Impact of Financial Inclusion on Financial Stability based on Income Group Countries

INCOME GROUP COUNTRIES

Azka Azifah Dienillah¹, Lukytawati Anggraeni², Sahara²

1 Author isresearch assistant of Bank Indonesia.

2 Author is economic lecturer of Bogor Agricultural University

Financial inclusion is one of strategies to increase inclusive growth in a lot of countries.

˜ ŽŸŽ›ȱ ’ȱ –Š¢ȱ ŒŠžœŽȱ Ž’‘Ž›ȱ œŠ‹’•’¢ȱ ˜›ȱ ’—œŠ‹’•’¢ȱ ’—ȱ ‘Žȱ ꗊ—Œ’Š•ȱ œ¢œŽ–ȱ Š—ȱ ‘Žȱ

’–™ŠŒȱ ŒŠ—ȱ ‹Žȱ ’쎛Ž—ȱ Š–˜—ȱ ’—Œ˜–Žȱ ›˜ž™ȱ Œ˜ž—›’Žœǯȱ ˜Ž—’Š•ȱ ’—œŠ‹’•’¢ȱ ’—ȱ ‘Žȱ ꗊ—Œ’Š•ȱ œ¢œŽ–ȱ ˜ŒŒž›œȱ  ‘Ž—ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ŒŠžœŽœ reduction in credit standard,

’—ŒŽŠœ’—ȱ ›’œ”ȱ ˜ȱ ‹Š—”ȱ ›Ž™žŠ’˜—ǰȱ Š—ȱ ž—Œ˜›Žœ™˜—’—ȱ ›Žž•Š’˜—ȱ ’—ȱ –’Œ›˜ę—Š—ŒŽǯȱ

‘Ž›Ž˜›Žǰȱ ‘’œȱ ›ŽœŽŠ›Œ‘ȱ Š’–Žȱ ˜ȱ –ŽŠœž›Žȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ Š—ȱ ꗊ—Œ’Š•ȱ œŠ‹’•’¢ȱ

’—Ž¡Žœȱ‹Ž ŽŽ—ȱŒ˜ž—›’ŽœȱŠ—ȱŠ—Š•¢£Žȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ˜—ȱꗊ—Œ’Š•ȱ stability in 19 countries based on income group from 2004-2014. Data were collected from World Bank, the International Monetary Fund (IMF) database, and other sources.

‘Žȱ–Ž‘˜œȱžœŽȱŠ›–Šȱ’—Ž¡ȱ˜ȱŒŠ•Œž•ŠŽȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ǰȱ•‹ž•ŽœŒžȱŠ—ȱ ˜¢ŽŠžȱ

’—Ž¡ȱ˜ȱŒŠ•Œž•ŠŽȱꗊ—Œ’Š•ȱœŠ‹’•’¢ǰȱŠ—ȱ˜‹’ȱ–˜Ž•ȱ˜ȱŠ—Š•¢£Žȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ

’—Œ•žœ’˜—ȱ˜—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ǯȱ‘Žȱ›Žœž•œȱœ‘˜ ȱ‘’‘Ž›ȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ‘ŠŸŽȱ‘’‘Ž›ȱ ꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŠ—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—Ž¡ȱ‘Š—ȱ•˜ Ž›ȱ’—Œ˜–ŽȱŒ˜ž—›’Žœǯȱ’—Š—Œ’Š•ȱ

’—Œ•žœ’˜—ȱ ˜—•¢ȱ ‘Šœȱ ™˜œ’’ŸŽȱ œ’—’ęŒŠ—ȱ ŽěŽŒȱ ˜ȱ ꗊ—Œ’Š•ȱ œŠ‹’•’¢ȱ ’—ȱ ‘’‘ȱ ’—Œ˜–Žȱ countries. Lower and upper middle income countries have to increase availability of ꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱ˜ȱŽ—‘Š—ŒŽȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ǯȱ˜›Ž˜ŸŽ›ǰȱ•˜ Ž›ȱŠ—ȱž™™Ž›ȱ–’•Žȱ

’—Œ˜–ŽȱŒ˜ž—›’Žœȱ‘ŠŸŽȱ˜ȱ’—Œ›ŽŠœŽȱꗊ—Œ’Š•ȱŽŸŽ•˜™–Ž—ȱ˜ȱŽ—‘Š—ŒŽȱꗊ—Œ’Š•ȱœŠ‹’•’¢ǯ

Ž¢ ˜›œDZȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’—Ž¡ǰȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—Ž¡ǰȱ˜‹’ȱ–˜Ž•

ȱ•Šœœ’ęŒŠ’˜—DZȱ Řŗǰȱ řŘǰȱŘř

ABSTRACT

I. INTRODUCTION

Financial inclusion becomes an important program at national and international level because there are 2.6 billion people or more than 50% of world population not

‘ŠŸ’—ȱŠŒŒŽœœȱ˜ȱŒ›Ž’ǰȱ’—œž›Š—ŒŽǰȱŠ—ȱœŠŸ’—œȱǻ ǰȱŘŖŗřǼǯȱ’—Š—Œ’Š•ȱ’—Œ•žœ’˜—ȱ program is expected to increase inclusive growth in many countries. Increasing

’—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŽ—‘Š—ŒŽœȱ‹ŠœŽȱŽ™˜œ’ȱŠœȱœ˜ž›ŒŽȱ˜ȱŒ›Ž’ǯȱ‘ŽȱŒ›Ž’ȱŒŠ—ȱ improve real sector peformance. These will reduce poverty, improve income

’œ›’‹ž’˜—ǰȱŠ—ȱ’–™›˜ŸŽȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ȱ’—ȱ˜›Ž›ȱ˜ȱŠŒ‘’ŽŸŽȱ growth that is felt by the entire community (Khan, 2011).

Seriousness of the international communities in implementing the program

˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ŒŠ—ȱ ‹Žȱ œŽŽ—ȱ ›˜–ȱ ’—Œ›ŽŠœ’—ȱ ˜ȱ ˜›–Š•ȱ ꗊ—Œ’Š•ȱ œŽ›Ÿ’ŒŽœȱ products. Figure 1 below shows an average increase of outstanding loans from 2004 to 2011. Upper middle income countries group has the highest average growth of outstanding loans. The percentage of outstanding loans growth in upper middle income countries group is 13.3%. Lower middle income countries group has negative growth of loans per 1,000 adult population. The growth rate of lower middle income countries group is negative 8.3%. Average world has positive credit accounts per 1,000 adult population growth rate amount of 8.1%.

Figure 1. Number of outstanding loans per 1000 adult population based on income level in 2004-2011 600

500 400 300 200 100

0

2004 2005 2006 2007 2008 2009 2010 2011

Year Global

Low Income Countries Group Lower Middle Income Countries Group Upper Middle Income Countries Group High Income Countries Group Number of outstanding loans per 1000 adult population

Source: World Bank (2014)

‘Ž›Žȱ Š›Žȱ Ž ȱ œž’Žœȱ Š‹˜žȱ ‘Žȱ ’–™ŠŒȱ ˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ˜—ȱ ꗊ—Œ’Š•ȱ

œŠ‹’•’¢ȱ ’‘ȱ’쎛Ž—ȱ›Žœž•ǯȱ˜–Žȱœž’ŽœȱŠ‹˜žȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ

˜—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ ‘’Œ‘ȱœ‘˜ ȱ‘Žȱ™˜œ’’ŸŽȱ’–™ŠŒȱ ŠœȱŒ˜—žŒŽȱ‹¢ȱ’Ž—’••Š‘ȱ ǻŘŖŗśǼǰȱ ˜›Š—ȱ Š—ȱ ˜—’—Žœȱ ǻŘŖŗŚǼǰȱ ž••ȱ Š—ȱ ž—ȱ ǻŘŖŖŝǼǰȱ Š—ȱ žŠ—ȱ Š—ȱ Ratnovski (2011). Meanwhile, some studies which show potential negative impact

˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ˜—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱž—Ž›Š”Ž—ȱ‹¢ȱž™ŠœȱŽȱŠ•ǯȱǻŘŖŗŘǼȱŠ—ȱ

‘Š—ȱǻŘŖŗŗǼǯȱ’—ŒŽȱ‘Ž›ŽȱŠ›Žȱ’쎛Ž—ȱ›Žœž•ȱ˜ȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ˜—ȱ ꗊ—Œ’Š•ȱœŠ‹’•’¢ǰȱ Žȱ—ŽŽȱ–˜›Žȱ›ŽœŽŠ›Œ‘ȱŠ‹˜žȱ‘’œȱ˜™’Œǯ

—ȱ ‘Žȱ ‘Ž˜›¢ǰȱ ‘’‘ȱ •ŽŸŽ•ȱ ˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ  ’••ȱ ‹Žȱ ˜••˜ Žȱ ‹¢ȱ œ›˜—ȱ ꗊ—Œ’Š•ȱœ¢œŽ–ȱŠ—ȱ™Ž˜™•Žȱ ’‘ȱ•˜ Ž›ȱ’—Œ˜–Žȱ•ŽŸŽ•ȱœ‘˜ž•ȱ‘ŠŸŽȱŠȱ‹ŽĴŽ›ȱ’–™ŠŒȱ

˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ˜—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ‘Š—ȱ™Ž˜™•Žȱ ’‘ȱ‘’‘Ž›ȱ’—Œ˜–Žȱǻ ǰȱ 2013). This is because people with higher income have a faster response when the crisis happen than people with lower income. The response can be seen from the massive withdrawal of higher-income customers when a crisis occurs. But,

›˜–ȱœ˜–Žȱœž’ŽœȱŠ—ȱŠŒȱ‘ŠŸŽȱ—˜ȱŒ˜—ę›–Žȱ‘ŽœŽȱ‘Ž˜›¢ȱœ˜ȱž›‘Ž›ȱ›ŽœŽŠ›Œ‘ȱ’œȱ needed.

