Determinants of cross regional disparity in financial deepening: Evidence from Indonesian provinces

Irwan Trinugroho, Agusman Agusman (), Mochammad Ariefianto (), Darsono Darsono () and Amine Tarazi
Additional contact information
Agusman Agusman: Bank Indonesia
Mochammad Ariefianto: Indonesia Deposit Insurance Corporation
Darsono Darsono: Faculty of Agriculture, Universitas Sebelas Maret

Economics Bulletin, 2015, vol. 35, issue 2, 896-910

Abstract: This paper investigates the determinants of financial deepening across regions in Indonesia after the institutional reforms which brought the country to become more decentralized. Using provincial-level data for 33 provinces from 2004 to 2010, we find that poor local governance significantly impedes financial deepening. Our results also conclude that in the socioeconomically less developed regions, the level of financial deepening is lower than that of more developed regions. Various policy implications are provided. Even though decentralization has been implemented, regional disparity in the form of financial deepening still exists. Improving local governance should be imposed to facilitate favorable business environment. Moreover, regulators have to reconsider regulations that have constrained bank lending.

Keywords: Financial deepening; Local governance; Socioeconomic; Indonesia (search for similar items in EconPapers)
JEL-codes: G2 (search for similar items in EconPapers)
Date: 2015-04-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Determinants of Cross Regional Disparity in Financial Deepening: Evidence from Indonesian provinces (2015)
Working Paper: Determinants of Cross Regional Disparity in Financial Deepening: Evidence from Indonesian provinces (2015)
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