ABSTRACT
Financial inclusion has been an important issue recently, and has become one of the programmes of the Millennium Development Goals (MDG) of the United Nations (UN) to alleviate property all over the world. Indonesia has taken part in the programme. Financial inclusion aims to open access to formal financial services, especially bank services, to the poor. This access could leverage the poor’s financial ability to provide capital for their business activities and improve their welfare with more affordable interest charged compared to non-financial institutions or informal moneylenders. The World Bank (2010) reports that only 21% of the Indonesian population have access to banks, which is considered a very low number. Using the National Economic Social Survey (SUSENAS) data of 2008 and 2012, this study identifies household profiles and analyses factors that determined households’ access to loans from banks, non-bank institutions, and individual (informal) sources. The possibility for households to obtain loans is influenced by several factors such as demographics, including sex, socio-economic condition, education, and the effectiveness of government programmes on financial inclusion. The biggest constraint to obtaining bank loans is mainly the collateral. Most of the poor have no quality assets to pledge for bank collateral. The findings in this study could help the Indonesian government formulate more effective policies for poverty alleviation.
