EXPLORING THE POTENTIAL OF ISLAMIC FINANCIAL INSTRUMENTS IN ADDRESSING ECONOMIC CHALLENGES: THE ROLE OF FINANCIAL INCLUSION AND INSTITUTIONAL QUALITY

Abstract

This study examines the effects of Islamic Venture Capital (IVC), Zakat, Infaq and Sadaqah (ZIS) Distribution, and Sukuk on Indonesia's sustainable economic development, considering the function of financial inclusion as a mediator and institutional quality as a moderator. The study collects secondary data quantitatively and employs multiple regression techniques. According to the findings, IVC, Sukuk, ZIS Distribution, and financial inclusion significantly and positively impact sustainable economic development. Additionally, the study demonstrates that financial inclusion mediates the relationship between IVC, Sukuk, ZIS Distribution, and sustainable economic development. In addition, institutional quality improves the effect of financial inclusion on sustainable economic development. The study contributes to the body of knowledge by presenting empirical evidence on the impact of IVC, Sukuk, and ZIS Distribution on sustainable economic development and the mediating and moderating functions of financial inclusion and institutional quality, respectively. This study also addresses the lack of research on the application of Islamic finance in Indonesia, where the Islamic financial sector has been expanding significantly over the past decade. These findings can assist policymakers and Islamic finance industry stakeholders in developing strategies to promote Islamic finance's contribution to sustainable economic development.