The Determinants of Micro, Small and Medium Enterpreneur (MSME) Become Customer of Islamic Banks (Religion, Religiousity and Location of Islamic Banks)

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1. The Determinants of Micro , Small and Medium Enterpreneur (MSME) Become Customer of Islamic Banks (Religion, Religiousity and Location of Islamic Banks) Yudhi Herliansyah1, Lucky Nugroho2, Denanda Ardilla3, Yananto Mihadi Putra4 {yudhi.herliansyah@mercubuana.ac.id1, lucky.nugroho@mercubuana.ac.id2, denandaardilaa@gmail.com3, yananto.mihadi@mercubuana.ac.id4} Universitas Mercu Buana, Indonesia 1234 Abstract. The purpose of this study was to find out the reasons for Micro Small Medium Entrepreneur (MSME) in making decisions to become sharia bank customers. Factors suspected of influencing decision making are religions, religiosity, and location of Islamic banks. The method used is quantitative which is limited by research questions (1) How is the relationship of religion to being a customer of Islamic banks (2) How is the relationship of religiosity by being a customer of Islamic banks (3) How is the location of being a customer of Islamic banks. Based on the results of the study, religion, religiosity, and location have a positive and significant influence on the decision to become Islamic bank customers. Whereas location has a negative and not significant influence. This shows that the higher the religion and religiosity of MSME entrepreneurs, then they will tend to make Islamic banks as their financial transactions. In contrast to the location, the farther away from the location of the Islamic bank from the place of residence or place of business, then they tend not to use the Islamic bank. Keywords: Religion, Religiosity, Location, Islamic Bank. 1 Introduction In line with economic growth in Indonesia, which reached 6.5% In 2011, also the increase in economic transactions and increased income in the community of a country, hence increasing the role of banks through the development of banking products and services. The banking sector in Indonesia continues to expand its business by opening offices in various parts of Indonesia. The development of the number of conventional banks was 120 banks at the end of 2011, with the number of 14,797 offices spread throughout Indonesia (1). The backbone of the economy in many developing countries, including Indonesia, are micro, small and medium enterprises (MSMEs). In addition to being the frontline in the MSME economy, it is also a strategic forum for providing independent workers who are free from dependence on other parties. Indonesia currently continues to strive and continues to strive to improve the economy for the sake of increasing the level of prosperity for its people (2). When the economic crisis hit the world automatically, it also worsened economic conditions in Indonesia. From 1997 to 1998, the condition of the crisis occurred, only the MSME sector (Micro, Small, and Medium Enterprises) was able to remain standing firm (3– ACEBISS 2019, March 26-30, Jakarta, Indonesia Copyright © 2020 EAI DOI 10.4108/eai.26-3-2019.2290775
2. 6 ). Data from the Central Statistics Agency released the situation after the economic crisis of the number of MSMEs at that time did not decrease. Instead, the growth was increasing, even able to absorb 85 million to 107 million workers until 2012. In that year, the number of entrepreneurs in Indonesia was 56.539.560 units, which MSMEs amounted to 56.534.592 units or 99%. The remaining around 0,01% or 4968 units is a large scale business. This phenomenon can also explain that MSMEs are productive businesses to be developed to support macro and microeconomic development in Indonesia and influence other sectors to develop. From the growth of MSMEs, One of the sectors affected is the banking services sector which is also affected because almost 30% of MSME businesses use operational capital from banks (7). Traditional markets are markets that are built and managed by the Regional Government. Local, private, state-owned and regional-owned enterprises include cooperation between the private sector and business places in the form of shops, kiosks, booths, and tents owned or managed by small, medium-sized, non-governmental organizations or cooperatives with small-scale businesses, selling processes buying merchandise can also be done through bargaining with small capital (8,9). The existence of the market, especially traditional markets, is one of the most obvious indicators of community economic activity in a region. The government must pay attention to the existence of traditional markets as one of the public facilities that can support community economic activities. The development of times and changes in human lifestyles that have been promoted so actively by various media have made the existence of traditional markets a little disturbed. However, traditional markets during the modern market invasion in various forms turned out that traditional markets were still able to survive and compete [22]. The Financial Services Authority (OJK), through the Director of Research, Development, Arrangement, and Licensing of OJK Sharia Banking Dhani Gunawan, told Investor Daily in Jakarta stated that at present, the total number of sharia banking customers reaches around 15 million. Meanwhile, conventional banking customers touch around 80 million people. The total number of new sharia bank customers reached 18.75 percent compared to conventional banks, and this shows a positive response from people using Islamic banking services and services making Islamic banks continue to multiply. The phenomenon can see from a large number of offices or the emergence of Islamic banks in Indonesia and already present in 34 provinces throughout the archipelago. It is not only Islamic banks that get a positive response from the Islamic community in Indonesia that is known to be religious, of course, financial institutions that use the sharia system also get a positive response (10). Based on these problems, the understanding of consumer behavior, in this case, banking customers are becoming increasingly crucial and exciting to study. So that this research was conducted to find out whether there is an influence between religion, religiosity, and location on the decision to become a customer of Islamic banks. 2 Literature Review/Theoretical Development Framework and Hypothesis 2.1 The Role of Sharia Banks Against Social Welfare In the economics of the state, banking is one of the agents of development (agent of development), because the primary function of banking is as an intermediary financial
