customer loyalty of islamic banks 13 3customer loyalty of islamic banks pramono hari adi1 1 jenderal soedirman university, purwokerto, indonesia abstract the highly rapid growth of sharia commercial banks have required them to compete in obtaining and retaining customers. therefore, it is important to look carefully at the position of their brands within the industry. among the measures to see how strong the position of a brand in the market is the level of customers’ brand loyalty. there are five levels of brand loyalty, each of which indicates particular marketing challenge to be addressed. those levels from least loyal to most loyal include switcher, habitual buyer, satisfied buyer, liking the brand, and committed buyer. using questionnaire to collect primary data from 100 respondents, the results indicate that the highest brand loyalty to islamic banks has been at the level of satisfied buyer and liking the brand, indicating that consumer loyalty to the islamic banks has not been perfect. loyalty needs to be improved towards the committed buyer. keywords: brand, customer loyalty, islamic bank 1. introduction the government of indonesia through bank indonesia has established a policy to develop a dual (conventional and islamic) banking system. since then, number of sharia commercial banks has been growing very rapidly in indonesia. by the end of 2013 there have been 11 islamic banks, 24 sharia business units, and 160 sharia people loan banks (bank indonesia, 2013). this development cannot be separated from the economic crisis in 2008 leading to the assumed inability of conventional economic system to develop the economy and the search for an alternative economic system which is considered more appropriate. noting the number of existing banks, islamic banks are required to compete in creating and maintaining customers, not only with the conventional banking but also with other islamic banks. therefore, various marketing efforts should be made to introduce the products and the brand of islamic banking institution to the community. facing the competition, it is important to look carefully at the position of their brands within the industry. among the measures to see how strong the position of a brand in the market is the level of customers’ brand loyalty (aaker, 1996). because there have been many islamic banks with diverse and innovative products, it cannot be well predicted that the two major players (bank muamalat indonesia and bank syariah mandiri) in the indonesian islamic banking market today are continuously able to maintain their position as the most powerful brands * corresponding author. email address: hariadipramono@yahoo.com mailto:hariadipramono@yahoo.com customer loyalty of islamic banks 14 in the market (karim counsultant, 2009). the level of consumer loyalty to islamic banking services will continue to change along with the increasing competition. 2. literature study the existence of islamic banks in indonesia has been driven by the desire of the indonesian people (especially the muslim community) who believe that interest is usury. usury means addition. in linguistics, usury means to grow and expand (saeed, 1996). antonio (1999) mentions that technically, usury means making additional principal or capital unfairly. for religious reasons, there have been customers who are loyal to sharia banking; however, there have been others who access services from sharia as well as conventional banking services. brand loyalty measures customer attachment to a brand. this measure provides an overview of the likelihood of a customer to switch to another product, especially if the brand is experiencing a change, either in relation to price or other attributes. a customer who is very loyal to one brand will not easily switch their purchases to other brands, no matter what happens with the brand. when customer loyalty to a brand increases, the vulnerability of the customer group against competitors’ threat and attack can be reduced. thus, the role of brand loyalty is a core indicator of brand equity, which is clearly related to sales opportunities, thus guarantee of the company's profit in the future. loyal customers in general will continue to purchase the brand even though they have many alternative brands that offer superior productc characteristics. having many customers of a product in this category means that the brand has a strong brand equity. on the contrary, unfaithful customers, at the time they make a purchase of the brand generally do not base on their interest in the product, price and convenience of use or various other attributes offered by other alternative brands. when most customers of a brand fall within this category, it means that brand equity is weak. brand loyalty of the customers is a strategic asset. when it is properly managed and exploited, it will potentially provide values in some forms, which in turn gives a positive value for the customer and for the company. the company also has to keep creating and maintaining brand loyalty in various ways, such as by treating customers with decent, establishing a close relationship with customers, managing customer satisfaction, creating switching costs, and providing extra services (aaker, 1997). there are several levels of brand loyalty, each of which indicates particular marketing challenge to be addressed. the levels of brand loyalty include the following (rangkuti, 2002): a. switchers, are customers who are at the most basic level. the higher the frequency the customers switch to other brands, indicating whether buyers are loyal.usually this type of customer buys products due to low price. b. habitual buyers, are those who are satisfied with the products or at least do not experience disappointment, so that they do not switch to other brands. customer loyalty of islamic banks 15 c. satisfied buyers, are customers who are satisfied but they have to bear the costs of transition, including time, money, and risk to switch to other brands. d. liking-the-brand customers are those who really like the brand. their choice of a brand is based on associations, such as a symbol of the series of experiences in using the brand or an impression of high quality. e. commited buyers are those who take pride of using a brand. an actualization of brand loyalty is to recommend and promote the brand to others. 3. research methodology this study is a survey research with primary data in the form of responses to questionnaires. it also collected data obtained from secondary sources. the population of this study are customers of islamic banks in purwokerto, the number of which is difficult to find out. with a confidence coefficient of 0.05 which is equal to 1.96, and determination of error of 10%, the minimum sample size is 96.04 and is rounded to 100 respondents. respondents were selected purposively and were distributed on existing islamic banks. operational definition of brand loyalty brand loyalty is a measure of customer attachment to a brand. this measure provides an overview of the likelihood that a customer switch to other brands, especially when the particular brand is experiencing a change in price or other attributes. loyalty is an indicator of brand equity which is associated with future sales and earnings. loyalty consists of five levels (from low to high): switcher, habitual buyer, satisfied buyer, liking the brand, and committed buyer. data analysis brand loyalty was measured using five-point likert scales (strongly agree, agree, neutral, disagree, and strongly disagree). before testing the hypotheses, data obtained from the respondents were tested for validity to determine how accurate an instrument performs the function of measuring. after that, reliability testing was performed to determine the stability of the instrument. the next step is tabulation of data to determine the average value to classify the levels of customers’ brand loyalty. switchers are customers who are sensitive to price changes. therefore, those fall in this category give responses such as "often" or "always". from tabulated data, the average values were obtained. the result of the calculation was mapped into a range of scales that produce interval (durianto et al, 2001): interval = ℎ𝑖𝑔ℎ𝑒𝑠𝑡 𝑣𝑎𝑙𝑢𝑒−𝑙𝑜𝑤𝑒𝑠𝑡 𝑣𝑎𝑙𝑢𝑒 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑙𝑎𝑠𝑠 = 5−4 5 = 0.8 once the interval is known, then a range of scales can be created to find out the average assessment of respondents to each element of differentiation and the extent of the variation. the scale ranges are as follows: 1.00 to 1.800 = very bad 1.81 to 2.60 = bad customer loyalty of islamic banks 16 2.61 to 3.40 = sufficient 3.41 to 4.20 = good 4.21 to 5.00 = very good the measurement of habitual buyer was based on answers "agree" and "strongly agree" on the questionnaire. the calculation follows the stages of switcher. satisfied buyers in this study are those whose responses are “satisfied” and “very satisfied ". the calculation follows the stages of switchers and habitual buyers. being classified as liking-the-brand customers are those who provided responses of “like” and “love” with the calculation similar to that of switcher and habitual buyer. committed buyer is the level of loyalty marketers desire most, because when customers have reached this level, there will be very small likelihood for them to switch. committed buyers are those who responded "often" and "always". 4. results description of respondents there were 48 female and 52 male respondents participating in the study, which was almost balanced. this shows that the economic activity at the moment has not been dominated by any particular gender. the majority of respondents (99 people) are moslems; only one respondent was non moslem. most respondents (56) hold bachelor degree, followed by high school graduates (21) and the rest were distributed into various levels of education. most respondents (35) work as private employees, followed by students (27). the majority of respondents (35) earned less than idr 1 million per month, 22 earned more than 4 million and the rest (33) between 1-4 million. among 100 respondents, 77 have accessed the services offered by islamic banks, while the rest (23) have not been customers of islamic banks. they know about islamic banks from mass media, visit to the office of islamic banks, as well as information sharing from other people. most respondents (41) have been in contact with islamic banks for more than 3 years, but those who became customers for less than one year were quite large (26). this phenomenon illustrates that loyal customers to islamic banks were quite large and new customers also increased. the reasons for which respondents chose islamic bank have been dominated by compliance with sharia (36), followed by usury avoidance (17) while the other reasons were distributed evenly in less significant numbers. most respondents (75) are associated with islamic banks to save money. other activities such as deposits and current accounts is very small (1), and the rest (24) to get loan (24). there were 36 respondents of this study who were only dealing with islamic banks; the rest (47) accessed the services of islamic bank as well as conventional bank. the dominance of dual customers has reflected the limited services and types of products that islamic banks offere. the respondents said that they still use conventional banks for salary and scholarships transfer and due to more complete facilities provided by conventional banks when compared with islamic banks. brand loyalty customer loyalty of islamic banks 17 brand loyalty consists of five levels: switcher, habitual buyer, satisfied buyer, liking-the-brand buyer, and committed buyer. the measurement of brand loyalty used a reference table in the form of loyalty scale ranges based on the respondents’ average responses so that loyalty levels were positioned in the scale range (interval). table 4.26 shows the scale range of brand loyalty. table 1 scale range of brand loyalty interval category 1.00 – 1.80 very small 1.81 – 2.60 small 2.61 – 3.40 sufficient 3.41 – 4.20 high 4.21 – 5.00 very high the result of the calculation of the bank's brand loyalty indicates that the switchers are at a sufficient level, reflecting that teh number of islamic banking customers who have a habit of switching to another bank is still quite large. the customers have a high sensitivity to switch to other banks for the reson of price benefit. in such circumstances, islamic banks should work hard to be able to increase the level of switcher to higher level of loyalty. table 2 comparison of average values of loyalty levels of islamic banks bank switcher habitual buyer satisfed buyer liking the brand committed buyer bank muamalat 3.18 1.91 3.60 3.75 3.78 bank syariah mandiri 3.92 1.83 3.42 3.50 2.83 bri syariah 3.50 3.50 3.50 4.00 2.00 bni syariah 2.57 1.86 3.57 3.71 3.29 3.2925 2.275 3.5225 3.74 2.975 habitual buyers are small in scale (score of 2.275). buyers who are at this level are those who are satisfied with the products, or at least they do not experience disappointment, so they do not switch to another brand. this shows that the consumers of islamic banks who are satisfied and do not switch to another bank are still small. consumers belonging to the satisfied buyers, defined as those who are satisfied with the transition costs are at a high scale (3.5225). consumers at this stage feel satisfied, but they have to bear the costs of transition, including time, money, and risk in making efforts to switch to other brands. these customers are usually referred to as loyal customers who feel the presence of a sacrifice if they turn to other brands. so consumers at this stage it is still possible to switch when a competitor offers a lower cost of transition. this condition is very likely to happen upon the very high degree of competition. however, liking-the-brand customers are in a high scale (3.74). their choice of a brand is based on an association, such as symbol of series of experiences in using the product or high quality impression. this illustrates that the number of liking-the-brand consumers have been significant. customer loyalty of islamic banks 18 consumers who take pride in using islamic banks are still in suffcient scale (2.975). therefore, there have not been a lot of consumers who actualize brand loyalty by recommending and promoting the brand to other people; the islamic banks, therefore, still have to foster promotional efforts. 5. conclusion and recommendation the highest brand loyalty to islamic banks has been at the level of satisfied buyers and liking the brand, indicating that consumer loyalty to the islamic banks has not been perfect. loyalty needs to be improved towards the committed buyer. overall, respondents who have reached the level of committed buyer were limited, so that the islamic banking industry should continue to foster public awareness of islamic banks to use services through outreach programs and well-managed and sustainable promotion. although in the sufficient category, consumers being classified as switcher are still quite large in number, so it needs special attention in order to retain them not to move to other banks. references aaker, d. (1996). measuring brand equity across products and markets. california management review, 38, 102-20. antonio, m.s. (1999). bank syari’ah: wacana ulama dan cendekiawan. bank indonesia dan tazkia institue. jakarta: stei tazkia. bank indonesia dan cbr universitas andalas. (2006). identifikasi faktor penentu keputusan konsumen dalam memilih jasa perbankan antara bank syari’ah dengan bank konvensional di wilayah sumatera barat. jakarta: bank indonesia. bank indonesia dan lp institut pertanian bogor. (2000). potensi, sikap dan perilaku masyarakat terhadap bank syari’ah di wilayah jawa barat. bogor: lembaga penelitian ipb. bank indonesia dan pusat penelitian kajian pembangunan lembaga penelitian universitas diponegoro semarang. (2000). penelitian potensi, preferensi dan perilaku masyarakat terhadap bank syari’ah di wilayah jawa tengah dan daerah istimewa yogyakarta. jakarta: bank indonesia. direktorat penelitian dan pengaturan perbankan bank indonesia. (2000). potensi, preferensi dan perilaku masyarakat terhadap bank syari’ah di pulau jawa. jakarta: bank indonesia. karim business consulting. (2005). islamic banking consumer behaviour in indonesia: a qualitative approach. jakarta: kbc. ratnawati, a., & mursid, mc. (2011). potensi dan strategi pengembangan bank syari’ah di indonesia: kajian produk syari’ah dari segi fiqih mu’amalat. jurnal hukum islam, 9(2), desember 2011, 255. saeed, a. (1996). islamic banking and interest: a study of prohibition of riba and its contemporary interpretation. leiden: ej brill undang-undang no. 10 tahun 1998 tentang perbankan. 2000. jakarta: bank indonesia. customer loyalty of islamic banks 19 wijaya, a. (2006). analisis segmen pasar dan perilaku nasabah terhadap bank syari’ah di wilayah yogyakarta dan implikasi pemasarannya. tesis tidak diterbitkan. bogor: manajemen dan bisnis institut pertanian bogor. reduction of food commodities contributor inflation on household welfare changes in the province of aceh 44 10 reduction of food commodities contributor inflation on household welfare changes in the province of aceh yasrizal 1*, ishak hasan2, and yusnaidi3 1,3 teuku umar university, meulaboh, indonesia 2 syiah kuala university, banda aceh, indonesia abstract the relationship of inflation and poverty can be seen from the contribution of the commodity contributor poverty. increases in the prices of commodities contributor to poverty led to declining real incomes and loss of income(incomeloss)households, causing poverty. commodities contributor to poverty is dominated by food commodities. rice and filter cigarettes are commodities contributor to poverty in aceh most dominant. model aids is a development of the engel curve and marshall equations derived from the theory of maximization of satisfaction. these models use a proportion of household expenditure on a commodity selected to represent variable demand. this research is empirical study. the data used are primary and secondary data obtained from field research and literature. research will be located in banda aceh and aceh barat. using the model of demand is almost ideal or model of aids will be seen household behavior in response to changes in commodity prices contributor of poverty. from these observations, the inflation rate of food commodities greatly affect the welfare of the people of aceh province, both for household banda aceh and meulaboh. inflation of food commodities had a huge influence to reduce household welfare in banda aceh. furthermore, the majority of households meulaboh work in agriculture and fisheries. so it can meet its own needs and also be produksen. many factors substitutes (goods substitution) and cultural factors affecting the level of price elasticity of the goods themselves for food commodities, changes in the elasticity of greater food in banda aceh than the district of meulaboh. keywords: elasticity, food commodities contributor to poverty, inflation, model of aids 1. introduction in the context regional economy, poverty is a problem often encountered in the process of economic development of a region. characteristics and differences in economic resources of a region causing poverty rates also vary between regions. an area that has abundant natural resources, the human resources that support can attain a high level of economic growth and result in low levels of poverty. in contrast areas that have limited economic resources is identical with the relatively slow economic growth and high poverty rates. * corresponding author. email address: yasrizal@utu.ac.id mailto:yasrizal@utu.ac.id afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 45 the poverty level of a country or region can be measured by per capita income of its people. household spending may be an appropriate approach to see the magnitude of per capita income of the people. based on this concept, the poor are people who have an average monthly per capita expenditure below the poverty line. the poverty rate will increase, especially when there is inflation, the rising prices of goods / services resulting in lower real income of society (bps 2014). judging from the comparison between regions, aceh is one of the provinces that have a low level of welfare, it can be seen from the poverty rate is high enough. poverty in aceh prevalent in rural areas, seen from the percentage of poverty in rural than in urban areas. in table 1 shows that poverty levels are well above the national average. table 1 poverty aceh province and the national year 2011-2016 (in percent) year aceh proverty lever national proverty lever urban rural total total 2012 14,65 23,54 20,98 13,33 2013 13,69 21,87 19,57 12,36 march 2014 13,07 21,97 19,46 11,96 september 2014 12,47 20,97 18,58 11,66 march 2015 11,59 19,96 17,60 11,37 september 2015 11,55 20,1 17,72 11,47 mamarch 2016 18.05 source: bps 2017 poverty situation has an impact on the economy of aceh, given aceh still has a dependency on other regions in compliance with food. in september 2015 and march 2016 an increase in poverty, it is in line with the policy of withdrawal of fuel subsidies and fuel price hike by the government household. calledpolicy administered price is leading to increased inflation in various commodities and lead to increased poverty, especially in rural households. there is a close relationship between inflation and poverty. according to wood etal.(2012), inflation in food would reduce economic welfare of lowincome households in both urban and rural areas, where the percentage of household expenditure on food will increase. the price increase will cause a loss of income (income loss) in the household. in line with this, skoufias etal.(2011) found an increase in prices will have a direct impact on the increase in poverty. the relationship of inflation and poverty can be seen from the contribution of the commodity contributor poverty. commodities contributor to poverty is a household commodity staples consumptive. increases in the prices of commodities contributor to poverty led to declining real incomes and loss of income(incomeloss)households, causing poverty. commodities contributor to poverty is dominated by food commodities. based on data from the central statistics bandan aceh province in 2017 contained in table 2. reduction of food commodities contributor inflation on household welfare changes in the province of aceh 46 table 2 commodity contributor to poverty timeframe of 2015 to 2016 in aceh province group komod itas comodity year 2015 year 2016 urban perdesa an perkota an rural total food rice 32,16 40,74 35,81 39,92 cigarettes kretek 12,99 11,39 9,81 12,52 filter tuna/tongkol 7,49 5,85 7,18 5,95 sugar 4,63 5,19 5,06 4,86 source : bps 2013 rice is a commodity contributor to poverty in aceh most dominant. rice is the cause of poverty in urban areas amounted to 32.16%, whereas in rural areas accounted for 40.74% rice in poverty. other commodities accounted for poverty is the dominant filter cigarettes, where cigarettes cause poverty by 12.99% in urban areas and amounted to 11.39% in rural areas. policies in tackling the problem greatly influenced by the expectations and behavior of households. households are assumed to always think rationally. when the government is planning to create a new policy, the policy has been anticipated household long before the policy is carried out. as a result of that policy bias as a form of time inconsistency. micro approach is to study the behavior of households deeper so it can be the root of economic problems that exist. the model uses micro-economic approach in an effort to see the economic welfare of households which are developed by deaton and muellbauer (1980), known as the model of aids (almost ideal demand system). these models use a proportion of household expenditure on a commodity selected to represent variable demand. the advantages of this model is able to see the behavior of households in response to changes in prices and other goods at the same price, so that it can be seen the effect of price elasticity and shape of the goods themselves and the price of other goods. the elasticity can be an indicator of changes in household welfare. this model is consistent with the theory of demand as there are restrictions that can be incorporated into the model and can be used to test (pusposari, 2012). based on the above, further researchers wanted to see how the level of economic welfare of households in terms of household demand for commodities contributor to poverty. using the model of demand is almost ideal or model of aids will be seen household behavior in response to changes in commodity prices contributor of poverty. as a control variable, in this study will be also the elasticity of socio-demographic variables, including the number of family members and the level of education. this study aims to look at changes in household welfare in the province of aceh as seen from the coefficients of each variable, namely food commodities contributor to poverty, price elasticity and income elasticity, and elasticity of sociodemographic variables. changes in the value of the elasticity coefficients and can looks at how changes in household welfare level due to rising commodity prices afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 47 contributor to poverty and changes in other variables included in the model system of commodity demand contributor to poverty. 2. literature review demand theory and model almost ideal demand system (aids) theory to explain the nature of the demand for a commodity buyer demand (goods and services) and also describes the relationship between the amount requested and the price as well as the formation of the demand curve. the proportion of expenditure as a proxy of demand developed by deaton and muelbauer (1980), known as model almost ideal demand system (aids). this model develops a demand function to include revenue and prices together. demand for commodities is the expenditure share of commodities that are examined in the model of the total expenditure of all commodities in the system. according pusposari (2012), the advantages of this model is the inclusion of other variables that could represent actual household conditions, such as sociodemographic variables, among others; education level, household size, income class, and others. demand price elasticity and welfare size relationship between inflation, income and well-being can be seen from the opinions skoufias et.al.(2011), namely; inflation would have a direct impact on the increase in poverty. in the short term, rising prices would be a serious problem in which the poor will be more spending money to buy food. the increase in prices will reduce real incomes so that they get poorer. on the other hand, manufacturers do not have the time to increase their production in response to price changes. in the long term rise in prices will reduce the welfare of middleclass households. price elasticity of demand (price elastisity of demand) is an indicator that measures consumer welfare, that is how big the demand changed as prices change. measurements price elasticity of demand by looking at the percentage change in the number of requests divided by the percentage change in price. the income elasticity is a measure of the magnitude of response to the demand of goods to changes in consumer income, which is calculated as the percentage change in the number of requests divided by the percentage change in revenue (curley etal.,2005) inflation and commodities contributor to poverty inflation is an increase in prices of goods in general and on -menerus in certain periods. inflation can be generally classified into two types, namely demand-pull inflation (due to demand-pull inflation) and cost-push inflation (inflation due to cost-push). to calculate the amount of inflation usually base the calculation is the consumer price index (cpi). there are two patterns for the calculation of inflation in indonesia, first, the calculation of inflation group of seven types of expenditure, namely; foodstuffs, processed foods, beverages, and tobacco, housing, clothing, health, education and sports, and transportation and communication. commodities contributor to poverty fall into seven groups of these expenses. in fact, there is a close relationship, in which the commodity contributor to poverty is also included in the commodities contributor to inflation. reduction of food commodities contributor inflation on household welfare changes in the province of aceh 48 3. the research methods modelanalysis modelalmost ideal demand system (aids) commodities contributor to poverty in this study are commodities that are causing the highest poverty. these commodities consists of six commodities, among others, are: rice, cigarettes / tobacco, sugar and other commodities home supplies. by using the stone price index then the equation becomes linear and easy to estimate. common models are then modified by social demographic variables such as household size, and education level. the following models of aids were used in this study. (1) where: wi : share expenditure to total expenditure commodity i, j i = j : 1 , 2 ... 6 (6 commodity contributor to poverty) log pj : the price of commodity j (where j = 1,2..7) log (x/p*) : log total income in deflation with the index log stone family member numbers family household i µi : error term. model two step heckman problem selectivity bias occurs because there are sampled households do not consume one particular commodities studied, for example, there are households that do not take up smoking. model to solve the problem ismodel of two-stepestimation of heckman, ie adding independent variable imr(inversemillsratio)on the main model. imr value obtained byregression logistic to estimate the odds of households to consume each commodity (pusposari, 2012). the first phase, regressed withmodels, logistic then the results will be obtained estimation value of imr. (2) where: zi : opportunities consumption, 0 = do not consume and 1 = consume calculation elasticity for welfare viewed from the estimation of the aids demand model, will then be used to calculate the elasticity. this elasticity calculations using the proportion of spending(budgetshare)the average of the i-th commodity groups. the following calculation formula of elasticity based on the estimation model of aids (seftarita etal.,2013): afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 49 1. the price elasticity itself: eii = 1 (𝛾𝑖𝑖− 𝛽𝑖,𝑤𝑖) 𝑤𝑖 2. price elasticity cross: eij = (𝛾𝑖𝑗− 𝛽𝑖,𝑤𝑗) 𝑤𝑖 3. income elasticity: eiy = 𝛽𝑖 𝑤𝑖 + 1 4. elasticity social demographics: eik = 𝜕𝑖 𝑤𝑖 4. results and discussion table 3 shows household expenditure on basic commodities of food and non-food. pengheluaran basic commodities is highest in households meulaboh. the amount of spending on rice would reduce spending on other basic commodities. this condition is very different when compared with households banda aceh, where the expenditure is spread evenly between expenditure of food and non-food expenditures. spending on education and health is low, not only in meulaboh but also in household banda aceh. this indicates that the level of welfare is still low in the province. table 3 commodity contributor to inflation in aceh (banda aceh, meulaboh) group commodity expenditure part meulaboh banda aceh rice tuna cigarette electric lpg education health services 0,420 0,062 0,149 0,190 0,064 0,115 0,016 0,276 0,072 0,137 0,201 0,109 0,201 0,021 welfare shift commonly seen on demand food commodities, the value of elasticity for households banda aceh higher relative to households meulaboh. this suggests that food inflation has a major influence on the decline in household welfare for banda aceh. this condition is mainly caused by several factors, first: aceh village is an area of the highest producing agricultural and fishery commodities, so that households meulaboh can meet their basic food needs at reasonable prices or even that they can produce their own food needs. second: there are a lot of commodity substitution in the market, especially for commodities tuna. the third: for the cigarette commodities, consumers in households meulaboh higher than households banda aceh. culture coffee shop and smoke in smoking households meulaboh meulaboh own-elasticty lead to a lower price than cigarettes own-price elasticity of domestic banda aceh. this indicates that the price of cigarettes does not have a big impact on demand for cigarettes in the meulaboh area. reduction of food commodities contributor inflation on household welfare changes in the province of aceh 50 table 4 elasticity komditas food (by marshallian) comodity region elastisity rice meulaboh -0.125 banda aceh -0.608 tuna meulaboh -0,945 * banda aceh -0.999 * filter kretek cigarettes meulaboh -0,974 banda aceh -0.710 *) significance on the validity of the 95 per cent table 4 indicates a shift in the price elasticity of the goods themselves that reflects changes in the level of household welfare in aceh due to price changes in food inflation. high inflation in the month in march 2017 led to a decrease in welfare households meulaboh and banda aceh. this condition is seen from the increased value of goods own price elasticity for each food commodity prices. demand tuna and cigarettes increased to elastic. generally, this condition indicates that there is an increase in household wealth due to a drop in inflation. in july inflation rises again and the highest inflation rate during the study period. july inflation due to the increase in the value of the price elasticity of the goods themselves resulted terhapad lowering household wealth in the province of aceh figure 1 change requests rice price elasticity between march and july 2017 -0.832 -0.608 band a -0.45 -0.353 meul aboh -0.253 -0.125 juli juni mei -0.012 0.003 -0.037 maret -0.1 -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8 afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 51 figure 2 changes in demand price elasticity tuna: between march and july 2017 figures 1 and 2 show a shift from rice price elasticity. the elasticity value in banda aceh households is higher relative to households meulaboh. the elasticity is not shown to be significantly in statistical testing both in households meulaboh and banda aceh. this condition is caused by changes in household income is lower than the meulaboh banda aceh households, households meulaboh more responsive to the increase in food commodity prices. figure 3 shows the elasticity of tuna. inflation in march to may has led to a decrease in household welfare in the area of banda aceh, and it is higher than households meulaboh. this is demonstrated by the increase in own-price elasticity becomes elastic. but in may of household wealth in banda aceh were changed and it was higher than in households meulaboh. this is indicated by changes in the price elasticity of the goods themselves. in june the value of goods own price elasticity decreased both in the area of meulaboh and banda aceh. lowest inflation emerged during the study period and it makes household welfare for the better. in july 2017, an increase in inflation of food commodities led to a decrease in household welfare banda aceh and meulaboh. the elasticity in banda aceh households is higher than households meulaboh -1.4 -1.187 -1.2 -0.945 -0.995 -1 -0.6 -0.670 -0.8 banda -0.917 meul -0.4 juli juni mei april mar e -0.2 reduction of food commodities contributor inflation on household welfare changes in the province of aceh 52 figure 3 change requests price elasticity smoking between march and july 2017 for non commodity, a price elasticity alone in the household goods banda aceh is higher than households meulaboh. this indicates that the rise in price of cigarettes each year smoking causes a decrease in consumer welfare in households banda aceh and lower than households meulaboh. in addition, cigarette consumers in households meulaboh higher than households banda aceh. coffeehouse culture and a smoke in the meulaboh area also affected the value of the price elasticity of the goods themselves to cigarette commodities in households meulaboh. as we know, aceh is very popular with the culture of the coffee shop, which affect people's behavior more dominant coffee consumption 5. conclusions and suggestions conclusions from these observations, the inflation rate of food commodities greatly affect the welfare of the people of aceh province, both for household banda aceh and meulaboh. inflation of food commodities had a huge influence to reduce household welfare in banda aceh. furthermore, the majority of households meulaboh work in agriculture and fisheries. so it can meet its own needs and also be produksen. many factors substitutes (goods substitution) and cultural factors affecting the level of price elasticity of the goods themselves for food commodities, food elasticity greater change occurred in the banda aceh meulaboh compared with the district. in contrast, non-inflationary effect of food commodities more in the households meulaboh. differences in household income levels lead to meulaboh be very sensitive to a rise in inflation. suggestions there are a few key points bedasarkan findings of this study. first bank indonesia (bi) as a monetary authorization must control inflation, then the aceh government should take part in controlling inflation in aceh by enhancing the supply side through increased spending policies in the region to -1.405 -1.251 -1.133 banda aceh -0.974 -0.973 -0.71 meul aboh -0.488 juli juni mei april mar e -1 afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 53 engage in crop farming sector investment and non-food konoditi. increased production pangandapat controlling food inflation. aceh government should encourage the growth of agriculture and fisheries sectors to maintain the availability of production. the government should regulate the smooth distribution of each commodity for the vital needs of society, including lpg. because of the different prices between regions due to poor distribution. references bosch, a., & koch, s. f. (2009). inflation and the household: towards a measurement of the welfare costs of inflation. south african reserve bank working paper, 2, 1-52. curley, s., sudjana, r., herlambang, r. b., & sugiarto. (2005). microeconomics a comprehensive assessment. jakarta: pt gramedia pustaka utama. kahar, m. (2010). analysis of consumption of urban and rural and correlation with socioeconomic characteristics in banten. [thesis]. bogor: bogor agricultural university, 1-72. martin, w., ivanic, m., & zaman, h. (2012). estimating the short-run poverty impacts of the 2010-11 surge in food prices. world development, 40(11), 2302-2317. muellbauer, j., & deaton, a. (2008). an almost ideal demand system. journal of stor,70, 312-326. skoufias, e. (2003). is the calorie-income elasticity sensitive to price changes? evidence from indonesia. world development, 31(7), 1291-1307. pons, n. (2011). food and prices in india: impact of rising food prices on welfare, center de sciences humaines,1-33. pusposari, f. (2012). analysis of food consumption pattern communities in maluku province. [thesis]. depok: university of indonesia, 1-86. seftarita, c., shakir, a., nasir, m., & masbar, r. (2013). analysis of public consumption behavior of commodities contributor to inflation. bank indonesia and economics faculty unsyiah, 1-58. seftarita, c. (2014). macroeconomic policy and business cycles: theory and empirical study. banda aceh: syiah kuala university press. susenas. 2008-2012. consumption expenditure for the indonesian population per province. book 3, the central bureau of statistics. skou fi as, e., tiwari, s., & zaman, h. (2011). crises, food prices and the income elasticity of micronutrients: estimates from indonesia. world bank economic review. reduction of food commodities contributor inflation on household welfare changes in the province of aceh 54 tash, m. n. s., shahraki, j., & jangi, s. n. (2012). estimating the almost ideal demand system models for rural households in iran. international journal of academic research in business and social sciences, 2(8), 344355. www.bps.go.id. 2017. http://www.bps.go.id/ zakat impact on poverty and welfare of mustahik: a cibest model approach 1 zakat impact on poverty and welfare of mustahik: a cibest model approach1 irfan syauqi beik1* and caesar pratama2 1,2 bogor agricultural university, bogor, indonesia abstract this research aims to analyze the impact of productive zakat program in poverty alleviation of mustahik households, based on materially and spiritually aspects. primary data was used as the source of data through distributing administered questionnaires in four rural areas in bogor regency. 121 respondents had been interviewed. they were the recipients of masyarakat mandiri program of dompet dhuafa amil institution. cibest model which have been developed by beik dan arsyianti (2014) was used as the tool of analysis. cibest model comprising four indices is used as tool of analysis. these indices are welfare index, material poverty index, spiritual poverty index and absolute poverty index. it is found that the presence of zakat utilization program is able to increase welfare index of the mustahik by 147.14 percent. the material poverty index, spiritual poverty index and absolute poverty index can also be reduced by 49.6 percent 1.6 and 12.3 percent, respectively. meanwhile, welfare index increase by 63.7 percent. in conclusion, productive zakat program give positive impact to the mustahik household life. keywords: cibest model, islamic poverty index, poverty, productive-based zakat program 1. introduction background poverty is still a multidimensional problem in this world, especially for developing country like indonesia. regulations and strategies have been established in order to reduce the poverty rate. however, the target of united nation as mentioned in 2000 summit, failed to be achieved in 2015. economy crisis was blamed as one of the cause, including 2008 crisis. the effect has reached the growth of economy which was decreasing, and a trade-off between the growth and the distribution of economy (beik, 2013). * corresponding author. email address: irfan_beik@ipb.ac.id;qibeiktop@gmail.com 1 earlier version of this paper has been presented in the 3rd islamic economics and finance forum (forum riset ekonomi dan keuangan syariah iii) organized by otoritas jasa keuangan (ojk), dpp ikatan ahli ekonomi islam (iaei) and faculty of economics and business, university of indonesia, april 28-29, 2015. mailto:irfan_beik@ipb.ac.id zakat impact on poverty and welfare of mustahik: a cibest model approach 2 figure 1 the amount and percentage of poverty in indonesia, 2003-2013 source : statistic indonesia (2015) we can say, from figure 1, that poverty in indonesia is decreasing, except in 2005-2006, there was a slight increasing in poverty from 35.10 million people to 39.05 million. a minor increasing also happened in march 2013 to september 2013 when the poverty increased from 28.07 million people to 28.55 million. according to the millennium development goals (mdgs) which targeted poverty reduction up to 7.5 percent from the total population, even though the figure is decreasing, the global target still far away to be achieved. this is due to the poverty rate in indonesia that is still around 11 percent of the total population. therefore, a new approach for reducing poverty is needed. ishaq (2002) stated that one of the reason why the problem is still occurred until now is because countries and poverty alleviation-related organizations are neglecting the spiritual values, believe, and local culture. economic regulations, so far, are established based on conventional economic framework which ignores spiritual values (beik 2013). in islam, to this extent, zakat has a crucial role in the economy. rasulullah stated that allah has obliged the rich muslim to pay zakat, so no one will suffer from hunger and lack of clothing unless the rich among us are bakhil (parsimonious) (narrated by imam thabrani). the hadith indicates that zakat has strategic role as well as the optimum instrument to reduce poverty and income gap. indonesia, as the biggest muslim populated country in the world, should integrate zakat, infak, wakaf in its country’s development program. actually, indonesia already has a regulation in managing zakat funds. based on the act number 23 year 2011 about zakat management, the national board of zakat (baznas) takes the responsibility and authority to coordinate all baznas in every province, city/regency, as well as all formal amil institutions (laz) launched by society in all over indonesia. these amil institutions also operate in every province and city/regency in indonesia. 0 5 10 15 20 25 30 35 40 45 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 m a r1 2 s e p -1 2 m a r1 3 s e p -1 3 poverty in percentage (%) poverty in figure (million) zakat impact on poverty and welfare of mustahik: a cibest model approach 3 a comprehensive and holistic standard of poverty needs to include spiritual aspect parallel with material aspect. so far, prevailing standards focus only on material part of poverty. for instance, the central board of statistic (bps) has a physical indicator approach in determining poverty line. the approach is based on food and non-food needs. for example, in september 2014, the poverty line according to bps is rp 312,328.00/capita/month. individual whose income is equal to or less than this amount is considered as poor. the figure derived from food poverty line amounted rp 229,469.00/capita/month and non-food poverty line amounted rp 82,859.00/capita/month. based on the above conception, a research elaborating the effectiveness of zakat fund distribution by using not only material approach is highly needed. the research should also be based on spiritual perception. therefore, beik dan arsyianti (2014) developed cibest model which can be referred for any research elaborating poverty alleviation. this paper aims to assess the productive zakat fund distribution program done by dompet dhuafa amil institution based on cibest model. therefore, the research is objected to analyze mustahik households’ income transformation before and after receiving zakat fund, and to analyze the poverty and welfare condition of mustahik household before and after productive zakat program based on cibest model. 