LEGAL FRAMEWORK AND ECONOMIC IMPACT OF SHARIA BANKING ON INDIGENOUS PAPUAN COMMUNITIES: EVIDENCE FROM JAYAPURA CITY

Abstract

This study analyzes the legal framework and economic impact of Sharia banking on indigenous Papuan communities in Jayapura City. Sharia banking in Indonesia has experienced rapid development since the enactment of Law No. 21 of 2008 on Sharia Banking, yet its implementation within indigenous Papuan communities requires in-depth examination. The research aims to identify the effectiveness of the Sharia banking legal framework in serving indigenous Papuan communities and measure its economic impact on community welfare. The methodology employs a qualitative approach using in-depth interviews, participant observation, and document analysis. Data were collected from 30 informants comprising traditional leaders, Sharia bank customers, Sharia bank managers, and regulators. Results indicate that the Sharia banking legal framework provides a strong foundation, though gaps remain in adaptation to traditional Papuan economic values and practices. Identified economic impacts include improved financing access for SMEs, development of agriculture and fisheries sectors, enhanced financial literacy, and women's economic empowerment. Primary constraints identified include low understanding of Sharia products, limited banking infrastructure, and differences in ownership concepts within Papuan culture. The study recommends the need for Sharia banking product adaptation that better aligns with the socio-economic characteristics of Papuan society, enhanced education and socialization, and strengthened partnerships with local customary institutions to ensure more effective and sustainable implementation.