The International Journal of Financial Systems
Financial systems form the backbone of modern economies, comprising a complex network of institutions, markets, regulations, and instruments that facilitate the efficient allocation of resources, risk management, and economic growth. Given the increasingly interconnected nature of our global economy, studying financial systems has become imperative for individuals, organisations, and policymakers alike. The development of financial systems is an ongoing process influenced by a myriad of factors, including technological advancements, regulatory frameworks, and changing market dynamics. Over time, financial systems have evolved from traditional, localised models to globalised, technology-driven ecosystems. Innovations such as digital banking, mobile payments, blockchain technology, and algorithmic trading have revolutionised financial transactions, reshaping the landscape of financial systems. Research on financial systems holds immense importance, as it delves into the intricacies and complexities associated with these systems. By examining various facets such as financial institutions, markets, instruments, regulatory frameworks, and risk management practices, researchers contribute to our understanding of how financial systems function, their efficiency, and their stability. Policymakers rely on this research to formulate effective regulations and policies that promote stability, enhance resilience, and mitigate systemic risks within financial systems. Furthermore, practitioners in the field of finance, including bankers, financial analysts, investment managers, and policymakers, benefit greatly from research on financial systems. These insights enable them to make informed decisions, manage risks effectively, and develop strategies that foster financial intermediation, sustainable economic growth, and financial inclusion. SCOPE The International Journal of Financial Systems welcomes papers from researchers, academics, and practitioners worldwide. We specifically invite contributions that address the following key topics: Financial Institutions Financial Instruments Financial Markets Financial Regulations and Policies Financial Inclusion Financial Literacy and Education Islamic Finance Sustainable Finance Innovative Financial Technology Financial System Stability Financial Integration
Articles
27 Documents
<![CDATA[Measuring Optimal Portfolio for Selected Financing Contracts of Islamic Banks in Indonesia ]]>
<![CDATA[Wiranatakusuma, Dimas Bagus]]>;
<![CDATA[Nindy, Aurellia Azh]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 1 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i1.5
<![CDATA[Financing is the primary factor in boosting the operational performance of Islamic banks. Financing is a productive asset that is susceptible to risk. The research mainly aims to find the optimal limit that can be tolerated in order to improve the operational performance of Islamic banks. The research objects cover Mudharabah, Musharakah, Murabahah, and Istishna financing contracts. This study shows the optimal level of Mudharabah growth should be between 1% and 4%, Musharakah growth should be between 3% and 6%, Murabahah growth should be between 2% and 3.6%, and Istishna growth should be between 1% and 3.7%.]]>
<![CDATA[Does Cross-Border-Establishment Improve Competition and Performance of Indonesia’s Financial Sector? ]]>
<![CDATA[Heni Nugraheni]]>;
<![CDATA[Satrio Nugroho]]>;
<![CDATA[Azizah Surayya Warman]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 1 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i1.6
<![CDATA[This study examines the effects of cross-border establishment of financial institutions on competition level in Indonesia’s financial sector. We use sample data on all conventional banks, securities firms, life and general insurance companies from 2013-2020. To measure competition, we use Lerner index, Boone indicator and Panzar-Rosse. Our analysis shows that the entry of foreign financial institutions may increase the competition in the financial sector. Further analysis shows that the increasing competition have positive impact to profitability and intermediation, reflected by the return on asset, loan ratio, transaction value, and insurance premium income to total asset ratio. However, foreign financial firms tend to have higher market power compared to domestic counterparts due to the efficiency in doing their businesses. Hence, domestic financial institutions need to boost efficiency, particularly through the adaption of technology and capacity enhancement of human resources, in order to compete with more advanced foreign financial firms.]]>
<![CDATA[Formulating Natural Disaster Insurance Scheme for Micro, Small, and Medium Enterprises (MSMEs) in Indonesia ]]>
<![CDATA[Setijawan, Edi]]>;
<![CDATA[Sutiyono, Guntur]]>;
<![CDATA[Wicaksono, Gandhi Cahyo]]>;
<![CDATA[Ardiyanti, Historya]]>;
<![CDATA[Christi, Petra]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 1 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i1.7
<![CDATA[The existence of disaster insurance in Indonesia is particularly important for disaster-prone areas. In recent years, only 2.96% of 64 million MSMEs have disaster insurance. This is because the existing disaster insurance scheme has not fully met the expectations of MSMEs regarding its premium value, its claims mechanism and MSMEs financial capability. This research seeks to explore the factors that influence MSMEs to own disaster insurance, by using quantitative analysis of Panel Fixed Effects Model as the first model and Probit Models as the second and third models as well as qualitative analysis. The result will be utilized to formulate the appropriate disaster insurance product which optimize insurance features based on MSMEs’ demand, encourage regulatory support and improve government funding capacity. Indonesia is currently facing approximately IDR19.75 trillion (USD1.4 billion) financing gap to cover the loss caused by disasters hence, there is also a need to create a high- level financing scheme to cover the gap.]]>
