Impact of Financial Inclusion and Economic Development on the Growth of MSMEs in East Kalimantan
Abstract
Micro, small, and medium enterprises (MSMEs) play a strategic role in promoting regional economic growth, including East Kalimantan Province, which recorded 460,147 MSMEs in 2022. The development of MSMEs serves as a crucial indicator for fostering a robust regional economy, expanding employment opportunities, and enhancing community income. A national survey in 2022 reported 93.25% financial inclusion in East Kalimantan. Banking networks, customer accounts, and the ratio of credit or savings to the working-age population determine financial services in this region. This quantitative study examines the impact of financial inclusion and economic development on East Kalimantan MSMEs. The research aims to provide insights and concepts for MSME development that may contribute to economic growth. This study builds upon previous research, with novel developments including the division of financial inclusion into two indicators: the number of banks and MSME loans. Secondary data is derived from government statistics and financial institution reports. PLS-SEM is utilized to analyze variable relationships. The results indicate that increased employment opportunities are the primary manifestation of financial inclusion's positive and statistically significant impact on East Kalimantan's economy. However, financial inclusion does not significantly affect MSME growth, suggesting limited utilization of financial services in this sector. Furthermore, economic development does not contribute substantially to the growth of MSMEs in the region.
Keywords: Financial inclusion, Economic development, MSMEs, East Kalimantan, Economic growth
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