The Impact of Islamic Social Finance on Economic Growth in Indonesia: A ZISWAF Development Model Approach

Abstract

The global demand for high economic growth (EG) has increased significantly due to the unpredictable nature of economic conditions. As a result, Islamic social finance has emerged as a widely recognised solution to address this need. This aspect necessitates the prioritisation of recent research and regulatory bodies. Therefore, this article aims to examine the influence of Islamic social finance instruments, namely zakat, Sadaqah, Waqf, and Infaq, on the economic growth (EG) in Indonesia. In addition to employing industrialization and inflation as control variables, the study utilised these factors to make predictions regarding economic growth (EG) in Indonesia. The secondary data utilised in this study was obtained from the World Development Indicators (WDI) database, covering the period from 1991 to 2022. The study also utilised the Dynamic Autoregressive distributed lag (DARDL) model to examine the interrelationships among the variables under investigation. The results of the study demonstrate a positive correlation between zakat, Sadaqah, Waqf, Infaq, industrialization, inflation, and economic growth (EG) in Indonesia. The study assists policymakers in formulating policies aimed at attaining high economic growth through the utilisation of Islamic social finance.