A Strategy for Strengthening Public Perception Toward Sharia Banking

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1. “A strategy for strengthening public perception toward sharia banking” AUTHORS Abbas Arfan Iklil Athroz Arfan ARTICLE INFO Abbas Arfan and Iklil Athroz Arfan (2021). A strategy for strengthening public perception toward sharia banking. Banks and Bank Systems, 16(2), 170-181. doi:10.21511/bbs.16(2).2021.16 DOI http://dx.doi.org/10.21511/bbs.16(2).2021.16 RELEASED ON Wednesday, 23 June 2021 RECEIVED ON Thursday, 25 February 2021 ACCEPTED ON Monday, 07 June 2021 LICENSE This work is licensed under a Creative Commons Attribution 4.0 International License JOURNAL "Banks and Bank Systems" ISSN PRINT 1816-7403 ISSN ONLINE 1991-7074 PUBLISHER LLC “Consulting Publishing Company “Business Perspectives” FOUNDER LLC “Consulting Publishing Company “Business Perspectives” NUMBER OF REFERENCES NUMBER OF FIGURES NUMBER OF TABLES 31 0 1 © The author(s) 2021. This publication is an open access article. businessperspectives.org
2. Banks and Bank Systems , Volume 16, Issue 2, 2021 Abbas Arfan (Indonesia), Iklil Athroz Arfan (Turkey) BUSINESS PERSPECTIVES LLC “СPС “Business Perspectives” Hryhorii Skovoroda lane, 10, Sumy, 40022, Ukraine www.businessperspectives.org A strategy for strengthening public perception toward sharia banking Abstract Received on: 25th of February, 2021 Accepted on: 7th of June, 2021 Published on: 23rd of June, 2021 © Abbas Arfan, Iklil Athroz Arfan, 2021 Abbas Arfan, Ph.D., Associate Professor, Universitas Islam Negeri Maulana Malik Ibrahim, Indonesia. (Corresponding author) Iklil Athroz Arfan, BA Student, Ibn Haldun University, Turkey. The number of Muslims in Indonesia reaches 85% of the total population of 270 million, but the progress of the Islamic economics in the country is stagnant. This is evidenced by the sharia banking assets, which only reach 5% and never increase every year. Therefore, it is necessary to investigate the primary obstacles hindering the development of sharia banking, from the perspective of sharia banking per se, and not from the society, as was the case in most previous studies. Besides, this study offers a strategy through a combination of Ibn Khaldun’s ashabiyyah and social construction theory of Peter L. Berger and Thomas Luckmann to strengthen the public perception toward sharia banking. The method used to reveal the obstacles is a field survey method in the form of an obstacle’s questionnaire with optional answers, which were distributed to several Islamic banks as samples, and then the most selected answers are calculated. Meanwhile, to find a strategic solution, it is necessary to review the literature using a philosophical approach. The results of a questionnaire that was distributed to several Islamic banks indicate three primary obstacles: low level of public awareness about the use of sharia banking (80 %), low level of public understanding and knowledge on sharia banking products (60 %), and low level of government support for sharia banking (40 %). Meanwhile, the theoretical application of asabiyyah theory with the help of the social construction theory can be used to strengthen public perceptions of Islamic banking through a three-stage process: externalization, objectivation and internalization. Keywords Islamic economics, sharia banking, ashabiyyah theory, social construction theory JEL Classification E71, Z12, Z13, Z18 INTRODUCTION This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International license, which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited. Conflict of interest statement: Author(s) reported no conflict of interest 170 In the early 1980s, Islamic banks emerged in Egypt, Sudan, the Gulf States, Pakistan, Iran, Malaysia, Bangladesh, and Turkey. The pilot practice of Islamic banking in Indonesia began in early 1980s through discussions of an Islamic bank as a pillar of the Islamic economics. More specific initiative regarding the establishment of a Sharia bank in Indonesia took place in 1990. Exactly on August 18-20, Indonesia Ulama Council (Majelis Ulama Indonesia (MUI)) organized a workshop of bank interest and banking in Cisarua, Bogor, West Java. The outcome of this workshop was discussed in more detail at the fourth MUI National Deliberative Council in Jakarta on August 22-25, 1990, which resulted in a mandate to form a workgroup for establishing a Sharia Bank in Indonesia. This workgroup is called by MUI Banking team who are charged with the responsibility of approaching and consulting on all related aspects. As a result, Banking MUI team is the establishment of PT Bank Muamalat Indonesia (BMI). Similar to its deed of incorporation, it was established on November 1, 1991, but BMI officially operated on May 1, 1992, with the initial capital of Rp 106,126,382,000 (Arfan, 2017, p. 111). http://dx.doi.org/10.21511/bbs.16(2).2021.16
3. Banks and Bank Systems , Volume 16, Issue 2, 2021 Sharia bank development in Indonesia since its appearance in the 1990s until now shows a significant growth. Sharia Banking statistics in the October 2013 report released by Bank Indonesia (BI) on February 12, 2014 shows that there is a significant increase in the distribution of funds (financing/credit) of sharia banking to clients with the principle of profit-sharing in mudharabah and musyarakah contracts. Total mudharabah contract financing in 2007 was Rp. 5,578 billion, 6,205 billion in 2008, 8,631 billion in 2009 and 2010, 10,229 billion in 2011, 12,023 billion in 2012 (December), and 13,664 billion in 2013 (October). Also, the musyarakah contract shows a significant increase (Arfan et al., 2016, p. 214). However, it turns out that the development of the Islamic economy with sharia banking as a driving force in Indonesia tends to run in place, as assessed by the Minister of National