Bank Indonesia Research Articles

Driving sustainable competitive advantage in banking: The role of transformational leadership and digital transformation in organizational agility and corporate resiliency

AbstractObjectivesContinuous adaptation and innovation are critical for sustaining a competitive edge in the dynamic and technology‐driven banking sector. This study explores the impacts of transformational leadership and digital transformation on organizational agility and corporate resiliency, and how these factors contribute to sustainable competitive advantage in the banking sector.MethodologyA quantitative approach utilizing a survey method was implemented for the research, which included a sample of 185 units comprising the head office, branch offices, and sub‐branch offices of Regional Banks in Indonesia. Data analysis was conducted using PLS‐SEM with second‐order constructs.FindingsThe results reveal that transformational leadership significantly enhances organizational agility but does not significantly impact corporate resiliency or sustainable competitive advantage. Digital transformation significantly improves both organizational agility and corporate resiliency, yet its effect on sustainable competitive advantage is insignificant. Moreover, organizational agility significantly influences both corporate resiliency and sustainable competitive advantage. Additionally, corporate resiliency makes a significant contribution to sustainable competitive advantage.ConclusionThe study underscores the critical role of transformational leadership and digital transformation in enhancing organizational agility and resiliency. These elements are pivotal in sustaining competitive advantages in the rapidly evolving banking industry.ImplicationsThis research underscores the strategic importance of banks investing in leadership development and digital initiatives to enhance organizational agility and corporate resiliency, which are crucial for maintaining a sustainable competitive advantage.

The Impact of Inflation, Stocks, Sukuk, and Sharia Mutual Funds on Economic Growth in 2017-2023

This study aims to ascertain, at least in part: 1) The impact of inflation on the development of the national economy 2) The performance of sharia stocks and the expansion of the national economy 3) The impact of sukuk on the development of the national economy, as well as the impact of sharia mutual funds on the same, which are the third and fourth impacts 5) Correlation between the development of the national economy in 2017-2023 through inflation, sharia mutual funds, sukuk, and stocks. Bank Indonesia (BI), the Financial Services Authority (OJK), the Central Statistics Agency (BPS), and other reliable sources of information provided the population used in the study. To sort the sample based on criteria set as independent variables, the monthly data source is used once a year. Data sources include time series data published for 2017-2023, which is considered secondary data. The analysis of the data is double linear, this research strategy uses a quantitative-associative methodology. It can be concluded that inflation has a significant adverse impact on the development of the national economy (sig. 0.0001 < 0.05), indicating that increasing inflation causes economic decline, in line with Simanungkalit's (2020) research. Sharia stocks and sukuk show a positive and significant impact on the national economy, with a value of sig. 0.0021 and 0.0019 (< 0.05), respectively, which means that an increase in the instrument will increase economic growth, according to research by Radjak & Kartika (2020) and Ardi (2018).

The Influence of Loan at Risk and Bank Spesific Variables on The Profitability of Commercial Banking in Indonesia Based on Core Capital: Period 2015 to 2022

This research aims to examine the influence of loan at risk (LAR) and other specific bank variables, namely size, leverage, and capital, on the profitability of commercial banks in Indonesia based on the classification of core capital set by banking authorities. The study utilizes panel data regression with a balanced fixed-effect model from a sample of 67 examined commercial banks, both in aggregate and based on the core capital classification of each bank, covering the research period from 2015 to 2022. The results indicate that the credit asset portfolio with LAR quality significantly affects the profitability of commercial banks negatively, both in terms of ROA and ROE, applying to the entire group of commercial banks studied. Meanwhile, other specific variables have varying degrees of influence and significance. Collectively, the independent variables in all research models have a significant impact on the profitability of all commercial banks in Indonesia. The findings of this study can contribute to the reference for bank management and other stakeholders in assessing the profitability performance of commercial banks, as well as expanding the literature in the field of banking.

The Effect Of Board Capital On The Efficiency Of Indonesian Commercial Banks In 2020-2022

This study aims to examine whether Board Capital factors have an effect on the efficiency of state-owned and private commercial banks in Indonesia. This study uses secondary data from annual reports and LinkedIn for 48 commercial banks in Indonesia for the period 2020-2022. The results of the study show that Education Capital does not have an effect on bank efficiency, Experience Capital has a negative effect, and Networking Capital has a positive effect. The significant control variables are NIM, Bank size, Bank age, and Pandemic year. Board of directors' networking becomes an important factor in improving bank efficiency in Indonesia.

