Beyond the Banks: Do Islamic Monetary Instruments Pave the Way for MSME Financing in Indonesia?
DOI: 10.35760/ugefic.v8i1.220Abstract
This study empirically investigates the effectiveness of Islamic monetary policy transmission to the real sector, with a focus on the distribution of financing for Micro, Small and Medium Enterprises (MSMEs) in Indonesia during the crucial period 2020-2024. By applying the Autoregressive Distributed Lag (ARDL) model, this study evaluates five key instruments: OPTS, SBSN, PUAS, SIMA, and FASBIS. The results provide unequivocal insights: The Interbank Mudharabah Investment Certificate (SIMA) emerges as the most powerful transmission channel, consistently driving MSME financing in both the short and long run. In contrast, the Sharia Open Market Operation (OPTS) proved to have a significant counterproductive effect, absorbing liquidity and suppressing financing disbursement. Meanwhile, FASBIS only provided a momentary boost, and other instruments such as SBSN and PUAS proved irrelevant. In conclusion, to sustainably support MSMEs, Islamic monetary policy should prioritize strengthening the efficiency of the interbank market while carefully managing counterproductive instruments.
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