Accessibility of Affordable Funds from Banking Liquidity Creation to Support SDGs in Indonesia

Abstract

The COVID-19 pandemic has affected peoples’ lives in many ways, including their health, income, and economic condition. One of the most affected sectors is the banking industry, which is facing difficulty in liquidity creation. This research attempts to analyze the ability of Indonesian commercial banks, both conventional and Syariah banks, to create liquidity pre and during the pandemic. The researchers employed a descriptive data analysis to investigate the pattern of liquidity creation in the Indonesian banking sector using monthly data from December 2018 to August 2020. Since these banks operate under different banking principles, they respond to the pandemic differently. The researchers found an interesting fact that the liquidity per rupiah asset created by the Syariah banks outperformed the conventional banks pre- and during the pandemic. This finding implies that the Syariah banks have a considerable potential to expand their operation in the Muslim majority such as Indonesia. Keywords: liquidity creation, Indonesian banks, COVID-19