Open AccessRural Bank and Regional Economic Development: Evidence from Indonesia
Author(s) -
Jamal Wiwoho,
Nugroho Saputro,
Putra Pamungkas,
Irwan Trinugroho,
Moch. Doddy Ariefianto,
Francisca Sestri Goestjahjantie
Publication year - 2021
Publication title -
international journal of business and society
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.236
H-Index - 15
ISSN - 1511-6670
DOI - 10.33736/ijbs.3761.2021
Subject(s) - merge (version control) , loan , economics , poverty , intermediation , financial intermediary , proxy (statistics) , development economics , economic growth , finance , machine learning , computer science , information retrieval
This paper investigates the relationship between fund reallocation on economic growth and poverty by using 1860 rural banks. Our quarterly data allow us to merge bank-level data and province level-data from 2010-2016. We find that loan-to-deposit ratio as our proxy of intermediation function could boost economic development. Our non-linear regression shows that too much finance reduces regional GDP growth but, in the long term, could help to reduce poverty. Our results provide some important policy implications that rural banks could contribute to economic development in a good way but should be highly supervised in terms of risk and competition.