Liquidity and credit risks during the COVID-19 pandemic: evidence from a dual banking system

Purpose The purpose of this paper is to investigate the relationship between liquidity risk and credit risk of Islamic and conventional banks in a predominantly Muslim country (Indonesia) adopting a dual banking system. Design/methodology/approach To investigate liquidity-credit risk nexus, this study used a sample of 72 Islamic and conventional banks in Indonesia for a period between 2019 Q4 and 2022 Q1. This paper used a generalized method of moments (GMM) and generalized least square (GLS) estimators. Findings This study found that there is a nonlinear (inverted U-shaped) relationship between liquidity risk and credit risk in dual banking system. Liquidity risk was found to increase credit risk if it is below the optimal threshold, and above this optimal threshold, liquidity risk begins to decrease credit risk, both before and during the pandemic. In addition, the impact of liquidity risk on credit risk is higher in Islamic banks compared to conventional banks. Originality/value This paper reinvestigates the puzzle between credit risk and liquidity risk by taking a sample of a dual banking system country and by considering the period of the COVID-19 pandemic. To the authors’ knowledge, this approach has not been addressed in prior empirical studies.

The Role of Corporate Governance in Banking Performance: Highlighted During the Covid Pandemic (Evidence in Indonesian Bank)

The study aims to analyze the impact of board size, number of non-executive Directors on Board, and Size of the Audit Committee on Return on Assets (ROA) and Tobin’s Q on banks listed on the Indonesian Stock Exchange between 2019 and 2022. The research method used is descriptive statistical analysis and regression test on a sample of 11 banking companies in Indonesia. The data used included relevant variables such as board size, non-executive director composition, audit committee size, ROA, and Tobin’s Q. The results of the analysis show that board size has a significant influence on ROA. However, board size had no significant influence on Tobin’s Q. Furthermore, the number of non-executive directors on board also proved to have a significant influence on ROA. However, the number of non-executive directors on board did not have a significant influence on Tobin’s Q. In addition, the size of the udit Committee also proved to have a significant influence on ROA and Tobin’s Q. The larger size of the Audit Committee provides more effective supervision, better risk management, and transparency in financial reporting, which has a positive impact on the company’s financial performance and market assessment. These findings have important implications that other factors, such as business strategies, risk management policies, or broader external factors, may also influence the company’s performance. Keywords: board size, number of non-executive directors on board, size of audit committee, return on assets, Tobin’s Q, Bank, Indonesia stock exchange

Analysis of the Use of E-Money, Money Supply, and Gross Domestic Product on Interest Rate

This research aims to examine the effect of a direct relationship between the use of e-money and the circulation of money on interest rates, as well as an indirect effect, namely through the intervening variable gross domestic product. This research method uses a statistical model of path analysis. The sample used was secondary data fetched from the Website of Bank Indonesia (BI) and the Central Bureau of Statistics (BPS), since regulation on electronic payment method was officially issued by Bank Indonesia in May 2009-March 2023. The test results shows that e-money and money supply each, have a significant positive effect on gross domestic product variables. Gross domestic product variables had a negative effect on interest rates. E-money and money supply variables has a negative effect on interest rates, both directly or indirectly through the intervening variable of gross domestic product. Increasing e-money user and money supply, preponderant to gross domestic product, can decrease the interest rate. The results of this research are expected to provide benefits as a prediction of the Indonesian economy in the future, as a result of the issuance of electronic payment instruments. So for the regulators, they can set the right interest rate policy to be able to maintain stable economic conditions. Keywords: electronic money, money supply, gross domestic bruto, interest rate

The Effect of Third Party Funds, CFO, Debt Ratio on Earning Quality of Islamic Commercial Bank

This study aims to analyze the factors that affect Earnings Quality. This research will offer a new and broader view on the factors that influence the profit quality of Islamic commercial banks in Indonesia. This research use quantitative study that uses multiple regression analysis methods. The data used is panel data from 2019-2022. The factors analyzed for their influence in this study are Third Party Funds, CFO, and DER. The model estimation used is multiple regression analysis with a quantitative descriptive method. The results of the study show that the CFO and DER have an impact on earnings quality, while, third third-party Funds do not affect Earnings Quality. These findings indicates that banks need to pay more attention to managing operating cash flow (CFO) and capital structure (DER) to improve earnings quality. Proper management of these two variables can help banks achieve more stable and transparent financial performance. Although Third Party Funds do not significantly affect earnings quality, their management is still important to maintain the stability of the bank’s liquidity. These results also suggest that investors and other stakeholders may need to focus on CFO and DER as key indicators when assessing a bank’s earnings quality.

