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Conceptualizing financial capability: evidence from Indonesia

Conceptualizing financial capability: evidence from Indonesia This paper aims to investigate how microfinance institutions’ clients in Indonesia conceptualize financial capability. Previous investigations on the concept were mostly in the lenses of those in the developed economies.Design/methodology/approachA qualitative method was used, in which focus group discussions (FGDs) and interviews were conducted with microfinance institutions’ clients and management in four provinces in Indonesia: DKI Jakarta, DI Yogyakarta, West Nusa Tenggara and South Sulawesi.FindingsThe results exhibit some similarities with those of previous studies that highlight the importance of financial management and financial planning for strategic purposes. However, financial literacies perceived as less important due to the lack of awareness of the concept and its benefits.Research limitations/implicationsThis research is only focused on certain groups of the population which implies its limited generalizability. One important implication is for policymakers and scholars to re-examine the value of financial literacy within the context of Indonesia. Although the interviews reveal skepticisms on the instrumental value of financial literacy, robust investigations are further needed.Originality/valueThis study is the first that uses the participatory method to define financial capability as understood by microfinance institutions’ clients in Indonesia. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Ethics and Systems Emerald Publishing

Conceptualizing financial capability: evidence from Indonesia

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2514-9369
DOI
10.1108/ijoes-06-2020-0095
Publisher site
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Abstract

This paper aims to investigate how microfinance institutions’ clients in Indonesia conceptualize financial capability. Previous investigations on the concept were mostly in the lenses of those in the developed economies.Design/methodology/approachA qualitative method was used, in which focus group discussions (FGDs) and interviews were conducted with microfinance institutions’ clients and management in four provinces in Indonesia: DKI Jakarta, DI Yogyakarta, West Nusa Tenggara and South Sulawesi.FindingsThe results exhibit some similarities with those of previous studies that highlight the importance of financial management and financial planning for strategic purposes. However, financial literacies perceived as less important due to the lack of awareness of the concept and its benefits.Research limitations/implicationsThis research is only focused on certain groups of the population which implies its limited generalizability. One important implication is for policymakers and scholars to re-examine the value of financial literacy within the context of Indonesia. Although the interviews reveal skepticisms on the instrumental value of financial literacy, robust investigations are further needed.Originality/valueThis study is the first that uses the participatory method to define financial capability as understood by microfinance institutions’ clients in Indonesia.

Journal

International Journal of Ethics and Systems – Emerald Publishing

Published: Feb 8, 2021

Keywords: Financial capability; Capability approach; Microfinance; Financial literacy; Indonesia; D14; I30; I31; I32; R20

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