Bank Lending and Income Inequality: Evidence from Indonesia

11 Pages Posted: 26 Dec 2015

See all articles by Putra Pamungkas

Putra Pamungkas

Université de Limoges, LAPE

Clovis Rugemintwari

Université de Limoges, LAPE

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science

irwan Trinugroho

Universitas Sebelas Maret - Faculty of Economics and Business

Date Written: December 23, 2015

Abstract

This paper investigates the relationship between financial development and income inequality by using a broad range of loan categories as proxies for financial development. Our unique data set allows us to identify loans to micro, small and medium-sized enterprises (MSMEs). It also allows us to distinguish business loans and consumer loans. Using panel data for 33 provinces in Indonesia during the 2007-2013 period, we find that lending to MSMEs reduces income inequality while businesses loans, either for working capital or investment purposes, but also consumer loans increase income inequality. Our results indicate that boosting loans to micro, small, and medium-sized enterprises could significantly contribute to reduce income inequality.

Keywords: Income Inequality, Gini Index, Bank Lending, Indonesia

JEL Classification: G21, D3, 015, P36, R11

Suggested Citation

Pamungkas, Putra and Rugemintwari, Clovis and Tarazi, Amine and Trinugroho, irwan, Bank Lending and Income Inequality: Evidence from Indonesia (December 23, 2015). Available at SSRN: https://ssrn.com/abstract=2708469 or http://dx.doi.org/10.2139/ssrn.2708469

Putra Pamungkas (Contact Author)

Université de Limoges, LAPE ( email )

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

Clovis Rugemintwari

Université de Limoges, LAPE ( email )

5 rue Félix Eboué BP3127
LIMOGES, 87031
France

HOME PAGE: http://www.unilim.fr/lape/staff/full-time/article/clovis-rugemintwari

Amine Tarazi

University of Limoges - Faculty of Law and Economic Science ( email )

5 rue Felix Eboue
Limoges, 87000
France

Irwan Trinugroho

Universitas Sebelas Maret - Faculty of Economics and Business ( email )

Jl. Ir. Sutami 36A
Kentingan
Surakarta, Jawa Tengah 57126
Indonesia

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