<![CDATA[Introduction: Traditional Islamic educational institutions in Indonesia, particularly Islamic boarding schools (pesantren), are experiencing an institutional paradigm shift driven by financial sustainability challenges and dependence on external funding. This study aims to formulate and explain the Santri Empowerment-Based Business Unit Diversification Model at Pondok Pesantren Darussalam Blokagung Banyuwangi to achieve institutional economic independence. Methods: This study adopted a qualitative approach with an exploratory case study design. Data collection was conducted through in-depth interviews with pesantren leaders (kiai), cooperative administrators (Koppontren AUSATH), business unit managers, and santri, supplemented by passive participant observation and document analysis. Data analysis was performed interactively through data reduction, data display, and conclusion drawing/verification. Source and method triangulation were employed to ensure data trustworthiness and validity Results: The findings reveal that santri empowerment is executed in phased stages through competency- and motivation-based recruitment, pre-membership training, learning by doing, task delegation with gradual autonomy, and regular deliberation sessions. The diversification of business units across productive and semi-productive sectors is driven by market opportunities, internal santri needs, alumni network support (DASCO), and monthly performance evaluations. This synergy successfully establishes operational independence in funding routine pesantren expenses, strengthens the socio-economic resilience of santri, and provides self-sustained internal services and facilities. Nevertheless, key challenges include time constraints faced by santri due to academic obligations and variations in managerial capacities. Conclusion and suggestion: The economic independence of Pondok Pesantren Darussalam Blokagung is achieved through the integration of santri empowerment, business unit diversification, the spiritual leadership of the kiai, and alumni network engagement, formulated into a Faith-Based Dynamic Hybrid Model. Future research is recommended to test the applicability of this model across different pesantren typologies using comparative or mixed-methods approaches to enhance external validity and model generalizability.]]>
