Taufiq Marwa

The global economy has fostered a dynamic environment of economic globalization, leading to amplified interconnectedness, integration, and worldwide influence in both commercial transactions and monetary activities. This occurrence emphasizes the vital role of liberalizing capital and international trade in economic discussions, particularly in emerging economies where banking-centric systems wield considerable influence. The objective of this study is to investigate the correlation between trade liberalization and financial inclusivity, specifically concerning the resilience of the banking industry in developing nations throughout the period of 2010–2020. Utilizing the dynamic data model of Arellano-Bond’s Generalized Method of Moment Estimator, this study yields a significant revelation. The interaction between trade openness and financial transparency exerts a noticeable and advantageous impact on banking stability, with each 1% increase in openness resulting in a remarkable improvement of 98.9445 in Net Interest Margin, 116.2575 in Z score, and 119.9189 in Non-Performing Loans. Consequently, this investigation confirms the presence of a diversification effect on stability while concurrently applying the concept of voltage fragility. In essence, trade openness propels the banking sector toward heightened competitiveness due to increased demand from local businesses, while financial openness fosters heightened competition within the credit market.

Type of the article: Research Article

Abstract
One of the fundamental functions of commercial banks is providing credit to the public; however, with advancements in digital technology, this function is increasingly being performed by fintech lending companies as well. Accordingly, this study seeks to examine whether the growth of fintech credit in Indonesia acts as a substitute for or a complement to credit extended by commercial banks. The analysis utilizes monthly data from January 2018 to February 2023 and employs the Autoregressive Distributed Lag (ARDL) model to capture both short-run and long-run relationships between fintech lending and bank credit growth. The results indicate that the expansion of fintech credit exerts a positive and significant effect on the growth of bank lending, showing that fintech financing functions as a complement rather than a substitute. An increase in fintech credit is associated with an expansion of bank credit, implying that fintech lending enhances overall financial intermediation by reaching underserved segments and supporting credit distribution through formal banking channels. These findings suggest that fintech development does not crowd out bank lending but instead strengthens Indonesia’s credit ecosystem. The findings offer important guidance for regulators and other stakeholders in formulating suitable policies to respond to the rapid advancement of fintech services. With a balanced regulatory framework, effective oversight, constructive collaboration, and adequate digital infrastructure, Indonesia’s financial ecosystem has the potential for inclusive, efficient, and sustainable financial development.