Financial Inclusion and Profitability of Quoted of Deposit Money Banks in Nigeria

Abstract

This study examines impact of financial inclusion on financial performance of quoted Deposit Money Banks (DMBs) in Nigeria. The study measures financial inclusion with Micro, Small and Medium Enterprises Financing, Rural Financing, Number of branches of DMBs, Pricing and Usage of banking services, while financial performance is measured with return on assets. This study adopts expo facto research design. The population of the study comprises of the 15 quoted deposit money banks on the Nigerian Stock Exchange for the period of 2002-2015. 14 out of 15 quoted DMBs are taken as sample, using filtering sampling technique to censor one of the quoted DMBs due to non-availability of sufficient data. The study makes use of secondary data collected from Central Bank of Nigeria statistical bulletin and financial reports of sampled banks. Panel multiple regression analysis is utilized and Hausman specification test favoured the use of fixed effect model. Test for adequacy were performed on the residuals and the results indicated that the residuals are homoskedastic and had no serial correlation, suggesting that the model is good. The study finds that rural financing and number of branches of deposit money banks have statistically significant effects on profitability of DMBs in Nigeria. The study concludes that financial inclusion improves profitability of DMBs in Nigeria. Based on the findings, this study recommends that DMBs should increase the amount of loan and advances given to rural areas and Micro, Small and Medium Enterprises as this will strengthen profitability of DMBs in Nigeria.