The Impact of Financial Inclusion on Economic Growth in Indonesia: Panel Data 34 Province
Keywords:financial inclusion, economic growth, panel data
AbstractFinancial inclusion is a significant phenomenon that needs the attention of policymakers around the world in planning strong policies to achieve sustainable growth. Most studies focus on access to finance or financial depth or a combination thereof. This study develops previous studies by looking at three aspects of financial inclusion: access, depth, and stability. This study aims to analyze the effect of financial depth, financial access, and financial stability on economic growth in 34 provinces in Indonesia for the 2014-2018 period. Based on the Fixed Effect Model of panel data, the results indicated that all financial inclusion variables used in this research affected economic growth. Financial depth and stability have a positive effect, while access to finance has a negative effect. This shows the validity of the paradox of thrift in Indonesia.
Aduda, J. & Kalunda, E. (2012), Financial Inclusion and Financial Sector Stability with Reference to Kenya: A Review of Literature, Journal of Applied Finance & Banking, Vol. 2, No. 6, pp. 95-120.
Agarwal (2010), Financial Inclusion: Challenges & Opportunities, 23rd Skoch Summit 2010.
Aginta, H.; Soraya, D.A. & Santoso, W.B. (2018), Financial Development and Income Inequality in Indonesia: A Sub-national Level Analysis, Economics, and Finance in Indonesia, Vol. 64 No. 2, December, pp.111–130.
Babajide, AA, Adegboye, f. B., & Omankhanlem, AE (2015), Financial Inclusion and Economic Growth in Nigeria, International Journal of Economics and Financial Issues, pp. 629-637.
Bakar, H.O. & Sulong, Z. (2018), The Role of Financial Inclusion on Economic Growth: Theoretical and Empirical Literature Review Analysis, Journal of Business & Financial Affairs, Vol. 7, Issue 4, pp. 1-5.
Bassant, S. (2011), Profitable Models for Financial Inclusion, Compendium II; Layout 1, BANCON Review papers.
Bruhn, M. & Love, I. (2014), The Real Impact of Improved Access to Finance: Evidence from Mexico. Journal of Finance, Vol. 69, Issue 3, pp. 1347–1376.
Chibba, M (2009), Financial Inclusion, Poverty Reduction, and the Millennium Development Goals, European Journal of Development Research, Vol 2, pp. 213-230.
Ghimire, B., & Giorgioni, G. (2013), Finance and Growth: An Investigation into the Role of Internal, Bank and Equity Finance, Poznan University of Economics Review, Vol. 13, Issue 2, pp. 31–46.
Goldsmith, RW. (1969), Financial Structure and Development, New Haven, CT: Yale University Press.
Gujarati, Damodar N (2012), Econometrics by Examples, Palgrave Macmillan, New York.
Guney, E. & Demirel, E. (2019), Access to Finance and Financial Inclusion Impacts on Economic Growth, Social Sciences, Management and Economics Journal, Vol. 1, Iss. 1 January, pp. 32-43.
Hariharan, M. & Marktanner U. (2012), The Need for Financial Inclusion in India, A publication of India Reserve Bank, pp. 22-32.
Honohan, P. (2008), Cross-Country Variation in Household Access to Financial Services, Journal of Banking & Finance, Vol. 32.
Mckinnon, RI (1973), Money and Capital in Economic Development, Brookings Institute, Washington Shaw.
Mankiw, N.G. (2010), Macroeconomics, Seventh Edition, Worth Publishers.
Mishkin, Frederic S., (2016), The Economics of Money, Banking, and Financial Markets, Eleventh Edition, Pearson Education Inc, Boston.
Oanolapo, A.R. (2015), Effects of Financial Inclusion on The Economic Growth of Nigeria (1982-2012), International Journal of Business and Management Review, Vol.3, No.8, September, pp. 11-28.
Ogege, S., & Boloupremo, T. (2014), Deposit Money Banks and Economic Growth in Nigeria, Financial Assets and Investing, Vol. 5, No. 1, pp. 41–50.
Okoye, LU, Adetiloye, KA, Erin, O., & Modebe, NJ (2017), Financial Inclusion as a Strategy for Enhanced Economic Growth and Development, Journal of Internet Banking and Commerce, pp. 1-12.
