Surprising Findings Impact of Financial Literacy on Human Development in Southeast Asia

Abstract

Our study looks into how financial literacy affects the growth of human resources in Southeast Asia. Using the composite index of four elements of financial inclusion, we examine the effect of financial literacy on human development (ATM, number of borrowers, commercial bank branches, depositors) employing the PCA approach, economic growth, total remittance percent of GDP, the consumer price index (CPI), and the total net inflow of foreign direct investment percent of GDP (FDI). The population in our study was all countries in the Southeast Asian region. Where we use purposive sampling by selecting 10 countries that are members of the ASEAN organization. The selection of the 10 countries that are members of ASEAN is intended to facilitate research and investigation. This study uses secondary data from the world bank and United Nations Development (UNDP). The data period used in this study is from 2000 to 2020. We investigate 10 ASEAN member countries using pooled ordinary least squares (POLS) and we employ linear interpolation to close data gaps. To address multicollinearity in the multiple regression in our model, we performed factor variance inflation (VIF) testing. We found that the total percent of remittances from GDP contributes the greatest influence of all variables. This finding is quite surprising to us because the total remittances percent of GDP has a significant influence and becomes an important component in human resource development in Southeast Asia. Domestic and foreign remittances are surprisingly important indicators of human development in Southeast Asia. In addition to the percentage of total remittances from GDP, financial inclusion, economic growth, and the consumer price index significantly impact human development in Southeast Asia. What we didn't expect, however, found that FDI in Southeast Asia had the smallest significant impact favorably on human development.