2. theoretical framework of cibest model the cibest2 model is a model developed by beik dan arsyianti (2014). the model is based on the holistic and comprehensive concept in examining poverty, which not only based on material aspect, but also spiritual facet. the concept is mainly based on quran and hadith and also ijtihad of ulama (islamic scholars) in defining basic needs of human, which according to hafidhuddin (2013) comprises the needs to perform worship; the needs on food, clothes and housing; and the needs to security and safety feeling. in this context, two fundamental basic needs are material basic needs and spiritual basic needs (quran surah (qs) 20: 118-120 and qs 106: 3-4). furthermore, household in the cibest model, is used as unit of analysis and divide the household into four possible situations with regard to their ability in fulfilling material and spiritual needs (beik and arsyianti, 2015). firstly, a household that is able to fulfill both material and spiritual needs completely. this is called as prosperous household, which live under hayatan thayyibah (welfare) as mentioned by allah swt in the qs 16: 97. secondly, a household that is able to fulfill spiritual needs only, while they are unable to fulfill material needs up to the minimum level. this household lives 2 cibest is an abbreviation of center of islamic business and economic studies, a research center based at institute of research and community services (lppm), bogor agricultural university, indonesia. cibest in the name of the model is attached as the appreciation to the center that accommodates poverty alleviation researches done by beik dan arsyianti (2014). zakat impact on poverty and welfare of mustahik: a cibest model approach 4 under material poverty. the qs 2: 155-156 state that allah will test some people with lack of wealth, lack of fruits and other material needs. however, they have strong spiritual condition, which allows them to always surrender themselves to allah and to maintain their patience and fortitude in the way of allah (beik and arsyianti, 2015). thirdly, a household that is able to fulfill only material needs. they suffer spiritual deficiency. this household basically lives under spiritual poverty. quranic verse, i.e. qs 6: 44, has described the presence of group of people who intentionally disobey allah’s rules. however, they are able to meet their material needs since they have excess of wealth and money. fourthly, a household that is not able to fulfill both material and spiritual needs. this household falls under absolute poverty as described by allah in the qs 20: 124. this is the weakest group in the society that should be given more attention in the development process of the country. based on this conception and typology of household, beik and arsyianti (2015) construct formula to compute welfare index, material poverty index, spiritual poverty index and absolute poverty index which are derived from cibest quadrant. this quadrant is based on the typology of household discussed above (vide figure 1). based on the figure 1, cibest quadrant is divided into four quadrants. a household that falls under the first quadrant is considered as materially and spiritually rich household. it is because the household can positively fulfill both material and spiritual needs. the second quadrant indicates the household that is materially poor and spiritually rich. the third quadrant portrays the materially rich and spiritually poor household, while the fourth one describes the materially and spiritually poor household (beik and arsyianti, 2015). figure 2: cibest quadrant source: beik dan arsyianti 2014 beik and arsyianti (2015) argue further that spiritual needs should be based on three groups of variable comprising worship, household environment and government policy. worship group consists of three variables, i.e. prayer, fasting and sharing (zakat and infaq), which are obligatory worship in the shariah zakat impact on poverty and welfare of mustahik: a cibest model approach 5 perspective. inability to fulfil these worships may reduce spiritual condition of the household and hence, may put them in the spiritual poverty. the inclusion of household environment and government policy is because these two variables have strong influence towards commitment of household members to perform their worship (ibadah) as well as associated with a sense of security and freedom in performing the worship (beik and arsyianti, 2015). specifically, table 1 provides the details and indicators of these spiritual needs. table 1 spiritual needs indicator variables likert scale poverty standard 1 2 3 4 5 prayer blocking others to pray against the concept of prayer performing obligatory prayer but not on regular basis always performing obligatory prayer but not in congregational prayer performing congregational prayer for obligatory one and perform recommended prayer average score for spiritually poor household is equal to 3 (sv = 3) fasting blocking others to undertake fasting against the concept of fasting not fully performing obligatory fasting performing only obligatory fasting performing obligatory fasting and recommendable fasting zakat and infak blocking others to pay zakat and infak against the concept of zakat and infak not paying infak at least once in a year paying zakat al-fitr and zakat al-maal paying zakat al-fitr, zakat almaal, and infak household environment forbid ibaadah against implementation of ibaadah consider ibaadah as private matter for household member support execution of ibaadah creating environment which obligates execution of ibaadah government policy environment forbid ibaadah against implementation of ibaadah consider ibaadah as private matter support execution of ibaadah creating environment which obligates execution of ibaadah source: beik and arsyianti (2015) 3. research methodology source of data questionnaires were distributed on february and march 2015 in four rural areas and three districts in bogor regency. they are babakan village, jampang village, jabon village, and kampung anyar village in jampang, ciseeng, and parung districts. those areas are targeted as the recipients of productive-based zakat program of dompet dhuafa, which is called masyarakat mandiri. population and sample population of this program is as much as 200 households. by using simple random sampling method, 121 households have been selected as respondents of this research. method of data analysis zakat impact on poverty and welfare of mustahik: a cibest model approach 6 application of cibest model according to beik and arsyianti (2016) requires five stages of calculation. those are: 1. determination of material poverty line and spiritual poverty line. material poverty line (symbolized by mv) is derived from the following formula: 𝑀𝑉 = ∑ 𝑃𝑖 𝑀𝑖𝑛𝑖=1 (1) whereby: mv = minimum material needs standard (in terms of rp or local currency) pi = price of goods and services i (in terms of rp or local currency) mi = minimum number of goods and services i needed this research in determining the value of mv uses bps standard of poverty line and modifies the standard. bogor regency poverty line used is rp 300,119.00/capita/month. since cibest model requires household as unit of analysis, this per capita poverty line should be transformed into household poverty line. it is done by multiplying the poverty line with average household member in bogor regency, respectively. according to bps (2014), the average household member in bogor regency is equal to 81641 322816 = 3.954 prior to the the program. it is derived from dividing total number of bogor regency population with total households in this area. after joining the program, average household member become 77331 330475 = 4.274. by multiplying it with the poverty line, the mv values can be calculated as follow: mv1 = rp 259 151 x 3.954 = rp 1.024.706,00/household/month mv2 = rp 300 119 x 4.274 = rp 1.282.708,00/household/month whereby: mv1 = modified bogor regency poverty line before joining productive zakat program mv2 = modified bogor regency poverty line after joining productive zakat program as for spiritual poverty line (symbolized by sv) it is equal to 3 (sv = 3). it has also been portrayed in the table 1. 2. calculation of spiritual score of the observed household prior to and after joining the productive-based zakat programs. general formula to compute spiritual score of the observed household is as below: ss = ∑ 𝑆𝐻𝑘 𝑁 𝑛 𝑘=1 (2) whereby: ss = average score of actual spiritual condition of all observed households sh = actual spiritual score of household k n = total number of observed households as for the value of sh, it is obtained by applying the following formula: zakat impact on poverty and welfare of mustahik: a cibest model approach 7 sh = ∑ 𝐻1+𝐻2+⋯+𝐻𝑛 𝑀𝐻 𝑛 𝑖=1 (3) whereby: sh = average score of actual spiritual condition of one household hi = actual spiritual score of household member i mh = total number of household members as for hi, its formula is as below: hi = 𝑉𝑝𝑖+𝑉𝑓𝑖+𝑉𝑧𝑖+𝑉ℎ𝑖+𝑉𝑔𝑖 5 (4) whereby: hi = actual spiritual score of household member i vpi = prayer score of household member i vfi = fasting score of household member i vzi = score of zakat and infak of household member i vhi = score of household environment based on perception of household member i vgi = score of government policy environment based on perception of household member i 3. calculation of actual income or expenditure of the observed households. this is important in order to determine whether their income or expenditure exceed the value of mv or not. through this stage it will be known whether the household is materially rich or poor. 4. grouped into cibest quadrant. after having the values of mv, sv, actual score of spiritual and real income or expenditure of the observed households, then each household is grouped into the cibest quadrant by using the combination of their spiritual and material scores (vide table 2). table 2 combination of mv and sv values results ≤ mv value >mv value >sv value materially poor and spiritually rich household (quadrant ii) materially and spiritually rich household (quadrant i) ≤ sv value materially and spiritually poor household (quadrant iv) materially rich and spiritually poor household (quadrant iii) 5. calculation of each quadrant in order to obtain the values of welfare index, material poverty index, spiritual poverty index and absolute poverty index, respectively. the formula of those indices is as below: n w w  (5) whereby: w = welfare index (0≤w≤1) w = the number of spiritually and materially rich households zakat impact on poverty and welfare of mustahik: a cibest model approach 8 n = the total number of observed households n mp pm  (6) whereby: pm = material poverty index (0≤pm≤1) mp = the number of materially poor and spiritually rich households n = the total number of observed households n sp ps  (7) whereby: ps = spiritual poverty index 0≤ps≤1 sp = the number of spiritually poor and materially rich households n = the total number of observed households n ap pa  (8) whereby: pa = absolute poverty index (0≤pa≤1) ap = the number of spiritually and materially poor households n = the total number of observed households 4. results and discussion zakat impact on income improvement of mustahik household data is tested using paired t-statistic test. the result shows significant p-value of 0.000. since it is less than 5 percent, we reject h0. this indicates that the income level of mustahik household before and after joining productive zakat program is different at a confidence level of 95 percent. the test also shows average income level before and after mustahik household joining the program. the average income level before joining the program is rp 874,000.00/household/month which is below the poverty line. after joining the program, the average income level becomes rp 2,160,000.00/household/month, which is above the poverty line. therefore, this program is statistically proved to have a significant impact on improving income level of mustahik household. the income level is increasing 147.14 percent. cibest model analysis to analyze the impact of productive-based zakat programs of dompet dhuafa, table 3 below provides the spiritual score of the observed households. table 3 average spiritual score of the mustahik households variable average spiritual score pre-zakat program (ss1) post-zakat program (ss2) shalat (prayer) 3.363 3.950 zakat impact on poverty and welfare of mustahik: a cibest model approach 9 fasting 3.942 4.504 zakat and infaq 3.404 4.685 household environment 3.404 4.322 government policy 3.826 4.702 average spiritual score of total observed households 3.588 4.433 source: primary data (processed) furthermore, since the income or expenditure of the observed households is known, each household is grouped to cibest quadrant by combining with their spiritual score. the following figure 3 portrays the results. figure 3 grouping of mustahik based on cibest quadrant (pre and post zakat program) source: primary data (processed) ( + ) ( ) spiritua l poverty line ( ) ( + ) material poverty line material poverty before : 97 households after : 37 households welfare before : 3 households after : 80 households absolute poverty before : 15 households after : 0 households spiritual poverty before : 6 households after : 4 households zakat impact on poverty and welfare of mustahik: a cibest model approach 10 from the table 3 it is found that basically the mustahik of dompet dhuafa spiritual score is good, i.e. 3.588, which is more than 3.00. meanwhile, from figure 3, it is indicated that majority of the households is in the second quadrant (97 households) prior to productive-based zakat programs and only 3 households are in first quadrant. however, there are 6 households who are in the fourth quadrant and 15 in the third quadrant before joining the program. after joining the program, mustahik household in the first quadrant become 80 households (increase 2566 percent). the spiritual score is also increasing. it becomes 4.433, which means that dompet dhuafa supervision in religious activities of the mustahik is successful. finally, the values of all indices can be calculated. the results can be found in the table 4 below. table 4 cibest index: pre and post zakat program cibest index pre zakat program post zakat program percentage change material poverty index 0,801 0,305 49,6 spiritual poverty index 0,049 0,033 1,6 absolute poverty index 0,123 0 12,3 welfare index 0,024 0,661 63,7 source: primary data (processed) from table 4, the figure indicates that material poverty index is decreasing. the situation happened due to zakat fund distribution program and supervision offered in masyarakat mandiri dompet dhuafa. the mustahik feel that they are being helpful by this program, so they can improve their skill after joining masyarakat mandiri program. the spiritual poverty index of mustahik is 0.049 before joining the program. after joining the program, the index is decreasing to 0.033 (1.6 percent). the result indicates that spiritual supervisory program done by dompet dhuafa is effective. before joining the program, absolute poverty index of the mustahik is 0.123. after the program, the index becomes zero (0). the result indicates that none of the mustahik still in the absolute poverty condition after having the supervisory program given by dompet dhuafa. furthermore, welfare index of the mustahik is 0.024 before joining the program, and after participating in the program, the index is increasing to 0.661 or equal to 63.7 percent. the figure indicates that after being given supervision by dompet dhuafa, 63.7 percent of them have been able to fulfil material and spiritual needs. zakat impact on poverty and welfare of mustahik: a cibest model approach 11 5. conclusion and recommendation according to the result, productive zakat fund program with supervision given by dompet dhuafa can improve mustahik households’ income. the program also successfully brings the mustahik out of poverty. in average, mustahik households’ income increases by 147.14 percent after participating in the program. their income increases from rp 874,000.00/month to rp 2,160,000.00/month. the program also successfully decreases material, spiritual, and absolute poverty indices by 49.6 percent, 1.6 percent, and 12.3 percent, respectively. meanwhile, welfare index increases by 63.7 percent. therefore, productive-based zakat fund distribution program can decrease material and spiritual poverty of the mustahik. therefore, in order to alleviate poverty, government and the society should integrate prevailing poverty alleviation programs. for islamic social finance institutions, spiritual aspect of the mustahik must be taken into consideration in addition to material aspect. references alimoeso, s. 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(2010). analisis dampak distribusi zakat terhadap tingkat kemiskinan dan kesenjangan pendapatan (studi kasus pendayagunaan zakat oleh bazda lampung selatan. [undergraduate thesis]. bogor (id): institut pertanian bogor. yogatama, ra. (2010). variabel-variabel yang mempengaruhi kepatuhan menunaikan zakat. [journal article manuscript]. yogyakarta (id). http://www.tnp2k.go.id/id/kebijakan-%20%20%20percepatan/pendahuluan/ http://www.tnp2k.go.id/id/kebijakan-%20%20%20percepatan/pendahuluan/ http://www.tnp2k.go.id/id/program/sekilas/ efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) di jawa timur periode 2014-2017. analisis dengan metode dea (crs,vrs, dan skala) 15 efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) di jawa timur periode 2014-2017. analisis dengan metode dea (crs,vrs, dan skala) aziza hanifa khairunnisa ¹ ⃰ 2and nisful laila² 1,2 universitas airlangga, surabaya, indonesia abstract this research aimed to find out the efficiency level of financing of islamic rural bak in east java. input variables used were the rights of third party on profit sharing and ppap cost, while output variable used was main operational income. method used to measure efficiency level was data envelopment analysis (dea) with the assumption of variable return to scale and the input and output orientations. the measurement of efficiency value with vrs assumption resulted three efficiency values, which are technical efficiency (vrs), economic efficiency (crs), and scale efficiency. then, these three values were analyzed further to get to know the source of inefficiency of financing in inefficient islamic rural bank. keywords: bprs, data envelopment analysis (dea)efficiency, financing 1. pendahuluan bank pembiayaan rakyat syariah merupakan bagian dari sistem perbankan syariah. keberadaan bprs didasari oleh undang-undang yang telah dibuat mengenai perbankan syariah. keberadaan bprs secara khusus dijabarkan dalam bentuk surat keputusan direksi bank indonesia no. 32/36/kep/dir, tertanggal 12 mei 1999 dan surat edaran bank indonesia no. 32/4/kppb tanggal 12 mei 1999 tentang bank perkreditan rakyat berdasarkan prinsip syariah keberadaan bprs dimaksudkan untuk dapat memberikan layanan perbankan secara cepat, mudah dan sederhana kepada masyarakat khususnya pengusaha menengah, kecil dan mikro baik di perdesaan maupun perkotaan. tujuan didirikannya bprs adala huntuk memfasilitasi masyarakat yang tidak memiliki akses ke bank umum untuk memperoleh pembiayaan serta didasari oleh prinsip tolong menolong dalam kebaikan, sebagai mana dinyatakan dalam surat al-maidah ayat 2. “...wata’āwanū ‘ala al-birriwa at-taqwā, walāta’āwanū ‘ala al-itsmiwaal udwāni. wattaqullaha, innallahasyadidul ‘iqobi.” * corresponding author. email address: aziza.hanifa.khairun-2014@feb.unair.ac.id afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 16 “...dan tolong-menolonglah kamu dalam (mengerjakan) kebajikan dan takwa, dan jangan tolong-menolong dalam berbuat dosa dan pelanggaran. dan bertakwalah kamu kepada allah, sesungguhnya allah amat berat siksa-nya.” (departemen agama, 2005 : 142). analisis mengenai efisiensi menjadi sangat penting karena penghimpunan dan penyaluran pembiayaan yang ekspansif tanpa memperhatikan faktor efisiensi akan berpengaruh terhadap profitabilitas bank yang bersangkutan. efisiensi merupakan salah satu tolak ukur yang dapat dilihat untuk mengukur kinerja suatu bprs. (muharam dan purvitasari, 2007:15). efisiensi secara umum menurut martic et.al (2009:37), adalah kemampuan suatu unit bisnis untuk mencapai target bisnis dengan menggunakan seminimal mungkin sumber daya yang ada. konsep efisiensi merupakan salah satu prinsip yang sangat penting dalam bisnis. dari sudut pandang ekonomi islam, setiap muslim dalam menjalankan bisnisnya haruslah memiliki keinginan yang kuat untuk meningkatkan efisiensi, yaitu dengan mengurangi biaya demi kebaikan konsumennya (affandi (2002) dalam kamaruddin, et. al 2008:33). metode pengukuran efisiensi dapat dikelompokkan atas dua kategori utama yaitu metode parametrik dan non-parametrik. metode yang umum digunakan adalah data envelopment analysis (dea) karena merupakan metode yang banyak digunakan dan paling fleksibel untuk digunakan. cooper,et.al (2011: 2) dalam perhitungannya dapat dilakukan dengan 2 asumsi, yaitu asumsi constan return to scale (csr) dan variable return to scale (vrs). model constan return to scale adalah model yang mengasumsikan bahwa bprs telah beroperasi pada skala optimalnya. sehingga, pengukuran tingkat efisiensi teknis yang dihasilkan merupakan overall technical efficiency (ote) yaitu, nilai efisensi yang berkaitan dengan kemampuan manajerial bank dalam mengelola input untuk menjadi output dan juga tingkat ukuran pembiayaannya. sedangkan model variable to scale adalah model yang mengasumsikan bahwa seluruh bank belum beroperasi pada skala optimalnya. sehingga pengukuran dengan asumsi vrs ini bertujuan untuk mengukur tingkat efisiensi teknis manajerial pembiayaan murni (pure technical efficiency) tanpa terbaurkan oleh skala ukuran pembiayaan bank. perbedaan atau gap pada nilai overall technical efficiency dan pure technical efficiency menggambarkan tingkat efisiensi skala pembiayaan (scale efficiency) suatu bank yang ditunjukkan dengan rasio overall technical efficiency (ote) terhadap pure technical efficiency (pte) . oleh karena itu pengukuran efisiensi skala pembiayaan (scale efficiency) pada bprs hanya bisa dilakukan dengan menerapkan dua pengukuran efisiensi yaitu model crs dan vrs pada saat yang sama. dengan analisis efisiensi bprs dengan metode dea, dapat diketahui input dan output yang menyebabkan ketidak efisienan pada pembiayaan di bprs. dengan latarbelakang yang telah dikemukakan diatas, penulis tertarik unutk melakukan penelitian dengan judul “analisis efisiensi pembiayaan bprs di jawa timur dengan menggunakan data envelopment analysis periode 20142017.” berdasarkan latar belakang diatas, maka rumusan masalah dari penelitian ini adalah bagaimana efisiensi pembiayaan pada bprs di jawa timur tahun 2014-2017. efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) di jawa timur periode 2014-2017. analisis dengan metode dea (crs,vrs, dan skala) 17 2. landasan teori menurut sudarsono (2007:83-84) status hukum bpr diakui pertama kali dalam pakto tanggal 27 oktober 1988, sebagai bagian dari paket kebijakan keuangan, moneter, dan perbankan, adapun tujuan yang dikehendaki dengan berdirinya bprs adalah: 1. meningkatkan kesejahteraan ekonomi umat islam, terutama masyarakat golongan ekonomi lemah yang ada umumnya berada di daerah pedesaan. 2. menambah lapangan kerja terutama di tingkat kecamatan, sehingga dapat mengurangi arus urbanisasi 3. membina semangat ukhuwah islamiyah melalui kegiatan ekonomi dalam rangka meningkatkan pendapatan per kapita menuju kualitas hidup yang memadai. kegiatan usaha yang dilakukan oleh bprs selain dari menghimpun dana adalah menyalurkan dana kepada masyarakat dalam bentuk pembiayaan bagi hasil berdasarkan akad mudharabah atau musyarakah, pembiayaan berdasarkan akad murabahah, salam, atau istishna’, pembiayaan berdasarkan akad qardh pembiayaan penyewaan barang bergerak atau tidak bergerak kepada nasabah berdasarkan akad ijarah atau sewa beli dalam bentuk ijarah muntahiya bittamlik dan pengambil alihan utang berdasarkan akad hawalah. bprs juga melakukan penempatan dana pada bank syariah lain dalam bentuk titipan berdasarkan akad wadi’ah atau investasi berdasarkan akad mudharabah dan/atau akad lain yang tidak bertentangan dengan prinsip syariah. bank pembiayaan rakyat syariah merupakan salah satu lembaga keuangan syariah yang beroperasi dengan prinsip bagi hasil serta mempunyai tujuan dalam meningkatkan kesejahteraan ekonomi umat islam, terutama ekonomi lemah. bank pembiayaan rakyat syariah harus dapat menyusun kebijakan pembiayaan yang sasaran utamanya adalah mencapai tingkat keuntungan tertentu dengan optimalisasi penyaluran pembiayaan ekonomi sektoral. pembagian pembiayaan menurut sektor ekonomi bisa digunakan sebagai bahan evaluasi bagi bank pembiayaan rakyat syariah untuk menentukan pembiayaan pada sektor ekonomi yang menjadi prioritas utama dapat memberikan kontribusi manfaat/penghasilan paling besar bagi pihak bank pembiayaan rakyat syariah. menurut muhammad (2004: 208) manfaat lain dari pembiayaan ekonomi sektoral bagi pihak bank pembiayaan rakyat syariah adalah adanya efisiensi pemakaian dana. dalam rangka melakukan efisiensi dana, bank pembiayaan rakyat syariah dapat mengambil keputusan dalam menentukan arah pemberian pembiayaan dengan cara menghindari proyekproyek usaha yang sudah jenuh. pengertian efisiensi secara umum merupakan perbandingan antara keluaran (output) dengan masukan (input). suatu perusahaan dapat dikatakan efisiensi yaitu apabila mampu mengelola input secara optimal untuk menghasilkan output yang maksimal. jika perusahaan tidak mampu mengelola input secara optimal yang berarti perusahaan kekurangan atau kelebihan input, maka perusahaan dikatakan tidak efisien sebab selain orientasi pada hasil, efisiens ijuga menekankan pada nilai guna (utility). berdasarkan pada penelitian yang dilakukan oleh jemric dan vujcic (2002) dan juga ascarya dan yumanita (2006) serta konsep pengukuruan rasio efisiensi pada bank, adapun variabel-variabel yang digunakan dalam penelitian ini afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 18 adalah: variabel input: (i) hak pihak ketiga atas bagi hasil; (ii) beban ppap, variabel output: (i) pendapatan operasional utama. 3. metode penelitian berdasarkan jenis data yang digunakan, maka pendekatan yang digunakan dalam penelitian ini adalah penelitian kuantitatif. berdasarkan rumusan masalah yang telah dikemukakan, maka dapat diidentifikasikan variabel-variabel dalam penelitian ini meliputi: a. variabel input: hak pihak ketiga atas bagihasil (i1) dan beban ppap (i2) b. variabel output: pendapatan operasional utama (o1) definisi operasional variabel variabel input 1. hak pihak ketiga atas bagi hasil hak pihak ketiga atas bagi hasil merupakan biaya yang telah dikeluarkan sebagai akibat dari penggunaan dana pihak ketiga untuk penempatan dana dalam bentuk pembiayaan pada bprs. 2. beban ppap terdiri dari beban dari penyisihan penghapusan aktiva produktif yang merupakan biaya ppap yang telah digunakan untuk menutupi kerugian aktiva produktif (bastian, indra dan suhardjono, 2006:). variabel output 1. pendapatan operasional utama pendapatan operasional utama dalam hal ini adalah pendapatan bagi hasil yaitu pendapatan yang didapat dari penempatan dana pada aktiva produktif yaitu pembiayaan. teknik analisis data variabel input dan output yang telah ditentukan sebelumnya dirumuskan sebagai berikut: (moussawi dan obeid,2011): max hk = ∑ 𝑢𝑟𝑦𝑟𝑗 𝑠 𝑟=1 ∑ 𝑣𝑖𝑥𝑖𝑗 𝑚 𝑖=1 …………….………(1) dimana: hk = nilai efisiensi pembiayaan uryrj = ouput terbobot vixij = input terbobot variabel input dan output yang telah ditentukan sebelumnya akan dianalisis akan dianalisis menggunakan model constan return to scale (crs) dan model variable return to scale (vrs) untuk mengetahui nilai efisiensi teknis dan efisiensi skala. 4. hasil dan pembahasan bank pembiayaan rakyat syariah (bprs) sebagai dmu dikatakan efisiensi secara relatif apabila nilainya sama dengan satu (nilai efisiensi = 1). sebaliknya, nilai efisiensi dmu yang kurang dari satu maka dianggap tidak efisien secara relatif. hasil perhitungan tingkat efisiensi memiliki rentang 0 hingga 1. perhitungan nilai efisiensi bprs dilakukan pada 17bprs selama periode 2014 hingga 2017.semua informasi variabel yang digunakan untuk efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) di jawa timur periode 2014-2017. analisis dengan metode dea (crs,vrs, dan skala) 19 mengukur efisiensi diambil berdasarkan laporan keuangan pada website resmi otoritas jasa keuangan (ojk) selama periode pengamatan tahun 2014 sampai dengan tahun 2017. pengukuran efisiensi bank pembiayaan rakyat syariah (bprs) pada penelitian ini menggunakan asumsi vrs (variable return to scale) dengan orientasi input. asumsi ini digunakan karena tidak semua bank pembiayaan rakyat syariah (bprs) (dmu) beroperasi pada skala yang optimal. orientasi inputdigunakan karena manajemen diasumsikan memiliki kontrol yang lebih terhadap input daripada output, artinya manajemen mampu mengurangi dan menambah input dengan mudah. berikut ini hasil efisiensi dengan asumsi vrs (variable return to scale) pada orientasi input. efisiensi secara vrs (variable return scale) hasil perhitungan efisiensi menggunakan metode dea yang berasumsikan vrs (variable return to scale) orientasi input, dapat dilihat pada gambar 1. tingkat efisiensi teknik (vrs) pada bprs tahun 2014-2017 cenderung mengalami fluktuasi. gambar 1 tersebut menggambarkan rata-rata pencapaian tingkat efisiensi teknik bprs setiap tahunnya. gambar 1 tren efisiensi teknik bprs 2014-2017 sumber: lampiran 2, data diolah kembali berdasarkan gambar 1, secara keseluruhan rata-rata nilai efisiensi teknik bprs belum efisien, sebab nilainya masih dibawah 100%. gambar 1 menggambarkan efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) pada tahun 2014 sebesar 94,9% kemudian mengalami peningkatan beberapa persen di tahun 2015 menjadi 96,653% lalu mengalami penurunan di tahun 2016 menjadi 91,426% dan meningkat kembali pada tahun 2017 menjadi 97,529%. jadi dapat disimpulkan bahwa bank pembiayaan rakyat syariah (bprs) dalam kurun waktu 4 tahun belum efisien dalam mengelola faktor input untuk menghasilkan output yang optimal. di bawah ini adalah efisiensi secara vrs yang dicapai oleh setiap bprs periode 2014-2017: tabel 1 hasil dea model vrs tahun 2014-2017 no. dmu vrs 2014 2015 2016 2017 1 bprs amanah 0,740 0,943 1 1 2 bprs bhakti 1 1 1 0,769 3 bprs jabal tsur 1 1 0,669 1 4 bprs annisa 1 1 1 1 5 bprs jabal nur 1 1 1 1 6 bprsummu 1 1 0,798 1 88.000 90.000 92.000 94.000 96.000 98.000 2014 2015 2016 2017 afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 20 7 bprs unawi barokah 1 1 0,287 0,835 8 bprs mandiri 0,713 0,680 0,788 1 9 bprs bumi rinjani 1 0,926 1 1 10 bprs situbondo 0,679 1 1 1 11 bprs rahma syariah 1 1 1 1 12 bprs asri madani 1 1 1 1 13 bprs madinah 1 1 1 1 14 bprs bumi rinjani prob. 1 1 1 1 15 bprs sarana 1 0,929 1 1 16 bprs al-mabrur 1 0,953 1 1 17 bprs daya artha 1 1 1 0,976 efisiensi secara crs (constant return to scale) pada perhitungan efisiensi dengan metode dea asumsi vrs (variable return to scale), hasil kedua yang diperoleh yaitu nilai efisiensi secara crs. efisiensi secara crs sering disebut dengan efisiensi secara ekonomi atau efisiensisecara keselurahan (gross efficiency atau overall technical efficiency). pada gambar 4.3, menunjukkan bahwa tingkat efisiensi ekonomi (crs) pada bprs tahun 2014-2017 cenderung mengalami fluktuasi. gambar dibawah menggambarkan rata-rata pencapaian tingkat efisiensi pembiayaan bprs setiap tahunnya. gambar 2 tren efisiensi ekonomi bprs 2014-2017 sumber: lampiran 2, data diolah kembali berdasarkan gambar 2, secara keseluruhan rata-rata nilai efisiensi ekonomi bprs adalah belum efisien, karena nilainya masih dibawah 100%. gambar 2 menggambarkan efisiensi bprs pada tahun 2014 sebesar 84,3%, kemudian mengalami peningkatan beberapa persen di tahun 2015 menjadi 86,77%, dan turun kembali di tahun 2016 menjadi 75,75%. lalu pada tahun 2017 mengalami peningkatan yang cukup besar menjadi 92,89%. jadi dapat disimpulkan bprs dalam kurun waktu 4 tahun dengan asumsi crs (semua perusahaan diasumsikan berada pada skala yang optimal) rata-rata belum efisien dalam manajerial pembiayaannya. efisiensi secara crs (efisiensi ekonomi) ini merupakan efisiensi kotor (gross efficiency) atau efisiensi secara keseluruhan (overall efficiency), yaitu gabungan dari efisiensi teknik (vrs) dengan mempertimbangkan efisiensi skala. skala ekonomi tidak dapat dicapai pada semua tingkatan skala produksi, sehingga tidak semua bprs mampu mencapai skala ekonomi yang optimal. di bawah ini adalah efisiensi secara crs yang dicapai oleh setiap bprs periode 2014-2017: 0 20 40 60 80 100 2014 2015 2016 2017 efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) di jawa timur periode 2014-2017. analisis dengan metode dea (crs,vrs, dan skala) 21 tabel 2 hasil dea model crs tahun 2014-2017 no. dmu crs 2014 2015 2016 2017 1 bprs amanah sejahtera 0,702 0,817 1 0,814 2 bprs bhakti haji 1 0,609 1 0,765 3 bprs jabal tsur 1 0,728 0,668 0,982 4 bprs annisa mukti 1 0,987 1 1 5 bprs jabal nur 1 0,876 0,985 0,750 6 bprs ummu 0,243 0,617 0,585 1 7 bprs unawi barokah 1 1 0,266 0,570 8 bprs mandiri mitra sukses 0,533 0,537 0,723 1 9 bprs bumi rinjani 0,954 0,907 1 1 10 bprs situbondo 0,645 1 1 1 11 bprs rahma syariah 0,957 1 0,642 1 12 bprs asri madani 0,987 1 0,987 0,991 13 bprs madinah 0,934 1 0,934 0,980 14 bprs bumi rinjani prob. 1 0,984 0,989 1 15 bprs sarana 1 0,861 1 1 16 bprs al mabrur 0,754 0,827 1 1 17 bprs daya artha 0,629 1 1 0,941 scale efficiency berdasarkan gambar 3, menunjukkan bahwa tingkat efisiensi skala pada bank pembiayaan rakyat syariah (bprs) tahun 2014-2017 mengalami peningkatan. pada tahun 2014 tingkat efisiensi skala pada bprs sebesar 88,9%. pada tahun 2015 tingkat efisiensi skala pada bprs sebesar 89,6%. pada tahun 2016 tingkat efisiensi skala pada bprs sebesar 94,8% dan terakhir pada tahun 2017 tingkat efisiensi skala pada bprs sebesar 95,7%. meskipun terus mengalami peningkatan, secara keseluruhan rata-rata nilai efisiensi skala bprs adalah belum efisien, karena nilainya masih dibawah 100%. gambar 3 tren efisiensi skala bprs 2014-2017 sumber: lampiran 2, data diolah kembali di bawah ini adalah efisiensi secara crs yang dicapai oleh setiap bprs periode 2014-2017 85.000 90.000 95.000 100.000 2014 2015 2016 2017 afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 22 tabel 3 hasil dea scale efficiency tahun 2014-2017 no. dmu skala 2014 2015 2016 2017 1 bprs amanah sejahtera 0,948 0,866 1 0,814 2 bprs bhakti haji 1 0,609 1 0,765 3 bprs jabal tsur 1 0,728 0,997 0,982 4 bprs annisa mukti 1 0,987 1 1 5 bprs jabal nur 1 0,876 0,985 0,750 6 bprs ummu 0,243 0,617 0,733 1 7 bprs unawi barokah 1 1 0,926 0,570 8 bprs mandiri mitra sukses 0,748 0,790 0,917 1 9 bprs bumi rinjani 0,954 0,980 1 1 10 bprs situbondo 0,951 1 1 1 11 bprs rahma syariah 0,957 1 0,643 1 12 bprs asri madani 0,987 1 0,987 0,991 13 bprs madinah 0,934 1 0,934 0,980 14 bprs bumi rinjani prob. 1 0,984 0,989 1 15 bprs sarana prima 1 0,927 1 1 16 bprs al mabrur 0,754 0,867 1 1 17 bprs daya artha 0,629 1 1 0,942 berdasarkan hasil penelitian dengan asumsi vrs, maka dapat disimpulkan bahwa kinerja bprs di jawa timur selama tahun 2014-2017 belum efisien, baik secara ekonomi (crs), teknis (vrs), maupun skala. efisiensi secara skala ini mengikuti hasil dari efisiensi secara ekonomi. jika secara ekonomi sudah dikatakan efisien, maka secara teknis akan efisien, dan otomatis secara skala juga efisien. ketidakefisienan bprs ini dibuktikan dengan proporsi bprs yang tidak efisien sebesar 22,05% secara teknis, 55,8% secara ekonomi, dan 55,8% secara skala (tabel 4.7). hal tersebut menunjukkan bahwa sebagian bprs yang diteliti belum cukup dapat mengelola pembiayaan dengan baik. ketidakefisienan bprs syariah ini selain disebabkan oleh pengelolaan input dan output juga karena skala usahanya yang belum optimal. tabel 4 sebaran bprs berdasarkan tingkat efisiensi secara ekonomi, teknis, dan skala dalam satuan unit skor efisiensi crs (ekonomi) vrs (teknis) scale 1 30 53 30 0,0001-0,9999 38 15 38 total 68 68 68 sumber: lampiran 2, data diolah apabila dilihat dari gambar 4.5, tren rata-rata nilai efisiensi mengalami fluktuasi dari tahun 2014-2017. namun, secara keseluruhan belum mencapai efisiensi. kemudian, pada tahun 2015 rata-rata nilai efisiensi pembiayaan bprs di jawa timur dengan orientasi input, baik secara ekonomi (crs), teknis (vrs), dan skala cenderung meningkat (gambar 4.5). meningkatnya tingkat efisiensi pembiayaan menunjukkan bahwa secara relatif pada 2015 efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) di jawa timur periode 2014-2017. analisis dengan metode dea (crs,vrs, dan skala) 23 bprs di jawa timur telah mampu meningkatkan efisiensi manajerial pembiayaannya. namun, meskipun tren rata-rata nilai efisiensi baik secara crs, vrs, maupun skala mengalami peningkatan baik pada 2015 maupun 2017, tetapi tidak terdapat bprs yang mengalami efisiensi terus menerus secara ekonomi (crs) maupun skala sepanjang tahun 214-2017. gambar 4 tren rata-rata efisiensi bprs 2014-2017 sumber: lampiran 2, data diolah kembali penetapan target perhitungan dea tidak hanya mengukur nilai efisiensi dari masing masing bprs yang ada dalam sampel, tetapi juga memberikan referensi atau acuan bank bagi bank yang berada dalam kondisi inefisien menjadi efisien. dalam penelitian ini terdapat 11 bank yang pernah mengalami ketidakefisienan selama empat tahun terakhir (2014-2017). hasil pengujian input dan output pada bpr syariah di wilayah gerbangkertasusila selama empat tahun dengan menggunakan data envelopment analysis (dea) menunjukkan hasil target input dan output pada masing-masing bpr syariah dari kondisi aktual. angka yang dihasilkan berbeda-beda dalam bentuk persentase. tanda negatif menunjukkan jika variabel tersebut harus diturunkan dan tanda positif menunjukkan jika variabel tersebut harus dinaikkan dari kondisi aktual untuk mencapai efisien. tahun 2014 bprs amanah 2014 variabel actual target potential improvement hpk 4218342 3152875 -25.26% ppap 316555 98427 -68.91% pou 26799649 28553303 6.54% bprs mandiri 2014 variabel actual target potential improvement hpk 4721193 2516713 -46,69 ppap 1768282 83313,93 -95,29 pou 15337340 15337340 0 bprs situbondo 2014 variabel actual target potential improvement hpk 240144 56860,92 -76,32 ppap 95829 65054,71 -32,11 pou 4164048 4164048 0 0.700 0.800 0.900 1.000 2014 2015 2016 2017 crs vrs scale afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 24 tahun 2015 bprs amanah 2015 variabel actual target potential improvement hpk 3344625 3152875 -5,73% ppap 6621639 98427 -98,51% pou 24737266 28553303 15,43% bprs mandiri 2015 variabel actual target potential improvement hpk 4947011 2658742 -46,26 ppap 346432 88015,7 -74,59 pou 16202892 16202892 0 bprs bumi rinjani kepanjen 2015 variabel actual target potential improvement hpk 9213193 8527152 -7,45 ppap 1302186 1205221 -7,45 pou 24659336 24659336 0 bprs sarana prima mandiri 2015 variabel actual target potential improvement hpk 3493210 3245779 -7,08 ppap 535738 497790,6 -7,08 pou 10836155 10836155 0 bprs al-mabrur babadan 2015 variabel actual target potential improvement hpk 2704079 2577747 -4,67 ppap 942320 898295,8 -4,67 pou 9491110 9491110 0 tahun 2016 bprs jabal tsur 2016 variabel actual target potential improvement hpk 3253087 2178539,61 -33,03 ppap 4086505 1989574,11 -51,31 pou 10243473 10243473 0 bprs ummu 2016 variabel actual target potential improvement hpk 408791 326207,5 -20,2 ppap 248059 197946,4 -20,2 pou 3698447 3698447 0 bprs unawi barokah 2016 variabel actual target potential improvement hpk 1045162 299919 -71,3 ppap 6413 1061 -83,46 pou 1542533 1665503 7,97 bprs mandiri 2016 variabel actual target potential improvement hpk 4272339 3087211 -27,74 ppap 411144 102199,9 -75,14 pou 18814066 18814066 0 efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) di jawa timur periode 2014-2017. analisis dengan metode dea (crs,vrs, dan skala) 25 tahun 2017 bprs bhakti haji 2017 variabel actual target potential improvement hpk 232786 178919 -23,14 ppap 233545 179502,4 -23,14 pou 1460128 1466939 0,47 bprs unawi barokah 2017 variabel actual target potential improvement hpk 359094 299919 -16,48 ppap 3059 1061 -65,32 pou 1135668 1665503 46,65 bprs daya artha 2017 variabel actual target potential improvement hpk 662849 647044,3 -2,38 ppap 1489371 1334203 -10,42 pou 4189081 4189081 0 pembahasan secara umum, bank pembiayaan rakyat syariah (bprs) di jawa timur belum efisien baik secara teknik, ekonomi, maupun skala. rata-rata nilai efisiensi teknik sebesar 0,951, efisiensi ekonomi sebesar 0,877, serta efisiensi skala sebesar 0,915. pada gambar 4.5, menunjukkan tren rata-rata nilai efisiensi pembiayaan bprs fluktuatif selama tahun 2014-2017 dan masih dibawah 100%. artinya, bank pembiayaan rakyat syariah (bprs) belum mampu mengelola input secara baik untuk menghasilkan output yang optimal serta belum mampu mencapai skala usaha yang optimal. terdapat enam bprs yang efisien secara teknik dari 17 bank pembiayaan rakyat syariah (bprs), namun tidak terdapat bprs yang efisien secara ekonomi maupun skala yang dianalisis selama tahun 2014-2017 (tabel 4.7). ketidakefisienan bank pembiayaan rakyat syariah (bprs) ini juga ditunjukkan dengan proporsi bank pembiayaan rakyat syariah (bprs) yang tidak efisien pada tabel 4.7 yaitu secara teknik (vrs) sebesar 22,05%, secara ekonomi (crs) sebesar 55,8%, dan secara skala sebesar 55,8%. adanya ketidakefisienan secara teknik atau murni manajerial dan pencapaian skala usaha yang belum optimal mendorong ketidakefisienan secara keseluruhan (crs). berdasarkan hasil pengukuran efisiensi dengan asumsi vrs, crs, dan scala efficiency sebagaimana dijelaskan diatas, maka secara umum dapat disimpulkan bahwa sumber ketidakefisienan bank pembiayaan rakyat syariah (bprs) lebih disebabkan oleh skala pembiayaannya. hal ini ditunjukkan dengan rata-rata tingkat efisiensi secara crs (ekonomi) dan skala lebih rendah jika dibandingkan dengan rata-rata tingkat efisiensi secara vrs (teknik) pada gambar 4.5. hasil ini menunjukkan bahwa ketidakefisienan pada pembiayan bank umum syariah lebih dikarenakan ketidakefisienan secara skala atau ukuran operasional pembiayaan pada bank umum syariah. pengukuran efisiensi bank cenderung terbatas pada hubungan teknik dan operasional dalam proses konversi input menjadi output (sutawijaya dan lestari, 2009). oleh karena itu, yang dibutuhkan adalah kebijakan mikro yang bersifat internal, yaitu pengendalian dan alokasi input yang optimal untuk mendapatkan output yang maksimal. afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 26 a. ketidakefisienan yang bersumber dari input hak pihak ketiga atas bagi hasil dapat perbaiki dengan cara memperbaiki struktur pendana bprs. ketidakefisienan yang bersumber dari input hak pihak ketiga atas bagi hasil terjadi karena bprs masih mengandalkan pembiayaan dari dana mahal. artinya nilai pengembalian ke pada terhitung cukup tinggi. dampaknya, bank syariah menjadi tak efisien karena harus menyediakan dana lebih besar untuk memberikan bagi hasil ke pada nasabah yang menyimpan uangnya di bprs. b. ketidakefisienan yang berasal dari input beban ppap dapat diperbaiki dengan melakukan penilaian ketat terhadap nasabah yang ingin melakukan pembiayaan karena beban ppap merupakan beban yang muncul akibat nasabah tidak mampu mengembalikan pembiayaan yang telah diberikan. oleh karena itu, untuk mengurangi ketidakefisienan beban ppap dapat dilakukan dengan melakukan penilaian ketat terhadap nasabah yang ingin melakukan pembiayaan. c. ketidakefisienan yang berasal dari output pendapatan operasional utama dapat diperbaiki dengan upaya yang dapat dilakukan adalah pengelolaan nisbah bagi hasil yang terkait dengan input hak pihak ketiga atas bagi hasil. 5. kesimpulan pengukuran efisiensi dengan metode dea asumsi vrs (variable return to scale) orientasi input dan output menghasilkan tiga skor efisiensi yaitu constant return to scale (crs), variable return to scale (vrs), dan scale efficiency (se). hasil ketiga efisiensi tersebut selama kurun waktu penelitian rata-rata menunjukkan tingkat efisiensi yang belum efisien. rata-rata skor efisiensi seluruh dmu secara teknik adalah 87,7 persen, secara ekonomi sebesar 87,7 persen, dan secara skala sebesar 91,5%. masih terdapat 15 dmu yang tidak efisien secara teknik dan 38 dmu yang tidak efisien secara ekonomi maupun skala dari 68 dmu yang dianalisis. hal ini berarti bank pembiayaan rakyat syariah (bprs) belum mampu mengelola input yang dimilikis ecara optimal (vrs) serta belum mencapai skala yang optimal untuk menghasilkan output yang maksimal sehingga mendorong ketidakefisienan secara menyeluruh. berdasarkan perhitungan dengan metode vrs dengan menggunakan program banxia frontier analysis 3.2.2 pada 17 bank pembiayaan rakyat syariah terdapat enam bprs yang sudah 100% mengalami efisiensi terus menerus selama periode penelitian yaitu pada tahun 2014-2017 dan 11 bprs yang pernah mengalami inefisiensi pada periode 2014-2017. sedangkan perhitungan dengan menggunakan metode crs dan skala, tidak terdapat bprs yang mengalami efisiensi terus menerus pada periode 2014-2017. daftar pustaka bastian, i., & suhardjono. (2006). akuntansi perbankan. jakarta: penerbit salemba empat. cooper, w. w, et.al. (2011). handbook on data envelopment analysis. international series in operations research and management science, vol.124: chapter 1 (http://www.springer. com). efisiensi pembiayaan bank pembiayaan rakyat syariah (bprs) di jawa timur periode 2014-2017. analisis dengan metode dea (crs,vrs, dan skala) 27 kamaruddin, b. h, et.al. (2008). assesing production efficiency of islamic banks and conventional bank islamic windows in malaysia. international journal of business and management science, 1(1), 31-48. moussawi, c. e. l., & obeid, h. (2011). evaluating the productive efficiency of islamic banking in gcc: a non-parametric approach. international management review, 7(1), 10-21. maryati, s. (2014). peran bank pembiayaan rakyat syariah dalam pengembangan umkm dan agribisnis pedesaan di sumatera barat, 3(1), 2-3. how islamic economics view on ecology? 115 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) how islamic economics view on ecology? muhammad anis1)*, irham zaki 2) 1,2 sharia economics department, faculty of economics and business, airlangga university, indonesia abstract as ecological problems become more apparent, public awareness of their dependence on nature is increasing. this then raises the urge to care about ecological issues. in line with this, there was also a movement that blended ecological issues with religious issues. so, there arose a scientific interest in studying religion in relation to ecology, including in islam. in this case, the discussion will focus on how islamic economic views about ecology. by using qualitative methods, the discussion is focused on getting an overview of the islamic economic view of ecology. islamic economic bases its value on the concept of tauhid, so it views ecology as a unified relationship between god, man, and nature. alquran, as the main source of sharia values, explains a lot about the nature and ecological crises that can occur if humans do damage. islamic economics is full of moral values, in exploring nature, the human must uphold the prevailing moral values and pay attention to the principles of maslahah and maqashid sharia. keywords: ecology, islamic economics, maqashid sharia. 1. introduction the increasing feeling of environmental problems has made people begin to realize how much they depend on the environment and nature for various ecosystem services. these services, which include soil protection, pest control, and clean water provision, are largely provided by natural and semi-natural ecosystems which in the past were thought to have had little or no economic significance (peter j, 1998). in this case, one of the consequences of the environmental crisis is that biodiversity is increasingly recognized as an important resource but is decreasing in number. whereas in the economic definition concerning the efficiency of scarce resources, the formulation of the concept of ecosystem services is a deliberate attempt to draw ecological processes into the economic domain (peter j, 1998). and then, it has created pressure to resolve the chronic environmental crisis problems that have occurred in various parts of the world. this has led to a combination of religion and ecological movements in the 21st century among environmental experts (asmanto, 2015). even in the last three decades, religious communities have contributed to the development of the wisdom of environmental values as a form of imagination of selfspirituality awareness in the environment based on primordial values that have existed in the traditions of world religions (asmanto, 2015). recent scientific interests in religion and ecology reaffirm the importance of religious models in understanding the place of humans in nature (saniotis, 2012). in islam, the approach to the environment is holistic and assertive. the al-qur'an and hadith are the main sources of environmental ethos (saniotis, 2012), explaining nature and natural phenomena beyond verses related to commands and sacraments (rizk, 2014). in line with that, islamic economics as an economic system that bases its value on sharia (islamic law) certainly has an ecological view that is different from the *corresponding author. email address: mazanis123@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:mazanis123@gmail.com afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 116 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) conventional economic system. for example, in contrast to conventional economics which assumes that resource is something that is limited (scarcity), islamic economics believes that the resource has been created with the levels of its size (qs. al-qomar: 49). in this case, the islamic economy has its perspective in relation to ecology. therefore, this paper will review related journals on ecology, islamic economics, and ecology from an islamic economic perspective. by using the content analysis method, this research is focused to get an overview of the theoretical concept of the islamic economic view of ecology. 2. literature study a. economics and ecology as homo economicus, humans cannot be separated from efforts to meet their growing needs by utilizing limited resources. in this case, the economy is closely related to the availability of resources, including natural resources. in relation to natural resource management, humans are often faced with ecological problems (syarifudin, 2006). these problems, for example, are in the form of climate change, soil degradation, threatened ecosystem and biodiversity preservation, and environmental pollution (cahyandito, 2010) which is often caused by human activities in meeting their needs. for example, related to climate change, increased levels of emissions from greenhouse gases caused by human activities in utilizing energy sources derived from fossils and deforestation and land conversion. likewise soil degradation, threatened ecosystems, and pollution (cahyandito, 2010). whereas in language, both economics and ecology have the same root term, namely from the word oikos which means household or habitat. thus, if economy means household management, then ecology means the study of households/habitats. however, the two things tend to be positioned as opposites. in this case, the economy focuses on production, distribution, and consumption of goods or services which ultimately leads to industrialization to respond to problems that develop in society (gayatri, 2017). meanwhile, ecology focuses on sustainability and biodiversity. (gayatri, 2017) the turmoil of understanding that separates the relationship between ecology and economics ultimately creates a conflicting definition. the development of thought and the expansion of the human community requires meeting needs and creating the following three things: first, is the discovery of advanced technology that allows the processing of natural resources extensively, thus enabling large-scale production through the industry. at the same time, economic growth theories were found to increase productivity, such as the division of labor, the use of technology, and free competition. (syarifudin, 2006) second, is the development of a secular lifestyle that reduces the influence of religion in people's lives. where in the process there is desacralization or profanization of nature which allows them to exploit and dominate nature. in addition, the reduced influence of religion also has an impact on consumer behavior. (syarifudin, 2006) third, the problem of urbanization, the increasing prevalence of urbanization is considered to affect agricultural production, in this case, urbanization is the movement of people from villages to cities where settlements are concentrated so that it does not allow them to farm. (syarifudin, 2006) in other words, the economy is thought to lead to development and change, whereas ecology leads to the conservation of nature and the environment. many environmentalists consider that economic growth and development often result in disasters for ecology, https://creativecommons.org/licenses/by/4.0/ how islamic economics view on ecology? 