Trade-off between financial inclusion and Islamic bank stability in five GCC countries: the moderating effect of CSR

Figures & data

Figure 1. Map of the adults with an account (%) in GCC countries in 2021. Source: World Bank (Global Findex) and authors’ creation.

Figure 2. The inverted U-shaped association between financial inclusion and Islamic banking stability.

Table 1. Breakdown of companies.

	Number of banks	Justification
Number of banks in GCC countries	91
Less conventional banks	48	The focus of this study is limited to Islamic banks.
Less Bahrain’ Islamic banks	16	Data on financial inclusion are not available for Bahrain.
The final sample	27

Table 2. Distribution of Islamic banks.

Countries	Number of Islamic banks	Obs.	%
Kuwait	6	54	22.22%
Oman	3	27	11.11%
Qatar	6	54	22.22%
Saudi Arabia	4	36	14.81%
UAE	8	72	29.63%
Total	27	243	100%

Table 3. FIMI, ACCI, and USAI indicators across GCC countries.

Countries	FIMI	ACCI	USAI
Kuwait	0.476	0.105	0.814
Oman	0.198	0.137	0.305
Qatar	0.920	0.892	0.719
Saudi Arabia	0.271	0.549	0.009
UAE	0.935	0.741	0.923
Average	0.560	0.485	0.554

Source: Author’s calculation.

Table 4. Descriptive statistics.

Variable	Obs	Mean	Std. Dev	Min	Max
IsBS	243	2.665	1.183	−1.305	5.141
FIMI	243	0.560	0.318	0.154	1
ACCI	243	0.538	0.331	0.044	1
USAI	243	0.649	0.362	0	1
CSRI	243	0.271	0.224	0	1
AQ	243	0.013	0.027	−0.011	0.370
BE	243	0.685	1.23	−2.33	15
LIQ	243	0.591	0.169	0.022	0.82
Size	243	3.971	0.645	2.093	5.097
Age	243	2.678	0.904	0	3.951
GDPG	243	0.022	0.027	−0.047	0.090
GS	243	0.620	0.169	0	1
SSB	243	0.261	0.200	0	1

Note: this table summarizes the descriptive statistics for all variables used in this study.

Source: Author’s calculation.

Table 5. Pairwise and VIF correlations.

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	VIF
(1) IsBS	1.000
(2) FIMI	0.073	1.000										1.39
(3) CSRI	−0.033	−0.254*	1.000									1.66
(4) GS	−0.050	−0.208*	−0.042	1.000								1.19
(5) SSB	−0.066	−0.304*	0.528*	−0.138*	1.000							1.58
(6) AQ	−0.206*	0.086	−0.038	−0.098	0.018	1.000						1.11
(7) BE	−0.048	−0.122	−0.121	0.007	−0.037	0.036	1.000					1.30
(8) LIQ	0.051	−0.174*	0.338*	0.136*	0.117	−0.265*	−0.347*	1.000				1.90
(9) Size	0.011	0.148*	0.246*	0.071	−0.025	−0.189*	−0.440*	0.574*	1.000			2.06
(10) Age	−0.254*	0.079	0.151*	−0.227*	0.053	0.077	−0.188*	0.006	0.282*	1.000		1.32
(11) GDPG	0.165*	0.198*	−0.300*	0.134*	−0.309*	0.066	0.076	−0.114	−0.088	−0.279*	1.000	1.26
Mean VIF												1.48

Note: This table shows the correlation coefficients between the dependent and independent variables and between all the independent variables used in this study over the period 2012-2020. * denotes the significant at 5% level.

Source: Author’s calculation.

Table 6. Financial inclusion and Islamic banking stability: main results.

