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Financial Inclusion, Financial Stability and Sustainability in the Banking Sector: The Case of Indonesia

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  • Nera Marinda Machdar

Abstract

Purpose: The purpose of the present study is to analyze the effect of financial inclusion on sustainable economic growth for Indonesian banking companies, and to investigate the effect of financial inclusion on sustainable economic growth through financial system stability. Design/Methodology/Approach: This research is a quantitative study using secondary data taken from annual financial statements of banking companies listed on the Indonesia Stock Exchange (BEI) over the period 2010-2017. Findings: The results show that (a) the financial inclusion does not affect sustainable economic growth in Indonesian banking companies, and (b) the financial system stability mediates the effect of financial inclusion on sustainable economic growth in Indonesian banking companies. Practical Implications: This study provides deeper insight into the factors that drive financial inclusion and an increase in market share and financial performance of banks. With conditions of inclusion that are still low in Indonesia while the number of banks is increasing, it is necessary to have strong financial system stability. By understanding the matrix in financial inclusion, managers are well-positioned to understand the strategies needed to promote financial inclusion so that market share increases. Likewise, the results of the present study are probable to be an input for other stakeholders for their consideration in decision making. Originality/Value: Empirical research that explores the effects of financial inclusion, and sustainable economic growth in Indonesia is still very limited. According to our knowledge, no one has examined the use of financial system stability as mediation as it is used in this study.

Suggested Citation

  • Nera Marinda Machdar, 2020. "Financial Inclusion, Financial Stability and Sustainability in the Banking Sector: The Case of Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 193-202.
    • Handle: RePEc:ers:ijebaa:v:viii:y:2020:i:1:p:193-202
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    Cited by:

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    2. João Jungo & Mara Madaleno & Anabela Botelho, 2022. "Financial Regulation, Financial Inclusion and Competitiveness in the Banking Sector in SADC and SAARC Countries: The Moderating Role of Financial Stability," IJFS, MDPI, vol. 10(1), pages 1-24, March.
    3. João Jungo & Mara Madaleno & Anabela Botelho, 2022. "The Effect of Financial Inclusion and Competitiveness on Financial Stability: Why Financial Regulation Matters in Developing Countries?," JRFM, MDPI, vol. 15(3), pages 1-20, March.
    4. Sadeq Damrah & Mohammad I. Elian & Mohamad Atyeh & Fekri Ali Shawtari & Ahmed Bani-Mustafa, 2023. "A Linear Mixed Model Approach for Determining the Effect of Financial Inclusion on Bank Stability: Comparative Empirical Evidence for Islamic and Conventional Banks in Kuwait," Mathematics, MDPI, vol. 11(7), pages 1-17, April.

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    More about this item

    Keywords

    Financial inclusion; financial system stability; sustainable economic growth.;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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