Development Planning/ Head of the National Development Planning Agency Bambang Brodjonegooro. Indonesia has a great potential to be a center of global Islamic economy as its Muslim population reached approximately 85 per cent of the total Indonesia’s population (Pitoko, 2018). Muslim population that reached almost 85 per cent from the total of Indonesian citizens as of July 1, 2019, is in total of 268,074,600 million and is the fourth-ranking in the world, or amounts to 3.54% of total world population (Wikipedia, 2019). Therefore, in this study, two problem formulations are determined to solve these problems. First, what are the main obstacles that are faced by sharia banking in Indonesia in implementing Islamic Economic System? This is very crucial to know so that strategic steps can be taken to overcome these obstacles. Second, how is the strategic move of the ashabiyyah’s Ibn Khaldun used to strengthen public perception towards sharia banking with the help of the social construction theory by Peter L. Berger and Thomas Luckmann? This is also very important to understand, since it can be used as a strategic step to optimize this great potential. 1. LITERATURE REVIEW petition stability theory, the presence of Sharia banks does not affect profitability, but they have Islamic banking theory is based on the theory made the banking industry more stable (Rizvi et of money and the neoclassical banking system, al., 2020). This stability emerges through asset and which implies that money is a ‘neutral lubricant’ liability channels (Rizvi et al., 2020). that facilitates exchange. Meanwhile, a bank’s position as an intermediary institution equates sav- They are two types of the Islamic banking strucing investment in the economy (Siddique, 2020). ture in Indonesia, namely Fully-Fledge Bank or Masvood (2019) states that every banking activ- Bank Umum Syariah (BUS) and Subsidiary Unit ity carried out within the Islamic jurisprudence or Usaha Unit Syariah (UUS). In Indonesia, Sharia parameters is called Islamic banking. In practice, banks still rely on the market-driven approach Islamic banking applies strong ethical values and (Purwanto et al., 2020). Therefore, the structure risk minimization principles (Masvood, 2019), concept suggested by Yuspin et al. (2020) is the since the Islamic banking system does not recog- Fully-Fledge Bank (BUS) that can be independent, nize the interest in lending and borrowing activi- innovative, and increase the market share, which, ties. It is contrary to the conventional investment in turn, can elevate the involvement of Islamic banks in which its value is built upon ‘real money’ banking in national economic development. – not upon virtual activity from swap or asset de- Contrary to that, Islamic banking in Malaysia usrivative (Musa et al., 2020). Besides, the difference es a state-driven approach so that their developbetween Islamic banking and the convention- ment is relatively better, compared to Indonesia al banking can be seen through their profit con- (Purwanto et al., 2020). The ups and downs of cept and loss sharing paradigm (Masvood, 2019). Indonesian Islamic Banking occur in sequence Financial institutions driven by Islamic principles with the development of the conventional bankacquire new clients without over-marketing as the ing industry (Purwanto et al., 2020), which must conservative values are continuing to be cultivat- be separated from a sharia business unit as regued (Musa et al., 2020). In accordance with com- lated in Article 68 of Law no. 21 of 2008 (Pasal 68 http://dx.doi.org/10.21511/bbs.16(2).2021.16 171
4. Banks and Bank Systems , Volume 16, Issue 2, 2021 UU No. 21) concerning Islamic banking (Yuspin et al., 2020). All banks must perform this separation before 2023. The asset value of Subsidiary Unit or Usaha Unit Syariah (UUS) has reached 50% of Conventional Commercial Banks’ total asset value (Yuspin et al., 2020). Something similar happened in Bangladesh, where many conventional banks have also started Islamic banking by maintaining separate branches/windows and sometimes carrying out a complete conversion strategy (Suzuki et al., 2020). Islamic banking’s prospect depends on the consumer’s knowledge of Islamic banking (Ezeh & Nkamnebe, 2019b; Abbas & Shirazi, 2015). In other words, the success of Islamic banking ultimately depends on the readiness of consumers and their implementation (Charag et al., 2020; Jinjiri Ringim, 2014). According to Charag et al. (2020), customer intention to use Islamic banking collectively lies on the attitude, religiosity, culture, risk perception, and government support. In contrast to that, Ezeh and Nkamnebe (2019a) identify four factors – Islam ethics, convenience, awareness of Islamic banking service, and physical evidence – to determine the level of public awareness of Islamic banking. Banks can use the knowledge and understanding of consumers in formulating strategies in positioning and targeting Islamic banking products (Charag et al., 2020). Nevertheless, the front-line employees’ knowledge often leads to the inadequate promotion of Islamic banking products (Damon & Bayat, 2018). The findings of the research are that public knowledge of the sharia banking system is relatively high, but the understanding of sharia unique banking services and products is relatively low. The factors that can motivate the public to use sharia banking services and products in the West Java and East Java are dominated by the service quality and the proximity of a bank’s location from the activity center. On the other hand, for the Central Java region, religious consideration is a significant motivator to encourage the use of sharia banking services and products. Interestingly, the research conducted among the people of West Java revealed that non-costumer communities who were briefed an explanation