PUBLIC-PRIVATE PARTNERSHIP IN SHARIA-BASED MSMES EMPOWERMENT IN INDONESIA

Abstract

Empowerment of micro, small, and medium enterprises (MSMEs) based on Islamic economics is a crucial strategy for strengthening the national foundation economy and achieving sustainable development. This research review includes cooperation models between the government and the private sector (Public- Private Partnership/PPP) in optimizing empowering MSMEs through a Sharia economy approach. The latest data show that the implementation of PPP in the Sharia UMKM sector has experienced significant improvement, with growth in Sharia financing for MSMEs reaching 22.4% in 2023, while collaboration government-private in the Sharia UMKM empowerment program has reached more than 2.3 million business micro perpetrators. This research uses qualitative and analytical methodologies to see the effectiveness of the PPP model in creating a supportive ecosystem growth of Sharia-based MSMEs. Findings show that integration of sharia principles in the PPP model can increase access financing, development capacity, and market expansion for MSMEs. This collaborative model strengthens the micro economy's resilience and encourages financial inclusivity according to Sharia principles. This research is done to optimize the role of PPP in empowering Sharia MSMEs, focusing on three main pillars: strengthening Islamic finance infrastructure, developing human resource capacity, and digitalising MSMEs. Based on the Sustainable Partnership Framework, the research identifies five key success factors for PPP in the context of Islamic MSMEs: (1) harmony policy regulation, (2) innovation of sharia financing models, (3) transfer of knowledge and technology, (4) fair risk distribution, and (5) program sustainability. These research results are expected to contribute significantly to developing policies and practices that best empower MSMEs based on Islamic economics through cooperation between government and private sectors.