Abstract for: Enhancing Islamic Economics and Financial Literacy in Indonesia using Diffusion of Innovations Model

Financial literacy is crucial for sustainable economic growth, yet Islamic Economic and Financial Literacy (IEFL) in Indonesia remains low, posing challenges to achieving the government’s progressive targets. In 2023, Islamic financial Literacy reached only 39.11%, with financial inclusion at 12.88%, leading to a modest 10.98% market share for Islamic financial assets. This highlights an urgent need for targeted strategies to bridge literacy gaps, boost financial inclusion, and expand market share. As Islamic finance spreads in the social systems through different communication channels, this study employs diffusion of innovation theory to examine its structure. A model was developed following Milling and Maier’s methodologies. This method intended to capture feedback loops that driving literacy adoption. Although a single model cannot include every variable and relationship, a clearly defined model can provide meaningful insights and serve as a foundation for effective policies. The proposed model differs from conventional approaches by explicitly capturing four key feedback loops indicating interrelation among awareness-building, social interaction community-based dissemination, knowledge retention, and demographic dynamics. It identifies critical stages of adoption and simulates reinforcing and balancing feedback loops. Critical variables include adoption probability, interaction frequency, campaign effectiveness, and population growth. It explains the current trajectory of Indonesia’s IEFL index and address key variables influencing literacy growth. Understanding the literacy systems is key to increasing IEFL. Appropriate combinations and timing of key strategies could facilitate achieving IEFL index target. Strategies for enhancing literacy include targeted social media campaigns, community-driven interactions, simplified educational content for diverse demographic groups, and structured integration of Islamic financial concepts into formal educational curricula. Effective strategies must be well-structured to supports continuous learning to achieve national literacy objective. related to grammar correction only.