Strengthening Islamic Financial Inclusion to Enhance Microenterprise Sustainability: Evidence from Women Entrepreneurs in Indonesia

Microenterprises play a vital role in economic development and achieving Sustainable Development Goals (SDGs). However, sustainability practices remain limited, especially among women-led businesses from an Islamic economic perspective. This study develops a sustainability performance model for women microentrepreneurs by examining the mediating role of Islamic financial inclusion between Islamic financial literacy and government support. A quantitative approach using Structural Equation Modeling–Partial Least Squares (SEM-PLS) was employed, with data collected from women microentrepreneurs in Java and Sumatra through purposive random sampling. Results reveal that Islamic financial literacy positively influences financial inclusion and the environmental dimension of sustainability but does not significantly affect economic and social dimensions. Conversely, government support strongly affects financial inclusion and all sustainability dimensions. Financial inclusion partially mediates the effects of both predictors on environmental and social dimensions but not on the economic dimension. These findings emphasize the importance of improving Islamic financial literacy and government support to foster inclusive finance and sustainable microenterprise practices, particularly in environmental and social aspects. Policies should integrate education, access to capital, and managerial capability to strengthen economic sustainability.