Financial Inclusion Research Articles

Examining the Nexus between Insecurity and Financial Inclusion: Evidence of Mobile Banking in Nigeria

The research aimed to explore the impact of insecurity on mobile banking usage, assessing its effects on accessibility and affordability in Nigeria. Specifically focused on the Niger Delta region, the study sought to uncover insights into the relationship between insecurity and financial inclusion, particularly within the context of mobile banking services.The study employed a descriptive cross-sectional design, utilizing purposive sampling to collect data from 311 mobile banking operators and users in Nigeria. A specialized questionnaire assessed how insecurity impacts mobile banking services in terms of usage, accessibility, and affordability. Data analysis involved employing ordinary least square model to test research hypotheses.The findings of the study revealed a significant negative relationship between insecurity and the usage, accessibility, and affordability of mobile banking in the Niger Delta region of Nigeria. The results indicated that as insecurity increases, there is a likelihood of a decrease in the usage and accessibility of mobile banking services. The study also highlighted the impact of insecurity on financial inclusion, particularly in the form of kidnapping, hostage-taking, violence, and other social vices, which have hampered the quality of financial products and the number of financially included individuals in the region.The study identified several gaps in the existing literature on insecurity and financial inclusion in Nigeria. It noted that previous studies often focused solely on financial inclusion, neglecting the influence of insecurity. Additionally, many studies were primarily theoretical and qualitative in nature, and some were found to have methodological and analytical limitations. Furthermore, the research highlighted that this study was the first of its kind to be conducted in the South-south region of Nigeria, indicating an existing gap in the understanding of insecurity and financial inclusion in this specific area.

The moderating effect of audit quality on the relationship between financial inclusion and corporate investment: new evidence from the Middle East and North Africa region

The moderating effect of audit quality on the relationship between financial inclusion and corporate investment: new evidence from the Middle East and North Africa region

Can digital financial inclusion converge the regional agricultural carbon emissions intensity gap?

To explore whether digital finance can reduce agricultural carbon emissions, promote regional convergence, and foster inclusivity in rural revitalization and shared prosperity, this paper uses the provincial-level index of digital financial inclusion to analyze the impact of digital financial inclusion on the intensity of agricultural carbon emissions and the Degum Gini coefficient (D-Gini coefficient) of regional carbon emission intensity in 30 sample provinces from 2010 to 2020. It examines the mechanism of the impact of digital financial inclusion on both variables to understand the underlying factors better. The main conclusions are as follows: (1) Digital financial inclusion significantly reduces the intensity of agricultural carbon emissions and narrows the gap in carbon emission intensity between regions. (2) The unconditional quantile regression coefficients show that the negative coefficients of the digital financial inclusion index and the three-dimensional indices decrease with increasing quantiles. However, the significant effects vary significantly at different quantiles. (3) Technological progress and the government's ability to allocate financial resources play a significant mediating role, and the income gap between urban and rural areas can be further narrowed, as well as the carbon emission intensity gap between provinces. The empirical results are robust and proven by replacing the econometric analysis method, changing the core variables, and other methods.

Digital Inclusive Finance Helps Green Industry in Fujian Province Development

Aims: Digital inclusive finance, as a combination of modern technology and financial services, has developed rapidly in recent years. This new financial model has not only changed the traditional way of providing financial services, but also profoundly affected all aspects of economic and social development. The report of the 18th CPC National Congress made the important decision of "vigorously promoting the construction of ecological civilization " from the strategic height of the sustainable development of the Chinese nation. China's green industry has ushered in a new phase of rapid development. As an important province on the southeast coast of China, Fujian Province, with rich natural resources and vast rural areas, is an important region to promote the development of green industry. Methodology: In this paper, the green industry index of nine prefecture-level cities in Fujian Province from 2011 to 2021 is selected as the explanatory variable, and the development level of digital inclusive finance is taken as the core explanatory variable to explore the impact of digital inclusive finance on the development of green industry in Fujian Province. Results: According to the multiple linear regression, it is found that the level of green industry development is positively correlated with the level of digital inclusive finance development at the 1% significant level, i.e., digital inclusive finance helps to promote the development of green industry in Fujian Province. Conclusion: Based on the findings of the study, the paper puts forward the following recommendations: through the provision of low-cost financing, innovative financial products, digitalized payments and settlements, popularisation of financial education, and the promotion of cooperation, digital inclusive finance can effectively support the development of the green industry. This not only helps to achieve the goal of environmentally sustainable development, but also promotes economic growth, creates employment opportunities and enhances social well-being.

