Conventional Financial Institutions Research Articles

Unintended consequences of microfinance: Effects on credit access for small‐ and medium‐sized enterprises

AbstractWhile competition in the financial system generally mitigates small‐ and medium‐sized enterprises' (SMEs) financing constraints, this paper theorises that competition by microfinance institutions (MFIs) has adverse effects through aggravating the ‘graduation problem’: Small firms outgrowing microfinance struggle to find financing as conventional financial institutions abstain from downscaling and developing suitable lending instruments for smaller firms if these market segments are narrowed down by upscaling MFIs. Using data from 51 countries between 2002 and 2015, microfinance is found to significantly lower SMEs' access to credit. Credit bureaus can reverse this effect indicating that credit information infrastructure can reconcile a strong microfinance sector with functioning SME finance.

SHARIA FINANCIAL LITERACY FOR TEACHERS IN DARUL AMAN DISTRICT, ACEH TIMUR REGENCY

This study aims to determine the Islamic financial literacy among teachers in Darul Aman sub-district, East Aceh Regency. It uses primary data obtained by distributing questionnaires to 80 respondents who were selected using Simple Random Sampling. The data analysis method used is simple linear regression. The data analysis method used is simple linear regression. The results partially show that Islamic financial literacy has a positive and significant effect on teachers in Darul Aman sub-district, East Aceh Regency. The results of the interview concludes that the knowledge of teachers in Darul Aman sub-district, East Aceh Regency on Islamic financial institutions is very good. Although they do not fully understand, they can already understand how the system is going on in Islamic financial institutions and conventional financial institutions, especially bank financial institutions

Urgensi Fatwa DSN-MUI Mengenai Manajemen Risiko Pembiayaan Berbasis Syariah

Risk management at Islamic financial institutions is still implementing bank Indonesia (BI) and Financial Services Authority (OJK) policies which previously applied the same to conventional financial institutions. The perfection of the enforcement of sharia principles in sharia financing institutions is not enough only in the aspect of transactional mechanisms, it needs to be supported by a sharia-based risk management system. The focus of this research includes the characteristics of Islamic financing, juridical aspects in the principle of prudence, and an overview of the maslahah of the urgency of sharia-based risk management. This research is normative legal research using a statutory approach and a benefits approach with a qualitative descriptive analysis. The results of the discussion show that a dynamic system also needs to be supported by juridical aspects to provide the legal force with the realization of regulatory solidity. At this regulatory level, in addition to the regulations issued by the OJK, the DSN-MUI fatwa is also very necessary and has a very urgent position. Because financing risk management is also part of the sharia economy that must maintain sharia principles, lest the application of sharia principles only exists in product technicalities, but does not apply to technical risk management. The expected sharia is the application of total sharia principles (kaffah), not partial ones.

Fraud in Financial Institutions

Fraudulent acts in financial institutions have often occurred, there are even some financial institutions who try to clarify related to the frauds that occur in these financial institutions. This study describes fraudulent acts that occur in conventional financial institutions, by taking data from the official websites of each financial institution, by reading reports Good Corporate Governance (GCG) of banks. Data collection from 2015-2019. The research conducted is descriptive quantitative research, where the researcher only describes the data obtained from the source. The results of the study found that there were fraudulent acts in financial institutions that experienced a decrease and an increase in tone. The results of the analysis carried out, that financial institutions need to understand the dangers of fraud in human resources, in order to prevent fraud from an early stage.

The Profession of YouTuber: Ethics in the Islamic Economics’ Perspective

One of the phenomenal businesses and professions in the world in the millennial digital world is as a YouTuber who can provide very promising benefits. Therefore, as a neutral, strategic, and preferred media, YouTuber videos have their important points that apart from being land for business. The objective of this research is to provide an understanding of the ethics of the YouTuber profession from the Islamic economics perspective. This research applies library research. The result shows that YouTube can be used as a means of conveying messages while remaining committed to the following Islamic ethics business, are: First, the video content is legal, lawful, and does not contain contradictory content in Islamic values, such as non-educational and other unsuitable content. The criteria for services being “traded” is lawful and valuable. Second, the products and advertising content in the video are halal and legal. These contents do not market products non-halal ads, conventional financial institutions, liquor, illegal goods, products that damage health, and products that destroy children's morals. Third, clarity of rights and obligations between the parties, including a YouTuber as a service seller and a company as a buyer of services carried out according to the agreement. Besides, there are other Islamic business ethics, namely: 1) principle of monotheism teaches that everything must reflect faith in Allah SWT and is responsible for all human actions including economic and business activities. 2) principle of justice teaches humans in every activity must be fair, both to themselves and others. Third, the principle of responsibility teaches that in every human activity, there is accountability to Allah SWT. Fourth, the principle of freedom teaches that every human has the freedom to choose and determine everything. Humans are given free will to control their lives alone, but must not ignore the fact that he is completely required by the law of God. Fifth, honesty and truth. Every activity, no matter how small, the activities carried out can be seen properly and feel good for others.

