International Journal of Education.
Social Studies.
And Management (IJESSM) e-ISSN : 2775-4154 Volume 4.
Issue 2.
June 2024 The International Journal of Education.
Social Studies, and Management (IJESSM) is published 3 times a year (February.
June.
Novembe.
Focus : Education.
Social.
Economy.
Management.
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LINK : http://lpipublishing.
com/index.
php/ijessm The Role of Sharia Banking in Building Micro Business in Indonesia Alfiatun Zahara1.
Bunga Andini2.
Wahyu Febri Ramadhan Sudirman 3.
Saru Reza4 1,2,3,4 Universitas Pahlawan Tuanku Tambusai.
Indonesia
ABSTRACT
ARTICLE INFO
Article history:
Received 22 March 2024 Revised 27 April 2024 Accepted 15 May 2024 Keywords Doi Corresponding Author :
This research aims to provide a better understanding of how Sharia banking can contribute to the development of micro-businesses in Indonesia.
The research method used is the literature research method or literature review.
This method focuses on the analysis and synthesis of written works that are relevant to the research topic being The results of this research show that Sharia banking has a significant role in building micro businesses in Indonesia.
Islamic banking can be an effective partner in helping micro-businesses grow and develop in Indonesia.
This article focuses on the role of Islamic banking in building micro businesses in Indonesia.
Although the role of Islamic banking in developing micro-businesses is well known, this research provides a better understanding of the real contribution of Islamic banking in forming an ecosystem that supports the growth and sustainability of micro-businesses in Indonesia, as well as highlighting the challenges and obstacles faced by Islamic banking in building micro businesses in Indonesia.
Indonesia.
This article provides important implications for Sharia banking, government, financial institutions, and society in creating an environment that supports the growth and sustainability of micro-businesses in Indonesia.
Business Strategy.
Sharia Banking.
Micro Business 52121/ijessm.
id@universitaspahlawan.
INTRODUCTION
In the era of modern society, the role of financial institutions and banking has an inevitable importance in the economic structure.
Banking institutions function as mediators and catalysts to facilitate the flow of exchange of goods and services.
As a mediator, this institution is tasked with collecting funds from the public in the form of savings or deposits and directing them to parties in need through providing loans and credits.
With available loan and credit funds, economic actors, especially in the industrial sector, can use them for production and investment activities.
This is expected to increase productivity, production International Journal of Education.
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And Management (IJESSM) Volume 4.
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June 2024 Page 388-401 volume of goods and services, and business profits.
In this way, through collecting funds, efficient allocation of funds, and optimal utilization, financial institutions, including Sharia banks, have the potential to help increase people's income and wealth through economic activities in the real sector, in line with increasing profits earned and supporting the growth of community output.
with the increase in productivity that they strive for (Mardani, 2.
The emergence of modern financial institutions and banking systems using interest rates that are common among Muslim communities has inspired some people to develop modern financial institutions and banking systems based on the principle of profit sharing.
This can be in the form of Mudarabah.
Murabahah.
Musharakah, or other contracts that follow Islamic principles.
This is what became known as Islamic banks or sharia banks.
Sharia banks, similar to conventional commercial banks, are financial institutions whose core activities involve collecting and distributing funds from and to the community to achieve profits (Amah, 2.
However.
Islamic banks distinguish themselves by conducting their business activities according to the principles of Islamic sharia.
In the Indonesian context, the operations of Islamic banks are adjusted to banking law, namely No.
7 of 1992 which has been revised through law no.
10 of 1998.
This law recognizes the existence and function of Islamic banks which apply the principle of profit sharing in every aspect of their Sharia banks also have the authority to carry out buying and selling or trading, provide financing for goods, and involve themselves in renting goods, as do leasing companies.
Apart from that.
Islamic banks can provide financing directly, for example through murabahah and mudarabah methods.
The principle emphasized is that there is no sharing of profits without sharing the risk of loss.
