Role of foreign banks in promoting financial inclusion: “A time series analysis of five permanent members of UN security council”

Abstract

PurposeFinancial Inclusion is an important determinant of bringing inclusive growth which is promoted by the foreign bank entry as it increases the market competition and brings about greater outreach. Foreign Bank Entry has been considered an impediment towards domestic markets which is misunderstood. Foreign Banks not only bring higher assets but also provide credit to government-owned enterprises, Small and Medium Enterprises, and Micro Credit. Most of the developed countries have understood this phenomenon and have achieved significant financial inclusion by liberalizing their banking industry. It is essential to conceptualize and measure the magnitude of factors, determinants, and antecedents for foreign bank entry promoting financial inclusion. MethodologyAn empirical research methodology has been adopted using the Normality test, data diagnostics for Regression, Unit Root Test, Bounds Co-Integration Test, Long Run Coefficients, and ARDL to explore the determinants of the entrance of foreign banks to promote financial inclusion. Data has been taken from 5 developed countries, United Nations Security Council's permanent members with Veto Powers including (United Kingdom, United States, Russian Federation, France, and China) for 15 years from 2004–2018, making it a sample size of 75 (n = 75) for each of the eight variables under study. FindingsThe results confirm that the foreign bank entry has a significant effect at the level and 1st order difference on the financial inclusion. OriginalityThis study is the original work of the authors and is not the exact replication of any prior study; this study provides empirical evidence and discusses the literature on Financial Inclusion and Foreign Bank Entry.