The role of financial inclusion in reducing household poverty: insights from Eastern Indonesia

This study investigates the roles of financial inclusion in alleviating both absolute poverty and multidimensional poverty at the household level in Eastern Indonesia, a region characterized by persistent inequality and limited access to financial infrastructure. Using microdata from the 2024 National Socio-Economic Survey (Susenas) covering 100,113 households across 16 provinces, we apply probit and instrumental variable probit (IV Probit) models to address endogeneity concerns. Financial inclusion index (FII) and Households Multidimensional poverty index (HMP) indices are constructed using the Multiple Correspondence Analysis (MCA) approach. The findings reveal that financial inclusion significantly reduces both forms of poverty, with stronger effects observed once endogeneity is accounted for. Credit access emerges as the most influential driver of poverty reduction, while savings and insurance show weaker and mixed effects. The results highlight the urgent need to expand inclusive financial services in rural and geographically dispersed areas, where physical access barriers remain critical. By focusing on household microdata and applying a multidimensional poverty lens, this study makes a novel contribution to the literature on financial inclusion, poverty, and provides policy-relevant evidence for achieving Sustainable Development Goals (SDG 1 and SDG 10).