The Influence of Internet Users and Macroeconomic Determinants on the Islamic Finance Index in Indonesia and Malaysia
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Abstract
The rapid proliferation of internet access has fundamentally transformed the operational landscape of global business and interpersonal communication, with Islamic finance being no exception to this transformation. This study examines whether internet penetration, economic growth, exchange rates, labor force participation, and poverty levels serve as determinants of the Islamic Finance Index (IFI) in Indonesia and Malaysia. A quantitative approach is adopted, employing panel data regression techniques. Given constraints in variable availability, an unbalanced panel regression is applied using quarterly data spanning the period from 2013 to 2022. Empirical findings confirm a statistically significant association between internet users and selected macroeconomic variables in relation to IFI. Specifically, internet penetration positively contributes to IFI advancement, while labor force participation and poverty rates also exert notable influences. The remaining macroeconomic variables, however, do not yield statistically significant results. Through a systematic examination of the relationships among internet users, macroeconomic determinants, and Islamic finance performance, this study addresses an existing gap in the literature, offering valuable guidance for policymakers and scholars seeking to identify the primary variables that should be prioritized to accelerate Islamic finance development in both Indonesia and Malaysia, in alignment with the growing rate and influence of internet adoption.
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