The Resilience of Islamic Banks in Facing the Economic Dynamics in Indonesia

Abstract

Bank as a fund’s distributor from the fund’s supplier to the fund’s holders has a important role in keeping the stability of economy especially in monetary. On Sub-prime Crisis in 2008, Islamic Banks proved that they can resilient when activities of Conventional Banks tend to be disturbed. The condition of the economy in Indonesia is being worse and volatilizing. To keep the economy health, we must know about the condition of the economy and the right policy. This paper tries to analyze the resilience of Islamic Banks, the effect of the economy at this time to the next and the factors which affect the resilience of Islamic bank in short term and long term. The Resilience of the Islamic Banks is measured by CAR and macroeconomics variables who can describe about the economy and also affect the resilience are Exchange Rate, Consumer Price Indices, Jakarta Composite Index, BI Rate and Investment Lending Rate. Error Correction Mechanism (ECM) is used to identify the effect of the macroeconomics variable in short term and long term. The result show that BI Rate has significant effect to CAR in short term with speed of adjustment (speed to go to equilibrium when CAR has shock) value 86 %. In long term, the factors which significantly affect CAR are Exchange Rate and BI Rate.