Rural ICT Penetration, Bank Credit, and Agricultural Sector Performance: A Panel ARDL Analysis in Eastern Indonesia

DOI 10.7160/aol.2024.160101
No 1/2024, March
pp. 3-14

Amaluddin, A., Indiastuti, R., Effendi, N. and Cupian C. (2024) "Rural ICT Penetration, Bank Credit, and Agricultural Sector Performance: A Panel ARDL Analysis in Eastern Indonesia", AGRIS on-line Papers in Economics and Informatics, Vol. 16, No. 1, pp. 3-14. ISSN 1804-1930. DOI 10.7160/aol.2024.160101.


The relationship between ICT, the financial sector, and output growth has been extensively studied, however, macro-economic studies with an emphasis on the role of rural ICT on agricultural performance are few and yield mixed findings. Additionally, past research has not given sufficient attention to how bank credit affects agricultural performance. This paper highlighted the dynamic effect of rural ICT penetration and bank credit on agricultural performance in Eastern Indonesia. We used secondary data taken from the Central Bureau of Statistics and the Financial Services Authority. The panel data covered 16 provinces of eastern Indonesia from the first semester of 2010 to the second semester of 2022 (2010S1–2022S2). Using the panel autoregressive distributed lag (ARDL) approach, the results showed that in the long run, rural ICT penetration and bank credit played a significant role in boosting agricultural performance. However, in the short run, the impact of rural ICT penetration and bank credit on agricultural performance was statistically insignificant. Finally, we recommended several important policies that can practically impact and contribute to improving agricultural performance.


Agriculture, Rural ICT, bank credit, ARDL, Eastern Indonesia.


