The Influence of Islamic Leadership on the Creativity of Employees of Sharia Microfinance Institutions: The Role of Knowledge Sharing and Organizational Innovation
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This study examines the influence of Islamic leadership on employee creativity within Islamic Microfinance Institutions, focusing on the mediating roles of knowledge sharing and organizational innovation. Utilizing Structural Equation Modeling with Partial Least Squares (SEM-PLS), data were collected from 117 employees across several institutions. The findings reveal that Islamic leadership significantly enhances knowledge sharing, positively impacting employee creativity. Organizational innovation directly fosters knowledge sharing and moderates the relationship between Islamic leadership and knowledge sharing, amplifying the positive effects. These results highlight the synergistic interaction among leadership, knowledge exchange, and innovation in cultivating a creative and high-performing organizational environment. This research enriches the literature on human resource management in Islamic finance by demonstrating how ethical leadership and innovative practices can improve organizational outcomes, with practical implications for enhancing competitiveness through leadership development and an innovative organizational culture.1. Introduction
The development of Islamic Microfinance Institutions (IMFIs) globally has grown rapidly in various parts of the world. MFIs are important in providing financial access to low-income communities and micro-enterprises that are often unaffordable by conventional financial institutions (Alam et al., 2021; Wardiono & Yuspin, 2019). World Bank data through the 2017 Global Findex Database reveals that the world's 1.7 billion people are still untouched by formal financial services. The presence of MFIs has proven effective in bridging economic disparities and empowering marginalized groups to participate actively in economic activities. Through sharia principles prioritizing justice and benefits, LKMS is an instrument of financing and a catalyst for social change towards a more prosperous and just society (Sari & Sulistyowati, 2023). In this context, MFIs are present as an alternative solution that offers financial products and services based on sharia principles, which meet the community's financial needs and align with religious and social values. In Indonesia, the development of IMFIs is marked by the emergence of the concept of Baitul Maal wat Tamwil (BMT), which has become a pioneer in the Islamic microfinance industry (National Committee on Sharia Finance, 2019). Islamic Microfinance Institutions (IMFIs) have a dual function: they are financial service providers and drivers of economic development that help people escape poverty(Alam et al., 2024; Hakimi et al., 2024).
The influence of Islamic leadership in the organization of financial institutions has been the focus of attention in recent years, especially in the context of Islamic microfinance institutions. Islamic leadership focuses not only on operational management but also on developing a work ethic and employee motivation (Wulandari et al., 2023). In Islamic microfinance institutions, leadership based on Islamic values can increase employee creativity and innovation by applying business ethics following Islamic law (Scott, 2018). Therefore, this study examines the impact of leadership models based on Islamic values on employee creativity in sharia microfinance institutions. In addition, this study also examines how the process of information exchange and the development of new ideas play a role in supporting the organization's progress. The research results are expected to make a meaningful contribution to optimizing the performance and usefulness of microfinance institutions that carry out their operations according to sharia rules.
Employee creativity plays a crucial role in encouraging the progress and competitiveness of Sharia Microfinance Institutions. Creative employees can develop fresh ideas and innovative solutions to face increasingly complex business challenges. However, employee creativity cannot develop optimally without the support of knowledge sharing and a climate of innovation in the organization. Knowledge sharing allows for exchanging information, experiences, and insights between employees, which can stimulate the emergence of new creative ideas. Meanwhile, a conducive organizational innovation climate allows employees to explore creative ideas and implement them into genuine innovations. Thus, the synergy between employee creativity, knowledge sharing, and organizational innovation is an important factor in improving the performance and competitiveness of Sharia Microfinance Institutions amid the ever-changing dynamics of the financial industry (Wening et al., 2023).
Prophetic leadership values based on the noble character of the Prophet PBUH - including honesty (Sidiq), integrity (Amanah), intelligence (Fatonah), and communication skills (Tabligh) - have shown their effectiveness in optimizing the productivity and performance of all elements of human resources in the organization. The application of these four prophetic leadership traits has a positive impact on improving work ethic and achieving employee targets comprehensively. This improvement can be seen from various aspects, ranging from the quality and quantity of work results to efficiency and the ability to collaborate. The improvement is realized through establishing an Islamic work ethic that emphasizes the values of patience, sincerity, dedication, and a strong work ethic. These values grow and develop in an organizational environment that implements an Islamic work culture under the direction of leaders who practice Islamic leadership principles (Shobastian, 2020). In addition, knowledge sharing within organizations also plays an important role in driving innovation. Islamic leadership can facilitate this process by creating a work atmosphere that prioritizes togetherness and openness. Research shows that an organizational culture based on Islamic principles can strengthen communication and cooperation between employees, thereby triggering the emergence of creative and innovative ideas in the work environment (Shalihah, 2015).
