The Effect of Internal and External Factors on the Proportion of MSME Sector Financing in Sharia Business Units in Indonesia
DOI:
https://doi.org/10.58968/ria.v5i2.689Keywords:
MSME, Financing, UUS, VECMAbstract
This paper aims to analyze the response of the proportion of MSME financing in Sharia Business Units in Indonesia to internal and external factor shocks. Additionally, it seeks to determine the contribution of each factor to the diversity of MSME financing proportions. This study employs the Vector Error Correction Model (VECM). The Covid-19 pandemic is included as an exogenous dummy variable. The analysis uses monthly data from January 2019 to December 2024, sourced from the Sharia Banking Statistics published by the Financial Services Authority (OJK). The study found that Third Party Funds, Operational Expenses to Operational Income, and the BI rate have a positive impact on MSME financing proportions in UUS. Conversely, Non Performing Financing (NPF), Return on Assets (ROA), Gross Domestic Product (GDP), Bank Indonesia Sharia Certificate (SBIS) exhibit a negative impact. The MSME financing proportion itself is the most dominant factor in financing variability, followed by NPF, BOPO, GDP, BI rate, SBIS, ROA, and DPK. This finding represents the supply side, referring to banks as financing providers. To obtain a more comprehensive perspective, further analysis is needed from the demand side by considering the characteristics of MSMEs as financing recipients. This area of research remains relatively underexplored, which is mandated to allocate at least 30% of its financing to the MSME sector, although actual disbursement remains around 10%.
Downloads
References
Ainiah, P. and Sriyana, J. (2024), "The influence of internal and external factors on non- performing financing (NPF) in Islamic commercial bank financing", Jurnal Ilmiah Ekonomi Islam, Vol. 10 No. 01, pp.401-412.
Ambalau, P.D.V., Kumaat, R.J., and Mandeij, D. (2019), "Analysis of the influence of money supply, exchange rate, and SIBOR on commercial bank lending interest rate through BI policy rate (2016:M09–2018:M12)", Jurnal Berkala Ilmiah Efisiensi, Vol. 19 No. 03, pp.23–33.
Andrianto, R. (2024), "Sri Mulyani: The role of MSMEs in Indonesia’s economy is the largest in ASEAN & G20", available at: https://www.cnbcindonesia.com/research/20240307164553-128-520510/sri-mulyani- peran-umkm-ri-terhadap-ekonomi-terbesar-se-asean-g20 (accessed 7 October 2024).
Aryanti, F.P., Nurhalizah, F., and Jannah, H. (2022), "The effect of micro working capital financing in Islamic banking institutions on the development of MSMEs in Palembang City (A case study of Indonesian Sharia Bank KC Demang)", Ekonomis: Journal of Economics and Business, Vol. 6 No. 2, pp.699-709. doi:10.33087/ekonomis.v6i2.566.
[BI] Bank Indonesia. (2025), BI Rate, available at: www.bi.go.id (accessed 11 October 2024). Bongomin, G.O.C., Munene, J.C., Ntayi, J.M., and Malinga, C.A. (2019), "Collective action among rural poor: Does it enhance financial intermediation by banks for 53 financial inclusion in developing economies?", International Journal of Bank Marketing, Vol. 37 No. 1, pp.20–43. doi:https://doi.org/10.1108/IJBM-08-2017-0174.
Destiana, R. (2016), "Analysis of internal factors affecting MSME financing in sharia banks in Indonesia", JRKA, Vol. 2 No. 1, pp.15-28.
Dinger, V. (2009), "Do foreign-owned banks affect banking system liquidity risk?", Journal of Comparative Economics, Vol. 37 No. 4, pp.647–657. doi:https://doi.org/10.1016/j.jce.2009.04.003.
Fitriani, A. (2017), "The effect of the deposit amount and SBIS placement on murabahah investment funds at Bank Syariah Mandiri", Undergraduate Thesis, University of UIN Sunan Gunung Djati Bandung.
Gujarati, D.N. (2021), Essentials of Econometrics, SAGE Publication, New York, NY.
Gurley, J.G. dan Shaw, E.S. (1956), "Financial intermediaries and the saving‐investment process", Journal of Finance, American Finance Association, Vol. 11 No. 2, pp.257-276.