Analisis Kinerja Keuangan Bank BUMN dan Bank Swasta Indonesia: Studi Komparatif

Purpose: This study assesses and compares the financial performance of state-owned and private banks in Indonesia from 2019 to 2021. This study focuses on evaluating key financial indicators to monitor the financial structure and efficiency of banking institutions continuously amid increasing competition in the banking sector. Methodology: This study utilizes several financial ratios and applies independent sample t-tests to analyze the financial performance of state-owned and private banks. The key ratios analyzed include (Equity to Total Assets Ratio), ECTAR (Equity to Customer Assets Ratio), IMAEAR (interest margin to average earnings assets ratio), LLCR (Loan Loss Coverage Ratio), DTCR (Debt to Capital Ratio), LDR (Loan to Deposit Ratio), and CAR (Capital Adequacy Ratio). Results: State-owned banks are financially weaker than private banks. Furthermore, there is no significant difference in the average financial performance of state-owned and private banks when measured using EATAR and ECTAR ratios. However, clear differences are observed between these two banking groups in terms of the IMAEAR, LLCR, DTCR, LDR, and CAR ratios. Limitations: This study is limited to the analysis of financial performance from 2019 to 2021, which may not fully capture long-term trends or the impact of external economic conditions, such as global financial crises or regulatory changes. Additionally, this study focuses only on a specific set of financial ratios. Contribution: This study contributes to the body of knowledge by providing a comparative analysis of the financial performance of state-owned and private Indonesian banks. It offers valuable insights for banking institutions, regulators, and investors on how financial performance differs across banking groups, highlighting areas where state-owned banks may need to improve their financial strength.

Bank Indonesia's CSR: A Model for Social Entrepreneurship Transformation

Context: This research explores how central bank social programs can empower micro-level Small and Medium Enterprises (SMEs) in Indonesia. The observed economic growth suggests both micro and macro contributions are at play. The study's practical value lies in aiding SMEs enhance their managerial skills, technical and marketing capabilities across local, regional, and international markets. The programs have enhanced human capital development, equipping individuals with the essential skills and knowledge to achieve the SDGs, particularly in developing regions. Purpose: The study aims to describe the social entrepreneurship transformation model implemented by Bank Indonesia (BI) as part of its Corporate Social Responsibility (CSR) efforts. Methods: Narrative-based qualitative methods and theme analysis were utilized. Data collection was done through in-depth interviews and observations. The subjects are 7 Small and Medium-sized Enterprise (SME) economic actors involved in BI's CSR program. Result: The socio-economic program implemented by BI includes training, technical guidance, and the provision of infrastructure to partner SME groups. This program has led to managerial improvement, market expansion, cost savings, production, and profit for these SME partners. On a macro scale, BI's CSR initiatives involving SMEs have enhanced its public reputation and bolstered its capacity to manage inflation, finance, and digital transformation. These outcomes align with the broader goal of policy coherence and support for the Sustainable Development Goals. Contribution: This study finds that the Indonesian central bank's initiatives contribute to improved economic performance for SMEs. It further supports the theory that state involvement, like social entrepreneurship initiatives driven by the central bank, can bridge the gap between government policies and local entrepreneurial activities.

The Effect of Inflation, Interest Rates and Non-Performing Loans On Stock Returns Through Profitability In Banking Companies Indonesia Period 2018-2022

Even if the Indonesian economy has grown and the stock market has improved after COVID-19, banking stock returns in Indonesia have remained stagnant. The returns on Indonesian banking stocks in 2022 were much lower than in prior years. Identifying the internal and external variables that contributed to the fall in these shares is an obvious challenge. The purpose of this study is to investigate how return on assets (ROA) acts as a mediator between inflation, interest rates, non-performing loans, and stock returns. Thirty businesses make up the sample for this study, which employs testing methodologies including multiple regression and route analysis. Additionally, in order to find the indirect impact, the Sobel test must be used. This study found that stock returns are positively affected by inflation and return on assets, but unaffected by interest rates and non-performing loans. Unlike inflation and interest rates, return on assets can moderate the impact of non-performing loans on stock returns. stock performance. Things that could affect future returns should be carefully considered by investors.

