The Role of Islamic Social Finance in Driving Industrial Innovation and Inclusive Economic Growth

Abstract

In the contemporary era of digital transformation and industrial acceleration, the integration of Islamic economic values with innovative financial mechanisms becomes increasingly vital. This study investigates the role of Islamic social finance—including zakat, waqf, and qard hasan—in fostering industrial innovation and promoting inclusive economic growth in Indonesia. Drawing on both primary data collected through structured surveys from micro-entrepreneurs and secondary data from BAZNAS, BWI, and national statistics, this research explores how the effective utilization of social finance instruments contributes to innovation among small businesses, especially in underserved and coastal regions. It also evaluates how these innovations lead to broader economic inclusion by increasing income, expanding employment opportunities, and reducing regional disparities. The findings aim to provide empirical insights for policymakers, zakat and waqf institutions, and stakeholders in the halal economy to develop sustainable financing models that align with maqashid shariah and national development goals. By empirically linking Islamic social finance with real-sector performance, this study contributes to the discourse on ethical financial innovation in the Muslim world and underscores its relevance in industrial development strategies.