about sharia banking services and products have a strong tendency to become a sharia banking customer; in contrast, people that already became a sharia banking costumer tend to stop becoming customers due to an inadequate service factor or doubts about the consistency of sharia principles application (Mu’allim, 2003, pp. 22-23). In most of the studies, the low public perception and interest of the public toward sharia banking are caused by two main factors: first, the factor of sharia banking’s service is not yet optimal to their customers. This service variable is the main variable that mostly contributes to their relation with the result of public perception towards sharia banking as similar to the result of field study by Sholihah (2015, p. 82) in East Lombok. Second, the factor of sharia system application is not yet optimal by most of the sharia banks, as the result of field research by Abbas Arfan et al. (2016) toA lot of research has been conducted on public per- wards all sharia banks in Malang City. ceptions or views on sharia banking since the establishment of sharia banks in 1992. For instance, Mukri (2014, p. 17) emphasized that it is necesstudies conducted by Bank Indonesia in 2000 in sary to have strategical moves in Islamic economy collaboration with several research institutions to system optimization that should be done by the map the development potential of sharia banking, government, central bank, and economic agents based on the analysis of economic potential and who care about sharia monetary system. Related attitudes of economic actors and sharia banking, to that, there are at least five steps in accelerating as well as to examine the characteristics and be- the development of sharia monetary system, either haviors of users and prospective users of sharia national or international. First, it is necessary to banking services in the community as a basis for strengthen Sharia monetary institutional regulaestablishing sharia banking strategies. The stud- tion and supervision of Sharia financial instituies were carried out throughout the region of Java tions. Second, international coordination and colIsland, including West Java, Central Java, and East laboration are needed. Based on its nature, Sharia Java, with samples in several districts and cities monetary system is more resilient and stable com(Mu’allim, 2003, p. 22). pared to monetary financial shocks. Even though, 172 http://dx.doi.org/10.21511/bbs.16(2).2021.16
5. Banks and Bank Systems , Volume 16, Issue 2, 2021 in reality, it should be realized that the operation of sharia monetary system is not isolated from the conventional financial system. Therefore, international collaboration and coordination are needed. In status quo, there are some international institutions, like International Financial Services Board (IFSB) in Malaysia, International Islamic Financial Markets (IIFM), and Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) in Bahrain. Third, collaboration is needed at the level of supervision of cross-border Islamic economic system. There are many sharia monetary institutions that are operated globally, but they still lack collaboration in multilateral supervision. Almost all collaborations in the Islamic economy system focus on standard regulation and liquidity management. Fourth, it is necessary to set sharia monetary system business model, especially in sharia banking, focusing on the real sector than the financial market. Besides, the continuity of development should be more promoted. This model can withstand monetary crisis pressure. Islamic economic monetary development in Indonesia is still in line with the business model. This happened due to the development of sharia monetary product system, which is boosted by the market to fulfill demands in the real sector. However, this strategy does not mean forgetting efforts to develop Islamic monetary/financial products in Indonesia, which are still somewhat lagging. Fifth, the benchmark rate of return based on real sharia principles should be determined. Profit and deficit sharing principle is the spirit of the actualization of the Sharia financial system. 2. RESEARCH METHODS The type of this study is qualitative research, which is the opponent of quantitative. As Moleong (2001, p. 2) explains, the term of qualitative research, in Kirk and Miller’s view, in the beginning, came from the qualitative observation that is opposed by quantitative research. Quantitative observation includes the level measurement of a particular thing. In another term, quantitative research includes the measurement or number or quantity, while qualitative includes quality, which refers to the natural aspect. This study is qualitative as it fulfils the characteristics of qualitative research. According to Zamroni (1992, p. 82), there are five qualitative research characteristics: a) it has a natural background and a researcher him/herself as a core instrument; b) it is descriptive in nature; c) it focuses more on the process than product; d) tends to analyze data inductively; and e) the meaning is really important. The data collection technique is used to address the first problem formulation, it is a field survey method with a questionnaire distributed to several Islamic banks in Malang City. The questionnaire includes questions about what the main obstacles are faced, by selecting several optional answers Thus, research related to sharia banking like now- from the seven obstacles provided in the questionadays public perception should not only criticize naire. After the answers were collected, their numsharia banking’s shortcomings that affect the low ber was calculated and the most selected answer public perception. Positive-applicative solutions by Islamic banking out of the seven obstacles in should be offered besides constructive critiques. the