FINANCIAL INCLUSION OF HOUSEHOLDS IN INDONESIA
DOI:
https://doi.org/10.33736/ijbs.5967.2023Keywords:
mobile phone, financial inclusion, IndonesiaAbstract
There is extensive attention on financial inclusion and its benefits, recently strategy to stimulate financial inclusion has focused on innovation and technology penetration. This paper analyzes the effect of financial inclusion on a household’s income and the role of cellphone and internet access in household financial inclusion in Indonesia. We develop the financial deprivation of each household to calculate financial exclusion. The Indonesia Family Life Survey year 2014 data are utilized in this paper. Our methodology is Ordinary Least Square (OLS) to examine how the role of financial institutions affects a household’s income. In the second model, we use Probit estimation to determine the likelihood of household financial deprivation due to cellphone and internet access. We also check the robustness of previous models using Propensity Score Matching (PSM) estimation. Our estimation results found that financial exclusion has a highly significant impact on a specific group of households. With middle-level income households, the financial exclusion would deprive income of almost 80 percent. This finding explains that middle welfare households benefited more from financial inclusion than households in the poorest and the wealthiest group. Another result found that cellphone and mobile banking significantly impact decreasing financial deprivation, respectively.
References
Periodicals:
Alkire, S., & Santos, M. E. (2010). Acute multidimensional poverty: A new index for developing countries. Oxford Poverty & Human Development Initiative (OPHI) Working Paper No. 38. United Nations Development Programme Human Development Report Office Background Paper No. 2010/11. https://dx.doi.org/10.2139/ssrn.1815243
https://doi.org/10.2139/ssrn.1815243
Allen, F., Demirguc-Kunt, A., Klapper, L., & Peria, M. S. M. (2016). The foundations of financial inclusion: Understanding ownership and use of formal accounts. Journal of financial Intermediation, 27, 1-30. https://doi.org/10.1016/j.jfi.2015.12.003
https://doi.org/10.1016/j.jfi.2015.12.003
Ang, J. B. (2009). Financial development and the FDI-growth nexus: The Malaysian experience. Applied Economics, 41(13), 1595-1601. doi:10.1080/00036840701222553
https://doi.org/10.1080/00036840701222553
Ariyadi, W. (2021). Empirical Analysis of Farmers Household Food Security Levels in Salatiga, Indonesia. Research Horizon, 1(1), 39-46. https://doi.org/10.54518/rh.1.1.2021.39-46.
https://doi.org/10.54518/rh.1.1.2021.39-46
Ashraf, N., Karlan, D., & Yin, W. (2010). Female empowerment: Impact of a commitment savings product in the Philippines. World Development, 38(3), 333-344. doi:10.1016/j.worlddev.2009.05.010
https://doi.org/10.1016/j.worlddev.2009.05.010
Astuti, I. P., Sugiyanto, F. X., & Kurnia, A. S. (2022). The Role of Financial Inclusion in Poverty Reduction: A Production Theory Approach. Economic and Business Horizon, 1(1), 24-32. Retrieved from https://journal.lifescifi.com/index.php/ebh/article/view/78.
Asuming, P. O., Osei-Agyei, L. G., & Mohammed, J. I. (2019). Financial inclusion in sub-Saharan Africa: Recent trends and determinants. Journal of African Business, 20(1), 112-134. https://doi.org/10.1080/15228916.2018.1484209
https://doi.org/10.1080/15228916.2018.1484209
Banerjee, A., Duflo, E., Glennerster, R., & Kinnan, C. (2015). The miracle of microfinance? Evidence from a randomized evaluation. American Economic Journal: Applied Economics, 7(1), 22-53. doi:10.1257/app.20130533
https://doi.org/10.1257/app.20130533
Beck, T., Senbet, L., & Simbanegavi, W. (2015). Financial inclusion and innovation in Africa: An overview. Journal of African Economies, 24(suppl_1), i3-i11. https://doi.org/10.1093/jae/eju031
https://doi.org/10.1093/jae/eju031
Bruhn, M., & Love, I. (2014). The real impact of improved access to finance: Evidence from Mexico. The Journal of Finance, 69(3), 1347-1376. doi:10.1111/jofi.12091
https://doi.org/10.1111/jofi.12091
Burgess, R., Pande, R., & Wong, G. (2005). Banking for the poor: Evidence from India. Journal of the European Economic Association, 3(2-3), 268-278. doi:10.1162/jeea.2005.3.2-3.268
https://doi.org/10.1162/jeea.2005.3.2-3.268
Chibba, M. (2009). Financial inclusion, poverty reduction and the millennium development goals. The European Journal of Development Research, 21(2), 213-230. doi:10.1057/ejdr.2008.17
https://doi.org/10.1057/ejdr.2008.17
Churchill, S. A., & Marisetty, V. B. (2020). Financial inclusion and poverty: a tale of forty-five thousand households. Applied Economics, 52(16), 1777-1788. https://doi.org/10.1080/00036846.2019.1678732
https://doi.org/10.1080/00036846.2019.1678732
Cole, S., Giné, X., Tobacman, J., Topalova, P., Townsend, R., & Vickery, J. (2013). Barriers to household risk management: Evidence from India. American Economic Journal: Applied Economics, 5(1), 104-135. doi:10.1257/app.5.1.104
https://doi.org/10.1257/app.5.1.104
Dev, S. M. (2006). Financial inclusion: Issues and challenges. Economic and Political Weekly, 41(41), 4310-4313.
