ANALYSIS OF THE EFFECT OF SHARIA BANK INDONESIA CERTIFICATES, MONEY SUPPLY, INFLATION, AND RUPIAH EXCHANGE RATE ON SHARIA MUTUAL FUNDS IN INDONESIA

Abstract

In the rapidly growing Islamic capital market of Indonesia, the world's largest Muslim population and a burgeoning hub for Sharia-compliant investments, understanding the macroeconomic drivers of Islamic mutual funds is crucial for fostering financial inclusion and stability amid global uncertainties like fluctuating commodity prices and geopolitical tensions.This study aims to comprehensively analyze the influence of the Bank Indonesia Sharia Certificates (SBIS), Money Supply (JUB), Inflation, and Rupiah Exchange Rate on the performance of Islamic Mutual Funds in Indonesia. The research is motivated by the dynamic development of the Islamic capital market and the need to understand macroeconomic determinants that shape the growth of Sharia-compliant investment instruments. Employing the Vector Error Correction Model (VECM) as the analytical method allows this study to capture both short-term adjustments and long-term equilibrium relationships among variables, which is crucial when examining financial time series data that exhibit cointegration. Using secondary data from official publications of Bank Indonesia, the Financial Services Authority (OJK), and the Central Statistics Agency (BPS), the study analyzes 96 monthly observations spanning from January 2017 to December 2024. The empirical results reveal that, in the long run, Money Supply and Rupiah Exchange Rate have a significant positive impact on Islamic Mutual Funds, while SBIS has a significant negative effect, and inflation shows no significant influence. Conversely, in the short run, inflation exerts a significant negative effect, while SBIS, Money Supply, and Rupiah Exchange Rate remain insignificant. These findings imply that liquidity expansion and currency appreciation tend to encourage the growth of Islamic Mutual Funds in the long term, whereas tighter monetary instruments such as SBIS may reduce fund attractiveness. The results provide useful insights for policymakers, investors, and fund managers in optimizing monetary policy responses and investment strategies within Indonesia’s Islamic capital market framework.