This data is analyzed to determine how digital financial inclusion affects household consumption in Indonesia. Some researchers also discuss digital financial inclusion (see Aziz and Cui, 2007; Grossman and Tarazi, 2014; Kuijs, 2006). Unfortunately, in recent years in Indonesia, no instrument can measure digital financial inclusion in society.
Our paper examines the understanding of Ozili's (2018a) model of the relationship between digital finance, financial inclusion and digital financial inclusion and the associated risks to economic stability and financial systems. Therefore, our article is closely related to another branch of literature focusing on digital financial inclusion. We then modified the model proposed by (Ozili, 2018a) to adjust for the level of household consumption factors affected by digital financial inclusion.
Considering digital financial inclusion as a technology innovation in the financial sector is one of the essential steps that can encourage household consumption levels to be even higher. The coefficient 𝛽1 measures the overall impact of digital financial inclusion on household spending per capita. The second stage is the estimation of equation (3), where the coefficient 𝛼1 measures the impact of the digital financial inclusion index on the mediating variable.
The coefficient 𝜆1 measures the effect of the mediating variables on household consumption after controlling for the independent variable, i.e. the digital financial inclusion variable.
EMPIRICAL RESULTS AND DISCUSSION A. Basic Result
The digital finance constant remains significantly positive, indicating that the higher the assets and household income, the higher the household consumption. Our findings imply that digital finance will effectively drive household consumption in every coverage and usage. Results reported in column (1) indicate that the interaction constant between the digital finance index and families with fewer assets is 0.041, which is considered positive.
The interaction coefficient of digital finance index and households in the third and fourth cities is 0.034, which is also vitally positive. The results show that the impact of digital monetary facilitation on household consumption remains significant within five consumption categories (food, clothing, home care, medical care, and entertainment and education). The results reported in the second column show that the coefficient of influence of the digital finance index on household online shopping is positive, indicating that digital finance has boosted household online shopping.
The Sobel mediation effect test shows that online shopping as a mediating variable is statistically significant at 8.23%, which means that 8.23% of the impact of digital finance on household consumption is attributed to encouraging online shopping for households. The results provided in the second column indicate that the coefficient of the impact of digital finance indices on online payments is significantly positive, suggesting that digital finance particularly encourages the use of digital payments. The effect of digital payment processing accounts for 10.46% of the total impact of digital finance on household consumption.
The results in column (2) indicate that the impact of the digital finance index on access to online credit is significantly positive, indicating that digital finance improved access to online credit in households. Meanwhile, the digital index coefficient is significantly positive and slightly lower than those reported in column (1), implying that access to online credit is a mediating variable through which digital finance affects household consumption. The coefficient for the digital finance index is still significant but weakly positive compared to the results reported in column (1).
This means that the purchase of financial products via the Internet is an indirect variable through which digital finance affects household consumption. The results reported in column (2) show that the coefficient of the digital financial index on the probability of households purchasing commercial insurance is significantly positive. Column (1) of Table 12 shows the results for the impact of the digital finance composite index on household spending per capita.
Column (2) provides results on the impact of coverage of total household consumption per capita on the digital financial index. This shows that the higher the development of the digital financial level, the higher the consumer spending of households; Digital finance has significantly increased household consumption, consistent with the results discussed earlier.
CONCLUSION
In this case, the added value of internet penetration growth represented by digital finance on household consumption is generally achieved through the influence of wealth and income and materialized by online finance (Yu et al., 2021). This result shows the effect of digital finance on household consumption by reducing liquidity shortages, payments and transactions, expanding investment channels, increasing income and increasing security. The figure shows household consumption divided by province in Indonesia, where the x-axis represents the level of household consumption and the y-axis represents the different provinces in Indonesia.
This figure shows the household consumption by criteria in Indonesia, with the different consumption categories represented by different colors. Household Consumption Per Capita The value derived from the total household expenditure of the number of family members. Household consumption rate Ratio derived from comparing total household expenditure with household income.
The first column shows the main effect of the digital finance index, while the second column shows the effect of digital finance on household consumption for lower wealth households. This table shows the effect of digital finance on eight different categories of household consumption. This table shows the effect of digital finance on the household consumption structure in terms of recurring and non-recurring household needs.
The first column shows the impact of the digital finance index on repeated household consumption, while the second column shows the impact on household consumption that is not repeated. This table contains the information about the impact of digital finance on online shopping and household consumption expenditure per capita. Column (1) shows the estimates of the impact of the digital financial index on per capita household consumption expenditure, while column (2) shows the impact of the digital financial index on online shopping.
Column (3) presents the estimates for the effect of online shopping on household consumption expenditure per inhabitant. The first column shows coefficient estimates for household consumption expenditure per capita for the digital finance index. The second column shows coefficient estimates for digital payment for the digital finance index. The third column shows coefficient estimates for household consumption expenditure per capita for digital payment The table also contains a Sobel test result, which is used to test the significance of indirect effect of the digital finance index on household consumption through digital payment.
The first column represents household consumption expenditure per capita, and the third column represents the same variable after taking into account the digital financial index. The second column shows the effect of online digital credit on household consumption expenditure per inhabitant. The table includes three columns, the first column represents the estimated coefficients for household consumption expenditure per capita, the second column represents the estimated coefficients for finance_internet and the third column represents the estimated coefficients for household consumption expenditure per inhabitant.
The table includes three columns: the first column shows the impact of the digital financial index on per capita household consumption expenditure, the second column shows the impact of commercial insurance on per capita household consumption expenditure, and the third column shows the results of the combined impact of the digital finance index and commercial insurance on consumption expenditure of households per inhabitant.
