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Digital Banking for Alleviating Rural Poverty in Indonesia: Some Evidences

Abstract

There are still a large number of unbanked people in Indonesia, particularly, in the rural areas. Without proper financial services, there can be no economy as banking is essential for any modern economy. Without economy, the livelihood of rural communities will remain poor. One reason for the large number of unbanked population in the rural areas is the cost of opening bank branches for low-income earners. It may not be cost-effective for banks to open branches in rural Indonesia. The number of customers may not be sufficient to cover the operating cost. This paper discusses digital banking services, such as online banking, SMS banking, and mobile banking. These new technologies could reduce the operating costs of banking services and allow the banks to provide financial services in the rural areas. This could potentially help the unbanked population have access to financial services, revitalize their local economy, and eventually improve the livelihood of rural communities, adding to the range of policy instruments to reduce rural poverty in Indonesia.

 

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