Fostering MSME sustainability through sharia-based sovereign-backed equity: An exploratory ABM-SDE simulation of proposed LPI-UMKM
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Abstract
The present study explores the impact of debt-based microfinance on the long-term socio-economic sustainability of Micro, Small, and Medium Enterprises (MSMEs) during crises. Conventional state interventions frequently result in the depletion of national budgets without building systemic resilience. The present paper propose Lembaga Penjamin Investasi (LPI) UMKM, sovereign-backed mechanism designed to transition MSME financing from debt-dependency to sustainable equity-based participation. Utilizing a hybrid Agent-Based Modeling and Stochastic Differential Equation (ABM-SDE) framework, we simulate the explore effectiveness of this framework under various stress conditions. By ensuring continuous capital circulation through sovereign-backed equity, this mechanism is in alignment with UN’s Sustainable Development Goals (SDGs) and creates resilient financial infrastructure that prevents permanent loss of productive capacity in the micro-enterprise sector. Interpreting simulation outputs through proposed three-pillar Sustainability Index (SI-LPI), the study demonstrates a demonstrable improvement over debt-based systems, positive fiscal sustainability trajectories, and significant crisis absorption. It also demonstrates the mechanism's theoretical contributions to SDG 1, SDG 8, SDG 9, SDG 10, SDG 12, and SDG 17. While Green Procurement Score is additionally identified as a structurally embeddable indicator for future circular economy and green finance integration, the study also anticipated incorporate moral hazard, capital diversion, bank risk inflation, and fiscal leakage multipliers.
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