ISLAMIC MONETARY POLICY AND ISLAMIC FINANCIAL CONTRACT INNOVATION: AN ANALYSIS OF THE EFFECT ON ECONOMIC STABILITY AND BANKING COMPETITIVENESS

Ariefah - Sundari; Khotib .; Siti Lathifatus Sun’iyah

Ariefah - Sundari Universitas Islam Darul 'Ulum Lamongan
Khotib . Universitas Islam Negeri Sunan Ampel, Surabaya, Indonesia
Siti Lathifatus Sun’iyah Universitas Islam Darul Ulum, Lamongan, Indonesia

Keywords: Islamic monetary policy, Sharia contracts, cash waqf, economic stability, Islamic banking.

Abstract

This study examines the influence of Islamic monetary policy and Sharia financial contract innovations on economic stability and banking competitiveness, using cash waqf management by Mawar Cooperative (2017-2024) as a case study. The research employs a mixed-method approach, combining quantitative analysis of financial reports with qualitative interviews. Findings reveal that Islamic monetary principles (prohibition of riba, gharar) and innovative contracts (mudarabah, musharakah) enabled 18% annual asset growth while distributing IDR 1.51 billion to education, da'wah, and economic sectors. The study demonstrates how Sharia-compliant investment strategies enhance financial stability by linking waqf assets to productive sectors (35% allocated to MSMEs). However, challenges include limited financial literacy (only 30% beneficiaries understand the mechanism) and regulatory fragmentation. The research contributes to Islamic finance literature by providing empirical evidence of cash waqf's dual role in social finance and monetary stability, offering policymakers insights for strengthening Indonesia's Islamic financial ecosystem.