The rapid development of the sharia banking sector in Indonesia has had a significant positive impact, especially in supporting the growth of microbusinesses.
In the era of globalization and economic complexity.
Islamic banking has emerged as a major player that not only provides financial services but also plays a strategic role in building and advancing micro-businesses in the country (Anshori, 2.
Islamic banking has shown significant development in recent years, especially in Indonesia, the country with the largest Muslim population in the In this context, the role and contribution of sharia banking to the development of micro-businesses in Indonesia become very important.
Micro businesses, which are the backbone of the Indonesian economy, often face challenges in accessing financing from conventional financial institutions.
In this International Journal of Education.
Social Studies.
And Management (IJESSM) Volume 4.
Issue 2.
June 2024 Page 388-401 situation.
Islamic banking emerges as an alternative that offers fair financing following sharia principles (Rachmadi, 2.
Islamic banking, with its unique principles, such as the prohibition of riba .
and emphasis on fair and transparent transactions, can help overcome some of the obstacles faced by micro-businesses (Asri et al.
, 2.
In this context.
Islamic banking can play an important role in supporting and advancing the micro-business sector in Indonesia.
However, the potential of Islamic banking in building micro businesses in Indonesia is still not fully exploited.
Therefore, it is important to understand and identify the challenges and obstacles that Islamic banking may face in playing this role.
This article aims to provide a better understanding of how sharia banking can contribute to the development of micro-businesses in Indonesia.
This article also aims to provide insight into the real contribution of Sharia banking in forming an ecosystem that supports the growth and sustainability of micro-businesses in Indonesia.
In this way, we can formulate more effective strategies and policies to maximize the contribution of sharia banking in developing the national economy.
In today's banking world, we certainly know sharia banks.
Functionally.
Islamic banks have the same role as conventional banks, namely collecting and distributing public funds.
However, one different thing is the principles of Islamic sharia, economic democracy, and the principle of prudence which guide the operating system of Islamic banks themselves.
Apart from its main task as an institution responsible for collecting and distributing public funds.
Islamic banks also have the aim of supporting the implementation of national development to support increased justice, togetherness and equal distribution of welfare among society (Ikatan, 2.
Based on Law no.
21 of 2008 concerning Sharia Banking, sharia banks are banks that carry out business activities based on sharia principles or principles of Islamic law.
The principles of Islamic sharia in question include the principles of justice and balance ('adl wa tawazu.
, benefit .
, universalism .
, and do not contain gharar, maysir, usury, unjust and haram objects, as regulated in the fatwa of the Ulema Council.
Indonesia.
Apart from that, the Sharia Banking Law also mandates sharia banks to always carry out social functions while also carrying out functions like baitul mal institutions.
Baitul mal institution is an institution that receives funds from zakat, infaq, alms, grants, or other social funds and distributes them to waqf managers according to the wishes of the waqf giver (Kholid, 2.
According to (Sudarsono, 2.
Sharia Bank is a state financial institution that provides financing and other services in payment traffic and also money circulation that operates using sharia or Islamic principles.
Meanwhile.
International Journal of Education.
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And Management (IJESSM) Volume 4.
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June 2024 Page 388-401 (Permataatmadja, 2.
explains that Sharia Banks are banks that operate based on sharia (Islami.
principles, and their procedures are based on the Al-Qur'an and Hadith.
Sharia banking is everything that concerns sharia banks and sharia business units, regarding institutions, business activities and processes in carrying out business activities.
From the several definitions of sharia banking above, the author concludes that there are 3 main topics of discussion related to sharia banking, namely institutions, business activities, and methods and processes for carrying out sharia bank business activities in general.
What is meant by sharia bank here is a financial institution whose main business is providing credit financing services and traffic services in payments and money circulation, but this still adheres to sharia principles and is based on the Al-Quran and Hadith.
By referring to the Al-Qur'an and Hadith.
