The Islamic Financing on Macroeconomic Stability in Indonesia
Abstract
The objective of this study is to examine the function of Islamic finance in fostering macroeconomic stability in Indonesia. Specifically, it will scrutinize the stability of Islamic banks, its effects on micro, small, and medium enterprises (MSMEs), and its impact on economic growth and inflation. Employing a qualitative research approach, data were gathered by means of document analysis, encompassing books, scholarly publications, and institutional reports. The results demonstrate that Islamic banks, which employ profit-sharing and asset-backed financing structures, have higher levels of stability in comparison to conventional banks, therefore mitigating the likelihood of financial catastrophes. Islamic finance has profoundly facilitated the expansion of MSMEs by offering cost-effective, interest-free lending, therefore augmenting their productivity and economic contributions. Furthermore, Islamic finance promotes consistent economic expansion by prioritizing investments in tangible assets in industry areas such as agriculture and manufacturing. Although it suppresses speculative activity, its effect on inflation is inconclusive, as further growth of micro, small, and medium enterprises (MSMEs) may have upward influence on pricing. In conclusion, the study highlights that Islamic finance contributes to Indonesia's macroeconomic stability by strengthening Islamic banks, promoting MSME development, and fostering balanced economic growth. The data shows a consistent rise in the contribution of MSMEs to Indonesia's GDP from 57.08% in 2017 to 61.90% in 2022, underscoring their increasing significance in the national economy. This upward trend highlights the growing role of MSMEs in economic development.
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References
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Rohmana, Y., & Utami, S. A. (2023). Inflation Through the Transmission Of Islamic And Conventional Monetary Policy In Indonesia. Amwaluna: Jurnal Ekonomi Dan Keuangan Syariah, 7(1), 29–57.
Sadeghi, A., Tayebi, S. K., & Roudari, S. (2023). Financial markets, inflation and growth: The impact of monetary policy under different political structures. Journal of Policy Modeling, 2(2), 23–43.
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Zulkhibri, M. (2019). Islamic finance, risk-sharing and macroeconomic stability. Islamic Finance, Risk-Sharing and Macroeconomic Stability, 1–268. https://doi.org/10.1007/978-3-030-05225-6
Agustina, A. (2023). The Influence Of Fintech On The Development Of Islamic Financial Inclusion In Msmes In Tanak Awu Village. Jurnal Ilmiah Ekonomi Islam.
Agustina, M., Majid, M. S. A., Musnadi, S., & ... (2022). Islamic banking, economic growth, and poverty reduction in Indonesia. 5th International Conference on Computational Intelligence and Networks (CINE), 1(1), 74–87.
Al Sharif, B. M. M. (2023). the Impact of Macroeconomic Variables on the Performance of Islamic Banks: an Empirical Study. International Journal of Professional Business Review, 8(4), 1–16. https://doi.org/10.26668/businessreview/2023.v8i4.1347
Alam, S., & Ramadhani, W. P. (2023). Transformasi Digital UMKM Di Indonesia Selama Pandemi. Journal Social Society, 3(2), 140–156.
Alam, T., Hussain, I., & Saqib, A. (2023). Net Stable Funding and Liquidity Coverage Influence on Islamic Bank Financial Stability: Evidence from Malaysian Islamic Banking. International Journal of Economics, Management and Accounting, 13(1), 153–176.
Analia, A. L., Hakim, A., Bekti, M., & Anto, H. (2024). Implementing maqasid sharia : Impact on stability of Indonesian Islamic banks. Jurnal Ekonomi Dan Keuangan Islam, 10(2), 164–176.
Angraini, D. P., Sudarsono, H., & Anindita, S. F. (2020). The influence of financial performance and macroeconomic on financing risk in Islamic banks. Asian Journal of Islamic BANKING.
Arifin, M. (2021). The Influence Of Islamic Law And Economic Principles On Banking Industry In Indonesia. Pt. 2 J. Legal Ethical \&Regul. Isses.
