In Search for Islamic Macroprudential Policy in Indonesia: The Case of Financing to Value (FTV) and Property Financing

Abstract

This study aims to examine the impact of macroprudential policy particlarly the relaxing of Financing to Value (FTV) on property financing of Islamic bank in case of Indonesia. In addition, this paper also analyzes the impact of macroeconomic variables and specific factors on property financing in Islamic Bank. This paper collects data from the Bank Indonesia website, the Financial Services Authority (FSA) and the Central Statistics Agency (CSA) form January 2010 until April 2016. By employing Vector Error Correction Model (VECM), this study found that inflation and Industry Produce Index (IPI) have been positively influence on the property financing, while the BI rate and financing to deposit ratio (FDR) have been negatively influence on the property financing. While the relaxing of FTV policy also negatively influence on the property financing. Therefore, This study conludes that the policy have not effectived yet.

The Effect of FTV Policy and Economic Factors on Home Ownership Financing in Indonesian Sharia Banking

“…The results of the research conducted are in line with the research on home ownership financing conducted by Abdul Qoyum & Fauziyyah, (2018) and Muthia, (2019) shows that the FTV policy has a significant negative effect on home ownership financing. This shows that the higher the value of the FTV, the lower the financing for housing ownership because in implementing the FTV policy, there are still not ready, and the banks' targets need to be quite right.…”

“…Research from Qoyum & Fauziyyah, (2018) resulted in the NPF variable significantly negatively affecting home ownership financing. NPF reflects the bank's ability to manage its financing, called financing risk.…”