Does sharia bank’s economic financing affect to gross regional domestic product? A research in East Java

¹ Universitas Trunojoyo Madura, Sharia Economic Department, PO BOX 2 Kamal Bangkalan, Indonesia
² Universitas Trunojoyo Madura, Sharia Business Law Department, PO BOX 2 Kamal Bangkalan, Indonesia

^* Corresponding author: nasrulloh@trunojoyo.ac.id

Abstract

Sharia banking plays a crucial role in channeling funds from surplus parties to those in need, potentially enhancing economic growth. This study investigates the impact of Sharia bank financing in the industrial processing and trade sectors on the Gross Regional Domestic Product (GRDP) growth of East Java. The research employs quantitative methods, utilizing time series data from 2016 to 2021, which includes Sharia bank financing data and GRDP data. Simple and multiple linear regression techniques are used to analyze the data. The results reveal that financing in both the industrial processing and trade sectors has a simultaneous effect on GRDP growth. However, when analyzed individually, only trade sector financing significantly influences GRDP growth, while industrial processing sector financing does not. The study concludes that although Sharia bank financing collectively impacts GRDP growth, its effects vary by sector. It is recommended that Islamic banks and government agencies focus on enhancing financing in sectors with a proven impact, such as trade, to better support economic growth. These findings underscore the importance of strategic financing in boosting economic growth, and collaboration between policymakers and financial institutions is essential to optimize the benefits of Sharia bank financing.