Is Islamic Monetary System Possible in Indonesia? Interrelation Study between BI 7 Days Reverse Repo Rate and Nisbah Rate
DOI:
https://doi.org/10.23917/suhuf.v36i1.4339Keywords:
BI 7 Days Reverse Repo Rate, Nisbah Rate, VAR Analysis, Sharia Banks, Islamic Monetary SystemAbstract
Background: Indonesia’s monetary system remains predominantly conventional and relies on the Bank Indonesia 7-Day Reverse Repo Rate (BI 7DRRR) as its policy benchmark. In Islamic monetary thought, interest is prohibited, creating a need to explore profit-loss sharing instruments as possible alternatives. Objective: This study investigates the interrelationship between the BI 7DRRR and the profit-loss sharing rate (Nisbah) applied by Bank Syariah Indonesia and evaluates its relevance for developing an Islamic-oriented monetary framework. Methodology: The study uses a Vector Autoregression (VAR) model to examine dynamic relationships between the BI 7DRRR and Nisbah rates. Monthly data for 2021-2023 were obtained from Islamic Banking Statistics published by Indonesia’s Financial Services Authority (OJK). Results: The findings show reciprocal effects between the BI 7DRRR and Nisbah rates, indicating that changes in conventional monetary policy influence Islamic banking returns, while movements in Nisbah rates also affect the benchmark interest-rate environment. Conclusion: The mutual relationship suggests that Nisbah rates have potential relevance in discussions on Islamic monetary policy, although they remain connected to the conventional system. Implication: Policymakers and Islamic financial institutions may consider developing a hybrid monetary framework that gradually integrates profit-loss sharing indicators, strengthens Sharia-compliant policy transmission, and reduces dependence on interest-based benchmarks over time.
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