THE EFFECT OF EXCHANGE RATES, MONEY SUPPLY, AND INFLATION ON ISLAMIC BANKING FINANCING IN SUMATRA, INDONESIA

Muhammad Rizky Gunawan; Armiadi Musa; Bismi Khalidin

doi:10.47353/bj.v6i4.697

Authors

Muhammad Rizky Gunawan Universitas Islam Negeri Ar Raniry – Daruussalam Banda Aceh - Indonesia
Armiadi Musa Universitas Islam Negeri Ar Raniry – Daruussalam Banda Aceh - Indonesia
Bismi Khalidin Universitas Islam Negeri Ar Raniry – Daruussalam Banda Aceh - Indonesia

DOI:

https://doi.org/10.47353/bj.v6i4.697

Keywords:

Exchange Rate, Money Supply, Inflation, Islamic Banking Financing, Murabahah, Mudharabah, Panel Data, Macroeconomic Determinants, Sumatra, Indonesia

Abstract

This study aims to analyze the partial and simultaneous effects of exchange rates, money supply, and inflation on Islamic banking financing across five provinces in Sumatra — Aceh, North Sumatra, West Sumatra, Riau, and South Sumatra — over the period January 2021 to December 2025. Using a quantitative, causal-associative design and balanced panel data, the research employs multiple linear regression with the Fixed Effects Model in EViews 12, utilizing t-tests for partial effects and F-tests for simultaneous effects. The results show that, individually, all three variables — exchange rate (t = 2.404; p = 0.001), money supply (t = 5.938; p = 0.000), and inflation (t = 2.131; p = 0.005) — have a positive and significant impact on total financing. For Murabahah financing, only money supply is significant (t = 5.106; p = 0.000), while exchange rate and inflation are not. Similarly, for Mudharabah financing, only money supply shows a significant positive effect (t = 5.248; p = 0.000), with exchange rate and inflation statistically insignificant. Simultaneously, the three variables jointly influence all three financing measures (p < 0.001). The findings indicate that systemic liquidity, measured by money supply, is the primary macroeconomic driver of Islamic financing in Sumatra, while exchange rate and inflation play secondary, aggregate-level roles. Maintaining ample liquidity alongside stable prices and exchange rates remains key to supporting sustainable Islamic financing growth in the region.

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