Š—ȱ Š—ȱ Ž•ŽŒ”¢ȱ ǻŘŖŗřǼȱ œŠŽȱ ‘Šȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ‘Šœȱ Šȱ ™˜œ’’ŸŽȱ ’–™ŠŒȱ

˜—ȱ ꗊ—Œ’Š•ȱ œŠ‹’•’¢ȱ ’—ȱ ‘’‘ȱ ’—Œ˜–Žȱ Œ˜ž—›’Žœȱ Š—ȱ ž™™Ž›ȱ –’•Žȱ ’—Œ˜–Žȱ

Œ˜ž—›’Žœǯȱ‘’œȱ’œȱ‹ŽŒŠžœŽȱ’—Œ›ŽŠœ’—ȱ’—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŒŠ—ȱ’–™›˜ŸŽȱŽ™˜œ’œȱ in commercial bank so it will make resilience of the funding base of deposits in banking sector when crisis occurs. In contrast to high-income countries group and upper middle income group, the lower middle income countries group has the

™˜Ž—’Š•ȱ’—œŠ‹’•’¢ȱ’—ȱꗊ—Œ’Š•ȱœ¢œŽ–ȱžŽȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱǻ‘Š—ǰȱŘŖŗŗǼǯ

›ŽŸ’˜žœȱœž’ŽœȱŠ‹˜žȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ˜—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ

œ’••ȱžœŽȱŠȱ™›˜¡¢ȱ˜ȱ›Ž™›ŽœŽ—ȱ‘Žȱ•ŽŸŽ•ȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŠ—ȱŠȱ•ŽŸŽ•ȱ˜ȱꗊ—Œ’Š•ȱ

œŠ‹’•’¢ǯȱ ˜›Š—ȱ Š—ȱ ˜—’—Žœȱ ǻŘŖŗŚǼȱ œžŽœȱ ˜ȱ ’—Œ•žŽȱ ˜‘Ž›ȱ ŸŠ›’Š‹•Žœȱ ’—ȱ

ŽœŒ›’‹’—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŠ—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱœ’—ŒŽȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’œȱ—˜ȱ

˜—•¢ȱœŽŽ—ȱ‹¢ȱꗊ—Œ’Š•ȱ™›˜žŒœȱ’—’ŒŠ˜›ȱœžŒ‘ȱŠœȱœȱ˜žœŠ—’—ȱ•˜Š—œȱ‹žȱŠ•œ˜ȱ

œŽŽ—ȱ‹¢ȱ™Ž—Ž›Š’˜—ȱŠ—ȱ™›˜žŒȱŠŒŒŽœœȱ˜ȱ˜›–Š•ȱꗊ—Œ’Š•ȱ’—œ’ž’˜—œȱ’—’ŒŠ˜›œȱ ǻŠ›–ŠǰȱŘŖŖŞǼǯȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ȱ’œȱ—˜ȱ˜—•¢ȱœŽŽ—ȱ‹¢ȱŠ—”ȱȱœŒ˜›Žȱ

‹ŽŒŠžœŽȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ȱ’œȱ—˜ȱ˜—•¢ȱ’—ĚžŽ—ŒŽȱ‹¢ȱ‘Žȱ‹Š—”’—ȱœŽŒ˜›ǰȱ‹žȱŠ•œ˜ȱ

’—ĚžŽ—ŒŽȱ‹¢ȱ‘ŽȱœŠŽȱ˜ȱ›ŽŠ•ȱŽŒ˜—˜–¢ǰȱ‘˜žœŽ‘˜•œǰȱŒ˜›™˜›Š’˜—œǰȱŽ¡Ž›—Š•ȱŠŒ˜›œǰȱ and so on. So it is necessary to build a more representative index describes the ꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŠ—ȱœŠ‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœ¢œŽ–ǯȱ‘Ž›Ž˜›Žǰȱ‘Žȱ™›˜‹•Ž–ȱ’—ȱ‘’œȱ research are:

1. ˜ ȱ ’œȱ ‘Žȱ ™Ž›˜›–Š—ŒŽȱ ˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ Š–˜—ȱ Œ˜ž—›’Žœȱ ‹ŠœŽȱ ˜—ȱ income group countries in 2004-2014?

2. ˜ ȱ’œȱ‘Žȱ™Ž›˜›–Š—ŒŽȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ȱœŠ‹’•’¢ȱŠ–˜—ȱ—Š’˜—œȱ‹ŠœŽȱ on income group countries in 2004-2014?

3. ‘Šȱ’œȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ˜—ȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ȱ based on income group countries in 2004-2014?

Based on the description above, the purpose of this research are to:

1. Š•Œž•ŠŽȱŠ—ȱŽœŒ›’‹Žȱ’—Ž¡ȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŠ–˜—ȱŒ˜ž—›’Žœȱ‹ŠœŽȱ˜—ȱ income group countries in 2004-2014.

2. Š•Œž•ŠŽȱŠ—ȱŽœŒ›’‹Žȱ’—Ž¡ȱ˜ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱŠ–˜—ȱŒ˜ž—›’Žœȱ‹ŠœŽȱ˜—ȱ income group countries in 2004-2014.

3. —Š•¢£Žȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ˜—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ‹ŠœŽȱ˜—ȱ’—Œ˜–Žȱ group between countries in 2004-2014.

II. THEORY

Řǯȱŗȱ˜—ŒŽ™ȱ˜ȱ’—Š—Œ’Š•ȱ—Œ•žœ’˜—

‘ŽœŽȱ Š›Žȱ ŸŠ›’˜žœȱ Žę—’’˜—œȱ ˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ›˜–ȱ œ˜–Žȱ ›ŽœŽŠ›Œ‘Ž›œȱ Š—ȱ institution:

Table 1.

Žę—’’˜—œȱ˜ȱ’—Š—Œ’Š•ȱ—Œ•žœ’˜—

˜ǯ ž‘˜›œ ŽŠ› ž‹•’ŒŠ’˜— Žę—’’˜—

1 Mandira Sarma

2012 Index of Financial Inclusion –a measure of Financial Sector Inclusiveness

Financial inclusion as a process that ensures the ease of access, availability and usage of the formal ꗊ—Œ’Š•ȱœ¢œŽ–ȱ˜›ȱŠ••ȱ–Ž–‹Ž›œȱ˜ȱŠ—ȱŽŒ˜—˜–¢ǯ

2 The Reserve Bank of India

2008 Financial Inclusion – from Obligation to Opportunity

Financial inclusion is the process of ensuring access

˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱŠ—ȱ’–Ž•¢ȱŠ—ȱŠŽšžŠŽȱŒ›Ž’ȱ where needed by vulnerable groups such as weaker

œŽŒ’˜—œȱŠ—ȱ•˜ ȱ’—Œ˜–Žȱ›˜ž™œȱŠȱŠ—ȱŠě˜›Š‹•Žȱ cost

3 Harun R Khan 2012 Issues &

Challenges in Financial

—Œ•žœ’˜—DZ˜•’Œ’Žœǰȱ

Š›—Ž›œ‘’™œǰȱ

›˜ŒŽœœŽœȱǭȱ

›˜žŒœȱ

Viable and sustainable business models with

˜Œžœȱ˜—ȱŠŒŒŽœœ’‹•ŽȱŠ—ȱŠě˜›Š‹•Žȱ™›˜žŒœȱŠ—ȱ processes, synergistic partnerships with technology

œŽ›Ÿ’ŒŽȱ™›˜Ÿ’Ž›œȱ˜›ȱŽĜŒ’Ž—ȱ‘Š—•’—ȱ˜ȱ•˜ ȱ value, large volume transactions and appropriate regulatory and risk management policies that

Ž—œž›Žȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŠ—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ move in tandem.

‘Žȱ •ŽŸŽ•ȱ ˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ŒŠ—ȱ ‹Žȱ –ŽŠœž›Žȱ ‹¢ȱ Š—ȱ —Ž¡ȱ ˜ȱ ’—Š—Œ’Š•ȱ

—Œ•žœ’˜—ȱ ǻǼǯȱ ˜–Žȱ ›ŽœŽŠ›Œ‘Ž›œȱ –ŽŠœž›Žȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ‹¢ȱ ŒŠ•Œž•Š’—ȱ ‘Žȱ

™›˜™˜›’˜—ȱ˜ȱŠž•ȱ˜›ȱ‘˜žœŽ‘˜•ȱ™˜™ž•Š’˜—œȱ ‘˜ȱ‘ŠŸŽȱŠŒŒŽœœȱ˜ȱ˜›–Š•ȱꗊ—Œ’Š•ȱ services. IFI developed by Sarma (2008) are based on three dimensions, namely banking penetration, availability of banking services, and usability.

Šǯȱ Š—”’—ȱŽ—Ž›Š’˜—

ȱ —Œ•žœ’ŸŽȱ ꗊ—Œ’Š•ȱ œ¢œŽ–œȱ –žœȱ ‹Žȱ ›ŽŠŒ‘Š‹•Žȱ ˜›ȱ  ’Ž•¢ȱ ŠŒŒŽœœ’‹•Žȱ Š–˜—ȱ users. Banking penetration can be represented from the proportion of adult people that have an account at the bank. Indicator of banking penetration in

‘’œȱœž¢ȱžœŽœȱ‘Žȱ™Ž›ŒŽ—ŠŽȱ˜ȱ˜Š•ȱŠŒŒ˜ž—œȱ’—ȱ˜›–Š•ȱꗊ—Œ’Š•ȱ’—œ’ž’˜—œȱ

˜ȱ˜Š•ȱ™˜™ž•Š’˜—ȱ˜ŸŽ›ȱŗśȱ¢ŽŠ›œȱŠ—ȱ‘Žȱ™Ž›ŒŽ—ŠŽȱ˜ȱœȱ‘Šȱ‘ŠŸŽȱŠŒŒ˜ž—œȱ

’—ȱ˜›–Š•ȱꗊ—Œ’Š•ȱ’—œ’ž’˜—œǯ

‹ǯȱ ŸŠ’•Š‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœ

ȱ —Œ•žœ’ŸŽȱꗊ—Œ’Š•ȱœ¢œŽ–œȱ–žœȱ‹ŽȱŠŸŠ’•Š‹•Žȱ˜ȱŠ••ȱžœŽ›œǯȱ—ȱ‘ŽȱœŠ›–Šȱœž¢ǰȱ availability indicator is represented by the number of outlets (branches, ATMs, etc.). In addition to Sarma (2012), Camara and Tuesta (2014), and Consultative ›˜ž™ȱ ˜ȱœœ’œȱ ‘Žȱ ˜˜›ȱ ǻŘŖŗŘǼȱ Š•œ˜ȱ œŠŽȱ ‘Šȱ ‘Žȱ ŠŸŠ’•Š‹’•’¢ȱ ˜ȱ ꗊ—Œ’Š•ȱ

œŽ›Ÿ’ŒŽœȱŒŠ—ȱ‹Žȱ’—’ŒŠŽȱ‹¢ȱ‘Žȱ—ž–‹Ž›ȱ˜ȱ‹›Š—Œ‘Žœȱ’—ȱꗊ—Œ’Š•ȱ’—œ’ž’˜—œȱ˜›ȱ ATMs (Automatic Teller Machine).

c. Usability

ȱ Žœ™’Žȱ ‘ŠŸ’—ȱ ŠŒŒŽœœȱ ˜ȱ ꗊ—Œ’Š•ȱ œŽ›Ÿ’ŒŽœǰȱ ‘Ž›Žȱ ’œȱ œ’••ȱ Šȱ ›˜ž™ȱ ˜ȱ ™Ž˜™•Žȱ