Women's Economic Transformation: A Literature Review on Empowerment through Entrepreneurship and Financial Inclusion in Pekalongan, Indonesia

This systematic literature review (SLR) explores factors influencing women's empowerment through entrepreneurship and financial inclusion in Pekalongan. Key elements supporting or hindering women entrepreneurs include access to capital, entrepreneurship education, training, and robust support networks. Financial inclusion, encompassing banking services, microcredit, and financial education, is crucial for enhancing women's economic capacity and independence. The research employs a structured SLR methodology, using databases like Scopus to identify relevant studies from the past decade. The data collection involves keyword identification, literature search, screening, full-text review, and data extraction, followed by thematic analysis and coding. The findings reveal that well-designed government and NGO programs significantly impact women's economic and social well-being, with success dependent on local context and sustained support. Policy recommendations for Pekalongan include increasing access to financial services through microcredit and entrepreneurship training, expanding financial education programs, strengthening support networks via women's business groups and mentoring, and addressing socio-cultural barriers. Tailored policies and programs that consider the local context are essential for effective implementation. This study's comprehensive approach, combining women's entrepreneurship and financial inclusion within Pekalongan's context, provides practical recommendations for policymakers and enriches existing literature, offering a framework for future research and policy development in similar socio-economic settings.

The impact of national savings on economic development: a focused study on the ten poorest countries in Sub-Saharan Africa

The purpose of this study is to examine the impact of national savings on economic development, as measured by the Human Development Index (HDI), Inequality-adjusted HDI (iHDI), and Multidimensional Poverty Index (MPI), in ten of the poorest countries in Sub-Saharan Africa. The study employs a sequential Generalized Method of Moments (GMM) analysis to address potential endogeneity issues and account for the dynamic nature of the relationships, covering the period from 2009 to 2019. The findings reveal a complex relationship between national savings and the selected development indicators. While national savings exhibit positive impacts on HDI and iHDI, the results are not consistently statistically significant across all the sequential models. However, the analysis suggests that national savings have a positive influence on reducing multidimensional poverty, as measured by MPI, particularly when effectively channeled into productive investments. The study also highlights the significant positive impact of government expenditure and foreign direct investment (FDI) on human development, underscoring the importance of strategic public investments and foreign capital. The results suggest that while national savings are crucial, their effective utilization is essential for enhancing human development indices. Strategic investments in public goods and foreign capital are also important. The mixed effects of inflation and official development assistance (ODA) emphasize the need for stable economic policies and effective utilization of foreign aid. The modest positive impact of institutional quality suggests that improvements in governance and institutional frameworks can contribute to human development. The findings underscore the need for policies promoting financial inclusion, efficient public expenditure, foreign direct investment, and stable macroeconomic conditions to leverage national savings for economic development. The study’s findings provide valuable insights for policymakers in Sub-Saharan Africa, highlighting the need for comprehensive strategies that leverage national savings, public expenditure, and foreign investment to drive sustainable economic development and poverty reduction.

Enhancing Renewable Energy Integration in Developing Countries: A Policy-Oriented Analysis of Net Metering in Pakistan Amid Economic Challenges

Net metering (NM) is among the potent regulatory tools used globally for supporting distributed generation and renewable energy sources. This paper examines the trajectory of NM in a developing country such as Pakistan, analyzing the impact of regulatory changes, confidence-building strategies, hindering factors, and technical/financial issues. The three-stage methodology involves three components, namely techno-economic analysis, stakeholder engagement surveys, and impact analysis of financing mechanisms. This study emphasizes the importance of clear regulatory and financial frameworks, grid upgrades, and public–private partnerships for technology distribution in the context of a developing country with weak grid utilities and an import–export energy ratio. It also explores the role of financial incentives, such as tax breaks and subsidies, to encourage investment in NM systems from the perspective of lucrative rates, impact on paybacks, and return on investments, and proposes concrete solutions to enhance financial inclusion for ambitious renewable energy goals. Until April 2023, over 56,000 NM/distributed generation facilities were commissioned, with an installed capacity of 950 MW. By May 2024, the number of NM consumers reached ~100,000, with a 1950 MW capacity, nearly doubling. However, the import and export ratio of IESCO changed most, with 61% exports and 39% imports, directly impacting the revenue stream. A total of 60% of banks have adopted actions linked with green banking criteria, aiming to limit their environmental impact. The change in tariff will result in reduced ROI for NM consumers to 20%, and increase the payback period from less than 4 years to 13 years. Government subsidies, tax breaks, and green financing frameworks are proposed to encourage investment, but have been abruptly halted, and were previously at a 6% interest rate. This research aims to provide insights into effective market evaluation methodologies for NM programs and offer policy recommendations to strengthen legislative and institutional frameworks governing NM.

