The Impact of FinTech on the Financial Performance of Commercial Banks in Bangladesh: A Random Effect Model Analysis

This paper examines the impact of agent banking activities, a recent FinTech development, influencing the profitability and financial outcomes of commercial banks operating in Bangladesh, as agent banking has been receiving significant global attention due to its technology-driven approach, cost-effectiveness and easy accessibility, and broader coverage of the unbanked population. Through the application of penal data regression methods, the study estimates a random-effect model using panel data comprising quarterly observations from nine Bangladeshi commercial banks that maintained uninterrupted agent banking activities, covering both deposit mobilization and lending during the period from 2018Q1 to 2024Q4. The empirical findings indicate that credit disbursement by agent banks has a positive and statistically significant impact on bank profitability measures, return on assets (ROA), and return on equity (ROE). Similarly, the expansion of agent banking outlets positively and significantly influences ROA. Therefore, an appropriate agent banking policy aimed at increasing agent banking outlets using digital platforms based on FinTech is vital for ensuring positive growth in credit disbursement to achieve improved financial outcomes for the banking sector in a developing country like Bangladesh.

Performance of private commercial banks (PCBs) in Bangladesh depends on some internal and external factors such as bank size, risk management, overhead cost, capital, ownership of the bank, interest rate spread, bank expenses, inflation, central bank interest rate, GDP, taxation, variables that represents market characteristics (e.g. market concentration, industry size and ownership status etc) on the performance of the bank. This paper uses a multi-criteria, performance based index to rank 27 PCBs operating in Bangladesh. Total profit (TP), return on asset (ROA), return on equity (ROE), and labor productivity (LP) for the year ended 2012 have been considered as pillars of the performance based index. After construction of performance index the hypothesis that there is a relationship between bank performance and bank size is tested through regression analysis. It is found that there is significant positive correlation between bank size and their performance.

Financial performance of commercial banks in the post-reform era: Further evidence from Bangladesh

The purpose of this study was to investigate the relationship between the growth of mobile banking and the financial performance of Bangladeshi commercial banks. The focus of the study was to clarify the mobile banking tactics used by commercial banks, evaluate their present financial situation, and identify how mobile banking impact their economic performance. The research design for the study was a descriptive survey. A census of all 13 of the commercial banks registered at Bangladesh Bank was conducted. The Central Bank of Bangladesh’s bulletins and financial statements covering the years 2018 through 2023 provided secondary data for the study. Using the statistical software for the social sciences (SPSS) version 26, descriptive statistics including mean, standard deviation, maximum, and minimum were utilized to examine the data and identify important patterns and sample features. After that, correlation analysis and a multiple regression model were used to evaluate the connections between the parameters. The study comes to the conclusion that the quantity of transactions and the number of mobile banking users have grown to be significant factors in the financial performance of Bangladesh’s commercial banks. Nevertheless, the quantity of transactions has no significant impact on the commercial bank’s financial standing in Bangladesh. The study leads to the execution that, despite a number of obstacles that must be overcome by cooperation amongst stakeholders, mobile banking is essential to improving the financial performance of commercial banks in Bangladesh.

As liquidity risk is affecting the banking industry of Bangladesh, the study aims to analyze the impact of liquidity risk on financial performance of selected commercial banks in Bangladesh. The study applied a descriptive research design and targeted 20 commercial banks in Bangladesh, with secondary data collected over the span of five years from 2014 to 2018 and analyzed by employing the panel regression analysis model. Nine factors affecting financial performance of selected commercial banks in Bangladesh were selected and investigated. In the study, Return on Asset (ROA) and Return on Equity (ROE) are used as bank performance measurement tools and Non-Performing Loan ratio (NPLR), Capital Adequacy ratio (CAR), Capital to Total Asset ratio (CTAR), Loan to Deposit ratio (LTD), Loan to Total Asset ratio (LTA), Deposit to Asset ratio (DTA), Cash to Deposit ratio (CDR), Liquidity Coverage ratio (LCR), and Net Stable Funding ratio (NSFR) are used as liquidity risk indicators. The result of panel data regression analysis showed that NPLR, CAR, LTD, and DTA had negative and statistically significant impact whereas, LTA, CTAR, and LCR had positive and statistically significant impact on the financial performance of selected commercial banks in Bangladesh. However, CDR and NSFR had no statistically significant impact on financial performance of the chosen banks for the sample period. Therefore, it has been identified that the liquidity risk is negatively affecting the financial performance of the selected commercial banks in Bangladesh.

