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Pagesfrom10 1108 - SEF 09 2020 0388
Pagesfrom10 1108 - SEF 09 2020 0388
Pagesfrom10 1108 - SEF 09 2020 0388
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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 ASEAN, Banking stability, Fintech, COVID-19, Digital financial inclusion index
Paper type Research paper
1. Introduction
Does digital financial inclusion (DFI) ensure the Association of Southeast Asian Nations
(ASEAN) banking stability? This simple question sheds light on a few issues. The Covid-19
pandemic, considered one of the biggest global crises, has brought a drastic impact on the
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 Studies in Economics and Finance
by the Faculty of Business and Accountancy, Universiti Malaya, Malaysia (Grant Number: © Emerald Publishing Limited
1086-7376
GPF043A-2020). The usual disclaimer applies. DOI 10.1108/SEF-09-2020-0388