Does Digital Inclusive Finance Increase Industry Chain Resilience in China?

A high level of industry chain resilience is essential for China’s economy to operate safely, soundly, and robustly. It also serves as the foundation for the nation’s capacity for growth, competitiveness, sustainable development capacity, and ability to respond to various external dangers. In this regard, the swift advancement of digital inclusive finance has shown significant prospects for enhancing the resilience of China’s industry chain. This study empirically examines the impact of digital inclusive finance on industry chain resilience, based on China’s provincial panel data from 2013 to 2021. The findings demonstrate the following: digital inclusive finance significantly contributes to industry chain resilience; optimization of industrial structure and technological innovation play mediating roles in the relationship between digital inclusive finance and industry chain resilience; and the high-quality development of the regional economy has a positive moderating effect on that relationship. Subsequent investigation reveals quantile and regional variations in the effect of digital inclusive finance on industry chain resilience. This study not only confirms the critical role that digital inclusive finance plays in bolstering industry chain resilience but also identifies a workable strategy for doing so in the case of China.

Effects of globalization and financial inclusion on energy intensity: The case of emerging economies

This research examines the effects of globalization and financial inclusion on the energy intensity of selected sixteen emerging economies by controlling the effects of economic growth, inflation, and stock market capitalization. The study period covers twenty-two years, starting from 2000 and ending in 2021, providing a complete perspective on the changing dynamics inside these countries. The study employs the novel technique of Method of Moment Quantile Regression (MMQR) to empirically assess the interlinkages between the employed factors on energy intensity. The findings suggest that when economies expand, engage in global trade, and encounter inflationary pressures, they tend to exhibit remarkable changes in energy intensity. The results find negative effects of globalization, GDP, and inflation on energy intensity. In contrast, a positive correlation exists between financial inclusion, stock market capitalization, and energy intensity. Policies must be designed with the objective of harnessing the advantages of globalization in order to enhance energy efficiency, encompassing elements such as technology transfer and regulatory harmonization. Concurrently, it is imperative to establish a sound relationship between financial inclusion and the expansion of stock markets, while also integrating sustainable energy practices.

Unraveling the Interplay: Financial Inclusion's Impact on Growth, Trade Dynamics, and Foreign Investment – A Comprehensive Empirical Study

The present study develops a Financial Inclusion (FI) index and extends an interlinkage between FI and Economic Growth (EG). The study is the first to develop an FI index created for the main trading nations from 2001-2019 based on financial development, financial depth, and financial stability and creates an association between FI and EG, including trade and foreign investment. Once the FI index is constructed, panel data analysis is applied by examining the stationarity and cointegration of the series, followed by panel regression and causality tests. Findings highlight a strong interlinkage between FI, EG, trade, and foreign investment for the selected nations. It suggests that the nations emphasize financial inclusion to stimulate EG, enhance trade, and increase foreign investment inflows. Each of the three variables is highly integrated, as indicated in the results, and acts as prerequisites for each other. The study is a significant contribution to the field of FI, trade, and EG. As very few studies have been carried out for integrated analysis, this study helps devise policies for expanding further relationships between FI, trade, investment, and EG across nations. Moreover, this study is the first to select a time period that marks major events like the US-China Trade War (2018) and the Global Financial Crisis (2008). The results of this study are helpful to the governments and policymakers of various economies. They can improvise the existing policies and procedures related to trade and foreign investment to enhance FI and EG. It is seen that for each country, the effect of the variables selected is different. In terms of developing holistic and effective trade policies, each nation can assess the relationship between these four key macroeconomic variables.