	(1)	(2)	(3)	(4)
VARIABLES	IsBS	IsBS	IsBS	IsBS
L.IsBS	0.861***	0.790***	0.780***	0.239***
	(0.049)	(0.053)	(0.047)	(0.074)
FIMI	0.543***		3.332***	15.656***
	(0.154)		(0.914)	(3.642)
FIMI^2			−2.136***	−9.269***
			(0.709)	(3.091)
CSRI		0.714**		13.485***
		(0.321)		(2.629)
FIMI*CSRI				−24.861***
				(6.447)
FIMI^2*CSRI				13.148**
				(5.850)
AQ	−9.660***	−8.253***	−9.227***	−18.633***
	(1.470)	(1.608)	(1.615)	(2.857)
BE	0.005	−0.024***	0.008	0.005
	(0.008)	(0.006)	(0.012)	(0.019)
LIQ	0.129	−0.416**	0.368**	−0.077
	(0.149)	(0.200)	(0.170)	(0.456)
Size	−0.085	−0.038	−0.103	−0.288
	(0.058)	(0.072)	(0.066)	(0.207)
Age	0.005	−0.029	−0.094*	−0.320**
	(0.040)	(0.031)	(0.053)	(0.132)
GDPG	−0.579	1.137	−1.838	3.841**
	(0.918)	(1.044)	(1.104)	(1.832)
GS	−0.237***	−0.398***	−0.299***	−0.088
	(0.077)	(0.106)	(0.084)	(0.198)
SSB	0.412***	−0.130	0.301**	−1.473**
	(0.130)	(0.218)	(0.128)	(0.581)
Constant	0.359	1.118***	0.164	−2.072*
	(0.291)	(0.336)	(0.321)	(1.179)
Observations	216	216	216	216
Number of banks	27	27	27	27
Number of instruments	27	27	27	27
AR (1) (p-value)	0.000	0.000	0.000	0.000
AR (2) (p-value)	0.807	0.505	0.588	0.461
Hansen test (p-value)	0.269	0.177	0.207	0.681

Notes: Standard errors are displayed in brackets. ***, ** and * denote statistical significance at the 1%, 5% and 10% levels respectively.

Source: Author’s calculation.

Table 7. U-shaped curve test.

Group	Lower bound	Upper bound
Interval	0.154	1
Slope	2.673***	−0.941**
	(3.808)	(-1.696)
Overall test
t-value	1.70
p-value	0.051
Extreme point	0.716

Notes: t-values are in brackets. **, *** indicate significance at 5% and 1% levels respectively.

Source: Author’s calculation.

Table 8. Change in dependent variable.

	(1)	(2)
VARIABLES	AIsBS	ln(SDROA)
L.AIsBS	0.608***	0.694***
	(0.067)	(0.064)
FIMI	1.663*	10.244***
	(0.874)	(3.538)
FIMI^2	−1.657**	−8.935***
	(0.784)	(2.922)
CSRI		3.419
		(2.104)
FIMI*CSRI		−15.663*
		(7.840)
FIMI^2*CSRI		13.314*
		(6.725)
AQ	2.067	2.159
	(1.594)	(3.471)
BE	−0.003	−0.053*
	(0.017)	(0.031)
LIQ	0.058	−0.090
	(0.183)	(0.450)
SIZE	0.037	0.120
	(0.051)	(0.118)
Age	−0.184***	−0.269***
	(0.053)	(0.052)
GDPG	−0.286	−0.731
	(0.831)	(1.682)
GS	−0.371**	−0.557***
	(0.177)	(0.182)
SSB	−0.032	−0.211
	(0.187)	(0.502)
Constant	1.456***	−0.411
	(0.352)	(1.160)
Observations	216	216
Number of banks	27	27
Number of instruments	27	27
AR (1) (p-value)	0.000	0.000
AR (2) (p-value)	0.298	0.925
Hansen test (p-value)	0.540	0.512

Notes: Standard errors are displayed in brackets. ***, ** and * denote statistical significance at the 1%, 5% and 10% levels respectively.

Source: Author’s calculation.

Table 9. Change in independent variable.

