The Role of Institutions on Financial Inclusion in Indonesia

Increasing economic growth can be achieved by increasing financial deepening that involves financial inclusion. Household savings can be be a solution to finance development, if it can accumulate in large numbers and involve the whole society (inclusive). In institutional theory, it is revealed that banking system institutions can encourage / inhibit bank competition and are translated as transaction costs for the public in accessing financial institutions. This research aims to analyze the role of institutions on financial inclusion. Institutional role on financial inclusion was analyzed using OLS regression method in time series data, monthly from June 2004 to June 2019. The results of the study show that the institutional factor as measured the number of bank service offices is also a significant determining factor in influencing financial inclusion. Increasing financial inclusion can be achieved by increasing the affordability, (financial outreach) of people to formal financial institutions, both physically and non-physically (digital / virtual).