3. institution . The bank function is to collect funds from the public in the form of deposits and redistribute them to the community in the form of credit or financing. The function of banking as an intermediary financial institution is also a concern of Islamic banking, besides being an institution that manages zakat, infaq, and shodaqoh (ZIS) (11,12). Thus the Bank plays a vital role in driving the national economy because banks are fund collectors from surplus units and credit channelers to unit deficits. Banks are an effective and productive savings place for the community and facilitate payment traffic for all sectors of the economy. The existence of Islamic banking as part of the national banking system is expected to drive the economic development of a country. Islamic banks in the economy aim and function for economic prosperity in a broad sense, full employment and optimum economic growth, socio-economic justice and equitable distribution of income and wealth, stability in the value of money, mobilization and investment savings that guarantee fair returns and effective services (13). This is due to the application of the anti-Maysir (Speculation/Gambling) anti-sunset principle, Gharar (uncertainty) and usury so that Islamic banks have the following principles (13,14): ▪ Brotherhood (ukhuwah); ▪ Justice; ▪ Benefit; ▪ Balance (tawazun); ▪ Universalism (syumuliyah). 2.2 Religious Factors Against the Decision to Become Customers of Islamic Banks Religion is a belief system that is united by practices related to sacred things, things that are permitted and prohibited, beliefs, and practices that unite moral communities called Mosques, Churches, Temples, Temples. This shows that religion as a belief has a broad meaning, religion, on the one hand, is referred to as a belief system by establishing rules of worship rituals that are carried out and on the other hand religion also as a system that is comprehensive and covers all aspects of life, including economic development problems and the banking industry as one of the driving forces of the economy (15). Islamic banking or Islamic banking is a banking system developed based on sharia (Islamic law). The effort to establish this system is based on the prohibition in Islamic religion to collect or borrow with interest, or in other words, usury. This is further reinforced by the opinion of the scholars in Indonesia represented by the number 1 2004 MUI fatwa on the interest, which essentially prohibits bank interest in which there are usury elements. The prohibition on usury collection, which is the main feature of Islamic banks, also turns out to have roots in the teachings of non-Islamic religions (13). Prohibition of usury collection, as found in the Qur'an QS. Al-Baqarah 2: 275-276, it turns out we can also find in the Englishlanguage Gospel revised edition, Exodus 22:25 and Eutronomy 23: 19-20. The concept of usury in Hinduism and Buddhism is found in the Laws of Manu, while the concept of Jewish usury is found in Exodus 22: 25 and Leviticus 25: 35-37 (13,16). 2.3 Religiosity Factors Against the Decision to Become a Customer of a Sharia Bank Religious values that have entered into human beings are also called religiosity, which later plays a significant role in efforts to develop human character. That is why in the history of the nations of the world, many religions teach virtue is a manifestation of ideas to make
4. honest and pious people in the future. It cannot be denied that there are still many individuals who lead religious lives in functional rankings. Religion is only used for other purposes that are not religious. Religion is only used in times of anxiety, during routine ceremonies, and so on, even though religious awareness should exist comprehensively in human life (17). At the beginning of the growth of Islamic banking as if religious motives were the main factor that encouraged customers to choose Islamic banks. However, in the face of competition with conventional banks other factors such as technology, customer service is also a determinant of the existence and development of Islamic banks (18). 2.5 Location Factors Against Decision To Become Customers of Sharia Banks Location plays an important role in the decision to purchase a product or service product. Customers may not look for products that are located outside the customer's reach. Of course, this will make customers think they can spend time, energy, and money (19). Therefore, the location factor where the product or service product in the company is highly dependent on the purchasing decision by the customer. The purpose of the bank location is where the products of the bank branch are traded and the banking control center. In practice, there are several types of bank office locations, namely the location of the head office, the main branch, the auxiliary branch, the cash office, and the location of the Automated Teller Machines (ATM). 2.6 Previous research The Influence of Knowledge and Religion, Salatiga's college About Islamic Banking Systems against the Interest in Saving in Islamic Banks". The results of the research are knowledge variables have significant, and variable religion has a significant influence to open saving account in Islamic Bank (20). Aditya Putra Pratama Prihandono conducted similar research (2017) entitled "Analysis of the Effect of Knowledge, Religiosity and Rational Motives on Lecturers' Decision Processes Using Islamic Banks (Case Study of Syarif Hidayatullah UIN Lecturers in Jakarta)." The results indicate that there is significant influence between knowledge variables, religiosity variables, and rational motive variables towards the lecturer decision process using Islamic Bank products and services (21). Another similar research was carried out by Indra Utama (2017) entitled "The Effect of Product Quality, Religiosity, Promotion Mix, and Location on the Decision Process of Becoming BNI Syariah Branch IB Hasanah Savings Customers." This study showed that product quality partially had a significant effect, religiosity has an effect, and the promotion mix partially (location) has a significant negative effect on the customer's decision process (21). 2.7 Hypothesis The hypothesis is a temporary answer to a problem that still needs to be verified and must be logical, clear, and testable. The following are hypothesis formulations, including: H1: Religious factors influence the decision of MSME to use Islamic banking services H2: Religiosity factor influences the decision of MSME to use Islamic banking services H3: Location factors influence the decision of MSME to use Islamic banking services Related to the hypothesis, thus the formulation of this article as follows: