Digital Economy, Waqf, and Green Fiscal Spending as Determinants of the Islamic Human Development Index: Evidence from West Java

Abstract

This study examines the effects of the digital economy, waqf, and green fiscal spending on the Islamic Human Development Index (IHDI) in West Java, with local government financial performance as a moderating variable. Despite being Indonesia’s most populous Muslim province, West Java still faces challenges in improving Islamic human development. Previous studies have mainly focused on conventional HDI or examined digitalization, waqf, and environmental spending separately. Empirical evidence integrating these factors into an IHDI framework remains limited, particularly at the local government level. This study fills this gap by integrating digital economy, Islamic social finance, and green fiscal policy into a single model and examining the moderating role of local government financial performance. The study uses saturated panel data from 27 districts/cities in West Java for 2018–2025 and applies Fixed Effect Model (FEM) and moderation analysis. The results show that the digital economy and green fiscal spending have positive and significant effects on IHDI, while waqf has a positive but insignificant effect. Local government financial performance has a positive and significant direct effect on IHDI and significantly moderates the effect of the digital economy, but does not moderate the effects of waqf or green fiscal spending. These findings indicate that Islamic human development is supported by digital transformation, sustainable fiscal spending, and sound local financial management. Meanwhile, the insignificant effect of waqf suggests the need to strengthen its institutional management and productive utilization to generate measurable human development outcomes.