• Seema Wati Narayan
Keywords: FinTech, Economic GRwoth, Indonesia


This paper investigates the role of financial technology (FinTech) in propelling economic growth in Indonesia from 1998 to 2018. The FinTech industry employs a technology-based business model to provide financial services, including lending, payment, investment, and financing services. The study is motivated by endogenous growth theory, which seeks to explain technology as the most important driver of economic growth. The study finds that FinTech startups are positively correlated with Indonesia’s economic growth. FinTech firms in their first year are found to be disruptive, but they fail to have serious consequences on Indonesia’s economic growth; however, they seem to significantly encourage economic growth in their second year. These findings are derived after accounting for other important growth determinants, namely, capital per labor, foreign direct investment (FDI), stock market development, and trade openness.


Download data is not yet available.


Ahmed, A. D. (2013). Effects of Financial liberalization on financial market development and economic performance of the SSA region: an empirical assessment, Economic Modelling, 261-273.
Arner, D. W., Barberis, J., Buckley, R. P., (2015). The Evolutionof FinTech: A New Post-Crisis Paradigm. University of Hong Kong Faculty of Law Research Paper No 2015/047.
Baldwin, R., Braconier, H., Forslid, R., (2005). Multinationals, Endogenous Growth, and Technological Spillovers: Theory and Evidence, Review of International Economics, 13(5), 945-963.
Bende-Nabende, A., and Ford, J. L. (1998). FDI, policy adjustment and endogenous growth: Multiplier effects from a small dynamic model for Taiwan, 1959-1995, World Development, 26(&). 1315-1330.
Bower, J. L. and Christensen, C. M. (1995). Disruptive technologies: Catching the wave, Harvard Business Review, 73(1), 43-53.
Cai, C. W., (2018). Disruption of Financial intermediation by FinTech: A review on crowdfunding and blockchain, Accounting and Finance, 58(4), 965-992.
Christensen, C. M., McDonald, R., Altman, E. J., and Palmer, J. E., (2018). Disruptive Innovation: An Intellectual History and Directions for future research, Journal of Management Studies, 55(7), 1043-1078.
Christensen, C. M., Raynor, M. E., McDonald, R., (2015) What is Disruptive Innovation? Harvard Business Review, December (01).
Chu, A. C., Cozzi, G., Furukawa, Y., and Liao, C-H. (2017). Inflation and economic growth in Schumpeterian model with endogenous entry of heterogenous firms, European Economic Review, 98, 392-409.
Compton, R. A., Giedeman, D. C. (2011). Panel evidence on Finance, institutions and economic growth, Applied Economics, 43(25), 3523-3547.
Devereux, M. B., and Smith, G. W., (1994). International Risk sharing and Economic Growth, International Economic Review, 35, 535-550.
Dyotch, N., and Narayan, S., (2016). Does FDI Influence Renewable Energy Consumption? An Analysis of Sectoral FDI Impact on Renewable and Non-renewable Industrial Energy Consumption, Energy Economics, 54, 291–301.
Febiyansah, P. T. (2017). Indonesia’s FDI-Exports-GDP Growth nexus: Trade or investment – driven? Bulletin of Monetary Economics and Banking (Buletin Ekonomi Moneter dan Perbankan),19(4). 470-487.
Gamra, S. B., (2009). Does financial liberalization matter for emerging East Asian economic growth? Some new evidence, International Review of Economics and Financial Studies,18, 392-403.
Grossman, G, M., and Helpman, E., (1991a). Innovation and Growth in the Global Economy. Cambridge, Mass.: MIT Press, 1991.
Grossman, G. M., and Helpman, E., (1991b). Trade, Knowledge Spillovers and Growth," European Economic Review, 35(3), 517-526.
Hsueh, S-J., Hu, Y-H., and Tu, C-H., (2013). Economic growth and financial development in Asian countries: A bootstrap panel Granger causality analysis, Economic Modelling, 32, 294-301.
Iman, N., (2018). Assessing the dynamics of FinTech in Indonesia, Investment Management and Financial Innovations, 15(4), 293-303.
Jaffee, D. M., and Russell, T., (1976). Imperfect information, uncertainty and credit rationing, Quarterly Journal of Economics, 90(4) 651-666.
Jagtiani, J., and Lemieux, C., (2018). Do FinTech lenders penetrate areas that are underserved by traditional banks?. Journal of Economics and Business, 100, 43-54.
