The Influence of Conventional Banking and Sharia Banking on Economic Growth in Indonesia
Abstract
The financial sector is referred to as one of the factors influencing the monetary crisis. This study examined the relationship between the banking development score in the dual banking system model and economic growth in Indonesia. This study used a quantitative method, using the VECM approach and the Granger Causality model. The findings showed that Conventional Banking Credit Growth, Sharia Banking Financing Growth, PMTB, LDR and FDR, and ROA of conventional and Sharia banks had a positive effect on economic growth in Indonesia. The inflation variables, NPF, and NPL had a negative effect on economic growth in Indonesia. This finding provided us with an understanding that the existence of Sharia banking could drive economic growth in Indonesia. In conventional banks, in the long term, there was a long-term relationship between the independent variables and the dependent variables. This study provided new insights into the influence of the banking sector on economic growth in Indonesia, highlighting the importance of synergy between conventional and Islamic banking in creating diverse financial instruments and enhancing access to banking services, especially in areas with limited financial access.
References
Abduh, M., & Azmi Omar, M. (2012). Islamic banking and economic growth: the Indonesian experience. International Journal of Islamic and Middle Eastern Finance and Management, 5(1), 35–47. https://doi.org/10.1108/17538391211216811
Abidin, Z., Ulum, M., Marheni, C. L., Faruq, U., & Umam, K. (2023). Al-Wasathiyah fî al-Iqtishâd al-Islâmî: Ârâ’u ‘ulamâ Jam’iyati “Nahdlatul Ulama” Bi Jawa alSyarqiyah haula “al-Taraddud” bi Sya’ini Fatâwa al-Fawâid al-Mashrîfiyah. Al-Ihkam: Jurnal Hukum Dan Pranata Sosial, 18(1), 246–284. https://doi.org/10.19105/al-lhkam.v18i1.6989
Anggareni, E., Nurmalia, G., & Kumedi Ja’far, A. (2024). Utilizing the Banking System For Digital Waqf Behavioral Approach of Millennial Muslims. El-Usrah, 7(1), 390–405. https://doi.org/10.22373/ujhk.v7i1.22562
Azizah, S. N. (2023). The adoption of FinTech and the legal protection of the digital assets in Islamic/Sharia banking linked with economic development: A case of Indonesia. Journal of World Intellectual Property, 26(1). https://doi.org/10.1111/jwip.12257
Bauer, M. D., Lakdawala, A., & Mueller, P. (2022). Market-Based Monetary Policy Uncertainty. Economic Journal, 132(644). https://doi.org/10.1093/ej/ueab086
Böhm, P., Böhmová, G., Gazdíková, J., & Šimková, V. (2023). Determinants of Financial Literacy: Analysis of the Impact of Family and Socioeconomic Variables on Undergraduate Students in the Slovak Republic. Journal of Risk and Financial Management, 16(4). https://doi.org/10.3390/jrfm16040252
Chan, V.-L. (2000). Foreign Direct Investment and Economic Growth in Taiwan’s Manufacturing Industries- East Asian Economic Development. African Development Review, 9(1).
Dahlan, A., Mawardi, & Mahfudz, S. (2023). The Crucial History of Sharia Banking Law Development in Indonesia. Al-Manahij: Jurnal Kajian Hukum Islam, 17(1), 27–40. https://doi.org/10.24090/mnh.v17i1.7191
Elvia, E. E., Mujib, A., Nor, A., & Akbar, M. I. (2023). Basyarnas As a Place for Dispute Resolution of Musyarakah Financing in Sharia Banking in the Disruption Era. El-Mashlahah, 13(1), 39–56. https://doi.org/10.23971/el-mashlahah.v13i1.5345
Eshugova, S. K., & Khamirzova, S. K. (2020). The role of state corporations in the development of the real sector of economy. New Technologies, 4. https://doi.org/10.47370/2072-0920-2020-15-4-126-133
Fidhayanti, D., & Jannah, I. M. (2022). The Principle of Mabda` Ar-Rada'iyyah in Land Purchase Agreements with Fraud Elements in State Court Judgment Number 12/Pdt.G/2017/PN.Mlg. El-Mashlahah, 12(2), 164–189. https://doi.org/10.23971/el-mashlahah.v12i2.4133
Fitri, F. A., Syukur, M., Majid, M. S. A., Farhana, I., & Hatta, F. (2022). Do intellectual capital and financing matter for the profitability of the Islamic banking industry in Indonesia? International Journal of Monetary Economics and Finance, 15(3). https://doi.org/10.1504/ijmef.2022.126888
