Islamic Green Finance: A Systematic Literature Review on Principles, Practices, and Future Directions in Pekalongan Region

Abstract

Abstracts Islamic green finance represents a critical convergence of Shariah-compliant financial principles and contemporary environmental sustainability imperatives, offering faith-based solutions to ecological challenges in Muslim-majority regions. This systematic literature review examines the theoretical foundations, practical implementations, and future trajectories of Islamic green finance with specific application to small and medium-scale enterprises in Pekalongan, Indonesia, a region facing significant environmental pressures from its textile manufacturing sector. Employing qualitative methodology and PRISMA-guided systematic review protocols, this study analyzes 43 peer-reviewed articles from international accredited journals published between 2021-2025, synthesizing current scholarship across three primary domains: foundational Islamic principles, practical financial instruments, and implementation challenges. The findings reveal that Islamic green finance, grounded in Maqasid al-Shariah, Khilafah stewardship principles, and Maslahah public interest concepts, provides robust theological and practical frameworks for environmental protection. Key instruments including green sukuk, Islamic microfinance structures, and Shariah-compliant environmental banking products offer viable pathways for financing Pekalongan's batik industry transition toward sustainable production systems.  significant implementation barriers persist, including limited awareness among small business owners, insufficient institutional capacity in regional Islamic financial institutions, standardization challenges in defining "green" criteria under Islamic law, and inadequate community-level project pipelines for sustainable investments.The study recommends multi-stakeholder interventions encompassing educational initiatives, capacity-building programs for financial practitioners, development of regional green sukuk funds, and establishment of Shariah-compliant environmental rating systems tailored to local contexts, thereby advancing both environmental sustainability and Islamic economic principles in regional development frameworks.