Integrating Islamic Finance in Achieving the Millennium Development Goals: The Indonesian Context

Abstract

This study investigates the role of Islamic finance in supporting Indonesia's achievement of the Millennium Development Goals (MDGs), focusing on its theoretical alignment and practical contributions. Given Indonesia's significant Muslim population and dual financial system, Islamic financial mechanisms—such as zakāt, wakāf, muḍārabah, and qard al-ḥasan—present culturally resonant tools for ethical and inclusive development. This research applies a qualitative, conceptual approach grounded in Islamic jurisprudence and development economics. It reviews key literature to examine how Islamic finance supports specific MDGs, including poverty reduction, education, and financial inclusion. The study finds that these instruments align strongly with MDG priorities and offer viable solutions to funding gaps in social development. However, their impact remains constrained by institutional fragmentation, regulatory ambiguity, and limited data systems. The study proposes a policy framework for integrating Islamic finance into Indonesia’s development planning through enhanced governance, performance metrics, and community engagement. It concludes that Islamic finance, when institutionalized and aligned with national goals, holds significant potential as a complementary force in global development agendas. The findings contribute to broader discourses on faith-based financing and pluralistic approaches to sustainable development.