Ghalia, B., Zakariyah, L., & Al Najjar, Y. A. (2022). Dawru Al-Waqf al-Mu’aqqat fî al-Tamwîl al-Ijtimâ’i fî al-Mashrîfiyah al-Islâmiyah Bî Malayziyâ. AL-IHKAM: Jurnal Hukum & Pranata Sosial, 17(2), 611–646. https://doi.org/10.19105/al-lhkam.v17i2.6768
Hasanudin, Kamsi, & Anshori, A. Y. (2024). The Contestation of Legal Foundations in the Resolution of Islamic Economic Disputes in Religious Courts. Al-Manahij: Jurnal Kajian Hukum Islam, 18(2), 271–288. https://doi.org/10.24090/mnh.v18i2.11934
Hayati, R. F., & Mujib, A. (2022). Dispute Resolution on Mudārabah Musytarakah Contract on Sharia Insurance in Indonesia: Between Regulation and Practice. El-Mashlahah, 12(1), 14–36. https://doi.org/10.23971/elma.v12i1.3795
Hidayat, A. S., Disemadi, H. S., Al-Fatih, S., Maggalatung, A. S., & Yunus, N. R. (2022). Legal Obligations of Corporate Social Responsibility as Efforts to Improve the Image of Islamic Banking in Indonesia. Samarah, 6(2), 775–797. https://doi.org/10.22373/sjhk.v6i2.12455
Hidayat, T., Muhammad Majdidin, R., Ridwan Habibi, Y., & Noviarita, H. (2024). Implementation of Law Number 21 of 2008 Concerning Sharia Banking Against Sharia Financial Institutions. KnE Social Sciences. https://doi.org/10.18502/kss.v9i2.15002
Hidayatullah, M. S., & Fadillah, R. (2022). Economic and Legal Dimensions of Collateral Existence in Modern Mudhārabah Contracts: Understanding the Relationship between Risk Management, National Law, and Contemporary Fiqh. Al-Manahij: Jurnal Kajian Hukum Islam, 16(2), 223–238. https://doi.org/10.24090/mnh.v16i2.6860
Husein, H., Said, W., Darwis, M., Arafah, M., & Hasan, H. (2024). Zakat and Empowerment of the Bajo Tribe Fishing Community in Bone, South Sulawesi: Collaboration between BAZNAS and the Ministry of Religion. El-Usrah, 7(2), 462–479. https://doi.org/10.22373/ujhk.v7i2.24961
Jamaluddin, Hayat, M., Masduki, Mukarromah, O., & Jamaludin. (2024). Examining the Synthesis of Islamic Commercial Principles and Local Customary Practices: A Case Study of Nyambut Sawah Traditions in Tejamari, Banten. Journal of Islamic Law, 5(1), 86–104. https://doi.org/10.24260/jil.v5i1.2091
Kasri, R. A., Indrastomo, B. S., Hendranastiti, N. D., & Prasetyo, M. B. (2022). Digital payment and banking stability in emerging economy with dual banking system. Heliyon, 8(11). https://doi.org/10.1016/j.heliyon.2022.e11198
Katsampoxakis, I. (2022). ECB’s unconventional monetary policy and spillover effects between sovereign and bank credit risk. EuroMed Journal of Business, 17(2). https://doi.org/10.1108/EMJB-09-2020-0103
Maulana, M., Jihad, A. A., Fildzia, A. S., Ramly, A., & Shabarullah, S. (2024). Islamic Banking Services for Communities and Families in Aceh Province Post Closure Of Conventional Banks: A Comprehensive Review. El-Usrah, 7(2), 903–922. https://doi.org/10.22373/ujhk.v7i2.26312
Miranda-Agrippino, S., & Nenova, T. (2022). A tale of two global monetary policies. Journal of International Economics, 136. https://doi.org/10.1016/j.jinteco.2022.103606
Muhammad, A. (2022). Optimalisasi Financial Well Being Generasi Sandwich di Indonesia. El-Usrah, 5(1), 127–135. https://doi.org/10.22373/ujhk.v5i1.17119
Naisabur, N., Putra, H. M., Ahyani, H., Novita, D., & Kurniati, P. (2024). The Prohibition of Social E-Commerce on TikTok Shop: A Fiqh Examination Based on Sharia Compliance and Economic Justice. Al-Manahij: Jurnal Kajian Hukum Islam, 18(1), 59–78. https://doi.org/10.24090/mnh.v18i1.9674
Nandiwardhana, A. P., Cudjoe, D., & Permana, D. (2022). A sustainable development assessment of Indonesia’s state banks financing for the industrial and non-industrial sector. Journal of Sustainable Finance and Investment, 12(3). https://doi.org/10.1080/20430795.2020.1809964
Nopriansyah, W., Munajat, M., & Mujib, A. (2022). Maintaining the Plurality and Sacred Value of Islamic Law through the Existence of the Sharia Banking Law. Al-Ahkam, 32(1). https://doi.org/10.21580/ahkam.2022.32.1.8825
Nurhisam, L., Eriyanti, N., Mundakir, M., Mursid, F., & Khulwah, J. (2024). Sharia Banking Syndicated Financing in The Context of Funding Strategic Projects after Islamic Financial Qanun Institution in Aceh. Samarah, 8(3), 1430–1453. https://doi.org/10.22373/sjhk.v8i3.15891
