A FINANCIAL INCLUSION INDEX FOR INDONESIA
Keywords:
financial inclusion, Principal component analysis, Unequal weights
Abstract
Numerous studies have constructed financial inclusion indexes for Indonesia, using a
multidimensional approach. However, there is a problem with the methodology, which
assumes that all the dimensions play the same role in defining financial inclusion,
since they are based on equal weighting criteria. This paper aims to obviate concerns
with the methodology by developing a more empirically based index, namely, a
weighted multidimensional index of financial inclusion based on two-stage principal
component analysis. In other words, we endogenize the weights. We find that usage is
the most important dimension in defining financial inclusion in Indonesia, followed
by availability and access.
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References
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Financial Inclusion: Understanding Ownership and Use of Formal Accounts.
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Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, Inequality, and the
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Brune, L., Giné, X., Goldberg, J., & Yang, D. (2011). Commitments to Save: A Field
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Burgess, R., & Pande, R. (2005). Do Rural Banks Matter? Evidence from the Indian
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Cámara, N., & Tuesta, D. (2014). Measuring Financial Inclusion: A Multidimensional
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Greenwood, J., & Jovanovic, B. (1990). Financial Development, Growth, and the
Distribution of Income. Journal of Political Economy, 98, 1076-1107.
Honohan, P. (2008). Cross-Country Variation in Household Access to Financial
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Jeanneney, S. G., & Kpodar, K. (2011). Financial Development and Poverty
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Growth in OIC Countries. Research in International Business and Finance, 43,
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Kuri, P. K., & Laha, A. (2011). Financial Inclusion and Human Development in
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Abandonment in Britain and United States. Transactions of the Institute of British
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Eveidence from the emerging Indian Economy. Journal of Financial Economic
Policy, 8, 13-36.
Sharma, S. S., & Syarifuddin, F. (2019). Determinants of Indonesia’s Income
Velocity of Money. Bulletin of Monetary Economics and Banking, 21, 323-423.
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Ekonomi Moneter dan Perbankan, 20, 99-126.
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dan Pemerataan Pendapatan di Indonesia. Jurnal Ekonomi dan Kebijakan
Pembangunan, 4, 1-27.
World Bank. (2017). The Global Findex Database 2017. Retrieved from World Bank:
https://globalfindex.worldbank.org/
Financial Inclusion: Understanding Ownership and Use of Formal Accounts.
Journal of Financial Intermediation, 27, 1-30.
Bank Indonesia. (2018). Statistik Sistem Keuangan Indonesia. Retrieved from Bank
Indonesia: https://www.bi.go.id/id/statistik/sski/default.aspx
Beck, T., Demirgüç-Kunt, A., & Honohan, P. (2009). Access to financial services :
measurement, impact, and policies. The World Bank research observer, 24, 119-
145.
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, Inequality, and the
Poor. Journal of Economic Growth, 12, 27-49.
Brune, L., Giné, X., Goldberg, J., & Yang, D. (2011). Commitments to Save: A Field
Experiment in Rural Malawi. World Bank Policy Research Working Paper No.
5748.
Burgess, R., & Pande, R. (2005). Do Rural Banks Matter? Evidence from the Indian
Social Banking Experiment. American Economic Review, 95, 780-795.
Cámara, N., & Tuesta, D. (2014). Measuring Financial Inclusion: A Multidimensional
Index. BBVA Working Paper No. 14/26.
Greenwood, J., & Jovanovic, B. (1990). Financial Development, Growth, and the
Distribution of Income. Journal of Political Economy, 98, 1076-1107.
Honohan, P. (2008). Cross-Country Variation in Household Access to Financial
Services. Journal of Banking and Finance, 32, 2493-2500.
Jeanneney, S. G., & Kpodar, K. (2011). Financial Development and Poverty
Reduction: Can There be a Benefit without a Cost? Journal of Development
Studies, 47, 143-163.