This research aims to examine the impact of the leadership model based on Islamic principles in encouraging the creative and innovative abilities of employees in charge of microfinance institutions that operate following Islamic law, by considering the role of knowledge sharing and organizational innovation as intervening variables. The significance of this study lies in its contribution to enriching the literature on human resource management in the context of Islamic financial institutions, which are still limited in number. In addition, this research has the potential to provide valuable insights for practitioners and policymakers in optimizing the performance of Islamic microfinance institutions through the development of effective leadership and the creation of a work environment that supports creativity and innovation. Thus, the results of this study are expected to be the foundation to improve the competitiveness and sustainability of Islamic microfinance institutions amid increasingly complex financial industry dynamics.
2. Literature review
The Methodology section should be written concisely, yet provide enough details to allow others to replicate and build on published results. The well-established methods can be introduced briefly with proper citations. Do not describe these published methods in details. In contrast, detailed descriptions are required for new methods. If multiple methods are adopted in the work, this section may be divided into several subsections, each providing details on a specific method. Note that the publication of your manuscript means all materials, data, codes, and protocols associated with the publication must be made available to readers. Remember to disclose restrictions on the availability of materials or information at the submission stage. If your manuscript uses large datasets deposited in an opensource database, please specify where the data have been deposited. If your study requires ethical approval, do not forget to list the authority and code of the ethical approval. The Baitul Maal wa Tamwil Sharia Savings and Loan Financing Cooperative (KSPPS) is an Islamic microfinance institution with two important societal roles. As Baitul Maal, BMT manages social funds such as zakat, infaq, alms, and waqf. Meanwhile, as Baitul Tamwil, BMT carries out savings, loan, and financing activities according to sharia principles. The existence and operation of BMT are officially regulated in the Regulation of the Minister of Cooperatives and SMEs Number 11 of 2017, which provides a legal basis for Baitul Maal wa Tamwil (BMT) in carrying out its role as an Islamic microfinance institution that serves the community in Indonesia (Huda, 2022)
In the context of economic empowerment, BMT functions as a financial service provider and an agent of social change. Various studies show that the presence of BMT can increase people's access to poverty alleviation. For example, research by Padmantyo et al. (2020) stated that BMT contributes to efforts to overcome the problem of poverty. Zakat has proven to be a powerful solution in distributing wealth from the wealthy to those in need, thereby creating an equitable welfare distribution in society. Zakat is not only seen as a form of personal worship but also as a means of community development with high social concern and common welfare.
However, despite the rapid development of BMT, challenges remain in regulation and supervision. Several studies have shown the need for a more transparent legal framework to support BMT operations in functioning optimally. BMT needs to maintain public trust by showing consistent performance and following sharia principles to continue to develop as a trustworthy financial institution (Falah et al., 2022). Thus, the development of BMT must be balanced with efforts to increase managerial capacity and professionalism to meet community expectations and contribute more to the people's economy. Other research by Alam et al. (2022) stated that BMT needs to improve the quality and competence of employees to anticipate and minimize risks and negative impacts that may occur in the future.
While prior research has extensively covered BMT's dual roles as both a financial intermediary and a social institution (Huda, 2022; Padmantyo et al., 2020), several gaps remain underexplored. First, most studies have concentrated on the financial inclusion and poverty alleviation functions of BMT, with limited focus on the organizational and behavioral dimensions that underpin institutional effectiveness (Ekawati & Kusumaningtias, 2024). Specifically, there is a scarcity of empirical research examining how leadership models—particularly Islamic leadership—impact internal processes such as employee creativity, knowledge sharing, and innovation within BMT (Permana, 2020). Furthermore, while the syariah-compliant governance and social accountability of BMTs are well documented, fewer investigations address how these governance mechanisms translate into organizational outcomes or foster sustainable human resource development (Khoirunnisa et al., 2023). This study addresses these gaps by analyzing the relationship between Islamic leadership practices and the creative potential of BMT employees, mediated by knowledge sharing and organizational innovation, thereby providing new insights into how Islamic microfinance institutions can optimize both their social mandate and organizational performance.
This study foregrounds leadership both as a managerial and social construct that significantly influences organizational effectiveness and adaptation. Leadership is not only a mechanism for strategic decision making but also a social network–driven process that facilitates collective goals and interpersonal collaboration (Berson & Avolio, 2004; Roth, 2022) . Contemporary approaches recognize the interdisciplinary nature of leadership, spanning psychology, sociology, and management, where creativity, intellectual capability, and the motivation of employees become essential characteristics (Buryk et al., 2025; Roth, 2022). Further, the emergence of leader–member ties is deeply affected by organizational culture, social networks, and contextual opportunity patterns, all of which contribute to the dynamic formation of leadership structures oriented toward adaptation and innovation (Roth, 2022).
Islamic leadership principles can be aligned with established global leadership theories, including transformational, servant, and adaptive leadership models. Transformational leadership, as described by Berson & Avolio (2004), centers on visionary influence, ethical standards, and a shared sense of organizational purpose. In parallel, servant leadership prioritizes nurturing and developing subordinates, leading to optimal team performance (Buryk et al., 2025). Adaptive leadership emphasizes flexibility and responsiveness to changing socio-economic contexts (Yukl & Mahsud, 2010). Islamic leadership perspectives reinforce these global approaches by emphasizing ethical foundations, trust, knowledge-sharing, and holistic organizational development. These alignments demonstrate that Islamic leadership, while rooted in religious values, embodies universal principles that integrate and complement widely recognized global leadership models.
