Assessing bank financial performance in the context of digital financial service policy: empirical insights

Purpose The Digital Financial Services Policy (DFSP) was initiated by the Ghana Ministry of Finance in 2020, to promote the use of digital financial services by financial institutions to achieve financial inclusion. This study aims to examine the impact of the DFSP on bank financial performance (FP). Design/methodology/approach This study used data from 20 universal banks between 2017 and 2022. The ordinary least square, logistic regressions, heterogeneity analysis and robustness tests were used to examine whether DFSP affect FP. Findings This study finds that DFSP positively impacts return on assets and return on equity. In addition, adopting DFSP in Ghana has levelled the playing field for both large and small banks, as well as for listed, non-listed, domestic and foreign-owned banks, supporting the financial inclusion theory’s benefits associated with banks. However, DFSP negatively impacts the net interest margin. Practical implications As DFSP enhances financial inclusion with improved social ramifications, this highlights the need for Ghanaian universal banks to support digitalization policies, invest in digital infrastructure and develop innovative digital products and services to enhance their performance. Originality/value To the best of the authors’ knowledge, this study provides some of the first empirical evidence on the effect of the DFSP on FP in Ghana.