questionnaire was determined. In addition to offering an applicative alternative solution, the research on sharia banking al- The data collection technique, to answer the secso should dig up direct information from related ond problem formulation, is the literature study sharia banking about the main obstacles in the method by reading and analyzing Ibn Khaldun’s Islamic economy system application, not only asabiyyah theory and the social construction theassessment and unilateral views, from the shar- ory of Peter L. Berger and Thomas Luckmann with ia banking service users. Based on this, the main the approach of ushul fiqh (Islamic legal philosoobjectives of this study are to determine the main phy) to be applied as a strategic step to strengthen obstacles faced by Sharia banking in Indonesia in public perceptions of Islamic banking. implementing the Islamic economic system and identify strategic steps to strengthen public per- After both data were collected, they were analyzceptions of Islamic banking. ed using the content-analysis method, then they http://dx.doi.org/10.21511/bbs.16(2).2021.16 173
6. Banks and Bank Systems , Volume 16, Issue 2, 2021 were explained using the descriptive qualitative method. To analyze data, the descriptive method is used. Descriptive method is a method to examine the status of human groups, an object, a condition, a system of thought or a class of events in the present. The purpose of descriptive research is a systematic, factual and accurate description of the facts, characteristics and relationship between the analyzed phenomena. Besides that, since data resulted from this research is qualitative data, a qualitative analysis method with reflective (deductive-inductive) reasoning is used. The questionnaire that was distributed to some of those sharia banks, there are eight choices related to the obstacles that sharia banking in can/often faces in applying the Islamic economic system: 3. RESULTS a) There are no clear standards and guidelines yet. 3.1. Obstacles facing Malang sharia banking To find out what obstacles Malang Sharia Banking faces in applying the Islamic economic system, it is enough to fill out a simple questionnaire to which Malang sharia banking, both Sharia Bank and Bank Pembiayaan Rakyat Syariah (BPRS) need to answer. Furthermore, there are eight sharia banks in Malang, they are: tionnaire until this article was written. Also, for BPRS in Malang City, there are just two banks such as BPRS Mitra Harmoni and BPRS Bumi Rinjani. Both BPRS also like the samples from this study (100%), so the total of samples taken is five out of ten sharia banks (50%). b) Lack of experienced human sources. c) The high cost of professional financial management according to sharia principles. d) Low public awareness of using sharia banking in the economy transactions. e) Low level of public awareness and understanding of contracts in sharia banking products. 1) Bank Syariah Mandiri (BSM); f) Lack of government support. 2) Bank Tabungan Negara (BTN) Syariah; g) They are less competitive compared to conventional commercial banks. 3) Bank Muamalat Indonesia (BMI); 4) Bank Rakyat Indonesia (BRI) Syariah; According to the answers, the following table was compiled (Table 1). 5) Bank Negara Indonesia (BNI) Syariah; Table 1. Obstacles facing Malang city sharia banking 6) Bank Panin Syariah; 7) Bank Mega Syariah dan; 8) Bank CIMB Niaga Syariah. There are eight banks (100%) in the sample of this study, but only three banks were willing to respond and to answer the questionnaire (37.5%), they are: BSM, BTN Syariah, and BMI, while the other five Sharia banks were not willing for various reasons; some reasoned that they were auditing and some wanted to fill out the questionnaire, but they did not return the ques- 174 Obstacle a Banks b c d e f g Total BMI – – – ˅ – – – 1 BSM – – – ˅ ˅ ˅ ˅ 4 BTNS – – – – – ˅ – 1 BPRS Mitra Harmoni – – – ˅ ˅ – – 2 BPRS Bumi Rinjani – ˅ – ˅ ˅ – – 3 Total 0 1 0 4 3 2 1 11 http://dx.doi.org/10.21511/bbs.16(2).2021.16
7. Banks and Bank Systems , Volume 16, Issue 2, 2021 3.2. The Ashabiyyah and social construction theory The definition of the ashabiyyah etymologically came from the word ashaba, which means bind. Functionally, ashabiyyah pointed to socio-culture bond that could be used to measure the power of social groups. Other than that, the ashabiyyah could be understood as social solidarity, by emphasizing awareness, harmony, and group unity (Esposito, 2001, p. 198). However, Ibn Khaldun divided ashabiyyah term into two meanings. First, ashabiyyah term in the positive meaning, which is related to the brotherhood concept. In the history of Islamic civilization, this concept builds social solidarity of Muslim society to collaborate, and set aside self-interest, and fulfilling the responsibility toward others. This spirit then encourages the actualization of social harmony and becomea a powerful strength to support the rise and advancement of civilization. Second, ashabiyyah term in the negative meaning, which affects blind loyalty and fanaticism that is not based on the truth aspect (Huda, 2008, pp. 41-52). The context of this second term is the undesired one in the Islamic economic system because it will blur the truth values brought by Islamic Economic Principals. If it is related to economics, so this ashabiyyah theory can be interpreted as “community based economy” that was stated by Ibn Khaldun as badawah (traditional/village-based community) and hadharah (city/modern based community). Besides that, there are other communities called as family-based communities, workers and merchants. Although Ibn Khaldun with his the ashabiyyah explained more about a country and policy, he also used his the ashabiyyah theory when discussing the economic problem. According to him, rich people in the city who are famous in helping their community