Islamic Financial Instruments and Economic Growth; An Evidence from Indonesia

Abstract

Sovereign sukuk, Islamic bank financing and zakat are the instruments that could develop Economic Growth of Indonesia. Sovereign Sukuk used to fund infrastructure development, labor intensive sector and optimizing of local potential that have impact on the development of Indonesia's economy. Islamic bank financing ia an instrument that fund the economic sector also have contribution on economic growth. Zakat could increase the aggregate consumption and also could play an important role in asset redistribution policies and creation of wealth which has contribution on economic growth. This research uses the empirical evidence to examine the role of sovereign sukuk, Islamic bank financing and zakat on Indonesia's economic performance. Quarterly data (2012:1-2017:4) are used in this research then the data analyzed using multiple linear regression with SPSS software. The result showed that sovereign sukuk, Islamic bank financing and zakat had significant effect on the GDP. This result showed that Islamic financial instruments had great contribution towards Indonesia's economic growth.

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