The Role of Financial Inclusion in Human Development: Evidence from Indonesia
Keywords:
Human Development, Financial Inclusion, Fintech Lending, System GMM, Dynamic PanelAbstract
This study aims to analyze the role of the financial sector in shaping human development in Indonesia, with particular emphasis on financial inclusion and fintech lending. The analysis employs panel data covering 32 provinces over the period 2019–2023 and applies a dynamic panel System Generalized Method of Moments (SYS-GMM) approach to address potential endogeneity issues. The estimation results indicate that the Human Development Index (HDI) exhibits strong persistence, as past HDI levels have a positive and statistically significant effect on current HDI. Furthermore, financial inclusion is found to exert a positive and significant impact on HDI, suggesting that greater access to formal financial services contributes to improvements in education, health outcomes, and living standards. In contrast, fintech lending does not show a statistically significant effect on HDI. This finding suggests that the contribution of fintech to human development remains conditional on regulatory quality, financial literacy, and a stronger orientation toward productive financing. Overall, the study provides important policy implications for strengthening an inclusive financial system to support sustainable human development.
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