Development of the Sukuk Market in Indonesia during the Era of President Jokowi’s Administration: A Study of the Role of the Financial Market and Macroeconomics in Indonesia

Abstract

As in the case of the sukuk market in other parts of the developing world, the sukuk market in Indonesia has developed relatively well since the beginning of sukuk issuance in Indonesia.   This research aims to find the determinants of sukuk market development in Indonesia, specifically during the period of President Jokowi’s leadership. How does the banking sector influence the sukuk market? And how do the bond market and stock market in the conventional financial industry influence sukuk development?   The quantitative analysis used an Error Correction Model (ECM). This model explains the conditions of short-term and long-term influence of a time series model.   Time series data were collected monthly from January 2018 to December 2022. The findings show that only the banking variable had a significant effect, in both the long term and short term, on the development of the sukuk market. In the long term, the banking variable was proven to have a positive effect while in the short term, the banking variable had a significant negative effect.  This research also found that the stock market variable was able to produce a positive effect on the sukuk market in the long term and did not have a significant effect on short term. The research results indicate a positive long-term contribution to sukuk development in Indonesia. Nevertheless, in the short term, per capita GDP in Indonesia was not seen to have a significant influence on the development of sukuk in Indonesia.  

Received: 15 January 2025 / Accepted: 28 February 2025 / Published: 02 March 2025