Pauzi, M., Arianti, F., Masum, A., & Rani, M. (2024). Actualizing Islamic Economic Law in the Digital Era: A Study of the Application of Khiyar al-Majlis in Electronic Contracts. Juris: Jurnal Ilmiah Syariah, 23(2), 205–214. https://doi.org/10.31958/juris.v23i2.11573
Prihasmoro, A., Sopyan, Y., Abdullah, R., & Sufiarina. (2024). Sharia Economic Bankruptcy Law (al-Taflis) and the Dualism of Court Competency in Indonesia. Juris: Jurnal Ilmiah Syariah, 23(2), 227–239. https://doi.org/10.31958/juris.v23i2.11045
Rasyid, M. (2021). Problematics of Implementation of the Mudhārabah Contract on Sharia Banking in Indonesia. Journal of Islamic Law, 2(1), 22–42. https://doi.org/10.24260/jil.v2i1.135
Rissy, Y. Y. W. (2021). The stakeholder model: its relevance, concept, and application in the Indonesian banking sector. Journal of Banking Regulation, 22(3). https://doi.org/10.1057/s41261-020-00140-2
Saputra, I., Murwaningsari, E., & Augustine, Y. (2023). The Role Of Enterprise Risk Management And Digital Transformation On Sustainable Banking In Indonesia. Neo Journal of Economy and Social Humanities, 2(1). https://doi.org/10.56403/nejesh.v2i1.85
Setiawan, I. (2019). The Role of Islamic Banking in the Development of Economic Sectors in Indonesia. International Journal of Applied Business Research, 1(02). https://doi.org/10.35313/ijabr.v1i02.70
Shofiana, G. F., Shomad, A., & Bintoro, R. W. (2019). Transformation of Banking Law in Indonesia. Jurnal Dinamika Hukum, 19(2). https://doi.org/10.20884/1.jdh.2019.19.2.2523
Singh, B. (2011). How Asymmetric is the Monetary Policy Transmission to Financial Markets in India? Reserve Bank of India Occadional Papers, 32(2).
Sukardi, B., Fachrurazi, F., & Supriyanto, S. (2019). Sharia Maqashid’s Inclusive Performance and Contribution to The Sharia Non-Bank Financial Industry in Indonesia. Economica: Jurnal Ekonomi Islam, 10(2). https://doi.org/10.21580/economica.2019.10.2.4325
Sukma, F., & Zulheldi. (2021). Government Policies in Economic Empowerment of Muslim Communities in the Digital Economy Era. El-Mashlahah, 11(2), 146–163. https://doi.org/10.23971/elma.v11i2.3108
Suwanposri, C., Bhatiasevi, V., & Thanakijsombat, T. (2021). Drivers of Blockchain Adoption in Financial and Supply Chain Enterprises. Global Business Review. https://doi.org/10.1177/09721509211046170
Taufiki, M., Darsyah, R., & Ridha, M. (2022). The Use of Maxims (al-Qawā͑id al-Uṣūliyyah wa al-Fiqhiyyah) in Legal Argumentation of Sharia Economic Court Decisions in Indonesia. Al-Ihkam: Jurnal Hukum Dan Pranata Sosial, 17(1), 165–188. https://doi.org/10.19105/AL-LHKAM.V17I1.6070
Trishananto, Y., Mas’ud, F., Setiawan, & Fauziah, U. N. (2024). Formulating policies for halal tourism in Indonesia based on Islamic law. Ijtihad : Jurnal Wacana Hukum Islam Dan Kemanusiaan, 24(1), 47–70. https://doi.org/10.18326/ijtihad.v24i1.47-70
Utami, N., Subagiyo, R., & Asiyah, B. N. (2023). Reputational Risk Management Strategy at Indonesian Sharia Bank and Muamalat Indonesian Bank. Balance: Journal of Islamic Accounting, 4(1). https://doi.org/10.21274/balance.v4i1.7726
Wahyudi, I., Nasrudin, M., & Sainul. (2021). Quantification of Sell-Buy Objects in Borongan Transaction at Metro City: An Islamic Law Perspective. Journal of Islamic Law, 2(1), 94–118. https://doi.org/10.24260/jil.v2i1.165
Yahya, A., Yusri, Y., Adwani, A., Adli, M., & Jafar, M. (2023). Legal Study of Building Sharia-based Investment in Aceh: The Challenges After the Enactment of the Qanun of Sharia Financial Institution. Samarah, 7(2), 959–977. https://doi.org/10.22373/sjhk.v7i2.17653
Yusmad, M. A., Irwansyah, Bin Marinsah, S. A., Ayyub, M., & Muang, M. S. K. (2024). Revitalization Supervision Islamic Banking in Enhancement Compliance in Indonesia and Malaysia. Samarah, 8(1), 468–494. https://doi.org/10.22373/sjhk.v8i1.20524

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms: (1) Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License (CC-BY-SA) that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal; (2) Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal; (3) Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).