The Effect of Working Capital, Investment, and Consumption Credit on Economic Growth in Central Sulawesi During 2016–2023

Abstract

This study aims to analyze the effect of bank credit comprising Working Capital Credit, Investment Credit, and Consumption Credit on the economic growth of regencies/cities in Central Sulawesi Province during the 2016–2023 period. This study employs secondary data in the form of panel data from eleven regencies/cities in Central Sulawesi. The analytical method used is panel data regression with the Common Effect Model (CEM), Fixed Effect Model (FEM), and Random Effect Model (REM) approaches. Based on the model selection tests, the Random Effect Model (REM) is the most appropriate model for this study. The estimation results show that, partially, Working Capital Credit and Investment Credit have a negative and insignificant effect on economic growth. This indicates that the disbursement of productive credit has not yet been fully able to optimally drive regional output. Meanwhile, Consumption Credit has a positive but insignificant effect on economic growth, suggesting that increased household consumption has not yet exerted a strong impact on regional economic growth in aggregate. Simultaneously, the three credit variables contribute to the variation in economic growth, although their effect is not statistically significant. These findings indicate that the structure of economic growth in Central Sulawesi remains dominated by consumption activity, while the effectiveness of productive credit disbursement needs to be improved so as to drive sustainable expansion of the real sector. Therefore, a more selective and well-targeted banking policy is required to enhance credit quality and strengthen its contribution to regional economic growth.