Hamid, A.S.D. and Isbanah, Y. (2019), "Determinants of saving decisions at mandiri bank customers in Kediri City", Jurnal Ilmu Manajemen, Vol. 7 No. 4, pp.1077-1086.
Hapsari, Y.A., Apriyanti, P., Hermiyanto, A., and Rozi, F. (2024), "Analysis of the role of MSMEs in Indonesia's economic development", Jurnal Manajemen dan Ekonomi Kreatif, Vol. 2 No. 4, pp.53-62. doi:https://doi.org/10.59024/jumek.v2i4.464.
Hayat, R.T.S.M. (2018), "Factors affecting Islamic commercial bank financing in the MSME sector (2015–2017)", Undergraduate Thesis, University of UIN Syarif Hidayatullah Jakarta.
Ichwani, T. and Dewi, R.S. (2018), "The effect of BI rate changes to BI 7-day reverse repo rate on MSME credit distribution", Jurnal Quality, Vol. 10 No. 29, pp.259-270.
Jaya, Y.P., Rindayanti, W., and Ali, K.H. (2015), "Determinants of Islamic banking financing in the transportation and communication sector in Indonesia", Al-Muzara’ah, Vol. 3 No. 1, pp.62-75.
Jimoh, A. (2023), "Why is the vector autoregressive model one of the best for time series forecasting?", available at: https://medium.com/@aliyujimoh58/why-is-the-vector- autoregressive-model-one-of-the-best-for-time-series-forecasting-317649670ea1 (accessed 18 October 2024).
Juanda, B. and Junaidi. (2012), Time Series Econometrics: Theory and Application, IPB Press, Bogor.
Kassim, S. (2016), "Islamic finance and economic growth: The Malaysian experience", Global Finance Journal, Vol. 30, pp.66–76. doi:10.1016/j.gfj.2015.11.007.
[Kemenkeu] Ministry of Finance. (2021), PEN Program, available at: https://djpb.kemenkeu.go.id/kppn/kotabumi/id/informasi-umum/publikasi- umum/program-pen.html (accessed 5 March 2025).
Khadafi, M., Chalirafi, Muchsin, and Khairani, E. (2022), "Factors influencing MSME sector financing in Islamic commercial banks (2015–2019)", Jurnal Ekonomi Manajemen dan Bisnis, Vol. 23 No. 1, pp.40-48.
Kuntari, S. (2022), "The influence of SBIS, inflation, and DPK on working capital financing in Islamic banks", Undergraduate Thesis, University of UIN Walisongo, Semarang.
Lestari, D.P. and Rani, L.N. (2022), "Analysis of internal and external factors affecting the liquidity of Islamic commercial banks in Indonesia", Jurnal Ekonomi Syariah Teori dan Terapan, Vol. 9 No. 4, pp.559-572. doi:10.20473/vol9iss20224pp559-572.
Mahsunah, S. (2023), "The influence of DPK, NPF, CAR, and ROA on MSME financing in Islamic commercial banks (2018–2022)", Undergraduate Thesis, University of UIN Salatiga.
Munandar, A. (2022), "Determinants of FDR and its implications on ROA and NOM in Islamic commercial banks (2014–2021)", Ekonomica Sharia: Jurnal Pemikiran dan Pengembangan Ekonomi Syariah, Vol. 7 No. 2, pp.105-116.
Nasir, M., Fakriah, and Ayuwandirah. (2016), "Analysis of macroeconomic variables on Indonesia’s sharia stock index using VAR approach", EKONIS: Jurnal Ekonomi Dan Bisnis, Vol. 15 No. 1, pp.53-63.
Nuriyah, A., Endri, and Yasid, M. (2018), "Micro, small-financial financing and its implications on the profitability of sharia banks", DeReMa Jurnal Manajemen, Vol. 13 No. 2, pp.175-197.
[OJK] Financial Services Authority. (2020). How MSMEs & Banking Can Succeed in the Digital and Economic Disruption Era. available at: Kajian Bagaimana UMKM dan Perbankan Dapat Sukses di Era Disrupsi Ekonomi dan Digital.pdf (accessed 12 March 2025).
