Relationship Between Non-Formal Credit and the Welfare of Indonesian Households
This study used Indonesian Family Life Survey (IFLS) data and applied the fixed effect estimation method. This study showed that informal credit had a more negative impact on household welfare compared to the use of formal credit. In addition, the use of semi-formal credit caused a more negative impact on household welfare compared to the use of formal credit. It can be due to higher interest rates in the use of informal credit compared to semi-formal and formal credit. This study also indicated that credit used for productive purposes brought about a more positive impact than credit used for consumptive purposes. The higher the amount of credit used, the more positive the impact on household welfare is compared to the use of fewer loans. This research results can be the basis for the government to concern about the policy of credit interest rates to the public.
Keywords: formal credit, semi-formal credit, informal credit, interest rate
 Bell, C., Srinivasan, T. and Udry, C. (1997). Rationing, Spillover, and Interlinking in Credit Markets: the Case of Rural Punjab. Oxford Economic Papers, vol. 49, issue 4, pp. 557-585.
 Carter, M. R. and Barrett, C. (2006). The Economics of Poverty: Traps and Persistent Poverty: An Asset-Based Approach. Journal of Development Studies, vol. 42, issue 2, pp. 178-199.
 Chandio, A. A. and Jiang, Y. (2018). Determinants of Credit Constraints: Evidence from Sindh, Pakistan. Emerging Markets Finance and Trade, vol. 54, issue 15, pp. 3401-3410.
 Chavan, P. (2007). Access to Bank Credit: Implications for Dalit Rural Households. Economic and Political Weekly, vol. 42, issue 31, pp. 3219-3224.
 Dartanto, T. and Otsubo, S. (2013). Measurements and Determinants of Multifaceted Poverty: Absolute, Relative, and Subjective Poverty in Indonesia. (JICA Research Institute, 2013).
 Dercon, S. (1996). Risk, Crop Choice, and Savings: Evidence from Tanzania. Economic Development and Cultural Change, vol. 44, issue 3.
 Dev, M. (2006). Financial Inclusion: Issues and Challenges. Economic and Political Weekly, vol. 41, issue 41, pp. 4310-4313.
 Duflo, E. (2001). Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment. The American Economic Review, vol. 91, issue 4, pp. 795-813.
 Dwiputri, I. N. (2017). The Impact of the Unconditional Cash Transfer Program (BLT) on Cigarette Consumption in Indonesia Society. Journal of Indonesian Economy and Business, vol. 32, issue 2, pp. 138-150.
 Gaisina, S. (2011). Credit Policies for Kazakhstani Agriculture. Central Asian Survey, vol. 30, issue 2, pp. 257-274.
 Gertler, P., Legine, D.I. and Moretti, E. (2009). Do Microfinance Programs Help Insure Families Against Illness? Health Economics, vol. 18, issue 3, pp. 257-273.
 Gertler, P. and Molyneaux, J. W. (1994). How Economic Development and Family Planning Programs Combined to Reduce Indonesian Fertility. Demography, vol. 31, issue 1, pp. 33-63.
 Heckman, J. J. and Robb, R. (1985). Alternative Methods for Evaluating the Impact of Interventions: An Overview. Journal of Econometrics, vol. 30, pp. 239-267.
 Kaboski J. P. and Townsend R. M. (2011). A Structural Evaluation of a Large-Scale Quasi-Experimental Microfinance Initiative. Econometrica, vol. 79, issue 5, pp. 1357-1406.
 Kaboski, J. P. and Townsend, R. M. (2012). The Impact of Credit on Village Economies. American Economic Journal Applied Economics, vol. 4, issue 2, pp. 98-133.
 Kamath, R. (2007). Financial Inclusion vis-à-vis Social Banking. Economic and Political Weekly, vol. 42, issue 15, pp. 1334-1335.
 Khandker, S.R. (2005). Microfinance and Poverty: Evidence Using Panel Data from Bangladesh. The World Bank Economic Review, vol. 19, issue 2, pp. 263-286.
 Keynes, J.M. (1936). The General Theory of Employment, Interest, and Money. International Relations and Security Network. www.isn.ethz.ch
 Kinsey, B., Burger, K. and Gunning, J. W. (1998). Coping with Drought in Zimbabwe: Survey Evidence on Response of Rural Household to Risk. World Development, vol. 26, issue 1, pp.
 Laczo, S. (2007). Informal Insurance and Income Inequality. (Universite de Touluse, 2007).
 Langley, P. (2014). Consuming Credit. Consumption Markets & Culture, vol. 17, issue 5, pp. 417-428.
 Ledgerwood, J. (1999). Microfinance Handbook: An Institutional and Financial Perspective. Washington D.C.: The World Bank.
 Madestam, A. (2014). Informal Finance: A Theory of Moneylenders. Journal of Development Economics, vol. 107, pp. 157-174.
 Moser, C. (2006). Asset-Based Approaches to Poverty Reduction in A Globalized Context: An introduction to asset accumulation policy and summary of workshop findings. Washington DC: The Brookings Institution.
 Morduch, J. (1995). Income Smoothing and Consumption Smoothing. Journal of Economic Perspective, vol. 9, issue 3, pp. 103 – 114.
 Nisbet, C. (1967). Interest Rates and Imperfect Competition in the Informal Credit Market of Rural Chile. Economic Development and Cultural Change, vol. 16, issue 1, pp. 73-90.
 Ogundeji, A. A., et al. (2018). Impact of Access to Credit on Farm Income: Policy Implications for Rural Agricultural Development in Lesotho. Agrekon, vol. 57, issue 2, pp. 152-166.
 Pradiptyo R., et al. (2013). Optimal Network for BPD Regional Champion (BRC) to Support Financial Inclusion. (SEADI Discussion Paper Series No.4, 2013).
 Pitt, M. M., et al. (1999). Credit Programs for the Poor and Reproductive Behavior in Low Income Countries: Are the Reported Causal Relationships the Result of Heterogeneity Bias? Demography, vol. 36, issue 1, pp. 1-21.
 Robinson, M. (2001). The Microfinance Revolution: Sustainable finance for the poor. Washington D.C: The World Bank.
 Romer, D. (2008). Advanced Macroeconomics (3rd ed.). New York: The McGraw-Hill Companies.
 Skoufias, E. (2003). Consumption Smoothing in Russia: Evidence from the RLMS. Economic of Transition, vol. 11, issue 1, pp. 67-91.
 Strauss, J., et al. (2009). The Fourth Wave of the Indonesia Family Life Survey (IFLS4): Overview and Field Report. April 2009. WR-675/1-NIA/NICHD.
 Wik, M. (1999). Coping with Risk in Agriculture: Income and Consumption Smoothing Strategies in LDCs”. Forum for Development Studies, vol. 2, pp. 329-344.
 Yamauchi, C. (2005). Evaluating Poverty Alleviation through Microcredit: Methodological and Empirical Evidence from Indonesia. (Job Market Paper, Department of Economics University of California, 2005).
 Zarazua, M. and Copestake, J. (2008). Financial Inclusion, Vulnerability and Mental Models: from physical access to effective use of financial services in a low income area of Mexico City. Savings and Development, vol. 32, issue 4, pp. 353-379.
 Zeller M., et al. (1997). Rural Finance for Food Security for the Poor. Food Policy Review, vol. 4, p. 139.
 Zeller, M. (2000). Product Innovation for the Poor: The Role of Microfinance. (International Food Policy Research Institute Working Paper Series, 2000).