Islamic leadership has a significant impact on knowledge-sharing behavior in Islamic microfinance institutions. Research by Hafidloh et al. (2023) shows that the application of work ethics based on Islamic teachings has a beneficial impact in creating a culture of knowledge sharing between employees and fostering a proactive attitude to contribute more to the progress of the organization. This Islamic Leadership then encourages an increase in the productivity and performance of employees working in sharia-based microfinance institutions (IMFIs). Islamic work ethics help create a work environment conducive to collaboration and information exchange. In addition, ethical values in work based on Islamic teachings can encourage workers to actively share knowledge and show organizational citizenship (OCB) behavior.
Islamic leadership distinguishes itself from general or conventional leadership models through its foundation in divine guidance derived from the Qur'an and Sunnah, emphasizing accountability not only to organizational stakeholders but ultimately to Allah (God) (Beekun & Badawi, 1998; Siregar et al., 2021). While general leadership often focuses on skills, personality traits, or transactional outcomes, Islamic leadership is characterized by the integration of spiritual, ethical, and moral dimensions—such as amanah (trust), adl (justice), shura (consultation), and servant-leadership principles, all anchored in religious obligations (Beekun, 2012; Mohiuddin, 2020). The primary objective of Islamic leadership is to seek the pleasure of Allah through service to others and the fulfillment of socially responsible missions, whereas general leadership typically pursues organizational effectiveness based on human-centric goals and managerial performance (Altalib, 2001; Siregar et al., 2021). This religious anchoring differentiates Islamic leadership by making leaders accountable for both worldly and spiritual consequences, promoting a holistic view that prioritizes ethical conduct, justice, and communal well-being over strict rational or profit-driven approaches.
The East-West theoretical dialogue highlights both convergence and divergence between frameworks. For instance, both Western and Islamic traditions emphasize ethical conduct and transformational influence, but Islamic leadership uniquely centers its foundation on spiritual accountability, justice, and collective well-being (Abay et al., 2023; Alsarhi et al., 2014; Eisenbeiss, 2012). Recent scholarship emphasizes the benefits of blending universal leadership models—rooted in empirical research from different contexts—with indigenous approaches, resulting in a more comprehensive, globally relevant conceptualization of leadership for contemporary organizations (Abay et al., 2023; Alsarhi et al., 2014; Liden et al., 2025).
Islamic leadership principles, prioritizing justice and social responsibility, positively impact the culture of knowledge sharing among employees. This Islamic leadership has been proven to support the creation of innovation and encourage improvement in organizational performance. Research conducted by Nasution et al. (2022) revealed that applying Islamic leadership styles effectively improves the quality of communication between individuals, strengthens bonds among employees, and creates a conducive work environment to develop innovative ideas.
This leadership also creates an ethical organizational climate, where Islamic values are consistently applied to support creativity and adaptability. In Islamic banking, research shows that knowledge sharing and innovation are integral to business survival and progress. Sharing knowledge between employees has a dual impact, encouraging collective learning skills and spurring creativity and renewal in Islamic banking institutions (Abbas et al., 2019).
Hypothesis 1. Islamic leadership has a significant influence on knowledge-sharing behavior in Islamic microfinance institutions.
Research on the influence of knowledge-sharing activities on employee creativity shows that knowledge exchange activities are crucial to personal and organizational innovation. Sharing information and experiences between employees has proven to be a major driver in fostering creative ideas and new solutions in the work environment. Knowledge sharing allows employees to acquire new information combined with previous knowledge, generating new and innovative ideas. Noerchoidah et al. (2023) confirmed that knowledge sharing positively influences individual creativity, showing that when employees share information and experiences, they are more likely to develop creative solutions to work challenges.
In addition, Knowledge sharing has proven to be a key driver of creativity and innovation in the work environment. When employees exchange insights and experiences, they hone their creativity and encourage the birth of breakthroughs. Wang (2023) revealed that employees who like to share innovative ideas with their colleagues have a better ability to create and implement fresh solutions in the workplace. This atmosphere of mutual sharing creates a bond of trust between employees, which triggers a closer spirit of cooperation and creates a more pleasant work environment for all parties.
Hypothesis 2. Knowledge-sharing behaviors directly affect employee creativity through collaborative processes and building strong professional relationships.
Organizational innovation significantly influences knowledge-sharing behavior, an important topic in human resource management and organizational development. Organizational innovation, which includes implementing new ideas, processes, or products, relies heavily on employees' ability to share knowledge effectively. Research shows that knowledge sharing can improve innovative work behaviors within an organization. Castaneda & Cuellar (2020) emphasized that knowledge-sharing behaviors significantly impact organizational innovation, indicating that an environment that supports information exchange is important in fostering workplace creativity and innovation.
In addition, a study by Afsar et al. (2016) shows that transformational leadership can strengthen the relationship between knowledge sharing and innovative behaviors. Leaders who support a culture of knowledge sharing create an environment that encourages employees to collaborate and innovate. Knowledge sharing significantly impacts employees' innovative behaviors, where individuals engaged in knowledge exchange can better take on challenges and create innovative solutions.