Sharia Banks are expected to avoid activities that contain elements of usury and anything contrary to Islamic law.
Sharia Banks have different functions from conventional banks, where the function of a Sharia Bank reflects the characteristics of the Sharia Bank itself, and the function of a Sharia Bank can have an impact on the implementation of the Sharia Bank's business activities.
The functions of Sharia Banks according to (Haryanto & Rudy, 2.
are divided into 4, namely:
Investment Manager Function.
This function can be seen from the perspective of Islamic bank fund collectors in collecting funds, especially mudharabah funds, acting as investment managers in the sense that these funds must be able to be channeled into productive channels so that the funds collected must be able to produce results which will be shared with the fund owners.
Sharia banks should not collect mudharabah funds if they cannot channel these funds into productive things, because the results obtained will remain fixed and will be distributed to larger fund owners so this will be detrimental to existing fund owners.
Investor Function.
Distributors of funds, both in terms of profit-sharing principles .
udharabah and musyaraka.
, ujroh principles .
jarah and ijarah Muntahia bittamil.
and buying and selling principles .
uarabahah, salam and istishn.
, sharia banks function as investors as owners of funds.
Therefore, as the owner of funds, investing funds is carried out according to established principles and does not violate Sharia, is invested in productive sectors and has very minimal risks.
Social Function.
The concept of Islamic banking requires Islamic banks to provide social services, either through qardh funds .
enevolent loan.
, zakat, or social funds following Islamic teachings.
Furthermore, the Islamic banking concept also requires Islamic banks to play a role in developing International Journal of Education.
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Financial Services Function.
The function of financial services in sharia banks is not much different from conventional banks, such as providing clearing services, transfers, collections, salary payments, and so on.
This can be done as long as it does not violate sharia principles.
Sharia banks also offer various other financial services to obtain compensation based on agency contracts or leases.
So it can be concluded that the role of sharia financial institutions includes meeting the community's need for funds as a means of carrying out economic activities following sharia principles.
For example, consuming an item, additional working capital, getting the benefits or using the value of an item, or even initial capital for someone who has a prospective business but does not have adequate financial capital.
RESEARCH METHODE
The research method used is the literature research method or literature Library Research involves the use of thematic methods as mentioned by (Evanirosa et al.
, 2.
The bibliographic research method here is understood as an approach that focuses on collecting information from various written sources, such as books, journal articles, and other documents, that are relevant to the research theme.
By utilizing the thematic method, researchers can make careful and systematic observations of various aspects of the theme being studied, gain in-depth insight into the issues being discussed, and prepare detailed answers to each problem that arises.
Library research as a methodology allows writers to explore and analyze various literature that are relevant to the research topic Figure 1.
Data Analysis Farmwork by Miles and Huberman International Journal of Education.
Social Studies.
And Management (IJESSM) Volume 4.
Issue 2.
June 2024 Page 388-401 The process of in-depth observation of this literature allows researchers to formulate a comprehensive understanding of the conceptual framework underlying the research topic, as well as explore various perspectives and approaches that have been put forward by previous experts.
Thus, the literature research method with a thematic approach applied in this research provides a solid foundation for the author to produce an in-depth and detailed study of the theme being studied.
The data analysis technique adopted is based on the framework that has been developed by Miles and Huberman, known as data reduction, data display .
ata presentatio.
, and conclusion drawing .
(Miles et al.
, 2.
With this approach, thoroughly integrated steps allow researchers to manage the data obtained in an organized way, interpret findings, and conclude research results more robustly and consistently.
RESULT AND DISCUSSION
Micro Business in Indonesia A micro business is a type of business that has a small scale and operates at a lower level than small and medium businesses (SME.
Micro businesses generally have a limited number of employees, relatively small assets, and low Micro-businesses are often owned and run by individuals or small groups, such as small traders, craftsmen, farmers, or small shop owners.
