) billion adults without a bank account in any financial institution, in 2014 this
number was 2 billion. In general (69%) of adults have an account in 2017, the ratio is
high in high-income economies where it reaches (94%), on the other hand only 63% of
adults have an account in developing economies as classified by the World Bank
(Asli et al., 2017). According to a survey done by (CBJ and GIZ, 2017), (21.6%) of
adults borrowed from any source in 2017, (9.9%) were borrowed from an official
financial institution and (13.3%) from unofficial sources. Among official institutions,
(4.3%) borrowed from a bank, and (4.2%) from a financing institution, and (1.4%)
borrowed using a credit card. Regarding unofficial credit sources, 11.3% borrowed from
family or friends, (1.9%) borrowed from employer, and (0.2%) got credit, and (0.6%)
borrowed from some other informal sources (CBJ and GIZ, 2017).
Credit cards are a method of payment, but they also serve as a short-term credit
source whenever they are used even when credit card holders pay their balance in full in
each session, as the use of credit cards affects the demand for short-term credit,
in high-income economies credit cards are more used (49%) when compared to
individuals in developing countries (8%) in 2017 (CBJ and GIZ, 2017).
The level of official financial inclusion in Jordan is low for some types of financial
products and between certain sectors of the population, for example, a poll conducted by
the World Bank (Global Findex) in 2014 found that only about 25% of Jordanians have a
bank account, and at a lower percentage for females when compared to males.
These findings prompted the Jordanian government to take measures to better understand
the reasons for lower financial inclusion in Jordan and find ways to enhance the
availability and quality of financial services (CBJ and GIZ, 2017).
International evidence shows that access to financial services enhances social
well-being, reduces income inequality, and increases real economic growth. For these
reasons, the World Bank has paid special attention to the issue of financial services,
establishing the Global Financial Inclusion Index (Global Findex) for more than
140 countries. One of the main indicators used is the percentage of individuals (aged 15
years and over) who has an account in an official financial institution (such as a bank,
credit institution, post office, or microfinance institution). Financial inclusion varies
490 A.R. Al-Chahadah et al.

greatly around the world, as the number of accounts in high-income countries is very
large, while the proportion of account acquisition in other parts of the world ranged
between (14%) in Middle East countries to (69%) in East Asian countries.

2.5 Financial literacy building and consumer financial protection

In recent years, great efforts have been made to advance financial literacy in Jordan, with
the aim of improving financial skills and behaviour as well as raising awareness among
the population of current financial products and services. In 2014, an ambitious long-term
program was launched at the school level with a detailed curriculum planned for six
different levels of education. The main constraints to consumer protection are the
lack of regulations to protect the consumer in non-banking financial institutions,
the lack of diligence on the part of financial institutions to explain their products and
terms of contract to customers, and low financial illiteracy on the part of customers, for
the banking sector, the consumer protection situation has improved in a way After
introducing new rules in 2012, a survey conducted by (CBJ and GIZ, 2017) in Jordan
revealed that:
• (42.2%) of adults who have a bank account understand the costs associated with their
bank account
• (47.3%) of the adults who borrowed from a financial institution are aware about the
costs associated with the loan
• (70.9%) of the adults who borrowed from a financial institution were clearly
informed by the lending institution about the costs and terms of the loan before
signing the contract
• (85.3%) of the adults say that they have read all the terms of the contract before
signing it.
Implementing the principle of disclosure and transparency is the basis of consumer
protection in a manner that guarantees a minimum level of financial awareness and
broadens the customer base through the introduction of new clients in addition to the
availability of clear data for clients on services and products provided to them so that
they can make the right decision after understanding their rights and obligations
(Shihadeh et al., 2018). Financial inclusion must be ensured in a responsible manner by
providing effective consumer protection measures that consider financial education for
the poorest, and protection is carried out by organizing the formulation of contracts,
terms and conditions, annual interest rates and fines and clarifying the difference between
the principal and interest (Shihadeh et al., 2018).

3 Research methodology

3.1 Variables of the study

Independent variables represented in the dimensions of the financial inclusion indicators
are:
 The impact of financial inclusion on bank performance: the case of Jordan 491

• digital payments and financial services

• enterprise financing (corporate, medium, and small businesses)
• payments, transfers and remittances
• financial access
• financial literacy building and consumer financial protection.
The dependent variable (bank profitability) is measured as the rate of return on assets in
Jordanian banks listed on the Amman Stock Exchange.

