Assessing Relation Between The Sukuk Market And Islamic Banks To Strengthen The Islamic Financial System: Evidence In Indonesia

If the company needs source of funding by staying compliant with Islamic law, the options available are taking financing in Islamic banks or by issuing sukuk. Both financial instruments are sources of Islamic funding th at are currently growing and being widely studied by researchers. Along with its development the question arises how the existence of Islamic banks whose main business is in the financing sector with the continued growth of sukuk issued by corporations. This study examines the relationship between these two Islamic funding instruments by examining the impact of the growth of corporate sukuk on the ratio of Islamic banking in Indonesia. This research uses secondary data of monthly time series sourced from the Indonesian Financial authority publication report. Testing data in this study uses quantitative methods with the Vector Auto Regression (VAR) model and the Granger Causality Test. This study also uses Impulse Response Function (IRF) and Variance Decomposition (VD) for further analysis. The results of this study indicate that the growth of the corporate sukuk market has a relationship with the ratio of Islamic banking. The increase in the volume of outstanding sukuk has a positive effect on Islamic bank CAR, but has a negative effect on Islamic bank FDR. While sukuk yield variables produce a positive relationship with Islamic bank FDR but have a negative relationship with Islamic bank CAR. So that the growth of corporate sukuk is relevant to be considered as an exogenous factor affecting the ratio of Islamic banking in Indonesia.