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The study was conducted using explanatory method, applying simultaneous regression estimation techniques with Two Stage Least Square method (TSLS) using data from the period 1992-2012. The main objective of this study is to analyze the role of Islamic banking to the improvement of people's welfare as measured by a decrease in the unemployment rate in Indonesia. Islamic banking is not just a contribution to economic growth but also contribute to the problems of employment creation and the growth of unemployment. Abstract: Islamic banking is present in the banking industry, as a means of conducting transactions and is expected to contribute more broadly in the context of development.