Dupas, P., & Robinson, J. (2013). Savings constraints and microenterprise development: Evidence from a field experiment in Kenya. American Economic Journal: Applied Economics, 5(1), 163-192. doi:10.1257/app.5.1.163
https://doi.org/10.1257/app.5.1.163
Fletschner, D., & Mesbah, D. (2011). Gender Disparity in Access to Information: Do Spouses Share What They Know? World Development, 39(8), 1422-1433. https://doi.org/10.1016/j.worlddev.2010.12.014
https://doi.org/10.1016/j.worlddev.2010.12.014
Karlan, D., McConnell, M., Mullainathan, S., & Zinman, J. (2010). Getting to the top of mind: How reminders increase saving. Management Science, 62(12), 3393-3411. doi:10.1287/mnsc.2015.2296
https://doi.org/10.1287/mnsc.2015.2296
Karlan, D., Osei, R., Osei-Akoto, I., & Udry, C. (2014). Agricultural decisions after relaxing credit and risk constraints. The Quarterly Journal of Economics, 129(2), 597-652. doi:10.1093/qje/qju002
https://doi.org/10.1093/qje/qju002
Lenka, S. K., & Barik, R. (2018). Has expansion of mobile phone and internet use spurred financial inclusion in the SAARC countries?. Financial Innovation, 4(1), 1-19. https://doi.org/10.1186/s40854-018-0089-x
https://doi.org/10.1186/s40854-018-0089-x
Mbiti, I., & Weil, D. N. (2011). Mobile Banking: The Impact 0f M-Pesa In Kenya. NBER Working Paper 17129, 1-57.
https://doi.org/10.3386/w17129
Mialou, A., & Amidzic, G. (2017). Assessing Countries' Financial Inclusion Standing - A New Composite Index. Journal of Banking and Financial Economics, 2/2017(8), 105-126. https://doi.org/10.7172/2353-6845.jbfe.2017.2.5
https://doi.org/10.7172/2353-6845.jbfe.2017.2.5
Park, C. Y., & Mercado, R. (2015). Financial inclusion, poverty, and income inequality in developing Asia. Asian Development Bank Economics Working Paper Series, (426). https://dx.doi.org/10.2139/ssrn.2558936
https://doi.org/10.2139/ssrn.2558936
Riswanto, A., Saribanon, E., & Gaffar, V. (2018). The importance of the cultural and gender outlook on consumer behavior studies: An Indonesian perspective. Arthatama, 2(1), 35-49. https://arthatamajournal.co.id/index.php/home/article/view/16.
Rosenbaum, P. R., & Rubin, D. B. (1983). The central role of the propensity score in observational studies for causal effects. Biometrika, 70, 41-55. doi:10.1093/biomet/70.1.41
https://doi.org/10.1093/biomet/70.1.41
Sarma, M., & Pais, J. (2011). Financial inclusion and development. Journal of International Development, 23(5), 613-628. doi:10.1002/jid.1698
https://doi.org/10.1002/jid.1698
Tran, V. T., Walle, Y. M., & Herwartz, H. (2018). Local financial development and household welfare in Vietnam: Evidence from a panel survey. The Journal of Development Studies, 54(4), 619-640. https://doi.org/10.1080/00220388.2017.1385772
https://doi.org/10.1080/00220388.2017.1385772
Triki, T., & Faye, I. (Eds.). (2013). Financial inclusion in Africa. African Development Bank. African Development Bank (AfDB). https://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Financial_Inclusion_in_Africa.pdf.
Zhang, Q., & Posso, A. (2019). Thinking inside the box: A closer look at financial inclusion and household income. The Journal of Development Studies, 55(7), 1616-1631. https://doi.org/10.1080/00220388.2017.1380798
https://doi.org/10.1080/00220388.2017.1380798
Zhang. & Posso, A. (2017). Microfinance and gender inequality: Cross-country evidence. Applied Economics Letters, 24(20), 1494-1498. doi:10.1080/13504851.2017.1287851
https://doi.org/10.1080/13504851.2017.1287851
Zhang, Q. (2017). Does microfinance reduce poverty? Some international evidence. The BE Journal of Macroeconomics, 17(2), 20160011. https://doi.org/10.1515/bejm-2016-0011
https://doi.org/10.1515/bejm-2016-0011
Books:
Bank Indonesia. (2014). Digital Financial Inclusion In Indonesia Financial Inclusion And Electronification Task Force Bank Indonesia Transformation.