117 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) while on the other hand, economists consider the environment to be anti-economic growth and development (gayatri, 2017). b. ecology in islamic perspective ecological spiritual conceptualization is needed to answer a sustainable need to raise a spiritual awareness of nature as god's creation that must be kept sacred through awareness in attitude and ethics (asmanto, 2015). a great deal of study interest in religion and ecology has recently reaffirmed the importance of religious models in understanding the place of humans in nature. in this case, islam has provided detailed ethical principles about the environment (saniotis, 2012), there are al quran and prophet's hadith which are the main sources of environmental values and ethos integrated into islamic fiqh which are well known (saniotis, 2012). in addition, there are also ijtihad and analogical deduction (qiyas) as mechanisms that offer the flexibility needed to cope with the changes and needs of a dynamic society (rizk, 2014). in terms of ecology, the verses of the koran that describe nature and natural phenomena are more than verses related to commandments and sacraments. of the approximately 6,000 verses there are about 750 verses, or one-eighth of them, advising believers to contemplate nature, to study the relationship between living organisms and their environment, to use the best of intellect, and to maintain the balance and proportion god has built into creation. (rizk, 2014) in addition, many of these rules also come from the second source of law, namely the sunnah/hadith. a hadith can address issues that the qur'an does not address, and is authoritative in showing whether the interpretation of the koran is definite or only possible, or it can show an appropriate analogy (hallaq, 1997). in this respect the islamic approach to ecology is holistic. everything in creation is related to something else; anything that affects one thing ultimately affects everything. humans are created from the essence of nature and are thus firmly attached to it. (rizk, 2014) the resources of the earth, land, water, air, minerals, and forests are available for human use, but these gifts come from god with certain ethical restrictions imposed on them. we can use them to meet our needs, but only in a way that doesn't upset the ecological balance and doesn't interfere with the ability of future generations to meet their needs. (rizk, 2014) 3. research methodology this research is qualitative research with a type of literature study where the discussion is focused on a review of the related literature. the analysis method used is content analysis. in this case, content analysis is used to find the overview of the islamic economic view about ecology. 4. result and discussion as an economic system that bases its value on sharia rules, islamic economics is an integral part of islam. in other words, islamic economics follows the values that exist in islamic teachings in every aspect (fauzia & et al., 2014). there are three fundamental aspects in islamic teachings, namely faith (tauhid), law (sharia), and morals (fauzia & et al., 2014). in this case, most discussions about the philosophical pillars of islamic sharia often begin with discussions related to the principle of tauhid (akidah) (rizk, 2014), including in islamic economics. with this principle, all economic activities carried out by https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 118 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) humans are in the framework of worshiping allah. (fauzia & et al, 2014) it is related to ecology, with this principle a universe is a connected unit and allah is the unifier outside of creation. this implies the equality of all creatures in the worship of the creator and the recognition of respect for the interdependence and interconnection between all (lubis, 2000). in other words, tawhid implies unity (unity) between god, man, and nature, so that the relationship between the three must be balanced and harmonious. thus the elimination of one of the roles will result in disharmony, for example, the elimination of god's role which will lead to seclarism as an ecological basis (rodin, 2017). this aspect of tawhid has become a worldview on islamic economics. so with this worldview, islamic economics also looks at ecology, where every economic activity that is carried out related to ecology must be based on the belief in the oneness of allah, which among the signs of his greatness is the creation of nature and all its contents according to its level. with this concept, humans know their role as caliphs. the caliph has the mandate to prosper the earth, so that he will protect, care for, and be held accountable for it. not as a ruler who can exploit the earth and all its contents. the next aspect is the legal or sharia aspect. in an islamic economy, a person must walk by the signs set by allah in his sharia (fauzia & et al., 2014). however, in economic terms, the rule applies that everything in muammalah is permissible unless there are arguments against it. this implies that all economic actions that bring benefit and there are no restrictions in it can be done. the things that are prohibited are things that are generally detrimental and cause harm to humans (fauzia & et al., 2014). thus, islamic economics prohibits economic activities that are ecologically detrimental. many verses explicitly advise believers to contemplate on nature, to study the relationship between living organisms and their environment, to use their best intellect to maintain the balance and proportionality that allah has created into his creation (syarifudin, 2006). al-quran also explicitly discusses the environmental crisis by using several terms, including facade (damage) for 50 times, halaka (destruction) for 68 times, and sa'a (the effort to do damage) as many as 30 times (rodin, 2017). in this case, the al-qur'an as the main value source of sharia, allows humans to take advantage of nature but provides limitations in its use. however, the role of economics, in this case, is actually closely related to the environment. for example in qs. al-a'raf verse 31, allah says which means: o son of adam, wear your good clothes every time you enter the mosque, eat and drink but don't overdo it. truly allah does not like people who are excessive (surah al a'raf: 31). in this verse, allah commands mankind to wear good clothes, eat and drink. in this case, the three activities are part of economic activity in the form of consumption. the verse is then closed with a prohibition to do israf (exaggeration). if you pay attention, the verse illustrates that in economic activity (using clothes, eating, and drinking for example) one must still pay attention to the ecological aspects, in this case, not to overdo it. the aspects that become the basis of the next islamic economy are aspects of morality (morals). all kinds of teachings contained in the al-quran and hadith relating to islamic economics are to uphold morals. in this case, morals are a very important point in islamic economics. (fauzia & et al, 2014). unlike conventional economics which bases its value on individual action and rationality in order to achieve satisfaction, in islamic economics, economic actors must consider the norm and islamic ethics in every activity. in other languages, these morals are the spirit in islamic economics. in this case, islamic economics is a social science as well as a religious science, of course, it is not free from moral norms and values (adinugraha, 2013). so in relation to https://creativecommons.org/licenses/by/4.0/ how islamic economics view on ecology? 119 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ecology, islamic economics responds to it by sticking to the moral values of islamic economics, so that its exploration activities uphold the principles of benefit and maslahah. this explains why islamic environmental ethics tend to focus on issues of preservation and conservation, which correspond to the dynamics of their predecessor's past, while usually finding little explanation for global warming, ozone depletion, genetically modified organisms, and another biodiversity (jenkins, 2005). on the other hand, some environmental ethicists see opportunities for birr (benevolence) and piety (piety) to underline the important role of spirituality in observing environmental protection (jenkins, 2005). from these three aspects (tauhid, sharia, and morals) islamic economics cannot be separated from the maqashid sharia paradigm, which consists of religious maintenance (hifdh ad-din), maintenance of the soul (hifdhu an-nafs), maintenance of reason (hifdhu alaql), maintenance of offspring (hifdhu an-nasl) and maintenance of property (hifdhu al-maal). concerning ecology, protecting nature by not creating damage in it is part of a religious order, so that in carrying out economic activities one must also consider the environmental aspects in it as an effort to carry out religious orders (hifdhu ad-din). in addition, environmental pollution caused by industrial activities often endangers life safety (utama, muhtadi, arifin, & mawardi, 2019), so protecting the environment can also be an effort to protect the soul (hifdhu an-nafs). in terms of maintaining reason (hifdhu al-aql), a healthy environment can help humans to think clearly and positively (utama, muhtadi, arifin, & mawardi, 2019). so in carrying out economic activities in an islamic economy, one must always protect the environment. islamic economics strongly prohibits exaggeration, including the use of natural resources, this is closely related to the preservation of these natural resources so that they continue to exist until the next generation, so in this case, economic activities that pay attention to ecology are part of the maintenance of offspring ( hifdhu an-nasl). regarding the maintenance of assets (hifdhu al-maal), the majority of scholars agreed to determine assets in the last order of kulliyah al khamsah, in contrast to the triple bottom line concept in conventional economics which places profit first (utama, muhtadi, arifin, & mawardi, 2019) . this shows that in economics, islamic economics does not only seek profit but also four other aspects. so it is very inappropriate if only to maximize profits, humans are willing to damage their environment. furthermore, yusuf qardhawi added one main element, namely hifdhu al-bi'ah (preserving/conserving the environment). so that imam syatibi's maqashidu sharia increases to six main elements which are perfected, namely by adding environmental elements as part of an important issue in today's globalization (nurhayati, 2018). islamic economics also has basic principles, including the following: first, resources are seen as god's mandate given to humans, so that their utilization will be accounted for in the afterlife (suprayitno, 2005). in contrast to the conventional economic view that considers resources as mere factors of production, in an islamic economy, resources are a mandate that must be maintained. this has a consequence that in an islamic economy, resources including ecology are something that must be preserved so that their use should not be carried out carelessly which can lead to ecological damage. in addition, in an islamic economy, natural resources are created at an appropriate level so that the scarcity of natural resources is recognized as only relative due to the inability of humans to manage them. the recognition of private ownership is recognized but within certain limits which are in the interests of the community (suprayitno, 2005). islamic economics avoids the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 120 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) concentration of wealth only on a handful of rich people regardless of the fate of those who are less fortunate. if it is related to ecology, in this case the islamic economy protects the sustainability of the ecology by preventing the privatization of forests and public spaces which are a common need. islamic economics also recognizes community / public ownership (suprayitno, 2005). in the islamic economy, there are several things that cannot be owned personally because they are the livelihood of many people, such as grass, fire, and water. it is related to ecology, then this proves that the islamic economy pays great attention to conservation, especially on these three things, so that not all things can be privatized for profit. islam guarantees individual freedom, but this freedom should not be used to violate allah's rules (suprayitno, 2005). thus human freedom cannot be used as an excuse for the destruction of nature which is clearly prohibited by allah. the islamic economy also has its own characteristics in its economic activities, both in terms of distribution, production, and consumption. in this case, the distribution is intentionally written at the beginning because in islam distribution is not only done post-production but also preproduction distribution. what is meant by pre-production distribution according to baqir as-sadr's concept is the distribution of natural resources which are natural production factors such as land, raw materials, water, and other resources (sadr, 2008). with this pre-production distribution, there is a division of ownership both state property rights, community property rights, or private property rights. with this pre-production distribution, the islamic economy is not like a capitalist economy which ignores the distribution of the sources of production and simply leaves it to the control and authority of the strongest under the slogan of economic freedom that serves the strongest and paves the way for monopolistic exploitation of nature and whatever. contained therein (sadr, 2008). whereas in terms of production, according to capitalist thinking, economic problems arise due to the scarcity of production and the neglect of nature, where nature is not exploited enough to meet human needs, the solution is to increase production and the maximum exploitation of nature and its wealth to meet human needs. (sadr, 2008) in contrast to this, according to the islamic economy, wealth is not the main goal as well as its search, that islamic economics also does not see an increase in production based on total wealth that is separate from distribution (sadr, 2008). in an islamic economy, these natural resources are sufficient to meet human needs and desires, even sufficient to fulfill everything that humans ask for. as for the economic problem is arising by humans themselves, namely injustice and their denial of allah's favor by exploiting nature arbitrarily to create life misery, therefore it is necessary to create a good relationship between distribution and mobilization of resources to prosper. nature (sadr, 2008). in terms of consumption, islamic economics has provided clear guidelines by prohibiting exaggeration. exaggeration here applies both ways by prohibiting too extravagant and too restrictive (hunks). thus, consumption ethics in islam is to take the middle way according to the proportions. with the prohibition of this excessive attitude, of course, this will have a positive impact on the sustainability of resources because exploitation is carried out in proportion. 5. conclusion from the above discussion, it can be concluded that islamic economics views ecology by using 3 basic aspects of islamic economics, namely faith, sharia, and morals. from the https://creativecommons.org/licenses/by/4.0/ how islamic economics view on ecology? 121 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) aspect of faith, islamic economics bases its value on the concept of monotheism, so that in looking at ecology, islamic economics sees it as a unified relationship between god, man, and nature, which cannot be separated. in this case, man as the caliph of allah has the mandate to prosper nature, so that he is obliged to make it prosperous, not dominate it. from the aspect of sharia, the al-quran as the main source of sharia values has explained a lot about nature and the environment, as well as related to ecological crises that can occur if humans do damage. therefore, in carrying out economic activities, we must pay attention to the ecological aspects. from a moral aspect, islamic economics is an economy that is full of moral values. so natural exploration must uphold the prevailing moral values and still pay attention to the principles of benefit and maslahah. the islamic economy also has its own characteristics in its economic activities, both in terms of distribution, production, and consumption. in this case, the distribution is intentionally written at the beginning because in islam distribution is not only done postproduction but also pre-production distribution. in addition, in islamic economics, it cannot be separated from the maqashid sharia as the paradigm. so in carrying out economic activities related to ecological aspects one must pay attention to kulliyah khamsah, namely religious maintenance (hifdh ad-din), maintenance of the soul (hifdhu an-nafs), maintenance of reason (hifdhu al-aql), maintenance of offspring (hifdhu an-nasl) and maintenance of property (hifdhu al-maal). qardhawi then added to the six main elements that were perfected, namely the addition of environmental elements as part of an important issue in today's globalization. reference adinugraha, h. h. (2013). norma dan nilai dalam ilmu ekonomi islam. media ekonomi & teknologi informasi vol 21 no.1, 49-59. asmanto, e. (2015). revitalisasi spiritualitas ekologi perspektif pendidikan islam. tsaqafah jurnal peradaban islam, 333-354. azid, t., & asutay, m. (2007). does ethico-moral coalition complement to economic coalition? a response in the periphery of islamic economic. humanomics vol 23 no 3, 153-173. cahyandito, m. f. (2010). pembangunan berkelanjutan, ekonomi dan ekologi, sustainability communication dan sustainability reporting. jurnal bisnis dan manajemen. fauzia, i. y., & dkk. (2014). prinsip dasar ekonomi islam perspektif maqashid al-syariah. jakarta: penerbit kencana. gayatri, e. (2017). bridging ecology and economy through islamic ethics of sterwardship. jurnal ekonomi & studi pembangunan, 103-110. hallaq, w. (1997). islamic legal theories. cambridge: cambridge university press. jenkins, w. (2005). islamic law and environmental ethics: how jurisprudence (usul al-fiqh) mobilizes practical reform. worldviews: environment, culture, religion, 338-364. nurhayati, n. (2018). kontekstualisasi teologi islam sebagai basis regulasi ekologi transendensi. prosiding seminar nasional hukum ums (pp. 583-592). surakarta: ums. peter j, e. &. (1998). the value of biodiversity: where ecology and economy blend. biological conservation vol 83, no. 3, 239-246. rizk, r. r. (2014). islamic environmental ethics. journal of islamic accounting and business research, vol 5, no. 2, 194-204. rodin, d. (2017). al-quran dan konservasi lingkungan: telaah ayat-ayat ekologis . altahrir jurnal pemikiran islam vol 17 no 2, 391-410. sadr, m. b. (2008). buku induk ekonomi islam iqtishaduna cetakan 1. jakarta: zahra publishing house. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 122 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) saniotis, a. (2012). muslims and ecology: fostering islamic environmental ethics. contemporary islam, 155-171. suprayitno, e. (2005). ekonomi islam: pendekatan makro islam dan konvensional. yogyakarta: graha ilmu. syarifudin. (2006). korelasi antara ekonomi dan ekologi. jurnal al-syir'ah vol. 4 no. 2 . utama, r. w., muhtadi, r., arifin, n. r., & mawardi, i. (2019). tinjauan maqashid syariah dan fiqh al-bi'ah dalam green economy. jurnal ekonomi islam vol.10 no. 2, 242259. wikipedia. (n.d.). retrieved from wikipedia indonesia: https://id.wikipedia.org/wiki/ekologi https://creativecommons.org/licenses/by/4.0/ difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 53 6 difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia aprila dwi widayati1* and raditya sukmana2 1,2 airlangga university, surabaya, indonesia abstract the purpose of this research is to examine the difference of islamic social reporting (isr) disclosure level of islamic banking in indonesia and malaysia based on isr index. the samples were selected by purposive sampling method. the samples that is used in this research is five islamic banks in indonesia and five islamic banks in malaysia. this research uses secondary data, that is annual report from 2010-2012. annual reports were analyzed using content analysis method. furthermore, the differences of isr disclosure level were tested using independent sample t-test. the results showed that isr disclosure level of islamic banking in indonesia is better than isr disclosure level of islamic banking in malaysia. based on the results of hypothesis testing, found that there are significant differences in the disclosure level between islamic banking in indonesia and malaysia. keywords: islamic social reporting, islamic social reporting index, islamic banking 1. introduction with the massive development of global economics it is unavoidable that every company today is demanded by the people to not only think about how to increase company profits but also care for the environment and the people around it. other than that, companies are also demanded to express social responsibility that have been implemented in the yearly report precisely for an added value to companies. in unanimous with the development of syariah banking internationally and related with the presence of demands in expressing social responsibility in a company. islamic social reporting has become the current topic. islamic social reporting is an expansion of social reporting that have islamic values already inserted inside it for aiding islamic companies in expressing their responsibility in yearly reports. in the 1990s period, the financial sector in indonesia expanded more and more with the presence of financial institutions that operate based on the principles of islamic teachings or islamic syariah. although indonesia is a country with a majority muslim population, indonesia is not the first country to apply financial institutions based on syariah principles of 45.4%. meanwhile malaysia has previously established a syariah bank far before indonesia or in other words malaysia is a pioneer of syariah banking in southeast asia with a growth of syariah banking assets that is very high in the world. * corresponding author. email address: adwidayati@gmail.com mailto:adwidayati@gmail.com difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 54 the isr index is a measure of the implementation of social responsibilities of syariah banking that consists of a compilation of standard items that are assigned by aaoifi (accounting and auditing organization for islamic financial institutions) that should be stated by an islamic entity. hanniffa (2002) contends that the report of corporate social responsibility in the conventional system only focuses on moral and material aspects. he adds that the spiritual and material aspects should also be a main focus in corporate social responsibility reports because the muslim decision makers have expectations so that companies reveal the newest information voluntarily for aiding in their fulfillment of spiritual needs. because of that, he views that there is a need for the presence of a specific frame for reporting social responsibility that is in accordance with islamic principles. the mentioned frame is not only useful for the muslim decision makers, but also useful for islamic companies in fulfilling their responsibility to allah swt and the people. this frame is known by the name of islamic social reporting (isr). the social reporting that is in accordance with islamic principles will be more and more visible in the social reporting of islamic banks. islamic banks that operate ideally are based on the principles of islamic law and as one of the forms of islamic business clearly its social reporting will be based on islamic principles (haniffa, 2002) problem formulation is there a difference in the disclosure of islamic social reporting (isr) in syariah banking that are in indonesia and malaysia reviewed from the 2012-2014 period? research purpose for analyzing disclosure differences of islamic social reporting in syariah banking that are in indonesia and malaysia reviewed from the 2012-2014 period. 2. literature base disclosure simply can be meant as an expenditure of information (sudarmadji and sularto, 2007). evans, 2003 (in raditya, 2012:23) declared that disclosure has the meaning of providing information in a financial report that covers the financial report itself, notes of the financial report and additional disclosure that relates with the financial report, disclosure is related with how a company is able to answer the following questions : 1. for who the information in revealed? 2. why the disclosure has to be made? 3. how much information has to be revealed? 4. when does the information has to be revealed? the above four questions have to be able to be answered by a company that will implement disclosure for knowing which parties will implement disclosure for knowing which parties will use the above information, the purpose or reason of the implementation of disclosure, the number of disclosure that is needed, and the right time for implementing disclosure (raditya, 2012). according to islamic teachings allah is the one almighty god that has created nature and all of its contents, so from that absolute ownership belongs to allah swt (permatasari, 2015:56). humans in the face of the earth are only khalifa difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 55 that have responsibilities for themselves, their actions and their doings to all other creations of allah. humans have an obligation for following all orders of allah and keep clear of all prohibitions of allah. humans have to apply the orders of allah which are islamic teachings in all aspects of life, because humans will be responsible for their actions in the qiyamah later. the application of these islamic teachings also covers to the economical aspect. in the islamic economy, accountability is needed for producing disclosure that is right, fair, and transparent. in the economic aspect one factor that needs to be paid attention is honesty that more specifically is accountability. haniffa (2002) declares that, “isr is an extension of social reporting that not only covers the hope of the committee to the views of the people to the role of companies in economics but also the fulfillment of the spiritual perspective for report users that are muslim. the practice of islamic social responsibility disclosure will be different with conventional social reporting because the basic principles are different although the basic concepts which are social responsibility and accountability are shown by both.” disclosure of social responsibility according to the islamic perspective is an effort for validating the stakeholders that are careful about the conformity and unconformity of syariah principles in a business activity for aiding them in making economic decisions and religious decisions for reaching falah (success in the life and afterlife). haniffa (2002) developed the isr index based on six themes which are finance and investment, products, employees, borrowers, and environment. othman and co. (2009) added one theme in the isr disclosure index that they develop which is company governance. this research will use the isr index that is designed by othman and co. (2009). the following are the six disclosure themes of islamic social reporting used in this research: 1. finance and funding, this theme consists of 6 items which are riba funds/interest/non halal income, gharar (obscurity), zakat, policy of late payment of customer claims, current value balance sheet and value added statement. 2. products and services, items consist of environmentally friendly products (green products), halal status of products, safety and quality of products and service of consumer complaints. 3. employees, an item index that consists of work hours/days off/employee remuneration, employee training and education, employee gender equality, involvement of employees in management discussions, employee health and safety, environment, and others. 4. people, items in this theme are factors such as sadaqah charity activities, wakaf, qardhul hasan, employee volunteer activities, education scholarships, and other social activities. 5. living environment, that consists of information about living environment conservation, activities that do not produce pollution, education about the living environment, environmental audit, and environmental management system. 6. company governance, obedience to syariah, share ownership structure, profile of the directing committee, and anti-corruption policy. difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 56 not only just conventional banks that are known by the people, but syariah banks also appear that are now starting to be in great demand by the people. the meaning of syariah banks according to (soemitra, 2010:61) is a financial institution that runs its business activities based on syariah principles and according to the types consists of public syariah banks, syariah business units, and syariah citizen financing banks. syariah banks are banks that are known to forward the principle of profit and loss sharing. so in syariah banks the presence of interest is not known, while conventional banks are known to always charge interest to their customers. according to act no. 21 year 2008 about syariah banking. the meaning of syariah banks are banks that run their business based on syariah principles and according to the types consists of public syariah banks, syariah business units, and syariah citizen financing banks. hypothesis h1: there is a difference in the level of isr disclosure between syariah banking in indonesia and malaysia. analysis model the analysis model from this research is begun with a checklist is financial reports of syariah banks in indonesia and malaysia, implementing scoring by granting a number 1 in every item that is disclosed, then comparing the scoring results between the two countries, after that it is continued with implementing an independent sample difference test t-test/mann whitney for knowing hypothesis proof and knowing if there is an isr difference in public syariah banks in the two countries. figure 1 analysis model 3. research methodology research approach this research is implemented by using a qualitative approach method, which is research that focuses on the hypothesis test, measuring variables that are being researched and will produce summaries that are able to be generalized, and use statistical aid instruments variable identification difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 57 for answering the problem formulation and testing the hypothesis, the variable that is used in this research is the isr total index that consists of six themes. which are finance and funding, product and service, employees, people, living environment and company governance. operatonal variable definition for providing a clear illustration about the variables that are used in this research, the variables are able to be defined as the following: a. islamic social reporting (isr) a variable that is used in this research is social responsibility of syariah banking that is seen through disclosure levels in islamic social reporting based on the isr index. the isr index that will be used in this research uses an isr index that is already designed by othman and co (2009). the value allocation in the content analysis that consists of 43 items of the isr index is not measured for some times of a number of occurrences for each item in a one year period of disclosure, but as long as there is a minimal isr disclosure of one time, the item is considered already present and given a value (score) of 1. if the item is not found and declared in the company’s report, the item will be given a value (score) of 0. the islamic social reporting disclosure level value is then counted with an equation (ahzar and trisnawati, 2013): disclosure level = items fulfilled item maximum score this score allocation does not rate the quality of companies through items in the isr index, but only rates the level or the disclosure score in the isr index. the rating of the disclosure index item will be identified and gathered from analysis or findings from company yearly reports. types and sources of data secondary data in this research are yearly reports of syariah banks that are in indonesia and malaysia. the yearly reports are obtained from websites of each bank or for yearly reports of syariah banking in indonesia are able to be obtained from the website www.ojk.go.id, while the data for yearly banking report data in malaysia is obtained from the official website of the central bank of malaysia which is www.bnm.gov.my. population and sample the population in this research is the syariah banking that are present in indonesia and malaysia, that totals at 27 syariah public banks, and consists of 12 syariah public banks in indonesia and 17 syariah public banks in malaysia. the sample pickup technique that is used is purposive sampling. samples are chosen by the researcher deliberately because there are some certain considerations with chosen criteria as the following: 1. syariah banks in indonesia and malaysia that are stand-alone. 2. the syariah bank publishes yearly reports in a row in the years 2012-2014 in both countries. 3. the five largest syariah banks in indonesia and malaysia seen from their total assets. analysis technique in this research, the following steps are taken for implementing analysis in this research among others: difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 58 1. implementing a checklist which is with allocating a value of 1 if there is one item that is disclosed in the yearly report and a value of 0 if the item is not disclosed. 2. implementing scoring which is by counting the islamic social reporting disclosure value levels. the islamic social reporting disclosure value levels are counted with the equation (ahzar and trisnawati, 2013): disclosure level = items fulfilled item maximum score 3. descriptive statistics test, descriptive statistics provide an illustration or description of a data that is seen from the average (mean) value, deviation standard, variant, maximum, and minimum. 4. normality test, this test is implemented to know if data is distributed normally or not that is known by implementing the normal kolmogrov-smirnov test (sujarweni, 2014:52). the pickup decisions from this test are a. if sig > 0.05 data is distributed normally b. if sig < 0.05 data is distributed abnormally 5. the hypothesis test is implemented with using an independent sample t-test. however if in the time of the normality test data is known to be distributed abnormally, the hypothesis test is implemented by using the mann-whitney test. results and discussion based on the content analysis that is implemented, it is found that the average score of isr disclosure levels of syariah banking in indonesia during the years 2012-2014 is higher than the disclosure score levels of isr syariah banking in malaysia in the same period. the average implementation and disclosure of social responsibility that are implemented by syariah banks during the three years in indonesia reaches 58.61% from a total of 43 disclosure items. while malaysia obtained a score of 47.28% form 43 disclosure items and has a score difference of 10.86%. this shows that the implementation of social responsibility and disclosure that is implemented by syariah banking in indonesia is better than malaysia. which means that isr index items that are disclosed by syariah banks in indonesia is more descriptive than isr index items that are disclosed by syariah banks in malaysia. descriptive statistics analysis based on table 1, the average (mean) value amount of syariah banking in indonesia for the isr score value is as large as 58.1393. the minimum value shows a number as large as 72.09. so it is able to be summarized that syariah banking in indonesia in disclosing isr, disclose at an average of 25 items or if presented is as large as 58.14%. table 1 descriptive statistics analysis result source: processed data n mean std. deviation min max indonesia 5 58.1393 9.17659 41.86 72.09 malaysia 15 47.2853 9.77583 34.88 62.79 valid n (listwise) 15 difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 59 while the smallest disclosure level which is as many as 18 disclosure items or 41.86% and the largest isr disclosure score is as large as 31 disclosure items or as large a 72.09%. while the lowest disclosure level of syariah banking in malaysia shows an average (mean) value of 47.2853 with a minimum value of 34.88 and a maximum of 62.79. this shows that the average disclosure of isr that is implemented by malaysian syariah banking based on the isr index is as large as 20 items or as large as 47.28%. the minimum value shows the lowest disclosure index that is implemented by syariah banking in malaysia which is as large as 15 disclosure items or 34.88% and the largest disclosure level is 27 disclosure items or as large as 62.79%. normality test table 2 kolmogorov-smirnov normality test variable category sig level asymp.sig. value remarks isr indonesia 0.05 0.953 normal malaysia 0.916 normal source: processed data based on data from table 2 it is able to be known that syariah banking data in indonesia and malaysia have a normal distribution. this shows a significance level of 0.953 of syariah banking in indonesia, while the significance level is as large as 0.916. the two significance levels of syariah banking in indonesia and malaysia show a larger significance levek than 0.05 so it is able to be declared normal, and fulfill the requirement for implementing the independent sample ttest. hypothesis test table 3 levene’s table test source: processed data in the levene test column shows its significance level of 0.659. this shows that the significance level that is obtained is larger than 0.05 (> 0.05) so the significance level that is seen is the number in the t-test column. equal variance assumed the equal variance assumed t-test value shows a number of 0.004 (table 4). this number shows that the significance value of isr disclosure levels in indonesia with syariah banking in malaysia is smaller than 0.05 or 5%, so the hypothesis in this research is accepted, and able to summarize that there is a significant difference between isr disclosure levels of syariah banking in indonesia and syariah banking in malaysia variabel levene’s test for equality of variance remarks isr f sig homogenous 0.198 0.659 difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 60 table 4 independent sample t-test independent sample t-test sig. (2tailed) remarks isr equal variances assumed 0.004 h1 accepted (there is a significant difference) equal variances not assumed 0.004 discussion based on content analysis results it is found that genrerally syariah banking in indonesia has an isr disclosure score that is higher than syariah banking in malaysia in every year. this shows that syariah banking in indonesia implements their social responsibility and disclose it better to the public and more open than syariah banking in malaysia. this content analysis result is different from results from the research of sofyani (2012) that states that the performance level of syariah banking in malaysia that is seen from the isr disclosure level is better than the level of social performance of syariah banking in indonesia. the difference occurs because the total syariah banking samples, period, and disclosure items that are used in this research are different, so the content analysis in this research is different and does not support the previous research results the 3 themes that make isr score values of syariah banking in malaysia lower than banking in indonesia are: 1. finance and budgeting theme, syariah banking in indonesia has an isr score that is higher than syariah banking in malaysia in this theme, which is because in the policy item of delays in recievables, malaysian syariah banking does not disclose about the policy at all. 2. people theme, in this theme the isr score value between items are relatively different in every item neither in syariah banking nor malaysia every year. this is because the social programs that are implemented by syariah banks in every year is different. 3. living environmnet theme, in this theme the average item that is disclosed by syariah banking in indonesia and malaysia is living environment conservation, an activity that does not make living evironment pollution (waste management, emission decomposition and others), and education. for the environmental management system theme, syariah banking only discloses 20%. in this theme syariah banks in indonesia have a total score of 27 while malaysia’s score is 15. the t-test equal variance not assumed value shows a number of 0.003. this number shows that the isr disclosure significance level of syariah banking in indonesia than syariah banking in malaysia is smaller than 0.05 or 5%, so the hypothesis in this research is accepted (h1 accepted), which is the presence of a significant difference in the islamic social reporting disclosure index in syariah banking that is present in indonesia and malaysia. the mentioned presence of an islamic social reporting (isr) value score in syariah banks in indonesia and malaysia is caused by: difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 61 1. there is not yet a rule that regulates about isr index disclosure in yearly syariah banking reports. 2. the meaning of isr items need to be explicitized or written clearly, because items that the meanings are not written clearly will cause disclosure levels in each syariah bank in indonesia and malysia to be not yet implemented or found perfectly (100%) 3. differences in disclosure levels that are implemented by syariah banking in indonesia and malaysia are able to be caused by internal factors. 4. large scale companies disclose more information because a large company size also means a large responsibility to the welfare of the stakeholders and environment and need a disclosure that is more complete and expansive. other than that, larger companies have more financial resources, facilities, and human resources for more disclosure of islamic social reporting, they will disclose more information, though without a standard or instruction that is able to be followed. this summary supports the previous research which is the research of othman and co. 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(2015). pengaruh ukuran perusahaan, profitabilitas, dan ukuran dewan direksi terhadap indeks islamic social reporting pada perusahaan yang terdaftar dalam jakarta islamic index tahun 2011-2013 http://www.bnm.gov.my/index.php?ch=li&cat=iib&type=iib&fund=0&cu=0 http://www.bnm.gov.my/index.php?ch=li&cat=iib&type=iib&fund=0&cu=0 http://www.gifr.net/gifr_2014.htm difference analysis of social performance with the islamic social reporting (isr) in syariah banking that are in indonesia and malaysia 62 . thesis not published. surabaya faculty of economics and business airlangga university. raditya, an. (2012). analisis faktor-faktor yang mempengaruhi tingkat pengungkapan islamic social reporting (isr) pada perusahaan yang masuk datar efek syariah (des). [thesis]. depok: faculty of economics indonesia uniersity. soemitra, a. (2010). bank dan lembaga keuangan syariah. jakarta: publisher kencana prenada media group. sofyani, ulum, syam, and wahjuni. (2012). islamic social reporting index sebagai model pengukuran kinerja sosial perbankan syariah (studi komparasi indonesia dan malaysia). malang: muhammadiyah university malang. sudarmadji, a.m., & sularto, l. (2007). pengaruh ukuran perusahaan, profitabilitas, leverage, dan tipe kepemilikan perusahaan terhadap luas voluntary disclosure laporan keuangan tahunan. proceeding pesat (psikologi, ekonomi, sastra, arsitek, & sipil). depok. sugiyono. (2012). metode penelitian kuantitatif, kualitatif, dan r&d. 17th print. bandung: cv alfabeta. sujarweni, v wiratna. (2014). spss untuk penelitian. yogyakarta: publisher: pustaka baru press. www.bi.go.id, accessed on 12 januari 2016. www.ojk.go.id, accessed on 16 januari 2016. http://www.bi.go.id/ http://www.ojk.go.id/ the influence of islamic branding and religiosity on brand image 31 9 the influence of islamic branding and religiosity on brand image anggie lia andini 1* and popy rufaidah 2 1,2 padjadjaran university, bandung, indonesia abstract the purpose of this study is to identify the magnitude of influence of islamic branding and religiosity on brand image. problem formulations in this research are whether there is an influence of islamic branding and religiosity on brand image. this study uses explanatory survey method to explain the causal relationship of research variables through hypothesis testing. the population of the study is the consumers of cosmetic products in indonesia. the study uses purpose sampling method, targeting the consumers of halal cosmetics and islamic brands. validity test results show that out of 37 question items, 36 items have correlation scores above 0.30 which means good and valid at 1% of significance level. reliability test results show that all variables have alpha cronbach scores above 0.90 which means very reliable and significant at 1% of significance level. the study results show that islamic branding and religiosity have significant influence on brand image. islamic branding has a greater than toward brand image. keywords: brand image, islamic branding, and religiosity 1. introduction indonesia is a country of diversity, home to different ethnic groups, cultures and religions diversity. this makes indonesia as one of the most diverse countries in the world. based on the population census conducted in 2010 by statistics indonesia (www.bps.go.id), the percentage of muslims was 87.2%, followed by christians at 6.9%, catholics at 2.9%, hindus at 1.7%, buddhists at 0.7 % and confucians at 0.05%. the large population of moslems in indonesia, influences the markets in a way that the products offered must be in accordance with islamic values. the religious diversity of islam, christianity, catholicism, hinduism, buddhism and confucianism provides a big opportunity to market various products based on religious values, such as cosmetics containing halal ingredients. the lifestyle development has shifted the consumption habit of muslim population in indonesia, especially for females, whose population is larger than that of males (www.bps.go.id), to products with religios values. muslims are required to use products with halal guarantee, as mentioned in the quran, surah al-baqarah verse 168: "o’ mankind! eat from whatever it is on earth (that is) lawful and good and do not follow the footsteps of satan. indeed, he is to you a clear enemy." muslim women or muslimah are increasing the level of awareness to look according to islamic teaching or sharia, especially for those who are married in to * corresponding author. email address: anggie14001@mail.unpad.ac.id mailto:anggie14001@mail.unpad.ac.id afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 32 please their husbands. as in the hadith of at-tabarani, the messenger sallallahu 'alayhi wa salam said: "the best women is she who when you look at her, she pleases you; when you command her, she obeys you; and when you are absent, she protects her honor and your property"(www.voa-islam.com). the obligation to practice the islamic teaching for muslims, especially for muslim women who tend to use cosmetics, affects the cometic industry in indonesia. the increasing awareness of muslim women to put on make up gives impact on the development of cosmetics with halal label. based on the data published on the website of the ministry of industry of republic of indonesia, the cosmetic industry has increased by 15% from 2012 (www.kemenperin.go.id). this increase also encourages the cosmetic industry to offer various types of halal-guatanteed cosmetics to meet the expectations of the muslim market segment. one of the manufacturers of cosmetics in the country is wardah which builds strategic positioning in the minds of its customers with halal certified products. therefore, it is interesting to examine the development of products that are built with islamic branding and wether the level of consumer religiosity has an effect on the formation of brand image of halal cosmetics. cosmetics from wardah as one of halal-guaranteed beauty products that exists in indonesian market are interesting to be studied. the problem formulation in this research is that whether islamic branding and religiosity influence the brand image of halal cosmetics. based on that, this research aims to investigate the influence of islamic branding and religiosity on brand image of halal cosmetics product. 