THE ROLE OF STATE-OWNED AND REGIONAL DEVELOPMENT BANKS IN PROMOTING SUSTAINABLE DEVELOPMENT: EVIDENCE FROM INDONESIA'S INDUSTRIAL AND NON-INDUSTRIAL FINANCING SECTORS

Sri Anah; Aditya Pratama; Siska Maya

doi:10.30998/jabe.v12i3.3793

Authors

Sri Anah Mercu Buana University Author
Aditya Pratama Mercu Buana University Author
Siska Maya Indraprasta Pgri University Author

DOI:

https://doi.org/10.30998/jabe.v12i3.3793

Keywords:

IRF, Regional Development Banks, Sustainable Development, Sustainable Finance, State-Owned Banks, VECM

Abstract

Sustainable finance has become an important instrument for supporting environmental sustainability and achieving sustainable development goals. In Indonesia, State-Owned Banks (SOBs) and Regional Development Banks (RDBs) play strategic roles in channeling financing to various economic sectors. This study examines and compares the contribution of financing provided by SOBs and RDBs to sustainable development performance, as represented by the SRI-KEHATI Index. Monthly time-series data were analyzed using the Vector Error Correction Model (VECM) and Impulse Response Function (IRF). The results indicate that financing from both banking groups significantly affects sustainable development performance, although the magnitude of the contribution remains relatively limited. SOB financing contributes more strongly to industrial-sector activities, accounting for approximately 13% of sustainable development variation, compared with 11% for RDB financing. In contrast, RDB financing shows a relatively greater contribution to non-industrial sectors, accounting for approximately 6%, compared with 3% for SOB financing. The IRF results further reveal differences in the responses of sustainable development performance to financing shocks across banking groups and sectors. Overall, the findings suggest that neither banking group is universally superior in promoting sustainable development. Instead, SOBs and RDBs perform complementary roles, with SOBs supporting large-scale industrial financing and RDBs contributing more effectively to regional and community-oriented sectors. Strengthening sustainable financing policies and expanding environmentally responsible investments are expected to enhance sustainable development outcomes in Indonesia.

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