<![CDATA[A Structural Equation Model of Governing Factors Influencing the Development of Sustainable Insurance Product in the Future: Evidence from Indonesian Insurance Industry ]]>
<![CDATA[Ismalina, Poppy]]>;
<![CDATA[Junarsin, Eddy]]>;
<![CDATA[Maftuchah, Istiana]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 1 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i1.8
<![CDATA[Designing and proposing sustainable insurance programs to insurance companies that run their businesses in Indonesia have been one of the insurers’ approaches to creating more stable and certain industry climate. Moreover, the Indonesian Financial Services Authority or OJK encourages financial services sector actors in creating, developing sustainable product innovations, and supporting financing of production activities that can create economic growth, social justice and environmental quality improvement. We conduct survey and analyze whether insurance companies in Indonesia are interested in implementing sustainable finance in insurance industry and developing sustainable insurance products. Participants’ responses depict insurance firms’ paradigm on sustainable insurance. In this study a framework is proposed for governing factors that impact the development of sustainable insurance product in the future such as the level of knowledge, readiness, and current sustainable insurance product development. To clarify the relationships, a structural equation model is utilized to examine the framework fit with the hypothesis for the four latent variables of this study. Acceptable goodness of fit is established for validity of the measurement model. The test of validity is accepted for the structural model in this study. The SEM results conclude that an insurer’s knowledge of sustainable finance principles affects the insurance firm’s readiness to implement sustainable insurance. Subsequently, the insurer’s readiness affects its current level of sustainable insurance product development. Eventually, the insurer’s knowledge and current development in sustainable insurance products have a positive effect on the insurance firm’s willingness to develop sustainable insurance products in the future. Thus, this study provides valuable information about factors affecting the development of sustainable insurance products in the future as a key for a successful implementation of sustainable finance in Indonesian insurance industry.]]>
<![CDATA[Disclosure Quality Assessment of Sustainability Reporting Practices in Emerging Countries: Case of Indonesia’s Banking Sector ]]>
<![CDATA[Maftuchah, Istiana]]>;
<![CDATA[Pramono, Teddie]]>;
<![CDATA[Bachtiar, Novita]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 1 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i1.15
<![CDATA[Indonesia has become a major force in advancing sustainable finance across emerging countries. One of the reasons was due to the role of the regulator and supervisor of Indonesia’s financial services industry, Indonesia Financial Services Authority, who required, through its regulation, Financial Services Institutions, Issuers and Public Companies to submit sustainable reports to Indonesia FSA and publish them for the public. This study is intended to conduct an assessment on the scope of disclosure presented on the sustainability report submitted by the Indonesian banking industry. The methodology used is qualitative with descriptive analysis. The evaluation was conducted through a desk study by analyzing banks’ sustainability reports available on their websites. The results of the analysis demonstrated that two years before the implementation of the Indonesia FSA sustainable finance regulation, only 28,5% of sustainability reports, which have submitted voluntarily by large commercial banks, are in line with materiality and stakeholders’ engagement principles. After the sustainable finance regulation was implemented, it was found that only 56,6% of the sustainability reports submitted met the materiality and stakeholders’ engagement principles required by the regulation. Therefore, the biggest challenge lies in the effort to promote awareness and understanding on the importance of sustainable finance and the quality of sustainability report disclosure.]]>
<![CDATA[The Impact Of Insurtech On The Insurance Business Model In Indonesia ]]>
<![CDATA[Widyani, Donafeby]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 2 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i2.24