However, the positive influence of knowledge sharing on innovative behaviors does not always occur automatically; Factors such as transformational leadership also play an important role. Leaders who adopt a transformational leadership style can facilitate an environment that encourages knowledge sharing, thus encouraging employees to engage more actively in the innovation process. In this context, a transformative leadership style plays a dual role – regulating knowledge sharing and innovative behaviors and creating an organizational climate conducive to innovation (Pandanningrum & Nugraheni, 2021). In this regard, transformational leadership not only affects the relationship between knowledge sharing and innovative behavior but also builds an organizational environment that supports the creation of innovation.
Hypothesis 3. Organizational innovation has a positive influence on employee knowledge-sharing behavior.
Theoretically, consistent, consultative, and expressing gratitude, Islamic leadership has positively impacted knowledge-sharing behavior in organizations. An international study published in the International Journal of Religion found that consistent and consultative leadership of Muslim scientists can increase worker participation in knowledge-sharing programs (A. A. Rahim et al., 2024). Organizational innovation is often used as a moderator in knowledge-sharing behavior studies. Organizational innovation can moderate the influence of Islamic leadership on knowledge-sharing behavior by improving a flexible work environment that is open to new ideas. Therefore, Organizational Innovation can facilitate more intensive interpersonal communication and collaboration, thereby increasing the likelihood of knowledge sharing. Another study confirms that a positive organizational culture can improve employee performance by modifying the work environment to respond more to individual needs (Efrina, 2024).
The influence of the moderation of organizational innovation on the relationship between Islamic leadership and knowledge-sharing behavior is also significant. Studies have shown that organizational innovation plays a role as a trigger that increases the positive impact of Islamic leadership on knowledge-sharing behavior. For example, organizations that empower innovative practices tend to experience higher levels of employee participation in knowledge-sharing activities. This phenomenon is supported by findings that show how intrinsic motivation, fueled by a supportive leadership style, can help boost team creativity and innovation. The interaction between these elements shows a synergistic relationship where Islamic leadership encourages a collaborative atmosphere and increases the innovation potential when combined with effective knowledge-sharing practices (Siswanto et al., 2022).
Hypothesis 4. Organizational innovation is a significant moderator in increasing the influence of Islamic leadership on knowledge-sharing behavior.
3. Methodology
This study applies the Structural Equation Modeling method based on Partial Least Squares (SEM-PLS) as the primary analysis tool to evaluate the influence of Islamic Leadership on Employee Creativity in Sharia Microfinance institutions. The SEM-PLS method was chosen for its ability to explain the complex relationships between independent and dependent variables, including intervening variables. In addition, this method is suitable for use on data that is not normally distributed and can handle complex models with varying types of data, ranging from nominal to ratio (Febryaningrum et al., 2024).
This study focuses on employees of Islamic microfinance institutions, specifically Baitul Maal Wa Tamwil (BMT). Given the relatively small population of BMT employees, a total of 117 individuals were purposively selected as the sample. The study's primary objective is exploratory in nature, aiming to provide deeper insights into the specified constructs rather than generalizing findings to a broader population. To strengthen the rigor of sampling and analysis, specific purposive sampling criteria were established, such as requiring a minimum duration of employment for respondent inclusion. Therefore, despite the limited sample size, the number of respondents is adequate and appropriate for exploratory research, which is designed to identify key patterns and relationships rather than statistical generalization. The research instruments have also been constructed and tested to ensure high validity and reliability in line with established standards (Hair et al., 2017). This approach enables the study to focus on its exploratory purpose and respond to the specific context of Islamic microfinance institutions.
We have added clarification as requested: “To enhance the diversity of the sample data, employee data were collected from five different Islamic microfinance institutions located in Central Java, Indonesia. This approach was intended to ensure broader representation of microfinance institutions within the region and to reduce potential bias from relying on a single institution.”
The research model shown in Figure 1 illustrates the relationship between the variables of Islamic Leadership (IL), Knowledge Sharing (KS), Employee Creativity (EC), and Organizational Innovation (OI) as moderators. The arrows in the relationship model are hypothesized to highlight the impact of Islamic Leadership and Knowledge Sharing Behavior on employee creativity. Organizational innovation moderates the impact of Islamic Leadership on the knowledge-sharing behavior of employees of Islamic microfinance institutions.
The initial stage of the analysis process begins with testing the validity and reliability of the research instrument. Use Average Variance Extracted (AVE) for convergent validity with a minimum acceptable value of 0.5. Furthermore, the reliability test of the construct was carried out through two measurement approaches, namely Cronbach's Alpha analysis and the Composite Reliability (CR) calculation, both of which require a minimum threshold value of 0.7 to be declared reliable. After that, the measurement model will be tested using the Fornell-Larcker Criterion to ensure each variable has good discriminant validity. The final stage is to conduct a structural model test with bootstrapping techniques to test the significance of the paths in the model. In this bootstrapping process, t-statistics and p-values are produced that determine the significance of the relationship between the variables of Islamic Leadership (IL), Knowledge Sharing (KS), Employee Creativity (EC), and Organizational Innovation (OI).
