The Impact of Banks Size on the Relationship between Financial Inclusion and Financial Performance: An Applied Study on Saudi Commercial Banks (2017–2023)

Abstract

The study aimed to analyse the impact of financial inclusion on the financial performance of commercial banks in Saudi Arabia, while examining the moderating role of bank size in this relationship. To achieve this, the study employed a descriptive-analytical approach using data from commercial banks listed on the Saudi Stock Exchange during the period 2017–2023. Financial inclusion was measured using variables such as the number of branches, ATMs, points of sale, and the percentage of financing for small and medium enterprises (SMEs), along with control variables such as bank age and leverage. Financial performance was measured using return on assets (ROA) and return on equity (ROE) to study the statistical significance of financial inclusion on the performance of Saudi banks and the statistical significance of bank size on the relationship between financial inclusion and the performance of Saudi banks. The results revealed a positive and statistically significant effect of ATMs and POS terminals on banking performance (ROA and ROE), while the number of branches had a negative effect on ROA with no statistically significant impact on ROE, and SME financing showed no direct significant effect on either performance indicator. The moderating role of bank size was statistically significant for the effects of number of branches, POS terminals, and ATMs, strengthening the relationships while maintaining their directions. SME financing showed a positive and significant effect on performance when considering bank size. Based on these findings, the study recommends enhancing digital channels, improving SME financing risk management, developing financial infrastructure.