A FINANCIAL INCLUSION INDEX FOR INDONESIA

Hilman Hanivan () and Nasrudin ()
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Hilman Hanivan: Statistics Indonesia
Nasrudin: Statistics Indonesia

Bulletin of Monetary Economics and Banking, 2019, vol. 22, issue 3, 1-16

Abstract: Numerous studies have constructed financial inclusion indexes for Indonesia, using a multidimensional approach. However, there is a problem with the methodology, which assumes that all the dimensions play the same role in defining financial inclusion, since they are based on equal weighting criteria. This paper aims to obviate concerns with the methodology by developing a more empirically based index, namely, a weighted multidimensional index of financial inclusion based on two-stage principal component analysis. In other words, we endogenize the weights. We find that usage is the most important dimension in defining financial inclusion in Indonesia, followed by availability and access.

Keywords: Financial inclusion; Principal component analysis; Unequal weights (search for similar items in EconPapers)
JEL-codes: C18 C43 G20 G21 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:22:y:2019:i:3e:p:1-16

DOI: 10.21098/bemp.v22i3.1056

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