2. literature review/hypothesis development islamic branding literature review on islamic branding often uses three different ways to define the concept: islamic brands by compliance, by origin or by customer (alserhan, 2010:35). the concept of islamic branding itself is a real thing and not a myth where islamic brand is distinct from conventional brand, i.e. it produces the truth where the seller and the buyer are involved in the truth as a reflection of the practice of worship (mohd yusof and wan jusoh, 2014:181). the purpose of islamic branding is to produce a product and offer an islamic service with the aim of adhering to sharia objectives (jalil and rahman, 2014:210). the concept of islamic branding combines religious, heavenly and worldly aspects and is not just about materialistic things (samidi et al., 2016:68). according to the concept proposed by noor (2010 in wilson, 2011:33), islamic branding is a friendly approach or in accordance with the principles of sharia. based on the literature review, the islamic branding concept used in this study is the one measured by three dimensions: compliance (halal product), origin (produced by muslim majority country) and customer (the product is intended for muslim consumers). in addition, islamic branding must be friendly or in accordance with the principles of sharia. religiosity the literature on the concept of religiosity suggests a revelation that religiosity is a link between religion and pro-social behavior and closely related to moral attitudes (van der duijn schouten, graaffland and kaptein, 2013: 439). the the influence of islamic branding and religiosity on brand image 33 definition of religiosity has been extensively reviewed by vitell, paolillo and singh (2006:118-119). vitell et al (2006) explored the concept of religiosity from mcdaniel and burnett (1990: religiosity is a belief that is accompanied by a commitment to god to follow the principles set forth by him). another notion of huffman's concept of religiosity (1988 in cui, et al., 2013: 748) states that religiosity is the determinant of several other indicators. religiosity is defined as a positive thing that is influenced by an ethical belief of the consumer (vitell and paolillo, 2003: 152). based on the concept of religiosity that has been put forward, it turns out that the concept of religiosity relies on the strength of cultural roles that can affect one's behavior (eid & el-gohary, 2014:478). based on the study of literatures, this research uses the concept of religiousity from glock’s multidimensional concept which is defined as a cultural force that influences one's behavior such as belief (ideological), religious practice (ritualistic), experience (experiential), practice (consequential), and religious knowledge/ intellectual (glock & stark in ancok and suroso, 1995). brand image the development of brand image concept is very dramatic and extraordinary. this concept is growing very rapidly with the many studies that have been published. brand image is often defined as an association of brands embedded in consumer memory (keller, 1993) or as a consumer's point of view that contains a number of perceptions (martín and rodriguez, 2008 in jraisat et al., 2015: 296). furthermore, brand image is also defined as a memory of a brand owned by consumers (gwinner and eaton, 2013:47). the concept of brand image is a combination of securities derived from the brand association (biel, 1992 in faircloth et al., 2001:64). another opinion that supports those definitions states that brand image is a belief about a brand (kotler, 1999). this research argues that brand image is a memory of a brand owned by consumers which consists of images viewed from the function of the product (functional image), the attitude to the brand (affective image) and the reputation of the brand (reputation) (hariri & vazifehdust, 2010). based on the literature review, this study adopted: (1) the concept of islamic branding from alserhan (2010: 35) using three dimensions to measure islamic branding, namely products are identified by compliance, products are identified by origin and products are identified by customer; (2) the concept of religiosity from glock & stark (in ancok and suroso 1995) that is measured by the dimensions of ritualistic, ideological, intellectual, experiential, and consequential; and (3) the concept of brand image from hariri & vazifehdust (2011) which states that the dimension of brand image can be measured through functional image, affective image and reputation. research that identifies simultaneously the influence of islamic branding and religiosity in shaping the brand image is still rarely done. brand image can be obtained a product on services for all efforts of companies who market their products or services through various media, for example from a number of attributes of products or services, the price applied, the intermediaries used and promotions used. however, it is interesting to explore the extent to which the influence of islamic branding and religiosity in shaping the brand image. is the greater the influence of islamic branding or religiosity towards the formation of a afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 34 product's brand image. to that end, this study focuses on identifying the magnitude of the impact of the influence of islamic branding and religiosity on brand image. hypothesis sugiyono (2013) argues that hypothesis is a temporary answer to the problem formulation of a study. so based on that opinion, a research hypothesis should be tested to prove that the allegations are true or false. there is still very little research to test whether there is an influence of islamic branding and religiosity on brand image, although islamic branding has been widely studied, such as by alserhan (2010) whose research entitled "islamic branding: a conceptualization of related terms". this research test the hypothesis as follows: h: there is an influence of islamic branding and religiosity on the brand image of halal cosmetics. 3. research methodology the method used in this research is explanatory survey method which is a useful method to explain causal relationship of research variables through hypothesis testing (aaker, kumar, day, & leone, 2011:72). causal research is conducted in order to identify impacts of specific changes on existing patterns. in this study, causal research is applied to examine whether the specific changes on islamic branding and religiosity could affect brand image. causal studies emphasis on an analysis of a situation or a specific problem, such as positive or negative image attached to specific products, to explain the patterns of relationships between variables, such as whether islamic branding partially affect brand image and religiosity partially influence the improvement on brand image. a survey was conducted to collect samples from the population with questionnaire as the data collection tool. the study gathered 182 respondents. the nature of this study is verification which means that the study aims to test the correctness of the hypotheses and to show that islamic branding and religiosity influence brand image. this study examines whether there is an influence of islamic branding and religiosity on brand image. the type of research used is descriptive analysis, which aims to contain a structured, factual and accurate description of the analysis of the facts, the nature and correlation between the variables analyzed statistically (sugiyono, 2013). furthermore, the results provides an answer to the hypothesis testing, i.e. whether there is an influence of islamic branding and religiosity on brand image. this study uses spss software to optimize the accuracy of research and minimize bias to prevent overgeneralization. multiple linear regression is used to explain the relationship between variables. the sampling method used is purpose sampling. research respondents are muslim consumers who have used halal cosmetics manufactured and marketed by wardah. the following section describes the variable operationalization to measure the variables. islamic branding is measured by three dimensions proposed by alserhan (2010: 35), namely compliance, origin and customer. the islamic branding by compliance indicators are: (1) the products contain halal ingredients to form the perception of an islamic brand; (2) the products have obtained halal certificate from lppom mui (lembaga pengkajian pangan, obat-obatan dan kosmetika – majelis ulama indonesia/institute for assessment of food, drugs and the influence of islamic branding and religiosity on brand image 35 cosmetics – indonesian ulema council); and (3) the products are marketed by spg (sales promotion girl) in islamic dress. the islamic branding by origin indicators are: (1) products produced by a country with a majority of muslim population; (2) product promotion done by a country with a majority of muslim population; and (3) islamic activities in promoting products originating from a predominantly islamic country. the islamic branding by customer indicators are: (1) the target market is muslims; (2) the use of halal certification on wardah products already meets sharia standards; (3) products manufactured in non-muslim countries are halal if they have halal label; and (4) products that do not have halal label coming from non-muslim countries. religiosity is measured based on the dimensions of ritualistic, ideological, intellectual, experiential, and consequential proposed by glock & stark (in ancok and suroso, 1995). the ideological dimension indicators are: (1) practicing the religion, (2) religious teachings lead to better people, and (3) consuming non-halal products is a sin. the ritualistic dimension indicators are: (1) consuming halal products as a form of adherence to the religion embraced; (2) using halal products is a firm adherence to belief; and (3) using halal products is an act of practicing the religious teachings. the experiental dimension indicators are: (1) feel peaceful when using halal products; (2) feel more religious when using halal products; (3) feel calm when consuming halal products; and (4) feel closer to god by constantly consuming halal products. the consequential dimension indicatorsare: (1) the social environment is the cause of always consuming halal products; (2) the social environment is not concerned with the consumption of halal or non-halal products; and (3) the social environment does not understand sharia-based actions. the intellectual dimension indicators are: (1) the teaching of consuming halal product is contained in the quran, surah al-baqarah 168; (2) the content of the quran especially surat al-baqarah 168; and (3) surah al-baqarah 168 in the quran serves as a guide in consuming halal products. brand image is measured by the dimensions proposed by hariri & vazifehdust (2011), namely functional image, affective image and reputation. the functional image indicators are: (1) the quality of products is superior to other halal cosmetics; (2) the prices of products are quite affordable; (3) local brand that has its own prestige compared with cosmetic brands from abroad; and (4) the benefits of the products are felt immediately. the affective image indicators are: (1) being pleased when using the products; (2) being calm when using the products; and (3) being happy everytime using the products. the reputation indicators are: (1) the products are well known as halal cosmetics in indonesia; (2) the products are the only halal cosmetics in indonesia; (3) the products are halal cosmetics suitable for muslim women; and (4) the products are halal cosmetics that can be used by all consumers from various religious backgrounds. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 36 4. results and discussion descriptive statistics this section describes the characteristics of the study respondents. the study collected 182 respondents. the majority of respondents are women (70%), aged between 20-30 years old. the majority of respondents live in bandung (64%), dki jakarta (15%) and the rest come from various cities such as cirebon, depok, bekasi, yogyakarta, solo, etc. the majority of respondents are students (89%) and the rest work as lecturers, entrepreneurs, employees and housewives. as many as 75% of respondents know wardah cosmetics from social media. furthermore, this study only focuses on the data of muslim consumers of halal cosmetics, so, nonmuslim respondents are excluded in the calculation. data from a total of 182 respondents was processed for further calculation using spss, including validity and reliability tests and multiple regression analysis. table 1 descriptive statistics demographic description frequency percent gender man 55 9.4% women 127 70.3% age 15-20 years 38 20.9% 20-30 years 128 70.3% 30-40 years 15 8.2% > 40 years 1 0.6% domicile bandung 117 64.3% dki jakarta 27 14.8% etc 38 20.9% work student / student 161 88.5% entrepreneur 8 4..4% employee / employee 6 3.3% housewife 5 2.7% etc 2 1.1% validity test validity test results show that out of 37 statement items, 36 items have correlation scores above 0,30 which means good and valid at 1% of significance level. furthermore, the item with correlation score below 0.3 was deleted and the correlation was then recalculated using 36 items. the correlation score before and after the deleted item is shown in table 1. furthermore, reliability test results show that all variables have cronbach alpha scores above 0.90 which means very reliable and significant at 1% of significance level. the results of validity test are presented in table 2 – 4. the influence of islamic branding and religiosity on brand image 37 table 2 the results of validity test: islamic branding variable dimensions and indicators of islamic branding variable (cronbach alpha 0.902) validity score before deleted score below 0.3 new scores of validity after deleted score below 0.3 dimension-1: islamic branding by compliance 1. the products contain halal ingredients to form the perception of an islamic brand 0.716** 0.716** 2. the products have obtained halal certification from lppom mui to form the perception of an islamic brand 0.661** 0.661** 3. the products are marketed by spg (sales promotion girl) in islamic-dress to form the perception of an islamic brand 0.711** 0.711** dimension-2: islamic branding by origin 4. islamic brand is formed by products produced by a country with a majority of muslim population 0.831** 0.831** 5. islamic brand is formed by various forms of product promotion done by a country with a majority of muslim population 0.817** 0.817** 6. islamic brand is formed by a variety of islamic activities in promoting products originating from a predominantly islamic country 0.730** 0.730** dimension-3: islamic branding by customer 7. an islamic brand is attached to a product because the target market is muslims 0.710** 0.710** 8. islamic brand is attached to a product because the use of halal certification on wardah products already meets sharia standards 0.748** 0.748** 9. i believe products manufactured in non-muslim countries are halal products if they have halal label 0.680** 0.680** 10. i do not trust products that do not have halal label coming from non-muslim countries 0.680** 0.680** ** significant at 1% level, r table (α = 0.01): 0.2226, (α = 0.05): 0.1584; afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 38 table 3 the results of validity test: religiosity variable dimensions and indicators of religiosity variable (cronbach alpha 0.937) validity score before deleted score below 0.3 new scores of validity after deleted score below 0.3 dimension-1: ideological 1. i always convince myself to always practice my religion 0.592** 0.592** 2. i believe that by believing in my religious teachings i can be a better person 0.553** 0.553** 3. i believe that consuming non-halal products is a sin 0.615** 0.615** dimension-2: ritualistic 4. i always convince myself to always consume halal products as a form of adherence to my religion 0.798** 0.798** 5. i believe that by using halal products i have been adhering to my belief 0.847** 0.847** 6. i believe that using halal products is an act of practicing the religious teachings 0.792** 0.792** dimension-3: experiental 7. i feel peaceful when using halal products 0.846** 0.846** 8. i feel more religious when using halal products 0.680** 0.680** 9. i feel calmer when consuming halal products 0.803** 0.803** 10. i feel closer to god by constantly consuming halal products 0.804** 0.804** dimension-4: consequential 11. the social environment in which i live causes me to always consume halal products 0.746** 0.746** 12. the social environment in which i live is not concerned with whether i consume halal or non-halal products 0.186** 13. the social environment in which i live does not understand whether i have acted according to sharia 0.379** 0.379** dimension-5: intellectual 14. i know that the teaching of consuming halal products is contained in the quran, surah al-baqarah 168 0.800** 0.800** 15. i know the content of surah al-baqarah 168 in the quran, "o’ mankind! eat from whatever it is on earth (that is) lawful and good and do not follow the footsteps of satan. indeed, he is to you a clear enemy." 0.820** 0.820** 16. i know that the content of surat al-baqarah 168 serves as a guide in consuming halal products. 0.813** 0.813** ** significant at 1% level, r table (α = 0.01): 0.2226, (α = 0.05): 0.1584; the influence of islamic branding and religiosity on brand image 39 table 4 the results of validity test: brand image variable dimensions and indicators of brand image variable (cronbach alpha 0.935) validity score before deleted score below 0.3 new scores of validity after deleted score below 0.3 dimension-1: functional image 1. wardah products are impressive because of their quality is superior compared with other halal cosmetics 0.827** 0.827** 2. wardah products are impressive because the prices are quite affordable 0.734** 0.734** 3. wardah products are impressive because as a local brand it has its own prestige compared with cosmetic brands from abroad 0.802** 0.802** 4. wardah products are impressive because the benefits of the products are felt immediately 0.886** 0.886** dimension-2: affective image 5. wardah image as halal cosmetics makes me feel pleased when using the products 0.880** 0.880** 6. wardah image as halal cosmetics makes me feel calm when using the products 0.806** 0.806** 7. wardah image as halal cosmetics makes me feel happy every time using the products 0.803** 0.803** dimension-3: reputation 8. wardah brand has been known as famous halal cosmetics in indonesia 0.641** 0.641** 9. wardah brand has been known as the only halal cosmetics in indonesia 0.706** 0.706** 10. wardah cosmetics have been known as halal cosmetics suitable for muslim women 0.788** 0.788** 11. wardah cosmetic have been known as halal cosmetics that can be used by all consumers from various religious backgrounds 0.687** 0.687** ** significant at 1% level, r table (α = 0.01): 0.2226, (α = 0.05): 0.1584; multiple regression analysis multiple linear regression is the most common form of linear regression analysis. as a predictive analysis, multiple linear regressions is used to explain the relationship between one dependent variable and two or more independent variables. the equation of multiple regression model used in this study is as follows: y=a+b1x1+b2x2.+ e. y represents brand image as a function of islamic branding (x1) and religiosity (x2). the constanta (a) shows the value of brand image if islamic branding value and religiousity value is zero. the symbol of e afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 40 represents the error value. regression coefficient determines the direction of regression line. using spss software, the output obtained from multiple regression is as follows: y= 4.806 + 0.669 x1 + 0.240 x2 + e. the interpretations of the equation are as follows: firstly, the value of a = 4.806, it means if the values of both islamic branding (x1) and religiosity (x2) are zero the value of brand image (y) will be 4.806 unit and the direction will cross the y axis; secondly, the value of b1= 0.476, it means if islamic branding (x1) increases by 1 unit, and the other variables are constant, then brand image (y) value will increase by 0.669 unit; finally, the value of b2= 0.232, it means if religiousity (x2) increases by 1 unit, and the other variables are constant, then brand image (y) value will increase by 0.240 unit. islamic branding (x1) and religiousity (x2) have direction of positive influence toward brand image (y). this indicates that the development of islamic branding and religiousity will effectively improve the brand image of halal cosmetics. table 5 coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 4.806 2.177 2.207 .029 totalx1 .669 .072 .568 9.310 .000 totalx2 .240 .049 .298 4.892 .000 a. dependent variable: totaly based on the above table, variable x1 (islamic branding) has a significance value of 0.000 (p< 0.05) which means that the hypothesis is accepted, i.e. there is a significant influence of islamic branding on brand image. variable x2 (religiosity) also has a significance value of 0.000 (p <0.05) which means that the hypothesis is accepted, i.e. there is a significant influence of religiosity on brand image. hypothesis testing the hypothesis testing uses simultant test (f test). simultaneous hypothesis testing is used to determine whether islamic branding and religiousity variables simultaneously influence brand image. the study tested the following hypothesis: h0: x1 (islamic branding) and x2 (religiosity) do not influence y (brand image) simultaneously and h1: x1 (islamic branding) and x2 (religiosity) influence y (brand image) simultaneously. the study used significance level (α) at 5%. the test criteria are as follows: if fscore ≥ ftable, then h0 is rejected; and if fscore < ftable, then h0 is accepted. table 6 anova f-test model sum of squares df mean square f sig. 1 regression 7165.693 2 3582.847 166.200 .000b residual 3923.463 182 21.557 total 11089.157 184 a. dependent variable: totaly b. predictors: (constant), totalx2, totalx1 the influence of islamic branding and religiosity on brand image 41 based on the calculation, the f score is 166.200 with p-value (sig) of 0.000. with α=0.05, the degrees of freedom are v1=2 and v2=182 (n-(k+1)), whereas the f table is 3,05. since the f score > f table, then h0 is rejected. it can be interpreted that based on the above anova table, the significance value of 0.000 (p <0.05) which means that islamic branding and religiosity significantly and simultaneously influence brand image. the result of f value shows that f score is larger than f table (116.200 vs. 3.05, df1 = 2, df2 = 182) which means that the hypothesis is accepted, i.e. there is a significant influence of islamic branding and religiosity on brand image. a slight change in islamic branding and religiousity will greatly change the brand image of the products. to maintain positive brand image, it is really important to maintain positive islamic branding as well as the religiousity of consumers. 5. conclusion islamic branding is the process of building brand identity of a product or service by applying islamic principles that integrate religion with the practice of everyday life. islamic branding is a way of using islamic values to get a special position in the minds of consumers. islamic branding also represents the activities in building distinctive identity of a product or service according to sharia. it is where the marketer considers islamic values when creating a brand to be accepted by muslim society. the research finds that consumers’ evaluation towards islamic branding could also be added with dimensions other than products such as the behaviour of sales promotion girls in promoting the products based on sharia. the behaviour of sales promotion girls in delivering services to the consumers could also create a brand position. religiosity is one's belief in a shared religion and a level of behavior to apply religious teachings in which it can shape one's moral attitude and behavior. religiosity dimensions under study are: ritualistic (practicing religious values) which includes things that must be conducted by someone in accordance with what is taught in a particular religion; ideological (conducting religious duties) which is the concept of a particular religious understanding that will shape one's thinking and morals; intellectual (knowledge of religion) which is the science taught in a particular religion about what should (not) be conducted experiental (experience when practicing) which is someone’s involvement in practicing the ritual of certain religious teachings; and consequential (consequences when not applying) which is the consequence of certain religious teachings more on causal causes in ritualistic terms. religiosity is the understanding or knowledge of a person about the teachings of his or her religion embodied in everyday behavior. theoretically, the more religious a person, the better his behavior based on the religious values he embraces. in relation to the study that examined the influence of islamic branding and religiosity on brand image, further study should strengthen the comprehension about the difference between brand image and branding. brand image is the output produced after branding a product or service brand. branding is the process of establishing the identity of a product or service by using a number of tangible and non-tangible attributes. islamic brand image and islamic branding are two different things. islamic brand image is the output produced after branding the brand of a product or service using islamic values. while islamic branding is the process of afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 42 establishing the identity of a product or service with islamic values through the use of a number of tangible and non-tangible attributes. brand image is the impression one gets on the result of establishing the identity of a product or service to the target market's perception. halal labeled cosmetics made in indonesia is one of the determinants of islamic product brand. products using halal labels have an advantage over products that do not use halal label as part of islamic branding. the consistent use of islamic branding determinants can shape an islamic brand image. islamic brand image is very important to obtain a product such as cosmetics used by the muslim market in indonesia. especially for halal cosmetics, wardah becomes the first halal cosmetics in indonesia. one factor that can influence the brand image of halal labeled products is consumer religiosity. in addition, the brand image of halal cosmetics is also influenced by islamic branding. references alserhan, b. a. 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(2003). consumer ethic: the role of religiosity. journal of business ethics, 46(2), 151-162. wilson, j. (2011). the challenges of islamic branding: navigating emotions and halal. journal of islamic marketing, 2(1), 28-42. www.kemenperin.go.id www.voa-islam.com www.bps.go.id obstacles and strategy of municipal islamic bonds issuance as an alternative of municipal funding 1 obstacles and strategy of municipal islamic bonds issuance as an alternative of municipal funding asa jasmine harimurti 1*1and achmad zaky2 1,2 universitas brawijaya, malang, indonesia abstract the objective of this thesis is to identify obstacles and strategies for municipal islamic bond issuance as an alternative in regional financing using the analytical networking process (anp). the analysis found that the most dominant obstacle in the aforementioned issue is the local government aspect. in the aspect of the central government, the obstacle is the unavailability of studies concerning the instrument of municipal islamic bonds. in the aspect of the local government, the obstacle is the low understanding of the government about the means of municipal islamic bonds. in the aspect of the regional house of representative, the obstacle is the behaviour of representatives, in which they complicate bureaucracy in the issuance of municipal islamic bonds. the most dominant solution for the obstacles and strategy in the issuance of municipal islamic bonds is a fundamental solution. the dominant strategy for a fundamental solution is the socialization of education about municipal islamic bonds and a promotion pattern in collaboration with indonesia’s financial service authority. keywords: municipal islamic bonds, obstacle, strategy 1. introduction decentralization is a fundamental in government management marked with the presence of a division of authority and the availability of an ideal public space for interpereting authority to lower level government units or known as municipal governments (hadi, 2005). a clear and strict seperation in the matter of central government finance with municipal governments is a form of fiscal decentralization (isdijoso and wibowo, 2002). in the implementation of fiscal decentralization, the central government provides funding support with the authority to collect tax and retribution in the area which is known as locally generated revenue. other than that the central government provides funding support through transfers or what is often known as municipal fund transfers in the form of balancing funds which are revenue sharing funds, public allocation funds, and specific allocation funds. the income source which municipal governments obtain are assessed as very limited, because the funding source obtaind from the central government is much absorbed into routine spending (kaluge and okta, 2011). with an all limited financial condition it is confirmed that municipal governments have difficulties for implementing several development, infrastructure and renovation projects of public facilities because of the limited funds owned. this condition indicates the need for municipal governments to implement innovation soon for covering the funding gap size by searching for municipal funding alternatives. the implementation of act number 33 year 2004 about 1 corresponding author. email address : jasmineharimurti@gmail.com afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 2 financial balnce between the central government and municipal governments and act number 32 year 2004 about municipal governments, provides municipal governments the opportunity for collecting funds as a funding alternative from other municipal income sources, one of which is by the issuance of securities. the presence of a syariah based financial system (syariah finance) is growing rapidly ,and adopted by several countries in the world. the syariah finance growth which is massive is marked with the issuance of several syariah based financial instruments in several countries one of which is the islamic bond. according to the national syariah council fatwa no 41/dsn-mui/iii year 2004, islamic bonds are one of the long term securities based on the syariah principle issued by emittance to islamic bond holders that requires issuers to pay income to islamic bond holders in the form of revenue sharing/margin/fee and paying back the islamic bond fund in the due date. according to act no 19 year 2008 about national syariah securities, other than being used as a source of national funding, the issuance of the islamic bond instrument is also used as infrastructure development project funding such as: developing toll roads, bridges, dams, airports, and power plants. research related with the opportunity of using municipal islamic bonds in indonesia is still limited to the analysis of the ability of a municipal in issuing municipal islamic bonds and the benefit of issuing municipal islamic bonds. when studied in depth, the primary obstacle in the municipal islamic bond issuance is that there is not yet a municipal that is able to collect funds by issuing securities. in another point, the opportunity of municipal islamic bond issuance is very large, considering the law in indonesia supports issuing municipal securities. because of that, there is a need for searching obstacles that underlies the problem of municipal islamic bond issuance in indonesia, and there is a need for formulating strategy and recommendations which are able to solve the present obstacles. 2. research method this research uses the analytical networking process (anp) approach in identifying obstacle factors and issuing strategies of municipal islamic bonds as an alternative of municipal funding in indonesia. the anp approach is able to absorb a value or view which scholars, practitioners, and regulators represent. the anp method selection in this research is implemented based on the fact that municipal islamic bond issuance, especially municipal bonds, have not yet been realized by municipal governments, even though there is already a regulation that allows the issuance of municipal bonds. other than that, specific regulations of municipal bonds have not yet been regulated in indonesia, other than comparing the benefit of municipal islamic bonds as a municipal funding alternative which has much potential to support municipal development. so, in line with the anp method, this research needs expert respondents in the fields of municipal funding and syariah finance which are able to provide views relevant with the obstacles and strategy of islamic bond issuance. research of obstacles and strategy of municipal islamic bond issuance as a municipal funding alternative in indonesia is implemented in accordance with the anp research phases. beginning with a literature review in the form of journals, books, and regulations related with islamic bonds and municipal funding, and implementing an in depth interview with an expert in the municipal obstacles and strategy of municipal islamic bonds issuance as an alternative of municipal funding 3 funding field. the result from the literature review and the interview is validated by experts, practitioners and regulators. the result from filling the questionnaire is processed and analyzed, so it produces a conclusion about obstacles and strategy as a municipal funding alternative. the data source used is a primary data obtained from the result of in depth interviews and questionnaire fillings by respondents. according to narimawati (2008), primary data is data from the real source or the first and is not present in the compiled form. respondents of this research are the experts, practitioners, and regulators by examining respondents’ competence to obstacles an strategy of municipal islamic bond issuance as an alternative of municipal funding in indonesia. the number of respondents in this research consist of 7 (seven) persons which consist of experts, practitioners, and regulators, because in the anp analysis the sample/respondent number is not used as a validity benchmark. the requirement for a respondent to be valid in anp is that the respondent is a competent person in the field (ascarya, 2005). meanwhile, data gathering methods used in this research are interviews and questionnaires. table 1 experts involved in the research no name position and institution party 1. rijanta tri wahjono head of syariah law documents section, directorate general of finance and risk management regulator 2. sugeng wahyu hendarto head of the development sub directorate , national planning agency regulator 3. nur sigit warsidi director of the syariah capital market, financial services authority regulator 4. noven suprayogi head of the syariah economy study program, faculty of economics and business airlangga university expert and practitioner 5. sigit kurnianto executive director of east java indonesia accountant bond expert and practitioner 6. san rudiyanto internal supervising unit, brawijaya university expert and practitioner 7. pemerintah daerah jawa barat staff of the economics and development division municipal government source: writer processed the implemented anp research phases consist of 9 (nine) phases among others: 1) problem identification, implemented by reading articles about the absence of municipals which are able to issue islamic regional bonds as a municipal funding alternative for obtaining topics and the research gap; 2) a literature review and in depth interview is implemented for obtaining independent variables from literature and interview results; 3) expert validation is implemented for reducing independent variables which are relevant with the present problem; 4) the questionnaire arranging and the anp scheme is created based on reducted variables by experts and the scheme is created with a software super decision; 5) an expert survey is implemented by filling questionnaires and studies related with the strategy with respondents; 6) the data analysis is a process of searching and arranging obtained data systematically by using the software super decision; 7) data interpretation is implemented by combining all anp scheme results which are processed in the data analysis phase by using microsoft excel; 8) the analysis result is the result of the average priority count of all respondents which then will be created into a variable ranking list; 9) the conclusion is the final phase of all the anp research phases. afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 4 figure 1 anp research phases 3. discussion obstacles and strategy of municipal islamic bond issuance as a municipal funding alternative based on literature review and interview results with competent sources in the fields of municipal islamic bond issuance and municipal funding, so the expert validation is then implemented in reducing variables which are assessed to be related with the obstacle of the issuance of municipal islamic bonds as a municipal funding alternative. the variable reduction table of the expert validation results is able to be seen in table 1 and the expert validation recapitulation result is able to be seen in table 2. meanwhile the municipal bond issuance strategy variable becomes a reference in implementing an in depth study with respondents for arranging the mapping action plan matrix. table 2 reduction variables of expert validation results 1. obstacle variables of the central government aspect obstacles central government aspect k1.1 the absence of incentives in igniting municipal bond issuance as a funding alternative (shidiq, 2017) k1.2 the complicated bureaucracy of municipal islamic bond issuance (ardhian, 2017) k1.3 the absence of a review about the municipal islamic bond instrument (shidiq, 2017) 2. obstacle variables of the municipal government aspect obstacles municipal government aspect k2.1 the low understanding of municipal governments to the municipal islamic bond instrument (interview result of rudiyanto, 2017) analysis results conclusion and suggestions anp questionnaire arranging and scheme/network expert survey problem identification expert validation literature review interview phase 1 konstruksi model phase 2 kuantifikasi model phase 3 analisa hasil data analysis result interpretation obstacles and strategy of municipal islamic bonds issuance as an alternative of municipal funding 5 k2.2 the tendency to avoid municipal islamic bond issuance risk and selecting another form of funding (solehudin, 2017) k2.3 the low commitment of municipal islamic bond planning (pontjowinoto, 2016) 3. obstacle variables of the municipal people’s representative council obstacles municipal people’s representative council aspect k3.1 complicates the bureaucracy of the municipal bond issuance instrument (interview result of rudiyanto, 2017) k3.2 less pro-active with the planning implemented by the municipal government (interview result of rudiyanto, 2017) 4. obstacle variables of the investor aspect obstacles investor aspect k4.1 a conservative attitude with an orientation for profit from investment results (interview result of rudiyanto, 2017) k4.2 an attitude of lesser trust of municipal government credibility (interview result of rudiyanto, 2017) 5. obstacle variables of the capital market aspect obstacles capital market aspect k5.1 the absence of equal knowledge of market players related with syariah based investment (interview result of rudiyanto, 2017) k5.2 the limited number of syriah based market players (interview result of rudiyanto, 2017) 6. roadmap strategy variable strategy roadmap strategy s3.1 arranging a grand design of the education pattern and promoting municipal islamic bonds in an interesting way collaborating with the financial services authority s3.2 implementing a structured and sustainable evaluation with investors and the central government related with municipal islamic bonds s3.3 improving the domestic investor base and opening the market for foreign investors 7. technical strategy variable strategy technical strategy s2.1 completing the issuance regulations of municipal islamic bond issuance s2.2 socialization of the municipal islamic bond issuance regulations s2.3 fixing regulations that complicate in islamic bond issuance afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 6 8. fundamental strategy variable strategy fundamental strategy s1.1 education and training related with municipal islamic bonds s1.2 optimizing the application of new public management for improving municipal government performance s1.3 the preparation of supporting professions and institutions of municipal islamic bond issuance source: writer processed based on the data processing result related with the obstacles and strategy of municipal islamic bond issuance as an alternative of municipal funding, the following results are obtained: table 3 priority rank data processing results aspect average rank rank central government 0.295198333 3 municipal government 0.352806667 1 municipal people’s representative council 0.351563333 2 central government average rank rank incentive 0.329666667 2 complicated bureaucracy 0.32875 3 review 0.341171667 1 municipal government average rank rank municipal government understanding 0.336263333 1 risk avoidance 0.329273333 3 low commitment 0.33282 2 municipal people’s representative council average rank rank complicates bureaucracy 0.339575 1 less pro-active 0.32995 3 conservative attitude 0.331806667 2 solution average rank rank fundamental solution 0.378063333 1 technical solution 0.333073333 2 roadmap solution 0.286123333 3 technical solution average rank rank education and training 0.376788333 1 optimizing student numbers 0.35821 2 profession and institutions 0.265001667 3 fundamental solution average rank rank completing regulations 0.339735714 2 socialization of regulations 0.365322857 1 fixing complicated regulations 0.297317143 3 roadmap solution average rank rank arranging the grand design 0.3341 1 structured and sustainable evaluation 0.31187 2 improving the domestic and foreign investor base 0.29937 3 source: writer processed obstacles and strategy of municipal islamic bonds issuance as an alternative of municipal funding 7 municipal islamic bond issuance action plan matrix table 4 action plan mapping matrix of municipal islamic bond issuance as a funding alternative no phase aspect solution strategy reccomendation 1 planning of municipal islamic bond issuance a the planning of municipal islamic bond issuance has to be followed by a project proposal and a study document preperation of the project worthiness study. municipal government aspect, where planning is implemented by project initiators, the proposed project is only a project that is allocated in the municipal income spending budget, can be in the form of a project which will be or in the process of being built fundamental education and training related with municipal islamic bonds the education and training related with municipal islamic bonds is implemented so municipal governments and the municipal people’s representative council understands the project which can be funded through municipal islamic bond issuance b assessment of project worthiness and approval central government and municipal people’s representative council aspect, where the readiness criteria and mui standard have released regulations of the project criteria in corresponding with syariah principles. other than that,the municipal islamic bond issuance needs the municipal people’s representative council’s approval in municipal islamic bond issuance. fundamental education and training related with municipal islamic bonds the readiness criteria and the mui standard regulations need to be socialized to municipal governments and the municipal people’s representative council so it is able to be a project assessment in determining the project priority list. 2 municipal islamic bond issuance budgeting a municipal income municipal government technical regulation socialization the allocation of the municipal income afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 8 no phase aspect solution strategy reccomendation spending budget allocation aspect, the advantage of the municipal islamic bond as a municipal funding alternative is not yet felt compared with other sources of funding. related with municipal islamic bonds spending budget in the form of budget items of project capiital spending which guarantee fund liquidation of project funding, yet the budgeting item for spending of compensation payment and the nominal value of municipal islamic bond issuance is also needed. b budgeting implementation document arranging municipal government aspect, the fund liquidation mechanism is not yet clear in the project implementation that is funded through municipal islamic bonds technical regulation socialization related with municipal islamic bonds the fund liquidation mechanism is adapted with the determined regulations specifically for municipal islamic bonds 3 municipal islamic bond issuance a planning of issuance and sales of municipal islamic bonds municipal government aspect technical completing the regulations of municipal islamic bond issuance the planning and sales process of municipal islamic bonds needs regulations that are clear and detailed so the implementation can be in line with the regulations determined by the central government b issuance implementation and sales of municipal islamic bonds municipal government aspect, the implementation of the issuance and sales need to be supervised roadmap arranging the grand design pattern and promoting municipal islamic bonds attractively collaborating with the financial service authority the regulation of issuance and sales need to be followed by education and promotion to society which will be municipal bond investors c administration issuance and municipal islamic bond sales municipal government aspect, financial obstaceles are able to be revealed in the administration of municipal islamic bond sales roadmap implementing a structured evaluation program with investors and the central government related with municipal islamic bonds the progress and administration results need to be informed to investors as holders of municipal islamic bonds and the central government as the regulator by holding a structured evaluation program d portfolio and risk management municipal government aspect, risks can be roadmap implementing a structured evaluation the finding of risks and portfolio management need to be informed to investors obstacles and strategy of municipal islamic bonds issuance as an alternative of municipal funding 9 no phase aspect solution strategy reccomendation identified some years after the municipal islamic bonds are published program with investors and the central government related with municipal islamic bonds as the municipal islamic bond holders and the central government as the regulator by holding an evaluation program the exposure in the action plan mappig matrix clearly shows that there is an influential relation between aspect processing results, obstacles, solutions and the priority strategy or dominant with every phase of municipal islamic bond issuance as an alternative to municipal funding. it clearly shows than the municipal government aspect appears as many as 7 (seven) times in all the subphases of municipal islamic bond issuance, in line with the selection of municipal governments as the most dominant aspect compared with other aspects. it is able to be concluded that municipal governments are parties which are not yet ready and not yet commited in issuing municipal islamic bonds as an alternative of municipal funding, even though the central government already provided incentives in the form of policies which tell that municipal governments are provided opportunities in issuing securities. the strategy in the fundamental solution is also filled by the education and training strategy related with municipal islamic bonds which is also the most dominant strategy compared with other strategies. the intended education and training is a continuation of the central government’s policy and the policy related with municipal islamic bonds has to be followed specifically and education and training need to be provided to apertures in the funding division in municipal governments. other than that, the strategy in the technical solution is also dominated by the strategy of regulation socialization related with municipal islamic bonds and is also the most dominant strategy compared with other strategies. it is able to be concluded that, after there are specific regulations related with municipal islamic bonds, the central government needs to implement the present policy socialization in the frame of educating municipal governments and the municipal people’s representative council about the importance of the funding factor through securities, one of which is the municipal islamic bond. 4. conclusion based on research analysis results to obstacles and strategy of municipal islamic bond issuance as a municipal funding alternative, the following conclusion is obtained: 1. research results show that the obstacles of municipal islamic bond issuance as an alternative to municipal funding consist of 3 (three) aspects which are the central government aspect, the municipal government aspect, and the municipal people’s representative council aspect. as a whole, the dominant obstacle or which becomes the priority obstacle and the strategy of islamic bond issuance is the municipal government aspect. as for the most dominant obstacle in each aspect are: 1) in the central government aspect the most dominant is the absence of a review about the municipal islamic bond instrument; 2) in the municipal government aspect the most dominant is the low understanding of municipal governments to the afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 10 municipal islamic bond instrument; 3) in the municipal people’s representative council aspect the most dominant is the complicated bureaucracy of municipal islamic bond issuance. the most dominant solution in the obstacles and strategy of municipal islamic bond issuance is a fundamental solution. while the most dominant strategy in each solution is: 1) a fundamental solution, education and training related with municipal islamic bonds; 2) a technical solution, socialization of regulations of municipal islamic bond issuance; 3) a roadmap solution, arranging the grand design of the education pattern and promonting municipal islamic bons effectively collaborating with the financial services authority. 