UGMUGM

Journal of Indonesian Economy and BusinessJournal of Indonesian Economy and Business

Financial inclusion plays an important role in improving welfare and quality of life, accelerating economic growth, and alleviating poverty. Digitalization can affect financial inclusion through the transmission of mobile financial services, such as internet banking. This study examines the effect of digitalization on access to household credit during the National Economic Recovery (PEN) program in Indonesia. Using data from the national socio-economic survey (SUSENAS) and statistics on village potential (PODES) from 2019 (before the pandemic) and 2021 (one year after the pandemic), the study employs a binomial logit model. The results show that digitalization has a significant impact on access to household credit, with the average marginal effect of a households internet use being 1 percent higher than non-use before COVID-19, and 1.6 percent higher post-COVID-19. The majority of households with access to credit are headed by males living in rural areas, married, working, graduated from junior high school or above, and aged 30-59 years old.

This study concludes that digitalization accelerated access to household credit as a result of the COVID-19 pandemic.Based on financial inclusion indicators, digitalization has a significant impact on household account ownership and access to credit, both before and during the pandemic.The study suggests that financial inclusion can be increased by accelerating credit distribution to all levels of society.However, there are limitations due to potential biases in the data.Future research could focus on analyzing financial inclusion among internet users who already use e-banking, investigating the reasons for the low usage of e-banking despite the surge in internet usage.

To further enhance financial inclusion, future research could explore the potential of digital financial services to reach populations that are not served by conventional financial services. Additionally, investigating the barriers to digital financial service adoption and the role of technological innovation in reducing these barriers could provide valuable insights. Furthermore, examining the impact of digitalization on financial literacy and its potential to enhance the effectiveness of financial initiatives would contribute to a comprehensive understanding of the relationship between digitalization and financial inclusion.

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