—˜ȱ¢ŽȱŠ‹•Žȱ˜ȱž’•’£Žȱ‘ŽȱŽ¡’œŽ—ŒŽȱ˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœǯȱ‘Ž›Ž˜›Žǰȱ‘ŠŸ’—ȱŠ—ȱ

ŠŒŒ˜ž—ȱ’œȱ—˜ȱŽ—˜ž‘ȱ˜ȱœ‘˜ ȱŠȱ•ŽŸŽ•ȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ǯȱ’—Š—Œ’Š•ȱ’—Œ•žœ’˜—ȱ

ŒŠ—ȱ‹ŽȱŽ–˜—œ›ŠŽȱ’—ȱ‘ŽȱžœŽȱ˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱœžŒ‘ȱŠœȱŒ›Ž’œǰȱŽ™˜œ’œǰȱ

™Š¢–Ž—œǰȱ ›Ž–’ĴŠ—ŒŽœǰȱ Š—ȱ ›Š—œŽ›œǯȱ —’ŒŠ˜›œȱ žœŽȱ ’—ȱ Š›–Šȱ ǻŘŖŗŘǼȱ Š›Žȱ

žœŠ—’—ȱ •˜Š—œȱ ›˜–ȱ Œ˜––Ž›Œ’Š•ȱ ‹Š—”œȱ ǻƖȱ ˜ȱ Ǽȱ ˜›ȱ žœŠ—’—ȱ

Ž™˜œ’œȱ ’‘ȱŒ˜––Ž›Œ’Š•ȱ‹Š—”œȱǻƖȱ˜ȱ ǼǰȱŽŠ— ‘’•ŽǰȱžœŠ‹’•’¢ȱ’—’ŒŠ˜›œȱ

’—ȱ ˜›Š—ȱ Š—ȱ ˜—’—Žœȱ ǻŘŖŗŚǼȱ Š—ȱ ˜—œž•Š’ŸŽȱ ›˜ž™ȱ ˜ȱ œœ’œȱ ‘Žȱ ˜˜›ȱ (2012) is more specialized in the use of loans by small and medium enterprises ǻœǼǯ

ŘǯȱŘȱ˜—ŒŽ™ȱ˜ȱ’—Š—Œ’Š•ȱŠ‹’•’¢

According to the publication of Asean Development Bank Institute (2014), there is

—˜ȱŽ—Ž›Š•ȱŠ›ŽŽ–Ž—ȱ˜›ȱ‘ŽȱŽę—’’˜—ȱ˜ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ‹žȱ–Š—¢ȱ’—œ’ž’˜—œȱ

Š—ȱ›ŽœŽŠ›Œ‘Ž›œȱ‘ŠŸŽȱ›’Žȱ˜ȱŽę—Žȱ’ȱ‹ŠœŽȱ˜—ȱ‘ŽȱŽ¡™Ž›’Ž—ŒŽœȱ˜ȱœ˜–ŽȱŒ˜ž—›’Žœȱ

Š—ȱ™›ŽŸ’˜žœȱœž’ŽœǯȱŠ—”ȱ—˜—Žœ’ŠȱǻŘŖŖŝǼȱœŠŽȱ‘Šȱ’—Š—Œ’Š•ȱ¢œŽ–ȱŠ‹’•’¢ȱ ǻǼȱ’œȱŠȱœŠ‹•Žȱꗊ—Œ’Š•ȱœ¢œŽ–ȱ‘ŠȱŒŠ™Š‹•Žȱ˜ȱŠ••˜ŒŠ’—ȱ›Žœ˜ž›ŒŽœȱŠ—ȱŠ‹œ˜›‹’—ȱ

œ‘˜Œ”œȱ‘ŠȱŒŠ—ȱ™›ŽŸŽ—ȱ’œ›ž™’˜—ȱ˜ȱ›ŽŠ•ȱœŽŒ˜›ȱŠŒ’Ÿ’’ŽœȱŠ—ȱꗊ—Œ’Š•ȱœ¢œŽ–ǯȱ

‘Ž—ȱŠŒŒ˜›’—ȱ˜ȱ‘Žȱž›˜™ŽŠ—ȱŽ—›Š•ȱŠ—”ȱǻŘŖŗŘǼǰȱꗊ—Œ’Š•ȱœ¢œŽ–ȱœŠ‹’•’¢ȱ’œȱŠȱ

Œ˜—’’˜—ȱ‘Šȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ȱŒŠ—ȱ˜ŸŽ›Œ˜–Žȱœ‘˜Œ”ȱŠ—ȱ›ŽžŒŽȱ‹Š››’Ž›œȱ’—ȱ‘Žȱ

™›˜ŒŽœœȱ˜ȱꗊ—Œ’Š•ȱ’—Ž›–Ž’Š’˜—ǯ

Based on studies that conducted by Hawkins and Klau (2000), Nelson and

Ž›•’ȱǻŘŖŖśǼǰȱ ›Š¢ȱŽȱŠ•ǯȱǻŘŖŖŝǼǰȱŠ—ȱ‘ŽŠ—ȱŠ—ȱ‘˜¢ȱǻŘŖŗŗǼǰȱ‘Ž›ŽȱŠ›Žȱœ˜–ŽȱœŽŒ˜›œȱ

‘ŠȱŒŠ—ȱŠěŽŒȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–DZ

Šǯȱȱ ŽŠ•ȱŒ˜—˜–’ŒȱŽŒ˜›

ȱ ‘Ž›ŽȱŠ›Žȱ˜ž›ȱŸŠ›’Š‹•Žœȱ˜ȱ‘Žȱ›ŽŠ•ȱœŽŒ˜›ȱ˜ȱ‘ŽȱŽŒ˜—˜–¢ȱ‘ŠȱŒŠ—ȱŠěŽŒȱ‘Žȱ

œŠ‹’•’¢ȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ǰȱ—Š–Ž•¢ȱ ȱ›˜ ‘ǰȱ˜ŸŽ›—–Ž—ȱŠ¡ȱ™˜œ’’˜—ǰȱ

•˜‹Š•ȱ˜’•ȱ™›’ŒŽȱ’—Ž¡ǰȱŠ—ȱ˜–Žœ’Œȱ’—ĚŠ’˜—ǯ b. Corporate Sector

ȱ ‘Ž›Žȱ Š›Žȱ ˜ž›ȱ ŸŠ›’Š‹•Žœȱ ˜ȱ ‘Žȱ Œ˜›™˜›ŠŽȱ œŽŒ˜›ȱ ‘Šȱ ŒŠ—ȱ ŠěŽŒȱ ‘Žȱ œŠ‹’•’¢ȱ

˜ȱ ‘Žȱ ꗊ—Œ’Š•ȱ œ¢œŽ–ǯȱ ‘ŽœŽȱ ŸŠ›’Š‹•Žœȱ Š›Žȱ ‘Žȱ ›Š’˜ȱ ˜ȱ Œ›Ž’ȱ ™Ž›ȱ Žšž’¢ǰȱ

Ž¡™Ž—’ž›Žȱ ˜—ȱ ’—Ž›Žœǰȱ —Žȱ ˜›Ž’—ȱ Ž¡Œ‘Š—Žȱ Ž¡™˜œž›Žȱ ˜ȱ Žšž’¢ȱ ›Š’˜ǰȱ Š—ȱ corporate failure.

c. Household Sector

ȱ ‘Ž›ŽȱŠ›Žȱ꟎ȱŸŠ›’Š‹•Žœȱ˜ȱ‘Žȱ‘˜žœŽ‘˜•ȱœŽŒ˜›ȱ‘ŠȱŒŠ—ȱŠěŽŒȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ

‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ǯȱ‘ŽœŽȱŸŠ›’Š‹•ŽœȱŠ›Žȱ‘˜žœŽ‘˜•ȱŠœœŽœǰȱ‘˜žœŽ‘˜•ȱŒ›Ž’ǰȱ household income, household consumption, as well as household credit services and principal payments.

ǯȱ ¡Ž›—Š•ȱŽŒ˜›

ȱ ‘Ž›Žȱ Š›Žȱ œ’¡ȱ ŸŠ›’Š‹•Žœȱ ˜ȱ ‘Žȱ Ž¡Ž›—Š•ȱ œŽŒ˜›ȱ ‘Šȱ ŒŠ—ȱ ŠěŽŒȱ ‘Žȱ œŠ‹’•’¢ȱ ˜ȱ

‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ǯȱ‘ŽœŽȱŸŠ›’Š‹•ŽœȱŠ›Žȱ›ŽŠ•ȱŽ¡Œ‘Š—Žȱ›ŠŽǰȱŒž››Ž—ȱŠŒŒ˜ž—ǰȱ

ŒŠ™’Š•ȱ̘ œǰȱ•˜‹Š•ȱ’—ĚŠ’˜—ǰȱ•˜‹Š•ȱ ǰȱŠ—ȱ•˜‹Š•ȱŽŒ˜—˜–’ŒȱŒ•’–ŠŽǯ e. Financial Sector

ȱ ‘Ž›ŽȱŠ›ŽȱœŽŸŽ—ȱŸŠ›’Š‹•Žœȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱœŽŒ˜›ȱ‘ŠȱŒŠ—ȱŠěŽŒȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ‘Žȱ ꗊ—Œ’Š•ȱœ¢œŽ–ǯȱ‘ŽœŽȱŸŠ›’Š‹•ŽœȱŠ›Žȱ–˜—ŽŠ›¢ȱŠ›ŽŠŽȱǻœŠŸ’—ǰȱ›Š—œŠŒ’˜—ǰȱ

˜Š•ȱ Œ›Ž’Ǽǰȱ –˜—Ž¢ȱ œž™™•¢ǰȱ ›Š’˜ȱ ˜ȱ ˜–Žœ’Œȱ Œ›Ž’ȱ ˜ȱ ǰȱ ’—Ž›Žœȱ ›ŠŽȱ

œ™›ŽŠǰȱ ‹Š—”ȱ ™›˜ęŠ‹’•’¢ȱ ǻȱ Š—ȱ Ǽǰȱ ›ŽŠ•ȱ ’—Ž›Žœȱ ›ŠŽǰȱ ‹Š—”’—ȱ œŽŒ˜›ȱ

›’œ”ȱǻ—˜—Ȭ™Ž›˜›–’—ȱ•˜Š—ǼǰȱŒŠ™’Š•ȱŠŽšžŠŒ¢ǰȱ•’šž’’¢ǰȱŒ›Ž’ȱ›Š’—ȱ˜ȱ‹Š—”œǰȱ

Š—”ȱȬŒ˜›ŽǰȱŠ—ȱ‹Š—”’—ȱŒ˜—ŒŽ—›Š’˜—ǯ f. Financial Market Sector

ȱ ‘Ž›ŽȱŠ›Žȱ꟎ȱŸŠ›’Š‹•Žœȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱ–Š›”ŽȱœŽŒ˜›ȱ‘ŠȱŒŠ—ȱŠěŽŒȱ‘ŽȱœŠ‹’•’¢ȱ

˜ȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ǯȱ‘ŽœŽȱŸŠ›’Š‹•ŽœȱŠ›ŽȱŒ‘Š—Žœȱ’—ȱœ˜Œ”ȱ’—Ž¡ǰȱ’œ›’‹ž’˜—ȱ

˜ȱ Œ˜›™˜›ŠŽȱ ‹˜—œǰȱ –Š›”Žȱ ŒŠ™’Š•’£Š’˜—ǰȱ –Š›”Žȱ •’šž’’¢ǰȱ Ÿ˜•Š’•’¢ǰȱ Š—ȱ housing prices.

