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Safira Azzahro
Universitas Muhammadiyah Yogyaarta

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Public Policy Framework for Islamic Banking Integration in Dual Financial System Implementation Safira Azzahro
Journal of State Public Policy Vol. 1 No. 1 (2025): Journal of State Public Policy
Publisher : Yayasan Cerdas Pedia Indonesia

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.65101/jspp.v1i1.235

Abstract

Islamic monetary policy faces unique challenges in a dual banking system due to the prohibition of interest and reliance on profit-sharing mechanisms. This study reviews the transmission effectiveness of instruments such as FASBIS, PUAS, SBIS, and SukBI in controlling inflation and promoting real output growth in Indonesia, Malaysia, and Pakistan. The literature indicates that although Islamic instruments exhibit greater quantitative impact, their response lags behind conventional policy. Limited secondary sukuk market depth and sensitivity to conventional interest rates hinder independent transmission. We recommend synergies between Islamic fiscal tools (zakat and waqf) and monetary measures, diversification of profit-sharing instruments, and fintech innovations like blockchain-based Smart Sukuk to strengthen market inclusion and liquidity. Cross-country regulatory harmonization is also essential for enhancing Islamic instrument efficacy. These findings offer a public policy framework adaptive to the structural diversity of Muslim-majority countries and aligned with maqāṣid al-sharī’ah objectives.
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