Banking Performance, Digitalization, and Financial Access on Financial Institution Depth in ASEAN-6

This study investigates the factors influencing the depth of financial institutions in ASEAN-6, namely Indonesia, Malaysia, Thailand, the Philippines, Vietnam, and Singapore. This study uses secondary data from the World Bank and IMF with an observation period of 2008-2022. The analysis method used is panel data regression with the fixed effect model approach to capture heterogeneous effects between countries. The independent variables in this study include bank profitability as measured by return on equity, credit risk represented by the non-performing loans ratio, as well as interest rates and banking digitalization as factors supporting the depth of the financial sector. The results show that bank profitability has a positive and significant effect on the depth of the financial sector, while non-performing loans have a significant negative impact. Banking digitalization has also been found to play a role in increasing the depth of the financial sector by expanding access to financial services. This implies that policies to improve bank operational efficiency, stricter credit risk management, and accelerate the digitalization of financial services are needed to strengthen the financial sector in ASEAN-6. The implications of this study provide recommendations for policymakers to encourage financial stability and depth to support sustainable economic growth in the ASEAN region.