  1. Ajibola, J. O. (2015) "Commercial Bank Lending and Economic Growth—The Nigerian Experience (1970-2013)", Open Access Library Journal , Vol. 2, No. 5, pp. 1-8. ISSN 2333-9721. DOI 10.4236/oalib.1101431.
  2. Aker, J. C. and Ksoll, C. (2016) "Can mobile phones improve agricultural outcomes? Evidence from a randomized experiment in Niger", Food Policy, Vol. 60, pp. 44-51. ISSN 0306-91292. DOI 10.1016/j.foodpol.2015.03.006.
  3. Akinlo, T., Yinusa, D. O. and Adejumo, A. V. (2021) "Financial development and real sector in sub-Saharan Africa", Economic Change and Restructuring, Vol. 54, No. 2, pp.417-455. ISSN 1574-0277. DOI 10.1007/s10644-020-09283-8.
  4. Amin, M. (2018) "ICT For Rural Area Development in Indonesia: A Literature Review", Journal of Information Technology and Its Utilization, Vol. 1., No. 2, pp.1-8. ISSN 2985-4067. DOI 10.30818/jitu.1.2.1881.
  5. Asteriou, D. and Hall, S. G. (2016) "Applied Econometrics", 3rd edition", Springer. ISBN 13 978-1137415462.
  6. BPS (2023) "Telecommunication Statistics in Indonesia 2022". Badan Pusat Statistik, Jakarta. ISSN 2476-9134.
  7. Dzanku, F. M., Osei, R. and Osei-Akoto, I. (2021) "The impact of mobile phone voice message reminders on agricultural outcomes in Mali", Agricultural Economics (United Kingdom), Vol. 52, No. 5, pp. 789-806. ISSN 1574-0862. DOI 10.1111/agec.12654.
  8. Ellinger, P. N. and Penson, J. B. (2014) "Agricultural Finance", In: Van Alfen, N. K. (ed.) "Encyclopedia of Agriculture and Food Systems", Vol. 1, pp. 92-104. ISBN 9780080931395. DOI 10.1016/B978-0-444-52512-3.00109-1.
  9. Evans, O. (2018) "Digital Agriculture: Mobile Phones, Internet & Agricultural Development in Africa", Actual Problems of Economics, Vol. 7-8, No. 205-206. pp. 76-90. ISSN 1993-6788.
  10. Fafchamps, M. and Minten, B. (2012) "Impact of SMS-based agricultural information on Indian farmers", World Bank Economic Review, Vol. 26. No. 3, pp. 383-414. ISSN 0258-6770. DOI 10.1093/wber/lhr056.
  11. Farooqi, Z., Yaseen, M. R., Anwar, S., Sohail, M. and Makhdum, A. (2020) "ICT adoption in developing countries", Indian Journal of Science And Technology, Vol. 13, No. 39, pp. 4116-4126. E-ISSN 0974-5645, ISSN 09746846.
  12. Gani, I. M. and Bahari, Z. (2020) "Islamic banking’s contribution to the Malaysian real economy", ISRA International Journal of Islamic Finance, Vol. 13. No. 1. pp. 6-25. ISSN 2289-4365. DOI 10.1108/IJIF-01-2019-0004.
  13. Goyal, A. (2010) "Information, direct access to farmers, and rural market performance in central india", American Economic Journal: Applied Economics, Vol. 2, No. 3, pp. 22-45. ISSN 1945-7782. DOI 10.1257/app.2.3.22.
  14. Hansen, B. (2022) "Econometrics". Princeton University Press. ISBN 9780691235899.
  15. Hopestone, K. C. (2014) "The role of ICTs in agricultural production in Africa", Journal of Development and Agricultural Economics, Vol. 6, No. 7, pp. 279-289. ISSN 2006-9774. DOI 0.5897/jdae2013.0517.
  16. Kaila, H. and Tarp, F. (2019) "Can the Internet improve agricultural production? Evidence from Viet Nam", Agricultural Economics (United Kingdom), Vol. 50, No. 6, pp. 675-691. ISSN 1574-0862. DOI 10.1111/agec.12517.
  17. Kemenkoinfo (2019) "Survey. Perkembangan Ekonomi Digital di Indonesia: Strategi dan Sektor Potensial" (Economy Digital Progress: Strategy and Potencial Sector in Indonesia). Kementerian Komunikasi dan Informasi. [Online]. Available: publikasi_660_3_233 [Accessed: Jan 14, 2024]. (In Indonesian).
  18. King, R. G. and Levine, R. (1993) "Finance and growth: Schumpeter might be right", Quarterly Journal of Economics, Vol. 108, No. 3, pp. 717-737. ISSN 1531-4650. DOI 10.2307/2118406.
  19. Kpodar, K. and Andrianaivo, M. (2011) "ICT, Financial Inclusion, and Growth Evidence from African Countries", IMF Working Papers, Vol. 11, No. 73. pp.1-10. ISSN 1018-5941. DOI 10.5089/9781455227068.001.
  20. Kumar, A., Mishra, A. K., Saroj, S. and Joshi, P. K. (2017) "Institutional versus non-institutional credit to agricultural households in India: Evidence on impact from a national farmers survey", Economic Systems, Vol. 41, No. 3, pp. 420-432. ISSN 0939-3625. DOI 10.1016/j.ecosys.2016.10.005.
  21. Levin, A., Lin, C. F. and Chu, C. S. J. (2002) "Unit root tests in panel data: Asymptotic and finite-sample properties", Journal of Econometrics, Vol. 108. No. 1, pp. 1-24. ISSN 0304-4076. DOI 10.1016/S0304-4076(01)00098-7.
  22. Levine, R. (1997) "Financial Development and Economic Growth: Views and Agenda", Journal of Economic Literature, Vol. 35, No. 2, pp. 688-726. ISSN 0022-0515. DOI 10.1596/1813-9450-1678.
  23. Lio, M. and Liu, M. C. (2006) ‘"ICT and agricultural productivity: Evidence from cross- country data", Agricultural Economics, Vol. 34, No. 3, pp. 221-228. ISSN 0169-5150. DOI 10.1111/j.1574-0864.2006.00120.x.
