Innovation for prosperity: analyzing the interplay of Islamic finance and human capital on economic development

Purpose Motivated by the priority on the global policy agenda for improving human capital and alternative financial systems. This study aims to investigate the interaction impact of Islamic finance and human capital on economic development in Muslim economies. Design/methodology/approach This study adopts a quantitative methodology, applying dynamic panel data analysis through the Generalized method of moments estimation approach. Islamic finance and human capital development are measured using the weighted index. Findings The research reveals that both Islamic finance and human capital significantly contribute to economic development. The interaction of human capital growth can enhance Islamic finance’s impact on economic development. Research limitations/implications Enhancing education and maintaining a stable financial system is essential for establishing a framework that supports the potential stability and efficiency of Islamic finance development in economic activities. Practical implications Continuous supports should focus not only on strengthening human capital and the financial system but also on supporting Islamic financial development together to provide a solid foundation for sustainable growth in Muslim economies. Originality/value This study can provide regulators and scholars with information on crafting financial regulation and human capital development framework for sustainable growth in the future, especially in Muslim economies.