The research instrument consisted of structured questionnaire items representing the core constructs: Islamic leadership, knowledge sharing, organizational innovation, and employee creativity. Each item was measured using a five-point Likert scale based on established scales from previous studies. Prior to analysis, instrument validity was evaluated using convergent validity, indicated by Average Variance Extracted (AVE) values exceeding the minimum threshold of 0.5, confirming that each indicator adequately represented its construct. Reliability was assessed through both Composite Reliability (CR) and Cronbach's Alpha, with all constructs achieving scores above 0.7, demonstrating strong internal consistency and construct reliability. Discriminant validity was tested using the Fornell-Larcker criterion, ensuring that each construct was distinct from others. All analyses were conducted according to standard SEM-PLS procedures (Hair et al., 2017; Mohammad et al., 2018). This methodological rigor helps guarantee that the results are both statistically robust and theoretically sound.
4. Results & Discussion
Demographic analysis of research respondents in Table 1. Provide a clear picture of the gender composition and length of work of the participants. Out of 117 respondents, there was a slight difference between male and female respondents, where men amounted to 56 people (47.9%) and women as many as 61 (52.1%). The composition of the participants in this study had a nearly balanced gender representation, which was important to ensure that perspectives of both sexes were taken into account in the analysis. Furthermore, an analysis based on the length of employment showed that most respondents had between 1 and 10 years of work experience. Specifically, 47 respondents (40.2%) had a length of service between 1 and 5 years, while 42 people (35.9%) had 5 to 10 years. Only 13 respondents (11.1%) had less than one year of experience, and 15 (12.8%) worked for more than ten years. This distribution indicates that most of the respondents have enough experience in their field so that they can provide more in-depth and relevant insights into the research topic. Thus, this demographic data not only reflects the basic characteristics of the respondents but also provides an important context for interpreting the research results.
Gender Classification | Counts | Percentage |
Male | 56 | 47.9% |
Female | 61 | 52.1% |
Length of Work | Counts | Percentage |
<1 Year | 13 | 11.1% |
1-5 Years | 47 | 40.2% |
5-10 Years | 42 | 35.9% |
>10 Years | 15 | 12.8% |
Table 2 Present the results of validity and reliability tests for indicators related to employee creativity, Islamic leadership, knowledge sharing, and organizational innovation. In terms of validity, all indicators show an Average Variance Extracted (AVE) value above 0.5, which includes Employee Creativity (0.687), Islamic Leadership (0.607), Knowledge Sharing (0.542), and Organizational Innovation (0.721). These values indicate that all indicators can reflect a well-measured construct. In addition, reliability is also well tested through Composite Reliability (CR) and Cronbach's Alpha. The CR value for each indicator was 0.916 for Employee Creativity, 0.915 for Islamic Leadership, 0.952 for Knowledge Sharing, and 0.928 for Organizational Innovation, all above the threshold considered adequate of 0.7. In addition, the Cronbach Alpha score shows good internal consistency with 0.886 for Employee Creativity, 0.891 for Islamic Leadership, 0.947 for Knowledge Sharing, and 0.903 for Organizational Innovation. Thus, the results of this analysis show that the instruments used in this study are valid and reliable, so they effectively measure the intended variables.
This study adds qualitative insights about leadership indicators. Fairness is illustrated when managers resolve disputes impartially and give equal recognition to achievements. Politeness is shown through respectful greetings, listening during meetings, and supportive feedback after mistakes. These examples reflect how staff experience leadership in daily interactions.
