THE IMPACT OF BANK INDONESIA'S INTEREST RATE POLICY: A QUALITATIVE ANALYSIS BASED ON LITERATURE SYNTHESIS

Abstract

Interest rate policy is the primary monetary policy instrument influencing economic stability and banking intermediation within the financial system. In the context of Indonesia's dual banking system, changes in the benchmark interest rate have the potential to impact Islamic banking financing, even though they do not directly utilize the interest mechanism. This study aims to analyze the impact of Bank Indonesia's interest rate policy on Islamic financing through a qualitative approach using a literature review method. Data were analyzed using a literature review through thematic grouping and comparison of relevant research findings. The study results indicate that interest rates influence indirectly through competition for funds, adjustments to financing margins, and expectations of market risk. Furthermore, the sensitivity of Islamic financing also varies by contract type, with profit-sharing financing being relatively more stable than fixed-margin financing. Nevertheless, the operational independence of Islamic banking from interest rate dynamics has not yet been fully achieved, necessitating the strengthening of Islamic monetary instruments and adaptive regulatory policies to enhance the independence of the Islamic financial system.