needs will need the power to protect them. This could be gained through people who are close to the king (government), or king’s close friends, or a particular community that the king will respect (Ibn Khaldun, 2000, p. 428). He also added that human will not be able to live alone, he/she still need others. A human could not do much without joining some other power if he/she wants to get foods for him/herself or others. By collaboration, human needs will be fulfilled (Ibn Khaldun, 2000, p. 72). http://dx.doi.org/10.21511/bbs.16(2).2021.16 Moreover, Ibn Khaldun emphasized that religion played an important role in creating unity in the ashabiyyah. The spirit of public unity created through religion could not be compared with other spirit unity’s factors, like ethnicity, blood/ descent, or even the family (Zainuddin, 1992, p. 155). Therefore, the ashabiyyah referred to this study is Islamic religious the ashabiyyah, that is the spirit of unity in the Muslim community or ukhuwwah Islamiyyah without dividing one mazhab toward another to be together in creating and developing tsaqafah Islamiyyah in the form of Islamic economic system culture within the wider community. Social construction theory, one of contemporary sociology theories was discovered by Peter L. Berger and Thomas Luckmann in their book, The Social Construction of Reality: A Treatise in Sociology of Knowledge (1966). This book was a joint p r o j e c t of several sociologists and philosophers; it was initiated in 1962–1963, but for some particular reasons some philosophers could not participate in writing this book, hence it was just written by Berger and Luckmann. Peter L. Berger is a sociologist from t h e New School for Social Research, New York, and Thomas Luckmann is a sociologist from the University of Frankfurt. This Social Construction Theory, in their view, is as a theoretic and systematic study of the sociology of knowledge (systematically theoretical reasoning) and not as a historical review of the development of scientific disciplines. Therefore, this theory is not focused on matters such as character reviews, influences or others, but rather emphasizes Humans as creative actors in their social reality (Berger & Luckmann, 1966, pp. 40-41). This theory entrenched from a constructive paradigm that sees social reality as a social construction created by an individual who is free. An individual becomes determinant in the social world, which is constructed based on their free w i l l . A human individual in many ways has the freedom to act outside the limit of the control of their social structures and social institutions. Moreover, an individual is a free human being who has a freedom to have relationships with others, so they will create a new social institution together with the community they have created. Hence, in the social process, 175
8. Banks and Bank Systems , Volume 16, Issue 2, 2021 an individual is seen as a social reality creator 4. DISCUSSION who is relatively free in his/her social world. This means that an individual is not a victim 4.1. Obstacles faced by sharia of social fact, but i s a production machine banking in Malang City and creative reproduction in constructing their The results of the field study show that the first posocial world. sition as the most chosen obstacle facing by sharia Berger and Luckmann emphasized that public banking is obstacle d), that is, Low public awareinstitutions are created and defended or changed ness of using sharia banking in their economy through human action and interaction itself. transactions, because this obstacle was chosen by Although, society and social institutions seem to 4 out of 5 sharia banks (80%). Then, the obstacle be real objectively, in fact, everything is built in e) ranked the second, Low public awareness and the subjective definition through the interaction understanding about contracts in sharia banking process. Objectivity can occur through repetitive products, since it was chosen by 3 out of 5 sharia affirmations given by others who have the same banks (60%). Both of those obstacles could show subjective definition. In the level of the highest that public perception and interest in sharia bankgenerality, human created the world in the univer- ing arestill low. The third position is occupied by sal symbolic meaning, which is their comprehen- obstacle f): Lack of government support, as it was sive view of their life, that legitimate and control chosen by 2 out of 5 sharia banks (40%). social shapes also give meaning to various areas of their life. This construction process, in Berger As for the obstacle a) (There are no clear standand Luckmann theory’s perspective, takes place ards and guidelines yet) and obstacle c) (High cost through dialectical social interaction of the three of professional financial management according forms of reality that become entry concept, they to sharia principles), they are zero (nihil). This are subjective reality, symbolic reality, and objec- means that in sharia banks, there is already a clear guideline from the government to operate sharia tive reality. banking and not high cost of professional finanObjective reality is a complexity definition reality cial management under sharia principals. As for (including ideology and belief), routine behavior the obstacle b) (Lack of experienced human sourcand action that has been already shaped, that all es) and g) (They are less competitive compared to are internalized by an individual commonly as a conventional commercial banks), each of them fact. Objective reality is shaped from experienc- was just chosen by one sharia bank. This shows that es in the objective world outside of an individu- the current problem with experienced resources is al’s world and reality that is guessed as a reality. not an obstacle for Islamic banking, because these Symbolic