3.2 Population and sample of the study

The population of the study consists of all the commercial banks listed in the Amman
Stock Exchange, these are (16) banks. The study covered the time period from 2014 to
2017, and the annual reports of the commercial banks listed on the Amman Stock
Exchange were used to obtain the financial measure of the dependent variable.
In addition to the financial reports Issued by the CBJ, the consolidated report issued by
the CBJ and the German Agency for International Cooperation (GIZ) for the year 2017,
and the report issued by the World Bank for the year 2017 regarding financial inclusion
were used to extract the independent variables examined in this study.

3.3 Overview and measurements of variables

Table 2 shows the independent variables included in the study and their measurement.
These variables represent financial inclusion indicators. As seen in Table 2, there are five
main indicators investigated in the model.

Table 2 Financial inclusion indicators and measurement

Dimension of financial inclusion Financial inclusion indicator

(X1) Digital payments and financial
services
(X2) Corporate and micro, small and
medium-sized enterprise financing
(X3) Payments, transfers and
Remittances
(X4) Financial access
(X5) Financial literacy building and
consumer financial protection
• Percentage of adults perform any transactions with a
bank account using mobile banking or internet
banking.
• Distributing credit facilities to banks operating in
Jordan, the credit granted to the SME sector, to the
total facilities.
• Sending and receiving local transfers in cash, through
the bank.
• Local remittances sent or received by cash and bank,
through exchange offices, the post office, and
through cash transfer services.
• Bank branches for every 100,000 adults 9.5 million
(2016).
• ATMs per 100,000 adults (2016).
• Percentage of adults who have a bank account know
the costs associated with their bank account.
492 A.R. Al-Chahadah et al.

Simple regression analysis is applied, the model is:

ROA = α + β ( X 1 , X 2 , X 3 , X 4 , X 5 ) + ε it

where
The dependent variable is firm performance measured as the return on assets (ROA) of
the bank
α = intercept coefficient of firm i, β = row vector of slope coefficients of regressors
X1 = Digital payments and financial services
X2 = Corporate and micro, small and medium-sized enterprise financing
X3 = Payments, transfers and remittances
X4 = Financial access
X5 = Financial literacy building and consumer financial protection
εit = residual error of firm i.
Correlation coefficients (R) and (R-square) are calculated between each independent
variable separately and the dependent variable to understand the strength and type of
relationship between these variables, on the one hand, and the degree of interpretation of
the independent variables of the dependent variable, on the other hand. The results of the
study are tested at the significance level of 5%, that is, the level of confidence of 95%.

3.4 Hypotheses of the study

From the study problem, the study hypotheses were formulated as follows:
Ho1: There is no statistically significant effect of the digital financial services and
payments index on the performance of banks listed on the Amman Stock Exchange.
Ho2: There is no statistically significant effect of the index of financing companies,
micro, small and medium-sized enterprises on the performance of banks listed on the
Amman Stock Exchange.
Ho3: There is no statistically significant effect of the index of payments, transfers and
transfers on the performance of banks listed on the Amman Stock Exchange.
Ho4: There is no statistically significant effect of the financial access index on the
return on the performance of banks listed on the Amman Stock Exchange.
Ho5: There is no statistically significant effect of the financial literacy building and
consumer financial protection on the performance of banks listed on the Amman
Stock Exchange.

4 Statistical analysis and hypothesis testing

4.1 Data validity test for statistical analysis

The study model employs the general linear model (GLM), which before applying it
requires many conditions. Therefore, data of the study should be examined to verify that
 The impact of financial inclusion on bank performance: the case of Jordan 493

it meets the conditions. The strength of the linear model depends on the assumption of the
independence of each of the independent variables, and if this condition is not met the
general linear model is then not valid for the application and a collinearity diagnostics
test was used by calculating the tolerance parameter for each of the independent
variables, and then finding the variance inflation factor (VIF) as this test is a measure of
the effect of correlation between the independent variables. In the event that the value of
(VIF) is greater than (5), this indicates a multicollinearity problem between variables.
Table 3 shows the results of the multicollinearity test.

Table 3 Multicollinearity diagnostic results

Variable VIF Tolerance

(X1) Digital payments and financial services 2.128 0.47
(X2) Corporate and micro, small and medium-sized enterprise financing 2.792 0.358
(X3) Payments, transfers and transfers 3.866 0.259
(X4) Financial Access 2.843 0.352
(X5) Financial consumer protection and financial capacity building 3.318 0.301

From Table 3 it is clear that the value of (VIF) for all independent variables is below (5),
which means that the study model is free from the linear interference problem.