The financial performance of commercial banks plays a crucial role in ensuring the stability and growth of a country’s financial system. Analyzing financial ratios is a sensible method of assessing a bank’s performance. This study aims to analyze the financial condition and evaluate the performance of eight selected commercial banks in Bangladesh through the application of the DuPont analysis framework. This study attempts to measure the financial performance of selected Bangladeshi private, Public and Foreign commercial banks for the period (2019–2023) through using the DuPont model which is an important tool for measuring profitability and judging the financial performance of any financial entity. ROE, a measure of the bank’s earning capacity, is broken down into five parts under the modified DuPont model: tax burden, interest burden, profit margin, total asset turnover, equity multiplier ratios, and financial management techniques and strategic choices. The DuPont model provides a detailed breakdown of Return on Equity (ROE) into its core components — net profit margin, asset turnover, and financial leverage — offering deeper insight into the internal drivers of profitability and efficiency. By utilizing financial data over a defined period, this research identifies the key strengths and weaknesses in the performance structures of the banks studied. The findings are expected to reveal significant variations in ROE components among the banks, highlighting which operational or financial strategies contribute most to performance. This paper contributes to the literature by providing empirical evidence on the applicability of DuPont analysis in the Bangladeshi banking sector and offers valuable insights for policymakers, investors, and financial managers in making informed strategic decisions.

Since banks mobilize financial resources across the economy, they are expected to be critical in bringing about financial stability and economic progress. The purpose of this research was to determine the impact of macroeconomic variables on the financial performance of commercial banks in Bangladesh. From the World Bank website, secondary data were gathered for the fiscal years 2010 through 2021. Correlation, multiple linear regression, factor analysis, and model selection criteria were utilized for this study. From the correlation analysis, it was observed that the inflation rate was significantly and positively correlated with the financial performance of commercial banks in Bangladesh. From the multiple linear regression analysis, it was seen that import, exchange rate, and inflation rates have a substantial impact on Bangladesh's commercial banks' financial performance. From the factor analysis, it was observed that GDP and imports are highly correlated with Bangladesh's commercial banks' financial performance. Based on the model selection criteria, it was discovered that the model including all variables is the best. The government, other researchers, bank managers, possible investors, financial experts, and anybody else involved in Bangladesh's banking sector should all take note of the findings.

Banking industry plays a very important role to the economy of Bangladesh and the financial performance measurement is one of the major considering factors for the banks. The study attempts to analyses and compares the financial performance of Islamic and Conventional commercial banks operating in Bangladesh during 2011 to 2015 using secondary data by applying CAMEL model and other relevant statistical tools. The study revealed that Islamic banks perform better than Conventional banks in terms of capital adequacy, assets quality, and management quality and earnings ability. However, Islamic banks had a weaker liquidity position in comparison to Conventional banks. This study also found that, there is no significant difference between the two banking categories except liquidity position. This study also revealed that under Islamic banking system Al-Arafah Islamic Bank and Exim Bank Limited performed better than other Islamic banks and under Conventional banking system Mercantile Bank Limited and Dutch-Bangla Bank Limited performed better than other conventional banks among the selected banks in the selected time period. The findings of the study will help to increase the confidence and consciousness in the partaking banks in Bangladesh. Finally, some suggestions and recommendations have been provided to increase financial performance of selected banks which will insure those banks sound positioning in banking sector of Bangladesh.

The research aims to empirically investigate the impact of credit risk management and bank-specific variables on the financial performance of the listed commercial banks in Bangladesh. This examination is based on secondary data from 28 listed commercial banks for six years starting from 2017 to 2021. Therefore, a dataset of 140 firm-year observations was used in this study. The random effect model has been used to examine the impact of two credit risk variables namely, ‘non-performing loan (NPL)’ and ‘capital adequacy ratio (CAR)’ including three bank-specific variables namely, ‘cost-effective ratio (CER)’, ‘average lending interest rate (ALR)’ and ‘liquidity ratio (LR)’ on financial performance which is measured using ‘return on assets (ROA)’ and ‘return on equity (ROE)’. The study finds that the credit risk variable NPL is negatively related, and CAR is positively related to both of the dependent variables, i.e. ROA and ROE. Among the bank-specific variables, CER and LR have a negative relationship, while ALR has a positive relationship with both of the profitability measurements. This study extends the existing understanding of credit risk and the bank specific variables and their correlation with financial performance. This study also provides valuable insight for banks and management to set their long-term financial goals. Legislators and the central bank can also benefit from this study in making new lending and credit risk policies. The study only included listed commercial banks in Bangladesh, however, this approach can also be used for non-listed, state-owned, and specialized banks. Future researchers can add these financial institutions and extend their inquiry. Other internal and macroeconomic factors that can affect bank financial performance may also be included in future studies.

