This seminar investigates the effects of a new regulation introduced in 2018 in the province of Aceh, Indonesia, which requires all banks operating in the province – whether they are conventional or shariah banks – to adhere with the shariah principles. We constructed a synthetic control unit for Aceh based on other Indonesian provinces and apply the synthetic control and synthetic difference-in-difference methods to look at the effects of this regulation on banking service usages. Our preliminary findings suggest that the new regulation has led to a decrease in the disbursement of working capital loans and savings deposits in the treatment group (Aceh province) compared to the control group. The findings are consistent with the view that the regulation, which was aimed to improve access to finance to previously unbanked population, resulted in decreased utilization of modern financial services.

To join in-person:

Venue: Acton Theatre, JG Crawford Building, 132 Lennox Crossing, Acton 2602, ACT (ANU Crawford School of Public Policy)

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