Islamic Financing for Economic Growth and Labour Absorption in Indonesia’s Green Development

DOI

10.2991/978-94-6239-709-5_173How to use a DOI?

Keywords

Islamic Financing; Economic Growth; Labor Absorption; Green Development

Abstract

This study examines the relationship between Islamic financing, economic growth, and labor absorption within the framework of green and inclusive development in Indonesia. Using a quantitative panel data approach across 33 provinces from 2010 to 2023, this research applies a simultaneous regression model (SEM) to analyze both direct and indirect effects. The findings reveal that Islamic financing has a negative and significant effect on economic growth, suggesting that current financing allocations are not optimally directed toward productive and labor-intensive sectors. Similarly, Islamic financing also exerts a negative and significant influence on labor absorption, while economic growth shows no significant effect on employment. As a result, the indirect effect of Islamic financing on labor absorption through economic growth is also insignificant. These outcomes indicate that although Islamic finance theoretically promotes equitable and sustainable growth, its implementation in Indonesia still faces structural and sectoral limitations. The study highlights the need for policy realignment to channel Islamic financing toward green, inclusive, and labor-intensive sectors to strengthen its role in supporting sustainable economic transformation.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Ayu Latifah Alfisyharin
AU  - Basri Hasanuddin
AU  - Sanusi Fattah
AU  - Nur Dwiana Sari Saudi
PY  - 2026
DA  - 2026/06/20
TI  - Islamic Financing for Economic Growth and Labour Absorption in Indonesia’s Green Development
BT  - Proceedings of the 10th International Conference on Accounting, Management, and Economics (10th ICAME 2025)
PB  - Atlantis Press
SP  - 2481
EP  - 2496
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-709-5_173
DO  - 10.2991/978-94-6239-709-5_173
ID  - Alfisyharin2026
ER  -