<![CDATA[In Indonesia, the integration of InsurTech into the business process is beginning to manifest, with emerging companies harnessing technology across various aspects, including customer acquisition, underwriting, claims, billing, and customer service. Furthermore, established companies are incorporating technology into specific facets of their business processes to improve overall efficiency and accuracy. Thus, it is intriguing to delve deeper to the phenomenon to understand what factors are driving the growth of InsurTech there, how it spurs business model innovation, what gaps exist between the country’s current insurance business models and the models required for development, and what capabilities existing insurance companies need to fill in these gaps. This is a qualitative study that interviewed 10 participants, which are C-level executives in ten major national and multinational insurance companies in Indonesia. The finding revealed that efficiency gains, achieved through streamlined processes and cost reduction, drive significant investments in InsurTech. Regulatory challenges and technological advancements shape the trajectory of InsurTech. The direct insurer consumer relationship facilitated by InsurTech enhances speed, ease, and transparency in insurance processes. However, challenges such as underdeveloped business models and resistance to innovation exist. Successful InsurTech integration requires a holistic approach, combining creative thinking, supportive leadership, and industry collaboration. InsurTech not only enhances customer experiences but also holds promise for sustainable business growth through operational optimisation in the Indonesian insurance sector.]]>
<![CDATA[How Did Depositors React to Bank Risks During the Covid-19 Outbreak in Indonesia? ]]>
<![CDATA[Tumbelaka, Indra]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 2 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i2.27
<![CDATA[The Covid-19 outbreak provides a unique setting to examine the association between deposits and bank risk, including loan risk, as both deposits and loan risk increased significantly during the outbreak. Employing dynamic regression models in datasets from the Indonesian banking industry before and during the Covid-19 outbreak, this study provides new evidence that depositor discipline is stronger during the outbreak, as depositors are more sensitive to loan risk. The findings are different from prior studies in that depositor discipline tends to diminish during the crisis period. Furthermore, this study confirms the effectiveness of the deposit insurance system implementation, as uninsured depositors exercise stronger discipline. Last but not least, this study documents that depositor discipline is weaker in government banks as those banks are perceived as having implicit guarantees from the government.]]>
<![CDATA[Regulating Crypto Assets: Understanding Stablecoins and Unbacked Crypto Assets Systemic Implication on the Financial Market ]]>
<![CDATA[Jausyan, Maulana Ahmad Rayhan Al]]>;
<![CDATA[Obed Juan Benito]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 2 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i2.29
<![CDATA[To bring clarity to the emerging regulatory concerns, this study employs GARCH and TVP-VAR models to compare stablecoins and unbacked crypto assets' profiles and their systemic implications to the financial market. Using daily price data, it reveals that stablecoins are more stable than unbacked crypto assets while both are having weak connectivity at the same time. Moreover, stablecoins exert a more significant systemic impact on the financial market. The time-varying analysis also indicates high connectivity between crypto assets and traditional financial assets during crisis. These findings inform regulatory frameworks, ensuring stability in the financial system while promoting fintech innovation.]]>
<![CDATA[Evaluation of the Productivity Performance of BPR for Economic Resilience in East Java: A View from Efficiency and Technological Change ]]>
<![CDATA[Aufa, Aufa]]>;
<![CDATA[Maripatul Uula, Mimma]]>;
<![CDATA[Maulida, Syahdatul]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 2 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i2.33
<![CDATA[The Rural Bank (BPR) plays a crucial role in the Indonesian banking industry, particularly at the regional level, serving as an alternative financ-ing source for the unbankable population. This research aims to analyse the productivity levels of BPRs in East Java using the Malmquist Pro-ductivity Index (MPI) during the period from 2016 to 2022. The study sample comprises 30 BPRs in East Java. The analysis results indicate that the productivity of BPRs in East Java fluc-tuates from year to year. Moreover, during the COVID-19 pandemic, BPR productivity experi-enced a significant decline. The study provides recommendations for BPR management and regulators to pay more attention to BPR pro-ductivity and decision-making foundations.]]>
<![CDATA[Determinants of BPR Competitiveness in New Normal Era: Empirical Study in Indonesia ]]>
<![CDATA[Sipahutar, Ida Rumondang]]>;
<![CDATA[Sari, Evita]]>;
<![CDATA[Warman, Azizah Surayya]]>
<![CDATA[ The International Journal of Financial Systems Vol. 1 No. 2 (2023) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v1i2.38
<![CDATA[As the rural bank in Indonesia, Bank Perkreditan Rakyat (BPR) serves people with limited products and services and is less regulated compared to Commercial Banks. During the COVID-19 pandemic, the growth rate of BPR slowed down. We developed a hypothesis on the negative influence of financial technology (fintech) on the competitiveness and performance of BPR. Using all BPR companies and 22 Fintech Lending companies as samples to measure the HHI and Lerner Index, we found that BPR and Fintech Lending companies were competing in an unconcentrated market. Several variables could not be examined while studying the determinants of BPR’s competitiveness, including Regional GDP, BOPO, third party funds, Loan Credit, ROE, NIM, and CAR. Several determinants, such as the NPL, Fintech Lending, and COVID-19 pandemic, were found to have significant negative impacts on the BPR’s competitiveness. Interestingly, BPR’s banking digitalization, as represented by its IT capability, was found to be not significant in this study.]]>
