Islamic Fintech Growth Prospects in Accelerating MSMEs Growth: Evidence in Indonesia

Abstract

Islamic fintech plays a role in encouraging the growth of MSMEs in Indonesia with its financing segment. The more Islamic fintech develops, the faster the growth of MSMEs in Indonesia will be. This study aims to identify macroeconomic factors such as gross domestic product (GDP), interest rates, and inflation in encouraging the growth of Islamic fintech. Using the OLS regression method, the results show that GDP has a positive effect on the growth of Islamic fintech, while interest rates have a negative effect on the growth of Islamic fintech.Improving macroeconomic conditions will encourage the growth of Islamic fintech which will ultimately contribute to the growth of MSMEs which are the main segment of Islamic fintech financing. In general, the growth of Islamic fintech assets in Indonesia tends to decline in line with the decline in GDP during the Covid-19 pandemic period. However, fintech assets can still grow, supported by declining interest rates and other factors such as the growth of the digital ecosystem in Indonesia.

The Impact of Financial Inclusion and Islamic Fintech on the Challenges of the SDGs (Sustainable Development Goals)

“…Fintech supports financial inclusion programs where two-thirds of Indonesia's population does not yet have access to financial institutions and the majority of these two-thirds are MSMEs. The lack of access is because MSMEs have not been able to reach banking services and the presence of fintech can bridge the needs of MSMEs who do not have these capabilities (Fenwick et al, 2017;Jagtiani & Lemieux, 2017;Saripudin et al, 2021). In addition, the role of financial inclusion will lead to the achievement of the Sustainable Development Goals (SDGs) challenges.…”