4.2 Results of the simple regression model

After calculating the values of the independent variables represented in the dimensions of
the financial inclusion and the values of the dependent variable represented in the return
on the assets, they were statistically analysed as the results of the analysis are shown
in Table 4.

Table 4 Results of the simple regression analyses model

Variable B α R R² Sig-f
(X1) Digital payments and financial services 0.141 0.277 0.234 0.0690 0.271
(X2) Enterprise financing (corporate, medium and 0.724 0.255 0.565 0.320 0.002*
small businesses)
(X3) Payments, transfers and remittances 0.043 32.8 0.195 0.034 0.365
(X4) Financial access 0.852 0.3923 0.555 0.309 0.003*
(X5) Financial literacy building and consumer 0.077 0.352 0.066 0.004 0.745
financial protection
*Significant at the 0.001 level.

As shown in Table 4, two financial inclusion indicators were found to have a significant
impact on the dependent variable (firm performance), these are;
• enterprise financing
• financial access.
494 A.R. Al-Chahadah et al.

While the other indicators were found insignificant. The first financial inclusion indicator
tested in this study (digital payments and financial services) was found to be insignificant
(Sig-f = 0.271). Therefore, we accept the first hypothesis (Ho1) that states: “there is no
statistically significant effect of the index of payments and digital financial services on
the return on the performance of banks listed on the Amman Stock Exchange”. Regarding
the variable related to enterprise financing (corporate, medium, and small businesses),
the value of (B) is (0.724), indicating a positive relationship between the dependent
variable and the independent variable. As for the level of significance (Sig-f), it is 0.002,
which is less than the level of significance approved in the study (0.05). Therefore, the
second hypothesis (Ho2) is rejected. As a result, the alternative hypothesis is accepted
which will state; “there is a statistically significant impact of enterprise financing
(corporate, medium, and small businesses) on the performance of banks listed on the
Amman Stock Exchange. The third variable (payments, transfers and remittances) is also
found insignificant (Sig-f = 0.365), therefore the third hypothesis is accepted, which
states that there is no statistical significant impact of the financial inclusion indicator
relating to payments, transfers and remittances on the return on the performance of banks
listed on the Amman Stock Exchange. The fourth financial inclusion indicator is financial
access. Results showed that this indicator has a significant positive impact on bank
profitability. As shown in the table, the effect of the financial inclusion indicator relating
to ‘financial access’ on the return on the assets is significant and positive (Sig-f = 0.003,
and B = 0.852). Therefore, we reject the fourth hypothesis (Ho4) and accept the
alternative hypothesis that reflects the existence of a statistically significant effect of the
financial access index on the performance of the banks listed in the Amman Stock
Exchange. Finally, results related to the fifth financial inclusion indicator (Financial
literacy building and consumer financial protection) was found positive (B = 0.077) but
insignificant (Sig-f = 0.745). Accordingly, the fifth hypothesis (Ho5) is accepted,
which states: “there is no statistically significant effect of financial literacy and consumer
protection on bank performance”.

5 Conclusion and recommendations

We know that financial inclusion contributes to country development and sustainability.

However, up to our best knowledge, there is no evidence in the literature on linking
financial inclusion with banks profitability, especially in emerging economies. Financial
inclusion is essential to improve the ways of groups unable to reach financially and drive
the sustainable economy. Here, there must be joint strategies between financial and
non-financial institutions from the private and public sectors and the CBJ to develop
criteria, foundations and indicators for financial inclusion, while creating a supportive
implementation framework for this strategy with policies in place. And appropriate
financial regulations and infrastructure. Given the various efforts by the CBJ to adopt
global standard practices for financial inclusion, these will be successful only if
supported by reliable data, actual indicators, and a realistic strategy based on a review
and monitoring of progress achieved in achieving improvements in indicators of
inclusion and financial success. In addition, given the correlation between the indicators
 The impact of financial inclusion on bank performance: the case of Jordan 495

of financial inclusion and the financial performance of banks, these financial institutions
must have major trends towards increasing innovative access to financial services, and
developing financial services infrastructure in order to raise the level of digital financial
services relatively low compared to middle-income countries.

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