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Bank Lending and Income Inequality: Evidence from Indonesia

Author

Listed:
  • Putra Pamungkas

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Clovis Rugemintwari

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Irwan Trinugroho

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

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.

Suggested Citation

  • Putra Pamungkas & Clovis Rugemintwari & Amine Tarazi & Irwan Trinugroho, 2016. "Bank Lending and Income Inequality: Evidence from Indonesia," Working Papers hal-01251500, HAL.
  • Handle: RePEc:hal:wpaper:hal-01251500
    DOI: 10.2139/ssrn.2708469
    Note: View the original document on HAL open archive server: https://hal-unilim.archives-ouvertes.fr/hal-01251500
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    References listed on IDEAS

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    1. Abdul Rahim Ridzuan & Shahsuzan Zakaria & Bayu Arie Fianto & Nora Yusma Mohamed Yusoff & Nor Fatimah Che Sulaiman & Mohamad Idham Md Razak & Siswantini Siswantini & Arsiyanti Lestari, 2021. "Nexus between Financial Development and Income Inequality before Pandemic Covid-19: Does Financial Kuznets Curve Exist in Malaysia, Indonesia, Thailand and Philippines?," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 260-271.

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    Keywords

    Income Inequality; Gini Index; Bank Lending; Indonesia;
    All these keywords.

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