Discourse on Indonesia’s Dual Banking System: A Thematic Literature Review

Abstract

Indonesia’s dual banking system, integrating conventional and sharia-compliant models, presents a unique case of institutional pluralism in the financial sector. This study offers a thematic literature review exploring the theoretical foundations, operational dynamics, and regulatory frameworks shaping the coexistence of these systems. Using Institutional Pluralism Theory, Financial Intermediation Theory, and Islamic Economic Principles, the review identifies how legal structures and ethical paradigms interact within Indonesia’s financial landscape. Findings highlight that while the system is legally robust and ethically justified, practical limitations such as regulatory fragmentation, consumer misperceptions, and product standardization remain. The study underscores the need for regulatory harmonization, consumer education, and adaptive jurisprudence to optimize the dual model for stability and social equity. Contributing to global discourses on financial pluralism, this review refines theoretical interpretations and offers practical recommendations for dual banking implementation in emerging economies.