TOWARD OPTIMUM SYNERGY OF MONETARY POLICY IN DUAL FINANCIAL/BANKING SYSTEM

In a country adopting dual financial/banking system, where a conventional financial system coexists with an Islamic financial system, monetary authority has the responsibility to maintain financial/monetary stability and synergy of both systems. This study analyses and compares one of the main pillars of conventional monetary system and Islamic monetary system (i.e., interest system vs. profit-and-loss sharing/PLS system) and try to come up with the possible conduct of optimum monetary policy under dual financial/banking system. The results show that PLS system is superior to interest system in fairness, justice, efficiency, and stability. Therefore, the optimum synergy in the dual financial/banking system can be achieved when monetary policy in conventional systembenchmarks its policy rate to the PLS market return in Islamic financial market of Islamic system, which will ensure optimum market efficiency that maximize distributive social welfare and justice. Monetary policy in managing money supply is only a response to thedynamic activity in the real sector. While, active monetary policy can be conducted, not by altering M, but by altering V, i.e. to increase the flow of money in the economy by issuing central bank SUKUK with PLS market return to finance government projects, commercially as well as socially, in the real sector.Keywords: Islamic Monetary System, Islamic Financial System, Dual Banking Financial Syste

TOWARD OPTIMUM SYNERGY OF MONETARY POLICY IN DUAL FINANCIAL/BANKING SYSTEM

In a country adopting dual financial/banking system, where a conventional financial system coexists with an Islamicfinancial system, monetary authority has the responsibility to maintainfinancial/monetary stability and synergy of both systems. This study analyses and compares one of the main pillars of conventional monetary system and Islamic monetary system (i.e., interest system vs. profit-and-Ioss sharing/PLS system) and try to come up with the possible conduct of optimum monetary policy under dual financiallbanking system. The results show that PLS system is superior to interest system in fairness, justice, efficiency, and stability. Therefore, the optimum synergy in the dual financiallbanking system can be aclJieved when monetary policy in conventional system benchmarks its policy rate to the PLS market return in Islamicfinancial market of Islamic system, which will ensure optimum market efficiency that maximize distributive social welfare andjustice. Monetary policy in managing money supply is only a response to the dynamic activity in the real sector. While, active monetary policy can be conducted, not by altering M, but by altering V. i.e. to increase theflow of money in the economy by issuing central bank SUKUK with PLS market retum to finance government projects, commercially as well as socially, in the real sector. Keywords: Islamic Monetary System, Islamic Financial System, Dual Banking Financial Syste

ALUR TRANSMISI DAN EFEKTIFITAS KEBIJAKAN MONETER GANDA DI INDONESIA

This study aims to investigate transmission mechanism of dual monetary system from conventional and Islamic policy rates to inflation and output using Granger and VAR methods on monthly Indonesian banking data form January 2003 to December 2009. The result shows that conventional transmission mechanismsfrom conventional policy rate are all linked tooutput and inflation, while Islamic policy rate are not linked to output and inflation.In addition, the interest rate, credit and conventional interbank rate shocks give negative and permanent impacts to inflation and output, while PLS, financing and Islamic interbank PLS, as well as SBIS(Central Bank Shariah Certificate) as Islamic policy rate shocks give positive and permanent impacts to inflation and output. SBI (Central Bank Certificate) as conventional policy givespositive impact to inflation and negative impact to output

INFLUENCE ANALYSIS OF SOCIAL VALUES ON THE NUMBER OF ISLAMIC MONEY DEMAND IN INDONESIA

As one of the existing instruments in the economic system of Islam, Zakat Becomes Important to Investigate its influence in the Formulation of monetary policy in Indonesia, especially relating to the amount of money. This paper analyzes whether Zakat will of affect, the money demand of Islam in Indonesia, by applying the Vector Error Correction Model (VECM) on monthly data During 2001 to 2007. This paper derives Trust interesting results on both conventional and Islamic money demand in Indonesia. In general, the result confirms the Domination of conventional economic system, one relative to the Islamic (Sharia), while the social value does not significantly affect the money demand in Indonesia.JEL Classification: C32, E41, P52Keywords: Money demand, social values, Islam, the VAR / VEC

CLASSICAL AND CONTEMPORARY FIQH APPROACHES TO RE-ESTIMATING THE ZAKAT POTENTIAL IN INDONESIA

This study aims to re-estimate the potential of zakat in Indonesia based on the classical and contemporary fiqh approaches, as well as including optimistic and realistic scenarios with different assumptions. Under the classical fiqh approach, the potential amount of zakat was calculated based on the zakatable assets that have been agreed upon by all scholars, including only zakat on savings. Meanwhile, using the contemporary fiqh approach, the zakat potential was calculated based on a new classification of zakatable assets agreed by contemporary scholars after considering the issue of economic development, including professional (household) zakat, corporate zakat and zakat on savings. The results show that, based on the classical fiqh approach, the potential zakat amount is IDR 69.57 trillion, or equivalent to 0.56% of GDP under the optimistic scenario, and it is IDR 13.26 trillion, or equivalent to 0.11% of GDP, under the realistic scenario. Meanwhile, based on the contemporary fiqh approach, the potential zakat amount is IDR 216.54 trillion, or equivalent to 1.75% of GDP, under the optimistic scenario, and it is IDR 74.87 trillion, or equivalent to 0.60% of GDP, under the realistic scenario. The estimated zakat potentials are still significantly higher than actual zakat collection recorded. However, the results of classical approach under the realistic scenario (0.11% of GDP) is the closest to the real 2018 zakat collection of 0.05% of GDP, which could be the indication that most Indonesian Muslims follow classical fiqh approach in calculating their zakat maal obligation