Analisis Fatwa DSN-MUI terhadap Kontrak Akad Qardh Di Lembaga Keuangan Syariah (Studi Kasus pada BPRS Baiturridha Pusaka)

In Indonesia, there are two financial institutions, namely conventional financial institutions and Islamic financial institutions. Islamic financial institutions in their operations are based on the fatwa that has been issued by the National Sharia Council of the Indonesian Ulema Council (DSN-MUI) as an authoritative institution in issuing fatwas in the field of Islamic economics. Baiturridha Puska, one of the Islamic financial institutions, issued al-qardh financing products. At the level of practice, which is implemented by BPRS Baituttidha Puska that in the contract it is indicated that there is a clause that is different from the provisions of the DSN-MUI fatwa No. 19 of 2001 concerning al-Qardh. The purpose of this study was to determine the concept of the qardh contract in fiqh and the DSN-MUI fatwa and to analyze the qardh financing contract contract at the Baiturridha Pusaka BPRS. This study uses qualitative research, with a normative juridical approach and data collection techniques by means of literature study. The results of the study show that first, the qardh contract is a form of tabarru contract so it is not intended for profit; secondly, the provisions of Article 2 of the Letter of Acknowledgment of Financing contain a clause that is contrary to sharia principles, namely the DSN-MUI fatwa no. 19 of 2001 concerning al-Qardh.

THE OPTIMIZATION OF SHARIA FINANCIAL INSTITUTION AS AGENT OF SALE FOR SUKUK PRODUCT

The development of sharia financial products is increasingly numerous and varied, choices are not only for savings products from sharia banking but also in the form of investment. Investment products can be the community's choice in using sharia financial products, with easier and more profitable access. One of the sharia financial products that can be used as a container for investment is sharia bonds or Sukuk products. Every year the government issues Sukuk as a means of investment for people who want higher returns from savings and deposits. It's just that the distribution of Sukuk is still dominated by conventional financial institutions. The purpose of this study is to determine the development of state Sukuk, and efforts to optimize sharia financial institutions as distribution agents for the sale of state Sukuk products. Type of research used in this research is qualitative research, the data source used is secondary data. Data collection is used through data collection from institutions that are considered relevant to the research. The data analysis technique used in this research is descriptive qualitative. Results showed development state Sukuk in 2019 had succeeded in reaching 100 percent of the planned, namely 258.275 trillion. The issuance of SBSN type of Sukuk Ritel (SR) growth in 2019 has increased by 46,07 percent. Marketing of Sukuk products needs to be done through sharia financial institutions, to maintain the collapse of the Sukuk products, to convince the public that the Sukuk products are sharia products that can be obtained by sharia financial institutions. Product marketing through sharia financial institutions will also further introduce the existence of sharia financial institutions and can improve services to the public.

Are Islamic financial institutions more resilient against the COVID-19 pandemic in the GCC countries?

PurposeThis paper aims to investigate and provide an objective appraisal of the impact of the COVID-19 outbreak on Islamic and conventional financial institutions and Islamic windows in the Gulf Cooperation Council (GCC) countries.Design/methodology/approachThe panel data techniques are conducted country-wise in each financial institution type: random-effect model, fixed-effect model and Hausman test.FindingsThe results of the first phase analysis that extends from 1 January 2020 to 30 October 2020 show that Islamic financial institutions are less exposed to the repercussions of the COVID-19 outbreak than the conventional and Islamic window financial institutions in Bahrain, Oman, Qatar, Saudi Arabia and UAE. Moreover, the Islamic financial institutions in Saudi Arabia and Oman have not been affected by the COVID-19 outbreak. The second phase analysis for the COVID-19 outbreak that extends from 1 November 2020 to 17 March 2021 confirms the disappearance of the negative impact of COVID-19 on Islamic financial institutions in Bahrain and Oman.Practical implicationsThe findings present that Islamic banks are not as resilient in the COVID-19 pandemic as in the 2008 financial crisis. It can be suggested that regulatory authorities, financial institutions and other key policymakers in the GCC countries should focus on implementing regulatory reforms related to human capital, innovative products, research and development to further develop individuals, societies and institutions within the framework of Islamic ontology to be more resilient in such crises.Originality/valueThis paper provides a different perspective from existing literature on the pandemics and financial institutions by comparing the stock prices in Islamic and conventional financial institutions and Islamic windows in GCC countries during the COVID-19 pandemic. Therefore, this paper should be considered as a contribution to filling a gap in the literature.

