The Effect of Financial Literacy, the use of Digital Financial Products, and the use of the internet against Financial Inclusion in Indonesia

International Journal of Economics and Management Studies

© 2022 by SSRG - IJEMS Journal

Volume 9 Issue 5

Year of Publication : 2022

Authors : Java Widodo, Sri Hasnawati, Ernie Hendrawaty

10.14445/23939125/IJEMS-V9I5P101

How to Cite?

Java Widodo, Sri Hasnawati, Ernie Hendrawaty, "The Effect of Financial Literacy, the use of Digital Financial Products, and the use of the internet against Financial Inclusion in Indonesia," SSRG International Journal of Economics and Management Studies, vol. 9,  no. 5, pp. 1-11, 2022. Crossref, https://doi.org/10.14445/23939125/IJEMS-V9I5P101

Abstract:

Financial inclusion has a vital role in increasing economic growth through the use of products from financial services. Public understanding and knowledge about finance is the main capital for economic actors, especially MSMEs, to obtain financial services and benefits from these financial service products. The use of digital-based financial products or Digital Financial Products supported by adequate internet access and services can be a bridge for the public to enter into an inclusive financial system. This study uses the partial least squares (PLS) method to estimate a formative model that analyzes the effect of financial literacy, use of digital financial products, and internet use on financial inclusion. The sample used was 210 respondents from MSME actors in Bandar Lampung City, taken by random sampling technique in March-April 2022. Data collection used a questionnaire that was directly obtained from respondents. The results showed that there was a direct and indirect influence. Financial literacy, the use of Digital Financial Products, and the use of the internet positively influence financial inclusion. Financial literacy also has a positive effect on digital financial products and internet usage. The indirect effect shows that financial literacy has a positive effect on financial inclusion through digital financial products and the use of the internet.

Keywords:

Financial literacy, Digital financial products, Internet, Financial inclusion.

References:

[1] Al-Rfou., Proof of Use of Internet Banking from Jordan. Asian Journal of Economic and Financial Review 3(5) (2013) 614–23.
[2] American Financial Association Financial Intermediaries and the Savings-Investing Process Author(s): John G. Gurley and Edward S. Shaw Published by: Wiley for the American Finance Association Stable URL: http://www.Jstor.Org/Stable/2976705 Accessed: 11(2) (2016) 257–76.
[3] Andrianaivo, Mihasonirina, and Kangni Kpodar., ICT, Financial Inclusion, and Growth: Evidence From. IMF Working Paper 1 (WP/11/73) (2011).
[4] APJII ., Penetration & Behavior Profile of Indonesian Internet Users in 2018. Apjii: 51, (2019).
[5] Atkinson, Adele, and Flore-Anne Messy. 2012. Measuring Financial Literacy: Results of the Oecd Infe Pilot Study. OECD Working Papers on Finance, Insurance and Private Pensions, (15) (2012) 1–73.
[6] Bank Indonesia.,. Electronic Money Transaction Table. Duke's Journal of Law 1(1) (2019) 1–13.
[7] Chen, Haiyang, and Ronald P. Volpe., Analysis of Personal Financial Literacy Among Students. Financial Services Review, 43(8) (1998) 107–28.
[8] Cheng, Chen, Haiqin Yang, Irwin King, and Michael R. Lyu., Fused Matrix Factorization with Geographic and Social Effects in Location-Based Social Networks. Proceedings of the National Conference on Artificial Intelligence, 1 (2012) 17-23.
[9] Gerrard, Philip, J. Barton Cunningham, and James F. Devlin., Why Consumers Don't Use Internet Banking: A Qualitative Study. Journal of Services Marketing, 20(3) (2006) 160–68.
[10] Ghozali, I., & Latan, H., Partial least squares concepts, techniques, and applications using the smart pls 3.0 program for empirical research. Semarang: UNDIP Publishing Agency, (2015)
[11] Jogiyanto, H. M., & Abdillah, W., The concept and application of PLS (Partial Least Square) for empirical research. BPFE Faculty of Economics and Business UGM. Yogyakarta, (2009).
[12] Kunt, Asli Demirguc et al., Findex Global Database: Measuring Financial Inclusion and the Fintech Revolution, (2017).
[13] Michelle, Agufa Midika., Effect of Digital Finance on Financial Inclusion in the Banking Industry in Kenya, (2016).
[14] Natalia, Maya Angela, Florentina Kurniasari, Ernie Hendrawaty, and Vina Medya Oktaviani., Indonesia's Influence of Financial Literature on Financial Inclusion using Social Capital as aMediator Variable. Ultima Management: Journal of Management Science, 12(1) (2020) 16–33.
[15] OECD., OECD/INFE International Survey on Adult Financial Literacy Competencies. OECD, (2016) 1-100.
[16] Financial Services Authority., 2019 OJK Survey Press Release: Financial Literacy And Inclusion Index Increases. Sp 58/Dhms/Ojk/Xi/2019 (November), (2019) 1.
[17] Ozili, Peterson K., Impact of Digital Finance on Financial Inclusion and Stability. Borsa Istanbul Review, 18(4) (2018) 329–40.
[18] PBI., Bank Indonesia Regulations concerning the Implementation of Financial Technology. PBI No.19/12/PBI/2017. Governor of Bank Indonesia, (2017).
[19] Financial Services Authority Regulation., Increasing Financial Literacy and Inclusion in the Financial Services Sector for Consumers and/or the Community, (2016).
[20] Pulungan, Delyana Rahmawany, and Ameliyani Ndururu., The Influence of Financial Literacy and Social Capital on Student Financial Inclusion. National Seminar & call paper 2019 Master of Management Business Seminar (2685–1474), (2019) 132–42.
[21] Rooij, Maarten Van, Annamaria Lusardi, and Rob Alessie., Financial Literacy, Retirement Planning, and Household Wealth. DNB Working Paper, 313 (2011).
[22] Saputra, Rachmat Simbara, and Andrieta Shintia Dewi., The Role of Social Capital as a Mediator of Financial Literacy and Financial Inclusion for Young People in Indonesia (Case Study in the Beginner Stock Investor Community). Journal of Theoretical and Applied Management | Journal of Theoretical and Applied Management, 10(3) (2017) 243.
[23] Sarma, Mandira., Financial Inclusion Index – A Measure of Financial Sector Inclusiveness. Berlin Working Paper on Money, Finance, Trade, and Development, (2012).
[24] Shen, Yan, Wenxiu Hu, and C. James Hueng., Effect of Financial Literacy, Use of Digital Financial Products, and Internet Use on Financial Inclusion in China. MATEC 228 Web Conference, (2018).
[25] Siahaan, Greta Joyce., Fintech Trigge.rs Competitiveness. Journal of Business Administration (JAB), 61(1) (2017) 215–23.