Řǯřȱ›ŽŸ’˜žœȱž’Žœ

—Žȱ˜ȱ™›ŽŸ’˜žœȱœž’Žœȱ‘ŠȱŠ—Š•¢£Žȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ˜—ȱꗊ—Œ’Š•ȱ stability is Han and Melecky (2014). The result is high income countries and middle income countries should increase the access to deposit ratio. It may increase the

›Žœ’•’Ž—ŒŽȱ ˜ȱ ‘Žȱ ž—’—ȱ ‹ŠœŽȱ ˜ȱ ‹Š—”’—ȱ œŽŒ˜›ȱ Ž™˜œ’œȱ Šȱ ꗊ—Œ’Š•ȱ œ›Žœœǯȱ ‘Žȱ

™˜œ’’ŸŽȱ’–™ŠŒȱ‹Ž ŽŽ—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱŠ—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ ŠœȱŠ•œ˜ȱ˜ž—ȱ in Adasme, Majnoni and Uribe (2006) about Chile. The result is an increase in

•˜Š—œȱ‹¢ȱœȱ•˜ Ž›’—ȱ›’œ”ȱ›˜–ȱ™˜›˜•’˜ȱ‹Š—”ȱ•˜Š—œȱ ‘’Œ‘ȱ–ŽŠ—œȱ’—Œ›ŽŠœ’—ȱ

‘ŽȱœŠ‹’•’¢ȱ˜ȱ‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ǯ

Khan (2011) conducted research about middle income countries. His study

œŠŽȱ‘Šȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ‘ŠœȱŽ’‘Ž›ȱ™˜œ’’ŸŽȱ˜›ȱ—ŽŠ’ŸŽȱ’–™ŠŒœȱ˜—ȱꗊ—Œ’Š•ȱ

œ¢œŽ–ȱ œŠ‹’•’¢ȱ ǻ‘Š—ȱ ŘŖŗŗǼǯȱ ˜œ’’ŸŽȱ ’–™ŠŒœȱ Š›’œŽȱ ’ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ŒŠ—ȱ

’—Œ›ŽŠœŽȱ ‘Žȱ ’ŸŽ›œ’ęŒŠ’˜—ȱ ˜ȱ ‹Š—”’—ȱ ŠœœŽœȱ Š—ȱ ’—Œ›ŽŠœŽȱ –˜—ŽŠ›¢ȱ ™˜•’Œ¢ȱ

›Š—œ–’œœ’˜—ǯȱ‘’•Žȱ‘Žȱ—ŽŠ’ŸŽȱ’–™ŠŒȱ’œȱžŽȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ–Š¢ȱŽŒ›ŽŠœŽȱ

‘ŽȱŒ›Ž’ȱœŠ—Š›ǯȱȱ–Š¢ȱŒŠžœŽȱ’—œŠ‹’•’¢ȱ˜ȱ–Œ›˜ę—Š—ŒŽȱ’—œ’ž’˜—œǯȱ

Furthermore, Dupas et al. (2012) with an experimental research in the western province of Kenya, which is a low-income country, has found out that increasing

’—ȱŠŸŠ’•Š‹’•’¢ȱ˜ȱ‹Š—”’—ȱœŽ›Ÿ’ŒŽœȱ’ȱ—˜ȱ•ŽŠȱ˜ȱ’—Œ›ŽŠœ’—ȱ’—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ǯȱ

‘’œȱ’œȱ‹ŽŒŠžœŽȱ‘Žȱ’—Œ›ŽŠœ’—ȱ’—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’œȱ—˜ȱ˜••˜ Žȱ‹¢ȱ•˜ Ž›ȱŒ˜œȱ of borrowing money for the lower middle class, lack of trust, and not followed by

’–™›˜Ÿ’—ȱ‘ŽȱšžŠ•’¢ȱ˜ȱœŽ›Ÿ’ŒŽœǯ

III. METHODOLOGY

řǯŗȱ¢™ŽœȱŠ—ȱ˜ž›ŒŽœȱ˜ȱŠŠ

The data used is secondary data which is an annual data with an unbalanced

™Š—Ž•ȱ ŠŠȱ œ›žŒž›Žǯȱ ‘Žȱ ™Š—Ž•ȱ ŠŠȱ Œ˜—œ’œȱ ˜ȱ Šȱ Œ›˜œœȱ œŽŒ’˜—ȱ ŠŠȱ ǻ꟎ȱ •˜ Ž›ȱ

–’•Žȱ ’—Œ˜–Žȱ Œ˜ž—›’Žœǰȱ —’—Žȱ ž™™Ž›Ȭ–’•Žȱ ’—Œ˜–Žȱ Œ˜ž—›’Žœǰȱ Š—ȱ ꟎ȱ ‘’‘Ȭ income countries) and time series data from 2004 to 2014. The data were collected from various sources such as: World Bank, World Development Indicators (WDI), International Monetary Fund (IMF) database, and other sources. This research was

Œ˜—žŒŽȱ ’‘ȱœ˜Ğ Š›ŽȱœžŒ‘ȱŠœȱȱŠ—ȱ’Œ›˜œ˜Ğȱ¡ŒŽ•ǯ

Table 2.

Information about Data, Unit, and Sources

—’ŒŠ˜› —’ ˜ž›ŒŽ

Financial Stability Index Financial Development Index (FDI)

Š›”ŽȱŠ™’Š•’£Š’˜—Ȧ (%) IFS IMF

Š’˜—Š•ȱž››Ž—Œ¢ȱ›Ž’Ȧ (%) World Bank

Interest Rate Spread (%) World Bank

Bank Concentration (%) World Bank

Financial Vulnerability Index (FVI)

—ĚŠ’˜—ǰȱ˜—œž–Ž›ȱ›’ŒŽœ (%) IFS IMF

Ž—Ž›Š•ȱŠ•Š—ŒŽǰȱŽęŒ’ȱ˜›ȱž›™•žœȦ (%) World Bank

ž››Ž—ȱŒŒ˜ž—Ȧ (%) World Bank

ŽŠ•ȱ쎌’ŸŽȱ¡Œ‘Š—ŽȱŠŽȱǻŒ‘Š—ŽǼ (%) World Bank

˜—ȱ ˜ŸŽ›—–Ž—Š•ȱ›Ž’Ȧ˜Š•ȱ›Ž’ (%) World Bank

Loan/Deposits (%) World Bank

Deposit/M2 (%) World Bank

Financial Soundness Index (FSI)

Š—”ȱ˜—ȬŽ›˜›–’—ȱ˜Š—œȱ˜ȱ ›˜œœȱ˜Š—œ (%) World Bank

Bank Capital To Total Assets (%) World Bank

Bank Return on Asset (ROA) (%) World Bank

Š—”ȱȬŒ˜›Ž (%) World Bank

˜›•ȱŒ˜—˜–’Œȱ•’–ŠŽȱ—Ž¡ȱ

˜›•ȱ—ĚŠ’˜—ǰȱ˜—œž–Ž›ȱ›’ŒŽœ (%) IFS IMF

˜›•ȱ ȱ›˜ ‘ (%) IFS IMF

Œ˜—˜–’Œȱ•’–ŠŽȱ—Ž¡ Index ’˜

Financial Inclusion

Ž—Ž›Š’˜—ȱǻž–‹Ž›ȱ˜ȱŠ—”ȱŒŒ˜ž—œȱ™Ž›ȱŗǰŖŖŖȱŠž•œǼ Index IMF Availability (Number of Bank Branches per 100,000 adults) Index IMF

œŠ‹’•’¢ȱǻžœŠ—’—ȱ˜Š—œȱŠœȱŽ›ŒŽ—ȱ˜ȱ Ǽ (%) IMF

œŠ‹’•’¢ȱǻžœŠ—’—ȱŽ™˜œ’œȱŠœȱŽ›ŒŽ—ȱ˜ȱ Ǽ (%) World Bank Other Factors

˜—ȬŽ›˜›–’—ȱ˜Š—ȱ˜ȱ ›˜œœȱŽ™˜œ’ (%) World Bank

ȱ™Ž›ȱŒŠ™’Š USD /

person

World Bank

›’ŸŠŽȱŒ›Ž’ȱ‹¢ȱŽ™˜œ’ȱ–˜—Ž¢ȱ‹Š—”œȱŠ—ȱ˜‘Ž›ȱꗊ—Œ’Š•ȱ’—œ’ž’˜—œȱ˜ȱ (%) World Bank

˜—ȬȱŒŠ™’Š•ȱ̘ ȱ˜ȱ Index World Bank

Financial Openness Index Chinn-Ito database

’šž’ȱŠœœŽœȱ˜ȱŽ™˜œ’œȱŠ—ȱœ‘˜›ȬŽ›–ȱž—’— (%) World Bank

řǯŘȱ’—Š—Œ’Š•ȱ—Œ•žœ’˜—ȱ—Ž¡

Calculation of Financial Inclusion index in this research uses a method developed by Sarma (2008). There are three dimensions in this calculation such as banking penetration (number of deposit accounts at commercial bank per 1,000 adult population), the availability of banking services (number of branches of commercial bank per 100,000 population) and usability (total of the proportion of loans and

Ž™˜œ’ȱ˜ȱ Ǽǯȱ‘ŽœŽȱŠ›Žȱ‘ŽȱœŽ™œȱ˜ȱŒŠ•Œž•Š’˜—DZ

1. Calculating the value of the indicator on each dimension that has been weighted.

(1) d_i= w_i

Where:

w_iȱƽȱ Ž’‘ȱ˜›ȱ’–Ž—œ’˜—ȱ’ǰȱŖȱǂȱ _iȱǂŗDzȱȏ’ȱƽȱž››Ž—ȱŸŠ•žŽȱ˜ȱ‘ŽȱŸŠ›’Š‹•Žȱ’ǯ ȱ –ȏ’ȱƽȱ–’—’–ž–ȱŸŠ•žŽȱ˜ȱ‘ŽȱŸŠ›’Š‹•Žȱ’Dzȱȏ’ȱƽȱ–Š¡’–ž–ȱŸŠ•žŽȱ˜ȱ‘ŽȱŸŠ›’Š‹•Žȱ’ǯ 2. Calculating the value of X₁ and X₂

