Maylawati Arum Puspita, Shanty Oktavilia

Digital Financial Instruments, Financial Inclusion, and Regional Economic Performance in Indonesia

Introduction

Digital financial instruments, financial inclusion, and regional economic performance in indonesia. Explore how digital financial instruments & financial inclusion impact Indonesia's regional economic performance. E-money, credit cards & internet positively affect GRDP, urging stronger digital ecosystems.

Abstract

Research Originality: This study examines the joint effects of digital financial instruments and financial inclusion indicators on regional economic performance during the post-pandemic period of accelerated digital transformation. Research Objectives: The study aims to analyze the impact of electronic money transactions, third-party funds of Rural Banks (BPR), credit card transactions, and household internet access on Gross Regional Domestic Product (GRDP) per capita. Research Methods: Using panel data from 38 provinces over the 2020–2024 period, this study employs panel regression analysis. Based on the Chow and Hausman tests, the Fixed Effects Model (FEM) is selected as the most appropriate estimator. Empirical Results: The findings indicate that electronic money transactions, credit card transactions, and household internet access have a positive effect on GRDP per capita. In contrast, third-party funds of Rural Banks do not demonstrate a significant relationship with regional economic performance. Implications: The results underscore the importance of strengthening digital financial ecosystems and expanding digital infrastructure to foster inclusive and sustainable regional economic growth in emerging economies. JEL Classification: O16, O33, R11, G21

Review

This study tackles a highly pertinent and timely topic by examining the interplay between digital financial instruments, financial inclusion, and regional economic performance in Indonesia. Focusing on the post-pandemic period marked by accelerated digital transformation, the research offers valuable insights into how these factors collectively influence economic outcomes at the provincial level. The originality of the work lies in its specific focus on the *joint effects* of various digital financial indicators, providing a nuanced understanding crucial for emerging economies navigating the complexities of digitalization and development. The research employs a robust quantitative methodology, utilizing panel data from all 38 Indonesian provinces over a recent five-year period (2020–2024). The authors appropriately selected a Fixed Effects Model based on Chow and Hausman tests, which is suitable for controlling unobserved heterogeneity across provinces. The study's objectives are clearly defined, aiming to analyze the impact of electronic money transactions, third-party funds of Rural Banks (BPR), credit card transactions, and household internet access on GRDP per capita. The empirical findings reveal that electronic money transactions, credit card transactions, and household internet access significantly and positively contribute to regional economic performance. However, a notable finding is the lack of a significant relationship between third-party funds of Rural Banks and GRDP per capita, suggesting differentiated impacts of various financial inclusion channels. The implications of this study are substantial, particularly for policymakers in Indonesia and other emerging economies striving for inclusive and sustainable economic growth. The positive correlation between digital financial instruments (e-money, credit cards) and internet access with GRDP per capita strongly advocates for strategic investments in and expansion of digital financial ecosystems and underlying digital infrastructure. While the finding regarding BPR funds is insightful, it might warrant further qualitative exploration to understand the mechanisms or potential barriers limiting their impact. Overall, this research provides compelling empirical evidence to guide policy decisions aimed at leveraging digital transformation for regional development, making a valuable contribution to the literature on financial development and economic growth.

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