Determinant Indonesian Islamic Rural Bank's Characteristics on Implementing Financial Technology for Their Business

Abstract. Indonesian Islamic rural bank or usually called Bank Pembiayaan Rakyat Syariah (BPRS) conducts business in Indonesia in activities based on sharia principles and providing banking services. The challenging business of BPRS right now is facing the Financial Technology (Fintech) business that grows very fast. Current market conditions request transactions simpler and easier, and the financial industry must be changed to accommodate this condition. To be able to compete with Fintech company, BPRS must be changed to adapt to the customer's needs by implemented Fintech in their business. The study aims to determinant the issues on implementing Fintech for BPRS. This study applies by using the Delphi method combined with the Likert scale. Data was obtained by an in-depth interview with three groups of experts as respondents including BPRS practitioners, Fintech practitioners, and experts. The result of this study shows Fintech is needed by BPRS to simplify the registration process, assess the quality of financing, expand their market share, and adopt ecosystem processes. This study has resulted in BPRS should develop Fintech by their resource, then collaborate with Fintech company on the Fintech area that can't be developed by BPRS.Keywords: BPRS, Collaboration, Delphi, Ecosystem, Fintech. Abstrak. Bank Pembiayaan Rakyat Syariah (BPRS) melakukan kegiatan usaha di Indonesia dengan kegiatannya berdasarkan prinsip syariah, dan menyediakan jasa layanan perbankan. Tantangan bisnis BPRS saat ini adalah menghadapi bisnis Teknologi Finansial (Tekfin) yang berkembang sangat pesat. Kondisi pasar saat ini meminta transaksi yang lebih sederhana dan mudah, mengakibatkan industri keuangan harus berubah untuk mengakomodasi kondisi tersebut. Untuk dapat bersaing dengan perusahaan Tekfin, BPRS harus bisa mengubah strategi bisnisnya dengan menerapkan Tekfin dalam mengadopsi kebutuhan nasabah. Penelitian ini bertujuan untuk mengetahui permasalahan terkait penerapan Tekfin bagi BPRS. Penelitian ini menggunakan metode Delphi yang dikombinasikan dengan skala Likert. Data diperoleh melalui wawancara mendalam dengan tiga kelompok ahli sebagai responden yaitu praktisi BPRS, praktisi tekfin, dan tenaga ahli. Hasil penelitian ini menunjukkan bahwa Tekfin dibutuhkan BPRS untuk bisa mempermudah proses registrasi, menilai kualitas pembiayaan, memperluas pangsa pasar, dan mengadopsi proses ekosistem. Penelitian ini juga menyimpulkan bahwa BPRS akan mengembangkan Tekfin menggunakan sumber dayanya sendiri, baru setelah itu berkolaborasi dengan perusahaan Tekfin untuk area Tekfin yang tidak dapat dikembangkan oleh BPRS.Kata kunci: BPRS, Kolaborasi, Delphi, Ekosistem, Tekfin

PELAJARAN YANG DIPETIK DARI KRISIS KEUANGAN BERULANG: PERSPEKTIF EKONOMI ISLAM

Financial crises have been repeated again and again over a long period of time since the demise of gold regime in 1915, have been temporarily subsided in the period under Bretton Woods Agreement with gold standard in 1950-1972, and have been reemerged after the collapse of Bretton Woods Agreement with higher frequency and magnitude. The recent subprime mortgage crisis in the US has spread out throughout the world threatening global meltdown. It seems that the conventional world have not really learned the lessons and have handled the crisis only partially in the symptoms without touching the root cause of the crisis. This study tries to determine the anatomy and root causes of the crisis and layout strategies to cure it using analytic descriptive and quantitative approaches under Islamic perspectives. The study concludes that the root causes of the crisis from Islamic economic perspective can be human error and natural phenomenon uncontrollable by human. Human error can be divided into three groups, namely (1) moral decadences that trigger (2) system or conceptual flaws and (3) internal weaknesses. Conceptual system flaws include 1) excess money supply from seigniorage, fractional reserve banking system, credit card and derivatives; 2) Speculation; 3) interest system; 4) international monetary system; and 5) real and monetary sectors decoupling. Empirical results show that riba rooted causes of financial crises (excess money supply 2.8%, interest rate 45.2%, and exchange rate 18.6%) give 66.6% share to financial crises in Indonesia, while if we substitute these three systems according to Islamic perspective (just money supply 0.7%, PLS return 2.5%, and single global currency 0.2%) will give only 3.4% share to financial crises in Indonesia, or a massive reduction of 63.2%. JEL Classification: E44, E51, G21 Keywords: Financial Crisis, Fiat Money, Fractional Reserve, Interest, Speculation, Narrow Banking, Profit-and-Loss Sharing, Single Global Currency

TRANSMISSION CHANNEL AND EFFECTIVENESS OF DUAL MONETARY POLICY IN INDONESIA

This paper investigates the transmission mechanism of dual monetary system from conventional and Islamic policy rates to inflation and output. We apply Granger Causality and VAR methods on monthly data of Indonesian banking, during the period of January 2003 to December 2009. The result shows that conventional policy rate is transmitted to output and inflation, while Islamic policy rate are not. In addition, the shock of conventional interest rate, credit and interbank rate give a negative and permanent impacts on inflation and output, except for SBI (Certificate of Bank Indonesia) with positive impact to inflation  though negatively affect the output. On the other hand, the shock of PLS, financing and Islamic interbank PLS, as well as SBIS (Central Bank Shariah Certificate) give positive and permanent impacts on inflation and output.   Keywords: Monetary transmission mechanism, Interest rate pass through, Conventional Banking, Islamic Banking JEL Classification: E43, E52, G21, G2