X₁ = (2)

3. Calculating the value of the Financial Inclusion Index = [X₁+X₂] (4) ȱ Š—Žȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’—Ž¡ȱ’œȱ‹Ž ŽŽ—ȱŖȱž—’•ȱŗǯȱ˜ž—›¢ȱŒŠŽ˜›¢ȱ‹ŠœŽȱ

˜—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’—Ž¡ȱŸŠ•žŽȱ’œȱŠœȱ˜••˜ œDZ

ȱ —Ž¡ȱǀŖǯřȱƽȱ˜ž—›’Žœȱ ’‘ȱ•˜ ȱ•ŽŸŽ•ȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ǯ

ȱ Ŗǯřȱǂȱ’—Ž¡ȱǀŖǯŜȱƽȱ˜ž—›’Žœȱ ’‘ȱ–˜Ž›ŠŽȱ•ŽŸŽ•ȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ǯ ȱ ŖǯŜȱǂȱ’—Ž¡ȱƽȱ˜ž—›’Žœȱ ’‘ȱŠȱ˜˜ȱ•ŽŸŽ•ȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ǯ

řǯřȱ’—Š—Œ’Š•ȱ¢œŽ–ȱŠ‹’•’¢ȱ—Ž¡

Š•Œž•Š’˜—ȱ˜ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—Ž¡ȱ’—ȱ‘’œȱœž¢ȱžœŽœȱŠȱ–Ž‘˜ȱŽŸŽ•˜™Žȱ‹¢ȱ

•‹ž•ŽœŒžȱ Š—ȱ ˜¢ŽŠžȱ ǻŘŖŗŖǼǯȱ ‘Ž›Žȱ Š›Žȱ ŗŞȱ ’—’ŒŠ˜›œȱ ’—ȱ ‘’œȱ ŒŠ•Œž•Š’˜—ǯȱ ‘ŽœŽȱ

’—’ŒŠ˜›œȱ ›Ž™›ŽœŽ—ȱ œ˜–Žȱ ˜ȱ ‘Žȱ œž‹Ȭ’—Ž¡Žœȱ –Š”’—ȱ ž™ȱ ‘Žȱ ’—Ž¡ȱ ˜ȱ ꗊ—Œ’Š•ȱ stability. The constituent sub-indexes include the Financial Development Index,

’—Š—Œ’Š•ȱž•—Ž›Š‹’•’¢ȱ—Ž¡ǰȱ’—Š—Œ’Š•ȱ˜ž——Žœœȱ—Ž¡ǰȱŠ—ȱ‘Žȱ˜›•ȱŒ˜—˜–’Œȱ

•’–ŠŽȱ—Ž¡ǯȱŽ™œȱ˜ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—Ž¡ȱŒŠ•Œž•Š’˜—ȱŠ›ŽȱŠœȱ˜••˜ DZ

(3)

1. Normalizing each indicator value with the following formula:

Where:

I_itn = value of variable that has been normalized.

I_it = current value of i variable.

Min (I_iǼȱ ƽȱ –’—’–ž–ȱŸŠ•žŽȱ˜ȱ’ȱŸŠ›’Š‹•ŽDzȱ Max (I_i) = maximum value of i variable.

Řǯȱ Š•Œž•Š’—ȱœž‹Ȭ’—Ž¡Žœȱ˜ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—Ž¡ǯ

(6), ǻŝǼǰ (8), (9)

Where:

D_t ƽȱ ŸŠ•žŽȱ˜ȱꗊ—Œ’Š•ȱŽŸŽ•˜™–Ž—ȱ’—Ž¡ȱ ‘’Œ‘ȱ’œȱ‘ŽȱŠŸŽ›ŠŽȱŸŠ•žŽȱ˜ȱŠ••ȱ‘Žȱ constituent indicators in t-period.

V_t ƽȱ ŸŠ•žŽȱ˜ȱꗊ—Œ’Š•ȱŸž•—Ž›Š‹’•’¢ȱ’—Ž¡ȱ ‘’Œ‘ȱ’œȱ‘ŽȱŠŸŽ›ŠŽȱŸŠ•žŽȱŠ••ȱ’—’ŒŠ˜›œȱ constituent in t-period.

S_tȱȱ ƽȱ ŸŠ•žŽȱ˜ȱꗊ—Œ’Š•ȱœ˜ž——Žœœȱ’—Ž¡ȱ ‘’Œ‘ȱ’œȱŠ—ȱŠŸŽ›ŠŽȱŸŠ•žŽȱ˜ȱŠ••ȱ’—’ŒŠ˜›œȱ constituent in t-period.

W_t = value of world economy climate index which is an average value of all

’—’ŒŠ˜›œȱŒ˜—œ’žŽ—ȱȱ’—ȱȬ™Ž›’˜ǯ

řǯȱ ’—Š••¢ǰȱ‘ŽȱŠ›ŽŠŽȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—Ž¡ȱ’œȱŒ˜–™˜œŽȱŠœȱ˜••˜ œDZ

(10)

Financial system stability index has a value between 0 and 1. If the index value

Œ•˜œŽȱ ˜ȱ Ŗȱ –ŽŠ—œȱ ‘Šȱ ‘Žȱ Œ˜ž—›¢ȱ ‘Šœȱ Š—ȱ ž—œŠ‹•Žȱ ꗊ—Œ’Š•ȱ œ¢œŽ–ǰȱ  ‘’•Žȱ ’ȱ ‘Žȱ

ŸŠ•žŽȱŒ•˜œŽȱ˜ȱŗȱ–ŽŠ—œȱ‘Šȱ‘ŽȱŒ˜ž—›¢ȱ‘ŠœȱŠȱœŠ‹•Žȱꗊ—Œ’Š•ȱœ¢œŽ–ǯȱžȱ’—Œ›ŽŠœ’—ȱ

’—ȱœ˜–Žȱ’—’ŒŠ˜›œȱœžŒ‘ȱŠœȱŠ—”ȱ˜—ȬŽ›˜›–’—ȱ˜Š—œȱ˜ȱ ›˜œœȱ˜Š—œǰȱ—ĚŠ’˜—ǰȱ

—Ž›ŽœȱŠŽȱ™›ŽŠǰȱ˜›•ȱ—ĚŠ’˜—ǰȱŠ—ȱ˜—ȬŽ›˜›–’—ȱ˜Š—ȱ˜ȱ ›˜œœȱŽ™˜œ’ȱ will reduce value of sub-indexes.

řǯŚȱ—Š•¢œ’œȱ‘Žȱ–™ŠŒȱ˜ȱ’—Š—Œ’Š•ȱ—Œ•žœ’˜—ȱ˜—ȱ’—Š—Œ’Š•ȱŠ‹’•’¢

—ȱ Š—Š•¢£’—ȱ ‘Žȱ ’–™ŠŒȱ ˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ˜—ȱ ꗊ—Œ’Š•ȱ œŠ‹’•’¢ȱ ’—ȱœ’Šǰȱ ‘Žȱ

ŽšžŠ’˜—ȱžœŽȱ’œȱŒ˜–™˜œŽȱŠœȱ˜••˜ œDZ

(11) (5)

Where :

AFSI_it : Index of Financial Stability for country i year t (index).

IFI_it : Financial Inclusion Index for country i year t (Index).

it DZȱ ‘Žȱ ›Š’˜ȱ ˜ȱ ™›’ŸŠŽȱ Œ›Ž’ȱ ›˜–ȱ ‹Š—”ȱ Ž™˜œ’œȱ Š—ȱ ˜‘Ž›ȱ ꗊ—Œ’Š•ȱ

’—œ’ž’˜—œȱ˜ȱ ȱ˜›ȱŒ˜ž—›¢ȱ’ȱ¢ŽŠ›ȱȱǻƖǼǯ

_it : FinŠ—Œ’Š•ȱ ˜™Ž——Žœœȱ ’—Ž¡ȱ ǻꗊ—Œ’Š•ȱ ˜™Ž——ŽœœǼȱ ˜›ȱ Œ˜ž—›¢ȱ ’ȱ ¢ŽŠ›ȱ ˜ȱ ȱ (Index).

e_it : ››or for country i year t.

IV. RESULT AND ANALYSIS

Śǯŗǯȱ’—Š—Œ’Š•ȱ—Œ•žœ’˜—ȱŠœŽȱ˜—ȱ—Œ˜–Žȱ ›˜ž™ȱ˜ž—›’Žœ

Table 3 shows the average Financial Inclusion Index (IFI) based on the Income ›˜ž™ȱ˜ž—›’ŽœȱŒ˜—œ’œ’—ȱ˜ȱ•˜ Ž›ȱ–’•Žȱ’—Œ˜–ŽȱŒ˜ž—›’Žœǰȱž™™Ž›ȱ–’•ŽǰȱŠ—ȱ

‘’‘ȱ’—Œ˜–ŽȱŒ˜ž—›’Žœǯȱ‘Žȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’—Ž¡ȱŒ˜—œ’œœȱ˜ȱ‘›ŽŽȱ’–Ž—œ’˜—œȱ that represent access to banking sector (d₁Ǽǰȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱŠŸŠ’•Š‹’•’¢ȱǻ₂), and usability (d₃).

Table 3.

’—Š—Œ’Š•ȱ—Œ•žœ’˜—ȱ—Ž¡ȱ‹¢ȱ—Œ˜–ŽȱŽŸŽ•ȱ ›˜ž™ȱ˜ȱ˜ž—›’Žœ

›˜ž™ ŸŽ›ŠŽȱ

_ŗ _Ř _ř IFI

LMIC 0.1128915 0.045201 0.20532 0.130108

UMIC 0.242146 0.191096 ŖǯŘŜŖŘśŝ 0.242013

HIC 0.5990889 0.414563 ŖǯŚşŖŚŖŝ 0.496548

Where:

LMIC : Lower Middle Income Countries.

UMIC : Upper Middle Income Countries.

HIC : High Income Countries.

d₁ : dimension of access to banking sector with normalized data.

d₂ȱ DZȱȱ’–Ž—œ’˜—ȱ˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱŠŸŠ’•Š‹’•’¢ȱ ’‘ȱ—˜›–Š•’£ŽȱŠŠǯ d₃ȱ DZȱȱ’–Ž—œ’˜—ȱ˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱžœŠ‹’•’¢ȱ ’‘ȱ—˜›–Š•’£ŽȱŠŠǯ IFI : Index of Financial Inclusion.

