Abstract
To build a strong banking sector, it is essential to adopt effective and robust strategies that are well coordinated with each other, with the ultimate goal of elevating the banking sector. This research aims to shed light on the impact of financial inclusion in enhancing the stability of the banking sector in Iraq for the period 2015-2022 and to understand the significance of the interaction and coordination between them.To achieve this goal, the research encompasses two main aspects. The first aspect provides a theoretical foundation on financial inclusion, its challenges, and banking stability, along with its challenges, followed by an analytical review of the reality of financial inclusion indicators and banking sector stability indicators in Iraq during the studied period.The second aspect involves a quantitative econometric analysis of the relationship between financial inclusion and banking sector stability in Iraq. This analysis employs a series of tests and econometric models, including unit root tests, cointegration tests, the ARDL model, and the generalized error correction model (VECM). The estimates yielded several findings, among which the impact of financial inclusion on banking sector stability indicators was varied. Some parameters were found to be insignificant, while others were significant. These mixed results were attributed to weak oversight by monetary policy on the banking sector, as both are managed by the same authority, the Central Bank. Consequently, their operations are parallel and complementary rather than intersecting. Therefore, it has become necessary for the Central Bank to draw a roadmap for the operation of both policies, ensuring that each complements the work of the other.