The influence of familiarity and personal innovativeness on the acceptance of fintech lending services: A perspective from Indonesian borrowers

Financial Technology (FinTech) Lending in Indonesia is an innovative solution for financial services in Indonesia because it has convenience and benefits for Indonesians who need loans, fund management, and other financial transaction activities. FinTech Lending is growing fast because it offers reasonable interest rates and access to conventional financial institutions. The growth of FinTech Lending is expected to support financial inclusion planned by the Indonesian government. In 2020, 126 FinTech Lending Companies were operating illegally by exploiting communities experiencing economic difficulties. This study aims to determine the factors that influence the adoption of FinTech services in Indonesia, considering obstacles and occasions. Factors related to obstacles are Trust and Security in Online Lending platforms, while factors related to occasions are Personal Innovativeness, Interest Rate, and Familiarity. This study used a sampling technique, namely purposive sampling, and involved 85 respondents from Indonesian Borrowers with the age majority between 20 to 25 years old. Processes data obtained from survey results using Partial Least Square-Structural Equation Modeling (PLS-SEM). The results are that Familiarity and Personal Innovativeness affect the acceptance of FinTech Lending companies in Indonesia. In addition, it produces guidance for the improvement of FinTech Lending Companies in Indonesia, which be used to develop and support financial inclusion in Indonesia.

Inflationary Dynamics of Consumer and Producer Financing – A case of Islamic and Conventional Banking in Pakistan

One of the objectives of macroeconomics is to stabilise purchasing power for the masses, which remains a leading economic problem in Pakistan for years. Economists are convinced about the existence of some degree of inflation in the economy to mobilize economic resources, with the condition to keep it to a minimum. Currently, Islamic finance is setting its firm footing in Pakistan and competing with the conventional financial system. Both of these financial systems provide their services to consumers and producers, which implicates inflation differently. Under this scenario, this study sets to compare the Shari’ah compliant financing provided by Islamic financial institutes and human made standards of conventional financial institutions. This study explores the effect of consumer financing and producer financing of Islamic and conventional banks on the inflation of Pakistan. Quarterly secondary data extracted from the State Bank of Pakistan (SBP) reports and International Financial Statistic (IFS). Empirical results displayed that Islamic consumer financing, as expected in theory, helps to control inflation. The preaching of moderation in Islamic finance makes Islamic consumer financing less inflationary and asset-based Islamic producer financing will perform better in reducing inflation. Islamic consumer financing is well participating in the management of inflation. However, Islamic producer financing lacks inflation curtailing ability. The small share in the financial market, and lack of long term investment plans, are the few reasons why Islamic producer financing is not managing inflation.

The Benefit of Microfinance Bank in Poverty Alleviation: A Case of Selected Micro, Small and Medium Enterprises in Anambra State

Poverty is an endemic problem that affects not just the individual or his or her immediate family, but the entire state, and eventually the nation. Poverty causes anger and hunger and this leads to violence in turn leads to reduction in economic growth and development. Through the utilization of descriptive survey involving questionnaire and microfinance banks’ directory, and Pearson Product Moment of Correlation Coefficient at 0.05 significant level, the study reveals that microfinance deal with the provision of financial services to SMEs who are traditionally not served by the conventional financial institutions in the country. The study also reveals that Micro Finance Banks have made a lot of impact in alleviation of poverty, thereby increasing the living standard of the people. More so, Micro-Finance Institutions throughout the developing world are providing small loans to the poor for self-employment and proving to be sustainable enterprises in the sight against poverty. The study recommended that federal government should put in place policies and programs that support the existence of Micro finance banks across the country so as to help the SMEs to growth and at the long run, alleviate poverty within the country.

Penyaluran Dana Bank Syariah Melalui Pembiayaan Murabahah, Istishna, dan Ijarah Sebelum dan Selama Pandemi Covid 19

Impact of the Covid-19 pandemic in Indonesia is not only in the productive sector but has an impact on the financial sector such as conventional and Islamic financial institutions including banking. Islamic banks have business activities through murabaha, istishna', and ijara financing for sale and purchase and lease types. The impact felt by the banking sector can be seen from the existence of financing problems. The purpose of this research is to compare the conditions of sharia financing before and during the Covid-19 pandemic. The method used is the paired sample t-test with a sample of Islamic banks in Indonesia. The results show murabaha and istisna' financing has increased, while ijara financing has decreased during the Covid-19 pandemic.

