Journal of Central Banking Law and Institutions

Does Artificial Intelligence Have an Impact on Monetary Policy Effectiveness in Indonesia?

Anisa Syahidah Mujahidah — Fri, 23 Jan 2026 00:00:00 +0000

The study empirically investigates the implications of AI Readiness, Broad Money, and political stability for monetary policy effectiveness, as measured by a composite index. The study uses robust fixed-effect panel data estimation techniques to analyse data from 19 OIC member countries between 2019 and 2023, with a focus on Indonesia. The results show that AI readiness and political stability have a substantial positive impact on monetary policy effectiveness in Indonesia, whereas Broad Money has a significant adverse impact. These findings offer relevant policy implications for AI transformation in the financial sector, particularly for effective monetary policy. These findings establish a relationship between the quest for high-quality institutions, defined by the readiness of AI implementation, political stability, and stable broad money. The study adds to a recent body of literature on the impact of AI and other variables on the efficiency of monetary policy.

Integrating Islamic Social Funds in Sharia Banking for Empowering Indonesia’s Productive Poor

Khotibul Umam, Berlian Widya Tama — Fri, 23 Jan 2026 00:00:00 +0000

The enactment of Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector (the DSFS Law) expands the role of Sharia banks beyond collecting social funds to managing and distributing them. However, challenges remain, including limited financial inclusion, limited use of social contracts such as qardh al-hasan, and underutilisation of commercial contracts like salam and istishna, which could benefit the micro, agricultural, and manufacturing sectors. This study examines the compatibility of Islamic social funds (ISF) with a bank’s role as a financial intermediary and with the expected function of Sharia banking in financing a productive poor society. This study uses normative legal research, emphasising secondary data, and employs three approaches: the statutory approach, the conceptual approach, and the comparative approach. The DSFS Law (Law No. 4/2023) provides a clear legal basis for Sharia banks and Sharia business units not only to collect but also to manage and distribute ISF. The DSFS Law broadens Sharia banks’ role in (ISF). However, gaps remain in waqf management and zakat coordination, creating challenges for integration with Sharia banking. To overcome this, more substantial regulatory alignment and support from Bank Indonesia (BI) and the Financial Services Authority (Otoritas Jasa Keuangan/OJK) are needed to fully connect sharia banks’ intermediation role with ISF.

Transparency and Disclosure in the Implementation of Fintech and AI by Financial Service Institutions in Sustainability Reports

Wiwiek Prihandini — Fri, 23 Jan 2026 00:00:00 +0000

This study evaluates the application of financial technology (FinTech) and artificial intelligence (AI), as well as the transparency of their disclosure in Sustainability Reports across four types of financial service institutions (FSIs) in Indonesia: banks, insurance companies, finance companies, and securities firms. By analysing the content of 20 Sustainability Reports, this study finds that banks have the highest level of technology implementation and disclosure, followed by finance, insurance, and securities firms. Although FinTech and AI contribute to operational efficiency, service innovation, and the expansion of financial access, disclosures related to these technologies are still limited in Sustainability Reports, often using terms like “digitalisation” without explicit explanation. These findings underscore the importance of enhanced transparency in technology disclosure to foster public trust and accountability, as well as to ensure compliance with regulations such as the OJK Regulation on Sustainable Finance. This study recommends strengthening reporting standards and regulatory guidelines to improve technology disclosures in the financial sector, thus enabling a sustainable and
inclusive digital financial ecosystem.

Navigating the Future of Finance: The Transformative Role of Generative AI

Hassnian Ali, Ahmet Faruk Aysan — Fri, 23 Jan 2026 00:00:00 +0000

Generative Artificial Intelligence (GenAI) has the potential to transform the financial services sector by advancing financial modelling, risk assessment, fraud detection, and customer service. This study employs Structured Topic Modelling (STM), a machine learning-based method for analysing unstructured text, to uncover key themes from academic and grey literature. Academic discourse focuses on technical applications, including portfolio optimisation and financial forecasting, while grey literature emphasises ethical risks, regulatory challenges, and operational concerns. The findings reveal that GenAI enhances operational efficiency, optimises risk management, and personalises services. However, challenges related to data security, algorithmic bias, and robust ethical governance persist. Policymakers must develop regulatory frameworks that balance innovation and consumer protection, ensuring privacy, transparency, and accountability. The study identifies five key areas for future research: ethical governance, blockchain integration, employment impacts, AI-driven risk management, and personalised financial services. These insights offer a roadmap for financial institutions, policymakers, and technology providers, highlighting GenAI’s transformative potential while addressing ethical considerations for its responsible deployment.

