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http://dx.doi.org/10.13106/jafeb.2021.vol8.no11.0097

Barriers to Access Formal Financial Services: An Empirical Study from Indonesia  

JAYANTI, Ari Dwi (Department of Economics, Faculty of Economics and Business, Airlangga University)
AGUSTI, Kemala Sari (Faculty of Economics and Business, Airlangga University)
SETIYAWATI, Yuli (Department of Economics, Faculty of Economics and Business, Airlangga University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.11, 2021 , pp. 97-106 More about this Journal
Abstract
The condition of financial services in Indonesia is unique, based on various characteristics, behaviors, and preferences. Therefore, the study of finance and banking is interesting to study as a recommendation for government policies. This paper aims to analyze the barriers to accessing formal financial services in Indonesia and why informal financial services are preferred. This paper presents a case study of financial inclusion in selected provinces in Indonesia using the SOFIA dataset from the Ministry of National Development Planning. Overall, this data consists of 20,000 individuals from 4 provinces and 93 regions representing the population in eastern Indonesia. The analysis was carried out by processing individual-level cross-sectional data surveyed in 2017 using the probit binary logistic method. The results identify the individual barriers in accessing formal financial services, including account ownership, saving, and credit activities in the formal financial institutions, and amplify the image by analyzing what determinants affect people to choose informal institutions. We found that some individual characteristics such as age, gender, education, income, employment status, residence, and access to technology significantly affect the barrier to formal financial services in East Indonesia.
Keywords
Financial Access; Financial Institutions; Non-bank Financial Institutions; Behavioral Finance; Indonesia;
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