Pengungkapan Pendapatan Non Halal pada Laporan Keuangan Bank Umum Syariah

<p class="bdabstract">Islamic Bank as a type of Islamic financial institution has the authority to collect and distribute funds to the public. In carrying out its operational activities, Islamic Banks have transactions that can lead to non-halal income because Islamic Banks also make transactions with Conventional Financial Institutions. PSAK 101 has regulated the disclosure of no n-halal income as part of the Report on the Sources and Use of Virtue Fund. The purpose of this study is to determine the description and disclosure of non-halal income in the financial statements of Islamic Commercial Banks. This study uses a qualitative research method with a descriptive approach. The subjects of this study were 14 Islamic Commercial Banks operating nationally and publishing complete financial reports in 2019 on the official website of Islamic Commercial Banks. The results showed that non-halal income from 14 Islamic Commercial Banks have been disclosed in accordance with PSAK 101, namely the Report on the Sources and Use of Virtue Funds. However, not all banks disclose in detail the reasons for the occurrence and use of non-halal income in the Notes to Financial Statements.</p>

Islamic banks financing of FinTech start-ups in Oman: An exploratory study

This study mainly aims to explore the current practice and prospects of FinTech start-ups financing in Oman, particularly the IFIs (Islamic Financial Institutions) financing practices and the challenges faced by these start-ups in obtaining it. The study applies qualitative methods in procedures of in-depth interviews with eight Islamic banks’ managers in Oman. The findings revealed that the financing of the FinTech start-ups in Oman still in the infant stage and below its potential. This might be due to the general lack of interest in this area by the Omani start-up businesses. This situation might be due to the lack of clear strategic vision of Omani financial institutions, including both Islamic and conventional financial institutions with regards the Fintech start-ups. The findings also showed that the start-ups in Oman prefer long term financial schemes, while the Islamic financial institutions (IFIs) generally prefer to offer short term financing on Musharakah and Ijarah contracts. Lastly, the findings showed that the IFIs are positive regarding the prospects of growth and success of FinTech in Oman. It is noteworthy that this is one of the early studies that addresses the FinTech start-ups financing from an Islamic perspective, and hence places the ground for the future studies to be conducted in this area.

Analisis Faktor-Faktor Yang Mempengaruhi Keputusan Anggota Dalam Menyimpan Dana Di KSPPS Kota Semarang

Islamic financial institutions in Indonesia are growing rapidly. However, the market share of Islamic financial institutions are still far from conventional financial institutions. The purpose of this study was to determine the effect of level of income, religiosity, culture, the principle of profit-sharing, and quality of service to members saving decisions at KSPPS in Semarang City. The population of this research are active members of KSPPS that registered in Dinas Koperasi dan Usaha Mikro Kota Semarang. The sampling technique uses accidental sampling and the number of the sample of this research are 100 respondents. Primary data collection using questionnaire method. The data were analyzed using descriptive analysis and PLS-based Structural Equation Modelling (SEM) with SmartPLS 3.0 analysis tool. Result of this research showed that level of income, religiosity, culture, the principle of profit sharing and quality of service has a significant positive effect on saving decision members at KSPPS in Semarang City

The Performance of Internal Shariah Auditor in Islamic Financial Institutions

Purpose –It is this study’s objective to examine the correlations between internal Shariah auditors’ independence, qualifications and performance in Islamic financial institutions (IFIs), conceptually.
 Design/methodology/approach – This paper is theoretical in its approach; whereby it also undertakes an extensive literature review. From a general agency theory, an Islamic agency theory is articulated and applied to ascertain the attributes of internal Shariah auditor performance revolving around the concept of independence and qualifications.
 Findings – Performance of internal Shariahauditing, as a mechanism of assuring Shariahcompliance by IFIs varies directly with the degree of independence and qualifications enjoyed by internal Shariah auditors themselves. The study finds that in evaluating the freedom and qualifications of FIs’internalShariah auditors, Islamic agency theory can potentially serve as the theoretical foundation in developing a multi-dimensional conceptual framework.
 Research Limitations/implications – Evidence is drawn strictly from secondary sources.
 Practical implications –To ensure that internal Shariahauditor is effectively performing, IFIs ought to improve the degree of independence and qualifications of their auditors.
 Originality/value –The studies on the performance of internal and external Shariahauditorsin conventional financial institutions have been extensively researched. However, research on the performance of IFIs’ internal Shariah audit is yet to be conducted extensively.