Jones, C. I., (1995). R&D based models of Economic Growth, Journal of Political Economy, 103(4), 795-784.
Marshall, E., (1987). Nobel Prize for theory of Economic Growth, Science (New York, N.Y.), 238(4828), 754-5.
Mishkin, F., (1992). Is the Fisher effect for real? A re-examination of the relationship between inflation and interest rates, Journal of Monetary Economics, 30, 195-215.
Li, Y., Spigt, R., and Swinkels, L., (2017). The impact of FinTech start-ups on incumbent retail banks’ share prices, Financial Innovation, 26(3), 1-16.
Lai, M. Y.,Peng, S. J. and Bao, Q. (2006). Technology spillovers, absorptive capacity and economic growth, China Economic Review, 17, 300–20.
Levine, R. and Renelt, D. (1992). A Sensitivity Analysis of Cross-Country Growth Regressions. The American Economic Review, 82, 942-963.
Lindblad, T. J. (2015). Foreign Direct Investment In Indonesia: Fifty Years Of Discourse, Bulletin of Indonesian Economic Studies, 51:2, 217-237
Lucas, E. R. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3–42.
Lui, W. S., and Agbola, F. W., (2014). Regional analysis of the impact of inward foreign direct investment on economic growth in the Chinese electronic industry, Applied Economics, 46(2), 2576-2592.
Naceur, S. B., Ghazouani, S., and Omran, M., (2008). Does stock market liberalization spur financial and economic development in the MENA region? Journal of Comparative Economics, 36, 673-693.
Narayan, S., Sahminan, S., (2018). Has FinTech Influenced Indonesia’s Exchange Rate and Inflation?, Bulletin of Monetary Economics and Banking (Buletin Ekonomi Moneter dan Perbankan), 21(2), 303-322.
Obstfeld, M., (1994). Risk-taking, Global Diversification and Growth, The American Economic Review 84, 1310-1329.
Perron, P., (1989). The great crash, the oil price shock, and the unit root hypothesis, Econometrica, 57(6). 1361-1401
Phillips, P. C. B., and Hansen, B. E. (1990). Statistical Inference in Instrumental variables regressions with I(1) processes, Review of Economic Studies, 57, 99-125.
Phillips, P. C. B. (1995). Fully modified least squares and autoregression, Econometrica, 63(5), 1023-1078.
Qureshi, H. A., and Mohyuddin, H. A. (2006). Health status, disease, and economic development: A cross country analysis, The journal of Developing Areas, 39(2), 121-128.
Riveria-Batiz, L. A. and Romer, P. M. (1991). Economic Integration and Endogenous Growth, Quarterly Journal of Economics 106, 531-555.
Ramondo, N., and Rodriguez-Clare, A., (2010). Growth, Size and Openness: A Quantitative Approach, The American Economic Review, 100(2), 62-67.
Romer, P. M., (1990). Endogenous Technological Change, Journal of Political Economy, 89(5), S71–S102.
Soekarno, S., Damayanti, S. M., and Wibowo, P. M. S. (2009). Technology Transfer Challenges in Indonesia: An experience from industry turbine overhaul. The Asian Journal of Technology Management, 2(1), 28-32.
Solow, R. M., (1956). A contribution to the Theory of Economic Growth, The Quarterly Journal of Economics, 70(1), 65-94.
Solow, R. M.., (1957). Technical Change and the Aggregate Production Function, The Review of Economics and Statistics, 39(3), 312-320.
Stiglitz, J. E., and Weiss, A., (1981). Credit rationing in markets with imperfect information, American Economic Review, 71(3), 393-410.
Sun, S. (2010). Heterogeneity of FDI export spillovers and its policy implications: the experience of China, Asian Economic Journal, 24, 289–303.
Sun, S. H. (2011). Foreign direct investment and technology spillovers in China’s manufacturing sector, The FDI and economic growth in Chinese electronic industry. Chinese Economy, 44, 25 –42.
Thalib, A. (2017). Technology Transfer in Indonesia and China: A comparative study, Jurnal Hukum Ius Quia Iustum. 23(2), 251-270.
The Economist, (2015). The FinTech Revolution, The Economist, May 9.
Yanping Huang, Yu Liu & Huakun Wu (2016). The Finance–Growth Nexus and Poverty Reduction in Western China, Emerging Markets Finance and Trade, 52:2, 513-521
Zalan, T., Toufaily E., (2017). The Promise of FinTech in Emerging Markets: Not as Disruptive, Contemporary Economics, 11(4), 415-430.
World Bank, (2019). Online Data.
How to Cite
Narayan, S. (2019). DOES FINTECH MATTER FOR INDONESIA’S ECONOMIC GROWTH?. Buletin Ekonomi Moneter Dan Perbankan, 22(4), 437 - 456.

Most read articles by the same author(s)