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Micro, Small, and Medium Enterprises (MSMEs) are an essential pillar of the Indonesian economy, contributing significantly to employment creation, poverty reduction, and income distribution. However, despite their substantial role, MSMEs continue to face a number of persistent challenges, including limited access to capital, low levels of financial literacy, and inadequate utilization of technology. These barriers hinder their ability to grow, compete, and adapt to rapid economic changes. This study aims to explore and analyze the role of Islamic Financial Institutions (IFIs) in empowering MSMEs within the framework of Sharia principles. Employing a descriptive qualitative approach, this research is based on a comprehensive literature review of scholarly articles, official reports, and other relevant academic sources. The findings reveal that IFIs provide both financial and social contributions to MSMEs. Financially, IFIs channel funds through Sharia-compliant contracts such as mudharabah and murabahah, which allow entrepreneurs to access financing without relying on conventional interest-based systems. Socially, IFIs carry out a redistributive role by managing and disbursing zakat, infaq, sadaqah, and waqf (ZISWAF), while also offering entrepreneurship training, mentoring, and technical assistance. These functions collectively enhance MSMEs’ access to capital, strengthen their managerial and operational capacities, and increase competitiveness in both domestic and global markets. Nevertheless, several challenges remain, including the uneven geographical distribution of IFI services, slow adoption of digital technology, and the need for more supportive regulatory frameworks. Strengthening IFIs’ role through policy integration, technological innovation, and collaboration with government and private sectors is essential for maximizing their impact on MSME empowerment. Thus, IFIs not only act as financial intermediaries but also as socio-economic catalysts that support sustainable and inclusive economic development in Indonesia.

This study aims to discuss the important role of Micro, Small and Medium Enterprises (MSMEs) in poverty reduction efforts in Indonesia. Poverty is a complex and multidimensional social problem that requires a comprehensive approach to overcome its challenges. MSMEs, as the backbone of the Indonesian economy, have great potential to be agents of change in reducing poverty levels. The subjects of this study are MSMEs that contribute to poverty reduction in Indonesia. The data collection technique in this study uses a library technique that takes multiple sources as references such as books, national journals, etc. The results of this study suggest that it can serve as a basis for developing sustainable policies to support MSMEs as one of the strategic solutions to overcome poverty in Indonesia.

Kasindir Village is one of the villages in Jorlang Hataran District, Kabupaten Simalungun, Sumatera Utara. Kasindir Village is a village that carries out agricultural, livestock, and trade activities. Kasindir Village has great potential for developing MSMEs in the village. The development of MSMEs is considered capable of realizing a sustainable economy and supporting local governments in the Sustainable Development Goals (SDG's) program, especially in poverty and hunger eradication programs, sustainable economic growth, and employment. Community service implementers in Kasindir Village observed that MSME actors still require understanding and knowledge on utilizing information technology to advance their businesses. This includes packaging attractive products, providing the latest innovations, and promoting on social media to expand their market. MSME strategy development is able to realize the spirit of the SDGs. In this activity, the methods used to carry out community service activities are socialization and observation methods. Some of the problems faced by creative MSMEs in Kasindir Village include limited capital, raw materials, the use of very simple production equipment, and limited marketing media. Therefore, various parties, both government and private, need to provide support through sustainable business development programs.

Micro, Small and Medium Enterprises (MSME) are sectors that are influential in running the economy in the community. MSME are also expected to be able to contribute in creating employment opportunities for the surrounding community, so as to be able to reduce poverty in an area. The existence of the Wolamgrezz MSME in Carangwulung village actually has the potential to become a large MSME in the Wonosalam District and even the entire Jombang Regency, because these UMKM raise the region's superior crops. Therefore, Wolamgrezz MSME must be fully supported in running their business, so that the existing potential can run optimally and can become the leading MSME in Jombang Regency. However, in carrying out its business, Wolamgrezz has several problems that arise in the field, such as obstacles to product promotion through digital e-commerce media and product marketing only by word of mouth, so that consumers who know Wolamgrezz's MSME products are very limited and only within the scope of Carangwulung village. Therefore, the branding and marketing of UMKM Wolamgrezz products must be carried out immediately and intensified so that they can attract consumers widely so that product sales can increase and income will also increase, and this can also affect the opening of new job vacancies.