Analyzing the reciprocal relationship between financial inclusion and banking stability (Iraq case study)

A Thesis Submitted To the Board of the College of Management and Economics, Which is Part of the Requirements For Obtaining a Master’s Degree in Finance and Banking Sciences

Presented By

Reyam F. Shaker Al – Fatlawi

Supervised ByAsst. Prof. Dr.Kamal K. Jawad Al-Shammari

abstract  

  Financial inclusion is one of the means by which the objectives of monetary policy can be achieved by reaching monetary stability in any national economy. On the other hand, financial inclusion can be a goal for the central bank through which it seeks to deliver financial services to all segments of society, especially disadvantaged and poor sectors, the basic argument from which research is based is how financial inclusiveness can affect banking stability on the one hand, and how bank stability can affect financial inclusion.

    In light of the great development in information and communications technology and the expansion of the use of electronic payment methods, the banking system has become the transition to the introduction of ATMs and the use of electronic cards, which play a major role in achieving financial inclusion and delivery of banking services to most segments of society. This research aims at analyzing the data of financial inclusion and banking stability in Iraq during the period 2010-2016 in order to measure the relationship of impact and correlation between the two variables. The research reached a number of results, the most prominent of which is that the weakness of the technological infrastructure of the banking sector and the modernity of the telecommunications sector in Iraq led to a decline levels of spread, intensity and depth in the provision of financial and banking services in addition to the low levels of financial education of the economic units on the demand side, which in return weakened their financial capabilities as well as the workers in the banking sector by supply and the results of the study also revealed a lack of relationship a significant statistical correlation between the dimensions of access and banking stability and the existence of a significant correlation between the dimensions of usage and banking stability.

     The study recommends strengthening the geographical spread of the banking sector in light of the expansion of the network of branches of banks and financial services providers, especially small enterprises, as well as the establishment of access points for official financial services (such as bank agents, mobile phone services, point of sale, ATMs, insurance services, check money, etc.). to encourage Government and private banks to improve and develop their electronic services in line with the needs of consumers in order to attract the largest number of users and leave a culture of self-reliance among individuals that contribute to the collapse of a large part of the mass of cash.