The Influence of Conventional Banking and Sharia Banking on Economic Growth in Indonesia

Abstrak

The financial sector is referred to as one of the factors influencing the monetary crisis. This study examined the relationship between the banking development score in the dual banking system model and economic growth in Indonesia. This study used a quantitative method, using the VECM approach and the Granger Causality model. The findings showed that Conventional Banking Credit Growth, Sharia Banking Financing Growth, PMTB, LDR and FDR, and ROA of conventional and Sharia banks had a positive effect on economic growth in Indonesia. The inflation variables, NPF, and NPL had a negative effect on economic growth in Indonesia. This finding provided us with an understanding that the existence of Sharia banking could drive economic growth in Indonesia. In conventional banks, in the long term, there was a long-term relationship between the independent variables and the dependent variables. This study provided new insights into the influence of the banking sector on economic growth in Indonesia, highlighting the importance of synergy between conventional and Islamic banking in creating diverse financial instruments and enhancing access to banking services, especially in areas with limited financial access.