Aryati, A. (2023). Financial Development and economic Growth: evidence from Indonesia Before and after the COVID-19 Pandemic. Economy of Regions, 19(4), 1263–1274. https://doi.org/10.17059/ekon.reg.2023-4-23
Ascarya, A., Suharto, U., & Husman, J. A. (2022). Proposed model of integrated Islamic commercial and social finance for Islamic bank in Indonesia. Eurasian Economic Review. https://doi.org/10.1007/s40822-022-00201-z
Asnawi, N., Sukoco, B. M., & Fanani, M. A. (2020). The role of service quality within Indonesian customers satisfaction and loyalty and its impact on Islamic banks. Journal of Islamic Marketing. https://doi.org/10.1108/JIMA-03-2017-0033
El Khatib, A. S., & Ferreira Savoia, J. R. (2024). Islamic Financial Institutions and Stability: An Empirical Analysis. International Journal of Economics and Finance, 16(7), 1. https://doi.org/10.5539/ijef.v16n7p1
Fidat, F., & Rolianah, W. S. (2023). The Role and Strategy of Mitra Sharia Cooperatives in Promoting MSME Growth. JURNAL ISLAM NUSANTARA.
Hanif, A. D., & Hanafi, S. M. (2023). The Effect of Islamic Finance on Economic Growth and Financial Stability: ASEAN-4 Case Study. Bulletin of Islamic Economics, 2(1), 32–44. https://doi.org/10.14421/bie.2023.021-05
Harini, A. R., Kurniawan, M., & Putra, B. J. (2024). Do Macroeconomic Variables Affect Deposits in Shariah Banks? Islamic Economics Journal, 10(1), 61–71. https://doi.org/10.21111/iej.v10i1.11611
Hartanto, A., & Samputra, P. L. (2023). Determinants of Non-Performing Financing for Islamic Commercial Banks in Indonesia with a Dynamic Panel Data Approach. Information Sciences Letters.
Hidayat, M. (2024). The Effect of Economic Growth and Inflation on Liquidity in “Bank Syariah Indonesia.” Economics Studies and Banking Journal (DEMAND), 15(3), 12–34.
Ismail, S., & Basyariah, N. (2022). THE ROLE OF THE STATE IN ISLAMIC FINANCE DEVELOPMENT: A WORLDWIDE GOVERNANCE INDICATOR APPROACH. IQTISHADUNA, 13(2). https://doi.org/10.20414/iqtishaduna.v13i2.5414
Janah, M., & Rintisari, N. (2024). Optimization Of The Utilization Of Productive Zakat For The Economic Empowerment Of Mustahik In The MSME Culinary Sector (A Case Study Of Lazismu Yogyakarta). Jurnal Ekonomi.
Kartika, F. C., & Budianto, E. W. H. (2024). The Ifluence of Knowledge, Religiosity, and Trust on Interest in Financing in Sharia Banking (Case Study on Halal MSME in Kediri Regency). Islamic Banking: Jurnal ….
Kasri, R. A. (2022). DETERMINANTS OF PUBLIC-PRIVATE PARTNERSHIP IMPLEMENTATION IN OIC COUNTRIES. Journal of Islamic Monetary Economics and Finance, 8(2), 275–304. https://doi.org/10.21098/jimf.v8i2.1437
Khalidin, B., Musa, A., & Kiawan, A. (2023). Murabaha Financing of the Indonesian Islamic Banks under an Islamic Economic Law and the Fatwa DSN MUI. PETITA.
Khan, S., Aziza, N. A., & Nawaz, A. D. (2024). Islamic and Conventional Banks Stability in Indonesia. Etikonomi, 23(1), 167–182. https://doi.org/10.15408/etk.v23i1.33879
Komaludin, A. (2019). Murabaha financing: Empirical evidence in Indonesian Islamic banking. International Journal of Innovation, Creativity and Change, 9(12), 49–65.
Nainggolan, M. (2023). The effect of roa, inflation, bi rate on total financing in sharia banks in Indonesia. Alhamdulillah: Jurnal Agama Islam, 2(10), 1–14.
Nasir, M. S. (2022). Determinants of Non-Performing Loans and Non-Performing Financing level: Evidence in Indonesia 2008-2021. Banks and Bank Systems, 17(4), 116–128. https://doi.org/10.21511/bbs.17(4).2022.10
Nisa, I. M. (2024). Mitigation of Murabahah Financing Risks in the Nusa Bangsa Sejahtera Gresik Savings and Loans and Financing Cooperative (KSPPS). Al-Afkar, Journal For Islamic Studies.
