Multidimensional access to financial services: Insights from Indonesia

Abstract

Although better access to financial services is known to lead to various economic opportunities, most studies have approached ‘access’ as a one-dimensional variable, such as availability of services or distance to services. This study proposes approaching access as a multidimensional concept and examining its impact on household economic outcomes. Using panel survey data collected in Indonesia between 2000 and 2014, this study examines how economic, geographical and social aspects of access relate to poverty alleviation and business development outcomes. The findings suggest that the economic and social aspects of access, especially savings (both formal and informal) and knowledge of loan sources, contribute to both overall household economy and business opportunity, whereas road condition was only significant for business development. These insights could help policymakers focus on improving certain aspects of access to financial services that can lead to positive business outcomes and ultimately to socioeconomic well-being.