Comparing Conventional Bank Credit Vis A Vis Shariah Bank Musharakah: Experimental Economic Approach

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Abstract

Central Bank of Indonesia with dual banking system – i.e Shariah and Conventional Bank – keep on developing system that considered as an answer to generate the national economic growth. One of the banking activities that emphasized by the Central Bank of Indonesia is fund distribution through either conventional bank credit or shariah bank financing. Having the Experimental Economic Approach based on Induced Value Theory and employing ANOVA, this paper found that shariah bank musharakah financing system would come up with higher profit opportunity compare to conventional credit system. One main reason is that musharakah financing in shariah bank applies profit and lost sharing (PLS) scheme so that will not be a burden to the customer when he finds low profit.

Keywords: Credit Loan, Musharakah Financing, Induced Value Theory, Experimental Economic Approach, Analysis of Variance (ANOVA).

Citation:

Abduh, M., and Sanrego, Y.D. (2008). Comparing Conventional Bank Credit vis-à-vis Shariah Bank Musharakah: Experimental Economic Approach. Tazkia Islamic Business and Finance Review, Vol. 3 No. 1, pp. 43-60.

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