Fractional Reserve Banking System and Money Multiplier Effect:A Proposed Scheme from Sharia Banking

Abstract

This study analyzes the effects of implementing the fractional reserve requirement banking system, its impact on the money multiplier,and the solutions offered by Shariabanking. Theworld community is starting to care about the dangers of the three pillars and their impact on the economy. Interest, fiat money, and fractional reserves are requirements in the banking system. This must be studied deeply to return the economy and monetary system to a usury-free system. This research usesa mixed method witha systematic literature review (SLR) method to identify, evaluate,and synthesize the findings of various studies regarding questions or research topics surrounding fractional reserves, their macroeconomic impact,and solutions from the perspective of Shariabanks.The quantitative approach is also used to support the counting of money multiplier effect. We suggestthe consequence of requiring scheme and product development in Shariabanks, one of which is an investment banking scheme with aMudharabah Muqayyadah product