Rural Bank and Regional Economic Development: Evidence from Indonesia

Authors

  • Jamal Wiwoho Faculty of Law, Universitas Sebelas Maret
  • Nugroho Saputro Faculty of Economics and Business and Center for Fintech and Banking, Universitas Sebelas Maret
  • Putra Pamungkas Faculty of Economics and Business and Center for Fintech and Banking, Universitas Sebelas Maret
  • Irwan Trinugroho Faculty of Economics and Business and Center for Fintech and Banking, Universitas Sebelas Maret
  • Moch. Doddy Ariefianto Accounting Department, BINUS Graduate Program-Master Accounting, Bina Nusantara University
  • Francisca Sestri Goestjahjantie STIE Insan Pembangunan

DOI:

https://doi.org/10.33736/ijbs.3761.2021

Keywords:

Rural Bank, Fund Allocation, Economic Growth, Poverty, Indonesia

Abstract

This paper investigates the relationship between fund reallocation on economic growth and poverty by using 1860 rural banks. Our quarterly data allow us to merge bank-level data and province level-data from 2010-2016. We find that loan-to-deposit ratio as our proxy of intermediation function could boost economic development. Our non-linear regression shows that too much finance reduces regional GDP growth but, in the long term, could help to reduce poverty. Our results provide some important policy implications that rural banks could contribute to economic development in a good way but should be highly supervised in terms of risk and competition.

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Published

2021-08-12

How to Cite

Jamal Wiwoho, Nugroho Saputro, Putra Pamungkas, Irwan Trinugroho, Moch. Doddy Ariefianto, & Francisca Sestri Goestjahjantie. (2021). Rural Bank and Regional Economic Development: Evidence from Indonesia. International Journal of Business and Society, 22(2), 818–827. https://doi.org/10.33736/ijbs.3761.2021