reality is all symbolic expression from resources have been fulfilled. Also, nowadays shaeverything which is internalized as the objective ria banking can compete with Islamic banking reality, for instance, media industrial product text, not be inferior to conventional banking. like news in print or online. In other words, symbolic reality is a symbolic expression from objec- Low awareness can be seen from the lack of a tive reality in every kind of shape. Subjective reality sense of belonging of each Muslim person to is the construction of a definition of reality owned Islamic banking. This is clear evidence that every by individuals and has already been constructed Indonesian Muslim person does not feel that he through internalization. This means that subjec- belongs, let alone be responsible for Islamic banktive reality is a reality created as a re-internaliza- ing’s growth and progress. Even though this tion process from two preceded realities (objective awareness refers to the socio-cultural ties that and symbolic) into an individual through inter- can be used to measure social groups’ strength by nalization (Yuningsih, 2006, p. 61). That is, the emphasizing group awareness, cohesiveness, and subjective reality inherent in every individual is unity. the basis of self-interference in the externalization process or social interaction with other individu- The low public knowledge about Islamic banking is a condition in which people are not fully als in the social structure. 176 http://dx.doi.org/10.21511/bbs.16(2).2021.16
9. Banks and Bank Systems , Volume 16, Issue 2, 2021 aware of Sharia banks and the difference between Islamic banks and conventional ones. Their primary knowledge of transaction products and their application procedures in Islamic banking are still relatively low. The development of banking cannot be separated from the government’s involvement in the functioning and development of banks. Government support has enabled the banking sector to progress. Simultaneously, the lack of government support, along with a weak legal and regulatory framework, and a low level of public awareness of Islamic finance have resulted in low demand for Islamic banking products (Smolo et al., 2020). There are three main obstacles for Islamic banking that are found from the perspective of Islamic banking itself, although there are several weaknesses of this study, including few and limited locus and research samples, but at least, it can be a picture of other sharia banking conditions that are likely not much different. In addition, this study can complement the shortcomings of other studies, because the existing research shows that two things mainly cause the low level of public perception and interest in Islamic banking. First, the factor of suboptimal Islamic banking services to its customers (Sholihah, 2015). Secondly, the factor of implementation of the sharia system in most Sharia banks was not optimal (Arfan et al., 2016). 4.2. Applying Ashabiyyah theory and social construction to strengthen public perception of sharia banking Low perception of Indonesian society in general and Muslim society in particular toward sharia banking, as explained above, is a social reality. Social reality in the view of constructive paradigm, as understood from Berger and Luckmann’s theory, is a social construction created by an individual who is a free human being and, in fact, is a determinant in the social world built based on their will. Therefore, society is not a victim of social reality, but is s creative production and reproduction machine in constructing their social world. Thus, social reality in its relation, with the http://dx.doi.org/10.21511/bbs.16(2).2021.16 low public perception of sharia banking, could be pursued by its change with Ibn Khaldun the ashabiyyah theory. The ashabiyyah in a shape of religion such as Islam, which is the religion with the most followers in Indonesia, is the main modal. Islam could play an important role in creating unity in the ashabiyyah. The spirit of society’s unity shaped through Islamic religion could not be defeated by other unity spirits shaped by other factors, such as ethnicity, citizenship, blood/descent, or even family. As it has been already explained before, the ashabiyyah theory means the ashabiyyah of Islamic religion, that is the spirit of unity in Islam community or ukhuwwah Islamiyyah without differentiating one mazhab toward others in order to create and develop tsaqafah Islamiyyah together in the form of a culture of the Islamic economic system within the wider community. According to Ibn Khaldun, the application of the the ashabiyyah theory to strengthen public perception toward sharia banking independently without help from another theory is relatively hard. This is because the ashabiyyah theory is classified as a general and normative theory, thus another theory is needed such as applicative theory. One of the applicative theories that could be used is Berger and Luckmann’s social construction theory that has some basic assumptions from its theory, which are as follows: a) the reality can the creation of creative humans through the social construction power against their social world; b) the relationship between human thought and the social context in which it arises is developed and institutionalized; c) society’s life is continually constructed; and d) there is a difference between reality and knowledge. Reality is defined as a quality contained in reality that is recognized as existing (being), which does not depend on our own will. Knowledge is defined as the certainty that realities are real and have specific characteristics. 177
