Economic Competitiveness in Aceh under the Islamic Financial System

Abstract

The full implementation of the Sharia Financial Institutions (LKS) system in Aceh constitutes a unique regional policy in Indonesia, with potential implications for the economic structure and competitiveness. This study aims to examine whether the implementation of the LKS system contributes to improving Aceh’s regional economic competitiveness through financing growth, constitutes a unique regional policy in Indonesia, and has potential implications for Gross Regional Domestic Product (GRDP) and financial inclusion. The research employs a descriptive quantitative approach using secondary data obtained from the Financial Services Authority (OJK), Statistics Indonesia (BPS) Aceh, and the Ministry of Finance for the period 2022–2024. The analysis focuses on financing trends, the regional economic structure, and the development of financial inclusion and the distribution of Sharia Microcredit (KUR Syariah). The findings reveal that Islamic banking financing in Aceh grew by 10.04% (May 2022–May 2023), reaching IDR 36.10 trillion in June 2023. Financial inclusion in Aceh reached 88.3%, exceeding the national average (83.5%), while the distribution of Sharia KUR increased to IDR 4.93 trillion in 2024. Nevertheless, Aceh’s economic structure remains dominated by the primary sector (32.06%), indicating that the impact of financing expansion on structural economic transformation remains limited. The study concludes that the LKS system has strengthened financial intermediation and inclusion in Aceh; however, its contribution to enhancing regional competitiveness remains gradual. Strengthening productive financing, promoting sectoral diversification, and integrating financial and regional development policies are essential to achieve sustainable economic transformation.