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The aim of this research is to propose a model in an effort to build and enhance the reputation of shariah banking industry. The model was determined by the effects between innovation on the corporate reputation through value creation as the intervening variable in the shariah banking industry (Shariah Commercial Banks and Shariah Subsidiary Unit) in South Sumatra Province, Indonesia. There is a paradox phenomenon showing that amidst huge market share potential as a muslim majority country, the market share of shariah banking is still very insignificant compared to that of the conventional banking although it has been established and operated in the business for more than three decades. This research used explanatory survey method. The approach in the modeling and the technical solution as the tool analysis utilized Structural Equation Modelling (SEM). Data were processed using Lisrel 8.8 . Primary data were collected via distribution of questionnaires directly to the customers, and also through email, considering distance, time and funding limitation. Unit of observation is a total of 57 offices including Branch Offices, Sub Branch Offices,and Cash Offices of 15 sharia banks throughout 14 regions and 3 cities spread around the province. The observation was made using cross-section/one-shot time horizon. Respondents were set based on purposive sampling method. Population was unknown, due to the rules wherein a few banks refused to provide data regarding the total amount of their customers. Therefore, Zikmund formula was used to draw samples, wherein a total of 385 respondents were selected proportionally from each regions and cities. The results revealed findings which described that innovation, as well as value creation, have positive and significant direct effect on the reputation. The indirect effect of innovation on corporate reputation through value creation is tested by using Sobel test. This research revealed a new concept that, Innovation influenced the reputation of shariah banking industry in South Sumatra which driven by value creation.