Security tokens, ecosystems and financial inclusion: Islamic perspectives

Purpose Shariah-compliant security tokens can play an important role in developing innovative solutions to resolve voluntary and involuntary financial exclusion in Muslim societies. This paper aims to present features of Shariah-compliant security tokens and supporting ecosystems that can provide additional sources of financing for small and medium enterprises (SMEs) and create alternative investment opportunities for retail investors. Design/methodology/approach This conceptual paper presents the building blocks of security tokens, their ecosystem and key functions and activities and then examines these features from Islamic perspectives. This is done by reviewing the contemporary literature on cryptoassets and their ecosystems and analysing these in light of Islamic legal and ethical values and principles. Findings The paper provides a framework of how Shariah-compliant asset- and equity-based security tokens can be used by SMEs to raise funds quickly and efficiently on crypto exchanges. Given the novelty and complexity of the technology involved and the lack of understanding and skills to develop blockchain-based systems among SMEs, this paper suggests developing security tokens and exchanges in a controlled manner under the supervision of a nation’s stock markets. Originality/value Although several studies examine cryptocurrencies from Islamic perspectives, literature on other cryptoassets and their role in financial inclusion is scant. This paper identifies Shariah-compliant asset- and equity-based security tokens and supporting ecosystems that can contribute to the development of digital capital markets where SMEs can raise funds efficiently and retail investors can invest in alternative asset classes.

Analyzing Determinants of Loan Repayment Performance at Grameen Koota: A Comprehensive Study in Bangalore District

Microfinance institutions (MFIs) are pivotal in promoting financial inclusion by providing financial services to underbanked populations. This study investigates the key determinants influencing loan repayment performance at Grameen Koota, a leading MFI in the Bangalore district. Employing a comprehensive mixed-method approach, the research integrates quantitative analysis of loan repayment data from 50 borrowers with qualitative interviews involving 20 borrowers and five loan officers. The findings indicate that borrower income stability, financial literacy, loan size, and loan duration significantly affect repayment performance. Specifically, higher income stability and greater financial literacy correlate with better repayment rates, while smaller loan sizes and shorter loan durations enhance repayment performance. Qualitative insights emphasize the importance of solid borrower relationships with loan officers and community support systems in addressing repayment challenges. These relationships and support mechanisms are crucial for timely and successful loan repayment. This paper contributes valuable insights into the microfinance sector within the urban Bangalore context, adding to the limited research on repayment determinants in MFIs operating in urban Indian settings. The study suggests that implementing financial literacy programs, offering manageable loan sizes, and fostering robust borrower support systems can significantly improve loan repayment rates. The research highlights the need for MFIs to focus on borrower education and community engagement to enhance financial inclusion and sustainability. This comprehensive analysis of loan repayment performance at Grameen Koota offers practical recommendations for MFIs to improve their operational strategies and better serve their clients, ultimately contributing to the broader goal of financial inclusion and economic development.

Security tokens, ecosystems and financial inclusion: Islamic perspectives

Purpose Shariah-compliant security tokens can play an important role in developing innovative solutions to resolve voluntary and involuntary financial exclusion in Muslim societies. This paper aims to present features of Shariah-compliant security tokens and supporting ecosystems that can provide additional sources of financing for small and medium enterprises (SMEs) and create alternative investment opportunities for retail investors. Design/methodology/approach This conceptual paper presents the building blocks of security tokens, their ecosystem and key functions and activities and then examines these features from Islamic perspectives. This is done by reviewing the contemporary literature on cryptoassets and their ecosystems and analysing these in light of Islamic legal and ethical values and principles. Findings The paper provides a framework of how Shariah-compliant asset- and equity-based security tokens can be used by SMEs to raise funds quickly and efficiently on crypto exchanges. Given the novelty and complexity of the technology involved and the lack of understanding and skills to develop blockchain-based systems among SMEs, this paper suggests developing security tokens and exchanges in a controlled manner under the supervision of a nation’s stock markets. Originality/value Although several studies examine cryptocurrencies from Islamic perspectives, literature on other cryptoassets and their role in financial inclusion is scant. This paper identifies Shariah-compliant asset- and equity-based security tokens and supporting ecosystems that can contribute to the development of digital capital markets where SMEs can raise funds efficiently and retail investors can invest in alternative asset classes.

