Title: An empirical study on income equality, economic growth and financial inclusion in Indonesia: model development on SMEs financing

Authors: Grahita Chandrarin; Anwar Sanusi; Ali Imron; Sari Yuniarti

Addresses: Department of Accounting, Faculty of Economics and Business, University of Merdeka Malang, Indonesia ' Department of Economic Development, Faculty of Economics and Business, University of Merdeka Malang, Indonesia ' Department of Law, Faculty of Law, University of Merdeka Malang, Indonesia ' Department of Finance and Banking, Faculty of Economics and Business, University of Merdeka Malang, Indonesia

Abstract: In line with economic growth (EG) in the world today, as one of the developing countries, Indonesia must rise to the challenge of income equality (IE) for all layers of the community. Financial inclusion (FI) is a government program employed to respond to such an issue. The study conducted is to develop an empirical model to evaluate such FI program. Credit distribution to SMEs through financing institutions (SMEs financing) is added to the model to evaluate the hypothesis that could strengthen FI's influence both toward IE and EG. Data were analysed using fixed and random effect models for all provinces during five years. Empirical analysis results indicate that FI is an Indonesian government program that can increase IE of the community. SMEs financing has a significant role in the strengthening of FI toward IE and the potential to foster greater FI within the overall goal of elevating EG in Indonesia.

Keywords: economic growth; financial inclusion; income equality; SMEs financing; Indonesia.

DOI: 10.1504/IJEED.2018.096056

International Journal of Education Economics and Development, 2018 Vol.9 No.4, pp.346 - 365

Available online: 06 Nov 2018 *

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