The Impact of Financial Inclusion on Financial Performance Effectiveness of Banks in Indonesia

Abstract

Financial inclusion has become a key policy agenda in strengthening the role of the banking sector in promoting inclusive and sustainable economic development, particularly within the framework of public sector accountability and financial performance evaluation. This study aims to examine the impact of financial inclusion on the effectiveness of financial performance of conventional banks in Indonesia during the period 2022–2023.

This research employs a quantitative approach using panel data from 53 conventional banks registered with the Financial Services Authority (OJK). Financial inclusion is measured using the Index of Financial Inclusion (IFI), while financial performance effectiveness is proxied by asset growth. Descriptive statistical analysis and regression analysis are applied to assess both the overall condition of financial inclusion and its effect on bank performance.

The results of the descriptive analysis indicate that most conventional banks in Indonesia exhibit a moderate to high level of financial inclusion during the study period, reflecting relatively broad credit distribution. Regression results show that financial inclusion has a positive and significant effect on the effectiveness of financial performance, suggesting that higher levels of financial inclusion are associated with improved bank performance. These findings imply that expanding access to financial services can enhance the operational effectiveness of conventional banks.

This study contributes to the literature by providing empirical evidence on the role of financial inclusion in improving financial performance effectiveness within the Indonesian banking sector. The findings offer practical insights for bank management and regulators in formulating inclusive financial policies that support sustainable banking performance.