The main characteristics of a micro business are a small operational scale and limited Microbusinesses often focus on local markets or specific communities, and the products or services they offer usually meet everyday needs or the needs of local communities.
Micro-businesses have an important role in the economy, especially in developing countries like Indonesia.
They contribute to job creation, income generation, and poverty reduction.
Microbusinesses also have the potential to be a source of innovation and creativity that can encourage economic growth (Hamdani, 2.
However, micro businesses also face unique challenges.
Some common challenges faced by micro-businesses include limited access to capital, limited knowledge and management skills, and limited access to markets and Therefore, proper support and guidance from various parties, including sharia banking, is very important to help micro businesses develop and In the context of sharia banking, micro-businesses can utilize financing that complies with sharia principles, such as profit-sharing-based financing, to gain access to the capital they need.
Apart from that, sharia banking can also provide training and technical assistance in financial and operational management for micro businesses.
With the right support, micro-businesses can International Journal of Education.
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The Urgency of Micro Business in Indonesia Micro business has high urgency in Indonesia and makes a significant contribution to the country's economic development.
Microbusinesses have a very important role in the Indonesian economy.
The following are some of the main roles of micro-businesses in Indonesia according to (Septiani & Thamrin, 2.
, namely as follows:
Job Creation: Micro business is one of the sectors that creates the most jobs in Indonesia.
With a small operational scale, micro-businesses can easily employ people locally, either as permanent employees or as daily workers.
Increased Income: Micro businesses provide opportunities for individuals and groups to generate income.
Microbusinesses are often owned and run by local people, so the income generated from these businesses can improve the standard of living and economic well-being of local communities.
Poverty Reduction: Microbusinesses play a role in reducing poverty levels in Indonesia.
By providing opportunities to individuals who lack access to formal employment, microbusinesses help reduce unemployment rates and improve the economic well-being of the wider community.
Economic Empowerment of Local Communities: Micro businesses have the potential to empower local communities.
By facilitating business ownership and operation by individuals or groups at the local level, microbusinesses can increase economic independence and provide control over economic resources to local communities.
Innovation and Creativity: Microbusinesses are often a source of innovation and creativity in the economy.
With a smaller scale and greater flexibility, micro businesses can create new products or services that suit more specific local and market needs.
Regional Economic Development: Micro businesses also play a role in regional economic development in Indonesia.
By operating at the local level, microbusinesses can help drive economic growth in previously underdeveloped areas.
With this broad and significant role, micro business plays a key role in building the Indonesian economy inclusively and sustainably.
Therefore, appropriate support and guidance from various parties, including the government, financial institutions and society, is very important to ensure the growth and sustainability of micro-businesses in Indonesia.
understanding the urgency of micro business, the government, private International Journal of Education.
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And Management (IJESSM) Volume 4.
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Discussion The Role of Sharia Banking in Building Micro Business in Indonesia Sharia banking in Indonesia has a strategic role in developing micro businesses as part of efforts to encourage financial inclusion and empower the micro-economic sector.
Islamic banking has become a significant force in the Indonesian economy, especially in supporting and building micro businesses.
The role of sharia banking in building micro businesses in Indonesia according to (Muheramtohadi, 2.
is as follows:
Providing Financing following Sharia Principles: Sharia banking provides micro businesses with access to financing by sharia principles.
In Islamic banking, profit-sharing-based financing such as musyarakah and mudharabah is used, which allows micro-business owners to obtain capital fairly and share risks with the bank.
This financing helps micro businesses overcome the capital access obstacles they often face.
Provide Financial Training and Education: Islamic banking also provides financial training and education to micro-business owners.
This training covers financial management, financial planning, and risk management.
increasing their financial understanding and knowledge, micro-business owners can manage their finances more effectively and make better decisions in managing their business.
Providing Technical Assistance and Consultancy: Islamic banking provides technical assistance and consultation to micro businesses to assist them in developing business, marketing, and operational strategies.