The VECM implementation for measuring the impact of monetary variables on Indonesia Property Prices Index

The basic human need for housing makes property investment safer than other sectors because demand tends to be stable despite changing economic conditions. The decision to invest is influenced by various aspects, including economic variables, including GDP, property credit growth, non-performing loans (NPLs), interest rates, exchange rates, and money supply, which are then examined for their influence on the Residential Property Price Index (RPPI) in Indonesia through this research using a Vector Error Correction Model (VECM) with quarterly data from 2003 to 2022. The findings show that GDP, interest rates, and money supply have a significant long-term impact on the RPPI. In the short-term, GDP and property credit growth have a negative impact on RPPI, while NPL and exchange rate do not. Causality tests indicate a bidirectional relationship between NPL and GDP with RPPI, with probability values exceeding 0.05. This study provides valuable insights into the monetary factors affecting residential property prices and suggestions for future research. AcknowledgmentThe authors gratefully acknowledge Ahmad Dahlan University for the support and facilities provided in conducting this research. They also greatly appreciate the academic resources that supported the data collection process and careful analysis of our findings. Besides, the authors express their gratitude to Bank Indonesia and Badan Pusat Statistik for their invaluable contribution to the data used in this research.

Navigating Compliance: Regulatory Technology's Role in Anti-Money Laundering in Indonesia Banking

The financial sector system is unlawfully used for money laundering, which causes massive losses for the state and country. An essential component of successfully combating money laundering is regulatory technology (RegTech). This study aims to investigate the impact of implementing Electronic Know Your Customer (e-KYC), transaction monitoring (TM), cost and time efficiencies (CTE), regulatory compliance (RC), and technology information infrastructure (ITI), in money laundering preventing (MLP) in the banking sector in Indonesia. A quantitative method is used to explore the interplay of variables. The research sample consists of 50 owners of BRI Link agents. Data analysis is conducted using a linear regression model. The study's findings underscore the significant influence of TM, CTE, RC, and ITI on the effectiveness of PML, with CTE emerging as the most influential driver. Despite a moderately positive correlation among these factors, the e-KYC provided by regulatory technology (RegTech) does not exert a substantial impact on MLP. The implications of this research suggest that the adoption of RegTech, positively contributes to MLP efforts in banking institutions, highlighting the importance of utilizing technology and regulations to enhance Anti Money Laundry (AML) measures.

Language Education for Development: Enhancing Regional Banks' Performance through Illocutionary Speech Act Mastery in Indonesia

This study aims to explain how language plays a significant role in improving the performance of regional development banks in Indonesia. The method used was qualitative with a questionnaire instrument involving 6 regional development banks in Indonesia. Some of the main findings are 24 statements were found, 19 of which fall into 5 categories, namely assertive illocutionary speech acts, directive illocutionary speech acts, expressive illocutionary speech acts, commissive illocutionary speech acts, and declarative illocutionary speech acts. In its implementation, the process emphasizing the humanistic approach scored over 90%. By prioritizing language training initiatives that emphasize the mastery of illocutionary speech acts, regional banks in Indonesia can expect improved operational efficiency, strengthened customer relationships and a more strategic approach to communication, contributing to the overall development and success of the banking sector. This study is limited to the context of only one type of bank, the regional development bank. It is further suggested that there is a strong need to provide adequate and timely capacity building for the employees of regional development banks, particularly in language training as part of public service and satisfaction development.

Digitalization and diversification strategies for effective bank liquidity management in emerging markets

The purpose of this study is to examine the impact of income, assets, and geographic diversity on bank liquidity in the Indonesian banking sector. This study uses purposive sampling and multiple regression analysis (MRA) to investigate the impact of digital banking on bank liquidity, as measured by the loan-to-deposit ratio (LDR) and liquidity ratio. The sample used is 87 banks in Indonesia, which include state-owned banks, commercial banks, regional development banks, and Islamic banks. The key findings of this study indicate that income and asset diversification significantly affect bank liquidity, with income diversification having a negative effect on the Loan-to-Deposit Ratio (LDR). The use of digital banking simplifies the relationship between diversification strategy and liquidity, thereby improving banks' ability to manage liquidity. However, despite digital integration, asset diversification continues to show an adverse correlation with liquidity, indicating limitations in its effectiveness. The study concludes that while digital banking enhances the effect of income diversification on liquidity management, it limits its effect on asset diversification. This suggests that digital utilization is a strategic resource for increasing liquidity, although it requires focused implementation. These findings offer important insights for bank management and policymakers in formulating digital transformation plans that enhance efficient cash management and financial stability, particularly in developing countries like Indonesia. Keywords: income diversification, asset diversification, digital banking, bank liquidity, financial stability.