Table 3 shows that high income countries group has the highest average

’—Ž¡ȱ ˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ǯȱ ‘Žȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ’—Ž¡ȱ ’œȱ ŸŠ•žŽȱ Šȱ ŖǯŚşȱ where the value is more than 0.3, which means high income countries group is

‘Žȱ ›˜ž™ȱ ˜ȱ Œ˜ž—›’Žœȱ  ’‘ȱ –˜Ž›ŠŽȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ǻŠ›–Šǰȱ ŘŖŖŞǼǯȱ ’‘ȱ

’—Œ˜–ŽȱŒ˜ž—›’Žœȱ›˜ž™ȱ‘Šœȱ‘Žȱ‘’‘ŽœȱŠŸŽ›ŠŽȱ’—Ž¡ȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱœ’—ŒŽȱ high income countries group has high value of banking penetration dimension represented by the number of deposit accounts at commercial bank per 1,000

Šž•ȱ ™˜™ž•Š’˜—ǰȱ ŠŸŠ’•Š‹’•’¢ȱ ˜ȱ ꗊ—Œ’Š•ȱ œŽ›Ÿ’ŒŽœȱ ’–Ž—œ’˜—œȱ ›Ž™›ŽœŽ—Žȱ ‹¢ȱ Šȱ number of commercial bank branches per 100,000 population adults, and product

žœŠ‹’•’¢ȱ˜ȱ˜›–Š•ȱꗊ—Œ’Š•ȱ’—œ’ž’˜—œȱ’–Ž—œ’˜—œȱ›Ž™›ŽœŽ—Žȱ‹¢ȱ‘Žȱ™›˜™˜›’˜—ȱ

˜ȱ˜žœŠ—’—ȱ•˜Š—œȱŠ—ȱŽ™˜œ’ȱ˜ȱ ǯ

™™Ž›Ȭ–’•Žȱ ’—Œ˜–Žȱ Œ˜ž—›’Žœȱ ‘Šœȱ Š—ȱ ŠŸŽ›ŠŽȱ ŸŠ•žŽȱ ˜ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ

’—Ž¡ȱŠȱŖǯŘŚǯȱ‘Žȱ’—Ž¡ȱŸŠ•žŽȱ’œȱ•Žœœȱ‘Š—ȱŖǯřȱœ˜ȱŒ•Šœœ’ꮍȱ’—ȱ‘Žȱ›˜ž™ȱ˜ȱŒ˜ž—›’Žœȱ  ’‘ȱ™˜˜›ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱǻŠ›–ŠǰȱŘŖŖŞǼǯȱ’–Ž—œ’˜—ȱ‘ŠȱŒ˜—›’‹žŽȱ‘Žȱ›ŽŠŽœȱ

ŸŠ•žŽȱ ˜—ȱ ‘Žȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ’—Ž¡ȱ ’—ȱ ž™™Ž›ȱ –’•Žȱ ’—Œ˜–Žȱ Œ˜ž—›’Žœȱ ›˜ž™ȱ

’œȱ ’–Ž—œ’˜—ȱ ˜ȱ ꗊ—Œ’Š•ȱ œŽ›Ÿ’ŒŽœȱ žœŠ‹’•’¢ǯȱ ȱ ’œȱ ›Ž™›ŽœŽ—Žȱ ‹¢ȱ ‘Žȱ ›Ž•Š’ŸŽ•¢ȱ

‘’‘ȱ ™›˜™˜›’˜—ȱ ˜ȱ ˜žœŠ—’—ȱ •˜Š—œȱ Š—ȱ Ž™˜œ’ȱ ˜ȱ ȱ Œ˜–™Š›Žȱ ˜ȱ ˜‘Ž›ȱ

’–Ž—œ’˜—œǯȱ‘Žȱ˜‹œŠŒ•Žœȱ’—ȱ‘Žȱ’–™•Ž–Ž—Š’˜—ȱ˜ȱꗊ—Œ’Š•ȱ’—Œ•žœ’ŸŽȱ’—ȱ™™Ž›Ȭ

–’•Žȱ ’—Œ˜–Žȱ Œ˜ž—›’Žœȱ ›˜ž™ȱ ’œȱ •ŠŒ”ȱ ˜ȱ ꗊ—Œ’Š•ȱ œŽ›Ÿ’ŒŽœȱ ’••žœ›ŠŽȱ ‹¢ȱ •˜ ȱ number of branches provided by commercial banks.

Lower middle income countries group has the lowest average value of ꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’—Ž¡ȱŠȱŖǯŗřǯȱ‘Žȱ’—Ž¡ȱŸŠ•žŽȱ’œȱ•Žœœȱ‘Š—ȱŖǯřȱœ˜ȱŒ•Šœœ’ꮍȱ’—ȱ‘Žȱ

›˜ž™ȱ˜ȱŒ˜ž—›’Žœȱ ’‘ȱ™˜˜›ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱǻŠ›–ŠǰȱŘŖŖŞǼǯȱ••ȱ’–Ž—œ’˜—ȱ˜ȱ ꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’—ȱ‘Žȱ›˜ž™ȱ˜ȱ–’•Žȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ’œȱ‘Žȱ•˜ ŽœȱŒ˜–™Š›Žȱ to other groups. Moreover, the lowest dimension in lower middle income group

˜ȱŒ˜ž—›’Žœȱ’œȱŠŸŠ’•Š‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱ’••žœ›ŠŽȱ‹¢ȱ‘Žȱ•˜ ȱ—ž–‹Ž›ȱ˜ȱ branches provided by commercial banks.

ŚǯŘǯȱ’—Š—Œ’Š•ȱŠ‹’•’¢ȱŠœŽȱ˜—ȱ—Œ˜–Žȱ ›˜ž™ȱ˜ž—›’Žœ

Š‹•Žȱ Śȱ œ‘˜ œȱ ‘Žȱ ›Žœž•œȱ ˜ȱ ŒŠ•Œž•Š’˜—ȱ ˜›ȱ ‘Žȱ ŠŸŽ›ŠŽȱ ꗊ—Œ’Š•ȱ œŠ‹’•’¢ȱ ’—Ž¡ȱ

‹ŠœŽȱ˜—ȱ—Œ˜–Žȱ ›˜ž™ȱ˜ž—›’Žœǯȱ’—Š—Œ’Š•ȱœ¢œŽ–ȱœŠ‹’•’¢ȱ’—Ž¡ȱ’œȱŒ˜–™˜œŽȱ˜ȱ

˜ž›ȱœž‹Ȭ’—Ž¡Žœȱ›Ž™›ŽœŽ—’—ȱ‘ŽȱŽŸŽ•˜™–Ž—ȱ˜ȱꗊ—Œ’Š•ȱœŽŒ˜›ǰȱ‘ŽȱŸž•—Ž›Š‹’•’¢ȱ

˜ȱꗊ—Œ’Š•ȱœŽŒ˜›ǰȱ‘Žȱœ˜ž——Žœœȱ˜ȱꗊ—Œ’Š•ȱœŽŒ˜›ǰȱŠ—ȱ ˜›•ȱŽŒ˜—˜–’ŒȱŒ•’–ŠŽǯȱ From the calculation results obtained as follows:

›˜ž™ ŸŽ›ŠŽ

FDI FVI FSI WECI AFSI

LMIC ŖǯŘşŞŜŞŝŗ 0.392638 ŖǯśşŝŚŝŜ 0.652325 0.46056

UMIC 0.398602 ŖǯŚşŜŝŞŝ 0.582886 0.638334 ŖǯśŗŝŜşř

HIC 0.5982915 ŖǯśŚŝŜŚŚ 0.531516 ŖǯŜŝŗŘřŜ ŖǯśŝśşŗŚ

Table 4.

’—Š—Œ’Š•ȱ¢œŽ–ȱŠ‹’•’¢ȱ—Ž¡ȱŠœŽȱ˜—ȱ—Œ˜–Žȱ ›˜ž™ȱ˜ž—›’Žœ

Where:

ȱȱ DZȱȱ’—Š—Œ’Š•ȱŽŸŽ•˜™–Ž—ȱ—Ž¡DzȱDZȱ’—Š—Œ’Š•ȱž•—Ž›Š‹’•’¢ȱ—Ž¡

ȱȱ DZȱȱ’—Š—Œ’Š•ȱ˜ž——Žœœȱ—Ž¡DzȱDZȱ˜›•ȱŒ˜—˜–’Œȱ•’–ŠŽȱ—Ž¡ǯ AFSI : Aggregate Financial Stability Index

Table 4 shows that the group of countries having the highest value of an

ŠŸŽ›ŠŽȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—Ž¡ȱ’œȱ‘’‘ȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ›˜ž™ǯȱ‘Žȱ‘’‘ȱ’—Ž¡ȱ

˜ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—ȱ‘’‘Ȭ’—Œ˜–Žȱ›˜ž™ȱ˜ȱŒ˜ž—›’ŽœȱžŽȱ˜ȱ‘Žȱ›Ž•Š’ŸŽ•¢ȱ‘’‘ȱ constituent sub-indexes such as the Financial Development Index and Financial

ž•—Ž›Š‹’•’¢ȱ —Ž¡ǯȱ ‘Žȱ ‘’‘ȱ ’—Ž¡ȱ ˜ȱ ꗊ—Œ’Š•ȱ ŽŸŽ•˜™–Ž—ȱ ’œȱ ’••žœ›ŠŽȱ ‹¢ȱ

‘Žȱ‘’‘ȱŠŸŽ›ŠŽȱŸŠ•žŽȱ˜ȱŒŠ™’Š•ȱ’—ȱ‘Žȱꗊ—Œ’Š•ȱ–Š›”Žœǰȱ‘’‘ȱŸŠ•žŽȱ˜ȱ˜–Žœ’Œȱ credit, low interest rate spreads, and high concentration of banking sector. Then,

‘Žȱ‘’‘ȱ’—Ž¡ȱ˜ȱꗊ—Œ’Š•ȱŸž•—Ž›Š‹’•’¢ȱ’œȱ’••žœ›ŠŽȱ‹¢ȱ‘Žȱ•˜ ȱ›ŠŽȱ˜ȱ’—ĚŠ’˜—ȱ

Š—ȱ‘’‘ȱ›ŽŠ•ȱŽěŽŒ’ŸŽȱŽ¡Œ‘Š—Žȱ›ŠŽǯ

’‘Ž›ȱ•˜ Ž›ȱ–’•Žȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ›˜ž™ȱ˜›ȱž™™Ž›ȱ–’•Žȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ

›˜ž™ȱ ‘Šœȱ •˜ Ž›ȱ ŸŠ•žŽȱ ˜ȱ ꗊ—Œ’Š•ȱ œŠ‹’•’¢ȱ ’—Ž¡ȱ ‘Š—ȱ ‘’‘Ȭ’—Œ˜–Žȱ Œ˜ž—›’Žœȱ group because group of lower middle income countries and upper middle

