DR.IBRAHEEM ABU RAHMA (2022) Financial Inclusion and the Performance of Banking Sector in Palestine , Administrative And Financial Sciences .
Despite evidence on the social and economic importance of financial inclusion (FI), the
relationship between FI and bank profitability remains unclear. In this research, we evaluated the
association between financial inclusion and the performance of banks in Palestine using dynamic
panel analysis applied to a sample of 11 banks, with two econometric models representing profitability
indicators over a nine-year period (2012–2020). In addition to linear regression models, the
generalized method of moments estimator was utilized. The results showed that access to financial
services (e.g., the number of automated teller machines (ATMs) and the number of bank branches),
service delivery (including the average costs to maintain a current account), and the quality of the
products improve banks’ profitability. However, point-of-sale terminals have no impact on profitability.
Additionally, financial service utilization reflected in bank account number sand credit to
small and medium-sized enterprises do not affect bank profitability, and among bank-specific variables,
the nonperforming loan ratios, the cost-to-income ratios, and liquidity were found to be the
main drivers of profitability. Policymakers in Palestine must prioritize FI by adopting rules that
encourage lending to practices of financial institutions.