2. the action plan matrix mapping shows that there is an influential relation between aspect processing results, obstacles, solutions and the priority strategy or dominant with each phase of municipal islamic bond issuace as a municipal funding alternative. the municipal government aspect appears as many as 7 (seven) times in the whole sub-phase of municipal islamic bond issuance, the strategy in the fundamental solution is filled with the education and training strategy related with municipal islamic bonds, and the strategy in the technical solution is also dominated by the socialization strategy of regulations related with municipal islamic bonds, which are all the most dominant variables. references ali, m. 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(1994). fundamentals of decision making and priority theory with the analytic hierarcky process. usa: rws publication. saaty, t. l. (2001). decision making with dependence and feedback: the analytical network process. usa: rws publication. http://www.iaei-pusat.org/id/article/ekonomi-syariah/perkembangan-sukuk-negara-untuk-pembangunan-infrastruktur. http://www.iaei-pusat.org/id/article/ekonomi-syariah/perkembangan-sukuk-negara-untuk-pembangunan-infrastruktur. http://www.konsultasi/ https://www.kompasiana.com/julianarizal/sukuk-dan-jenis-jenis-sukuk-indonesia_591b25231cafbd1075971132. https://www.kompasiana.com/julianarizal/sukuk-dan-jenis-jenis-sukuk-indonesia_591b25231cafbd1075971132. obstacles and strategy of municipal islamic bonds issuance as an alternative of municipal funding 13 saaty, t. l., & vargas, l. g. (2006). decision making with the analitic network process. economic, political, social and technological applications with benefits, opportunities, costs and risk. usa: springer. shodiq, m. (2012). urgensi sukuk bagi pemerintah daerah. https://saepudinonline.wordpress.com/2012/07/17/urgensi-sukuk-bagipemerintah-daerah/. akses 25 september 2017 siskawati, e. (2010). perkembangan obligasi syariah di indonesia: suatu tinjauan. jurnal akuntansi & manajemen vol 5 no 2. padang: politeknik negeri padang. sudaryanti, n., mahfud., a. a., & wulandari, r. (2014). analisis determinan peringkat sukuk dan peringkat obligasi di indonesia. tazkia islamic finance and business review, 6(2). bogor: tazkia sugiyono. metode penelitian kuantitatif, kualitatif dan r&d. bandung: alfabeta sutedi, a. (2009). aspek hukum obligasi dan sukuk. jakarta: sinar grafika tim pengembangan instrumen pembiyaan syariah. (2008). pembiayaan proyek dengan penerbitan sbsn istishna-ijarah. studi kasus: pembiayaan proyek jembatan suramadhu. jakarta: departemen keuangan republik indonesia tim penulis dewan syariah nasional mui. (2003). himpunan fatwa dewan syariah nasional. jakarta: pt intermasa. tim studi investasi syariah pasar modal indonesia. (2004). studi tentang investasi syariah di pasar modal indonesia. jakarta: bappepam. undang-undang nomor 19 tahun 2008 tentang surat berharga syariah negara undang-undang nomor 22 tahun 2011 tentang anggaran pendapatan dan belanja negara undang-undang nomor 25 tahun 1999 tentang perimbangan keuangan pusat dan daerah undang-undang nomor 32 tahun 2004 tentang pemerintah daerah undang-udang nomor 33 tahun 2004 tentang perimbangan keuangan antara pemerintah pusat dan pemerintah daerah wahid, n. a. (2010). sukuk: membedah obligasi pada perbankan syariah. yogyakarta: ar-ruzz media. wahyuni, y. s. (2011). analisis komparasi imbal hasil dan risiko sukuk dengan menggunakan harga pasar dan harga wajar (studi kasus sukuk yang diterbitkan di indonesaia periode 2009-2011). jakarta: universitas indonesia. walidi. (2009). peta penawaran dan permintaan atas penerbitan sukuk daerah. jakarta: universitas indonesia https://saepudinonline.wordpress.com/2012/07/17/urgensi-sukuk-bagi-pemerintah-daerah/ https://saepudinonline.wordpress.com/2012/07/17/urgensi-sukuk-bagi-pemerintah-daerah/ afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 14 wibowo, t., & isdijoso, b. (2002). analisis kebijakan fiskal pada era otonomi daerah (studi kasus: sektor pendidikan di kota surakarta). jakarta zakik, k., & widita. (2016). analysis of municipal sukuk issuance and impact on regional financial independence in east java province. malang: universitas brawijaya. management of zakat as the instrument to improve economic recession of covid-19 1 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) management of zakat as the instrument to improve economic recession of covid-19 mursyidi abror1)*, muhammad nafik hadi ryandono2) 1, 2 master of science in islamic economics, faculty of economics and business, airlangga university abstract the purpose of ziswaf management is to restore the chaotic condition of the country due to covid19, especially in the economic sector. the purpose of this research is to analyze how the mechanism and implementation of zakat distribution in response to the covid-19 pandemic. the method used is literature study method. the literature study in this research is technical literature and non-technical literature. based on the results of the analysis, baznas has distributed zakat funds to three sectors, namely the field of health emergencies, socio-economic emergencies, and the field of existing program sustainability. from the results of this analysis, it can be concluded that the handlers of zakat implementation in handling covid 19 have a very big influence. the total distribution of funds for the three sectors reached rp. 7,578,461,063. keyword: ziswaf, economics, covid-19 1. introduction in the past, the world is being shocked by a tragedy that can destroy state governance in terms of health, economy, education, religion and socio-culture. namely with the covid-19 virus outbreak that originated in wuhan china, which then spread to other countries to enter indonesia. in indonesia, the case of the covid-19 virus is very high. on november 25, 2020, there were 512 thousand cases of the community tested positive for covid-19, with 430 thousand declared cured and 16,225 dead. this caused the government to take action by imposing large-scale social restrictions (psbb) to reduce the spread of this virus and break the chain of transmission of covid 19.(irfandi, et. al 2020). however, the existence of this psbb policy has disturbed several community activities, especially in economic activities. where many workers complain about the existence of this psbb policy because the income they get is drastically reduced while their basic needs continue to creep up. to restore the state of the country, it cannot be solved by relying on government policy. it requires cooperation from all elements, namely society, government, and social organizations. one of the social organizations that can be used to deal with this condition is the zakat management institution (kadir et. al., 2020). before the covid-19 virus pandemic, the recipients of zakat funds were special, namely only for 8 groups as mentioned in the at-taubah letter. however, with this case the indonesian ulema council (mui) reviewed the utilization of zakat, infaq and alms funds to deal with the impact of the *corresponding author. email address: mursyidiabror96@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:mursyidiabror96@gmail.com afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 2 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) covid-19 pandemic. the scholars agree that islam is a religion of humanity, which is compatible with time, meaning that the rules and laws in islam were created for the benefit of mankind. so, in current conditions, zakat is used as an instrument for funding sources in dealing with covid-19. however, the use of zakat funds for these conditions is carried out freely, but must be based on clear criteria so as not to leave the zakat function itself. (saputra, 2020). the use of zakat funds has several provisions, namely, productive zakat that is distributed in cash or in kind for the poor who are affected by covid-19. then the use of zakat funds in the form of services or asset management for the benefit of the community is prioritized for mustahiq, such as basic needs, provision of medicines, ppe, and disinfectants needed by officers or volunteers in dealing with covid-19. thus, the use of zakat funds is given to people affected by covid-19, both muslims and non-muslims (saputra, 2020). the distribution of zakat is very important and useful if the distribution is focused on productive activities so that the benefits will be felt continuously. the implementation of the distribution of zakat funds can be done in the form; zakat is distributed to maintain the income of individuals in the poor, zakat that has been allocated in 50% can be allocated in the form of financing productive activities for the poor or underprivileged, for example financing for productive skills training and activities or providing business capital (maulana et. al, 2019). the steps that must be taken in overcoming the covid-19 pandemic are by using zakat funds that have been managed by baznas. then distributed to people affected by this covid-19 pandemic. furthermore, if zakat funds increase, the aggregate purchasing power will also increase. if the purchasing power increases, it will increase production activities or the aggregate supply will increase. so that it can provide more job opportunities and increase taxes, if the tax increases, it will automatically increase and restore national income so that the government is able to build public infrastructure that has a good impact on the welfare of the indonesian people. with the existence of zakat which has the potential to be very important in a pandemic like today, if it is managed, utilized (amalia & mahalli, 1999). based on the description above, this study is aimed at analyzing how the mechanism and implementation of zakat distribution in the response to the covid-19 pandemic. 2. literature study 2.1 definition of zakat zakat (zakāt) comes from arabic, which is from the wordوكس ی زكى which means "blessing, growing, clean and good". in terms of zakat, it is the assets issued to purify the person who gives zakat (muzakki) from the filth of the stingy and sins, nourishes the remaining assets, increases the reward for those who issue, and nourish and purify society as a whole. thus, because zakat is a manifestation of mutual cooperation between the rich and the poor, it is also a form of protection for the community from social disasters in the form of poverty and physical and mental weakness. therefore, allah said: https://creativecommons.org/licenses/by/4.0/ management of zakat as the instrument to improve economic recession of covid-19 3 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) "take zakat from some of their assets, with that zakat you clean and purify them, and pray for them. surely your prayer (is) peace of mind for them. and allah is allhearing, all-knowing. " (surat al-taubah: 103). according to abdul mujieb zakat is to issue a certain amount of assets to be given to people who are entitled to receive it on conditions determined by the syara (mujieb, 1994). meanwhile, according to al-syarbani zakat is the name for a certain number of certain assets that must be given to certain parties with certain conditions as well (al-sharbani, 1321). as for al-ghazzi's opinion about zakat is the name for a certain asset according to certain ways, then it is given to a certain group of people as well (al-ghazzi, 2005). meanwhile, according to law number 23 year 2011 zakat is property that must be issued by a muslim or business entity to be given to those entitled to receive it in accordance with islamic law. legal basis of zakat zakat is part of the third pillar of islam after prayer and prayer. this means that someone is required to pay zakat. because the benefits of zakat, if implemented properly, can be a potential source of income to support the success of national development, especially in the fields of religion and economy, especially to help increase people's income and welfare (zuhdi, 1994). as for the arguments that show that a person is obliged to pay zakat, it is written in qs at taubah 60 and 103, ad-dzariyat 19, al-baqoroh 245, 261 and 267 and in qs maryam 31. apart from that the prophet muhammad also said about obligation to pay zakat, as for the reads, namely: "from ibn abbas ra, that the holy prophet has sent mu'adz (bin jabal) ra to yemen. the holy prophet said: call (invite) them to admit that there is no god but and that i (muhammad) are the messenger of allah. if they accept that, then tell them that allah has made it compulsory for them to pray five times a day and night. if they have accepted it, then inform them that allah has obliged zakat on their property; taken from the rich among them and given to the poor among them. " (albukhari 1987) "it was from abu hurairah that a hamlet arab came to the messenger of allah. and asked: o messenger of allah, show me the deeds that if i do i will go to heaven! he replied: worshiping allah and not associating partners with him, establishing the obligatory prayers, paying the obligatory zakat, and fasting ramadan. he said: as my soul is in his grasp, i will not increase or decrease it at all. when he was gone, the holy prophet said: whoever wants to see one of the inhabitants of heaven look at this person. " (muslim 1972) "from ibn umar ra, that rasulullah saw. said: islam is founded on five principles: acknowledging that there is no god (right) but allah and that muhammad is the messenger of allah, establish prayers, pay zakat, perform hajj and fast in the month of ramadan. " (al-bukhari 1987) 2.2 purpose and benefits of zakat islam requires a muslim to pay zakat for nothing but the welfare of the people. because in the view of islam, zakat provides a belief that everything that is obtained and owned by humans is a permit from allah. therefore, whoever is lucky has the right to wealth, the wealth may not be https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 4 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) accumulated or hoarded and must be rotated (fitri, 2017). departing from the three principles of islamic economics, the objectives of zakat worship are: 1. to clean / purify the muzakki's soul from despicable traits such as stingy and selfishness / individualism. 2. to clean property from the possibility of mixing with illicit property. 3. to prevent the circulation of money to a group of the rich. 4. to improve the quality and welfare of human life. while the benefits of zakat, among others (sari, 2006): 1. as a manifestation of faith in allah swt. 2. because zakat is a mustahik right where zakat functions to help, assist and foster them, especially the poor towards a better life. 3. zakat is one of the sources for the development of facilities and infrastructure 4. zakat is to promote correct business ethics, because zakat is not cleaning up dirty property, but removing part of the rights of others from the assets that we work for properly and correctly. 5. the main indicator of one's submission to islamic teachings 6. opening up wide employment opportunities 7. doubling the control of assets and capital in the hands of muslims. 3. research methodology this research uses descriptive qualitative method, which is a study that uses qualitative data and then describes it descriptively. this type of research is used to analyze a social situation, event, or phenomenon. the research focus is on articles on how to analyze how the mechanism and implementation of zakat distribution in the response to covid-19. in this study using a literature study instrument. the literature study aims to reveal various kinds of theories concerned in the problem being studied, literature studies can also be used as input and a basis in explaining how the mechanism and implementation of zakat distribution in the response to the covid-19 pandemic. this study also uses secondary data sources (prasanti, 2018). the data analysis technique used in this research is qualitative data analysis, this analysis has 4 stages, namely collection, reduction, presentation and conclusion. collecting data in this study used secondary data, from the baznas journal and website regarding baznas reports in handling covid-19. furthermore, the data reduction stage, the data that has been obtained is analyzed, simplified, and removes unnecessary parts of the data in order to produce relevant information. then the data presentation stage, after the data is analyzed, the data set is arranged systematically. presentation of qualitative data in the form of graphs, charts, networks, matrices or narrative text. through this stage, the data will be arranged in a relationship pattern, making it easier to draw https://creativecommons.org/licenses/by/4.0/ management of zakat as the instrument to improve economic recession of covid-19 5 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) conclusions. the final stage in analyzing this data is drawing conclusions and verification. the data that has been collected, then the researcher looks for relationships, similarities, and differences and valid evidence in order to get answers to existing problems, so that it becomes a conclusion. the existence of data verification is intended so that the conformity of the data with the objectives in the analysis is more precise and rational (rezkia, 2020). this research method describes the analysis of data obtained from research on the utilization of zakat during the pandemic. because zakat is very much needed which has the potential during a pandemic like now, so that the management, utilization, and distribution of zakat is right on target and optimal, it will help the government and society to deal with pandemic conditions like today. in conditions of uncertainty and difficulties like this, zakat is an instrument to tackle covid-19 (kadir et al., 2020). 4. result and discussion the indonesian ulema council (mui) issued a fatwa on the use of zakat funds to overcome the covid-19 pandemic which has been written in fatwa no. 23 of 2020. in addition, baznas also provides support for the use of zakat funds which are used for communities affected by the pandemic and they do not consider religion. this means that all indonesian people, both muslim and nonmuslim, are entitled to receive assistance from this zakat fund. several programs that focus on the use of zakat funds include mustahik health program assistance, such as distribution of masks, spraying disinfectants, construction of isolation rooms in hospitals, and provision of ppe. table 1 distribution of baznas zakat on handling covid-19 no. field of program amount (in idr) 1 health emergency a. curative (rsb isolation room, health workers, ppe etc.) 1,823,852,122 b. promkes (spraying disinfectants, phbs education, etc.) 268,777,411 2 socio-economic emergency a. zakat fitrah 3,830,125,000 b. cash for work 170,868,000 c. family logistics package 933,710,000 d. bmt 70,200,000 3 existing program security 480,928,530 total 7,578,461,063 source: baznas, may 2020 from the table above explains that baznas has distributed zakat funds in several sectors, including in the health emergency sector which is used to stop the distribution of the covid-19 virus https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 6 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) by buying several needs related to this pandemic, such as: buying ppe, establishing isolation rooms, spraying disinfectants, and provide education to the public. furthermore, this zakat fund is also distributed to the socio-economic emergency sector, namely to help restore economic conditions caused by the covid-19 virus by providing family food assistance, assistance for employees affected by layoffs due to this pandemic, cash for work, zakat fitrah and bmt. and finally the zakat funds are distributed to the sustainability of the existing program, where in this sector, baznas disbursed rp. 480,928,530. the total distribution of funds for the three sectors reached rp. 7,578,461,063 (baznas, 2020). apart from baznas, the ministry of religion also provided assistance to preachers affected by the covid-19 virus. the aid funds come from the ministry of religion's asn zakat income which is operated by baznas. the distribution of these funds is given to islamic religious educators, reciting teachers, ustadz / ustadzah, mufassir / mufassiroh, qori / qoriah, and mosque imams. in which each recipient gets cash assistance of rp. 300,000. in addition, baznas is also collaborating with the mustahik economic empowerment institute (lpem) to implement the distribution of zakat funds through the cash for work (cfw) action to embrace msme entrepreneurs affected by covid19 and the lower class to become volunteers. then the entrepreneurs were assigned to provide for the needs of cfw activities such as preparing rice boxes which were then given to people in need and ended. furthermore, the rice box is given to people in need. then it ended with the distribution of vouchers, in the form of zakat mart vouchers to cfw volunteers in the amount of rp. 300,000 to be exchanged for basic food packages (sahbani, 2020). apart from baznas and the ministry of religion, there are also those who play a role in helping to overcome the covid-19 pandemic in indonesia, namely the zakat management organization (opz). in indonesia, there are 85 opzs from 25 provinces consisting of the islands of sumatra, java, kalimantan, sulawesi and papua, which have moved to respond to mustahiks to help their needs. the services provided by the opz are in the form of procurement services for body bags, health assistance, food logistics, regional information and education about covid-19, independent hand sanitizer products and so on. as was done by one of the opzs, namely indonesian red crescent volunteers from north sumatra who played an active role in distributing such as 1,000 bottles of hand sanitizers, ppe assistance worth 80 million and spraying disinfectants at 155 points (sahbani, 2020). discussion the covid-19 pandemic in indonesia has spread for more than one year, where the covid19 virus has claimed many victims and even robbed the country's economy, besides that it also has an impact on social life such as: the destruction of the world of msmes and many workers being sent home which resulted in an increase in levels. poverty that exists in the country. therefore, looking at the majority of indonesian people who are muslim, people must be reminded to help people affected by the covid-19 pandemic through zakat. because the potential for zakat in indonesia is very influential in the economic empowerment of the community. according to farida prihatin as a https://creativecommons.org/licenses/by/4.0/ management of zakat as the instrument to improve economic recession of covid-19 7 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) lecturer in islamic law at the university of indonesia, this zakat fund cannot be used as a disaster management tool, as at this time the covid-19 pandemic has occurred. and this is related to law no. 23 of 2011 which explains the management of zakat, in which he states that zakat must be distributed to recipients according to the provisions in islam. in addition, he urges to distribute zakat in accordance with quality, fairness, and can be considered the principles of equity and territory. in a situation like this now, he saw the number of people affected which greatly affected the economy and the distribution of zakat (sahbani, 2020). figure 1 projection of 2020 economic growth source: smeru working paper the table above explains that the poverty rate that occurred before the existence of covid19 only reached 9.22%, which is equivalent to 24.8 million people below the poverty line, whereas when the covid-19 happened economic growth only reached 4.2 or 3% and that number the poverty increased by 9.7 and 10.7%. so it can be concluded that economic growth has slowed down by 2.1%, 1.2% and 1%, while the poverty rate has increased by 11.4%, 12.2% and 12.4%. this shows that economic growth is slowing down and the poverty rate is increasing in indonesia which has decreased very drastically (suryahadi et. al, 2020). with such data, baznas (national zakat agency) has the impetus to carry out zakat distribution movements to tackle the covid-19 pandemic. for this reason, baznas collaborates with several zakat institutions such as: ups, regional baznas, laz, program institutions, and other stakeholders to carry out activities in handling the covid-19 pandemic (saputra, 2020). the head of baznas, prof. bambang sudiyo explained that the distribution of zakat, infaq, alms and dskl can help handle pandemu both economic, health and social assistance. such as assistance in providing sinks in various places, spraying disinfectants, and distributing masks for medical personnel and the community, providing ventilators, providing ppe for medical personnel to establishing isolation rooms in hospitals (sahbani, 2020). baznas will strive to enforce zakat law in any condition, https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 8 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) formulate a good plan and practice optimally to work during an emergency in order to keep serving the muzakki and mustahik optimally. the director of distribution in utilizing baznas, mr. irfan syauqi beik, said that baznas has several programs in receiving ziswaf funds, namely cash for work in the form of family logistical assistance which is provided in non-cash or cash forms (kneks, 2020). in this distribution, baznas (national zakat agency) distributes regardless of race or religion, all people affected by the covid-19 pandemic are entitled to receive assistance from baznas. this has been explained by m. arif as the president director of baznas purwakananta that in our lives as humans we must embrace each other, with the existence of zakat, we are able to help people who are in need and affected by the pandemic like today.(saputra, 2020). so that with such a thing, we hope that the groups in indonesia will be more sympathetic by donating part of their funds to people affected by covid-19 or to help government needs. behind the covid-19 pandemic, there is a wisdom from every disaster, especially in the current pandemic, the social and financial sector of islam, one of which is zakat which must be able to answer challenges and be able to play a significant role in protecting the state of indonesia, where part of the population is muslim, and can minimize the global economic recession and the impact of the crisis (baznas, 2020). based on the above discussion, it can be concluded that this zakat fund can be used to overcome the financial impact caused by covid-19. in which the two parts of the funds are allocated, namely for the medical team as well as health facilities and communities affected by this pandemic. the health facilities provided include procuring medical equipment and materials, building isolation rooms and financing patients affected by the covid-19 virus. while the assistance provided to people affected by this pandemic, such as providing cash assistance for people affected by layoffs or for msmes, providing basic necessities for migrants who cannot return home due to the ban on going home and others (irfandi et. al, 2020). ustadz oni sahroni explained that all people who are muslim must know about the obligation to pay zakat and there is no reason to avoid it because they do not know about the obligation of zakat. whoever denies this obligation has denied the pillars of islam. it is the same as denying other pillars of islam, such as fasting and prayer. so, this zakat is not only obligatory, but higher than the obligatory law, namely the pillars of faith and ma'lum min ad-din bidhdharurah. so from this it is very harmonious if it is associated with the maqashid zakat, namely to meet the needs of the mustahik, namely the needy, the poor, amil, people / parties who are being softened up, forms of slavery, people in debt, people who preach in the way of allah sabil. as for the benefits of zakat funds in distributing to a pandemic when viewed from the maqashid sharia, namely to fulfill all basic needs during a pandemic, such as: medicines, groceries and cash assistance, this is when viewed from the point of view of dharuriyah. as for the hajj, funds are given to the community to keep their basic needs better, such as providing free health checks. furthermore, in terms of tahsiniyah, zakat funds are given to the community so that they can improve the two aspects described, so that in this aspect the zakat funds are used for complementary https://creativecommons.org/licenses/by/4.0/ management of zakat as the instrument to improve economic recession of covid-19 9 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) needs, such as providing masks, hand sanitizers and spraying disinfectants (kadir et al., 2020). as for the zakat fundraising strategy after the covid-19 pandemic, baznas carries out 5 digital fundraising strategies. first, the internal platform strategy, namely baznas to develop donation services via the internet. second, the external platform strategy, namely baznas to collaborate with digital business platforms and online stores. third, the social media platform strategy, namely baznas to develop a donation program via social media. fourth, the artificial intelligence platform strategy, namely baznas to establish an intelligent machine to strengthen and simplify services by creating a zaki application. fifth, the innovation platform strategy, namely baznas to develop fundraising innovations in accordance with the needs, demands, and adaptation of technology (nurhidayat, 2020). 5. conclusion indonesia is a country with the largest muslim population in the world. so that it is hoped that muslims in indonesia will be able to provide the best role through various ways in overcoming the impacts caused by the covid-19 pandemic. one of them is the zakat fund which is an option for people affected by this virus. the mui also gave permission on the use of zakat funds to deal with the covid-19 pandemic. this is evidenced by the existence of the mui dsn fatwa no. 23 of 2020 the use of zis funds is used to deal with the covid-19 pandemic. zakat funds from muzakki may immediately be channeled to the community, the funds are channeled through three sectors, namely the health emergency sector, used to buy ppe, establish isolation rooms, spray disinfectants, and provide education to the public, socio-economic emergency sector, to help restore economic conditions caused by the covid-19 virus, provide family food assistance, cash for work, as well as assistance for laid-off employees or laborers and the sector for the sustainability of the existing program. the total distribution of funds for the three sectors reached rp. 7,578,461,063. if these programs can be well organized and handled properly, then zakat will be a source of funds that can be used for general welfare. reference afifuddin, k. &. (2020). penggunaan dana zakat pada korban covid-19 perspektif maqashid syariah. islamic law. al-ghazzi, m. q. (2005). fath al-qarib fi sharh alfāẓ al-taqrīb. beirut: dar ibn hazm. al-sharbani, m. b.-k. (1321). al-iqna fi hall alfaz abi shujā’. mesir: al-matba'at al khairiyyat. amalia, & mahalli, k. (1999). potensi dan peranan zakat dalam mengentaskan kemiskinan di kota medan. jurnal ekonomi dan keuangan. baznas. (2020). laporan baznas dalam penanganan pandemi covid-19. jakarta: badan amil zakat nasional. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 10 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ez, i., & maisyal, n. (2020). pendayagunaan zakat untuk penanggulangan pandemi covid-19 perpektif filsafat hukum islam. al muamalat: jurnal hukum dan ekonomi syariah, 5(1), 1– 26. https://doi.org/10.32505/muamalat.v5i1.1849 fitri, m. (2017). pengelolaan zakat produktif sebagai instrumen peningkatan kesejahteraan umat. economica: jurnal ekonomi islam. https://doi.org/10.21580/economica.2017.8.1.1830 kadir, a., hakim, m. r., syam, f., & karim, m. s. (2020). pengunaan dana zakat pada korban covid-19 perspektif maqashid syariah. al-tafaqquh: journal of islamic law, 1(2), 107. https://doi.org/10.33096/al-tafaqquh.v1i2.61 kneks. (2020, may). peran inovasi zakat dalam menanggulangi covid-19. retrieved from https://knks.go.id/berita/251/peran-inovasi-zakat-dalam-menanggulangi-covid19?category=1 maulana, m. i., rahman, a., & setiawan, a. i. (2019). implementasi pendistribusian zakat produktif dalam meningkatkan ekonomi masyarakat. https://doi.org/10.15575/tadbir mujieb, m. a. (1994). kamus istilah fiqih. jakarta: pt pustaka firdaus. nurhidayat, n. (2020). strategi fundraising zakat pasca pandemi covid-19. salam: jurnal sosial dan budaya syar-i, 7(8), 737–748. https://doi.org/10.15408/sjsbs.v7i8.16553 prasanti, d. (2018). penggunaan media komunikasi bagi remaja perempuan dalam pencarian informasi kesehatan. lontar: jurnal ilmu komunikasi. https://doi.org/10.30656/lontar.v6i1.645 rezkia, s. m. (2020). langkah-langkah menggunakan teknik data kualitatif. sahbani, a. (2020, may). retrieved from hukum.online.com: https://www.hukumonline.com/berita/baca/lt5ec74915e853d/sekelumit-peran-zakat-kala pandemi-covid-19/. saputra, h. (2020). zakat sebagai sarana bantuan bagi masyarakat berdampak covid-19. al ijtima`i: international journal of government and social science. https://doi.org/10.22373/jai.v5i2.549 sari, e. k. (2006). pengantar hukum zakat dan wakaf. jakarta: pt. grasindo. suryahadi, a., al izzati, r., & suryadarma, d. (2020). the impact of covid-19 outbreak on poverty: an estimation for indonesia (draft). smeru working paper, april(april), 1–20. retrieved from http://smeru.or.id/en/content/impact-covid-19-outbreak-poverty-estimation indonesia zuhdi, m. (1994). masail fiqhiyah (kapita selekta hukum islam). jakarta: cv. haji masagung https://creativecommons.org/licenses/by/4.0/ http://www.hukumonline.com/berita/baca/lt5ec74915e853d/sekelumit-peran-zakat-kalahttp://www.hukumonline.com/berita/baca/lt5ec74915e853d/sekelumit-peran-zakat-kalahttp://smeru.or.id/en/content/impact-covid-19-outbreak-poverty-estimationdo macroeconomics variables affect conventional and islamic banking profitability? 101 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) do macroeconomics variables affect conventional and islamic banking profitability? achmad fadlil abidillah1), muhamad nafik hadi ryandono2) 1,2) departement of sharia economic, faculty of economic and business, airlangga university, indonesia. abstract this study aims to examine the impact of external macroeconomic variables on the profitability of conventional banking and islamic banking in indonesia. macroeconomic variables included in the model are inflation, gross domestic product, exchange rate, and money supply. this study took a period from 2007 to 2017, quarterly. using an englegranger cointegration test and error correction model, this study will analyze a short and long-term correlation of macroeconomic variables again banking profitability. the results of this study indicate that in short term, conventional banking’s profitability is influenced by money supply, while in long term is influenced by inflation and currency exchange rates. then, other results show that macroeconomic variables do not affect islamic banking’s profitability in the short term, while in the long term islamic banking’s profitability is only influenced by an exchange rate of the currency. this study provides recommendations to banking management to optimize the management of its instruments so that it can adjust to macroeconomic turmoil in the economy. keywords: macroeconomics; conventional bank; islamic bank; cointegration; error correction model. 1. introduction financial institutions play an important role in the economy. these important roles are in charge as a holder of a payment system, as a financial intermediary between economic actors, and as a provider of economic transaction transparency (alper & anbar, 2011:139). banking is one of the most important financial institutions because banks play a role in allocating economic resources from one to another. because of its important role, banks must be sustainable and profitable (ongore & kusa, 2013:237). profitability can be measured in many ways, but indonesian bank as the central bank of indonesia prioritizes the use of profitability ratio of return on assets (roa) rather than the ratio of return on equity (roe) because roa measures profitability based on assets whose sources come from public funds, while roe measured on banking capital which is the source of investment. *corresponding author. email address: achmad.fadlil.abidillah-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:achmad.fadlil.abidillah-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) vol 4, no. 2 (2019) 102 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) fig. 1: movement of conventional and islamic roa from 2005 2017. figure 1 shows the movement of roa from conventional and islamic banks in indonesia. it can be seen that the roa movement of banks, both conventional and islamic, experienced two decreasing trends in the same period, in 2008 and 2014. in both periods, it was known that the national economy was experiencing macroeconomic turmoil. in 2008 we all know about the subprime mortgage crisis that affected global financial stability, while in 2014 indonesia faced a financial outflow caused by tapering policy from the fed. guru et al., argues that the influence of macroeconomic turmoil is categorized into the influence of external banking factors (anto & wibowo, 2012:150). much research has been examined macroeconomic influences on banking profitability in many countries, but the results haven’t shown consistent conclusions. several studies abroad, such as a research of topak & talu (2017:583) in turkey; rover et al. (2013:175) in brazil; and sufian & kamarudin (2012:24) in bangladesh, found that macroeconomics had a significant influence on banking profitability. however, research conducted in indonesia such as wibowo & syaichu (2013:8), anto & wibowo (2012:158), and hendrayanti & muharam (2013:13), concluded that macroeconomics didn’t have a significant influence on banking profitability in indonesia. this gap indicates the need for further research. this study will examine two banking objects at once, that is conventional banking and islamic banking, because of the banking structure in indonesia which is a country with a dual banking system. this study will use englegranger cointegration methods and error correction models, so it can describe how the effects of macroeconomics on banking profitability both in the short-term and long term. 2. literature study bank profitability, according to guru et al. (cited by anto & wibowo, 2012:150), is influenced by two factors, that is factors of internal banking itself and factors of external banking. abduh & idrees (2013:209); davydenko (2011:26); and sufian & kamarudin (2012:24), explained that internal banking factors included capital ratio, liquidity ratio, 1 2 3 4 p e rc e n ta g e year conven. bank's roa islamic bank's roa https://creativecommons.org/licenses/by/4.0/ do macroeconomics variables affect conventional and islamic banking profitability? 103 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) credit risk, and operations expense. rover et al. (2013:175); vejzagic & zarafat (2014:10); davydenko (2011:26); and topak & talu (2017:583) explained that external banking factors are macroeconomic conditions such as inflation, economic growth, exchange rates, and money supply. van horne (cited by swandayani & kusumaningtias, 2012:149) argued that profitability is generally more often measured using the ratio of return on assets (roa). according to him, roa is the most objective measurement method based on accounting data and roa shows the efficiency of banking policies. banking profitability in indonesia from 2005 to 2017 generally experienced two crises that resulted in a decline of roa’s trend, that is in 2008 and 2014. in both periods it was known that the national economy was volatile, so this study will focus more on analyzing the influence derived from external banking. alper & anbar (2011:144) use two-factor classifications to examine variables that affect banking in turkey, that is specific bank variables and macroeconomic variables. specific banks variables include asset size, capital adequacy, asset quality, liquidity, deposits, and income-expenditure structure, while macroeconomic variables are real gdp, inflation, and interest rates. their research found that macroeconomic variables don’t affect profitability proxied by return on assets, while proxied by return on equity only interest rate variables have a positive influence on profitability. kiganda (2014:46) only included macroeconomic variables in his research model on banking in kenya. these variables include economic growth, inflation, and currency exchange rates. his research produced findings that economic growth, inflation, and exchange rates did not affect the profitability of banks in kenya. this results from the findings of rao & lakew (2012:13) and ongore & kusa, (2013:237), who also concluded that macroeconomic variables did not affect banking profitability. petria et al. (2015:522) analyze the profitability of banks in the europe union (eu27). his research included several internal and external variables. internal variables he uses are bank size, capital adequacy, credit risk, management efficiency, liquidity risk, and business mix indicators, while the external variables are market concentration, inflation, and economic growth. the findings are that credit risk, liquidity risk, management efficiency, business mix indicators, market concentration, and economic growth affect the profitability of banks in the eu27. the interesting thing is the finding of the conclusion that market competition has a positive effect on profitability, meaning that tighter competition in the banking industry will increase the profitability of banks in the industry. rover et al. (2013:156) analyze bank profitability in brazil. his research uses financial and macroeconomic variables. variables used include liquidity, credit risk, operating expenses, operational efficiency, leverage, economic activity, inflation, money supply, interest rates, and credit markets. his research produced findings that liquidity, credit risk, operating expense, and operational efficiency negatively affected profitability, https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) vol 4, no. 2 (2019) 104 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) while leverage, economic activity, inflation, and interest rates had a positive effect on profitability, and other variables in the model were found to not affect brazil’s banking profitability. davydenko (2011:24) analyzes determinants of bank profitability in ukraine. his research classifies independent variables into three parts, that is bank-specific, industryspecific, and macroeconomic. the variables categorized as bank-specific are capital level, credit risk, bank size, cost management, liquidity, loans to total assets ratio, and deposits to total assets ratio. industry-specific variables include market concentration and foreign ownership. then macroeconomic variables are gdp, inflation, exchange rate, and economic crisis. the results of his study concluded that all macroeconomic variables in the model had a significant effect on bank profitability in ukraine. gdp and exchange rate have a positive effect while inflation and crisis have negative effects on ukraine’s banking profitability. abduh & idrees (2013:204) conducted a study of the profitability of banks in malaysia. factors that affect the profitability of banks in malaysia that he entered into the model are bank-specific variables, that is capital ratios, liquidity ratios, credit risks, financial risk, operational efficiency, and bank sizes; industry-specific variables that are financial market development and market concentration; while the macroeconomic variable is gdp growth and inflation. the findings are that only bank sizes, financial market development, market concentration, and inflation variables have a significant effect, while other variables do not affect the profitability of malaysian banks. topak & talu (2017:574) conducted a study of banking profitability in turkey. their research classifies independent variables into two, bank-specific variables and macroeconomic variables. bank-specific variables include net interest margin, capital adequacy, bank sizes, credit risk, liquidity, operating expenses, and non-interest revenues, while macroeconomic variables are inflation/interest rate, exchange rate, and gdp. his research found that all bank-specific variables had a significant effect, only credit risk and liquidity had negative effects. while the macroeconomic variables that have a positive effect are inflation/interest rate and gdp, the exchange rate has a negative effect on bank profitability in turkey. kanwal & nadeem (2013:193) conducted a study on the effect of macroeconomic variables on the profitability of commercial banking in latvia. their research uses three different endogenous variables, namely return on assets (roa), return on equity (roe), and equity multiplier (em). meanwhile, the exogenous variables used are inflation, economic growth, and interest rates. using the pooled ordinary least square method, this study found that inflation has a negative effect on return on asset, return on equity, and equity multiplier. interest rates have a positive effect on return on asset, return on equity, and equity multiplier. the last, economic growth does not affect the return on asset, return on equity, or equity multiplier. through these findings, we can understand that roa, roe, and em do not have different effects due to macroeconomic upheavals. https://creativecommons.org/licenses/by/4.0/ do macroeconomics variables affect conventional and islamic banking profitability? 105 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) anto & wibowo (2012:157) examined the profitability of islamic banking in indonesia. his research focuses on macroeconomic variables that influence bank profitability. macroeconomic variables used are gdp, inflation, interest rate, market share, and money supply. his research uses short and long-term analysis. the conclusion is that only the interest rate variable that affects the profitability of islamic banking in indonesia both in the short term and long term, has a negative effect; while gdp, inflation, market share, and money supply have no effect both in the short and long term. this finding shows that islamic banking profitability in indonesia is more resistant to macroeconomics interferences. swandayani & kusumaningtias (2012:158) analyze the effect of inflation, interest rates, foreign exchange rates, and the money supply on the profitability of islamic banking in indonesia. the results of his study concluded that interest rates, foreign exchange rates, and the money supply had a significant positive effect on profitability, while inflation did not significantly influence profitability. the insignificance of inflation is by erina & lace's (2013:7) research which also examines bank profitability in latvia. aviliani et al. (2015:392) conducted an analytical study on the effect of macroeconomic indicators on the profitability of banks in indonesia from 2006 to 2013. several macroeconomic indicators used include production index, inflation, bank indonesia rate, jakarta stock index, exchange rate, and crude oil prices. while the bank performance indicators used some data, namely net interest margin (nim), return on assets (roa), operating costs/operating income (bopo), non-performing loans (npl), loan to deposit ratio (ldr), third party funds, total credits, and net income. the findings of the impulse response function (irf) test from this study are that indicators of operating costs/operating income, net income, return on assets are indicators that respond a lot to macroeconomic changes. specifically for roa, this indicator is positively influenced by the exchange rate and inflation but negatively affected by the production index, bi rate, and crude oil prices. 