Foreign banks entry and financial inclusion: insights from MENA region

• Publish Date: 2025-06-15

Research Abstract:

Purpose

This study aims to examine the impact of foreign bank entry (FBE) on financial inclusion in the MENA region, using a panel regression model with data from 21 countries over the period 2000–2021. It investigates whether this impact is conditional to the level of financial development and institutional quality. Specifically, the framework uses modernization theory to hypothesize that FBE enhances financial services access and usage through efficiency gains and improved banking practices. In contrast, neo-institutional theory is operationalized to analyze the moderating effects of institutional quality on these relationships, positing that weak institutions can restrict access by encouraging foreign banks to engage in “cherry-picking” of clients. Despite the increasing presence of foreign banks in the MENA region, empirical studies that examine how this presence directly impacts financial inclusion – specifically in terms of access and usage – are limited.

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