[OJK] Financial Services Authority. (2025), Sharia Banking Statistics, available at: www.ojk.go.id (accessed 11 October 2024).
[PBI] Bank Indonesia Regulation No. 3/2/PBI/2001 concerning Credit for Small Enterprises. (2001).
[PBI] Bank Indonesia Regulation No. 23/13/PBI/2021 concerning Macroprudential Inclusive Financing Ratio. (2021).
Permata, J.P. (2025), "Sustainable MSMEs as the key to Indonesia’s economic future", available at: https://perbanas.id/2025/01/30/umkm-berkelanjutan-kunci-masa-depan- ekonomi-indonesia/ (accessed 11 April 2025).
Purwanto. (2019), "Improving Islamic bank profitability through MSME financing", Indonesian Interdisciplinary Journal of Sharia Economics (IIJSE), Vol. 1 No. 2, pp.7- 15.
Ramadhan, M.M. and Beik, I.S. (2013), "The effect of sharia and conventional monetary instruments on MSME financing in Indonesia", Al-Muzara’ah, Vol. 1 No. 2, pp.175-190. Ramadhanty, R.P. and Auwalin, I. (2021), "The effect of Islamic bank financing on provincial GRDP in Indonesia (2010–2019)", Jurnal Ekonomi Syariah Teori Dan Terapan, Vol. 8 No. 1, pp.8–17. doi: https://doi.org/10.20473/vol8iss20211pp8-17.
Rasyid, A.M.I. (2018), " The influence of fiscal, Islamic monetary, and macroeconomic policy instruments on working capital financing in Islamic banking", Undergraduate Thesis, IPB University, Bogor.
Rohmatunnisa, H. and Pratiwi, L.N. (2020), "The influence of NPF, FDR, CAR, and inflation on working capital financing in Islamic rural banks (BPRS) in Indonesia", Journal of Applied Islamic Economics and Finance, Vol. 1 No. 1, pp.137-151.
Sahara, A.Y. (2013), "The influence of inflation, BI rate, and GDP on the ROA of Islamic banks in Indonesia", Jurnal Ilmu Manajemen, Vol. 1 No. 1, pp.149-157.
Santoso, B. and Ahmad, K. (2016), "Islamic microfinance branchless banking model in Indonesia", Intellectual Discourse, Vol. 24, pp.409-433.
Sari, D.H., Annisa, R., and Ismawanto, T. (2021), "The influence of CAR, BI7DRR, and inflation on MSME credit", Jurnal Studi Manajemen dan Bisnis, Vol. 8 No. 1, pp.50-55.
Selian, M.M.P. and Lutfi, L. (2024), "Determinants of islamic bank financing during economic turbulence", JPS (Jurnal Perbankan Syariah), Vol. 5 No. 1, pp.21-37.
Soemitra, A. (2020), Contemporary Issues in Islamic Monetary Economics, FEBI UIN-SU Press, Medan.
Sudarsono, H. (2017), "Modelling the response of financial ratios to financing in Indonesian Islamic banks", Jurnal Ekonomi Syariah Indonesia, Vol. 7 No. 1, pp.1-13.
Sumarlin. (2016), "Analysis of the influence of inflation, CAR, FDR, BOPO, and NPF on the profitability of Islamic banking", ASSETS, Vol. 6 No. 92, pp.296-313.
Sunaryono. (2021), "Islamic financing and macroeconomic stability: Implications for MSME development in Indonesia", Jurnal Ekonomi STIEP (JES), Vol. 9 No. 1, pp.131-143.
Utami, U.R. (2018), "The effect of bank’s internal factors towards microfinancing in islamic commercial bank in Indonesia", Journal of Islamic Economic Laws, Vol. 1 No. 1, pp.78- 98.
[UU] Republic of Indonesia. (1998), Law No. 10 of 1998 on Banking.
[UU] Republic of Indonesia. (2008a), Law No. 20 of 2008 on Micro, Small, and Medium Enterprises (MSMEs).
[UU] Republic of Indonesia. (2008b), Law No. 21 of 2008 on Islamic Banking.
