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Building an early warning towards the resilience of Islamic Banking in Indonesia

Kusuma, Dimas Bagus and Duasa, Jarita (2017) Building an early warning towards the resilience of Islamic Banking in Indonesia. Al-Iqtishad: Journal of Islamic Economics, 9 (1). pp. 13-32. ISSN 2087-135X

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Abstract

An early warning system (EWS) is widely used as surveillance mechanism for preserving financial system stability. This paper addresses the issue of namely which macroeconomic indicators that are capable of signaling adverse shocks towards the resilience of Islamic banking in Indonesia. This research uses an extraction signal approach as EWS mechanism. The results suggest that there are several indicators that (1) IBRI, which is composed from standardized deposit and financing, is able to figure out the resilience of Islamic banking. The resilience of Islamic banking was considered stable since the index was moving below the normal line during the global financial crises, and (2) Some selected macro financial indicators, M2/reserve (M2res), credit growth (CG), real effective exchange rate (REER), and inflation rate (INF) empirically show low noise to signal ratio. It means that these four variables are capable of signaling vulnerabilities due to adverse external shocks. The paper recommends that the resilience of Islamic banking needs to be supported by the resilience in the real sector. Sistem deteksi dini banyak digunakan sebagai mekanisme surveillans guna menjaga stabilitas sistem keuangan. Tulisan ini membahas isu terkait dengan manakah indikator makroekonomi yang mampu mengeluarkan sinyal karena tekanan eksternal kaitannya terhadap ketahanan perbankan syariah. Tulisan ini menggunakan pendekatan ekstraksi sinyal sebagai mekanisme sistem deteksi dini. Hasil penelitian ini menyarankan bahwa beberapa indikator, yaitu pertama, IBRI yang terdiri dari simpanan dan pembiayaan yang sudah distandarisasi, mampu menggambarkan tingkat ketahanan perbankan Syariah yang bervariasi. Pada tahun 2004, tingkat ketahanan perbankan Syariah menurun, namun secara bertahap membaik dan stable hingga tahun 2016. Tingkat ketahanan perbankan Syariah menunjukkan arah yang stabil karena IBRI bergerak dibawah garis hijau selama krisis global. Kedua, beberapa indikator makro terpilih, yaitu M2/reserve (M2res), pertumbuhan kredit (CG), real effective exchange rate (REER), dan tingkat inflasi (INF), secara empiris menunjukkan ratio signal to noise yang rendah. Ini berarti indikator terpilih tersebut mampu menjadi indikator utama dalam mengeluarkan sinyal kerentanan karena adanya tekanan eksternal. Akhirnya, tulisan ini memberikan rekomendasi bahwa ketahanan perbankan Syariah perlu didukung oleh ketahanan di sektor riil mengingat basis usahanya adalah pengembangan sektor riil.

Item Type: Article (Journal)
Additional Information: 3479/62229
Uncontrolled Keywords: early warning system, resilience of Islamic banking, extraction signal approach sistem deteksi dini, ketahanan perbankan Syariah, pendekatan ekstraksi sinyal
Subjects: H Social Sciences > HG Finance > HG1501 Banking
H Social Sciences > HG Finance > HG3368 Islamic Banking and Finance
Kulliyyahs/Centres/Divisions/Institutes: Kulliyyah of Economics and Management Sciences > Department of Economics
Depositing User: Prof. Dr. Jarita Duasa
Date Deposited: 27 Feb 2018 09:40
Last Modified: 27 Feb 2018 09:41
URI: http://irep.iium.edu.my/id/eprint/62229

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