The Comparative Analysis of Risk Management Practices in Conventional and Islamic Banking in Indonesian

Abstract

The phenomenon of banking development in Indonesia shows that the sector plays an important role in the economy, with similar risks faced by both conventional and Islamic banking, such as credit, market, liquidity and operational risks. However, due to different basic operational principles, especially the prohibition of usury in Islamic banking, these two types of banks have different risk management approaches. This study aims to compare risk management practices in conventional and Islamic banking in Indonesia, focusing on credit and liquidity risks as the main challenges. The method used is qualitative analysis through literature studies and case studies on PT Bank Negara Indonesia (Persero) Tbk and several Islamic Commercial Banks in Indonesia. The results showed that Islamic banking faces greater challenges in managing risk, especially in credit and liquidity risk, due to the profit sharing mechanism that increases risk exposure. The conclusion of the study states that Islamic banking requires a more structured risk management strategy to comply with sharia principles, while being able to maintain operational stability. The Financial Services Authority (OJK) is advised to develop more supportive regulations so that Islamic banking can address the unique risks faced by monitoring and controlling procedures arising from all bank business activities.