Strengthening the Role of Sharia Public Banking in the Indonesian Construction Industry: Towards an Atmosphere of Sustainable Urban Development

Abstract

The sharia public banking is one of the major finacing methods in Indonesian contraction industry. The big sharia banks such as BTPN Syariah, Bank Syariah Mandiri, BNI Syariah, and BRI Syariah (named CR4) play a major role in financing construction industry in Indonesia. The CR4 monopolize the construction industry that causes an unfair competition, while the Financial Control Authority (called Otoritas Jasa Keuangan, OJK) has yet issued regulations that favor small- scale banks. As a result, this competition causes the impact on inequality in financing construction service projects. This paper analyzes the competition within the banking industry, especially sharia public banks, the factors that affect the level of competition, and the improved regulation by the OJK in order to mitigate the competitive fringe competition in the construction financing. This study emphasise that the capital has a significant positive effect in the form of minimum capital limitation regulation. With this regulation, the small scale sharia public bankings would be merged and financially stronger to support the construction projects. This revised regulation aims to achieve the distribution of sustainable urban development implementation in Indonesia.