The Impact of Sharia Banking Financing Micro, Small, and Medium Enterprises on economic Growth

Abstract

Islamic banking plays a crucial role in supporting the development of Micro, Small, and Medium Enterprises (MSMEs), which are key drivers of economic growth. This study aims to analyze the impact of Islamic banking financing on MSMEs and its effect on economic growth in South Kalimantan. The research employs multiple linear regression analysis using monthly interpolated data from the Financial Services Authority (OJK) and the Central Bureau of Statistics (BPS) for the period 2016–2022. The findings indicate that MSME working capital financing has a negative and significant effect on economic growth, while MSME investment financing has a positive and significant effect. Meanwhile, labor as a control variable shows a negative but insignificant impact on economic growth. These results highlight the importance of optimizing investment-based financing to enhance economic growth and suggest further evaluation of working capital financing schemes to improve their effectiveness in supporting MSME development.