The impact of financial inclusion on national development and national financial system stability

Abstract

This study seeks to understand the relationship between financial inclusion, national development, and the stability of the national financial system in Indonesia. The data collected in this study is a secondary data that includes the data of the number of commercial bank accounts, number of commercial banking service offices, number of general credits, average income, population welfare, goods and services production, and number of credits of 34 provinces throughout Indonesia, from 2015 until 2019. A dynamic statistic panel Model of the Generalized approach of Moments (GMM) is used for data analysis. The results of this research showed that financial inclusion has a significant negative influence on national development, but it can increase the national financial stability system. This is possible due to the diversity of demography, economic condition, and geographical condition in each province of Indonesia.