Sharia Compliance in Micro Waqf Bank Business Activities: A Study of Protection of Consumer’s Spiritual Rights

The emergence of conventional financial institutions before sharia financial institutions affects the development of the two financial institutions to be different. Another factor is the public's cynicism or skepticism towards Islamic financial institutions which assume that the two financial institutions are the same. Thus, the purpose of this study was to analyze the implementation of sharia compliance policies as an effort to improve the development of Islamic financial institutions and consumer protection in Indonesia. This research focused on the Micro Waqf Bank as a Micro Financial Institution that applies sharia principles using statutory and conceptual approaches. In Indonesia, the sharia compliance policy of the Micro Waqf Bank has been regulated in the laws and regulations related to Micro Financial Institutions. The implementation of sharia unity is an effort to reduce cynicism in Islamic financial institutions and to provide protection to consumers' special rights in the form of spiritual rights that every Muslim has to carry out his religion perfectly (kaffah). Sharia compliance policy is the result of the transformation of the DSN-MUI Fatwa into the form of legislation to make it more binding and applicable in the business activities of Micro Waqf Bank.

PREFERENSI DAN PERILAKU MASYARAKAT PEDESAAN TERHADAP PERBANKAN SYARIAH (Studi Kasus Di Desa Luwunggede, Mundu Dan Karangreja)

Since the issuance of the 2003 MUI fatwa about the interest is forbidden, Islamic banks are growing rapidly but its slower than conventional banks market share. The villager has not been reached to socialize about the activities of Islamic banks. So as the villager who have low income levels, related only to conventional financial institutions such as cooperatives, rural banks, banks and even moneylenders because the Islamic financial institutions are not reached by them. This study aims to analyze religious and economic preferences and behaviour of rural people towards Islamic banking. This study uses descriptive statistical analysis research with quantitative and qualitative approaches. The data used are primary and secondary data obtained from questionnaires distributed to 90 respondents and interviews from certain figures. The data analysis method used is frequencies.The results of the study show that religious and economic preferences are the most important factors that greatly influence to the behavior of rural people towards Islamic banking.This makes Islamic bank is urgent to accommodate that can not be done by conventional bank, especially in terms of the maslahah afterlife in order to stay away from usury that is unlawful so it is in line with the Islamic principal ما لا يدرك كله لا يترك كله and الميسور لايسقط بالمعسور .

Corporate Board Attributes, Shariah Board Attributes and Credit Rating: Evidence from Islamic Banks of Pakistan

Shariah Governance is an essential characteristic that differentiates Islamic financial institutions from Conventional financial institutions. The study’s purpose is to explore the effect of corporate governance attributes and Shariah board attributes on the long term and short-term credit rating of Islamic banks in Pakistan. The study develops six different models based on corporate board characteristics, Shariah board attributes and credit ratings, and collected data from annual reports of Pakistani Islamic banks for the period 2013- 2019. This study used Long term credit rating scale used by Grassa (2016) and, Ashbaugh-Skaife, Collins, and LaFond (2006), and developed a Short term credit rating scale. The study applied descriptive statistics, correlations and ordered logit regression. The results confirmed that corporate governance and Shariah governance attributes are significantly associated with the long term and short-term credit ratings of Islamic banks. The study concludes that credit rating agencies in Pakistan i.e. PACRA and JC-VIS, and other international credit rating agencies including Fitch, Moody and Standard & Poor’s must consider Shariah governance attributes as key determinants while assigning long term and short term credit ratings to Islamic banks.

Religiusity Effect on Retirees Customer Decisions in the Take over From Conventional Banks to Islamic Banks: Study at Gorontalo City - Indonesia

The phenomenon of taking over financing from conventional banks to Islamic banks carried out by retired customers in Gorontalo City is so large and the majority of the population is Muslim or a religious community making this issue important to research with the aim of knowing and examining the effect of religiosity on retirees customer decisions in taking over from conventional banks to Islamic banks in Gorontalo City. This type of research is a quantitative study with a sample size of 199. Questionnaires were distributed to respondents using multi-stage sampling techniques (proportional and accidental sampling). The results of this study indicate that religiosity has a positive and significant effect on retired customers' decisions to take over from conventional banks (BRI, BTPN, Bank Sulut, Bank Mandiri Taspen) to Islamic banks (Bank Syariah Mandiri [BSM]) in Gorontalo City. For this reason, it is recommended that Islamic financial institutions take advantage of the tendency of customers to switch to Islamic Banks by increasing public understanding through promotion of the importance of financing as a usury-free product, services remaining competitive with conventional financial institutions, and improving human resource quality.