10. Banks and Bank Systems , Volume 16, Issue 2, 2021 4.2.1. Externalization: self-adaptation moment Externalization is the first process in creating social construction. It is a self-adaptation moment with the socio-cultural world. At this moment, the used media are language and action. Language is a human communication tool in the process of self-adaptation, while actions are activities that are inherent when the language is used. At this moment, some managed to adapt and some failed (Syam, 2005, p. 249). Both of them are like two sides of a coin that could not be separated. In this first stage, a strategical move to strengthen public perception toward sharia banking is socializing tsaqafah Islamiyyah (Islamic Economic Knowledge) to the wider community and continually through podium of the mosques, mass media (print and electronic), other place and media that could be an information source to the wider community. The existence of this stage is the first and most important as the success of socialization in this stage will determine the next two stages. Process in this stage is an adaptation effort of each Muslim individual with the holy texts (Quran and Sunnah) and other scholars’ view used as a foothold to provide legitimacy about the obligations of every Muslim to use the Islamic economic system in their every economic transaction. 4.2.2. Objectification: self-interaction with sociocultural world moment The second social construction stage is objectification. In objectification, social reality seems to be outside of human beings. It becomes an objective reality that has two realities, there is a subjective reality of the self and other realities that are outside of the objective self. Those two realities (subjective and objective) create an inter-subjective network interaction through the process of institutionalization (Syam, 2005, pp. 252-253). reality where there is a process of institutionalization established based on habitualization that includes continuity action so that the patterns are visible (polarization) and continue to be reproduced as an understood action. If this habitualization has taken a place, then there will be precipitation and tradition. The whole human experience is stored in consciousness, settles and, finally, can understand itself and its actions in the social context of life. Through this tradition process, finally, the experience is transmitted to the next generations. Likewise, tsaqafah Islamiyyah is in the form of Islamic Economic Knowledge, if it has been socialized continually to the wider community (externalization process). It then impacts those continuously practiced in public economic transactions, especially in Islamic banking, in such a way that the civilized tsaqafah Islamiyyah took its place and entrenched until it could be transmitted to next generations. As already explained above, the process of objectification is a self-interaction process with their socio-cultural world, so objectification is a process of realizing one’s position in the midst of interaction with the social world. Hence, in the objectification process, self-awareness is the most important. Each Muslim individual should have a self-awareness that he/she must know Islamic economic knowledge and practice it in his/her economic transactions, including choosing a sharia bank over conventional banking. 4.2.3. Internalization: self-identification moment with socio-cultural world Internalization is a process of an individual’s self-identification in the socio-cultural world. Internalization is the moment of withdrawal of social reality into oneself or social reality to become a subjective reality. When social reality is in human beings, the human self will be identified in their socio-structural world (Syam, 2005, Objectification is a self-interaction process of p. 255). Thus, internalization is the final stage each Muslim individual with tsaqafah Islamiyyah. of the new social construction shaping process. In the second stage, hopefully, there could be This is because internalization is a moment to continuous interaction between the two (each place ourselves in the middle of social life, hence Muslim individual in the society with tsaqafah it will produce some typologies and social clasIslamiyyah), therefore, there could be a strong tra- sification based on awareness, understanding, dition entrenched into the society. The society, ac- and self-identification, which in this context is cording to Berger and Luckmann, is an objective self-identification of each Muslim individual 178 http://dx.doi.org/10.21511/bbs.16(2).2021.16
11. Banks and Bank Systems , Volume 16, Issue 2, 2021 with their tsaqafah Islamiyyah. This means the actualization of social classification in the society, which is based on theological-ideological society, therefore, it will be easy to distinguish between Muslim identity and non-Muslim in the society during economic transactions. By nature, humans tend to group and will always be in a group that is mostly based on a sense of identity. Therefore, barriers to social interaction will not be often found when humans are in the same identity, even vice versa, and can interact intensively (Syam, 2005, p. 255). The human tendency to group in the same identity and keep trying to be in the group is the fact of the instinct (potential) of the ashabiyyah of each human individual. However, there are negative and positive the ashabiyyah, as already explained above about Ibn Khaldun the ashabiyyah theory. Furthermore, the ashabiyyah that will be built on the basis of Berger and Luckmann’s social construction theory is fanaticism on tsaqafah Islamiyyah, which is classified positively as the ashabiyyah. This is because one of the main principles of Islamic economics is to realize equality, honesty, and fairness in economic transactions with anyone, even non-Muslims. CONCLUSION Based on several studies, this paper indicates that the public perception of Islamic economic system in sharia banking is still low due to several obstacles. Nevertheless, the