The findings highlight an important challenge for Indonesia: expanding access to financial services does not necessarily mean that people are using those services effectively or productively. The study also shows that simply increasing years of formal schooling may not be enough to ensure that people have the practical financial skills needed to benefit from banking, credit, savings, and digital financial services.
Financial Access Remains Uneven Across Provinces
Financial inclusion has become an important part of efforts to reduce poverty. Access to bank accounts, savings, credit, insurance, and digital payments can help households manage income, finance productive activities, receive government transfers, and cope with unexpected financial shocks. However, the benefits depend not only on whether financial services are available, but also on whether people can access and use them effectively.
Mustin and Ariusni found substantial differences in financial inclusion among Indonesian provinces. The average financial inclusion index across the sample was only 0.160 on a scale from 0 to 1.
DKI Jakarta recorded the highest average index at approximately 0.850 and was the only province classified in the high-inclusion category. The other 33 provinces, representing 97.06 percent of the provinces in the sample, remained in the low category.
The researchers argue that these differences show why national financial inclusion figures can hide major regional disparities. Expanding the number of accounts or financial facilities alone may not be enough if households still face limited infrastructure, high costs, weak connectivity, or insufficient knowledge about how to use financial products.
How the Researchers Analyzed Indonesia's Provinces
The study examined 170 province-year observations covering 34 Indonesian provinces over five years, from 2020 through 2024. The researchers used secondary data from official statistical and institutional sources, including Statistics Indonesia (BPS), the Financial Services Authority (OJK), and Bank Indonesia.
The researchers measured poverty using the percentage of a province's population living below the official poverty line. Education was represented by average years of schooling, while unemployment and economic growth were included as additional economic indicators.
Financial inclusion was measured through a multidimensional index combining three components: accessibility, availability, and usage. Accessibility included the number of accounts per 1,000 adults; availability considered bank offices and automated teller machines; while usage incorporated deposits and credit relative to provincial economic output.
The researchers then used statistical regression with province-specific effects. This approach allowed them to account for persistent differences between provinces, such as geography, infrastructure, institutional history, and long-standing economic structures.
Education Shows a Strong Relationship with Lower Poverty
The analysis produced several notable findings.
- Financial inclusion was significantly associated with lower poverty. The estimated coefficient ranged from -3.274 to -3.289 across the two models.
- Education had an even stronger and highly significant negative association with poverty. Each additional year in average provincial schooling was associated with an approximately 2.48–2.49 percentage-point decline in poverty.
- Education did not significantly strengthen the effect of financial inclusion. The interaction between financial inclusion and education was negative but statistically insignificant, with a coefficient of -0.146 and a probability value of 0.8377.
- Unemployment was not statistically significant in explaining provincial poverty in the models.
- Economic growth was positively associated with poverty during the 2020–2024 observation period. The researchers caution that this does not mean economic growth inherently causes poverty. Instead, growth may have been concentrated in sectors or regions whose benefits did not reach poorer households.
The particularly important finding is that education and financial inclusion appear to operate as separate factors associated with lower poverty rather than as mutually reinforcing forces.
More Schooling Does Not Automatically Mean Better Financial Capability
The researchers from Universitas Negeri Padang suggest several possible explanations for the insignificant interaction between education and financial inclusion.
Average years of schooling measure formal educational attainment, but they do not necessarily measure practical financial literacy. Someone may spend more years in school without learning how to manage debt, compare financial products, understand interest rates, assess risks, protect digital accounts, or use credit for productive business activities.
The effectiveness of financial inclusion can also be restricted by structural conditions, including financial-product costs, collateral requirements, digital connectivity, local employment opportunities, and the strength of local business ecosystems.
As Mustin and Ariusni of Universitas Negeri Padang emphasize in their policy discussion, expanding education and financial services is valuable, but their coexistence does not automatically create synergy. Financial programs therefore need to be connected with practical capabilities such as financial guidance, business mentoring, bookkeeping, debt management, digital-risk awareness, and consumer protection.
Implications for Policy, Education and Business
The findings point toward a broader approach to poverty reduction in Indonesia.
Financial authorities and local governments could prioritize underserved provinces by improving reliable digital infrastructure, expanding agent networks, providing appropriate savings products, and increasing access to affordable productive credit. At the same time, financial inclusion programs could move beyond simply counting newly opened accounts and instead measure active usage, suitability, business outcomes, resilience, and poverty reduction.
Education policy also remains important. The study supports continued efforts to increase school participation and completion while adding practical financial capability to secondary, vocational, and community education.
For businesses and small enterprises, the findings suggest that access to financial services should be accompanied by financial management support. Credit availability, for example, may be more beneficial when borrowers also understand cash-flow management, repayment obligations, business bookkeeping, and financial risks.
The researchers caution that the results should be interpreted as statistical associations rather than definitive proof of causation. The study covers only five years, uses aggregate provincial measures, and relies on observational data.
Author Profiles
Farah Asalin Mustin — Faculty of Economics and Business, Universitas Negeri Padang, Indonesia. The journal article does not state an academic degree or a more detailed professional profile. Her research in this article focuses on financial inclusion, education, poverty, and provincial economic conditions in Indonesia.
Ariusni — Faculty of Economics and Business, Universitas Negeri Padang, Indonesia, and corresponding author of the article. The published article does not state an academic degree or detailed field-of-expertise profile. In this work, Ariusni focuses on the relationship between financial inclusion, education, economic conditions, and poverty in Indonesia.
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