Fractional Reserve Banking is a banking and financial system used in most countries around the world. This research aims to look at its impact empirically and at the contributions given from the components of fractional reserve banking against inflation that occurs in Sharia Commercial Banks and Sharia Business Unit. The fractional reserve banking components covered in these studies are statutory reserve requirements, total deposit, total financing, Mismatch Ratio, and total non-performing financing. This research used VAR VECM and ECM as analysis tools and collected secondary data from Indonesia’s Financial Service Authority (OJK) that spanned from June 2014 to September 2018. The results of this research found that the largest contributor on Sharia Commercial Bank (BUS) is the Statutory Reserve Requirement while in sharia Business Unit the results showed that Third Party Fund and Mismatch ratio provided the greatest contributions against inflation. Moreover, it shows that fractional reserve banking occurred both in UUS and BUS. To prevent fractional reserve banking from affecting in the future, the control of mismatch and introducing the irrevocable investment account might be the solutions.
DOES FRACTIONAL RESERVE BANKING SYSTEM EXIST IN INDONESIAN ISLAMIC BANKING?
Tanggal Publikasi: 25 Jan 2023
Fractional Reserve Banking; Islamic Banking; Mismatch; Inflation.