Role of Banking Agencies and Village Crediting Institutions on Economic Growth Inclusion in Bali Province

Abstract As a development agency, Commercial Banks and Lembaga Perkreditan Desa (LPD) are financial intermediaries conducting activities to collect and channel funds for the smoothness of economic activity. The existence of BPR and LPD is expected to create inclusive or qualified economic growth, which is economic growth accompanied by poverty reduction, decreasing inequality of income distribution and decreasing unemployment rate. With the inclusive economic growth is expected to increase public welfare. This study aims to analyze the role of banking institutions and Lembaga Perkreditan Desa (LPD) against changes in economic structure, inclusiveness of economic growth, and community welfare in Bali Province. The data used are obtained from secondary sources in the form of panel data of regencies / cities in 2010 until 2016. The design of this study uses a tiered causality model by applying the Structural Equation Model (SEM) with the application of Partial Least Square (PLS). The result of the research shows that credit given by Commercial Banks and Lembaga Perkreditan Desa (LPD) gives the impact of changes in economic structure, namely the increase of capital formation, the increase of labor absorption, and the increasing contribution of modern sectors to economy. Changes in economic structure affect the inclusiveness of economic growth. Inclusiveness of economic growth is economic growth accompanied by poverty reduction, decreased inequality in income distribution and declining unemployment rate. Inclusiveness of economic growth also affects the welfare of the people in Bali Province.