Designing Sharia-Compliant Green Finance Contracts for Islamic Microfinance ‎Institutions in Indonesia

Islamic Green Finance and Sustainable Development

Abstract

This article examines the development of research on sharia-compliant green finance contracts for Islamic Microfinance Institutions (LKMS) in Indonesia. Although the Islamic green finance literature has grown through studies of green sukuk, green banking, Islamic social finance, ESG disclosure, maqasid al-sharia, and fiqh al-bi'ah, attention to the design of green financing contracts at the micro level remains limited. This study aims to map research trends, identify research gaps, and formulate a conceptual framework for green finance contracts for LKMS. The method used is an integrative literature review based on the Scopus database with the search string TITLE-ABS-KEY (("green finance" OR "sustainable finance" OR "sustainability" OR "environmental") AND ("Islamic finance" OR "sharia" OR "Islamic") AND ("Indonesia")). From 615 initial documents, after deduplication and selection based on inclusion and exclusion criteria, 50 core articles were analyzed using narrative and thematic synthesis. The review shows that prior research remains fragmented among macro instruments, banking governance, normative legitimacy of environmental fiqh, and microfinance inclusion. The main gap lies in the absence of a contract model that integrates sharia contracts, a micro green taxonomy, environmental covenants, risk mitigation, greenwashing prevention, and environmental impact measurement. This article concludes that contracts can serve as operational instruments for translating sharia and sustainability principles into inclusive, proportional, and measurable LKMS financing practices.