Before answering the title question above, it must first be understood that Islamic banks and conventional banks have different contracts.
Regardless of the conditions that exist "on the ground", Islamic banks in Indonesia, since their establishment in the early 1990s, have not provided money loans, why? because lending money with additional interest means usury, clearly usury.
If Islamic banks do not charge interest, then where can Islamic banks get profits, pay employees, and so on? Isn't the main business of banks is funding - lending. Yes, that's right, banking is actually doing business, by attracting people to save their money in the bank in return for interest (funding), then channeling it to those in need by charging interest (lending).
Although banks are often said to be intermediary institutions, mediators between people who have a lot of money and people who need money, in reality banks are commercial companies.
In Islam, the main business of banks lending money is a form of usury, because in essence the contract used is a qardh contract (debts), so the rule is "every debt that brings benefits is usury", but other banking services, such as transfer fees, ATM fees, safe deposit box fees and other fees included in the ijarah contract, are allowed.
Akad/Contract in Islamic Banks
Now what if in a Sharia bank, what contract is used?, for example: if there is an entrepreneur who has a project, then the entrepreneur lacks working capital, then the contract that can be used is profit sharing such as the Musyarakah contract, each has a portion of capital, how much is the profit sharing?, according to the agreement, Islamic banks certainly provide the profit sharing offer they want, say 60% Entrepreneurs 40% Islamic banks, imagine if the project runs in just 3 months, isn't the portion of Islamic banks' profits also large? of course.
The conditions are different if entrepreneurs use money loans instead of profit sharing, the interest is certainly relatively small, then it's better to borrow money, right? Big wrong, earlier it was mentioned usury, the sin will also be very big, such a situation actually looks odd, it is impossible for Islam to burden its people, it turns out that indeed the main business of conventional banks and Islamic banks is not the same, not apple to apple, if you want apple to apple, then debt in Islam uses a qardh contract, aka there is no interest at all 0%, Let alone interest, even non-material benefits are not allowed to be charged to those who borrow money, in Islam, a qardh contract is a contract of help (tabarru) not a muawadhah or commercial contract!
Thus, conventional banks actually utilize or commercialize help contracts so that they become usury, while Islamic banks run pure business with commercial contracts such as profit sharing contracts, buying and selling contracts, leasing contracts etc., then it looks as if the price at Islamic banks is more expensive than conventional banks, yes obviously different contracts indeed. Such conditions are exacerbated by the small scale of Islamic banking, while the operational burden of banking is quite large, ironically with a majority Muslim population, Islamic banks are still not the main choice, as seen from the market share which is still below 10% compared to the entire national banking.
Wallahu a'lam bishawab