Financial Inclusion's Role in Algerian Banks' Competitiveness: Eloued Agencies Evidence

Abstract

Financial inclusion has emerged as a strategic priority for regulators in emerging economies, yet its mechanisms of influence on bank competitiveness in MENA contexts remain underexplored, particularly at the sub-national level. This study examines how the three dimensions of financial inclusion — access, usage, and quality of services — shape competitive advantage in Algerian commercial banks operating in El Oued Province, a peripheral region where 58% of Algerian adults remain unbanked and where the Central Bank of Algeria's inclusion agenda intersects with persistent urban–rural and gender disparities. Drawing on Sarma's Financial Inclusion Index and Porter's competitive advantage framework, the study employs a sequential mixed-methods design. Quantitative data were collected through 174 structured questionnaires distributed via stratified random sampling across seven Algerian banks, achieving an 87% response rate. The 37-item instrument, validated through expert review (S-CVI = 0.91) and pilot testing, demonstrated strong internal consistency (Cronbach's α = 0.937). Simple linear regression conducted in SPSS v26 was supplemented by interviews and focus groups to contextualise the quantitative patterns. The findings establish that financial inclusion explains 40.6% of the variance in competitive advantage (R = 0.637; p < 0.05). Among the three dimensions, service quality demonstrated the strongest association (R = 0.581; 33.8% variance explained), followed by usage (R = 0.535; 28.7%) and access (R = 0.533; 28.4%). Three contextual findings extend prior MENA literature: a digital adoption paradox in which 92% mobile-phone penetration coexisted with only 11% active mobile-banking usage, attributable to rural infrastructure deficits and fraud-related distrust reported by 73% of respondents; a local gender gap of 22% in financial service use, exceeding the national average of 15%; and unexpectedly low cost sensitivity (29.8%), reflecting that 86% of respondents held fee-free public-sector accounts. The study contributes to the economics–regulation interface by providing the first sub-national empirical assessment for southern Algeria, identifying a behavioural-regulatory gap between digital infrastructure provision and actual adoption, and offering evidence-based guidance for geographically differentiated inclusion policies in conservative rural markets.