Kim, D.W., Yu, J.S., & Hassan, M. K. (2018). Financial Inclusion and Economic
Growth in OIC Countries. Research in International Business and Finance, 43,
1-14.
Kuri, P. K., & Laha, A. (2011). Financial Inclusion and Human Development in
India: An Inter-State Analysis. Indian Journal of Human Development, 5, 61-77.
Leyshon, A., & Thrift, N. (1995). Geographies of Financial Exclusion: Financial
Abandonment in Britain and United States. Transactions of the Institute of British
Geographers, 20, 312-241.
Narayan, P. K., & Popp, S. (2010). A New Unit Root Test with Two Structural
Breaks in Level and Slope at Unknown Time. Journal of Applied Statistics, 37,
1425-1438.
Narayan, P. K., & Popp, S. (2013). Size and Power Properties of Structual Break
Unit Root Tests. Applied Economics, 45, 721-728.
Neaime, S., & Gaysset, I. (2018). Financial Inclusion and Stability in MENA:
Evidence from poverty and Inequality. Financial Research Letters, 24, 230-237.
OECD. (2008). Handbook on constructing composite indicators: methodology and user
guide. Retrieved from http://www.oecd.org/sdd/42495745.pdf
Otoritas Jasa Keuangan. (2017). Laporan Triwulanan: Triwulan IV-2017. Retrieved
from Otoritas Jasa Keuangan: https://www.ojk.go.id/id/data-dan-statistik/
laporan-triwulanan/Pages/Laporan-Triwulan-IV---2017.aspx
Park, C.Y., & Mercado Jr., R. V. (2015). Financial Incluion, Poverty, and Income
Inequality in Developing Asia. ADB Economics Working Paper Series No. 426.
Park, C.Y., & Mercado Jr., R. V. (2018). Financial Inclusion: New Measurement and
Cross-Country Impact Assessment. ADB Economics Working Paper Series No.
539.
Saltelli, A. (2007). Composite indicators between analysis and advocacy. Social
Indicators Research, 81, 65-77.
Sanjaya, I. M., & Nursechafia. (2016). Inklusi Keuangan dan Pertumbuhan Inklusif:
Analisis Antar Provinsi di Indonesia. Buletin Ekonomi Moneter dan Perbankan,
18, 281-306.
Sarma, M. (2012). Index of Financial Inclusion - A measure of financial sector
inclusiveness. Berlin Working Paper on Money, Finance, Trade and Development
No. 7.
Sarma, M., & Pais, J. (2011). Financial Inclusion and Development. Journal of
International Development, 23, 613-628.
Sharma, D. (2016). Nexus between Financial Inclusion and Economic Growth:
Eveidence from the emerging Indian Economy. Journal of Financial Economic
Policy, 8, 13-36.
Sharma, S. S., & Syarifuddin, F. (2019). Determinants of Indonesia’s Income
Velocity of Money. Bulletin of Monetary Economics and Banking, 21, 323-423.
Umar, A. I. (2017). Index of Syariah Financial Inclusion in Indonesia. Buletin
Ekonomi Moneter dan Perbankan, 20, 99-126.
Ummah, B. B., & Nuryantono, N. (2013). Analisis Keterkaiitan Inklusi Keuangan
dengan Pembangunan di Asia. Bogor: Central Library of Bogor Agricultutal
University.
Ummah, B. B., Nuryartono, N., & Anggraeni, L. (2015). Analisis Inklusi Keuangan
dan Pemerataan Pendapatan di Indonesia. Jurnal Ekonomi dan Kebijakan
Pembangunan, 4, 1-27.
World Bank. (2017). The Global Findex Database 2017. Retrieved from World Bank:
https://globalfindex.worldbank.org/
Published
2019-10-15
How to Cite
Hanivan, H., & Nasrudin, N. (2019). A FINANCIAL INCLUSION INDEX FOR INDONESIA. Buletin Ekonomi Moneter Dan Perbankan, 22(3), 351 - 366. https://doi.org/10.21098/bemp.v22i3.1056
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Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