Rewilak, J. (2017). The Role of Financial Development in Poverty Reduction, Review of Development Finance, 7, pp. 169-176.
Sanjaya, I.M. & Nursechafia (2016), Financial Inclusion and Inclusive Growth: Analysis between Provinces in Indonesia, Bulletin of Monetary Economics and Banking, Vol. 18, No. 3, January, pp. 281-306.
Santoso, B. & Meera, A.K.M. (2017), Strategy of Financial Inclusion Development in Indonesia, SHARE Journal of Islamic Economics and Finance, Vol.6, No.1, pp. 53-84.
Sarma, M. (2008), Index of Financial Inclusion, Finance Working Papers 22259, East Asian Bureau of Economic Research.
Sarma, S. & Pias O. (2011), Financial Inclusion and Development: A Cross Country Analysis, Journal of Economic Literature, Vol. 3, pp. 8-19.
Schumpeter, JA. (1911), The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Harvard University Press, Cambridge.
Sharma, D. (2016), Nexus between Financial Inclusion and Economic Growth: Evidence from the Emerging Indian Economy, Journal of Financial Economic Policy, Vol. 8, No. 1, pp. 13-36.
Suidarma, I.M. (2019), The Nexus Between Financial Inclusion and Economic Growth in ASEAN, JEJAK Journal of Economics and Policy, Vol. 12 (2), pp. 267-281.
Sukirno, S. (2004), Introduction Macroeconomics Theory, third edition, Raja Grafindo Persada, Jakarta.
World Bank (2014), Global Financial Development Report 2014: Financial Inclusion, Washington, DC.
Yorulmaz, Recep (2012), Financial Inclusion & Economic Development: A Case Study of Turkey and A Cross-Country Analysis of European Union, Thesis, Clemson University.
1. Author and Manuscript
- The author whose name appear in the above statement is declaring that he/she is the author of the stated manuscript
- All of the authors, if any, has already aware of this agreement and give consent for the mentioned name to act on their behalf
- The author stated that the manuscript is original and has never been published elsewhere.
- The author has obtained permissions from other contributors, if any
- The author has specifically mentioned and cited all external materials properly
- Note: External materials refers to any material, writings, figures, tables, illustrations, or any other materials which is not being produced, made, or patented by the author
- The author holds the sole responsible should there are any mistyping; unclear citation and holds responsible should there are any inappropriate manners such as unlawful, breaches, obscene, or any other reasons which are not aligned with the law and norm.
3. Deliverable of Manuscript and Other Materials
- The Contributor/Author shall deliver their manuscript using the provided and acceptable format (doc. Or docx) in the assigned date as well as author copyright document signed.
- Inability delivering the manuscript in the stated date and format will affecting the publication process thus, The Publisher have the rights to reject the manuscript and terminate the letter of acceptance or letter of offerings
- Author is responsible to deliver the manuscript using the provided format. Note: All of the figures, tables, illustrations, or any other materials that will be inserted in the manuscript need to be in high quality
- Should the author decided to alter the manuscript format, the fee will be charged and bore by authors
The Author give “Yayasan Sinergi Riset dan Edukasi” (here forth known as RSF Press) the unlimited right to publish the contribution identified above, without any restraints, in any form, at any time, directly or through others, to reproduce, transmit, archive, lease/lend, sell and distribute the contribution or parts thereof individually or together with other works in any language, revision and version (digital and hard), including reprints, translations, photographic reproductions, microform, audiograms, videograms, electronic form (offline, online), or any other reproductions of similar nature, including publication in the aforementioned book or any other book, as well as, the usage for advertising purposes. RSF Press will ensure that the Author’s name(s) is/are always clearly associated with the manuscript, and the publishers will not make any substantial change to the manuscript without consulting the author and ask for their consent. RSF Press is also entitled to carry out editorial changes in the contribution with the sole purpose of enhancing the overall organization and form of the contribution.
The Author retains the rights to publish the contribution in his/her own web site and thesis, in his/her employer’s web site and to publish a similar or revised version elsewhere, as long as it is clearly stated that the contribution was presented first RSF Press and the corresponding DOI is associated with the contribution.