Blockchain and AI in Combating Financial Corruption: A Systematic Literature Review

Rimal Mahdani, Dara A. Soufyan — Fri, 23 Jan 2026 00:00:00 +0000

Corruption in the financial sector threatens economic stability, resource allocation, and public trust. This study explores how blockchain and artificial intelligence (AI) can combat this corruption. Using a systematic literature review (SLR) guided by the PRISMA methodology, we analysed articles from 2020 to 2024. Findings show that blockchain enhances transparency through immutable, decentralised ledgers, while AI improves fraud detection through realtime anomaly detection and predictive analytics. Case studies reveal successful applications, such as greater accountability in public procurement and enhanced fraud detection in banking. However, adoption of these technologies faces challenges, including scalability, regulatory hurdles, and data privacy concerns. Integrating blockchain and AI into financial institutions’ operations can strengthen existing anti-corruption measures, boosting transparency and accountability. Yet, this study is limited by the technologies’ early development stage and the shifting regulatory environment. Future research should address barriers to unlocking the full potential of AI and blockchain to build a more equitable financial system.

The Key Challenges for Islamic Fintech Implementation in Malaysia

Muhammad Ilyas bin Ab Razak, Nur Akma binti Mohd Dali — Fri, 23 Jan 2026 00:00:00 +0000

This article explores the evolving landscape of Islamic fintech in Malaysia, delving into the looming regulatory challenges. As Malaysia solidifies its position as the global epicentre of Islamic finance and technological innovation, the intersection of these domains presents a distinctive set of challenges for regulators. The authors scrutinise the challenges and potential gaps within the regulatory framework governing Islamic fintech in Malaysia through meticulous analysis. The key challenges include ensuring Shariah compliance amid rapid technological advancements, addressing consumer protection concerns, navigating cross-border regulatory issues, managing technological risks and cybersecurity, achieving regulatory clarity for innovative models, and addressing talent scarcity and expertise gaps. Ultimately, the recommendations in this article offer valuable insights into developing regulatory models that harmonise innovation with adherence to Shariah principles. By embracing these recommendations, stakeholders in Malaysia can pave the way for a vibrant Islamic fintech ecosystem that thrives on innovation, integrity, and inclusivity. The study employs qualitative research techniques, including a review of existing literature, regulatory documents, and industry reports, to gather information on the regulatory framework governing the Islamic fintech ecosystem.

Exploring AI Integration in Financial Institutions: Challenges, Compliance, and Quality Assurance's Role in Security

Tasneem Rahmatullah, Nurul Nadia Nozlan — Fri, 23 Jan 2026 00:00:00 +0000

The use of Artificial Intelligence (AI) in financial institutions offers significant opportunities while raising concerns about regulatory compliance, security, and the changing function of Quality Assurance (QA). This research explores the impact of AI integration on fairness, transparency, and financial inclusion in the Malaysian financial sector, and investigates the challenges QA professionals face in navigating the dynamic regulatory landscape, with a focus on data privacy and cross-border regulations. It also examines QA’s role in mitigating technological risks, addressing security vulnerabilities, and supporting organisational transformation. Employing a qualitative methodology, the study combines a desk review of existing literature and a semi-structured interview with an Enterprise Architecture and Quality Assurance Specialist from Bank Muamalat Malaysia Berhad (BMMB). By triangulating theoretical frameworks with practical insights from industry professionals, the study finds that QA plays a pivotal role in ensuring the responsible and secure implementation of AI. Specifically, findings highlight the need for robust QA processes to address algorithmic bias, ensure transparency in AI decision-making, and promote inclusive access to financial services. This research contributes to the discourse on responsible AI adoption in the financial sector by providing practical recommendations for financial institutions seeking to implement responsible AI strategies. This research was conducted in accordance with ethical research standards.