Health impact evaluation of Aspirational Districts Program in India: Evidence from National Family Health Survey

The Aspirational District Program (ADP) is a unique initiative of Government of India launched in 2018 that aims to reduce inter-district multidimensional inequality. ADP aims to bring the least developed districts to catch up with the rest of the other districts in the country. The program is comprehensive in its scope as it targets improvement of several key development indicators spanning health and nutrition, education, agriculture and water resources, financial inclusion and skill development and basic infrastructure indicators. Aspirational districts (ADs) are eligible for enhanced funding and priority allocation of various initiatives undertaken by the central and the state governments. Our research estimates the causal impact of ADP on the targeted health and nutrition indicators using a combination of propensity score matching and difference-in-differences (PSM-DID). We use the fourth and fifth rounds of National Family Health Survey (NFHS) data collected in 2015–16 and 2019–21 respectively which serve as the pre and post-treatment data for our analysis. Moreover, we take advantage of the transparent mechanism outlined for the identification of ADs under ADP, which we use for propensity score matching for our PSM-DID. While we observe negative impact of ADP on early initiation of breastfeeding, we believe that the impact is confounded with the effects of Covid-19 since part of NFHS-5 data was collected during the pandemic. However, the negative impact of ADP on early initiation of breastfeeding disappears when we only use pre-covid data (i.e. data for districts from states surveyed before the pandemic). Additionally, using pre-covid data we find a reduction in the prevalence of underweight children younger than 5 years to an extent of 2 to 4 percentage points in ADs as an impact of ADP, which is robust across multiple specification. We do not find evidence of a positive or a negative impact of ADP on any other health and nutrition indicators. Future research efforts should be made towards impact evaluation of all the targeted indicators in order to get a comprehensive unbiased evaluation of ADP.

Legal protection of personal data for emergency contacts unilaterally included in illegal online loan services

New opportunities for digital financial services (Fintech) have emerged to accelerate digital financial inclusion amid social distancing, one of which is through Online Loans. The convenience offered by Online Loans in the process of borrowing money or financing without having to visit conventional financial institutions such as banks directly, is one of the factors supporting the increasing popularity of Online Loans, thereby opening up more opportunities for Online Loan Providers to expand their industry. However, issues arise due to the ease of this technology, one of which is the misuse of borrowers' emergency contacts, causing inconvenience to the owners of those contacts whose personal lives are disrupted. The study is conducted using normative legal research. The experience of convenience offered by Online Loans is much greater; the borrowing process only takes place through a website or mobile phone, allowing consumers to confirm only through the system and do it anytime and anywhere. However, the conveniences provided by Online Loans are often not accompanied by adequate education in society regarding the technology used or the legal and lending provisions. This has become a loophole for "predatory lending" actors to develop their businesses. Legal protection for borrowers is already regulated in the Financial Services Authority Regulation Number 10/POJK.05/2022 Regarding Information Technology-Based Borrowing and Lending Services. Borrowers regarding their personal data have also been clearly regulated in Law Number 27 of 2022 Concerning Personal Data Protection, as well as the presence of Financial Technology associations that accompany the pace of technology-based borrowing and lending services. Control of personal data must obtain explicit consent from the data subject to process personal data. There are several sanctions for online loan customers who provide emergency contact numbers without consent. These sanctions include written warnings, temporary cessation of all personal data processing activities, deletion or destruction of personal data, and/or administrative fines.

A Probe into the High-Quality Development Path of China’s Financial Industry

Under the new economic normal, the financial industry plays an important role in the high-quality development of the national economy, which is conducive to promoting the development of a socialist market economy with Chinese characteristics, improving the financial system, laying a good foundation for the "Internet +" economic development, and promoting the stability and prosperity of the market economy. China’s financial industry should be based on the new economic normal, strengthen the risk control of the financial industry, and ensure the stability of the financial market; Further improve the inclusive finance business, alleviate the capital problems of small and medium-sized enterprises, and activate the vitality of the financial industry; Promote fintech innovation, adapt to market changes and technological progress of The Times, and improve the comprehensive competitiveness of China’s financial industry; Improve the financial supervision system, strengthen the supervision of the financial industry, standardize the development of the financial industry, and promote the high-quality development of the financial industry.

Exploring the mediating role of financial inclusion in the relationship between economic policy uncertainty and CO2 emissions: A global perspective.