This study examines the impact of sustainable finance factors on bank performance in Bangladesh. It utilizes annual data from 24 listed commercial banks in Bangladesh from 2016 to 2022. It focuses on three sustainable finance factors: green finance, corporate social responsibility (CSR), and digitalization. These factors ensure sustainable finance practices by prioritizing eco-friendly investments, responsible business operations, operational efficiency, and reduced resource consumption rather than focusing solely on short-term profit maximization. Return on assets (ROA) and return on equity (ROE) are used to measure the performance of commercial banks. This study incorporates default rate and bank size as control variables to consider inherent risk and operational scale, resulting in a more precise evaluation of the impact of digitization, CSR, and green financing on bank performance. Traditional and dynamic panel regression models, including feasible generalized least squares (FGLS) and random effects models, are applied to ensure robust findings. The findings indicate that green finance exhibits an insignificant impact on bank performance. However, corporate social responsibility (CSR) demonstrates a statistically significant positive effect on ROE through positive marketing, enhancing reputation, and building shareholder loyalty towards banks. Conversely, digitalization shows a statistically significant negative effect on performance, implying that initial implementation costs and challenges may outweigh the benefits. In addition, control variables, including default rate and bank size, exhibit a statistically significant negative relationship with performance measures. This suggests that higher default rates indicate increased credit risk and financial losses, while larger bank sizes may lead to inefficiencies due to agency costs and organizational complexities.

The researcher aim was to ascertain what exactly affects the financial performance of Commercial banks in Central Equatorial State, South Sudan, a case of KCB South Sudan, African National bank, Ecobank-South Sudan, CFC Stanbic Bank-South Sudan, Ethiopian Commercial Bank-South Sudan and Ivory Bank branches in Juba. There are numerous elements that affect performance, this study focused on technological innovations that are thought to drive financial performance. The study was divided into three main common areas that have recently caught the attention of the banking industry namely internet banking, agency banking and mobile banking that affect the financial performance of KCB South Sudan, African Nation bank, Ecobank-South Sudan, CFC Stanbic Bank-South Sudan and Ethiopian Commercial Bank-South Sudan in Central Equatorial State. Central Equatoria State has been chosen since it hosts Juba as the capital City and an epicenter of numerous commercial activities. The study’s specific objectives were to determine the influence of agency banking, mobile banking, Automated Teller Machines and debit and credit cards on financial performance of commercial banks in Central Equatorial State. The study employed a descriptive research design. The study targeted population of 294 respondents. The sample size was 169 staff of KCB South Sudan, African Nation bank, Ecobank-South Sudan, CFC Stanbic Bank-South Sudan, Commercial Bank of Ethiopia-South Sudan and Ivory Bank spread across the branches in Juba, Central Equatoria State. Respondents were selected using purposive random sampling. Structured questionnaires were used to collect primary data from respondents while secondary data was obtained from the annual financial reports from KCB South Sudan, African Nation bank, Ecobank-South Sudan, CFC Stanbic Bank-South Sudan, Commercial Bank of Ethiopia-South Sudan and Ivory Bank of South Sudan. Measures of central tendencies were used to describe the results and data was presented using graphs charts and tables. The influence of dependent and independent variable was depicted by use of multiple regression. The study found that agency banking significantly influences performance of commercial banks in Central Equatoria State, South Sudan (β= 0.889; p=0.000). The study revealed that mobile banking significantly influences performance of commercial banks in Central Equatoria State, South Sudan (β= 0.613; p=0.000). The study established that automated teller machines significantly influences performance of commercial banks in Central Equatoria State, South Sudan (β= 0.744; p=0.000). The study found that debit and credit cards significantly influences performance of commercial banks in Central Equatoria State, South Sudan (β= 0.640; p=0.000). The study concluded agency banking, mobile banking, automated teller machines and debit and credit cards significantly influences financial performance of commercial banks in Central Equatorial State, South Sudan. The study recommended that commercial banks in South Sudan should ensure that bank agent’s guarantees security of data and information that is operated on the agency banking platform. The study recommends that commercial banks in South Sudan should work with regulatory authorities to establish a clear and comprehensive regulatory framework for agency banking including guidelines on risk management, customer protection, and agent licensing. The study also recommends that commercial banks in South Sudan should implement stringent security protocols and fraud prevention mechanisms for ATMs. 

The performance of the banks depends on some bank-specific factors. This paper set out to investigate the influence of asset management, operational efficiency and expense management on the financial performance of five commercial banks in Bangladesh for the period of 2011-2015. Descriptive statistics, correlation, and regression techniques were applied to find out the ultimate results. The empirical study suggested that operational efficiency had a positive effect on the dependent variables return on asset (ROA), and return on equity (ROE), but expense management was negatively related to the both indicators. On the other hand, asset management was positively related to ROA but negatively related to ROE. In addition, the regression results summed up that the changes in the performance of commercial banks could explain by bank-specific factors selected for the study.