Comparative Study on Stock Movement Prediction Using Hybrid Deep Learning Model

Applying machine learning techniques in stock market prediction has evolved significantly, with deep learning methodologies gaining prominence. Conventional algorithms such as Linear Regression and Neural Networks initially dominated but struggled to capture complex temporal dependencies in financial data. Recent research has explored deep learning architectures like LSTM and CNN and hybrids such as CNN-LSTM and LSTM-CNN, showcasing promising results. However, there's a gap in research comparing these models across different datasets, particularly in predicting stock movements. This study addresses this gap by conducting a comparative analysis of deep learning and hybrid models for stock movement prediction in the Indonesian banking sector. The evaluation based on RMSE and MAE reveals that the LSTM-CNN hybrid consistently outperforms other models, showcasing its versatility and accuracy across different data characteristics. Then, exploration through hyperparameter tuning demonstrates the criticality of parameter selection in optimizing model performance. These findings contribute to advancing predictive modeling in financial markets, offering valuable insights for investors, analysts, and policymakers. Further research in hyperparameter tuning and model optimization holds promise for enhancing accuracy and reliability in stock price prediction.

Pengaruh Faktor Makroekonomi Nasional Terhadap Indeks Harga Saham Gabungan Di Bursa Efek Indonesia: Studi Kasus 2018-2022

Although an increase in investments can have an impact on a nation's economic growth, it is impossible to forecast a nation's future economic circumstances or obstacles. This research examines how the Indonesia Stock currency Composite Index (IHSG) is affected by foreign currency rates, inflation, and the BI Rate (Bank Indonesia Rate) between 2018 and 2022. Saturated sampling is used to select a sample size of 60 data points for each variable from the 60 monthly closing price data of IHSG collected over the last five years, using secondary data from official online business and financial portals. To assess how these macroeconomic factors affect the IHSG, the study uses1multiple linear1regression1analysis. The1findings show1that the IHSG is impacted by all three variables at the same time. However, the foreign exchange rate has no discernible effect1on the IHSG, but inflation and the BI Rate alone have a large impact. The1relationship between1macroeconomic variables1and Indonesia's stock1market performance is better understood thanks to these findings.

The Effect of Murabahah, Mudharabah and Musharakah Financing on Profitability in Sharia Commercial Banks

Financing is an important activity for Islamic banks. Islamic banks, which have a function as an intermediary institution, are obliged to carry out operational activities effectively and efficiently in order to generate maximum profits. This study aims to determine the influence of Murabahah, Mudharabah, and Musharakah Financing on profitability in Sharia Commercial Banks in Indonesia. The analysis method used is the panel data regression method with the selected model being the Fixed Effect Model. The population in this study is all Sharia Commercial Banks in Indonesia registered with the FSA for the 2019-2021 period as many as 14 Islamic banks. The determination of the number of samples was carried out using the Purposive Sampling technique and was determined as many as 9 samples of Islamic banks. The results of the t-test show that partially Murabahah Financing and Musharakah Financing do not have a significant effect on profitability, while Mudharabah Financing has a negative and significant effect on profitability. The results of Test F show that simultaneously Murabahah, Mudharabah, and Musharakah Financing has a significant effect on profitability in Sharia Commercial Banks in Indonesia registered with the Financial Services Authority for the 2019-2021 period.

PENGARUH KECUKUPAN MODAL, PROFITABILITAS, DAN EFISIENSI TERHADAP ZAKAT PERUSAHAAN DENGAN UKURAN PERUSAHAAN SEBAGAI VARIABEL MODERATING

This research is motivated by the lack of financial performance discipline in paying zakat in Islamic banking. Not all Islamic banks in Indonesia fulfill their obligations in issuing corporate zakat. This is judged by the very essential position of Islamic banking, and is a good example for companies in issuing zakat in order to help the welfare of the community. The purpose of this study is to examine the effect of financial performance ratios, namely capital as proxied by Capital Adequacy Ratio (CAR), profitability as proxied by Return Of Assets (ROA), efficiency as proxied by Expenses/Operational Income to Islamic banking zakat. The approach in this study uses quantitative methods, with this type of research using associative. The sampling technique used purposive sampling, with secondary data. The data source uses the company's annual report recorded at the Financial Services Authority for the 2011-2020 period. The analytical methods used in this study include (1) Descriptive Statistics, (2) Test Models; (3) Classical Assumption Test, (4) Hypothesis Testing; (5) Moderation Regression Analysis. The analytical tool used in this research is EViews 10. The results showed that (1) CAR had no significant effect on corporate zakat (2) ROA had a significant effect on corporate zakat (3) BOPO had no significant effect on corporate zakat (4) company size was unable to moderate CAR on corporate zakat (5) company size unable to moderate ROA on corporate zakat; (6) the size of the company is able to moderate the BOPO against corporate zakat.

Analysis of the Potential Impact of Central Bank Digital Currency (CBDC) on Banking in Indonesia

Analysis of the Potential Impact of Central Bank Digital Currency (CBDC) on Banking in Indonesia