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
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<![CDATA[Measuring the Financial Resilience of Indonesian Banking Sector under Geopolitical Uncertainty Using Panel Vector Autoregression (PVAR) ]]>
<![CDATA[Nisak, Khoirun]]>;
<![CDATA[Setyowati, Endah]]>;
<![CDATA[Najib, M. Thoha Ainun]]>
<![CDATA[ The International Journal of Financial Systems Vol. 3 No. 2 (2025) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v3i2.88
<![CDATA[Geopolitical tensions can affect the stability of companies, including Indonesia's banking sector. Geopolitical risk, as measured by the Geopolitical Risk Index (GRI), is an external factor that reflects economic and political uncertainty arising from global adverse events. This study aims to understand the dynamics of the interaction of geopolitical risk on the stability of banking indicators, including ROA, ROE, CAR, and NPL. Furthermore, this study aims to assess financial resilience in the banking sector amid geopolitical tensions. Sampling was conducted across banking categories, including KBMI 4, KBMI 3, Islamic banks, and regional development banks. The data used are quarterly panel time series from 2015 to 2024. The analysis was conducted using Panel Vector Autoregression (PVAR) with the Generalised Method of Moments (GMM) approach. The results show that the impact of the GRI shock on banking indicators is short to medium-term, with the most significant effects on profitability (ROA, ROE) and credit quality (NPL). The results confirm that global geopolitical pressures play a dominant role in explaining fluctuations in bank indicators in Indonesia, particularly capital efficiency and capital structure. Based on the dynamics of these interactions, Bank A, Bank B, Bank D, and Bank E are classified as more resilient, and Bank C, Bank F, Bank G, and Bank H are classified as less resilient. More resilient banks are characterised by a low GRI impact on ROA and CAR, and a quick return to stability, while less resilient banks have a high GRI impact on ROE and CAR.]]>
<![CDATA[Artificial Intelligence and the Fragile Fortress: Addressing the Security and Data Privacy Gaps in Indonesia’s Financial Sector Resilience ]]>
<![CDATA[Maturbongs, Yoseph Hendrik]]>
<![CDATA[ The International Journal of Financial Systems Vol. 3 No. 2 (2025) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v3i2.89
<![CDATA[Indonesia’s financial sector embodies a paradox of a “fragile fortress”: while Artificial Intelligence (AI) accelerates innovation and strengthens external facades, it simultaneously embeds systemic vulnerabilities within its digital architecture. To address this dichotomy, this article introduces the Algorithmic Digital Integrity Fault Lines Syndrome (ADIFL Syndrome) as a novel theoretical framework. ADIFL conceptualises six interlinked algorithmic risks, cyber-privacy vulnerability, data abuse by design, erosion of social legitimacy, infrastructure fragility, regulatory asymmetry, and AI service unreliability that collectively erode digital integrity. Using a qualitative-constructive methodology grounded in systemic theories and strategic case studies, the study demonstrates that these risks are not isolated incidents but manifestations of deeper structural fault lines. Findings reveal how compounding vulnerabilities undermine resilience and legitimacy, offering actionable policy recommendations to strengthen adaptive governance. Furthermore, the article proposes the Digital Integrity Risk Index (DIRI) as a future evaluative tool, complete with measurable indicators for each ADIFL subset. By framing AI risks as emergent and interconnected phenomena, this research provides a conceptual foundation for building anticipatory digital resilience, relevant not only to finance but also to critical domains such as public services, healthcare, and education.]]>
<![CDATA[Firm-Level Determinants of Agency Channel Performance in Indonesia’s Life Insurance Industry ]]>
<![CDATA[Serpina, Nada]]>;
<![CDATA[Hafidh, Ezra Pradipta]]>;
<![CDATA[Melati, Rosi]]>
<![CDATA[ The International Journal of Financial Systems Vol. 3 No. 2 (2025) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v3i2.90
<![CDATA[The insurance sector plays a crucial role in supporting economic stability and household financial protection. However, insurance penetration in Indonesia remains significantly lower than in many peer countries. Improving insurance premium growth is therefore essential, and the agency distribution channel represents one of the key contributors to this objective. This study identifies the key determinants influencing agency channel performance in Indonesia’s life insurance industry, focusing specifically on firm-level factors and their implications for premium growth and market penetration. Using panel data from life insurance companies over the period 2018–2024, a random effects regression analysis reveals significant positive impacts from company total assets, acquisition