The Role of Islamic Economic Law in Promoting Equitable Welfare through Financial Ethics
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Authors
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Asep Hidayatulloh
Doctoral Program in Islamic Community Development, UIN Raden Intan Lampung, Indonesia
Keywords:
Islamic economic law, Welfare, Financial ethics, Sharia internalization, Risk sharingAbstract
Objective: This research focuses on how Islamic economic law will lead to equitable welfare (falah) through financial mechanisms based on ethical sharia practices. The direct effects of asset ownership, sharia contracts, trust, joint risk, and government incubators are investigated along with the moderating effect of sharia value internalization.
Methods: This study uses quantitative research designs with the primary data taken directly from the respondents using the structured questionnaire methods from 312 Islamic Economic Actors in Indonesia. The data was analyzed through the method of using SmartPLS 4 by assessing the measurement and structural model fit including the moderating effects.
Results: Research findings indicate that all five independent variables have positive and significant effect towards quality welfare. In addition, internalization of sharia value is also a moderating variable of the relationship between these two variables to welfare, which means, the greater internal ethical commitment it has, it will strengthen the effectiveness of formal economic mechanism.
Novelty: In this study, we apply an integrated Islamic legal construct with institutional theory model of welfare in its dimensional aspects: possible structural and ethical dimensions. It moves the conversation forward by presenting evidence how the presence of internalised sharia improves the performance of the institutions of Islamic economics.
Implications: We see from its results that there is an assurance of empirical evidence to justify how moral consciousness should be the basis for Islamic economic policymaking. The paper recommends improving both institutional regulation and individual or social ethical awareness for sustainable welfare among policymakers and Islamic financial institutions.
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