Othman, A. (2021). Towards a sustainable fiscal position for Malaysia: A proposal for reform. Towards a Sustainable Fiscal Position for Malaysia: A Proposal for Reform, 1–147. https://doi.org/10.1515/9783110591187
Panjaitan, N. K., & Nurbaiti, N. (2024). Analysis of Financial Regulatory Challenges for the Development of Islamic Banking in Indonesia. Journal La Sociale, 5(5), 1346–1357. https://doi.org/10.37899/journal-la-sociale.v5i5.1383
Rashid, A., Yousaf, S., & Khaleequzzaman, M. (2017). Does Islamic banking really strengthen financial stability? Empirical evidence from Pakistan. International Journal of Islamic and Middle Eastern Finance and Management, 10(1), 130–148.
Rhoudri, S., & Ougoujil, S. (2024). Propensity toward Islamic debt financing among Moroccan MSMEs: assessing the mediating effect of entrepreneurial achievement motivation using PLS-MGA. International Journal of Bank Marketing. https://doi.org/10.1108/IJBM-01-2024-0070
Rihab Ben Slimen, Fethi Belhaj, & Manel Hadriche. (2022). Banking Short- and Long-Term Stability: a Comparative Study Between Islamic and Conventional Banks in Gcc Countries. Copernican Journal of Finance & Accounting, 10(4), 139–158. https://doi.org/10.12775/cjfa.2021.019
Rohmana, Y., & Utami, S. A. (2023). Inflation Through the Transmission Of Islamic And Conventional Monetary Policy In Indonesia. Amwaluna: Jurnal Ekonomi Dan Keuangan Syariah, 7(1), 29–57.
Sadeghi, A., Tayebi, S. K., & Roudari, S. (2023). Financial markets, inflation and growth: The impact of monetary policy under different political structures. Journal of Policy Modeling, 2(2), 23–43.
Saifurrahman, A., & Kassim, S. H. (2024). Regulatory issues inhibiting the financial inclusion: a case study among Islamic banks and MSMEs in Indonesia. Qualitative Research in Financial Markets. https://doi.org/10.1108/QRFM-05-2022-0086
Sandy, N., & Armina, S. H. (2023). Analysis of the Influence of Islamic Microfinance in Creating Sustainable Financing Model Innovations for MSMEs in Indonesia. Proceedings of Femfest International Conference on Economics, Management, and Business, 1(1), 161–171.
Saputra, A. E., & Zulpahmi, Z. (2023). The Influence Of Msmes, Inflation, And Sharia Bank Finance On Economic Growth. Jurnal Ilmiah Ekonomi Islam, 8(1), 1–23.
Saratian, E. T. P., Arief, H., Oktaviar, C., & ... (2024). Advancing the Financial Inclusion with Profit Sharing Scheme for the Sustainability of Indonesian MSMEs. ICCD, 4(1), 237–243.
Soumena, F. Y., Umaima, U., & ... (2024). The Influence of SME Funding and Non-Performing Financing on Indonesia’s Economic Growth in The Period 2015-2022. Return : Study of Management, Economic and Bussines, 3(3), 166–180.
Supriani, E., Kartika, M., & Bariyah, N. (2024). The Role of Islamic Bank Financing in Increasing the Productivity of MSMEs in Indonesia. East African Scholars Journal of Economics, Business and Management.
Ulina, S., & Majid, M. S. A. (2020). A comparative analysis of resilience of Islamic and conventional banks in Indonesia. Muqtasid: Jurnal Ekonomi Dan Perbankan Islam.
Zulkhibri, M. (2019). Islamic finance, risk-sharing and macroeconomic stability. Islamic Finance, Risk-Sharing and Macroeconomic Stability, 1–268. https://doi.org/10.1007/978-3-030-05225-6
Authors
Aini, M. (2024). The Islamic Financing on Macroeconomic Stability in Indonesia. Agregat: Jurnal Ekonomi Dan Bisnis, 8(2), 112–130. https://doi.org/10.22236/agregat_vol8.i2/16299
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