costs, training costs, number of branch offices, and agent productivity. Affiliation with banking groups, while statistically significant, shows a negative association. Meanwhile, the number of agents, marketing expenses, ownership type, and external macroeconomic factors, including financial sector development indicators, showed no significant influence. These results suggest that internal company resources, structured incentive schemes, well-designed training programs, and expanded branch offices networks are vital for enhancing agency productivity and driving premium growth. The findings emphasise quality over quantity in agency management and suggest targeted strategies for improving distribution effectiveness. From a policy perspective, regulatory authorities such as Otoritas Jasa Keuangan (OJK) should encourage agency professionalisation and closely monitor incentive systems to improve distribution effectiveness and expand insurance penetration. By doing so, the life insurance sector can enhance household financial protection, support financial inclusion, and contribute more effectively to Indonesia’s long-term economic growth.]]>
<![CDATA[Revisiting the Influence of Lending Rate to Indonesia’s Credit Market ]]>
<![CDATA[Luviyanto, Afif Narawangsa]]>;
<![CDATA[Prabowosunu, Mohammad Alvin]]>;
<![CDATA[Pavayosa, Erin Glory]]>
<![CDATA[ The International Journal of Financial Systems Vol. 3 No. 2 (2025) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v3i2.91
<![CDATA[This paper investigates the responsiveness of credit volumes to changes in lending rates in Indonesia and reexamines the strength of the monetary transmission mechanism through the credit channel. Using a vector autoregression framework applied to disaggregated bank credit data by sector, loan type, and firm size, we analyse how policy-driven interest rate movements propagate into actual lending outcomes. The results reveal a markedly uneven transmission: credit to micro, small, and medium enterprises (MSMEs) shows negligible sensitivity to interest rate changes, whereas lending to large firms responds more appreciably. In particular, bank credit to large corporates declines significantly when policy rates rise, consistent with conventional theory, while credit to smaller firms remains largely unaltered. These findings suggest that the traditional interest rate pass-through is fragmented and weak in key segments of the economy, undermining the efficacy of pricebased monetary policy. The analysis points to structural factors, including heterogeneous bank behaviour, borrower constraints, and a propensity of banks to shift toward safer assets in uncertain times as underlying causes. The findings imply the need for a more nuanced policy approach that complements interest rate adjustments with targeted interventions to achieve broad-based credit stimulus and effective monetary control. ]]>
<![CDATA[Optimizing Strategic Economic Pillars for National Resilience: A Study on the Impact of Trump’s 19% Tariff on Indonesia’s Economic Stability ]]>
<![CDATA[Zahra, Khalista Arintyas]]>;
<![CDATA[Kautsar, Farah Amilya]]>;
<![CDATA[Ilma, Ajeng Faizah Nijma]]>
<![CDATA[ The International Journal of Financial Systems Vol. 3 No. 2 (2025) ]]>
Publisher : <![CDATA[Otoritas Jasa Keuangan ]]>
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DOI: 10.61459/ijfs.v3i2.94
<![CDATA[As a global superpower, the United States plays a dominant role in international political and economic dynamics. The election of Donald Trump in 2017, under the “Make America Great Again” agenda, marked a shift toward protectionist trade policies, including higher import tariffs, in response to China’s rapid economic rise, triggering the U.S.–China trade war. Although U.S. import tariffs were subsequently reduced from 32% to 19%, they continued to pose risks to economic stability in developing countries, including Indonesia. This study employs a mixed-methods approach combining qualitative analysis and quantitative tools—SWOT, Internal–External Factor Evaluation (IFE–EFE), and the Analytic Hierarchy Process (AHP) to examine the impact of the trade war on Indonesia’s economic stability and to formulate a prioritized strategic policy mix. The results indicate that strengthening national economic resilience requires a balanced inward- and outward-looking strategy, including export-oriented industrial downstreaming supported by TKBI policies, export market diversification through RCEP and IEU–CEPA partnerships, enhanced utilization of domestic products (P3DN), and the implementation of Local Currency Settlement (LCS). The findings suggest that enhancing economic resilience in developing countries facing protectionist trade shocks requires a coordinated policy mix integrating trade, industrial, monetary, and financial stability policies, while highlighting the strategic role of financial authorities in mitigating transmission risks from global trade disruptions to the domestic financial system.]]>
