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Index of Financial Inclusion: Improvements, Developments, and Simulations


Financial inclusion is one the important factor to enable a sustainable economic growth. Low financial inclusion indicates low people' participations in formal financial activities. Increase in the level of financial inclusion will improve the financial efficiency through the increase of formal financial services. This will lead to the increase of economic activities that will also contribute to economic growth.

Financial inclusion has become one of the global agenda which crucial for sustainable economics and has been one of the main topics in various high level meetings in finance, from national, regional Asia to international level. Financial inclusion has also become one of main development agenda of the Government of Indonesia.

However, although the importance of financial inclusion has been realized, there are no formal consensus on the definition of financial inclusion and how to measure the state of financial inclusion. Moreover, there are also no existing comprehensive statistics or measurement tools that can summarize all dimensions of financial inclusion. The main challenges in developing this measurement tools is on how to decide the standard and identify the current state of financial inclusion. Challenge is also appear from the difficulties to monitor the current status of financial inclusion and to measure the impact of related policies. If those challenges can be tackled, it would help the policy makers to identify the issues, develop the relevant policy, and to implement the financial inclusion related programs. Therefore, indicators in the form of indexes are needed to enable the comparison between regions that also serves as policy communication tools.

DEFINIT, appointed by Bank Indonesia, conducted studies on development of financial inclusion index. The study conducted simulations on several methods to estimate financial inclusion indexes by referring to previously implement international practices. The simulations were conducted in several levels, those are kabupaten/kota, provincial, and between countries. The study had managed to formulate suitable estimations methods of financial inclusion indexes and their thresholds that can be implemented in Indonesia and the regional level.

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