3. research methodology research design this study uses a quantitative approach which purposes to identify the effect of exogenous variables on endogenous variables. in this study, it is assumed that the research data is not stationary at level (0), but will be stationary at a higher degree, so this study uses the engle-granger cointegration test and error correction model. the statistical tool used here is eviews 6. this study examines the effect of inflation, gross domestic product, exchange rates, and the money supply on the profitability of conventional and islamic banking in indonesia, with an observation period from 2007 to 2017. data and sample https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) vol 4, no. 2 (2019) 106 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the object of this research is conventional and islamic banking in indonesia. banking profitability will be proxied by return on assets (roa). the conventional and islamic banking’s roa data comes from banking statistics published by indonesian bank (bi) and the financial services authority (ojk). data published by bi and ojk include roa from all banks in indonesia which will later be classified into conventional banks and islamic banks. the period of observation is from 2007 to 2017, with a quarterly period. the exogenous variable data in this study were also obtained through literature study and documentation. data on inflation, gross domestic product, exchange rates, and money supply were obtained through reports and publications from the indonesian bank (bi), financial services authority (ojk), the central statistics agency (bps), and the republic of indonesian ministry of trade. data obtained is quarterly data from 2007 to 2017. all data can be seen in appendix 1. variables definition variable return on assets (roa) is a comparison ratio between banking profits after being taxed with total assets owned by banks. the unit of return on assets is a percentage. inflation is an increasing general price of goods and services in an economy at a certain period. the unit of inflation is a percentage. gross domestic product is the total amount of output produced in an economy in a certain period. gdp data used is gdp on the business field with a basis for calculation in 2010. the unit of gdp is billion rupiah. the exchange rate used is the rupiah value of the us dollar. the unit of the exchange rate is the rupiah. the money supply is proxied by a total amount of money in a narrow sense (m1). the unit of the money supply variable is billion rupiahs. empirical models this study aims to analyze the long-term and short-term effects of external macroeconomic variables on the profitability of conventional and islamic banking so that cointegration analysis and error correction models are used. the cointegration model used for conventional and islamic models is as follows: • conventional banking model: roact = α0 + α1inft + α2gdpt + α3exct + α4mont + e1t • islamic banking model: roait = β0 + β1inft + β2gdpt + β4exct + β4mont + e2t while the error correction model is the following: • conventional banking ecm: ∆roact = γ0 + γ1∆inft+ γ2∆gdpt + γ3∆exct + γ4∆mont + γ5ectc1-t + e3t • islamic banking ecm: ∆roait = δ0 + δ1∆inft+ δ2∆gdpt + δ3∆exct + δ4∆mont + δ5ecti1-t + e4t model’s information: https://creativecommons.org/licenses/by/4.0/ do macroeconomics variables affect conventional and islamic banking profitability? 107 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) roac : return on asset of conventional banking roai : return on asset of islamic banking inf : inflation rate gdp : gross domestic product exc : exchange rate mon : money supply ect : error correction term 4. result and discussion stationarity test using augmented dickey-fuller (adf) test, the results of unit root test show that all variables are not stationary neither conventional banking model nor islamic banking model. table 1 shows the result. table 1. unit root test with adf variables adf value mackinnon critical value 1% 5% 10% roac -1,734845 -3,59 -2,93 -2,60 roai -2,155879 -3,59 -2,93 -2,60 inf -2,252726 -3,59 -2,93 -2,60 gdp -1,720591 -3,59 -2,93 -2,60 exc -0,676481 -3,59 -2,93 -2,60 mon 0,228096 -3,61 -2,94 -2,61 source: eviews 6 unit root test with adf. when we know all variables are not stationary, the next step is to test the degree of integration by looking for the level of data stationarity. integration degree test first, check the data stationarity at the first difference level (1) using adf test. the result can be seen in table 2. tabel 2. first difference (1) test with adf variables adf value mackinnon critical value 1% 5% 10% roac -8,527146** -3,59 -2,93 -2,60 roai -8.170304** -3,59 -2,93 -2,60 inf -5,702461** -3,61 -2,94 -2,61 gdp -2,593288 -3,62 -2,94 -2,61 exc -5,360648** -3,60 -2,93 -2,61 mon -2,551138 -3,61 -2,94 -2,61 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) vol 4, no. 2 (2019) 108 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) source: eviews 6 first difference test with adf. the result shows that variable gross domestic product and money supply aren’t stationary at the first difference level (1). therefore, the adf test must be continued to the second difference level (2). the result can be shown below: table 3. second difference (2) test with adf variables adf value mackinnon critical value 1% 5% 10% roac -8,425246** -3,61 -2,94 -2,61 roai -8.271399** -3,61 -2,94 -2,61 inf -5,411881** -3,61 -2,94 -2,61 gdp -4,912396** -3,63 -2,95 -2,61 exc -5,834782** -3,63 -2,95 -2,61 mon -13,64442** -3,61 -2,94 -2,61 source: eviews 6 second difference test with adf. from table 3, it can be seen that all the variables have been stationary at the second difference level (2). hence, there is a possibility that the estimation model has a longterm relationship and needs to be tested by cointegration methods. cointegration test the cointegration test is carried out to determine whether or not there is a long-term effect of the variables in the model. this study applies the engle-granger cointegration test. this test will estimate the adf statistical value from the residuals of ordinary least square (ols) regression. the test results are as follows: table 4. conventional and islamic banking cointegration test (engle-granger) model adf residual test value critical value 1% 5% 10% conventional banking -3.414050 (0.0158) -3.59 -2.93 -2.60 islamic banking -4.208197 (0.0018) -3.59 -2.93 -2.60 source: the results of the residual unit root test with adf. from table 4, the adf statistical value for conventional banking is -3.414050, while the adf statistical value for islamic banking is -4.208197. both values are bigger than the critical value at the 5% level (-2.93). the probability value of conventional and islamic banking models are smaller than α 5%. so it can be stated that the residuals of the conventional model and the islamic model are stationary. this means that both the https://creativecommons.org/licenses/by/4.0/ do macroeconomics variables affect conventional and islamic banking profitability? 109 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) conventional and islamic banking models are co-integration models that have a long-term balance. therefore, the long-term estimation model of both banking models can be formed as follows : table 5. long-term estimation variables conventional banking islamic banking coefficient t-statistic coefficient t-statistic constant -4.652610 (0.2682) -1.123160 23.74080 (0.0620) 1.921843 inf 0.065125** (0.0499) 2.023994 0.039032 (0.6864) 0.406779 gdp 0.672512 (0.1832) 1.355196 -1.921766 (0.2017) -1.298615 exc -0.728444** (0.0000) -6.492933 -1.239012* (0.0007) -3.703372 mon -0.127061 (0.5623) -0.584489 0.851441 (0.1967) 1.313399 f-statistics 13.90385 (0.000000) 11.70811 (0.000002) sources: regression estimation of eviews 6, processed. from the table above, in the long-term, conventional banking profitability is positively affected by inflation and negatively affected by the exchange rate, while economic growth and money supply are not affecting conventional banking’s profitability. the coefficient of the inflation rate is 0.065125, this means that a 1% increase in the inflation rate will increase 0.065% of the profitability of conventional banking. while the coefficient of the exchange rate is -0.728444, meaning that a 1% increase in the exchange rate will decrease 0.73% of the profitability of conventional banking. then, islamic banking in a long term is only negatively affected by the exchange rate. the coefficient of the exchange rate is -1.239012, meaning that a 1% increase in the exchange rate will decrease 1.24% of the profitability of islamic banking. hence, we can form an estimation model for both bankings as follow: the long-term estimation model for conventional banking is: roact = –4.653 + 0.065inft + 0.673gdpt – 0.728exct – 0.127mont the long-term estimation model for islamic banking is: roait = 23.741 + 0.039inft – 1.922gdpt – 1.239exct + 0.851mont https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) vol 4, no. 2 (2019) 110 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) error correction model the error correction model is the stage of forming a short-term model. after the model is declared to be cointegrated and has a long-term relationship, it is possible that the model also has a short-term balance. formation of error correction models as follows : table 6. short-term estimation variables conventional banking islamic banking coefficient t-statistic coefficient t-statistic constant -0.000315 (0.9797) -0.025672 -0.006150 (0.8781) -0.154411 ddinf 0.046923 (0.1926) 1.327951 0.003898 (0.9727) 0.034467 ddgdp 0.0539337 (0.1217) 1.585196 -0.575033 (0.6034) -0.524092 ddexc -0.303942 (0.1586) -1.439506 -0.025031 (0.9711) -0.036425 ddmon -0.280509** (0.0373) -2.163069 -0.443823 (0.3111) -1.027351 ect(-1) -0.727830** (0.0005) -3.831825 -0.953167** (0.0001) -4.577159 fstatistics 4.995003 (0.001414) 5.685259 (0.000579) source: ecm estimation used eviews 6, processed. tabel 6 shows the short-term estimation for conventional and islamic banking. in a short-term period conventional banking’s profitability is only negatively affected by money supply. it can be seen that the coefficient of the money supply is -0.280509, meaning that a 1% increase in money supply will decrease 0,28% of conventional banking’s profitability. the coefficient of error correction term (ect) of the conventional banking model is -0.727830 and significant at 5%. it means the short-term model of conventional banking is a valid estimation. the ect coefficient of conventional banking’s ecm model shows that the difference between short-term and long-term values is corrected by 0.73% over a quarter of the time. then, the table also shows that none of the macroeconomic variables in the model affect islamic banking’s profitability. the coefficient of ect is -0.953167 and significant at 5%, which means the short-term model of islamic banking is a valid estimation, and the ect coefficient shows that the difference between short-term and long-term values is corrected by 0,95% over a quarter of the time. hence, we can form an estimation model for conventional and islamic model as follow: the short-term estimation model of conventional banking is: https://creativecommons.org/licenses/by/4.0/ do macroeconomics variables affect conventional and islamic banking profitability? 111 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ddroac = –0.000315 + 0.047ddinft + 0.054ddgdpt – 0.304ddexct – 0.281ddmont – 0.728ectct short-term estimation model of islamic banking is: ddroait = –0.00615 + 0.0039ddinft – 0.575ddgdpt – 0.025ddexct – 0.444ddmont – 0.953ectit discussion based on the results of the analysis, it can be concluded that simultaneously in short term and long term, inflation, gross domestic product, currency exchange rates, and the money supply have a significant effect on the profitability of conventional banking and islamic banking in indonesia. it can be seen in the f statistic results from all estimation models that are bigger than the f table value, also the f probability value is less than the 5% significance level. inflation variables have no effect in the short-term, but in the long-term, it has a significant influence on increasing the profitability of conventional banking, following the findings of rover et al. (2013:175); sufian & kamarudin (2012:24); and abduh & idrees (2013:209), meaning that when general prices increase, conventional banks can maintain their profits through the interest rate adjustments. while for islamic banking both in the short-term and long-term, inflation does not affect profitability, this finding accordance with the results of anto & wibowo (2012:158), that inflation doesn’t affect the profitability of islamic banking in indonesia. alper & anbar (2011:144) and kiganda (2014:46) also found similar results, the inflation variable didn’t affect bank profitability in turkey and kenya. variables gross domestic product in the short-term and the long-term do not affect the profitability neither conventional banking nor islamic banking. this result is precisely contrary to the findings of rover et al. (2013:175) and vejzagic & zarafat (2014:11) who concluded that gross domestic product has a positive influence on banking profitability, as well as the findings of sufian & kamarudin (2012:24) which state that gross domestic product has a negative effect on profitability. this is because when indonesia's gross domestic product increases or decreases, the impact doesn’t directly affect the income of individuals from the community and the will of their savings. the impact of a gross domestic product increase will last long until it eventually increases per capita income from the community. variable currency exchange rates in the short-term do not affect the profitability of conventional banking and islamic banking, but in the long-term, the effect is significant on reducing the profitability of both conventional banking and islamic banking. these results accordance with the findings of topak & talu (2017:583). the negative relationship here means when the value of the rupiahs weakens, the profitability of the banking will decrease, either the profitability of conventional banking or the profitability https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) vol 4, no. 2 (2019) 112 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) of islamic banking. this happens because, in the current era, banking has been operating in the foreign exchange sector, which not only depends on the savings and loan sector, so the fluctuations in exchange rates will greatly affect banking income. the money supply only in short term affects the decline in profitability of conventional banking, while in the long run, it has no effect. this finding is in line with the findings of rover et al. (2013:175) who also concluded that money supply had a negative effect on profitability. in the short term, the condition of the high money supply indicates that people prefer to hold cash rather than save it, as a result, this condition decreases profitability but enters long-run conditions, no matter how much money circulation in the community will not affect banking income, due to management conditions banking that has been stable in the long run. regarding islamic banking, both in the short and long term, the money supply does not affect the profitability of banks. this means that the amount of money circulating in the community does not cause a negative or positive impact on the income of islamic banks. the result in islamic banking is in line with the research of anto & wibowo (2012:158) who concluded that the profitability of islamic banking isn’t influenced by money supply both short and long term. 5. conclusion the results of this study indicate that conventional banking is more influenced by macroeconomic conditions than islamic banking. in the short-term model, the profitability of islamic banking isn’t influenced by any macroeconomic variable in the model, while the profitability of conventional banking is negatively affected by the money supply. in the long-term model, the profitability of islamic banking is only influenced by currency exchange rates, the effect is negative, while the profitability of conventional banks is influenced by currency exchange rates and inflation, the exchange rate has a negative effect and inflation has a positive effect. this result concludes that the management of conventional banks must be aware of the macroeconomic fluctuations. their preparation for facing crises that may occur in the future must be optimal because the state desperately needs a stable banking condition to maintain an economic process. from this result, we can also see that the movement of islamic banking should be even more optimal because it is not much influenced by conditions outside its operations, such as macroeconomic fluctuations. islamic banking management must be able to take advantage of this condition so they can expand the scope of its performance because we know that the condition of islamic banking is still far behind when compared to conventional banking. on other side, the government must be able to take control of fluctuations of macroeconomic movements, so that financial stability can be maintained. reference https://creativecommons.org/licenses/by/4.0/ do macroeconomics variables affect conventional and islamic banking profitability? 113 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) abduh, m., & idrees, y. (2013). determinants of islamic banking profitability. australian journal of basic and applied sciences, 7(2), 204–210. retrieved from https://www.researchgate.net/publication/267642343_determinants_of_islamic_b anking_profitability_in_malaysia alper, d., & anbar, a. (2011). bank specific and macroeconomic determinants of commercial bank profitability: empirical evidence from turkey. business & economics research journal, 2(2), 139–152. retrieved from https://ssrn.com/abstract=1831345 anto, a., & wibowo, m. g. (2012). faktor-faktor penentu tingkat profitabilitas bank umum syariah di indonesia. la_riba: jurnal ekonomi islam, 6(2), 147–160. https://doi.org/https://doi.org/10.20885/lariba.vol6.iss2.art1 aviliani, a., siregar, h., maulana, t. n. a., & hasanah, h. (2015). the impact of macroeconomic condition on the bank’s performance in indonesia. buletin ekonomi moneter dan perbankan, 17(4), 379–402. https://doi.org/https://doi.org/10.21098/bemp.v17i4.503 davydenko, a. 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(2012). pengaruh inflasi, suku bunga, nilai tukar valas dan jumlah uang beredar terhadap profitabilitas pada perbankan syariah di indonesia periode 2005-2009. akrual: jurnal akuntansi, 3(2), 147– 166. https://doi.org/10.26740/jaj.v3n2.p147-166 topak, m. s., & talu, n. h. (2017). bank specific and macroeconomic determinants of bank profitability: evidence from turkey. international journal of economics and financial issues, 7(2), 574–584. retrieved from https://www.researchgate.net/publication/321869530_bank_specific_and_macroe conomic_determinants_of_bank_profitability_evidence_from_turkey vejzagic, m., & zarafat, h. (2014). an analysis of macroeconomic determinants of commercial banks profitability in malaysia for the period 1995-2011. asian economic and financial review, 4(41), 41–5741. wibowo, e. s., & syaichu, m. (2013). analisis pengaruh suku bunga, inflasi, car, bopo, npf terhadap profitabilitas bank syariah. diponegoro journal of management, 2(2), 1–10. retrieved from http://ejournal-s1.undip.ac.id/index.php/djom https://creativecommons.org/licenses/by/4.0/ health sector sharia shares reaction to the events of the 2019 corona virus disease distribution 1 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) health sector sharia shares reaction to the events of the 2019 corona virus disease distribution m. irfan yusuf* universitas airlangga, surabaya, indonesia abstract the purpose of this study was to determine the reaction of issi-listed health stocks to covid19 which was divided into three events, namely the lockdown of the city of wuhan, the announcement of the president of the republic of indonesia regarding the covid-19 case, and the who announcement about the virus pandemic. this study uses a quantitative approach with the event study method. market reaction is measured by the abnormal return variable and trading volume activity. meanwhile, the market model is used to find the expected return with a simple linear regression analysis technique, which is then carried out by the one-sample kolmogorov smirnov test for normality and one sample t-test for hypothesis testing. the results of the study found that the manufacturing and service sectors were not affected by the wuhan lockdown. because the indicators aar, caar and atva do not show significant results. meanwhile, the announcement of the president of the republic of indonesia regarding the covid-19 case and the announcement of the who pandemic virus showed that there was an influence on the manufacturing sector and health services. because the indicators aar, caar and atva show significant results. the results of the study found that the manufacturing and service sectors were not affected by the wuhan lockdown. meanwhile, the announcement of the president of the republic of indonesia regarding the covid-19 case and the announcement of the who pandemic virus showed that there was an influence on the manufacturing sector and health services. keywords: event study, issi, lockdown of wuhan city, announcement of the president of the republic of indonesia regarding the covid-19 case, announcement of the who pandemic virus. 1. introduction the capital market can be said to be efficient if an event that contains information has succeeded in reflecting it on the price and volume formed in the market in the form of shares (fama, 1970). one of the events that can affect the capital market is the corona virus disease 2019 (covid-19). the beginning of the spread of covid-19 came from a new type of corona virus disease called sars-cov-2. this virus was first reported by the chinese government to who (world health organization) on december 31, 2019 in wuhan. january 23, 2020, with the increasing number of wuhan residents confirmed positive for covid-19, the chinese government again made the decision to lock down the city of wuhan (who, 2020). on march 2, 2020, quoted from the official website www.presidenri.co.id, president joko widodo announced that there were 2 indonesian citizens who were confirmed positive for covid-19. furthermore, on march 11, 2020, the spread of covid-19 had spread and infected 113 countries besides china. with the increasing level of spread and worsening conditions, the who has changed the covid-19 category from an epidemic to a pandemic (who, 2020). information in an event is very important for issuers or investors in making investment decisions (chen et al., 2018). factors that influence stock price movements can come from external or internal. the spread of covid-19 is one of the external factors that affects the *corresponding author. email address: m.fan.yusuf-2016@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:m.fan.yusuf-2016@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 2 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) fluctuations in stock prices and trading volume of an issuer in the capital market. source: bursa efek indonesia figure 1. issi closing price figure 1 shows the movement of the issi in each covid-19 incident. from this figure, issi has experienced a weakening price which has an impact on the reaction of the indonesian capital market. quoting from kontan news (thursday, 12/03/20) the decline in the jci was caused by investors experiencing panic selling over the outbreak of the corona virus. the panic selling reaction by both local and foreign investors had an impact on stock sales. investors sell their shares if the information gives a negative signal to the market. this is done because investors do not want to experience losses from an event. health sector stocks listed in issi are probably one of the stocks affected by panic selling, because health stocks are directly related to the covid-19 incident, while health issuers are providers of health products in the form of medicines and medical devices or services in the form of hospital services and medical laboratory. health sector stocks can be grouped into two, namely, the manufacturing health sector and the health services sector. from this explanation, the purpose of this study is to determine the reaction of the indonesian islamic capital market, especially health sector stocks, to issuers listed in the issi index (indonesian sharia stock index) to the occurrence of the covid-19 spread. this event study research uses three events, the first is the lockdown of the city of wuhan, the second is the announcement of the president of the republic of indonesia regarding covid-19, and the third is the announcement of who regarding the covid-19 pandemic. this research also wants to know the efficiency of the capital market in issi-listed issuers using the abnormal return (ar) and trading volume activity (tva) variables. 2. literature study market efficiency measures the extent to which a market will react to information to reach a new equilibrium price (jogiyanto, 2017: 605). market efficiency occurs when the price of shares traded in the market reflects all available information, both past information and current information (tandelilin, 2010: 219). on the other hand, the market is said to be inefficient if changes in stock prices do not reflect the information received by investors (samsul, 2006: 270). fama (1970) divides the market efficiency model as follows: a. market efficiency is in the form of weak form, when the prices of securities fully reflect existing information in the past (historical data). 0 50 100 150 200 issi issi https://creativecommons.org/licenses/by/4.0/ health sector sharia shares reaction to the events of the 2019 corona virus disease distribution 3 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) b. market efficiency is in the form of a semi-strong form, when the prices of securities fully reflect all information, both published information and historical data. c. market efficiency is a strong form, when the current stock price reflects all available data, be it historical data, published information and special or confidential information. according to (sutedi, 2011: 29) the islamic capital market is a capital market that is run by using sharia principles. sharia principles that are applied in the islamic capital market, namely the absence of maysir, gharar, usury. as explained in the qs. al baqarah verse 275 which reads: meaning: “people who eat usury cannot stand but are like a person who is possessed by a demon because he is crazy. that is because they say that buying and selling is the same as usury. even though allah has made buying and selling legal and forbidden usury. whoever gets a warning from his god, then he stops, then what he has obtained before becomes his and his business (it's up to allah). whoever repeats, then they are residents of hell, they are eternal in it (qur'an kemenag, 2020). the islamic capital market cannot be separated from the influence of the covid-19 spread. according to the deputy for economic affairs of the ministry of national development planning / bappenas, quoted from the news portal of the republika (15/06/20), the islamic capital market is more immune in the midst of a pandemic. this can occur because islamic instruments are more stable than conventional capital markets. cahyaningrum (2017) explains that the principles of investment in the islamic capital market are based on the real sector and the rate of return on the productivity of the fund. one of the real sectors in the indonesian economy is the health sector, which includes manufactured products and services directly. thus, the islamic capital market in this sector is closer to the real economy in every event that occurs, especially during pandemic conditions like this at issi. research gaps can be seen in the various results of previous studies and the use of different methods or objects. previous research by chen et al. (2007) examined the relationship between the sars (severe acute respiratory syndrome) virus on the reaction of hotel stocks in taiwan. he et al. (2020) examines the impact of covid-19 on share prices of all sectors in the chinese capital market. goker et al. (2020) examines the impact of covid-19 on the index in istanbul turkey. kumar et al. (2020) examined the efficient market hypothesis of the pharmaceutical industry in india. and alam et al. (2020) which examines the response of the capital market during covid-19 to india's lockdown. meanwhile, this study focuses on health sector stocks. health stocks were chosen because health issuers are providers of health products in the form of medicines and medical devices or services in the form of hospital and laboratory services that were badly needed during covid-19. the research hypotheses are as follows: h1: the wuhan lockdown has a significant effect on the occurrence of abnormal returns and trading volume around the event. h2: the announcement of the president of the republic of indonesia regarding the covid-19 case has a significant effect on the occurrence of abnormal return and trading volume activity around the event. h3: the who pandemic announcement event has a significant effect on the occurrence of abnormal returns and trading volume activity around the event. 3. research method this study uses a quantitative approach using the event study method. suganda (2018), event study research is a study conducted to analyze the impact of an event on the capital market. this study uses three events that are used to see market reactions, especially islamic stocks in the health sector, manufacturing and services. the lockdown of the city of wuhan, https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 4 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the announcement of the president of the republic of indonesia regarding the covid-19 case and the who announcement regarding the virus pandemic are all events of the spread of covid-19. figure 2. empirical model type of data this study uses secondary data, in the form of the date of the event, closing stock price history, market index price history, stock trading volume history, number of shares outstanding and issi indexed issuers. data sources were obtained from the official website www.presidenri.go.id, www.who.int, www.idx.co.id, and www.duniainvest.com. the population of this research is issuers listed on the indonesia stock exchange (bei) and listed in issi according to regulation no .: peng-00073 / bei.pqp / 03-2020 and a population of 440 issuers indexed by issi is obtained. the sampling process used purposive sampling method with the appropriate criteria. the criteria used in sampling: a. all stocks indexed by issi during the research period 11 october 2019 26 november 2020 and according to the des review as of may and november 2019. b. shares of the consumer goods industry sector and the trade, service and investment sectors, especially those engaged in pharmaceutical and healthcare. c. do not perform corporate actions such as dividend distribution, stock split, right issue, rups during the research period. the sample of this study obtained 13 stocks which were then divided into the manufacturing and service sectors. the manufacturing sector includes inaf, kaef, klbf, peha, sido, and pyfa. meanwhile, there are heal, mika, prda, prim, same, silo, and sraj in the service sector. c o v id -1 9 penguncian kota wuhan abnormal return aar caar trading volume activity atva pengumuman presiden republik indonesia abnormal return aar caar trading volume activity atva pengumuman who pandemi virus abnormal return aar caar trading volume activity atva https://creativecommons.org/licenses/by/4.0/ health sector sharia shares reaction to the events of the 2019 corona virus disease distribution 5 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) data analysis technique tandelilin (2010: 565) describes the 10 steps used in the following event study method: a. identify events b. determine the observation period. the period used in this study is 60 days as the estimate period and 20 days for the window period. within the window period is divided into before and after events. the first event, the lockdown of wuhan city estimated period was taken (11 october 2019 08 january 2020) and the window period occurred on (09 january 2020 06 february 2020). the second event, the announcement of the president of the republic of indonesia regarding the covid-19 case in the estimated period (19 november 2019 14 february 2020) and the window period (17 february 2020 16 march 2020). the third event, the who announcement on the virus pandemic estimated period (28 november 2019 25 february 2020) and the window period on (26 february 2020 26 march 2020). estimated period period of events t-n-e t-n t0 t+n c. determine the method used to calculate expected return in calculating abnormal returns using the market model. d. calculating the abnormal return by first calculating the actual return and the expected return. actual return: 𝑅𝑖𝑡 = 𝑃𝑖𝑡 − 𝑃𝑖𝑡−1 𝑃𝑖𝑡−1 expected return: e(rit) = α i + β i. rmt + εij e (rit) is the expected return of stock i in the estimated period t, α is the intercept in the regression on stock i, β i is the slope coefficient which is the beta of stock i and rmt is the market index return in the jth estimate period which can be calculated by the formula: rmj = (issij issij-1)/issi j-1, εit is the regression error. abnormal return: rtnit = rit – e(rit) aar= ∑ 𝐴𝑅𝑡 𝑛 caar = ∑ 𝐴𝐴𝑅𝑖,𝑡 𝑘 𝑖=1 𝑛 tva= ∑ saham emiten yang di perdagangkan hari ke t ∑ saham emiten yang tercatat di bei hari ke t atva= ∑ 𝑇𝑉𝐴𝑡 𝑛 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 6 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 4. result and discussion result the results of the normality test using the kolmogorov smirnov one sample test showed that aar, caar and atva were normally distributed. the results of the aar test for the wuhan city lockdown can be seen in appendix 1 appendix 1 can be seen that the manufacturing aar in the observation period after the wuhan city lockdown has a significant value at t + 7 with a p-value of 0.058 or significant at the 10% (0.1) level. this indicates that there is no effect of locking the city of wuhan on ar shares on the idx. the existence of a significant value after the event is possible because of the optimism attitude of investors to obtain high returns so that it can influence investment decision making. meanwhile, service aar can be seen that there is no significant value either before or after the event. this indicates that hypothesis 1 accepts h0 or there is no effect of locking the city of wuhan on the occurrence of ar shares in the indonesian capital market. the results of the caar test for the wuhan city lockdown can be seen in appendix 2 appendix 2 can be seen that manufacturing caar was found to be significant in the window period (-7, + 7) with a p-value of 0.077; (-5, + 5) p-value 0.030; (-3, + 3) p-value 0.089; and (-2, + 2) with a p-value of 0.083. a significant caar indicates that there is an effect of locking the city of wuhan on the cumulative calculation of ar. this happens because the ar value fluctuates during the observation period. meanwhile, service caar during the 5 event window period has a significant value at (-10, + 10) with a p-value of 0.005; (-7, + 7) p-value 0.003; (-5, + 5) p-value 0.004; (-3, + 3) p-value 0.006 and (-2, + 2) p-value 0.002. a significant caar in the 5 window period indicates that h0 is rejected or there is an effect of the lockdown of the city of wuhan on the cumulative ar occurrence in the indonesian capital market. the results of the wuhan city lockdown atva test can be seen in appendix 3 appendix 3 of the manufacturing atva results show that a significant value occurs at t9 before the event with a p-value of 0.013 and t + 5 after the event with a p-value of 0.051. the existence of a significant atva indicates that there is no effect of the wuhan city lockdown on the occurrence of tva in the indonesian capital market. meanwhile, service atva can be seen as a significant value around the event occurring at t + 9 with a p-value of 0.008 and t + 10 with a p-value of 0.019. the existence of a significant atva value around the event means that there is no effect of the lockdown in wuhan city on the occurrence of tva in the indonesian capital market. the results of the aar test for the announcement of the president of the republic of indonesia can be seen in attachment 4 appendix 4 shows the results of hypothesis testing using the one sample t-test statistical tool on aar samples of goods and services around the event. manufacturing aar which has a significance value smaller than the significance level (α) of 1% or 5% or 10% occurs at t-9 with a p-value of 0.072; t0 with a p-value of 0.084; and t + 6 with a p-value of 0.049. this value shows that there is an effect of the announcement of the president of the republic of indonesia regarding the covid-19 case on the abnormal return of health stocks on the indonesian capital market. significant manufacturing aars before the event, during the event and after the event are possible because there are investors who hold their shares for precautionary motives. meanwhile, the service aar shows a significant value that occurs at t10 with a p-value of 0.019 and t-2 with a p-value of 0.098 before the event, the significance value that occurs at t +4 with a p-value of 0.032 after the event. the existence of a significant manufacturing and service aar proves that there is an effect of the announcement of the https://creativecommons.org/licenses/by/4.0/ health sector sharia shares reaction to the events of the 2019 corona virus disease distribution 7 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) president of the republic of indonesia regarding the covid-19 case on the occurrence of abnormal returns on health stocks on the indonesian capital market. the results of the caar test for the announcement of the president of the republic of indonesia regarding covid-19 can be seen in attachment 5 appendix 5 shows the overall significant manufacturing caar for the entire window period. this proves that hypothesis 2 rejects h0, or in other words there is an effect of the announcement of the president of the republic of indonesia regarding the covid-19 case on the cumulative abnormal return of shares in the indonesian capital market. meanwhile, service caar shows significant results during the window period. this proves that h0 is rejected or in other words there is an effect of the announcement of the president of the republic of indonesia regarding the covid-19 axle on the cumulative abnormal return of shares in the indonesian capital market. the results of the atva test for the announcement of the president of the republic of indonesia can be seen in attachment 6 appendix 6 shows the results of hypothesis testing on manufacturing and service atva during the observation period surrounding the event. there is a significant manufacturing atva value before the event at t-10 with a p-value of 0.001; t-9 with a p-value of 0.013; and significant at t-7 to t-2, respectively. thus, there is an effect of the announcement of the president of the republic of indonesia regarding the covid-19 case on the occurrence of stock trading volume activity in the indonesian capital market. meanwhile, service atva can be seen from the test results showing that there is a significant atva value for 9 days at t-9 to t1 and t + 1, t + 3, t + 4 and t + 10. the test results prove that there is an effect of the announcement of the president of the republic of indonesia regarding the covid-19 case on stock trading volume activity around the events on the indonesian capital market. the results of the aar test for the announcement of the who pandemic virus can be seen in appendix 7 appendix 7 aar manufacturing has a significant value at t-1 with a p-value of 0.051. this shows that there is an effect of the who announcement regarding the virus pandemic on the abnormal return of stocks that occur in the indonesian capital market. meanwhile, service aar has a significant value at t-9 with a p-value of 0.077 and t-3 with a p-value of 0.046. this proves that there is an effect of the who announcement regarding the virus pandemic on the abnormal return of stocks that occur in the indonesian capital market. the results of the caar test for the announcement of the who pandemic virus can be seen in appendix 8 appendix 8 shows that the caar test results have a significant value, this proves that h0 is rejected or it can be interpreted that there is an effect of the who announcement about the virus pandemic on the abnormal return of stocks in the indonesian capital market. meanwhile, service caar shows the same result, namely rejecting h0. so that the who announcement about the virus pandemic has an effect on the cumulative abnormal return of shares that occurs in the indonesian capital market. the results of the atva test for the announcement of the who pandemic virus can be seen in appendix 9 appendix 9 which shows the atva values before and after the events in the window period. it can be seen that the significant atva value around the event occurred at t-10 with a p-value of 0.018; t-9 with a p-value of 0.078 and t + 6 with a p-value of 0.059. so that the who announcement about the virus pandemic has no effect on the trading volume activity of shares that occur in the indonesian capital market. meanwhile, service atva has a significant value 5 days before the event that occurred at t-10, t-9, t-8, t-6 and t-4. and 5 days are https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 8 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) significant at t + 3, t + 5, t + 6, t + 8 and t + 9 after the event. that way it can prove that the who announcement about the pandemic virus affects the trading volume activity of stocks around the events that occur in the indonesian capital market. discussion the wuhan city lockdown the statistical test results showed a significant manufacturing aar at t + 7. this means that this event has no effect on the indonesian capital market. this happens because investors have not seen the information contained in the wuhan city lockdown as important information. so that it is considered worthless and does not need to be considered in making investment decisions. whereas at caar manufacturing the test results show significant throughout the window around the event. but on a daily basis it is not significant, meaning that the return that occurs during the day is not different from the expected return. however, after the accumulation shows significant results, it means that the return experiences a development trend after the gradual and alternate days of the event are still being observed by investors. so investors follow the developments that occur from that event, although on a daily basis it is not significant. a significant caar value is positive, meaning that there is a cumulative upward trend in share prices. this is due to investors' assessment that health sector stocks will experience an increase in production. so that will cause the demand for health goods such as medical devices and medicines will increase. so that the analysis shows a cumulative positive ar reaction by showing an increase in stock prices. however, individual daily ar did not show significant results. meanwhile in the service sector the aar test results showed insignificance in all daily tests. this was possible because investors did not consider the wuhan incident as something important and should be considered. thus, according to investors, the information contained in the wuhan city lockdown is of no value and will not cause ar. in addition, the level of service, be it hospitals or medical laboratories, did not increase. this happened because the spread of covid-19 at that time had not yet entered indonesia. on the other hand, the service caar shows significant results across the event window. this is possible because investors suspect that there will be an increase in occupation, one of which is the hospital. this is considered as a form of anticipation if the spread of covid-19 has entered indonesia. therefore, the market reacts positively by experiencing an increasing trend in the share price of service health issuers, which is what causes a positive return. individually, ar on testing per day does not show significant results, but cumulatively on average it shows significant results and affects the indonesian capital market. the results of the manufacturing atva test showed significant at t-9 and t + 5. even though there is a significant result it is not considered a spike in transactions because it did not occur on an ongoing basis. this happened because investors considered the information in the lockdown of wuhan to be of no value and had no direct impact on the indonesian capital market. so that trade transactions in the indonesian capital market run normally. meanwhile, the service atva also shows significant results at t + 9 and t + 10. this means that there is no surge in buying or selling transactions around the event. this happened because investors did not properly assess the information contained in the wuhan city lockdown. so this is in line with the test results on the aar where the information presented in the lockdown of the city of wuhan is worthless and trade in the indonesian capital market is running normally. announcement of the president of the republic of indonesia regarding covid-19 https://creativecommons.org/licenses/by/4.0/ health sector sharia shares reaction to the events of the 2019 corona virus disease distribution 9 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the manufacturing aar test shows significant results at t-9, t0 and t + 6. at t0, it shows a significant result, it is possible to have panic buying because investors think that the press release by president jokowi is very important and must be considered. with the announcement of the positive case of indonesian citizens with covid-19, this has made investors think that manufacturing health stocks will experience an increase in sales and share prices, which is what causes investors to experience buying pressure. at t + 1 and the next day investors have evaluated the information that occurs at t0 so that there is no significant ar at t + 1. information has also been distributed evenly because the information is public, so there is no buying pressure from investors. at t + 6, this significant result is likely to occur because there are still investors who wait and see the performance of issuers on the development of covid-19 information or there is an influence from other events that are happening. meanwhile, manufacturing caar showed significant results in 5 event windows. the largest positive caar value occurs in the event window around -3, + 3, this happens because cumulatively, aar shows an increase in stock prices even though on daily tests there is no increase. the increase in share prices occurred because investors considered that there would be an increase in demand for health goods such as medicines and medical devices. so that cumulatively can produce ar but not on a daily test. this confirms the statistical test results of aar, where the caar around -3, +3 which is close to the date of the event shows a significant result. meanwhile, from the service aar test, there are significant results at t-10, t-2 and t + 4. this probably happened because investors did not see the cases of the two indonesian citizens who were positive for covid-19 as a surge in patients, because the cases were considered by investors as cases with a small number. therefore, the information is considered as invaluable information by investors. a negative service aar value indicates that there is no increase in occupational health services. so that investors assess that there will be no increase in occupation either in hospitals or medical laboratories because of the small number of victims. thus, aar services relatively have no effect on the indonesian capital market, but the majority of the daily tests show a negative investor response. on the other hand, the service caar shows significance in the entire event window. this may occur because investors see that the cumulative service aar has decreased in share prices as indicated by negative reactions by investors. this is because the actual return is smaller than the expected return, meaning that investors hope that the return will increase. however, it is experiencing a downward trend which causes a negative caar value. this happened because the number of victims was still small, so there was no increase in occupation. this is what causes cumulatively significant service aars around the event. however, individual testing per day did not show a significant effect. the results of the manufacturing atva test showed significant at t-10; t-9 and t-7 to t2. this is because investors' assessments are based on information from who that the spread of covid-19 has spread to various countries. this may lead to transaction panic resulting in a transfer of share ownership even though the stock price is not too large because abnormal returns are not formed on a daily basis but cumulatively an abnormal return is formed. t-0 shows insignificant results, this proves that investors have evaluated the information before the president of the republic of indonesia announced that 2 indonesian citizens were confirmed positive for covid-19. with the investor's evaluation, the transactions in the market subside as evidenced at t-1 and when officially announced at t0 the results show insignificance up to t + 10. however, the atva value shows positive, which means that the trading volume has increased. this may occur because investors see that there will be an increase in demand for medical goods or medical devices. on average, at t0 to t + 6, transactions occur above the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 10 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) average atva in the estimated period. this happens because investors suspect an announcement, but after it is announced, investors evaluate the information and the market returns to stability or trading continues normally. meanwhile, service atva shows significance at t-9 to t-1. this happened because investors suspected the announcement but the information had not been proven to be true. so that when it was officially announced by the president of the republic of indonesia that the trade transaction returned to normal, this happened because investors had analyzed the information so that transaction panic would not occur. even so, there are still significant results at t + 1, t + 3, t + 4 and t + 10. this may occur because investors are still waiting and seeing the announcement of the president of the republic of indonesia regarding the covid-19 case. who pandemic virus announcements the manufacturing aar test showed significant results at t-1. this is likely because the distance between the president's announcement regarding covid-19 and the who's announcement of the virus pandemic is still very close. so it is possible that there is still investor behavior that takes a wait and see position on the president's announcement. in addition, prior to the who announcement of the virus pandemic, investors were still panic buying. this occurs because of an imbalance between the supply and demand of health goods such as medicines and other medical devices. however, after the announcement of the who pandemic virus, the market reaction decreased because investors were no longer panic buying. meanwhile, the manufacturing caar showed positive and significant results in the entire event window. this happens because investors think that there will be an increase in demand for health goods. around the cumulative events, there is an increase in stock prices which causes a cumulative ar to be formed. however, in individual ar tests and tests per day, daily ar was not formed. this happens because the information presented is considered by investors to be of no value to the indonesian capital market. the service aar test results have significant results at t-9 and t-3. the aar value is negative, meaning that the occupation of the hospital and medical laboratory has decreased. sehinggan causes a negative aar. this is possible because investors see the information presented in the who pandemic virus announcement as insignificant. this is because investors are still waiting and seeing the announcement of the president of the republic of indonesia regarding the covid-19 case. that is what causes the t-3 to have an abnormal return. however, investors are quick to evaluate the information. so that there is no effect found the next day. meanwhile, the results of the caar service test showed negative and significant results around the incident. this is because investors think that the occupation of hospitals and medical laboratories has not increased. so this is what causes a negative price trend. aar cumulatively decreases in share price thus forming ar around cumulative events. however, individually do not form daily ar around events. thus the information presented in the who announcement of the virus pandemic is considered of no value. the manufacturing atva test showed significant results at t-10, t-9 and t + 6. this is because trade transactions are not affected by the who announcement of the virus pandemic and during the announcement there were no jumps in transactions. so that investors see this information as invaluable information on the indonesian capital market. meanwhile, the service atva test showed significant results on several days of testing. this shows that there was a surge in trade transactions which was probably due to the increasing number of victims who were confirmed positive for covid-19. with the increasing number of victims, there will be an increase in hospital occupation, which will cause an increase in stock prices due to a surge in transactions. however, 3 days before the announcement, at the time of the announcement and 2 days after the announcement did not show any significant results, it means that there was no spike in transactions on that day. this is probably because investors https://creativecommons.org/licenses/by/4.0/ health sector sharia shares reaction to the events of the 2019 corona virus disease distribution 11 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) can evaluate the information presented, so that trading runs stable. however, it did not last long, trading again took place, possibly due to a more important announcement that investors considered more valuable. 