Financial literacy in Indonesia’s remote provinces: Evidence from a two-wave panel of 11 provinces in 2016-2022

Financial literacy is increasingly treated as a developmental capability; however, its subnational distribution remains uneven in large archipelagic countries. This study examines financial literacy in Indonesia's remote and outer-island contexts using a balanced two-wave panel of 11 provinces observed in 2016 and 2022. The study focuses on provinces with substantial remote-area, archipelagic, frontier, and/or underdeveloped-district characteristics: Nusa Tenggara Barat, Nusa Tenggara Timur, Kalimantan Barat, Kalimantan Tengah, Kalimantan Utara, Sulawesi Tenggara, Sulawesi Barat, Maluku, Maluku Utara, Papua Barat, and Papua. Publicly reported provincial indicators from the Otoritas Jasa Keuangan (OJK) National Survey of Financial Literacy and Inclusion are used to construct province-year measures of financial literacy, financial inclusion, and the inclusion-literacy gap. The results show that the mean financial literacy index increased from 25.55% in 2016 to 48.08% in 2022, while the mean financial inclusion index rose from 63.01% to 81.61%. The average inclusion-literacy gap narrowed from 37.45 to 33.53 pp, but the aggregate trend masked sharp heterogeneity. Nusa Tenggara Barat, Papua Barat, and Kalimantan Utara recorded large literacy catch-up, whereas Sulawesi Tenggara and Kalimantan Tengah displayed widening gaps, suggesting that formal access may have expanded faster than user capability. Panel regressions indicate a strong positive level association between inclusion and literacy, but first-difference estimates are not statistically significant, underscoring the need for caution in the causal interpretation. The study concludes that remote-area financial-literacy policy should move beyond access expansion toward capability, trust, digital safety, local-language delivery, and province-specific segmentation.