  24. Miller, C. and Jones, L. (2010) "Agricultural value chain finance instruments", In: "Agricultural Value Chain Finance", pp. 55-114. FAO, UN and Practical Action Publishing. ISBN 978 1 85339 702 8. DOI 10.3362/9781780440514.004.
  25. Mishkin, F. S. (2013) "The Economics of Money, Banking, and Financial Markets", 10th ed., Pearson Education, Harlow. ISBN 0321122356.
  26. Morina, F. and Özen, E. (2020) "Does the commercial bank’s loans affect economic growth? Empirical evidence for the real sector economy in Kosovo (2005-2018)", International Journal of Sustainable Development and Planning, Vol. 15, No. 8, pp. 1205-1222 E-ISSN 1743-761X. DOI 10.18280/ijsdp.150807.
  27. Mankiw, N. G. (2010) "Macroeconomics", 7th ed., 41 Madison Avenue, New York. ISBN 9781429218870.
  28. Nakasone, E., Torero, M. and Minten, B. (2014) "The power of information: The ICT revolution in agricultural development", Annual Review of Resource Economics, Vol. 6, No. 1, pp. 533-550. ISSN 19411359. DOI 10.1146/annurev-resource-100913-012714.
  29. Neal, T. (2014) "Panel cointegration analysis with xtpedroni", The Stata Journal: Promoting communications on statistics and Stata, Vol. 14, No. 3. ISSN 1536-867X. DOI 10.1177/1536867x1401400312.
  30. Ngong, C. A., Onyejiaku, C., Fonchamnyo, D. C. and Onwumere, J. U. J. (2022) "Has bank credit really impacted agricultural productivity in the Central African Economic and Monetary Community?", Asian Journal of Economics and Banking, Vol. 7, No. 3, pp. 435-453. ISSN 2615-9821. DOI 10.1108/ajeb-12-2021-0133.
  31. Nguyen, T.-T., Nguyen, T. T. and Grote, U. (2023) "Internet use and agricultural productivity in rural Vietnam", Review of Development Economics, Vol. 27, No. 3, pp. 1309-1326. ISSN 1467-9361. DOI 10.1111/rode.12990.
  32. Nwude, E. Ch. and Anyalechi, K. C. (2018) "The impact of Microfinance on Rural Economic Growth: The Nigerian Experience", International Journal of Economics and Financial Issues, Vol. 8. No. 4. pp.27-31. ISSN 2146-4138.
  33. Olmstead, A. L. and Rhode, P. W. (2014) "Agricultural Mechanization", In: Van Alfen, N. K. "Encyclopedia of Agriculture and Food Systems", pp. 168-178. ISBN 9780080931395. DOI 10.1016/B978-0-444-52512-3.00236-9.
  34. Oyelami, L. O., Sofoluwe, N. A. and Ajeigbe, O. M. (2022) "ICT and agricultural sector performance: empirical evidence from sub-Saharan Africa", Future Business Journal, Vol. 8, No. 1. ISSN 2314-7210. DOI 10.1186/s43093-022-00130-y.
  35. Pedroni, P. (1999) "Critical values for cointegration tests in heterogeneous panels with multiple regressors", Oxford Bulletin of Economics and Statistics, Vol. 61, No. 51, pp. 653-670. ISSN 0305-9049. DOI 10.1111/1468-0084.0610s1653.
  36. Pedroni, P. (2004) "Panel Cointegration: a symptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis", Econometric Theory, Vol 3., pp. 579-625. ISSN 0266-4666. DOI 10.1017/S0266466604203073.
  37. Peng, Y., Latief, R. and Zhou, Y. (2021) "The Relationship between Agricultural Credit, Regional Agricultural Growth, and Economic Development: The Role of Rural Commercial Banks in Jiangsu, China", Emerging Markets Finance and Trade. Vol. 57, No. 7, pp. 1878-1889. ISSN 1540-496X. DOI 10.1080/1540496X.2020.1829408.
  38. Pesaran, M. H., Shin, Y. and Smith, R. P. (1999) "Pooled Mean Group Estimation of Dynamic Heterogeneous Panels", Journal of the American Statistical Association, Vol. 94. No. 446, pp. 621-634. ISSN 1537274X. DOI 10.1080/01621459.1999.10474156.
  39. Rehman, A., Chandio, A. A., Hussain, I. and Jingdong, L. (2017) "Is credit the devil in the agriculture? The role of credit in Pakistan’s agricultural sector', Journal of Finance and Data Science, Vol. 3, No. 1-4, pp. 38-44. ISSN 24059188. DOI 10.1016/j.jfds.2017.07.001.
  40. Sethi, D. and Acharya, D. (2018) "Financial inclusion and economic growth linkage: some cross country evidence", Journal of Financial Economic Policy, Vol. 10, No. 3, pp. 369-385. ISSN 1757-6393. DOI 10.1108/JFEP-11-2016-0073.
  41. Suroso, A. I., Fahmi, I. and Tandra, H. (2022) "The Role of Internet on Agricultural Sector Performance in Global World", Sustainability (Switzerland), Vol. 14. No. 19, pp. 2-10. ISSN 2071-1050. DOI 10.3390/su141912266.
  42. Toader, E., Firtescu, B. N., Roman, A. and Anton, S. G. (2018) "Impact of information and communication technology infrastructure on economic growth: An empirical assessment for the EU countries", Sustainability (Switzerland). Vol. 10. No.10, pp. 1-22. ISSN 2071-1050. DOI 10.3390/su10103750.
  43. Vaithilingam, S., Guru, B. K. and Shanmugam, B. (2003) "Bank lending and economic growth in Malaysia", Journal of Asia-Pacific Business, Vol. 5, No. 1, pp. 51-69. ISSN 1059-9231. DOI 10.1300/j098v05n01_05.

Full paper

  Full paper (.pdf, 520.09 KB).