Indicators | Code | Environmental Considerations Indicators/Dimensions | Factor Loading | AVE | CR | Cronbach Alpha |
Employee Creativity | EC 1 | I think my work is creative | 0.849 | 0.687 | 0.916 | 0.886 |
EC 2 | I often try new ideas and methods first | 0.844 | ||||
EC 3 | I am looking for new ideas and ways to solve problems | 0.821 | ||||
EC 4 | I generate innovative ideas related to the field | 0.839 | ||||
EC 5 | I am a good role model when it comes to creativity | 0.791 | ||||
Indicators | Code | Environmental Considerations Indicators/Dimensions | Factor Loading | AVE | CR | Cronbach Alpha |
Islamic Leadership | IL 1 | My boss is fair to his subordinates | 0.763 | 0.607 | 0.915 | 0.891 |
IL 2 | My boss acted reasonably concerning the decisions taken by his subordinates | 0.649 | ||||
IL 3 | My boss has technical knowledge about his job | 0.752 | ||||
IL 4 | I think my boss is a religious person | 0.852 | ||||
IL 5 | My boss avoids acts that his religion forbids, I believe that is a core value | 0.784 | ||||
IL 6 | My boss's behavior is balanced | 0.857 | ||||
IL 7 | I think my boss is a polite person | 0.779 | ||||
Indicators | Code | Environmental Considerations Indicators/Dimensions | Factor Loading | AVE | CR | Cronbach Alpha |
Knowledge Sharing | KS 1 | I often share information, skills, and experiences with my colleagues | 0.639 | 0.542 | 0.952 | 0.947 |
KS 2 | When I find out new information, I tell my colleagues about it | 0.747 | ||||
KS 3 | When I learn something new, I tell my colleagues about it | 0.782 | ||||
KS 4 | I told my colleagues several times what I was doing | 0.776 | ||||
KS 5 | I have informed my colleagues several times about my work assignments | 0.724 | ||||
KS 6 | I asked my colleagues several times what they knew | 0.756 | ||||
KS 7 | When I need specific knowledge, I will ask my colleagues | 0.790 | ||||
KS 8 | I ask my colleagues about their abilities when I need to learn something | 0.788 | ||||
KS 9 | When a coworker is good at something, I ask them to teach me how to do it | 0.722 | ||||
KS 10 | I have read several times the information, skills, and experiences shared on social media or online platforms | 0.711 | ||||
KS 11 | I have gathered information and skills, as well as experiences shared on social media (WhatsApp, Facebook, etc.) or online platforms several times | 0.718 | ||||
KS 12 | I have read several discussions or exchanges of knowledge on social media (WhatsApp, Facebook, etc.) or online platforms | 0.729 | ||||
KS 13 | I have participated in discussions or knowledge exchanges on social media (WhatsApp, Facebook, etc.) or online platforms several times | 0.738 | ||||
KS 14 | I disseminate information or knowledge gained from social media or online platforms to colleagues | 0.707 | ||||
KS 15 | I learned a lot from the information or knowledge shared on social media or online platforms | 0.702 | ||||
KS 16 | I use information or knowledge gained from social media or online platforms for my work tasks or organizational activities | 0.740 | ||||
KS 17 | I am aware that reading information and knowledge shared on social media or online platforms has changed my thinking towards my career or the company | 0.730 | ||||
Indicators | Code | Environmental Considerations Indicators/Dimensions | Factor Loading | AVE | CR | Cronbach Alpha |
Organizational Innovation | OI 1 | My organization has introduced new products/services several times | 0.776 | 0.721 | 0.928 | 0.903 |
OI 2 | My organization has improved the product/service several times | 0.864 | ||||
OI 3 | My organization introduced new processes several times | 0.845 | ||||
OI 4 | My organization has improved processes several times | 0.881 | ||||
OI 5 | My organization has introduced new processes and improved processes several times compared to other organizations in the same industry | 0.876 |
Table 3 shows the results of the Fornell-Lacker criteria test as discriminative validity for four variables: Employee Creativity (EC), Islamic Leadership (IL), Knowledge Sharing (KS), and Organizational Innovation (OI). The diagonal values on the table, which are the square root of the Average Variance Extracted (AVE), show that EC has values of 0.829, IL 0.779, KS 0.736, and OI 0.849. A higher diagonal value than the correlation value between other constructs indicates that EC and KS have qualified discriminant validity. This validity can be seen from the magnitude of the diagonal value that exceeds the correlation values outside the diagonal. However, Islamic Leadership does not fully meet this criterion because its value (0.779) is lower than the correlation with KS (0.780), suggesting a stronger relationship with KS than its internal strength as a separate construct. Meanwhile, Organizational Innovation showed good discriminant validity with the highest diagonal value (0.849) and had no higher correlation with other constructs. Overall, this analysis indicates that most of the constructs in this study have good discriminant validity, except for Islamic Leadership, which requires further attention in developing its theoretical model.
Variables | EC | IL | KS | OI |
Employee Creativity | 0.829 | |||
Islamic Leadership | 0.480 | 0.779 | ||
Knowledge Sharing | 0.780 | 0.659 | 0.736 | |
Organizational Innovation | 0.617 | 0.569 | 0.708 | 0.849 |
Table 4 Demonstrate a significant relationship between Islamic leadership (IL), knowledge sharing (KS), employee creativity (EC), and organizational innovation (OI). The first hypothesis (H1) indicates that IL positively affects KS, as demonstrated by a path coefficient of 0.383 and a T-value of 4.600, indicating strong statistical significance (P = 0.000). These findings confirm that Islamic values-based leadership principles can encourage knowledge exchange between organization members. The second hypothesis (H2) confirms that KS has a massive influence on EC, with a path coefficient of 0.780 and a T-value of 16.966, implying that the increase in knowledge sharing directly contributes to employee creativity. In addition, the third hypothesis (H3) shows that OI also positively affects KS, with a path coefficient of 0.454 and a T-value of 6.045, indicating that innovative organizations are better at sharing knowledge. Finally, the fourth hypothesis (H4) highlights the interaction between OI and IL affecting KS with a path coefficient of 0.130 and a T value of 2.051 (P = 0.040), suggesting that combining these two factors is also significant. Overall, all hypotheses are accepted and show that these elements are closely interrelated in increasing knowledge sharing and creativity in the organizational environment.
