DETERMINANTS OF ISLAMIC BANKING MSME FINANCING IN INDONESIA 2015-2024
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Abstract
This study examines the influence of macroeconomic and socio-economic indicators on the distribution of Islamic banking financing to Micro, Small, and Medium Enterprises (MSMEs) in Indonesia over the period 2015–2024. Using a quantitative approach with multiple linear regression analysis and secondary time-series data from the Financial Services Authority (OJK), Bank Indonesia (BI), and Statistics Indonesia (BPS), this research analyzes the effects of Gross Domestic Product (GDP), Open Unemployment Rate (TPT), poverty rate, inflation, and BI 7-Day Reverse Repo Rate (BI7DRR) on MSME financing (OS_PUMKM). The findings reveal that poverty rate negatively and significantly affects MSME financing, while TPT and BI7DRR demonstrate positive and significant effects. Conversely, GDP growth and inflation show no significant influence on MSME financing distribution. These results indicate that Islamic bank MSME financing is more sensitive to socio-economic conditions, particularly poverty and unemployment, rather than macroeconomic indicators such as inflation and economic growth. The study contributes to the understanding of Islamic banking intermediation functions and provides policy recommendations for strengthening MSME financing in Indonesia
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