Journal of Integrated Socio-Economic Systems and Islamic Finance

Vol. 2 (2026)
Articles

Examining the Impact of Islamic Social Finance in Alleviating Poverty using Ibn Khaldun's Development Model: Evidence from Indonesia

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  • Rahmatina Awaliah Kasri,
  • Adela Natasya
Rahmatina Awaliah Kasri
Department of Economics, Faculty of Economics and Business, Universitas Indonesia
Adela Natasya
Centre for Islamic Economics and Business, Universitas Indonesia

Published 2026-06-09

Keywords

  • Islamic Social Finance,
  • Poverty Alleviation,
  • Ibn Khaldun Model,
  • Impact Case Study,
  • Aceh,
  • Indonesia,
  • Panel VECM
    • ...More
    Less

How to Cite

Examining the Impact of Islamic Social Finance in Alleviating Poverty using Ibn Khaldun’s Development Model: Evidence from Indonesia . (2026). Journal of Integrated Socio-Economic Systems and Islamic Finance, 2, 20-35. https://doi.org/10.65638/2978-8196.2026.2.03

Abstract

Despite being the only province in Indonesia that formally implements Islamic law and possesses substantial Islamic social finance potential, Aceh province continues to face persistent poverty challenges. This study, therefore, examines the determinants of poverty across 20 districts in Aceh Province during the period 2015–2019 using Khaldun’s Development Model, with particular emphasis on zakat as a proxy of Islamic social finance. Employing a Panel Vector Error Correction Model (VECM), the study investigates the relationships among poverty, regional economic growth, population, education, investment, the Gini index, and zakat. The empirical results indicate that, in the long run, poverty is significantly and negatively associated with regional economic growth, investment, and education, while population growth is positively associated with poverty. Interestingly, although zakat demonstrates a consistent poverty-reducing relationship, its effect is not statistically significant during the observation period. Furthermore, the Granger causality analysis reveals that education and regional economic growth significantly influence poverty. These findings suggest that poverty alleviation in Aceh requires not only stronger economic growth, greater investment, and improved educational outcomes, but also a more effective utilization of Islamic social finance instruments, particularly zakat. This study contributes to the Islamic development literature by empirically testing Khaldun’s Development Model in Aceh and highlighting the role of zakat as a proxy of Islamic social finance in addressing poverty, with policy implications for Indonesia and other Muslim-majority countries.

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