5. conclusion the purpose of this study is to determine the market reaction that occurred in the wuhan city lockdown, the announcement of the president of the republic of indonesia regarding the covid-19 case and the announcement of the who pandemic virus. all events in statistical testing show that the indonesian capital market, especially health stocks, reacted to the announcement of the president of the republic of indonesia and the announcement of the who regarding the virus pandemic. this is due to investor behavior such as panic buying during the president's announcement. in addition, the application of physical distancing and the increasing number of patients led to an increase in the manufacturing industry and health services. meanwhile, the wuhan lockdown has no effect on the capital market, especially health stocks. this happens because the market views the information presented as insignificant. suggestions in this study are divided into three, namely for policy makers, for investors and for further researchers. the following is a further explanation of the suggestions from the researchers. for policy makers, such as the indonesia stock exchange, they can observe an event that is happening both internationally and nationally. policies such as auto rejection and trading halt. for investors, in order to sort out which stocks are 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(2020). coronavirus disease (covid-19) weekly epidemiological update and weekly operational update. retrieved march 11, 2020, from www.who.int website: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports/ https://creativecommons.org/licenses/by/4.0/ an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 28 an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy ahmad ridho darmawan31*1 1 universitas islam negeri walisongo, semarang, indonesia abstract this paper contains the results of a comparative study of islamic stock portfolios between the years of 2014-2016. in 2015, indonesia's economic growth experienced the lowest weakening in the past 6 years. the jakarta islamic index (jii) on 2014 experienced an uptrend, in 2015 it rebounded to a downtrend, and in 2016 an uptrend is experienced again. the purpose of this study was to compare the performance of islamic stock portfolios before, during and after the weakening of the indonesian economy and to find the impact of the optimal portfolio strategies in conditions of fluctuating economic growth performance. the population are all the islamic stocks that are listed on jii in every period during the years of 2013 2016. the sample used the purposive sampling method, the portfolio performance assessment used the treynor index and analyzed the data using the paired-sample t-test. the results of the study are that (h1) was rejected with a significance value of 0.699> 0.05, (h2) was rejected with a significance value of 0.910> 0.05 and (h3) was rejected with a significance value of 0.797 <0.05. in conclusion, all the hypotheses (h1, h2, h3) are rejected and h0 is accepted. based on these results, the use of the optimal portfolio method in investment is able to minimize the risks, although it doesn’t eliminate the risk. keywords: jakarta islamic index, stock portofolio, stock return, stock risk 1. introduction in the year 2015 the growth of indonesia’s gross domestic product (gdp) is as large as 4.87% which became the lowest in the last 6 years. this condition is the first gdp growth under 5% since the year 2010. figure 1 indonesia gdp growth 2009-2016 (percent) source: secondary data from the central body of statistics which was processed by the data center and information system, ministry of trade * corresponding author. email address: ahmadrdy17@gmail.com 4.38% 6.10% 6.17% 6.03% 5.56% 5.01% 4.88% 5.02% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50% 2009 2010 2011 2012 2013 2014 2015 2016 afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 29 figure 2 monthly growth of combined figure 3 monthly growth of stock price index jakarta islamic index (jii) december 2013-december 2016 december 2013-december 2016 source : ihsg secondary data source: jii secondary data in line with the gdp growth, the combined stock price index and jakarta islamic index in the monthly growth of the december 2013-december 2016 period showed the same performance. based on the stock index data, the combined stock price index and the jakarta islamic index showed the macroeconomic condition that provides performance influence in general. yet it does not mean the jii performance development illustrates the performance of each stock in the listing at that period as the same with the index performance. for example, the return that is shown by the stock of aali, adro and akra which are always on the listing for the years of 2014-2016. table 1 return stock of aali, adro, akra in the closing of 2014-2016 stock code year. 2014 year. 2015 year. 2016 aali -3% -35% +11% adro -4% -50,4% +229% akra -5,8% +74,15% -16,4% source : secondary data of aali, adro, akra return stocks 2013-2016 which are already processed table 1 shows the price fluctuation of some stock which are in the jii list, yet there is an incompatibility with the jii value trend in some stock. in other words the return of each stock does does not always follow the performance trend and the formed stock index, and it shows a development that is not positive or negative. the conclusion is that although investment in stocks can be appropriate with the syariah principle, stock investment is still an economic business investment which has risks and no guarantee of return inside it. in the investment process, determining strategy, forming and managing a portfolio is considered adequately important, a portfolio is defined as a series of combinations of several assets which are invested by investors. the forming of a portfolio is meant so that investors implement diversification in asset selections for optimizing the profit expectation and minimize risk chances with a logical reason and analysis, so the speculation practice is avoided. the modern portfolio approach was first introduced by harry m. markowitz. the portfolio theory that was introduced by markowitz assumed that investors make their investment decisions based on the expected return and portfolio risk. 4000 4500 5000 5500 6000 d e c1 3 a p r1 4 a u g -1 4 d e c1 4 a p r1 5 a u g -1 5 d e c1 5 a p r1 6 a u g -1 6 d e c1 6 ihsg (indeks harga saham gabungan) ihsg 550 600 650 700 750 800 d e c1 3 a p r1 4 a u g -1 4 d e c1 4 a p r1 5 a u g -1 5 d e c1 5 a p r1 6 a u g -1 6 d e c1 6 jii (jakarta islamic index) jii an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 30 the optimal portfolio other than inputting assets in stock form with the highest profit and lowest risk, also considers the proportion and allocation of funds in the portfolio forming assets. the most important matter in the forming of the syariah stock optimal portfolio based on the jii is the meaning that listed stocks in jii which are the portfolio forming objects are 30 of the most liquidable syariah stocks and continue to fluctuate and recorded in the syariah effect list. although each stock has different risks and returns, the economic phenomenon in indonesia very much influences the performance or the jii index value. especially in 2015 where the indonesian and global gdp conditions experienced the lowest growth in the last 6 years. although not all the stock are impacted by jii performance. so this shows the urgency about the importance if portfolio performance assessment of syariah stock in the periods before, in and after the indonesian economic weakening in 2015. 2. literature review investment in the al-qur’an surah al-hasyr verse 18 allah stated: َٱَّللَّ َخَ يَ َإِنَّ ٱتَّقُواْٱَّللَّ َۚ َو ٖۖ ۡتَِلغ د اَق دَّم ۡلت نُظۡرَن ۡفٞسَمَّ و َ نُوْاَٱتَّقُوْاٱَّللَّ َء ام أ يُّه اٱلَِّذين ٰ َٰ لُون اَت ۡعم َبِم ١٨ََِبيُرُۢ meaning: o who believe, follow allah and each self should be attentive to what they do for tommorrow (the afterlife); and follow allah, truly allah is the all knowing of what you do in that verse, allah orders all believers to oblige to follow allah and the attitude of the followers is that every believer should be attentive to what they do for tommorrow. the emphasis of this verse, is that for every believer, one of the forms of following allah is by preparing the life for tommorrow (investment). so indirectly, a form of belief and following for every muslim is investing with the intention because of allah, to strengthen their belief. investment itself is based on the word invest meaning to plant. donald e. fischer and ronald j. jordan in their book security analysis and portfolio management, defined that an investment is a commitment of funds made in the expectation of some positive rate of return”. jack clark francis, in his book investment : analysis and management, defined that: “an investment is a commitment of money that is expected to generate of additional money” investment is a process of managing assets which are able to provide results in the future. so it can be concluded, investment is a commitment in allocating an asset in the form of money or other resources with the expectation an consideration to obtain a positive result in the future. the investment activity if observed from the object is divided into two objects, which are investment in real assets (assets in physical form such as land, buildings and the like) and investment in monetary assets (assets in the form of securities (effects) such as syariah bonds, syariah stock and other securities), syariah stock stock is a proof of the company assets that issue the stock. while in the syariah principle, the addition of capital is implemented in companies that do not follow the syariah principle such as gambling, usury, producing forbidden goods. generally according to the bill right there are two types of stock, common stock and preferred stock. common stock are the most plentiful afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 31 securities and are spreaded in the trade. while what is named as preferred stock is because the holder has special rights above usual stockholders, in certain matters that are agreed in the stock emission. this privilege is different between one emmitance and other emmitances which are the agreement results between investors or stockholders with emmitance. return stock basically there are 2 results (returns) in stock investment among others: a. divident a divident is profit sharing that companies provide to investors and is from the profit that the company produces. b. capital gain capital gain is the difference between the selling price and buying price of stock and cash divident which is obtained from emmitance because companies obtain profit, this gain is formed with the presence of stock trade activities in the secondary market.l stock risk risk is also defined as a probability of the occurrence of loss which investors will experience or an uncertainity of the return which will be obtained in the future. so, risk is defined as a chance that an unwanted occasion will occur. in the stock investment context in the capital market, risk can be divided into two types which are: a. systematic risk a systematic risk as a risk which cannot be eliminated by diversification, because the fluctuation of this risk is influenced by macroeconomic factors which are able to be influenced by macroeconomic factors that can influence the market as a whole. such as the change of interest levels, foreign exchange rates, government policies and others.( b. unsystematic risk an unsystematic risk is a risk that can be eliminated by diversification, because this risk is only present in one company or certain industries such as the capital structure factor, asset structure, liquidity levels, profit levels and others. single index model portfolio the single index model portfolio is a simplification of the index model developed by markowitz. developed by william f. sharpe in 1963, it explains the relation between returns from each asset in the market index return. the single index model divides the return from an effect into two primary components which are: 1. the ereturn component related with company uniqueness: symbolized with αi; 2. the return component related with the market; symbolized with βi . rm. primarily, the steps implemented for forming a portfolio are a. counting the stock return level (ri) and expected return (e(ri)); an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 32 b. counting the market return index (rm), alpha (αi) and beta (βi); c. counting the deviation standard and residual variant (unsystematic risk); d. counting the excess return to beta (erb) e. counting the cut-offpoint (c*) f. counting the portion of each stock g. counting the expected return portfolio h. counting the portfolio risk by determining the variant size of the portfolio. the forming of the optimal portfolio using the single index model is determined from the excess return to beta (erb) from a positive effect then compared with the cut-offpoint value (c*) the effect that has an erb is larger or the same with c* so it will be in the optimal portfolio candidate with the single index method. risk adjusted performance this concept is based on the capital market theory which is a portfolio performance measurment concept pioneered by william sharpe, treynor, and michael jensen with the term of composite (risk-adjusted) meeasure of portofolio performance. treynor index the treynor index is a measure of portfolio performance developed by jack treynor (1965) and this index is often also called the reward to volatility ratio (rvor). the portfolio performance in the treynor index is observed by connecting the return portfolio level with the risk size from the portfolio. the assumption is that the portfolio is already diversified well so the risk considered relevant is the systematic risk (market risk) measured with beta. treynor (tp) = rp-rf (1) βp previous research some previous research which support and even almost similar, from the methodical and the research object, for becoming reference materials as sources of reference and a comparison in this research. some of the previous research are among others: 1. agustin sulistyorini (2009) in her thesis titled “analisis kinerja portofolio saham dengan metode sharpe, treynor, dan jensen (saham lq45 di bursa efek indonesia tahun 2003-2007)”, stated that there is no significant difference between testing with the sharpe, treynor and jensen methods. where h0 in this research is accepted, which is in the absence of a difference of lq45 stock portfolio which was evaluated by usingthe sharpe, treynor and jensen methods. in this research the writer implemented research in the form of comparing evaluation results from the three methods by a difference testing method using the one way of variance by rank with kruskal-wallish. the result formed a value of =1.906 with a probability of 0.386. so that result is known from the test probability which is ≥ 0.05 and a count of <table 5.99. 2. ratna utami and maha putra kusuma in their research titled “analisis kinerja saham syariah dan pengaruhnya terhadap respon pasar pada afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 33 perusahaan yang tercatat di jii” showed counting results of the jakarta islamic index market parameter in the december 2008 – november 2010 period, the jii index provided a market return rate (rm) positively valued at 0.108% and larger than the return rate of the risk free investment as large as 0.625%. 3. imam edi subekhi (2012) in his thesis “analisis perbandingan kinerja portofolio saham syariah sebelum dan sesudah listing di jakarta islamic index (studi pada saham-saham di jii periode 5 desember 2008-8 juni 2011)” studied about the optimal portfolio performance of syariah stock formed based on a time period, which is before, in, and after the jii listing in the period of 2008-2011. with the treynor index assessment method, the result of the assessment of the three portfolios is compared with by implementing the two direction difference test (paired sample t test). the result showed that the comparison between portfolios when listing with 3 months before listing provided a tcount as large as 76.805 with a 0.000 probability. so h0 is rejected and h2 is accepted, which there is a significant difference between in the listing with 3 months after the jii listing. and lastly the portfolio performance comparison of 3 months before listing with the portfolio of 3 months after listing of jii, it provides a value as large as 3.560 with a probability of 0.003. so h0 is rejected and h3 is accepted. this research tested 3 portfolios based on 3 different time periods as a cause of an evaluation event and listing in jii. framework the primary problem of this research is observing the influence of the indonesian economic condition in 2015 to the significance of a difference of an optimal portfolio of syariah stock formed from syariah stock issued in jii in the years before economic growth weakening (2014), in the economic growth weakening (2015) and after the economic growth weakening (2016). by using the portfolio performance assessment of risk adjusted performance (treynor index). the optimal portfolio is formed from shares listed in jii and corresponding to the sample criteria before tne years of the indonesian economic growth weakening in 2015 is named as the 2014 portfolio. while the one that is formed in the year of the indonesian economic growth weakening in 2015 is named as the 2015 portfolio. and the one that is formed after the year of the indonesian economic growth weakening is named as the 2016 portfolio. based on the assumption and explanation above, the following framework is formed. an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 34 portfolio performance 2014 (difference test) h1 h2 (difference test) h3 (difference test) figure 4 theoretical framework hypothesis from the framework model, this research proposed 3 hypotheses (h1,h2,h3) about the syariah stock performance which are: h0:there is no portfolio performance difference between the years of 2014 (before), 2015 (at the time) and 2016 (after). h1:there is a portfolio performance difference between the years of 2014 (before) with 2015 (at the time). h2:there is a portfolio performance difference between the years of 2015 (at the time), with 2016 (after). h3:there is a portfolio performance difference between the years of 2014 (before), with 2016 (after). 3. research methodology this research is a qualitative research which analyzes the optimal portfolio performance comparison which is formed from listed syariah stock in jii. the forming of this portfolio uses the single index method developed bytw william sharpe. because that method is more suitable for this research, it is observed that the primary problem in this research is the macroeconomic condition that influenced the index performance. the formed portfolio is also evaluated per semester or every 6 months corresponding with the jii issuance schedule. such as what is known is that the portfolio strategy is an investment strategy with a short term analysis. the data used is the daily secondary data which is obtained from research documentation results to form a portfolio. the comparison of portfolio performance is measured by comparing the average daily return per week between portfolios using the risk adjusted performance method developed by treynor (treynor index). so in processing data by comparing the performance index between portfolios per period, 51 samples of data in the form of treynor index values are obtained each day per week in the observation period. as a cause of avoiding performance fluctuations of each stock which is too high, the the portfolio analysis is a short term analysis and the weekly total is stable in one year, where it is not influenced by stock exchange results. in this research the writer is assisted by the computer assistant portofolio performance 2015 portofolio performance 2016 afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 35 program (software) microsoft excel for forming portfolios and counting the portfolio performance index with the risk adjusted performance method, and the spss computer program (software) for implementing the t-test difference test. data type and source in this research, the data used is the secondary data, which is primary data that is continously processed and presented well by the collecting party of the primary data or other parties. where what becomes the data is the daily closing price of stock per day which goes into the research sample for the research period, the jii closing index per day in the research period, and the bi rate for the research period. data for this research was collected and obtained from the indonesia stock exchange investment gallery, faculty of economics and business walisongo islamic university semarang, data collected for this research are: a. emmitance list data included in the jakarta islamic index (jii) in the 20132016 period b. transaction data of syariah stock prices in the closing per day included in the jakarta islamic index (jii) in the 2013-2016 period included in the sample criteria for counting the stock return; c. jakarta islamic index (jii) price data in the closing per day in the 2013-2016 period for measuring market return; d. bi rate data for the 2013-2016 period for counting risk free return; e. and other related data which supports this research process. these data are obtained from the sites: http://www.idx.co.id, http://www.ojk.go.id, http://www.bi.go.id, http://www.finance.yahoo.com, http://www.sahamok.com, and other supporting data obtained from internet articles or libraries in the form of bulletins, journals, and other research related and relevant to this research. population and data sample population is the whole research object, which consist of visible objects, abstracts, events and causes which are the data sources which have certain and same characteristics. basically the object in this research are the stocks in the jii listing before and after the indonesian economic weakening of 2015. because of that the population in this research are the issuers which entered jii in the january 2013 period until the december 2016 period in a row. the determination of that period is based on the indonesian economy weakening phenomenon in 2015 so it is fine if the syariah stock performance is assessed after the weakening. besides that, there is a decrease of index performance mid 2015 where before the performance decrease occurred the jii index showed a good performance. samples are part of a population where the characteristics will be explored and considered capable of representing the whole population. for avoiding a bias, the purposive sampling method is used, which is a sample selection method with certain criteria. the criteria used in this research are: 1. stock in the jii category in the december 2013 – may 2014 period for the 1st semester 2014 portfolio period, june – november 2014 period for the 2nd semester 2014 portfolio period, december 2014 – may 2015 period for the 1st semester 2015 portfolio period, june – november 2015 period for the 2nd semester 2015 portfolio period, december 2015 – may 2015 period for the 1st semester 2016 portfolio period, , june – november 2016 period for the 2nd semester 2016 portfolio period. http://www.idx.co.id/ http://www.ojk.go.id/ http://www.bi.go.id/ http://www.finance.yahoo.com/ http://www.sahamok.com/ an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 36 2. does not implement corporate action (stock split, stock dividend, and right issue) in the portfolio observation period. the reason is for avoiding biased data analysis results so an increase of the stock price is expected or the stock price decrease is genuine because the transaction volume factor is by investors and is not a cause of corporate action. operational and variable definition table 2 portfolio research variables no variable remarks indicator forming the single index method optimal portfolio 1 ri counting return stock i in the t period ri = 𝑃𝑡− 𝑃𝑡−1+𝐷𝑡 𝑃𝑡−1 (2) 2 e(ri) counting the expected return stock i e(ri) = ∑ 𝑅𝑖𝑡 𝑛 𝑡=1 𝑛 (3) 3 sdi counting the stock i deviation standard sdi = ∑ [𝑅𝑖𝑡−𝐸(𝑅𝑖)] 2𝑛 𝑡=1 𝑛 (4) 4 𝜎𝑖 2 counting the stock i variant 𝜎𝑖 2 = sd2 = [ ∑ [𝑅𝑖𝑡−𝐸(𝑅𝑖)] 2𝑛 𝑡=1 𝑛 ]2(5) 5 rm counting the jii market return index period t rm = 𝐽𝐼𝐼𝑡− 𝐽𝐼𝐼𝑡−1 𝐽𝐼𝐼𝑡−1 (6) 6 e(rm) counting the expected jii market return index e(ri) = ∑ 𝑅𝑖𝑡 𝑛 𝑡=1 𝑛 (7) 7 sdm counting the jii market deviation standard index sdm = ∑ [𝑅𝑚𝑡−𝐸(𝑅𝑚)] 2𝑛 𝑡=1 𝑛 (8) 8 𝜎𝑚 2 counting the jii market variant index 𝜎𝑚 2 = [ ∑ [𝑅𝑚𝑡−𝐸(𝑅𝑚)] 2𝑛 𝑡=1 𝑛 ]2(9) 9 σim counting the stock i covariant with the jii market index σim= ∑ [(𝑅𝑖𝑡−𝐸(𝑅𝑖)).(𝑅𝑚𝑡− 𝐸(𝑅𝑚𝑡))] 𝑛 𝑡=1 𝑛 (10 ) 10 βi counting the stock i beta value βi = 𝜎𝑖𝑚 𝜎𝑚 2 (11) 11 αi counting the stock i alpha value αi =𝐸(𝑅𝑖 ) − 𝛽𝑖 . 𝐸(𝑅𝑚) (12) 12 𝑅𝑓 counting the risk free return rf = ∑ 𝐵𝐼𝑅𝑎𝑡𝑒 𝑛 𝑡=1 𝑛 (13) 13 𝐸𝑅𝐵𝑖 counting the excess return to beta 𝐸𝑅𝐵𝑖= 𝐸(𝑅𝑖)−𝑅𝐵𝑅 𝛽𝑖 (14) 14 ci counting the c value for determining the cut-off value. usually the cut-off value is the stock with the largest c value ci = 𝜎 𝑚 ∑ 𝐴𝑗 𝑖 𝑗=1 2 1+ 𝜎 𝑚 ∑ 𝐵𝑗 𝑖 𝑗=1 2 (15) 15 wi counting the portfolio composition proportion (procentage) wi = 𝑍𝑖 ∑ 𝑍𝑖 𝑘 𝑗=1 (16) zi = 𝛽𝑖 𝜎𝑒𝑖 2 (𝐸𝑅𝐵𝑖 − 𝐶 ∗) (17) 16 rp counting the return portfolio rp = 𝑅𝑝𝑡− 𝑅𝑝𝑡−1 𝑅𝑝𝑡−1 (18) 17 𝐸(𝑅𝑝) counting the expected return portfolio e(rp) = ∑ 𝑅𝑝𝑡 𝑛 𝑡=1 𝑛 (19) afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 37 18 σpm counting the portfolio covariant with the jii market index σpm= ∑ [(𝑅𝑝𝑡−𝐸(𝑅𝑝)).(𝑅𝑚𝑡− 𝐸(𝑅𝑚𝑡))] 𝑛 𝑡=1 𝑛 (20) 19 𝛽𝑝 counting the portfolio beta value 𝛽𝑝 = 𝜎𝑝𝑚 𝜎𝑚 2 (21) portfolio performance assessment with the risk adjusted performance method 20 𝑇𝑝 counting the treynor index 𝑇𝑝= 𝑅𝑝̅̅ ̅̅ − 𝑅𝑓̅̅ ̅̅ 𝛽𝑝 (22) 4. results and discussion jakarta islamic index the jakarta islamic index in an index created by pt. bursa efek indonesia (bei) with pt. danareksa investment management (dim) based on islamic syariah in the frame of developing the syariah capital market. this index is meant to be used as a measurement (benchmark) for measuring performance of an investment that enters the jii index, it is implemented with the following order: 1) selecting stock groups with the primary business of not being against the syariah principle and already recorded for more than 3 months (except being included in the 10 big capitalizations) 2) selecting stock based on yearly financial reports or the last annual middle which have an obligation to assets as large as 90% maximum 3) selecting 60 stocks from the above stock composition based on the average market capitalization order for the last year. 4) selecting 30 stocks with the composition based on average regular liquidation levels for the last year. portfolio 2014 semester i in the portfolio period of semester i 2014 there are 4 stocks included in the portfolio. table 3 2014 portfolio semester i no. stock code company name industrial sector percentage 1 adro adaro energy tbk. mining (coal mining) 33.72% 2 aali astra agro lestari tbk. agriculture (plantation) 41.63% 3 lsip pp london sumatera indonesia tbk. agriculture (plantation) 3.17% 4 untr united tractors tbk. trade, services and investment (wholesale(durable &non-durable goods) 21.48% source: processed secondary data an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 38 figure 5 semester 1 2014 portfolio percentage semester ii in the portfolio period of semester ii there are 5 stocks included in the portfolio. table 4 2014 portfolio semester ii no. stock code company name industrial sector percentage 1 smgr semen indonesia (persero) tbk. basic industry and chemicals (cement) 13.46% 2 inco vale indonesia tbk. mining (metal and mineral mining) 40.72% 3 mppa matahari putra prima tbk. trade, services and investment (retail trade) 23.94% 4 lsip pp london sumatera indonesia tbk. agriculture (plantation) 10.51% 5 aali astra agro lestari tbk. agriculture (plantation) 11.36% source: processed secondary data figure 6 semester 2 2014 portfolio percentage 2015 portfolio semester i in the portfolio period of semester i 2015 there are 4 stocks included in the portfolio. table 52015 portfolio semester i source: processed secondary data no. stock code company name industrial sector percentage 1 pgas perusahaan gas negara (persero) tbk. infrastructure, utilities and transportation (energy) 12.96% 2 ptpp pembangunan perumahan (persero) tbk. property, real estate and building construction (building construction) 56.67% 3 wika wijaya karya tbk. property, real estate and building construction (building construction) 24.62% 4 ssms sawit sumbermas sarana tbk. agriculture (plantation) 5.75% afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 39 figure 7 semester 1 2015 portfolio percentage semester ii in the portfolio period of semester ii 2015 there are 11 stocks included in the portfolio. table 6 2015 portfolio semester ii source: processed secondary data pgas infrastructure, utilities and transportation (energy)… ptpp property, real estate and building construction (building construction), 56,67% wika property, real estate and building construction (building … ssms agriculture (plantation), 5.75% no. stock code company name industrial sector percentage 1 akra akr corporindo tbk. trade, services and investment (wholesale(durable &non-durable goods) 8.72% 2 ssms sawit sumbermas sarana tbk. agriculture (plantation) 24.56% 3 wskt waskita karya (persero) tbk. property, real estate and building construction (building construction) 22.04% 4 ptpp pembangunan perumahan (persero) tbk. property, real estate and building construction (building construction) 9.87% 5 smra summarecon agung tbk. property, real estate and building construction (property and real estate) 7.08% 6 mppa matahari putra prima tbk. trade, services and investment (retail trade) 2.27% 7 untr united tractor tbk. trade, services and investment (wholesale(durable &non-durable goods) 1.40% 8 unvr unilever indonesia tbk. consumer goods industry (cosmetic household) 13.14% 9 icbp indofood cbp tbk. consumer goods indutry (food and beverages) 7.67% 10 lppf matahari department store tbk. trade, service and investment (retail trade) 1.30% 11 silo siloam international hospitals tbk. trade, services and investment (healthcare) 0.31% an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 40 figure 8 semester 2 2015 portfolio percentage 2016 portfolio semester i in the portfolio period of semester i 2016 there are 2 stocks included in the portfolio. table 5 2016 portfolio semester i no. stock code company name industrial sector percentage 1 akra akr corporindo tbk. trade, services and investment (wholesale(durable &non-durable goods) 80.22% 2 pwon pakuwon jati tbk. property, real estate and building construction (property and real estate) 19.78% source: processed secondary data figure 9 semester 1 2016 portfolio percentage semester ii in the portfolio period of semester ii 2016 there are 11 stocks included in the portfolio. table 8 2016 portfolio semester ii no. stock code company name industrial sector percentage 1 wskt waskita karya (persero) tbk. property, real estate and building construction (building construction) 48.56% 2 silo siloam international hospitals tbk. trade, services and investment (healthcare) 2.65% 3 ssms sawit sumbermas sarana tbk. agriculture (plantation) 4.40% 4 indf indofood sukses makmur tbk. consumer goods indutry (food and beverages) 15.24% 5 adro adaro energy tbk. mining (coal mining) 4.04% akra trade, services and investment (wholesale(durable &non-durable goods), 8.72% ssms agriculture (plantation), 24.56% wskt property, real estate and building construction (building … ptpp property, real estate and building construction (building construction), 9.87% smra property, real estate and building construction (property and real estate), 7.08% mppa trade, services and investment (retail … untr trade, services and investment (wholesale(durabl e &non-durable … unvr consumer goods industry … icbp consumer goods indutry (food and beverages), 7.67% lppf trade, service and investment (retail trade), 1.30% silo trade, services and investment (healthcare… akra trade, services and investment (wholesale(durable &nondurable goods), 80.22% pwon property, real estate and building construction (property and real estate), 19.78% afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 41 6 lsip pp london sumatera indonesia tbk. agriculture (plantation) 3.90% 7 tlkm telekomunikasi indonesia (persero) tbk. infrastructure, utilities and transportation (telecommunication) 12.78% 8 pwon pakuwon jati tbk. property, real estate and building construction (property and real estate) 4.38% 9 jsmr jasa marga (persero) tbk. infrastructure, utilities and transportation (toll road, airport, harbour and allied products) 3.23% 10 akra akr corporindo tbk. trade, services and investment (wholesale(durable &non-durable goods) 0.33% 11 ptba tambang batubara bukit asam tbk. mining (coal mining) 0.50% source: processed secondary data figure 10 semester 2 2016 portfolio percentage statistical data analysis based on the statistical count and analysis to each portfolio, a performance growth graph is obtained which shows the daily performance growth of each week as shown in the following: figure 11 average weekly return performance between portfolios it is seen graphically that the performance of each portfolio provides different results, yet the numbers are not significant. if observed from the global wskt property, real estate and building construction (building construction), 48.56% silo trade, services and investment (healthcare), 2.65%ssms agriculture (plantation), 4.40% indf consumer goods indutry (food and beverages), 15% adro mining (coal … lsip agriculture … tlkm infrastructure, utilities and … pwon property, real … jsmr infrastructure, utilities and transportatio… akra trade, services and investment … ptba mining (coal mining), 0.50% -3.000% -2.000% -1.000% 0.000% 1.000% 2.000% 3.000% mg 1 mg 4 mg 7 mg 10 mg 13 mg 16 mg 19 mg 22 mg 25 mg 28 mg 31 mg 34 mg 37 mg 40 mg 43 mg 46 mg 49 2014 2015 2016 an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 42 economy issue, the weakening occured in mid 2015, where the 2015 portfolio was observed with a deeply negative trend. yet the numbers do not reach the 3% average. table 9 return portofolio descriptive data analysis results lowest return highest return average return deviation standard total return portofolio 2014 i -2.01% 1.43% 0.12% 1.61% 11.40% jii 2014 i -0.76% 0.94% 0.09% 1.17% 9.87% portofolio 2014 ii -1.49% 1.26% 0.01% 1.36% -1.80% jii 2014 ii -0.84% 0.62% 0.07% 0.90% 5.29% portofolio 2015 i -2.54% 1.03% -0.04% 1.41% -13.88% jii 2015 i -2.07% 1.01% -0.03% 1.05% -5.40% portofolio 2015 ii -0.98% 1.92% -0.07% 1.57% 5.07% jii 2015 ii -1.45% 2.14% -0.09% 1.72% -7.86% portofolio 2016 i -1.87% 2.25% -0.04% 2.10% -4.17% jii 2016 i -0.89% 1.13% 0.13% 1.05% 17.27% portofolio 2016 ii -1.23% 2.14% 0.07% 1.54% 5.02% jii 2016 ii -1.12% 1.74% 0.08% 1.19% 1.06% source: processed secondary data yet when observed based on statistical counts shown on table 9, it is seen that the portfolio condition has a higher value compared with .the jii index. yet there are some conditions where the portfolio value is lower than the jii index. in semester 1 2015 and semester 1 2016 there is a change of the portfolio habit, caused by the presence of the market trend which is caused by investor expectations which change following government expectations. while observed from the risk value, all portfolios have a higher risk value compared with the jii index. this is considered normal, although portfolio forming has a purpose for maximizing returns, with a risk value as minimal as possible, yet for obtaining the maximum return, the risk level will increase. so in can be concluded that the global and regional economic condition influences the stock price index performance which causes the portfolio performance which is formed by the single index method. where the portfolio with the single index method is very dependent on value, and the trends and risk values of the stock price. while the average performance value of weekly return portfolios, beta values, variance values, average weekly return index performance and the risk free rate are obtained from the average weekly bi rate which produces values as shown in the following table 10. table 10 average return. beta, variance portfolio, average index, and average risk free return avg. return beta portofolio (βp) variance jii (rm) bi rate (rf) 2014 i 0.12% 0.596097 0.0002586 0.09% 0.14% 2014 ii 0.01% 0.721693 0.0001844 0.07% 0.14% 2015 i -0.04% 0.577479 0.0001977 -0.03% 0.14% 2015 ii 0.07% 0.721047 0.0002473 -0.09% 0.14% afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 43 2016 i -0.04% 0.561066 0.0004416 0.13% 0.13% 2016 ii 0.07% 0.922251 0.0002357 0.02% 0.13% source: processed secondary databes based on the data shown in table 10, each year based portfolio can be measured and compared to the weekly treynor index performance in each portfolio so it provides a hypothesis test result in the first, second and third hypotheises. the t test result between the portfolio treynor index provides the same result, which is the rejection of hypothesis 1 (h1), hypotheisis 2 (h2), and hypotheisis 3 (h3). and the acceptance of hypotheisis 0 (h0) which illustrates that there is no difference between the average weekly performance from every performance measure index. table 11 test results of the firstthird hypotheises (2014-2016) t count t table significant value significant level result first hypothesis test (2014-2015) treynor index 0.388 2.0086 0.699 0.05 h0 accepted second hypothesis test (2015-2016) treynor index -0.113 -2.0086 0.910 0.05 h0 accepted third hypothesis test (2014-2016) treynor index 0.259 2.0086 0.797 0.05 h0 accepted source: processed secondary data based on table 11, every t test value and significance value in every performance measure index of each hypothesis test period, there is not one that fulfills the criteria of the hypothesis 0 (h0) rejection and accepts the alternative hypothesises (h1, h2, h3) which explains that performance wise the weekly portfolio does not provide a significant difference. so it can be concluded, that the purpose of forming portfolios for searching for the lowest risk with the maximum return can be said as accomplished, with the proof of the inter-year weekly portfolio before, at the time, and after the indonesian economic weakening which does not have a significant difference, which means, the weakening condition of the indonesian economy in 2015 which is a macroeconomic condition ot can be said as a part of the beta value (systematic risk) does not influence the average weekly portfolio performance which is formed significantly compared with the years before and after 2015 where the indonesian macroeconomic condition does not experience growth weakening. table 12 portofolio return, jii return and beta portofolio portofolio return (rp) jii return (rm) beta portofolio (bp) portofolio 2014 i 11.40% 9.87% 59.61% portofolio 2014 ii -1.80% 5.29% 72.17% portofolio 2015 i -13.88% -5.40% 57.75% portofolio 2015 ii 5.07% -7.86% 72.10% portofolio 2016 i -4.17% 17.27% 56.11% portofolio 2016 ii 5.02% 1.06% 92.23% source: processed secondary data an optimal portfolio comparison of syariah stocks before and after the weakening of the 2015 indonesian economy 44 yet, when observed and compared with the portfolio return, jii return, and beta portfolio per semester, it illustrates a different performance with the average weekly performance, there is even something that is not symetrical with the jii market performance index. it is seen from the first semester of 2014 until the first semester of 2015, the semesterly portfolio return is symetrical with the beta portfolio value. even though performance wise the average weekly portfolio provided results that there is no significant performance difference. so what becomes the attention is that the analysis of portfolio forming and performance is a short term analysis for adapting to the purpose in forming the portfolio. based on the result, a rational investor needs to pay attention t the implemented investment process specifically in the portfolio forming phase, portfolio revision, portfolio assessment and evaluation and the right timing in making decisions, as the writer explains for maximizing the investment results. 5. conclusion based on the analysis results implemented for finding the portfolio performance difference of the optimal syariah stock which us arranged by considering the factors before, at the time, and after the weakening of the indonesian economic growth in 2015, the conclusion is as the following: 1. there is no significant difference in the average weekly treynor index in the syariah stock optimal portfolio which is formed from the jakarta islamic index before and at the time of the economic growth weakening in 2015. in other words, there is no difference of average weekly portfolio performance between the 2014 and 2015 portfolios. this result is proven with the insignificant t count value, because the statistical count shows a t count value as large as 0.388 below the 2.0086 t table with a probability value (sig-t) as large as 0.699 which the value is above the 0.05 significance level. 2. there is no significant difference in the average weekly treynor index in the syariah stock optimal portfolio which is formed from the jakarta islamic index before and at the time of the economic growth weakening in 2015. in other words, there is no difference of average weekly portfolio performance between the 2014 and 2016 portfolios. this result is proven with the insignificant t count value, because the statistical count shows a t count value as large as -0.113 below the 2.0086 t table with a probability value (sig-t) as large as 0.910 which the value is above the 0.05 significance level. 3. there is no significant difference in the average weekly treynor index in the syariah stock optimal portfolio which is formed from the jakarta islamic index before and at the time of the economic growth weakening in 2015. in other words, there is no difference of average weekly portfolio performance between the 2014 and 2016 portfolios. this result is proven with the insignificant t count value, because the statistical count shows a t count value as large as 0.259 below the 2.0086 t table with a probability value (sig-t) as large as 0.797 which the value is above the 0.05 significance level. 4. the conclusion from the three tested hypotheises provides an illustratio of the portfolio forming strategy in investment in the years 2014, 2015 and 2016, with the presence of an economic growth weakening in the year 2015 as a systematic risk variable which can be minimalized. this shows the portfolio strategy to be in the reach of the goal of portfolio forming. afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 45 references ahmad, k. (2004). dasar-dasar manajemen investasi dan portofolio. jakarta: pt. rineka cipta. p. 2. brigham, e. f., & houston, j. (2009). fundamentals of finance management. terj. ali akbar yulianto. jakarta: salemba empat. p. 216. hartono, j. (2014). teori dan praktik portofolio dengan excel. jakarta: salemba empat. p. 7-8. hartono, j. (2007). teori portofolio dan analisis investasi. yogyakarta: bpfe yogyakarta. p. 207. pt bursa efek indonesia. sekolah pasar modal syariah tahun 2011. p.3. samsul, m. (2006). pasar modal dan manajemen portofolio. jakarta: erlangga. p. 35. subekhi, i. (2011). analisis perbandingan kinerja portofolio saham syariah sebelum dan sesudah listing di jakarta islamic index (studi pada sahamsaham di jii periode 5 desember 2008 8 juni 2011. [theisis]. semarang: walisongo public islamic university. p. 111-114. sudandarumini. (2002). metedologi penelitian petunjuk praktis untuk penelitian pemula. yogakarta: gajah mada university press. p. 47. sulistyorini, a. (2009). analisis kinerja portofolio saham dengan metode sharpe, treynor, dan jensen (saham lq45 di bursa efek indonesia tahun 2003-2007). [tesis]. semarang: diponegoro university. p. 62-63. tandelilin, e. (2001). analisis investasi dan manajemen portofolio. yogyakarta: bpfe yogyakarta. p. 17. tandelilin, e. (2001). analisis investasi dan manajemen portofolio. yogyakarta: bpfe yogyakarta. p. 327 tuerah, c. (2013). perbandingan kinerja saham lq45 tahun 2012 menggunakan metode jensen, sharpe dan treynor. emba journal. 