The role of sukuk financing in addressing unemployment and education gaps

Purpose This study aims to investigate the socioeconomic impact of sukuk financing on unemployment and government education expenditure in six countries: the United Arab Emirates, the UK, Indonesia, Malaysia, Saudi Arabia and Türkiye. It explores how sukuk structures can support inclusive development through targeted investments and strong governance. Design/methodology/approach Using a panel autoregressive distributed lag model, this study analyses the short- and long-term effects of sukuk issuance on unemployment and education spending from 2000 to 2023. Governance indicators from the World Governance Indicators data set and macroeconomic controls were incorporated to reflect the institutional and policy contexts. Findings The sukuk size significantly reduces unemployment in the long run, reflecting its potential to finance labour-intensive sector. However, outstanding sukuk positively correlate with unemployment in some contexts, highlighting the inefficiencies in fund allocation. High coupon rates constrain the developmental impact of sukuk. Importantly, governance quality, especially government effectiveness and corruption control, emerges as a key enabler of positive outcomes. Research limitations/implications Although this study provides a robust cross-country analysis, it is limited to six sukuk markets. Broader regional comparisons and expanded variables (e.g. education outcomes and green finance) are suggested for future research. Practical implications Findings inform strategies to reduce financing costs, strengthen institutional quality and align sukuk proceeds with employment and education objectives. Originality/value To the best if the authors’ knowledge, this study offers one of the few empirical analyses linking sukuk financing with labour market and education outcomes across multiple countries. This study advances the literature by integrating governance quality and applying second-generation panel techniques to enhance the empirical robustness.