Hypothesis | Relationship | Path Coefficient | T statistics | p-values | Conclusion |
H1 | IL -> KS | 0.383 | 4.600 | 0.000 | Accepted |
H2 | KS -> EC | 0.780 | 16.966 | 0.000 | Accepted |
H3 | OI -> KS | 0.454 | 6.045 | 0.000 | Accepted |
H4 | OI X IL -> KS | 0.130 | 2.051 | 0.040 | Accepted |
The results of the first hypothesis test as shown in Figure 2 showed that Islamic leadership (IL) had a positive and significant influence on knowledge sharing (KS) behavior in Islamic microfinance institutions, with a coefficient value of 0.383, t-statistic of 4.600, and significance of 0.000. The results of this study show that there is a positive and significant correlation between IL and KS. This finding aligns with previous research showing that Islamic leadership enhances Islamic work ethics and reinforces information-sharing behaviors at the individual, group, and organizational levels. For example, Hidayat & Nurhidayati (2023) show that Islamic Leadership significantly impacts knowledge sharing, where leaders who implement Islamic values can establish an atmosphere that encourages employee knowledge exchange.
However, some studies show different results regarding the influence of Islamic leadership on specific aspects of organizational performance. For example, a study conducted at BMT Hasanah Ponorogo revealed that Islamic leadership does not significantly influence employee performance. However, it positively impacts work motivation, which is an intervening variable. The finding indicates that the effect of Islamic leadership may depend on the organization's context and other factors such as work culture or organizational structure (Mukaromah, 2022). This phenomenon indicates that Islamic leadership, including knowledge sharing, is not always effective in influencing employee performance.
The study also shows a strong relationship between knowledge sharing (KS) activities and employee creativity (EC) in Islamic microfinance institutions. With a path coefficient value of 0.780, t-statistics of 16.966, and a p-value of 0.000, the H2 hypothesis is accepted. This finding indicates that sharing knowledge effectively can increase employee creativity in the organization. Sharing knowledge allows employees to exchange ideas, experiences, and insights that drive innovation and creative solutions. Several previous studies support this research. For example, Akhtar et al. (2017) and Mohammad et al. (2018) demonstrate that knowledge sharing integrated with Islamic leadership principles can create a work culture that supports creativity and optimal performance through values such as sincerity and dedication. In addition, the research (Mukhsin, 2017) also found that Islamic leadership that encourages knowledge sharing contributes significantly to work productivity.
Employee creativity in practice takes many forms at Islamic microfinance institutions. Staff generate new ideas for customer service, propose improvements to loan application procedures, and develop innovative outreach strategies such as organizing finance seminars or designing promotional content for social media. Team members also introduce efficient workflows and recommend technology tools to streamline daily operations, reflecting their creativity in solving workplace challenges.
However, some studies do not fully support these findings. For example, research by Saputra et al. (2024). This study revealed that the variable of knowledge sharing did not have a significant effect on employee performance. The findings show that sharing knowledge does not positively contribute to employee performance, so the hypothesis that links the effect of knowledge sharing on employee performance is rejected. This finding reflects the low awareness of employees about the importance of sharing knowledge in improving their performance. In addition, the research by Putri et al. (2018) shows that the effectiveness of the implementation of Knowledge Sharing in the PPNS Maritime Business Management study program has not achieved optimal results, as evidenced by the minimal impact produced on improving achievements, thus creating the perception that this system is challenging to run sustainably.
This study also shows that organizational innovation (OI) significantly influences knowledge sharing behavior (KS), as shown by the results of the path analysis with a coefficient of 0.454, a T-statistical value of 6.045, and a P value of 0.000. This result indicates that the higher the level of innovation in the organization, the greater the incentive for employees to share their knowledge. Organizational innovation creates an environment conducive to exchanging ideas and information, ultimately increasing employee collaboration and creativity. Previous research supports these findings. For example, a study conducted by Ainulisany & Radikun (2022) shows that knowledge sharing significantly impacts innovative behaviors in work teams in the microfinance industry. Research by Natalia & Sandroto (2020) supports this by showing that knowledge-sharing behaviors mediate the relationship between individual-organizational fit and innovative work behaviors. Thus, the relationship between organizational innovation and knowledge-sharing behavior is important in building Islamic microfinance institutions' competitiveness and sustainability.
However, some studies do not fully support the positive relationship between organizational innovation and knowledge sharing. Some studies show that while organizational innovation can increase the potential for knowledge sharing, barriers such as a lack of trust between employees or organizational structure can hinder the process. Some studies show conflicting results. For example, research by Yeşil & Hirlak (2013) revealed no significant relationship between knowledge-sharing behaviors and innovative work behaviors in specific contexts. This condition can be caused by factors such as a lack of trust between employees or an organizational culture incompatible with knowledge-sharing practices. This phenomenon shows that the success of knowledge sharing depends not only on innovation in the organization but also on crucial aspects such as the cultural values embedded in the organization and the mutual trust built among employees. These three elements are interrelated in creating an effective information exchange process in the work environment.
