The Effect of Financial Literacy and Financial Inclusion on Economic Growth in Indonesia

Nurul Hidayatinnisa' Hidayatinnisa',Fauziah Fauziah,Shinta Maharani Trivena,Yulis Nurul Aini

doi:10.21070/jbmp.v7i2.1539

Nurul Hidayatinnisa' Hidayatinnisa', Fauziah Fauziah + Show 2 more

Open Access

https://doi.org/10.21070/jbmp.v7i2.1539

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Abstract

Increasing financial literacy and inclusion become a global issue that are believed affecteconomic growth. However, in Indonesia, increasing financial literacy and inclusion inseveral provinces is not followed by the economic growth. The purpose of this research is toanalyze the effect of financial literacy and financial inclusion on economic growth inIndonesia.This study analyzed 34 provinces in Indonesia with 2 survey periods, 2016 and2019. The method of the data analysis used panel data regression with e-views 10 software.Moreover, Chow test and Hausman test are carried out to determine the best model. Theresults of the hypothesis test showed that financial literacy and financial inclusion have nosignificant effect on economic growth in Indonesia, neither partially or simultaneously. Itshowed that the financial literacy and inclusion improvement in Indonesia need to beenhanced in order to achieve inclusive growth as the main goal.

Highlights

In the last few decades, increasing financial literacy and inclusion has become a global issue to play an important role in promoting economic growth
Increasing financial literacy and financial inclusion has become a global issue believed to play an important role in increasing economic growth
The phenomenon that occurred in Indonesia, the increases in financial literacy and financial inclusion in several provinces were not followed by the economic growth of the province

Summary

Introduction

In the last few decades, increasing financial literacy and inclusion has become a global issue to play an important role in promoting economic growth. According to Otoritas Jasa Keuangan (OJK) (2007), empowering consumers through financial literacy will encourage the achievement of financial system stability, improve people's welfare, reduce poverty and income inequality, as well as achieve more inclusive development. According to the definition, it can be seen that financial service business actors, financial products consumers, and society are expected to know and understand financial services, and to improve their ability to make financial decisions. It changes their attitudes in managing finance to enhance the public welfare

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