’—Œ˜–Žȱ‘ŠŸŽȱ•˜ ȱŸŠ•žŽȱ˜ȱꗊ—Œ’Š•ȱŽŸŽ•˜™–Ž—ȱ’—Ž¡ǯȱ‘Žȱ•˜ ȱ’—Ž¡ȱ˜ȱꗊ—Œ’Š•ȱ

ŽŸŽ•˜™–Ž—ȱ’œȱ’••žœ›ŠŽȱ‹¢ȱ•˜ ȱŸŠ•žŽȱ˜ȱ‘ŽȱŒŠ™’Š•ȱ’—ȱ‘Žȱꗊ—Œ’Š•ȱ–Š›”ŽœȱŠ—ȱ

‘Žȱ•˜ ȱ˜–Žœ’ŒȱŒ›Ž’ȱŸŠ•žŽȱ‘žœȱ’—‘’‹’’—ȱœŠ‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœ¢œŽ–ǯ

Śǯřǯȱ –™ŠŒȱ ˜ȱ ’—Š—Œ’Š•ȱ —Œ•žœ’˜—ȱ ˜ȱ ‘Žȱ ’—Š—Œ’Š•ȱ ¢œŽ–ȱ Š‹’•’¢ȱ ŠœŽȱ ˜—ȱȱ

—Œ˜–Žȱ ›˜ž™ȱ˜ž—›’Žœ

‘’œȱ’œȱ‘Žȱ›Žœž•ȱ˜ȱ›Ž›Žœœ’˜—ȱžœ’—ȱ˜‹’ȱ–˜Ž•ȱ˜ȱŠ—œ Ž›ȱ‘Žȱ’–™ŠŒȱ˜ȱꗊ—Œ’Š•ȱ

’—Œ•žœ’˜—ȱŠ—ȱ˜‘Ž›ȱŠŒ˜›œȱ˜—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ‹ŠœŽȱ˜—ȱ’—Œ˜–Žȱ›˜ž™ȱŒ˜ž—›’ŽœDZ

LMIC UMIC HIC

AFSI AFSI AFSI

IFI Ŗǯřŝŝŝ 0.4568* 0.5142* *

0.1965* 0.0239* ŖǯŖŜŝř

0.0004 0.0022 ȬŖǯŖŗŘŝȘ

Cons 0.4123*** 0.4911*** 0.5403***

ȘȘȘȱDZȱ’—’ęŒŠ—ȱ•ŽŸŽ•ȱ˜ȱŗƖǰȱȘȘȱDZȱ’—’ęŒŠ—ȱ•ŽŸŽ•ȱ˜ȱśƖǰȱȘȱDZȱ’—’ęŒŠ—ȱ•ŽŸŽ•ȱ˜ȱŗŖƖǯ Table 5.

Impact of Financial Inclusion and

˜‘Ž›ȱŠŒ˜›œȱ˜—ȱ’—Š—Œ’Š•ȱŠ‹’•’¢ȱŠœŽȱ˜—ȱ—Œ˜–Žȱ ›˜ž™ȱ˜ž—›’Žœ

Š‹•Žȱśȱœ‘˜ œȱ‘Šȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ‘ŠœȱŠȱ™˜œ’’ŸŽȱ’–™ŠŒȱ˜—ȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ

‘Žȱꗊ—Œ’Š•ȱœ¢œŽ–ȱ’—ȱ•˜ Ž›ȱ–’•Žȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ›˜ž™ǰȱ‹žȱ‘ŽȱŽěŽŒȱ’œȱ—˜ȱ

œ’—’ęŒŠ—ǯȱ—ȱž™™Ž›ȱ–’•ŽȱŠ—ȱ‘’‘ȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ›˜ž™ǰȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ

‘Šœȱ Šȱ ™˜œ’’ŸŽȱ Š—ȱ œ’—’ęŒŠ—ȱ ’–™ŠŒȱ  ’‘ȱ Šȱ œ’—’ęŒŠ—ȱ •ŽŸŽ•ȱ Šȱ śƖȱ Š—ȱ ŗŖƖǰȱ  ‘’Œ‘ȱ–ŽŠ—œȱ’—Œ›ŽŠœ’—ȱ’—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’—ȱŽ›–œȱ˜ȱŠŒŒŽœœǰȱŠŸŠ’•Š‹’•’¢ǰȱŠ—ȱ

žœŠ‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱ ’••ȱ’–™›˜ŸŽȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœ¢œŽ–ǯȱ‘’œȱ’œȱ

žŽȱ˜ȱ’—Œ›ŽŠœ’—ȱ’—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ’••žœ›ŠŽœȱ‘Žȱœ›Ž—‘Ž—’—ȱ˜ȱ›ŽŠ•ȱœŽŒ˜›ǯȱ

—ȱŠ’’˜—ǰȱ’—Œ›ŽŠœ’—ȱ’—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ ’••ȱ‹Žȱ˜••˜ Žȱ‹¢ȱŠȱœ›Ž—‘Ž—’—ȱ˜ȱ the base deposit that can be used to improve the process of intermediation (Khan, 2011).

‘Ž›ȱ ŸŠ›’Š‹•Žœȱ ‘Šȱ œ’—’ęŒŠ—•¢ȱ ŠěŽŒȱ ꗊ—Œ’Š•ȱ œŠ‹’•’¢ȱ Š›Žȱ ‘Žȱ ›Š’˜ȱ ˜ȱ

™›’ŸŠŽȱ Œ›Ž’ȱ ›˜–ȱ ‹Š—”ȱ Ž™˜œ’œȱ Š—ȱ ˜‘Ž›ȱ ꗊ—Œ’Š•ȱ ’—œ’ž’˜—œȱ ˜ȱ ȱ Š—ȱ ꗊ—Œ’Š•ȱ ˜™Ž——Žœœǯȱ ‘Žȱ ›Š’˜ȱ ˜ȱ ™›’ŸŠŽȱ Œ›Ž’ȱ ›˜–ȱ ‹Š—”ȱ Ž™˜œ’œȱ Š—ȱ ˜‘Ž›ȱ ꗊ—Œ’Š•ȱ ’—œ’ž’˜—œȱ ˜ȱ ȱ ‘Šœȱ Šȱ œ’—’ęŒŠ—ȱ ™˜œ’’ŸŽȱ ’—ĚžŽ—ŒŽȱ ˜—ȱ œŠ‹’•’¢ȱ ˜ȱ ꗊ—Œ’Š•ȱœ¢œŽ–ȱ˜ŸŽ›ȱ‘Žȱ›˜ž™ȱ˜ȱ•˜ Ž›ȱŠ—ȱž™™Ž›ȱ–’•Žȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ ’‘ȱ

Šȱœ’—’ęŒŠ—ŒŽȱ•ŽŸŽ•ȱŠȱŗŖƖǰȱ’ȱ–ŽŠ—œȱ’—Œ›ŽŠœ’—ȱ’—ȱ‘Žȱ›Š’˜ȱ˜ȱ™›’ŸŠŽȱŒ›Ž’ȱ›˜–ȱ

‹Š—”ȱŽ™˜œ’œȱŠ—ȱ˜‘Ž›ȱꗊ—Œ’Š•ȱ’—œ’ž’˜—œȱ˜ȱ ȱ ’••ȱ’–™›˜ŸŽȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ ꗊ—Œ’Š•ȱœ¢œŽ–ǯȱ‘’œȱ’œȱ‹ŽŒŠžœŽȱ’—Œ›ŽŠœ’—ȱ’—ȱ™›’ŸŠŽȱŒ›Ž’ȱ ’••ȱ•ŽŠȱ˜ȱ›˜ ‘ȱ’—ȱ

‘Žȱ›ŽŠ•ȱœŽŒ˜›ȱŠ—ȱ›˜ ‘ȱ’—ȱꗊ—Œ’Š•ȱœŽŒ˜›ȱ‘Šȱ ’••ȱœ›Ž—‘Ž—ȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱ ꗊ—Œ’Š•ȱœ¢œŽ–ȱǻŠ‘Š¢ȱŽȱŠ•ǯǰȱŘŖŗśǼǯ

’—Š—Œ’Š•ȱ˜™Ž——Žœœȱ‘ŠœȱŠȱœ’—’ęŒŠ—ȱ—ŽŠ’ŸŽȱ’–™ŠŒȱ˜—ȱœŠ‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱ system in high-income countries at the level of 10%. It means increasing in ꗊ—Œ’Š•ȱ˜™Ž——Žœœȱ ’••ȱ›ŽžŒŽȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœ¢œŽ–ȱžŽȱ˜ȱ‘’‘ȱ•ŽŸŽ•ȱ

˜ȱ ꗊ—Œ’Š•ȱ ˜™Ž——Žœœȱ  ’••ȱ ’—Œ›ŽŠœŽȱ ‘Žȱ Ÿž•—Ž›Š‹’•’¢ȱ ˜ȱ ŒŠ™’Š•ȱ ˜žĚ˜ œȱ ›˜–ȱ

œ‘˜›ȬŽ›–ȱŒŠ™’Š•ȱ ‘Ž—ȱœ‘˜Œ”œȱ˜ŒŒž›ǯȱŠ™’Š•ȱ˜žĚ˜ ȱ ’••ȱ‹Žȱ˜••˜ Žȱ‹¢ȱŸ˜•Š’•Žȱ capital (depreciation of capital in the stock market) and the depreciation of the

Œž››Ž—Œ¢ȱ  ’••ȱ ŽŸŽ—žŠ••¢ȱ Ž—‘Š—ŒŽȱ ’—œŠ‹’•’¢ȱ ’—ȱ ꗊ—Œ’Š•ȱ œ¢œŽ–ȱ ǻœ›ŠŠǰȱ Š›”ǰȱ and Ramayandi, 2015).