The results of the study show that organizational innovation (OI) plays a significant role as a moderator in increasing the influence of Islamic leadership (IL) on knowledge sharing (KS) behavior. The proposed hypothesis was accepted with a path coefficient value of 0.130, a t-statistic of 2.051, and a p-value of 0.040. This result indicates that organizational innovation strengthens the relationship between Islamic leadership and knowledge-sharing behavior in Islamic microfinance institutions. In this context, organizational innovation creates an environment that supports implementing Islamic leadership values such as justice, trust, and deliberation, encouraging employees to be more active in sharing knowledge. These findings are consistent with previous research. Abbas et al. (2019) show that combining Islamic leadership, innovation, and knowledge sharing results in more optimal organizational performance. Organizational innovation reinforces the positive effects of Islamic leadership in encouraging knowledge-sharing behaviors among employees. However, not all studies support this conclusion. For example, a study by Nasution et al. (2022) found that knowledge sharing is a mediator between leadership and organizational innovation, not vice versa. This finding shows that knowledge-sharing behaviors encourage the creation of organizational innovation.
The results of this study appeared as they did because Islamic leadership, knowledge sharing, and organizational innovation interact synergistically within the specific cultural and ethical climate of Islamic microfinance institutions. Leadership succeeds in these settings due to strong alignment with shared religious values, open communication, and organizational support for innovation. In other contexts, leadership might not achieve similar results if there are barriers such as weak ethical norms, lack of trust, or hierarchical cultures that do not encourage participation or creativity. These differences underscore the importance of contextual factors and cultural fit, explaining why effective leadership in one institution may not yield the same outcomes elsewhere.
Research in Indonesian Islamic microfinance institutions demonstrates that Islamic leadership enhances knowledge sharing and employee creativity through values-based management and supportive organizational practices. These findings correspond with Malaysian studies, which similarly report positive associations between Islamic leadership and organizational innovation, knowledge sharing, and employee empowerment in Islamic financial contexts (Rahim et al., 2024; Rahim et al., 2023). In Malaysia, additional factors such as psychological empowerment and ethical climate act as mediators, but Islamic leadership remains a key driver of innovative and collaborative behaviors (Rahim et al., 2024; Rahim et al., 2023). Both Indonesian and Malaysian research highlight the necessity of embedding Islamic ethical principles in leadership approaches to improve creativity and organizational outcomes within microfinance institutions.
The practical contribution of this research is relevant for leaders, managers, and practitioners within Islamic microfinance institutions, particularly Baitul Maal Wa Tamwil (BMT), as well as policymakers in the financial sector. The results provide evidence-based guidance on developing leadership rooted in Islamic values, emphasizing justice, integrity, and knowledge sharing to encourage employee creativity and organizational innovation. Implementation of these leadership strategies can strengthen employee performance, foster competitiveness, and help institutions respond effectively to changing industry challenges. The findings also offer insights for policymakers to design training and regulatory frameworks that promote sustainable and effective Islamic microfinance operations.
5. Conclusions
This study aims to evaluate the influence of Islamic leadership on employee creativity in Islamic microfinance institutions, paying attention to the role of knowledge sharing and organizational innovation as an intermediary variable. The approach used in this study is Structural Equation Modeling based on Partial Least Squares (SEM-PLS) to analyze the relationships between variables. The validity test was carried out through Average Variance Extracted (AVE), which produced a value above 0.5 on all constructs, while the reliability test using Composite Reliability (CR) and Cronbach's Alpha showed a value of more than 0.7, so that the research instrument was declared valid and reliable. The results of the study showed a significant relationship between the variables tested. First, Islamic leadership positively influences knowledge sharing (path coefficient 0.383; p ≤ 0.000), suggesting that Islamic values in leadership can improve information sharing practices in organizations. Second, knowledge sharing significantly affects employee creativity (path coefficient 0.780; p ≤ 0.000), which confirms that the exchange of ideas and information between employees encourages innovation and creative solutions. Third, organizational innovation also positively impacts knowledge sharing (path coefficient 0.454; p ≤ 0.000), suggesting that an innovative work environment facilitates collaboration. Finally, organizational innovation moderated the relationship between Islamic leadership and knowledge sharing significantly (path coefficient 0.130; p ≤ 0.040), reinforcing the positive impact of Islamic leadership in creating a knowledge sharing culture. This research emphasizes the importance of Islamic leadership based on ethical values in increasing employee creativity through knowledge-sharing mechanisms and organizational innovation. These results significantly contribute to the human resource management literature in the Islamic finance sector and offer practical insights for managers of Islamic microfinance institutions to improve organizational performance through a practical leadership approach and a work environment that supports creativity and innovation.
The conception and design of the study, data collection, statistical analysis, interpretation of the results, and drafting the initial manuscript: A.A.; The research framework, data analysis, and the critical revision of the manuscript for important intellectual content: F.A.H.; Overall guidance and supervision throughout the research process, the interpretation of findings, and comprehensive feedback: N.N. All authors reviewed and approved the final version of the manuscript and agreed to be accountable for all aspects of the work.
The data used to support the research findings are available from the corresponding author upon request.
The authors gratefully acknowledge the administrative support provided by the Department of Islamic Economic Laws, Faculty of Islamic Studies, Universitas Muhammadiyah Surakarta, which was essential for completing this research project.
The authors declare no conflict of interest.
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