Financial Services and Insurance: Interregional Linkages and Regional Economic Impact Across Six Indonesian Islands
DOI:
10.47353/ecbis.v4i6.605Published:
2026-10-01Downloads
Abstract
This study examines the contribution of the Financial Services and Insurance Sector to regional economic development across six major island groups in Indonesia using an Inter-Regional Input-Output (IRIO) framework. The 2016 IRIO table from Statistics Indonesia (BPS), covering 17 sectors across six island groups, was analyzed using Forward and Backward Linkage indices derived from the Leontief inverse matrix. Results show that Java accounts for approximately 75% of national financial sector output, while most input-output flows remain within originating islands. Despite this concentration, the sector demonstrates strong linkages across all regions, with Forward Linkage indices exceeding 1.91 and Backward Linkage indices exceeding 1.12. The Electricity and Gas Supply Sector consistently emerges as the primary downstream beneficiary of financial sector activity. These findings indicate that the Financial Services and Insurance Sector occupies a strategically important position in Indonesia’s economic structure, but its contribution to balanced regional development remains constrained by spatial concentration and limited interregional integration, as reflected in the relatively low inter-island export share of 6.41%. The findings highlight the importance of strengthening equitable access to financial services, promoting interregional financial integration, and directing financial intermediation toward productive sectors and infrastructure-related activities to support more balanced regional development across Indonesia.
Keywords:
financial sector iner-regional input-output forward linkage backward linkage regional development indonesiaReferences
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Copyright (c) 2026 Tamira Pontia Kirana, Eka Agustiani, Muhammad Dzul Fadlli
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