This assistance includes improving managerial skills, developing sustainable business models, and implementing relevant technology and innovation.
With this help, micro-businesses can improve their operational efficiency and optimize growth potential.
Providing Local Economic Empowerment: Sharia banking plays a role in empowering the local economy through support for micro businesses.
providing access to financing and technical assistance to micro businesses.
Islamic banking helps increase the economic independence of local Developing micro businesses can create jobs, increase people's income, and reduce poverty levels in the area.
Contributing to National Economic Growth: Sharia banking, through its role and support for micro businesses, contributes to overall national economic growth.
Developing micro businesses are a source of significant International Journal of Education.
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Sharia banking has an important role in building micro businesses in Indonesia.
Through financing following sharia principles, financial training, and education, technical assistance and consultation, as well as local economic empowerment, sharia banking has made a significant contribution to the growth and development of micro-businesses in Indonesia.
The impact of the role of sharia banking is very positive.
Micro businesses get access to fair capital, better financial understanding, and help in developing business strategies.
This helps micro businesses improve their financial performance, operational efficiency and competitiveness (Hayati, 2.
The importance of Sharia Banking influences economic activities to advance the country's economy.
Banking is considered one of the main foundations to support and drive the national economy because it functions as an intermediary or intermediation institution between those who own money and those who need As stated in the Banking Law.
Article 4, sharia banking is the main pillar driving and supporting the national economy, to realize the main objectives of national banking, namely to support the implementation of national development to increase equality and economic growth and to achieve national stability and improve the economic welfare of the Indonesian people.
(Mujahideen, 2.
Sharia Banking Strategy for Building Micro Business in Indonesia Sharia banking in Indonesia has a strategic role in developing micro businesses as part of efforts to encourage financial inclusion and empower the micro-economic sector.
Sharia banking can help in developing business strategies for micro businesses.
The following are several strategies that can be implemented by sharia banking to achieve these goals according to (Alfian, 2.
Business Consulting: Islamic banking can provide business consulting to micro-business owners.
They can help in identifying business strengths and weaknesses, market opportunities, and challenges faced.
By understanding the business situation thoroughly.
Islamic banking can provide appropriate advice and guidance to develop effective business strategies.
Market Analysis: Islamic banking has access to market data and related information that can help micro businesses in analyzing the market and relevant trends.
By understanding the market and customer needs.
Micro businesses can develop more effective marketing and sales strategies.
Appropriate Financing: Islamic banking can provide financing that suits the needs of micro-businesses.
In this case.
Islamic banking can help in International Journal of Education.
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This also includes cash flow management, cost control, and efficient use of capital.
Diversification of Products and Services: Islamic banking can help micro businesses develop product and service diversification strategies.
Through innovative product and service offerings, micro-businesses can expand their market share and increase their competitiveness.
Islamic banking can provide advice and support in identifying diversification opportunities under sharia principles.
Access to Networks and Business Opportunities: Islamic banking often has extensive networks and access to potential business opportunities.
They can help micro businesses in establishing partnerships, accessing new markets, or participating in business development programs.
By taking advantage of these networks and opportunities, micro-businesses can develop mutually beneficial collaboration strategies and increase their growth.
Islamic banking can effectively support the growth and sustainability of micro-businesses in Indonesia, creating a positive impact on the economy and financial inclusion.
Through support in developing business strategies.
Islamic banking helps micro businesses improve their performance and competitiveness.
With the right business strategy, micro-businesses can grow and develop sustainably, achieve their business goals, and contribute to overall economic growth (Sri & Ahmad, 2.
Opportunities and Challenges of Sharia Banking in Building Micro Business in Indonesia Islamic banking opportunities refer to the opportunities and growth potential that exist for financial institutions that operate based on sharia This opportunity involves various aspects, including growing markets, high demand for Islamic financial products and services, government support, product innovation, and changes in societal attitudes.
Indonesia has a large population and rapid economic growth.
