THE EFFECT OF THE SHARIA FINANCIAL LITERACY INDEX AND THE SHARIA FINANCIAL INCLUSION INDEX ON THE GROWTH OF INDONESIAN SHARIA BANKS' ASSETS IN THE 2021-2023 PERIOD

Abstract

The Islamic banking sector in Indonesia has significant potential considering the majority of the population is Muslim, but its asset growth remains volatile and lags behind conventional banking. The Islamic Financial Literacy Index and the Islamic Financial Inclusion Index are key factors influencing public interest as customers, as evidenced by various studies such as Nurrohmah and Purbayati (2018) and Kinasih et al. (2019). Low understanding and access to Islamic financial services hampers the expansion of Islamic banks, even though the Financial Services Authority (OJK) has regulated literacy improvement through POJK Number 76/POJK.07/2016. This study aims to analyze the influence of Islamic Financial Literacy and Islamic Financial Inclusion on the growth of Islamic bank assets in Indonesia. Islamic financial literacy reflects an individual's level of understanding of Islamic financial concepts, products, and services, while Islamic financial inclusion measures the extent of access to and use of Islamic financial services in the community. The research method used is quantitative with a multiple linear regression approach, using secondary data obtained from various official sources such as annual reports of Islamic banks, publications from the Financial Services Authority (OJK), Bank Indonesia (BI), and relevant previous research. Data analysis was carried out through classical assumption tests to ensure the regression model meets the requirements and validity and reliability tests to ensure data quality. Hypothesis testing using the t-test showed that both independent variables have a significant effect on the growth of Islamic bank assets. The results showed that Islamic Financial Literacy has a significance value of 0.000 <0.05 and a calculated t of 5.268 > t table 2.03452, which means that Islamic financial literacy has a positive and significant effect on the growth of Islamic bank assets. Meanwhile, Islamic Financial Inclusion also has a significance value of 0.000 <0.05 and a calculated t of 8.255 > t table 2.03452, so it can be concluded that Islamic financial inclusion has a positive and significant effect on the growth of Islamic bank assets. For Islamic banks, increasing Islamic financial literacy and inclusion can contribute to an increase in the number of customers, third-party funds (DPK), and broader business expansion. By increasing public understanding of Islamic financial products and services, Islamic banks can develop more effective marketing strategies and create financial products that better suit customer needs.

For the public, increasing Islamic financial literacy can help them make better financial decisions in accordance with Islamic principles. With greater understanding, people tend to be more confident in utilizing Islamic banking products, which can improve their financial well-being. Furthermore, broader Islamic financial inclusion allows communities, especially in remote areas, to gain easier access to financial services tailored to their needs. Therefore, synergy is needed between the government, Islamic financial institutions, and the public to strengthen Islamic financial literacy and inclusion to support the growth of the Islamic banking sector in Indonesia.