Diversification plays a vital role in risk management and consequently financial performance of commercial banks. Diversification mitigates systemic risk facing a commercial bank and thus reduces the probability of bank failure. In Kenya, commercial banks have been diversifying their business by increasingly offering new services such as mobile banking, agency banking, bank-assurance, faceless banking and integrating microfinance in their banking system. Diversification by the commercial banks is premised on the need to enhance financial performance. This has mainly emanated from banking industry having undergone numerous regulations regimes which over the years have affected financial performance of these entities. Empirical literature shows that diversification may not always lead to higher financial performance due to increased overheads and exhausted economies of scale. The study sought to determine the effect of diversification on financial performance of commercial banks in Kenya. The specific objectives of the study were to determine the effect of income diversification on financial performance of commercial banks in Kenya, to examine the effect of geographical diversification on financial performance of commercial banks in Kenya and to examine the effect of product diversification on financial performance of commercial banks in Kenya. Secondary data used by the study was collected for five years period (2013-2017 on annual basis). All the commercial banks were studied. Data was analysed using descriptive and inferential statistics and presented in tables and figures. The study found that Income Source Diversification and Geographical Diversification had a positive effect on the financial performance of the commercial banks while the Product Diversification had a negative impact the financial performance the commercial banks. The findings from the OLS regression analysis revealed that the diversification components studied namely product diversification, geographical diversification and income diversification explain up to 13.3% of the variations in return on assets (R2=0.133) and 18.7% of the variations in return on equity (R2=0.187). The study concluded that financial performance of the commercial banks in Kenya can be accounted for by the diversification strategies that have been implemented. It was further concluded that increased formulation and implementation of additional diversification strategies resulted in significant improvement in the financial performance of the commercial banks. The study recommended that managers at the commercial banks to make formulation and implementation of diversifications as a key organizational priority. Before the adoption of any particular diversification, the management of the commercial banks are econcouraged to first determine the suitability of that particular diversification strategies based on the organization structure, culture and policies and the overall intended outcomes. The study recommends that the government and other regulatory bodies to create favourable policies on the implementation of diversifications in commercial banks. This will ensure that there is effectiveness, efficiency as well as consistency in the use and adoption of diversifications by not only the banks but also other organizations in different sectors.

The management of credit risk in commercial banks determines the banks' financial performance, which predominantly influences the quality of the loan portfolio and the nature of credit administration programs as a whole. By ensuring that credit risk is effectively managed, the primary objective of credit risk management is to generate a high-quality, stable, large, and growing flow of net interest income for banks. This objective is achieved by ensuring that banks can meet the needs of their customers. This study determined the effect of credit risk management on the financial performance of Kenyan commercial banks. The investigation was founded on the portfolio theory. The paradigm of Positivism served as the philosophical foundation for the investigation. The study incorporated both explanatory and longitudinal research designs into its methodology. The study's target population consisted of 32 Commercial Banks in Kenya. The study utilized panel data consisting of time series and cross-sectional data spanning a decade from 2010 to 2019. Using Eviews, descriptive and inferential statistics were used to analyze the collected data, which was then presented in tables and figures. The study found out that Credit risk management had an insignificant negative relationship with Return on Equity (ROE) (F=87.02884, p<0.05) and Return on Assets (ROA) (F=118.1208, p<0.05). Arising from the study findings, it is observed that credit risk management has a negative effect on financial performance measure either in ROA or ROE, it is recommended that commercial banks should keep this parameter as minimum as possible so as not involve in loss making undertakings.

This study explores the impact of credit risk on the financial performance of Nepalese commercial banks, focusing on critical performance indicators such as Return on Assets (ROA), Return on Equity (ROE), and liquidity ratios. The primary objective of this study is to evaluate the relationship between credit risk factors such as Non-Performing Loan Ratio (NPLR), Loan Loss Provision Ratio (LLPR), Capital Adequacy Ratio (CAR), and Credit Risk Ratio (CRR), and key financial metrics, and their influence on profitability and stability. Adopting a positivist research philosophy, the study employs a quantitative methodology using secondary data from the annual reports of commercial banks. The population consists of all commercial banks operating in Nepal, while a sample of seven banks was selected through the lottery method, a random sampling technique. Correlation and regression analyses were conducted to examine the relationships between the variables. The results disclose significant negative correlations between NPLR and both LAR and CAR, indicating adverse impacts of rising non-performing loans on asset leveraging and capital adequacy. Conversely, NPLR positively correlates with ROE, highlighting complex dynamics where banks with higher credit risks may achieve increased equity returns under certain conditions. Regression analysis indicates that LLPR and CRR negatively influence both ROA and ROE, whereas CAR positively impacts profitability. The findings highlight the critical importance of effective Credit Risk Management (CRM) in enhancing financial performance. Banks must balance lending activities with risk management to maintain profitability and stability. The study concludes that robust CRM strategies are essential for mitigating credit risks and sustaining growth in Nepal’s banking sector. These findings hold implications for policymakers, regulators, and practitioners aiming to strengthen the resilience of financial institutions in developing economies.