Human Development and Its Determinants in Indonesia

Insights from Islamic Economic Framework

Abstract

This study aims to analyze the influence of economic, social, regional, and fiscal policies, as well as Islamic social financial instruments, on the Human Development Index (HDI) in Indonesia. The variables used include the distribution of zakat, infaq, and alms (ZIS) funds, GDP per capita, poverty rate, unemployment rate, income inequality (Gini Ratio), realization of the health and education sector APBD, and ultra-micro financing (UMi). This study uses a quantitative, panel-data regression approach on 34 provinces in Indonesia during the period 2015–2024. The model selection was conducted using the Chow and Hausman tests, which indicated that the Fixed Effect Model (FEM) is the best. The results of the study show that ZIS, GDP per capita, realization of the health sector APBD, realization of the education sector APBD, and ultra-micro financing (UMi) have a positive and significant effect on HDI. On the other hand, poverty and unemployment rates have a negative and significant effect on HDI. Meanwhile, income inequality has no significant effect on HDI. These findings indicate that improvements in the quality of human development are influenced not only by economic growth but also by welfare distribution, local government fiscal policies, and the optimization of Islamic social financial instruments. This research contributes to enriching the literature on human development by integrating conventional economic approaches and Islamic economics. The policy implications show the importance of increasing the effectiveness of education and health spending, strengthening poverty alleviation and job creation programs, and optimizing the management of ZIS and UMi financing to encourage inclusive and sustainable human development.