The Impact of Financial Inclusion on Banking Efficiency: Mediating Effects of Stability Risk and Moderating Effects of Economic Growth

Abstract

This study investigates how financial inclusion in turn affects the efficiency of banks, the moderating effects of economic growth (expressed in terms of GDP), and the mediating effects of risks of instability in the BRICS countries. The availability and usage of the various financial services, classified as financial inclusion, have been identified as a major contributor to economic growth and stability. Financial inclusion is expected to lessen poverty, increase savings, and make the underbanked population participate more in the economy by mitigating the barrier between the formal financial sector and the underbanked population. This study deals with the complicated connection that exists between financial inclusion and banking efficiency in the matters of BRICS and looks at how the economic growth such as GDP, influence the relationship and how the risks of stability, such as liquidity risk      , alter the findings. With the help of sufficient and well-developed econometric methods and the data used during the period between 2000 and 2023, the research provides a renewed understanding of the relationship between financial inclusion, banking efficiency, economic growth, and financial stability. The results indicate that financial inclusion increases the efficiency of the banking system, but the degree of its efficiency depends on the macroeconomic environment and bank stability in the financial system. This study helps in addressing the debate surrounding financial inclusion, since it incorporates variables that act as moderators and mediators, and therefore can recommend efforts toward policymakers and banking institutions in emerging nations, to substantially increase financial inclusion and the performance of the banking industry.