obstacles in this study are seen from the perspective of sharia banking per se, rather than from a societal perspective, as in most studies. The aim of this study is to investigate the primary obstacles faced by sharia banking and how alternative solutions can be applied as a strategy in an effort to strengthen public perceptions of sharia banking. The findings of this study are as follows. First, there are three main obstacles faced by sharia banking in Indonesia in implementing the Islamic economic system: a) lack of public awareness in using sharia banking for their economic transactions; b) lack of public knowledge and understanding of the contracts in sharia banking products; c) lack of government support to develop an Islamic economic system through sharia banking. Second, the application of Ibn Khaldun’s ashabiyyah theory to strengthen public perception of sharia banking with the help of Peter L. Berger and Thomas Luckmann’s social construction theory is through three processes: a) externalization: an effort to adapt each individual Muslim to tsaqâfah Islâmiyyah (Islamic economics) through intensive socialization; b) objectivation: the continuous interaction of Muslim individuals and tsaqâfah Islâmiyyah, so that it becomes a strong tradition; c) internalization: the realization of social classifications in society on the basis of theological-ideological in economic transactions. Although the locus of this study is in only one city in Indonesia, it is expected to benefit the wider community, especially other Islamic banking researchers, policy makers, and practitioners. AUTHOR CONTRIBUTIONS Conceptualization: Abbas Arfan. http://dx.doi.org/10.21511/bbs.16(2).2021.16 179
12. Banks and Bank Systems , Volume 16, Issue 2, 2021 Data curation: Abbas Arfan. Formal analysis: Abbas Arfan. Funding acquisition: Abbas Arfan. Investigation: Abbas Arfan, Iklil Athroz Arfan. Methodology: Abbas Arfan. Project administration: Abbas Arfan, Iklil Athroz Arfan. Resources: Abbas Arfan. Software: Iklil Athroz Arfan. Supervision: Abbas Arfan, Iklil Athroz Arfan. Validation: Abbas Arfan. Visualization: Iklil Athroz Arfan. Writing – original draft: Abbas Arfan. Writing – reviewing & editing: Abbas Arfan, Iklil Athroz Arfan. REFERENCES 1. 2. 3. 4. 5. Abbas, K., & Shirazi, N. (2015). The key players’ perception on the role of Islamic microfinance in poverty alleviation: The case of Pakistan. Journal of Islamic Accounting and Business Research, 6(2), 244-267. https://doi. org/10.1108/JIABR-06-2013-0017 Arfan, A. (2017). 99 Kaidah Fiqh Muamalah Kulliyah: Tipologi dan Penerapannya dalam Ekonomi Islam dan Perbankan Syariah. Malang: UIN Maliki Press. Retrieved from https:// opac.perpusnas.go.id/DetailOpac. aspx?id=1158761 Arfan, A., Saifullah, S., & Fakhruddin, F. (2016). Implementasi Prinsip Bagi Hasil dan Manajemen Risiko dalam Produk-Produk Pembiayaan Perbankan Syariah di Kota Malang. Inferensi Jurnal Penelitian Sosial Keagamaan, 10(1), 213-238. https://doi.org/10.18326/infsl3. v10i1.213-238 Berger, P. L., & Luckmann, T. (1966). The Social Construction of Reality: A Treatise in Sociology of Knowledge. Penguin Books Ltd, England. Retrieved from http:// perflensburg.se/Berger%20socialconstruction-of-reality.pdf Charag, A. H., Fazili, A. I., & Bashir, I. (2020). Determinants of consumer’s readiness to adopt Islamic banking in Kashmir. Journal of Islamic Marketing, 11(5), 1125-1154. https://doi. org/10.1108/JIMA-10-2018-0182 180 6. 7. 8. 9. Damon, S., & Bayat, A. (2018). The ethico-political promotion of Islamic banking: The role of knowledge practices. Proceedings of the 15th International Conference on Intellectual Capital, Knowledge Management and Organizational Learning (ICICKM 2018) (pp. 59-66). Retrieved from http://toc.proceedings. com/42484webtoc.pdf Esposito, J. L. (Ed.). (2001). Ensiklopedi Dunia Islam Modern, Vol. 1. Bandung: Mizan. Ezeh, P. C., & Nkamnebe, A. D. (2019a). Islamic bank selection criteria in Nigeria: a model development. Journal of Islamic Marketing, 11(6), 1837-1849. https://doi.org/10.1108/JIMA-062019-0123 Ezeh, P. C., & Nkamnebe, A. D. (2019b). The prospects of Islamic banking in Southeast of Nigeria. Journal of Islamic Marketing, 11(1), 251-267. https://doi.org/10.1108/ JIMA-03-2016-0023 10. Huda, Nur. (2008). Pemikiran Ibn Khaldun tentang Ashobiyah. SUHUF, 20(1), 41-52. Retrieved from http://hdl.handle. net/11617/916 11. Jinjiri Ringim, K. (2014). Perception of Nigerian Muslim account holders in conventional banks toward Islamic banking products. International Journal of Islamic and Middle Eastern Finance and Management, 7(3), 288-305. https://doi.org/10.1108/ IMEFM-04-2013-0045 12. Khaldun, Ibn. (2000). Muqaddimah. Trans. Ahmadie Thoha. Jakarta: Pustaka Firdaus. 13. Masvood, Y. (2019). A critical evaluation of articles related to Islamic banking. International Journal of Recent Technology and Engineering, 8(2s4), 302-306. https://doi.org/10.35940/ijrte. B1057.0782S419 14. Moleong, L. J. (2001). Metodologi Penelitian Kualitatif (Monograf). Bandung: PT Remaja Rosdakarya. Retrieved from https://opac. perpusnas.go.id/DetailOpac. aspx?id=1133305 15. Mu’allim, A. (2003). Persepsi Masyarakat terhadap Lembaga Keuangan Syariah. Al-Mawarid, 10(2), 17-31. Retrieved from https://media.neliti.com/media/ publications/42539-ID-persepsimasyarakat-terhadap-lembagakeuangan-syariah.pdf 16. Mukri, S. G. (2014). Langkah Strategis Optimalisasi Sistem Ekonomi Syariah. SALAM: Jurnal Sosial Budaya Syar-i (SJSBS), 1(1), 7-18. http://dx.doi.org/10.15408/ sjsbs.v1i1.1521 17. Musa, H., Natorin, V., Musova, Z., & Durana, P. (2020). Comparison of the efficiency measurement of the conventional and Islamic banks. Oeconomia Copernicana, 11(1), 29-58. https://doi. org/10.24136/oc.2020.002 http://dx.doi.org/10.21511/bbs.16(2).2021.16
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