Assessing the Impact of Financial Inclusion on the Profitability of the Commercial Banking Sector in Pakistan

Abstract

This paper aims at examining the role played by financial inclusion in the context of commercial banking sector of Pakistan especially, the relations between the various factors that exert a major influence on the performance of the banks. The areas of financial inclusion have been taken as the independent variable while profitability has become taken as the dependent variable There are several critical factors in financial inclusion namely, increase in number of bank accounts, micro finance and home loans. This way, quantitative research methodology was adopted to provide a systematic and data-oriented analysis. The data was collected through structured questionnaires divided into four parts for the employees of 10 Commercial banks in Pakistan. A total of 250 participants were taken through random sampling to have a cross-sectional view of the practices in the financial inclusion sector. Data analysis was conducted using SPSS software using both descriptive and inferential techniques, with tables for presenting trended data and regression analysis for testing the hypotheses stringently. The efficiency of banking profitability and financial inclusion in the study has been linked conclusively. It notes that certain aspects of financial liberalisation like improvement of access to banking services, micro-finance and home loans are very critical for improvement of on performance commercial banks. Not only does all of this led to better or increased profitability but also makes way for a greater customer acquisition. Outcomes of this study are useful for understanding existing challenges of the commercial banking sector in Pakistan. They emphasise the relevance of market orientation strategy that requires the banks to strategically direct efforts on the growth of financially underserved households to create value for themselves and the customers. And by deciphering and prioritizing these fields of financial inclusion, all the banks get the competitive edge, the increased customer loyalty, as well as the significant positive impact on the further development of thefinancial sector. By doing so, this paper provides a valuable reference for all the stakeholders interested in implementing financial inclusion initiatives with an eye on improving the profit-making prospects and overall growth trajectories of the banking system in the countries under comparison