Universitas Islam Negeri Raden Mas Said Surakarta
International Conference on Islamic Economics Studies (ICIES)

Evaluating the Impact of Economic and Non-Economic Uncertainty on Banking Intermediation Function: A Comparative Study between Islamic and Conventional Banking in Indonesia

Date Published : 3 January 2026

Contributors

Mumuh Muhammad

correspondence

Taufik Nugroho

Author

Risa Sari Pertiwi

Author

Rumaisah Azizah Al Adawiyah

Author

Erika Takidah

Author

Sandi Khairiansah

Author

Keywords

Economic Uncertainty; Non-Economic Uncertainty: Financing; Islamic bank; conventional bank.

Proceeding

Vol. 5 No. 1 (2025): The 5th International Conference on Islamic Economics Studies

Track

General Track

License

Copyright (c) 2026 International Conference on Islamic Economics Studies (ICIES)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Abstract

This study analyzes the impact of economic uncertainty on the intermediation function of Islamic banks and conventional banks in Indonesia using time series data from January 2014 to April 2024 using the Autoregression Distributed Lag (ARDL) method. The results show that global uncertainty, measured by the World Uncertainty Index (WUI), has a positive influence on Islamic bank financing growth, but negatively impacts conventional bank credit growth in the short and long term. Furthermore, domestic economic uncertainty, reflected in inflation, has been shown to increase financing growth in both types of banks. Furthermore, the Consumer Confidence Index (CCI) and the rupiah exchange rate against the dollar have a positive influence on conventional bank credit growth, while other variables such as the BI Rate, Global Economic Policy Uncertainty (GEPU), the COVID-19 pandemic, and world oil prices do not affect the growth of Islamic financing or conventional bank credit. Policy implications recommend increasing incentives for Islamic banks and stricter supervision of conventional banks to address economic uncertainty

References

Abaidoo, R. and Agyapong, EK (2023), Regulatory policy uncertainty, banking industry innovations and
financial development among emerging markets. Journal of Financial Economic Policy , Vol. 15 No.
6, pp. 613-627. https://doi.org/10.1108/JFEP-07-2023-0180 .
Ahir, H., Bloom, N., Furceri, D. (2018). The World Uncertainty Index. (October 29, 2018). Available at
SSRN: https://ssrn.com/abstract=3275033 or http://dx.doi.org/10.2139/ssrn.3275033 .
Alessandri, P., Bottero, M. (2020). Bank lending in uncertain times. European Economic Review , 128
(September 2020) 103503.
https://doi.org/10.1016/j.euroecorev.2020.103503.
Ali, DJ, Sargon, B., & Hadi, DM (2024). The impact of economic policy uncertainty and oil price shocks on
G20 banks' stock performance: Wavelet coherence and non- parametric causality in quantiles approach.
Heliyon , 10 (2024) e28846. https://doi.org/10.1016/j.heliyon.2024.e28846 .
Aman, A., Anwar, S., Khan, M.A., Haddad, H., Al-Ramahi, N.M., & Khan, M.A. (2024). Economic policy
uncertainty and financial system efficiency. Heliyon , 10 (2024) e31384. https://doi.org/10.1016/j.heliyon.
2024.e31384.
Anis, M., & Hamdi, B. (2022). Liquidity risk in economic uncertainty: Evidence from Indonesian Islamic
banks. Journal of Islamic Economics and Finance , 8 (January 2022).
https://journal.uii.ac.id/JEKI/article/view/21869 .
Apergis, N., Cooray, A., & Rehman, M. U. (2023). US partisan conflict uncertainty and households' access
to bank credit: Evidence from UK survey data. Global Finance Journal , 56 (May 2023) 100744.
https://doi.org/10.1016/j.gfj.2022.100744.
Ashraf, B.N., & Shen, Y. (2019). Economic policy uncertainty and banks' loan pricing. Journal of Financial
Stability, 44 (October 2019) 100695.
https://doi.org/10.1016/j.jfs.2019.100695 .
Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring Economic Policy Uncertainty. The Quarterly
Journal of Economics, 131 (November 2016) 1593–1636. https://doi.org/10.1093/qje/qjw024.
Bilgin, M.H., Danisman, G.O., Demir, E., & Tarazi, A. (2021). Bank credit in uncertain times: Islamic vs.
conventional banks. Finance Research Letters , 39 (March 2021), 101563.
Boubakri, N., Mirzaei, A., & Saad, M. (2023). Bank lending during the COVID-19 pandemic: A comparison of
Islamic and conventional banks. Journal of International Financial Markets, Institutions and Money , 84
(April 2023) 101743. https://doi.org/10.1016/j.intfin.2023.101743 .
Bilgin, M.H., Danisman, G.O., Demir, E., & Tarazi, A. (2020). Bank credit in uncertain times: Islamic vs.
conventional banks. Research in International Business and Finance
, 52, 101-123. https://doi.org/10.1016/j.ribaf.2020.101123

Downloads

How to Cite

Taufik, T., Risa Sari , R. S. ., Rumaisah Azizah , R. A. ., Erika, E., & Sandi , S. . (2026). Evaluating the Impact of Economic and Non-Economic Uncertainty on Banking Intermediation Function: A Comparative Study between Islamic and Conventional Banking in Indonesia. International Conference on Islamic Economics Studies (ICIES), 5(1), 87-106. https://conferences.uinsaid.ac.id/icies/paper/view/319