Can Sharia Finance Affect Indonesia’s Economic Growth?

Abstract

This study determines the effect of sharia bank financing, sharia mutual funds, sharia shares and Sukuk on Indonesia's economic growth in the long and short term and analyzes the balanced relationship between the independent variable and the dependent variable using the ARDL method. Stationarity testing using the Augmented Dickey-Fuller Stationary (ADF) approach, from March 2011 to September 2021. The results found that the long-term estimation of Sukuk has a positive and significant effect on economic growth while sharia bank financing, mutual funds and sharia stocks have no impact on economic growth. In the short term, the Sharia bank financing variable has a positive and significant impact on economic growth. Then, the results of the bound test estimate show that there is a short-term and long-term equilibrium relationship. Through the results of this study, it is hoped that it can be used as material for consideration by investors in making decisions to invest in the sharia financial market and to the government, it can be used as material for evaluating economic policies so that investment in sharia finance in Indonesia is growing.

Islamic financial development & economic growth: the emergence of Islamic financial market in Pakistan

“…Conversely, the empirical findings of Yüksel and Canöz (2017) indicate that there is no cointegration between Islamic banking and economic growth. Same results were found by Fuadi et al (2022) in Indonesia where Islamic banking finance could not significantly influence economic growth, so they are supporting neutrality hypothesis. Khaliq and Thaker (2017) argued that Islamic banking and finance play a prominent role in driving the economic development of Malaysia.…”

“…Recently, Naz and Gulzar (2022b) discovered the stimulating effect of Sukuk on economic growth of Islamic countries in the long run. Relatedly, Fuadi et al (2022) also found that in the long run, Sukuk has a significant positive impact on economic growth of Indonesia, thus supporting supply leading hypothesis. The research of Yıldırım et al (2020) tested the relationship of Sukuk market and economic growth in nine Muslim countries, where Islamic financial system prevails.…”

“…Similarly, Fathan and Arundina (2019) found that there is no causal relationship between the development of Islamic stock markets and economic growth. Fuadi et al (2022) confirmed that Shariah mutual funds and stocks do not impact on economic growth in Indonesia and, hence, endorse neutrality hypothesis. Abduh and Sukmana (2015) conducted a comparative study on the conventional and Islamic stock markets in Malaysia and found a significant bidirectional cointegration among Islamic stock market and economic growth.…”

“…In this study, the ARDL cointegration regression technique has been used to assess the long-and short-term cointegration between Islamic financial development and economic growth (Pesaran et al, 2001). Consistent with the studies of Kartini and Milawati (2020), Orhan and Tirman (2021) and Fuadi et al (2022), ARDL is the most preferred model over other co-integration techniques for many reasons. First and foremost, the ARDL model simultaneously estimates the long-and short-run coefficients.…”

Peran Mahasiswa MSIB Batch 4 Bank Syariah Indonesia KC Surabaya Basuki Rahmat Terhadap Peningkatan Literasi Keuangan Syariah Di Kota Surabaya

“…Hal ini dapat dilihat pada literasi keuangan di Indonesia masih tergolong rendah. Menurut survei Otoritas Jasa Keuangan (OJK) pada 2022, indeks literasi keuangan nasional berada di angka 49,86% (Fuadi, Suriani, and Zulham 2022). Artinya, hanya sekitar separuh penduduk Indonesia yang memiliki pengetahuan memadai tentang produk dan layanan keuangan.…”