Bodie, Z., Merton, R. C., & Cleeton, D. L. (2009). Financial economics. Upper Saddle River, NJ: Prentice Hall.
Massara, M. A., & Mialou, A. (2014). Assessing countries' financial inclusion standing-A new composite index. Washington, DC: International Monetary Fund.
Chapters in books:
Brody, L. R. (1993). On understanding gender differences in the expression of emotion. In S. L. Ablon, D. Brown, E. J. Khantzian & J. E. Mack (Eds.), Human feelings: Explorations in affect development and meaning. NJ: The analytic Press Hillsdale.
Conference proceedings:
Sarma, M. (2008). Index of financial inclusion: Indian council for research on international economics relation (Discussion Paper No. 10-05). New Delhi: Indian Council for Research on International Economics Relations.
Reports:
World Bank. (2015). Global financial development report 2015-2016: Long-term finance. Washington, DC: Author.
Internet documents/webpages:
Angelucci, M., Karlan, D., & Zinman, J. (2013). Win some lose some? Evidence from a randomized microcredit program placement experiment by Compartamos Banco (Working Paper No. 19119). Retrieved from National Bureau of Economic Research website http://www.nber.org/papers/w19119.pdf
https://doi.org/10.3386/w19119
World Bank. (2017). Financial Inclusion [Web page]. Retrieved from http://www.worldbank.org/en/topic/financialinclusion/overview
World Bank. (2018). Database Global Findex Menunjukkan Inklusi Keuangan Meningkat, Tapi Kesenjangan Tetap Ada. Retrieved from The World Bank: https://www.worldbank.org/in/news/press-release/2018/04/19/financial-inclusion-on-the-rise-but-gaps-remain-global-findex-database-shows
Downloads
Published
How to Cite
Issue
Section
License
Copyright Transfer Statement for Journal
1) In signing this statement, the author(s) grant UNIMAS Publisher an exclusive license to publish their original research papers. The author(s) also grant UNIMAS Publisher permission to reproduce, recreate, translate, extract or summarize, and to distribute and display in any forms, formats, and media. The author(s) can reuse their papers in their future printed work without first requiring permission from UNIMAS Publisher, provided that the author(s) acknowledge and reference publication in the Journal.
2) For open access articles, the author(s) agree that their articles published under UNIMAS Publisher are distributed under the terms of the CC-BY-NC-SA (Creative Commons Attribution-Non Commercial-Share Alike 4.0 International License) which permits unrestricted use, distribution, and reproduction in any medium, for non-commercial purposes, provided the original work of the author(s) is properly cited.
3) For subscription articles, the author(s) agree that UNIMAS Publisher holds copyright, or an exclusive license to publish. Readers or users may view, download, print, and copy the content, for academic purposes, subject to the following conditions of use: (a) any reuse of materials is subject to permission from UNIMAS Publisher; (b) archived materials may only be used for academic research; (c) archived materials may not be used for commercial purposes, which include but not limited to monetary compensation by means of sale, resale, license, transfer of copyright, loan, etc.; and (d) archived materials may not be re-published in any part, either in print or online.
4) The author(s) is/are responsible to ensure his or her or their submitted work is original and does not infringe any existing copyright, trademark, patent, statutory right, or propriety right of others. Corresponding author(s) has (have) obtained permission from all co-authors prior to submission to the journal. Upon submission of the manuscript, the author(s) agree that no similar work has been or will be submitted or published elsewhere in any language. If submitted manuscript includes materials from others, the authors have obtained the permission from the copyright owners.
5) In signing this statement, the author(s) declare(s) that the researches in which they have conducted are in compliance with the current laws of the respective country and UNIMAS Journal Publication Ethics Policy. Any experimentation or research involving human or the use of animal samples must obtain approval from Human or Animal Ethics Committee in their respective institutions. The author(s) agree and understand that UNIMAS Publisher is not responsible for any compensational claims or failure caused by the author(s) in fulfilling the above-mentioned requirements. The author(s) must accept the responsibility for releasing their materials upon request by Chief Editor or UNIMAS Publisher.
6) The author(s) should have participated sufficiently in the work and ensured the appropriateness of the content of the article. The author(s) should also agree that he or she has no commercial attachments (e.g. patent or license arrangement, equity interest, consultancies, etc.) that might pose any conflict of interest with the submitted manuscript. The author(s) also agree to make any relevant materials and data available upon request by the editor or UNIMAS Publisher.
