Economics & Sociology

ISSN: 2071-789X eISSN: 2306-3459 DOI: 10.14254/2071-789X
Index PUBMS: f5512f57-a601-11e7-8f0e-080027f4daa0
Article information
Title: The role of branchless banking in performance of households’ micro and small enterprises: The evidence from Indonesia
Issue: Vol. 12, No 3, 2019
Published date: 09-2019 (print) / 09-2019 (online)
Journal: Economics & Sociology
ISSN: 2071-789X, eISSN: 2306-3459
Authors: Ktut Silvanita Mangani
Universitas Kristen Indonesia

Yusman Syaukat
Bogor Agricultural University

Bustanul Arifin
Universitas Lampung

Mangara Tambunan
Bogor Agricultural University
Keywords: branchless banking, financial inclusion, household economic behaviour, micro and small enterprise, simultaneous equation model
DOI: 10.14254/2071-789X.2019/12-3/8
Index PUBMS: 79ea1c2d-f437-11e9-bbfd-fa163e0fa1a0
Language: English
Pages: 114-131 (18)
JEL classification: D13, O12, G20
Website: https://www.economics-sociology.eu/?690,en_the-role-of-branchless-banking-in-performance-of-households%E2%80%99-micro-and-small-enterprises-the-evidence-from-indonesia
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Abstract

In Indonesia, branchless banking (BB) for low-income communities is a new financial channel to create a financial system accessible to all levels of society. This research aims to investigate how to develop BB programs to improve the performance of households’ micro and small enterprises (MSEs) in rural areas. The data was collected from 97 MSEs who conducted financial transactions at BB agents. For a case study, as many as 32 agents out of 360 BB agents in Bogor District, West Java, Indonesia were chosen purposively from 13 sub-districts. Then, 97 MSEs were chosen with the experience of conducting transactions through BB agents. The study analyzes the household economic behavior using the model of a simultaneous structural equation, that has not been discussed in prior literature on Branchless Banking studies. The study has found that an increase in the value of financial transactions and investment variables have a positive impact with larger magnitudes on the production and other endogenous variables than an increase of those variables independently. However, the impact on household savings is small. The results imply that the development of MSEs through BB programs is not enough by only providing the speed and ease of financial transactions through the presence of BB agents in rural areas that are close to local businesses. Capacity building by increasing the investment value of micro and small enterprises becomes a factor driving the success of BB programs.

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