TRANSFORMATION OF ISLAMIC BANK IN INDONESIA: OPPORTUNITIES AND CHALLENGES IN FACING THE DIGITAL ERA

Abstract

Islamic banking in Indonesia has undergone continuous transformation, starting from the idea of establishing Islamic banking in the 1960s, the founding of Bank Muamalat Indonesia as the first Islamic bank in the 1990s, and continues to grow rapidly, especially in the digital era, which also presents both opportunities and challenges faced by Islamic banking in the digital era. The research method used is descriptive qualitative with a literature review approach. The findings of this study show several opportunities to Islamic banking in Indonesia, including the development of products that meet societal needs, the use of digital technology to facilitate services, and the development of human resources, which also presents challenges for Islamic banks. Furthermore, the challenges currently faced by Islamic banking include integrating technology with sharia prinsiples, competition with conventional financial institutions, cyber security, and the low financial literacy of the public. Therefore, Islamic banks must continue to innovate and develop in order to maintain their relevance in the face of tight market competition.