	(1)	(2)	(3)	(4)
	ACCI		USAI
VARIABLES	IsBS	IsBS	IsBS	IsBS
L.IsBS	0.927***	0.357***	0.757***	0.553***
	(0.042)	(0.075)	(0.051)	(0.054)
FIMI	1.319**	8.980***	1.355**	3.249***
	(0.631)	(2.625)	(0.598)	(0.876)
FIMI^2	−1.124*	−6.355***	−0.359	−2.202***
	(0.593)	(2.038)	(0.515)	(0.641)
CSRI		6.388***		3.350***
		(1.802)		(0.999)
FIMI*CSRI		−18.410***		−9.460***
		(5.924)		(2.553)
FIMI^2*CSR		13.083**		6.739***
		(5.149)		(1.766)
AQ	−8.284***	−17.814***	−13.166***	−9.813**
	(1.725)	(3.200)	(1.536)	(4.252)
BE	−0.017***	−0.000	−0.000	−0.019
	(0.005)	(0.018)	(0.010)	(0.015)
LIQ	−0.033	0.338	0.029	−0.408
	(0.174)	(0.564)	(0.179)	(0.370)
SIZE	−0.112	−0.630***	−0.011	0.068
	(0.083)	(0.224)	(0.080)	(0.129)
Age	0.034	−0.112	−0.040	−0.158**
	(0.049)	(0.097)	(0.053)	(0.073)
GDPG	0.691	1.762	0.314	3.394**
	(1.213)	(1.270)	(0.989)	(1.609)
GS	−0.344***	−0.158	0.009	−0.099
	(0.064)	(0.230)	(0.094)	(0.159)
SSB	0.412***	−0.800*	0.163	−0.125
	(0.114)	(0.398)	(0.157)	(0.331)
Constant	0.434	1.822***	0.069	0.563
	(0.291)	(0.407)	(0.463)	(0.558)
Observations	216	216	216	216
Number of banks	27	27	27	27
Number of instruments	27	27	27	27
AR (1) (p-value)	0.000	0.000	0.000	0.000
AR (2) (p-value)	0.857	0.262	0.563	0.468
Hansen test (p-value)	0.642	0.672	0.197	0.941

Notes: Standard errors are displayed in brackets. ***, ** and * denote statistical significance at the 1%, 5% and 10% levels respectively.

Source: Author’s calculation.

Table A1. Results of Bartlett sphericity test, Kaiser-Meyer-Olkin sample adequacy measure and PCA (total variance explained).

Panel A: Applicability tests
		Bartlett Sphericity Test			KMO
		Chi-square	Degrees of freedom	p-value
Access dimension		85.772	3	0.000	0.500
Usage dimension		74.050	1	0.000	0.500
Financial inclusion		84.441	1	0.000	0.500
Panel B: PCA (total amount of variance explained)
Component		Eigenvalue	Difference	% of Variance	Cumulative variance %
	1	2.299	1.697	0.766	0.766
	2	0.602	0.503	0.201	0.967
Access dimension	3	0.099		0.033	1.000
	1	1.773	1.545	0.886	0.886
Usage dimension	2	0.227		0.114	1.000
	1	1.104	0.208	0.552	0.552
Financial inclusion	2	0.896		0.448	1.000

Source: Author’s calculation.

Table A2. Name of Islamic banks.

Kuwait	Ahli United Bank; Boubyan Bank; Gulf Investment House; Kuwait Finance House; Kuwait internatioanl bank; Warba bank
Oman	Alizz Islamic Bank; Bank Nizwa SAOG; Sohar Islamic Bank
Qatar	Dukhan Bank; Masraf Al Rayan; Qinvest bank; Qatar First Bank; Qatar International Islamic Bank; Qatar Islamic bank
Saudi Arabia	Al Rajhi Banking and Investment Corporation; Alinma bank; Bank al jazira; Bank albilad
UAE	Abu Dhabi Islamic Bank; Al Hilal Bank; Ajman Bank; Dubai Islamic Bank; Emirates Islamic Bank; Mashreq bank; Union National Bank; Sharjah Islamic Bank

Data availability statement

The data presented in this study are available on request.