This study examines the connection between economic policy uncertainty (EPU), CO2 emissions, and financial inclusion in developed and developing countries. Using the data from 2004 to 2021, advanced statistical techniques are employed, including Sobel test, to explore the mediating effect of financial inclusion on the relationship between economic policy uncertainty (EPU) and CO2 emissions. There is a dearth of research examining these three variables together in a single study. Similarly, using financial inclusion as a mediator in the relation of EPU and CO2 emissions is a novel concept. This article employs a multi-indicator approach to measure key variables like CO2 emissions and financial inclusion. The results indicate that uncertainties in economic policies contribute in practices that lead to higher CO2 emissions in overall panel data of 44 countries. In addition, when considering the relationship between EPU and FI, the results indicate a significant and negative relationship between EPU and FI. If there is uncertainty in economic policies, it may lead toward challenges and hurdles in financial inclusion. When the mediating affect was checked, it was found financial inclusion acts as a significant mediator in the relationship between EPU and CO2 emissions, depicting that financial inclusion fosters the environmental quality and mitigates the potential harmful effects of environmental aspects of economic policy uncertainty. Therefore, policies that promote financial inclusion should be given top priority by governments, particularly in emerging nations. Financial literacy and bank service accessibility should be promoted. These measures would lessen the impact of staggering economic policies on CO2 emissions. It is necessary for policymakers to include environmental factors, specifically those relating to carbon emissions, into economic strategies. This requires encouraging industries to adopt eco-friendly practices and coordinating economic strategies with sustainability objectives.

Role of Business Correspondents (BCs) in Financial Services – Reaching in Unreached Rural Areas – A Case Study in Tamil Nadu

BCs are honest workers working in rural India, elevating the country from the viewpoint of financial services to world-level recognition in terms of financial inclusion by opening bank accounts and collecting deposits, as well as other financial services having networks with commercial banks. As per the Reserve Bank of India’s (RBI) FY22 annual report, the total number of business correspondents in villages has increased from more than 11.9 lakh in 2020 to 18.44 lakh in 2021, reflecting the penetration and scale that banks generate partnering with BCs. Ultimately, the rural people who opened a bank account under PMJDY got the benefit. With this background, the study has attempted to study the role played by the BCs in rural areas and to find the problems faced by the BCs, especially women, while rendering services. This present research is carried out based on a case study method and is descriptive in nature. The study was undertaken purposefully in two districts of Tamil Nadu, Dharmapuri and Dindigul. In Dharmapuri, the Indian Bank Morappur Branch and in Dindigul District, the Canara Bank Gandhigram Branch have been selected for the study. It was concluded that the average salary for the BCs here ranges between Rs. 3000 and Rs. 6000. It should be increased considerably; otherwise, the BCs will try to charge additional money from the account holder for their doorstep services. Adopting the BC model in the cooperative sector leads to faster financial inclusion.

The Decline and Levelling Off of Earnings Inequality: Boon or Bane for a Growing Economy?

AbstractThis paper investigates evidence on deficits in economic inclusion, focussing on the labour market in Indonesia. Increasing job polarization and an accompanying rise in earnings inequality on account of technological development and globalisation over the past few decades have augmented concerns about the attainability of governments’ perennial objective of inclusive growth. However, there are circumstances in which declining or levelling earnings gaps may be more of a bane than a boon for a country’s long-term economic health. Using the particularly interesting case of Indonesia, which has reduced and subsequently levelled off its earnings inequality in the midst of impressive growth, this paper studies how structural factors and labour market policies influence dynamics of inequality. The study finds evidence of a strong role of structural characteristics, which appears to indicate that reductions in earnings inequality may be more of a bane than a boon for Indonesia’s long-term prosperity. The paper concludes with broader insights and a discussion on policy implications that extend beyond the Indonesian context.

The Decline and Levelling Off of Earnings Inequality: Boon or Bane for a Growing Economy?

AbstractThis paper investigates evidence on deficits in economic inclusion, focussing on the labour market in Indonesia. Increasing job polarization and an accompanying rise in earnings inequality on account of technological development and globalisation over the past few decades have augmented concerns about the attainability of governments’ perennial objective of inclusive growth. However, there are circumstances in which declining or levelling earnings gaps may be more of a bane than a boon for a country’s long-term economic health. Using the particularly interesting case of Indonesia, which has reduced and subsequently levelled off its earnings inequality in the midst of impressive growth, this paper studies how structural factors and labour market policies influence dynamics of inequality. The study finds evidence of a strong role of structural characteristics, which appears to indicate that reductions in earnings inequality may be more of a bane than a boon for Indonesia’s long-term prosperity. The paper concludes with broader insights and a discussion on policy implications that extend beyond the Indonesian context.