ABSTRACT
Financial inclusion is one of the instruments in sustainable development and a comprehensive commitment for many developing countries as a development agenda from the financial aspect and it is expected to encourage inclusive growth. This study aims to look at the role of financial inclusion in Islamic banking on economic growth and unemployment reduction as indicators of inclusive growth in Indonesia and the Middle East countries. The data was used quarterly from IFSB (Islamic Financial Statistics Board) and World Bank. The panel regression method is used to see the effect of financial inclusion instruments consisting of the amount of financing as well as macroeconomic variables consisting of the interest rate, exchange rate, and inflation rate on economic growth and unemployment as a proxy for inclusive growth. The results found that financial inclusion with Islamic bank financing had a significant positive effect on economic growth. Meanwhile, Islamic bank financing can help reduce unemployment so that the increase in Islamic financing channels can absorb labor. Thus, financial inclusion can encourage inclusive growth through indicators of economic growth and employment. Meanwhile, macroeconomic variables, such as inflation, pose a negative effect on economic growth and unemployment.