V. CONCLUSION śǯŗǯȱ˜—Œ•žœ’˜—œ

›˜ž™ȱ˜ȱŒ˜ž—›’Žœȱ ’‘ȱ‘’‘Ž›ȱ’—Œ˜–Žȱ•ŽŸŽ•ȱ‘ŠœȱŠȱ‹ŽĴŽ›ȱ•ŽŸŽ•ȱ˜ȱŠŸŽ›ŠŽȱŠŒŒŽœœǰȱ

ŠŸŠ’•Š‹’•’¢ǰȱŠ—ȱžœŠ‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱœ˜ȱ‘Šȱ’ȱ‘Šœȱ‘’‘Ž›ȱŸŠ•žŽȱ˜ȱꗊ—Œ’Š•ȱ

’—Œ•žœ’˜—ȱ’—Ž¡ȱ‘Š—ȱ•˜ Ž›ȱ’—Œ˜–Žȱ›˜ž™ǯȱ ›˜ž™ȱ˜ȱŒ˜ž—›’Žœȱ ’‘ȱ‘’‘Ž›ȱ’—Œ˜–Žȱ

•ŽŸŽ•ȱŠ•œ˜ȱ‘Šœȱ‘’‘Ž›ȱŸŠ•žŽȱ˜ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—Ž¡ȱ‘Š—ȱ•˜ Ž›ȱ’—Œ˜–Žȱ›˜ž™ǯȱ‘Žȱ

‘’‘ȱŠŸŽ›ŠŽȱ’—Ž¡ȱ˜ȱꗊ—Œ’Š•ȱœŠ‹’•’¢ȱ’—ȱ›˜ž™ȱ˜ȱŒ˜ž—›’Žœȱ ’‘ȱ‘’‘Ž›ȱ’—Œ˜–Žȱ

žŽȱ˜ȱ–Š—¢ȱŠŒ˜›œȱœžŒ‘ȱŠœȱ‘ŠŸ’—ȱ‘’‘ȱŸŠ•žŽȱ˜ȱŒŠ™’Š•ȱ’—ȱ‘Žȱꗊ—Œ’Š•ȱ–Š›”Žœǰȱ

‘ŠŸ’—ȱ‘’‘ȱŒ˜—ŒŽ—›Š’˜—œȱ˜ȱ‹Š—”’—ȱœŽŒ˜›ǰȱ‘ŠŸ’—ȱ•˜ ȱ•ŽŸŽ•ȱ˜ȱ’—ĚŠ’˜—ǰȱŠ—ȱ so on.

’—Š—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ ‘Šœȱ Šȱ ™˜œ’’ŸŽȱ ’–™ŠŒȱ ‹žȱ —˜ȱ œ’—’ęŒŠ—ȱ ˜ȱ ‘Žȱ œŠ‹’•’¢ȱ

˜ȱꗊ—Œ’Š•ȱœ¢œŽ–ȱ’—ȱ‘Žȱ›˜ž™ȱ˜ȱ•˜ Ž›ȱ’—Œ˜–ŽȱŒ˜ž—›’Žœǰȱ‹žȱ‘ŠœȱŠȱœ’—’ęŒŠ—ȱ

™˜œ’’ŸŽȱ’–™ŠŒȱ˜—ȱ‘ŽȱœŠ‹’•’¢ȱ˜ȱꗊ—Œ’Š•ȱœ¢œŽ–ȱ’—ȱž™™Ž›ȱ–’•Žȱ’—Œ˜–ŽȱŠ—ȱ

‘’‘Ȭ’—Œ˜–Žȱ Œ˜ž—›’Žœȱ ›˜ž™ǯȱ ‘’œȱ ’œȱ ‹ŽŒŠžœŽȱ ’—Œ›ŽŠœ’—ȱ ’—ȱ ꗊ—Œ’Š•ȱ ’—Œ•žœ’˜—ȱ illustrates the strengthening of the real sector in high-income countries group. In

Š’’˜—ǰȱ‘Žȱ’—Œ›ŽŠœŽȱ’—ȱꗊ—Œ’Š•ȱ’—Œ•žœ’˜—ȱ ’••ȱ‹Žȱ˜••˜ Žȱ‹¢ȱŠȱœ›Ž—‘Ž—’—ȱ˜ȱ the base deposit that can be used to improve the process of banking intermediation (Khan, 2011).

śǯŘǯȱŽŒ˜––Ž—Š’˜—œ

1. ˜›ȱ‘Žȱ˜ŸŽ›—–Ž—ȱŠ—ȱ‘Žȱꗊ—Œ’Š•ȱœŽŒ˜›ȱ’—ȱ•˜ Ž›ȱ–’•Žȱ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ

œ‘˜ž•ȱŽ—Œ˜ž›ŠŽȱœž‹Ȭ’—Ž¡ȱ˜ȱꗊ—Œ’Š•ȱŽŸŽ•˜™–Ž—ȱ‹¢ȱŽ—Œ˜ž›Š’—ȱŒŠ™’Š•ȱ ̘ ȱ’—ȱꗊ—Œ’Š•ȱ–Š›”ŽœȱŠ—ȱŽ—‘Š—Œ’—ȱ˜–Žœ’ŒȱŒ›Ž’ǯ

2. ˜›ȱ‘Žȱꗊ—Œ’Š•ȱœŽ›Ÿ’ŒŽœȱŠž‘˜›’¢ȱŠ—ȱ‹Š—”’—ȱœŽŒ˜›ȱ’—ȱž™™Ž›ȱ–’•ŽȱŠ—ȱ

‘’‘ȱ ’—Œ˜–Žȱ Œ˜ž—›’Žœǰȱ ˜ȱ Ž—Œ˜ž›ŠŽȱ ꗊ—Œ’Š•ȱ œŠ‹’•’¢ȱ ŒŠ—ȱ ™žœ‘ȱ ꗊ—Œ’Š•ȱ inclusion by increasing bank capital to assets and reducing volatility of banking return on assets.

3. ˜›ȱž›‘Ž›ȱ›ŽœŽŠ›Œ‘ǰȱ’Ȃœȱ‹ŽĴŽ›ȱ˜ȱŠȱ•˜ Ȭ’—Œ˜–ŽȱŒ˜ž—›’Žœȱ›˜ž™ȱ’ȱ’ȱ‘Šœȱ—˜ȱ problem of data availability.

4. One of lack of this research is only use data from 2004-2014, so it could not capture economic crisis in 1998-1999.

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’ȱœ’Šǯȱ˜˜›ȱǻǼȱDZȱ—œ’žȱŽ›Š—’Š—ȱ˜˜›ǯ

ž™Šœǰȱ ›ŽŽ—ǰȱŽŠœǰȱ˜‹’—œ˜—ǰǯȱǻŘŖŗŘǼǯȱ‘Š••Ž—Žœȱ’—ȱŠ—”’—ȱ‘Žȱž›Š•ȱ˜˜›DZȱ

Ÿ’Ž—ŒŽȱ›˜–ȱŽ—¢ŠȂœȱŽœŽ›—ȱ›˜Ÿ’—ŒŽǯȱŠ–‹›’Žȱǻ ǼȱDZȱŠ’˜—Š•ȱž›ŽŠžȱ˜ȱ

Œ˜—˜–’ŒȱŽœŽŠ›Œ‘ǯ

œ›ŠŠȱ ǰȱŠ›”ȱǰȱŠ–Š¢Š—’ȱǯȱǻŘŖŗśǼǯȱ’—Š—Œ’Š•ȱŽŸŽ•˜™–Ž—ǰȱꗊ—Œ’Š•ȱ˜™Ž——Žœœǰȱ

Š—ȱŒ˜—˜–’Œȱ ›˜ ‘ǯȱ˜”¢˜DZȱȱŽŒ˜—˜–’Œœȱ˜”’—ȱŠ™Ž›ȱŽ›’ŽœȱŚŚŘǯȱ Han, R., & Melecky, M. (2013). ’—Š—Œ’Š•ȱ —Œ•žœ’˜—ȱ ˜›ȱ ’—Š—Œ’Š•ȱ Š‹’•’¢ǯȱ ŒŒŽœœȱ ˜ȱ

Š—”ȱŽ™˜œ’œȱŠ—ȱ‘Žȱ ›˜ ‘ȱ˜ȱŽ™˜œ’œȱ’—ȱ‘Žȱ •˜‹Š•ȱ’—Š—Œ’Š•ȱ›’œ’œ. Washington DC (US): ˜›•ȱŠ—”ǯ

Huang, R., & Ratnovski, L. (2011). The Dark Side of Bank Wholesale Funding.

˜ž›—Š•ȱ˜ȱ’—Š—Œ’Š•ȱ—Ž›–Ž’Š’˜—ǰȱ20(2), 24-63.

Khan, H.R. (2011). ’—Š—Œ’Š•ȱ’—Œ•žœ’˜—ȱŠ—ȱꗊ—Œ’Š•ȱœŠ‹’•’¢DZȱŠ›Žȱ‘Ž¢ȱ ˜ȱœ’Žœȱ˜ȱ‘Žȱ

œŠ–ŽȱŒ˜’—ǵ. Chennai (IN): The Indian Bankers Association and Indian Overseas Bank.

˜›Š—ǰȱǯǰȱǭȱ˜—’—ŽœǰȱǯȱǻŘŖŗŚǼǯȱ’—Š—Œ’Š•ȱŠ‹’•’¢ȱŠ—ȱ’—Š—Œ’Š•ȱ—Œ•žœ’˜—. Tokyo ǻǼȱDZȱœ’Š—ȱŽŸŽ•˜™–Ž—ȱŠ—”ȱ—œ’žŽǯ

Sahay Žȱ Š•ǯȱ ǻŘŖŗśǼǯȱ Ž‘’—”’—ȱ ’—Š—Œ’Š•ȱ ŽŽ™Ž—’—DZŠ‹’•’¢ȱ Š—ȱ ›˜ ‘ȱ ’—ȱ

–Ž›’—ȱŠ›”Žœǯȱ’–ȱœŠěȱ’œŒžœœ’˜—ȱ—˜ŽǰȱŘŖŗŜǰȱ›˜–ȱ‘Ĵ™œDZȦȦ   ǯ’–ǯ˜›Ȧ

Ž¡Ž›—Š•Ȧ™ž‹œȦĞȦœ—ȦȱŘŖŗśȦœ—ŗśŖŞǯ™

Š›–ŠǰȱǯǰȱǭȱŠ’œǰȱǯȱǻŘŖŖŞǼǯȱ’—Š—Œ’Š•ȱ—Œ•žœ’˜—ȱŠ—ȱŽŸŽ•˜™–Ž—DZȱȱ›˜œœȱ˜ž—›¢ȱ

—Š•¢œ’œǯȱ Ž›•’—ȱ ǻ ǼDZȱ Ž›•’—ȱ ˜›”’—ȱ Š™Ž›œȱ ˜—ȱ ˜—Ž¢ǰȱ ’—Š—ŒŽǰȱ ›ŠŽȱ Š—ȱ Development.

˜›•ȱŠ—”ǯȱǻŘŖŗŚǼǯȱž–•Š‘ȱ›Ž”Ž—’—ȱ”›Ž’ȱ™Ž›ȱŗȱŖŖŖȱ™˜™ž•Šœ’ȱŽ ŠœŠǯȱŽ›’ŽŸŽȱ

Ž‹›žŠ›¢ǰȱŘŖŗŜǰȱ›˜–ȱ‘Ĵ™DZȦȦ   ǯ ˜›•‹Š—”ǯ˜›Ȧǯ