The Effect of Gross Fixed Capital Formation and Islamic Bank Financing

Abstract

This study aims to analyze the effect of Gross Fixed Capital Formation (GFCF) and Islamic bank financing on economic growth in Jambi Province during the 2010–2024 period. This research employs a quantitative approach using annual time series secondary data obtained from the Central Statistics Agency (BPS) and the Financial Services Authority (OJK). The analytical method applied is the Autoregressive Distributed Lag (ARDL) model using EViews 12 software. The results show that Gross Fixed Capital Formation (GFCF) has a negative and significant effect on economic growth in Jambi Province, indicating that investment allocation has not yet optimally contributed to regional economic output. Meanwhile, Islamic bank financing has a positive and significant effect on economic growth through its support for productive business activities and real sector development. Simultaneously, GFCF and Islamic bank financing significantly influence economic growth. Furthermore, the Bounds Test and Error Correction Model (ECM) confirm the existence of both long-run and short-run relationships among the variables. These findings imply that improving the quality of investment allocation and expanding Islamic financial inclusion are important strategies for supporting sustainable regional economic growth in Jambi Province.