This creates a huge opportunity for Islamic banking to provide financial services to existing and developing micro-businesses in Indonesia.
With a significant number of micro businesses.
Islamic banks have the opportunity to expand their market share and provide financing and financial services that comply with sharia principles (Suadi, 2.
Micro businesses often face challenges in gaining access to financing.
Sharia banking can take advantage of this opportunity by providing financing that is by sharia principles, such as profit-sharing based financing.
By providing fair financing and sharing risks.
Islamic banking can be an attractive option for micro businesses that need capital to grow.
Public awareness about sharia banking is increasing in Indonesia.
This creates greater demand for Islamic banking International Journal of Education.
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People are increasingly aware of the benefits of sharia principles in finance and are increasingly interested in using sharia banking services.
Islamic banking can take advantage of this growth to expand their market share in supporting micro businesses (Suadi, 2.
The Indonesian government has provided strong support for the development of sharia banking and the micro business sector.
This includes policies and incentives designed to encourage microeconomic growth and the development of Islamic banking.
This support creates a conducive environment for Islamic banks to operate and expand their reach in developing the micro economy in Indonesia.
Apart from the opportunities that sharia banking has, it also has challenges that it must face.
Islamic banking challenges refer to the obstacles and difficulties faced by financial institutions operating based on sharia Some of the challenges faced are the lack of understanding and awareness of sharia banking principles among the public, including micro The public needs to be given a better understanding of the principles of Islamic banking and its benefits for micro businesses.
Sharia banking needs to take the initiative in providing education and increasing awareness about sharia banking services and products (Nuraini, 2.
Several regions in Indonesia, especially rural areas, still face challenges in access to banking infrastructure.
Access to adequate technology and banking services is an obstacle for micro businesses in remote areas.
Sharia banking needs to develop innovative solutions, such as technology-based banking services, to ensure accessibility of financial services for micro businesses throughout Indonesia.
Islamic banking needs to build sufficient capacity to serve micro businesses effectively.
This includes increasing human resources who have adequate understanding and skills in sharia banking as well as a good understanding of the needs of micro businesses.
Islamic banks need to train their staff in providing services that comply with sharia principles and understand the special needs of micro businesses.
Micro businesses often have higher risks compared to larger scale businesses.
Islamic banking needs to have a strong risk management system to minimize credit and operational risks associated with micro businesses.
Islamic banking needs to carry out careful risk analysis and effective risk management strategies to ensure the sustainability of the micro businesses it supports (Nur'aini, 2.
In facing these opportunities and challenges.
Islamic banking needs to work together with the government, financial institutions, and other related parties to strengthen their role in developing the micro economy in Indonesia.
Despite these challenges.
Islamic banking continues to develop and overcome these obstacles by increasing financial literacy, developing better infrastructure, and International Journal of Education.
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Support from the government and increased public awareness can also help overcome these challenges.
By overcoming challenges and exploiting opportunities.
Islamic banking can become a significant force in advancing micro businesses and driving inclusive economic growth in Indonesia (Norrahman, 2.
CONCLUSION
Sharia banking has a strategic role in developing micro businesses as part of efforts to encourage financial inclusion and empower the micro economic sector in Indonesia.
In facing opportunities and challenges.
Islamic banking needs to work together with the government, financial institutions and other related parties to strengthen their role in developing the micro economy.
Despite the challenges.
Islamic banking continues to develop and overcome these obstacles by increasing financial literacy, developing better infrastructure, and innovating in products and services.
Support from the government and increased public awareness can also help overcome these challenges.
By overcoming challenges and exploiting opportunities, sharia banking can become a significant force in advancing micro businesses and driving inclusive economic growth in Indonesia.
Thus, this article provides a better understanding of how sharia banking can contribute to the development of micro-businesses in Indonesia, as well as providing insight into the real contribution of sharia banking in forming an ecosystem that supports the growth and sustainability of micro-businesses in Indonesia.
REFERENCES