1 (4). p. 1447 umar, h. (2000). research methods in finance and banking. jakarta: pt gramedia pustaka utama. print. ii. p. 82 utami, r. dan nugraha, m. (2011). analisis kinerja saham syariah dan pengaruhnya terhadap respon pasar pada perusahaan yang tercatat di jii. jurnal reviu akuntansi dan keuangan. 1 (2). p. 169-170. consumption behavior patterns of muslim students on the decision of buying halal culinary fast food in surabaya 38 consumption behavior patterns of muslim students on the decision of buying halal culinary fast food in surabaya a. fikri amiruddin ihsani1), novi febriyanti2), 1state islamic university of sunan ampel, surabaya 2state islamic university of sunan ampel, surabaya abstract the purposes of this study was to analyze the consumption behavior patterns of the postgraduate students of uinsa islamic economics study program as consumers and supporting factors in purchasing halal culinary food products. the research method used was a qualitative research method with a phenomenological approach, this research observes 10 informants of the postgraduate students of islamic economics study program uinsa as fast food consumers kfc ahmad yani surabaya. the results of this study prove that all informants have knowledge of the concepts of consumer behavior and halal products in indonesia, especially in surabaya. the students have also applied the pattern of islamic consumption behavior that is tauhid, fairness, free will, responsibility and halal as well as supporting factors including cultural, social, personal and psychological factors. knowledge about other supporting factors should be utilized by other consumers for the sustainability and development of perceptions about halal culinary fast food in surabaya. keywords: consumption behavior, halal food, fast food. 1. introduction muslim society basically needs consumption to survive where the higher the human needs, the human consumption behavior also increases. everyone's consumption is different, according to their needs and income level. different income is the main determinant of consumption of muslim society. as a muslim, not all food can be consumed, there are restrictions or rules that must be met (misbahuddin, 2011: 283-310). in the science of jurisprudence there are rules related to halal and haram food. the rule is that all food in the world is basically halal or permissible. no food is forbidden, except if allah swt has determined its prohibition. it is the duty of a muslim to obey allah swt and his messenger, in this context which is to eat thayyiban’s halal products (m amin, 2011: 2). the order to consume and use thayyiban's halal products is mentioned in his word (al-baqarah (2): 168). guaranteed halal of a product is an important thing to note, because now with the rapid development of science and technology has given birth to a variety of fast food product businesses. business competition in the food industry has become commonplace for people (samori, et al, 2014: 482-486). this is an opportunity for business companies to expand their markets. one opportunity to expand the market is through the food industry. one pattern of the food industry is marked by the growth *corresponding author. email address: fikriamiruddin27@gmail.com mailto:fikriamiruddin27@gmail.com afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 39 of the culinary fast food industry or can be called fast food. as we know, franchises have a good reputation for increasing their business worldwide. in addition, the main strategy of the franchise is how to influence the market by examining legal issues regarding halal awareness, habits or lifestyle of consumers, especially on halal products (presswire, 2014: 72). according to the badan pusat statistik (bps, 2019), indonesia has 237,641,326 residents throughout indonesia. this means that there is a great opportunity to expand the market in indonesia. the issue of halal is a major problem for muslim consumers in indonesia. halal information for a product can be conveyed through the halal label given by the majelis ulama indonesia (mui). since the 1990s the majelis ulama indonesia (mui) has taken the initiative to establish the lembaga pengkajian pangan obat-obatan dan kosmetika (lppom) which purposes to provide halal product guarantees for muslim consumers through halal certification of a product (mui, 2016: 49-84). halal certification is legal certainty for muslim consumers. this means that consumers get a guarantee that the products they consume are already qualified as halal products. halal awareness must be considered for culinary industry entrepreneurs, especially fast food, to identify how many lifestyles consumers know whether the product is safe or not. (prabowo, et al: 2015, 268-291). in the era of modernization as it is today, the challenge of developing practical and instant lifestyles that affect almost all populations in the world. instant lifestyle is a lifestyle that is fast, precise, and effective. according to industry, the challenge is the most important factor in supporting the success of the business world. supporting competition will bring great benefits for consumers who then respond to the franchise (yolanda hani, 2015: 571). one of the franchises that attracts so many consumers is kentucky fried chicken (kfc) ahmad yani surabaya by providing halal culinary fast food for the fast-paced muslim community (kfc, 2019). these consumers are in the form of individual, group, and organizational behavior that selects, buys and uses products to satisfy their needs and desires (ahmad yani, 2017: 45). consumption behavior is an action that is directly involved in getting, consuming and consuming a product including the decision process that precedes the action. the decision is in the form of purchases made by everyone at any time and place (tatik suryani, 2013: 4). buying decisions are supported by several factors, these factors encourage that requires everyone to be able to get the products needed and desired. factors that support purchasing decisions by consumption behavior are cultural, social, personal and psychological factors (daryanto, ismanto, 2014: 83). that way the level of halal culinary fast food has a relationship with consumer consumption behavior patterns interesting to study. diversity of consumer consumption behavior patterns in buying a product is supported by various factors both internal and external. consumption behavior patterns of muslim students on the decision of buying halal culinary fast food in surabaya 40 2. literature study 2.1 islamic consumption behavior consumption behavior is the study of how individuals, groups, and organizations choose, buy, use, and how goods, services, ideas, or experiences to satisfy their needs and desires (tatik suryani, 2013: 4). efforts made by consumers to obtain goods and services can be preceded by efforts to search for information, can be through the internet or the surrounding community. if the product is high risk, then consumers will look for more information to avoid mistakes in decision making. if consumers believe in the benefits of a superior product, consumers will buy and consume these products. behavior carried out between consumers will certainly vary according to consumer conditions, internal and external situations and conditions that support it (bilson simamura, 2004: 11). thus the fulfillment of one's consumption should be based on the principles that have been determined in the teachings of islamic economics. because the pattern of consumption behavior is essentially issuing something in order to meet the needs of an individual or group. (muhammad muflih, 2006: 16) the pattern of consumption behavior will be discussed more clearly as follows: 1. tauhid a person who has a soul of tauhid will not be able to do god's prohibition, because in economics it is used as mediation in meeting human needs, both primary needs, secondary needs and complementary needs, involving interactions between metaphysical and physical aspects, because economic activities (business) in the perspective of tauhid is based on the principles in islam (tim sembilan, 2004: 85-86). 2. fairness fair means equal (average), commensurate size (measurement), balance in conducting economic transactions carried out. with regard to justice it has four parts namely the creation of a balanced one, equality and interpretation of all forms of discrimination, the maintenance of individual rights and the granting of rights to everyone who is entitled to receive, as well as maintaining the right for continued existence (muhammad, 2005: 167). 3. free will humans are free will creatures but this freedom does not mean that humans are independent of qadha and qadhar. qadha and qadhar are cause and effect based on literacy, perceptions and attitudes that humans do in economic activities. furthermore, humans must have free will by possessing simple qualities including shame, calm, generous, satisfied, loyal and noble (sumarin, 2013: 85). 4. responsibility the freedom to determine the choice above is attached to the mandate and responsibility, because humans have been given the intellect to think about afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 41 what is good and what is bad, what is maslahah and which interpretations are beneficial and mudharat. because of that freedom, it is logical (natural) if humans must be responsible for all economic behavior of their own choosing (sutisna, 2003: 205). 5. halal the halal of a consumer good is an antipization of the evils that are caused by the good. halal refers to everything that is good from a case that is permitted, permitted and justified according to islamic sharia law. that way, halal products are food and drinks that can be consumed by muslim communities, while food and drinks that are forbidden by islam are not allowed to be consumed by muslim communities (said, et al, 2008: 60). 2.2 halal food the term halal in the qur’an means permissible (john l, 2002: 143). muḥammad ibn ali al-shaukanī believes that it is said to be halal because it has been detached and the detached knot or prohibited ties are prevented. while the word halal in the encyclopedias of islamic law, that is, anything that causes someone not to be punished if using it, can be interpreted as something that can be done according to the law of syara’ (muhammad, 1996: 505-506). halal food is food that is allowed for muslim communities to eat. islam justifies everything that is good. while forbidden food is forbidden for muslim communities to eat (muchtar ali, 2016: 292). basically, all food in this world is halal to be consumed, unless there is a proposition that prohibits either from the qur’an or hadith. in accordance with the following fiqh rules: "the law of origin is something that is permissible until there is an argument that forbids it (forcing it or forbid it)." the purpose of the rule is that the original law of everything created by allah swt is permissible and permissible, unless there is naṣh ṣaḥīih which shows its prohibition. in other words, if there is no naṣh ṣaḥīih or there is no clear indication of its prohibition, then something is still in its original law, that is mubah (abdul a, 1996: 32). in islam consuming food does not only promote the concept of halal, but also ṭayyiban. in accordance with the word of allah swt in surah al-maidah verse 88:"and eat halal food again that is good from what allah swt has blessed you with, and fear the god whom you believe in him." the verse explains that all muslims living on this earth must seek sustenance, the ḥalāl and ṭayyib. they must eat halal food and avoid eating dirty food and food that is prohibited in islam. so it will not damage their bodies and lives. therefore, the concept of ḥalālan ṭayyiban means usefulness, which consists of quality, cleanliness and safety for all the lives of muslims. the word of ṭayyib in arabic has a good meaning, so good food for consumption is still fresh and protected from disease. as muslims, in eating daily food should not be consumption behavior patterns of muslim students on the decision of buying halal culinary fast food in surabaya 42 careless. the food we eat must be ḥalālan ṭayyiban, which means halal and good food according to islamic sharia law (abu al-husain, 1994: 487). 3. research methodology the research method used was a qualitative research method with a phenomenological approach, this research observes 10 informants of the postgraduate students of islamic economics study program uinsa as fast food consumers kfc ahmad yani surabaya. in this study the author focuses on the results of data collection obtained directly from the informants and sources who have been determined (sugiyono, 2019: 293). the research will be purposed at uinsa postgraduate students and focused on all of islamic economics study programs related to islamic consumption behavior patterns and factors supporting purchasing decisions in terms of the halal culinary fast food level. the formulation of the problem in this research is how the consumption behavior patterns of uinsa postgraduate students as consumers in the decision to buy products at kfc ahmad yani surabaya restaurant, and what are the dominant factors as supporters in the decision to buy products at kfc ahmad yani surabaya restaurant. the benefit of this research is to know and have a clear picture, in addition to enriching insights and knowledge, especially relating to consumer behavior in relation to buying decisions. 4. result 4.1 islamic consumption behavior limitation of consumption in islam does not only pay attention to aspects of halal-haram, but also includes what is considered is good, suitable, clean, not disgusting, prohibition of islam and prohibition to boast (khotib, 2019). because the calculation of the quantity and quality of consumption has an impact on income, consumption and savings should be determined on the basis of justice so that it does not overstep the boundaries by being wasteful (tabzir) or miserly (bakhil). behavioral consumption of students of the islamic economics postgraduate study program in consuming halal culinary fast food products has several patterns, including: 1. tauhid the principle of tauhid becomes the main foundation for every muslim in carrying out his activities including economic activities (syaikul fikri, 2019). the postgraduate students of islamic economics study program uinsa as consumers when they consume will have to know the knowledge about the products to be consumed at kfc ahmad yani surabaya. the laws relating to halal culinary fast food whether something is halal or haram both in terms of the substance, process, and purpose. as a consequence of the aqeedah and knowledge that has been known about islamic consumption, then as a consumer at kfc ahmad yani as a halal culinary fast food producer consumes only halal and away from haram and syubhat (muslih, 2019). afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 43 2. fairness as consumers in consumption should not cause tyranny, must be in the corridor of religious rules or laws and uphold propriety or goodness. by obeying the teachings of islam there is no danger or sin when consuming halal products provided by allah swt. as long as consuming is an effort to meet the needs that bring benefits to life and the role of humans to increase devotion to allah swt, then allah swt will give justice in the form of his grace to muslim's consumption (kiky dzakiyah, 2019). is the most important part of justice with the aim of mutual benefit to the postgraduate students of islamic economics study program uinsa as consumers with kfc ahmad yani surabaya as halal culinary fast food producers. the implications of this principle are as follows (nur aini, 2019): a. fullfillment of basic needs. b. halal sources of income. c. equitable distribution of income and wealth. d. growth and stability 3. free will the consumption action is carried out every day by anyone including students of the postgraduate students of islamic economics study program uinsa as consumers. the goal is to get the highest satisfaction and reach the level of prosperity in the sense of fulfilling various needs, one of which is halal culinary fast food at kfc ahmad yani surabaya, which is much loved. the level of consumption gives a picture of the level of prosperity of a person or students of the postgraduate students of islamic economics study program uinsa as consumers (ummi kulsum, 2019). however, this excessive attitude does not contain meaning beyond natural needs and tends to discourage passions or is otherwise too stingy so that it tortures oneself. 4. responsibility in the end, the consumption of the postgraduate students of islamic economics study program uinsa as consumers as a whole is framed by morality contained in islam so that it does not merely fulfill all needs. consumption behavior patterns in islam have been prescribed so as not to live lavishly, not to try forbidden work in order to become a reference in the development of the islamic economic system (siti fatimah, 2019). human awareness of the behavior or actions, whether intentional or unintentional to the behavior patterns of halal culinary fast food consumption at kfc ahmad yani surabaya. responsibility also means acting as an expression of awareness of the obligation. 5. halal consumption is not an unlimited activity, but it is also limited by the nature of halal and haram which has been outlined by the islamic syariah law. there are uinsa islamic economics postgraduate students with a rational consumption behavior pattern (mustahlik al-aqlani) always spending income on various types of goods that suit their physical and spiritual needs consumption behavior patterns of muslim students on the decision of buying halal culinary fast food in surabaya 44 (muaddin, 2019). kfc ahmad yani as a producer of halal culinary fast food has already been seen, namely food that is not obtained from stealing, pillaging, cheating, or corruption. there are several benefits of eating halal food, especially for bodily health. some of them are as follows (khotib 2019): a. stay away from sources of disease b. maximizing the power source c. keep your heart and mind d. maintain morals e. get the pleasure of allah swt f. lead to his heaven g. repairing offspring 4.2 supporting factors of consumption behavior regarding the factors that support purchasing decisions in the consumption patterns of students of the postgraduate students of islamic economics study program uinsa are based on cultural, social, personal and psychological factors. further explanation is as follows: 1. cultural factors culture is the most basic supporting factor of desire and behavior to get what is developing. like halal culinary fast food at kfc ahmad yani, which has a lot of interest among students of the postgraduate students of islamic economics study program uinsa. the relationship between the purchasing decision of students of the the postgraduate students of islamic economics study program uinsa is that culture is used as a reference for someone to make a purchase. so that culture fully supports the purchasing decisions in consumption behavior patterns. halal culinary fast food is very popular because of the rise of instant and fast human life, coupled with the location of the restaurant that is so close in front of the uinsa surabaya (mohammad septyan, 2019). 2. social factors a. group factors the meaning of a group of students in the postgraduate students of islamic economics study program uinsa are friends, friends provide direct support to each person. that is because if someone often interacts with his friends indirectly all input and information from his friend tends to be taken into consideration to make purchasing decisions in consumption behavior patterns (shelvyna rikantasari, 2019). the friend factor which is considered as one of the factors by showing more and more friends often inviting or persuading to consume halal culinary fast food, then the person the greater the purchase decision to consume it. b. family factors the meaning of family in the postgraduate students of islamic economics study program uinsa is parents, parents are included in the primary group who are able to support any consumption behavior patterns afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 45 of halal culinary fast food purchases in kfc ahmad yani surabaya. parents are one of the reference sources of reference and input sources that can provide important and valuable information about the attributes of the product you want to buy. it can be said that parents are merely a reference by providing input but the purchasing decision that ends consumption is still decided by the individual concerned (muslih, 2019). c. role and status factors the role consists of activities that are expected to be undertaken by students of the postgraduate students of islamic economics study program uinsa according to other students who are nearby. each role carries a status that reflects the award given by students. that means someone tends to buy products according to their status among students around. like students who want a product that can be immediately obtained, by entrusting to one student to regulate the course of consumption to related students (muaddin 2019). 3. personal factors a. age factor the more age, the maturity level and maturity of a person will be more mature in thinking and behaving. in terms of trust, students of the postgraduate students of islamic economics study program uinsa are more trusted than people who are not equal in terms of education on campus (khotib, 2019). associated with purchasing decisions in consumption behavior patterns, a person whose age is more mature in terms of science can be considered and be more careful before deciding to consume an item, compared to someone who is younger in age and thought that tends to decide to consume an item based on ego and aspects price of an item. b. job factor the students of the postgraduate students of islamic economics study program uinsa have a variety of activities, the activities are more suited to their respective passions. evidenced by the number of students who have jobs besides college. halal culinary fast food itself is very much needed by workers because one food product is very easy to find or find and obtain, so it will not interfere with the working hours of students of the postgraduate students of islamic economics study program uinsa who are already working (kiky dzakiyah, 2019). c. economic status factors kfc ahmad yani surabaya always said that the quality of the product was in accordance with the reality seen, while students did not defect the expected product. this is commensurate with the economic needs of students of the postgraduate students of islamic economics study program uinsa as consumers that the quality of halal food products with brands and which have been widely recognized and assessed well after consumption behavior patterns of muslim students on the decision of buying halal culinary fast food in surabaya 46 purchase as a factor that strongly reflects the quality of the individual economy. the better the pattern of student consumption behavior on a halal food product, the better consumers' perception of product quality (ummi kulsum, 2019). d. lifestyle factors the postgraduate students of islamic economics study program uinsa as consumers in buying food products are to fulfill their hunger and lifestyle. consideration of hunger and lifestyle becomes the main consideration of kfc ahmad yani surabaya as a producer of fast food. another factor which is the motivation or reason for the postgraduate students of islamic economics study program uinsa as consumers in buying food products is due to the influence of advertising. this is because kfc ahmad yani surabaya promotes its products through advertisements such as print media in the form of billboards, banners or pamphlets and electronic media in the form of television and cyberspace, so consumers are attracted and try advertised food products (siti fatimah, 2019). 4. psychological factors a. motivation product display, name, symbol or label, advertisement, are closely related to the brand image of kfc ahmad yani surabaya as the producer. brand image refers to the motivation of the postgraduate students of islamic economics study program uinsa as consumers of a product identity. on the other hand, kfc ahmad yani surabaya as the producer always performs customer satisfaction and comfort in terms of service because service is a priority (nur aini, 2019). students who are satisfied with the quality of the products obtained and good service from kfc ahmad yani surabaya, then consumers will always refer to other prospective customers to conduct transactions in the same place. b. knowledge they have the knowledge of science in consumption as consumers that the products sold at kfc ahmad yani surabaya meet the legal requirements of halal and thayyib. and the attitude of resignation shown by kfc ahmad yani surabaya is always producing good quality products to be traded to consumers every day. add to this the acknowledgment of the halal status of a product issued by lppom mui (lembaga pengkajian pangan obat-obatan dan kosmetik majelis ulama indonesia). this adds to the position that is centered on the guarantee of halal products (novia dwi, 2019). c. confidence the postgraduate students of islamic economics study program uinsa as consumers and kfc ahmad yani surabaya as halal culinary fast food producers do not do negative thinking or prejudice. the postgraduate students of islamic economics study program uinsa as consumers and kfc ahmad yani surabaya as producers can fulfill their afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 47 rights and obligations. consumers have the right to choose the product to be purchased, as well as the producer also has the right to explain the product it sells, as well as provide promo prices or packages to consumers with an appropriate offer. if both of them agree on the price of the product offered, then both of them make a purchase by agreement of the sale and purchase transaction agreement (shelvyna rikantasari, 2019). 5. discussion consumption behavior is an activity that is closely related to the process of purchasing an item or service. consumption behavior underlies consumers to make purchasing decisions (tatik suryani, 2013: 3). when deciding to buy an item or a product, of course the consumer always thinks first of the item to be purchased. starting from the price, quality, function or usefulness of the goods, and so forth. the activity of thinking, considering, and questioning goods before buying constitutes or belongs to consumption behavior. consumption behavior has several patterns in purchasing decisions to be made ((bilson simamura, 2004: 11). first is tauhid, a person who has a soul of tauhid will not be able to do god's prohibition, because in economics it is used as mediation in meeting human needs, both primary needs, secondary needs and complementary needs, because economic activities (business) in the perspective of tauhid is based on the principles in islam (tim sembilan, 2004: 85-86). the postgraduate students of islamic economics study program uinsa as consumers when they consume will have to know the knowledge about the products to be consumed at kfc ahmad yani surabaya. the laws relating to halal culinary fast food whether something is halal or haram both in terms of the substance, process, and purpose. as a consequence of the aqeedah and knowledge that has been known about islamic consumption, then as a consumer at kfc ahmad yani as a halal culinary fast food producer consumes only halal and away from haram and syubhat. second is fairness, fair means equal (average), commensurate size (measurement), balance in conducting economic transactions carried out (muhammad, 2005: 167). as consumers in consumption should not cause tyranny, must be in the corridor of religious rules or laws and uphold propriety or goodness. by obeying the teachings of islam there is no danger or sin when consuming halal products provided by allah swt. as long as consuming is an effort to meet the needs that bring benefits to life and the role of humans to increase devotion to allah swt, then allah swt will give justice in the form of his grace to muslim's consumption (kiky dzakiyah, 2019). is the most important part of justice with the aim of mutual benefit to the postgraduate students of islamic economics study program uinsa as consumers with kfc ahmad yani surabaya as halal culinary fast food producers (nur aini, 2019). third is free will, humans are free will creatures but this freedom does not mean that humans are independent of qadha and qadhar. qadha and qadhar are cause and effect based on literacy, perceptions and attitudes that humans do in economic activities (sumarin, 2013: 85). the consumption action is carried out every day by consumption behavior patterns of muslim students on the decision of buying halal culinary fast food in surabaya 48 anyone including students of the postgraduate students of islamic economics study program uinsa as consumers. the goal is to get the highest satisfaction and reach the level of prosperity in the sense of fulfilling various needs, one of which is halal culinary fast food at kfc ahmad yani surabaya, which is much loved. the level of consumption gives a picture of the level of prosperity of a person or students of the postgraduate students of islamic economics study program uinsa as consumers (ummi kulsum, 2019). fourth is responsible, the freedom to determine the choice above is attached to the mandate and responsibility, because humans have been given the intellect to think about what is good and what is bad, what is maslahah and which interpretations are beneficial and mudharat (sutisna, 2003: 205). in the end, the consumption of the postgraduate students of islamic economics study program uinsa as consumers as a whole is framed by morality contained in islam so that it does not merely fulfill all needs. consumption behavior patterns in islam have been prescribed so as not to live lavishly, not to try forbidden work in order to become a reference in the development of the islamic economic system (siti fatimah, 2019). human awareness of the behavior or actions, whether intentional or unintentional to the behavior patterns of halal culinary fast food consumption at kfc ahmad yani surabaya. responsibility also means acting as an expression of awareness of the obligation. fifth is halal, the halal of a consumer good is an antipization of the evils that are caused by the good. halal refers to everything that is good from a case that is permitted, permitted and justified according to islamic sharia law. that way, halal products are food and drinks that can be consumed by muslim communities, while food and drinks that are forbidden by islam are not allowed to be consumed by muslim communities (said, et al, 2008: 60). consumption is not an unlimited activity, but it is also limited by the nature of halal and haram which has been outlined by the islamic syariah law. there are uinsa islamic economics postgraduate students with a rational consumption behavior pattern (mustahlik al-aqlani) always spending income on various types of goods that suit their physical and spiritual needs (muaddin, 2019). the pattern of consumption behavior refers to the selection, acquisition and consumption of goods and services to meet their needs. there are various processes involved in consumption behavior. initially, consumers try to find what products they want to consume, then only choose products that promise greater utility. after choosing a product, the consumer makes an estimate of the funds available to buy it. finally, consumers look at current commodity prices and make purchasing decisions on which products to consume. meanwhile, there are several factors that support patterns of consumption behavior such as cultural, social, personal and psychological factors. cultural factors, culture is also a way to act and think in accordance with the experiences that have been had. culture is the most basic supporting factor of desire and behavior to get what is developing. like halal culinary fast food at kfc ahmad yani, which has a lot of interest among students of the postgraduate students of islamic economics study program uinsa. the relationship between the purchasing afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 49 decision of students of the postgraduate students of islamic economics study program uinsa is that culture is used as a reference for someone to make a purchase. so that culture fully supports the purchasing decisions in consumption behavior patterns. halal culinary fast food is very popular because of the rise of instant and fast human life, coupled with the location of the restaurant that is so close in front of the uinsa surabaya (mohammad septyan, 2019). social factors are group, family, role and status queues. the meaning of a group of students in the postgraduate students of islamic economics study program uinsa are friends, friends provide direct support to each person. that is because if someone often interacts with his friends indirectly all input and information from his friend tends to be taken into consideration to make purchasing decisions in consumption behavior patterns. the meaning of family in the postgraduate students of islamic economics study program uinsa is parents, parents are included in the primary group who are able to support any consumption behavior patterns of halal culinary fast food purchases in kfc ahmad yani surabaya. the meaning of role and status consists of activities that are expected to be undertaken by students of the postgraduate program of islamic economics in uinsa according to other students who are nearby. each role carries a status that reflects the appreciation given by students. personal factors include factors of age, profession, economic status and lifestyle. the more age, the maturity level and maturity of a person will be more mature in thinking and behaving. in terms of trust, students of the postgraduate students of islamic economics study program uinsa are more trusted than people who are not equal in terms of education on campus. halal culinary fast food itself is very much needed by workers because one food product is very easy to find or find and obtain, so it will not interfere with the working hours of students of the postgraduate students of islamic economics study program uinsa who are already working. because the postgraduate students of islamic economics study program uinsa as consumers in buying food products are to fulfill their hunger and lifestyle. psychological factors have motivational factors, knowledge and beliefs. product display, name, symbol or label, advertisement, are closely related to the brand image of kfc ahmad yani surabaya as the producer. brand image refers to the motivation of students of the postgraduate program of islamic economics uinsa as consumers of a product identity. taking into account celebrity endorsement in advertising and the price offered can affect a positive brand image on consumer purchasing decisions. they have the knowledge of science in consumption as consumers that the products sold at kfc ahmad yani surabaya meet the legal requirements of halal and thayyib. add to this the acknowledgment of the halal status of a product issued by lppom mui (lembaga pengkajian pangan obat-obatan dan kosmetik majelis ulama indonesia). this adds to the position that is centered on the guarantee of halal products. thus the pattern of consumption behavior of muslim students and supporting factors in the decision to purchase halal culinary fast food in surabaya. it should consumption behavior patterns of muslim students on the decision of buying halal culinary fast food in surabaya 50 always be based on the teachings that have been determined in islamic sharia law, because consumption is essentially issuing something in order to meet needs. 6. conclusion based on the results of the analysis and discussion, it can be concluded the research patterns of consumption behavior of students of the postgraduate students of islamic economics study program uinsa on halal culinary fast food in surabaya based on tauhid, fairness, free will, responsibility and halal as well as supporting factors including cultural, social factors, personal and psychological for purchasing decisions in the consumption patterns of students of the postgraduate students of islamic economics study program uinsa as consumers on purchasing halal food products, precisely halal culinary fast food at kfc ahmad yani surabaya. references aini, nur. 2019. “consumption behavior of halal culinary fast food”. results of personal interviews: surabaya. ali, muchtar. 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(1994). mu’jam al maqayis fiy al-lughah. beirut: dar al-fikr. management of zakah distribution: empirical evidence from indonesia 1 management of zakah distribution: empirical evidence from indonesia rahmatina a. kasri 1* 1 university of indonesia, depok, indonesia abstract despite the importance of zakah distribution, few studies attempt to evaluate practices in managing the distribution. the paper, thus, aims to explore approaches and evaluate practices in managing the zakah distribution. it employs qualitative research approach with semi-structured interviews with key management personnel of seven largest zakah organizations in indonesia. the main finding identifies two approaches in distributing zakah in indonesia, namely consumptive disbursement and productive utilization approaches. each approaches is different in terms of purpose/expected impact, types/nature of programs and methods of distributing the zakah proceeds. it is also found that different types of zakah organizations tend to focus on different zakah distribution approach. moreover, some challenges are identified particularly in relation to selection/coverage of mustahik and threat or ‘competition’ in distributing zakah funds. overall, the study highlights the increasing relevance of productive utilization approach as well as importance of enhancing outreach and availability of information related to zakah programs (including through online platforms) and continuously educate all zakah stakeholders. the findings are expected to provide insights in managing zakah distribution in indonesia and ultimately in increasing effectiveness of zakah institution to achieve its objectives. keywords: indonesia, qualitative research, zakah distribution, zakah management, zakah organizations 1. introduction zakah is one of the five pillars of islam. literally, zakah means ‘growth’, ‘increase’, or ‘purity’ of wealth. while from fiqh perspective, it specifically refers to the predetermined share of wealth to be distributed among the deserving categories prescribed by god (al-qardawi, 2000). several conditions have to be fulfilled before zakah is payable. this includes, among others, the type of assets (i.e. only assets that are acquired for the purpose of creating wealth is subject to zakah), haul (completion of one full islamic year) and nisab (minimum threshold stipulated for each type of the assets). zakah is deemed to be an important economic tool to mobilize assets for the purpose of economic growth, poverty alleviation and empowerment of eight specific groups in society (saad and haniffa, 2014). as zakah institution is expected to contribute in economic growth and poverty alleviation, the question on how zakah revenues/proceeds are utilized become crucial. this issue is important * corresponding author. email address: rahmatina@ui.ac.id mailto:rahmatina@ui.ac.id afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 2 not only because improper use of zakah proceeds will result in failure to achieve the main objectives of zakah institution, but also because misused of zakah funds might endanger trust and beliefs of muslim society on the significance of zakah institution in islamic teaching and islamic society as it is one of the five pillars in islam. therefore, the issue of effective management of zakah distribution is crucial to be addressed. the issue of zakah distribution, however, seems to be overlooked by most of zakah related studies. currently, majority of studies related to zakah seems to focus on administration/colection of zakah (see, for instance, kahf 2000, samad and glen 2010, sari et al 2013), zakah and poverty alleviation (see, among others, ahmed 2004, beik 2013, kasri 2015) as well as zakah and islamic microfinance (see, for instance, obaidullah and shirazi 2014, ibrahim and ghazali 2015, shaikh and shaikh 2017). the issue on zakah distribution sometime appears in the discussion under the abovementioned topics. nevertheless, as far as our concern, few studies specifically and thoroughly addressed the issue of zakah distribution in their analysis. with this perspective, the main objective of this paper is to explore approaches and evaluate practices in distributing zakah in indonesia. indonesia is chosen as a case study since it is one of the largest muslim countries in the world. additionally, since there are three types of zakah organizations in the country, it also attempts to analyse whether different types of zakah organizations focus on different approaches in distributing zakah proceeds. it also explores challenges in managing zakah distribution in indonesia in order to provide more insights into the management practices. to achieve the research objectives, the study employs inductive and qualitative research approach. it collects primary qualitative data from semistructured interviews with 23 key management personnel, mostly directors and operational managers, of seven largest zakah organizations in indonesia. the results are subsequently analysed by utilizing thematic analysis. following the introductory section, the structure of this paper is as follow. section two reviews some theoretical aspects and previous studies related to zakah distribution. section three explains the data and methods used in the study. section four presents the results, while section five discusses the findings. the last section concludes the study and provide some recommendations for relevant zakah stakeholders. 2. literature study earlier literature related to zakah distribution generally discusses several aspects of zakah distribution, such as aspects related to recipients of zakah or mustahik (definition/selection of mustahik, share of mustahik, etc.), form of distribution and time of distribution. in terms of the recipients of zakah, the qur’an clearly mentioned that, “the charities (zakah) are for the poor, needy, those employed to administer the funds, those whose hearts have reconciled to the truth, freeing slaves (those in bondage), those indebted, in the cause of god, and the wayfarer in need...” (qs 9:60). thus, zakah should only be given to the eight groups of people (see table 1 for the definition of each group). management of zakah distribution: empirical evidence from indonesia 3 table 1 types of zakah recipients (mustahik) no group definition 1 the poor (fuqara) persons whose wealth/income fall short of satisfying basic needs. 2 the needy (masakin) persons whose wealth/income fall short of satisfying essential needs, but cannot obtain sufficient sustenance. 3 the administrators of zakah (amil) persons responsible for the management (collection and distribution) of zakah proceeds. 4 the converts (muallaf) persons who have recently been brought to islam, those who need their commitment to be strengthened and /or can benefit and defend muslims. 5 those in bondage (riqab) persons free themselves from bondages/slavery, captives (war prisoners) and others in ‘bondage situations’ who cannot afford the cost of their freedom. 6 those in debt (gharimin) persons who are in debt for personal or social reasons but do not have sufficient assets/income to pay off the debt. 7 those in the cause of god (fi sabilillah) persons who conduct actions/deeds which are sincerely intended for the sake of god and islam. 8 the wayfarer (ibnu sabil) persons travelling (on missions that benefit the public) and need help because they have lost/consumed what they have. source: summarized from al-qardawi (2000: 5-82) in terms of share for each mustahik, most of islamic jurists are in opinion that the share of each group is 1/8 of zakah revenues. however, they also agree that the distribution of zakah should be prioritized to the poor and needy as they are the most disadvantaged people in society (zaim, 2012). moreover, it is suggested to distribute zakah proceeds immediately after receiving it from zakah payers (muzakki). according to abu hamam, this is so because zakah is basically relief to the poor; hence, it should be immediate for otherwise it does not fulfill its role (in al-qardhawi 2000). the jurists, however, still allow rooms for delay in some circumstances that may benefit either the payer or the designated recipients (abdullah et al 2013). zakah proceeds are usually given in form of cash or goods directly distributed to the recipients, such as staple food and clothing, as practiced by the prophet saw and the successive ruling caliphs (al-qardawi, 2000). in earlier literature, most of the zakah proceeds are given in forms of consumptive goods because majority of islamic legal scholars are of the opinion that zakah is primarily intended for meeting the consumption and basic needs of the poor (in kasri 213). however, more recently, muslim scholars started to consider productive purposes of zakah distribution. it is suggested that zakah can be given as qard-hasan loan (in al-qardawi 2000:634) or used for investment/productive purposes (fiqh academy, in ahmed, 2004). afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 4 based on the literature, it could generally be suggested that there are two types of zakah distribution, namely consumptive-based and productive-based distribution. this categorization is used by some studies, such as beik (2013), ibrahim and ghazali (2014) and nurzaman (2016). it is also utilized by a number of studies/report, such as indonesia zakah development report (pebs and imz, 2010), islamic social finance report (2016) and indonesia zakat oulook (2017) albeit the term ‘consumptive’ is sometimes replaced with the term ‘charity’ purpose. in his study, beik (2013) investigates the economic role of zakah in reducing poverty and income inequality in jakarta indonesia. in analyzing the economic role, he divided the zakah disbursement programs into productive-based and consumptive-based programs. he referred to the former as the programs utilizing mudharabah and qard hasan method/contract, while the latter is defined as programs “dedicated for assisting those who are in needs”. similar categorization and definition are used by nurzaman (2016) in his study about the impact of productive zakah in jakarta. however, both studies did not elaborate the characteristics of each distributional approach implemented in the area of indonesia. ibrahim and ghazali (2014) provide a clearer explanation regarding the approach of zakah distribution in malaysia. according to the study, there are two approaches of zakah distribution in selangor state of malaysia, namely consumptive and productive approach. consumptive zakah distribution is given continuously for consumption purposes and for a relatively long period of time. it covers distribution in form of food, shelter, transportation, medicine and schooling expenses. on the other hand, productive zakah distribution is given for production purposes. this assistance is given to productive recipients to finance their economic projects for a long-term production and survival purposes. in a long term period, they are expected to become self-reliant and productive and able to pay zakah in return. thus, unlike the consumptive assistance which is given continuously, productive assistance is given for a short period of time only. the main goal is for a productive and effective use of resources to eradicate poverty. at this junction, two models of zakah distribution, i.e. consumptive and productive distribution could be suggested from the existing literature. however, particularly in the context of indonesia, there is an indication that that the current literature has not provided sufficient information regarding characteristics of each approach. arguably, this issue is important for at least three reasons. first, as zakah institution is expected to contribute in economic growth and poverty alleviation, improper use of zakah proceeds/revenues might result in failure to achieve the objectives of zakah institution. second, misused of zakah funds might endanger trust and beliefs of muslim society on the significance of zakah institution in islamic teaching and islamic society as zakah is one of the five pillars in islam. third, exploring approaches, practices and challenges in distributing zakah might provide important insights in increasing effectiveness of each approach and ultimately in achieving the objectives of zakah institution. these are the main issues explored and investigated in this study. management of zakah distribution: empirical evidence from indonesia 5 3. research methodology in exploring the management practices of zakah distribution implemented by zakah organizations in indonesia, this study utilizes inductive and qualitative research approach. in this regard, primary data is obtained from semi structured interview with key person with managerial position in zakah agencies. in collecting the data, the interview protocol was initially sent to director/head of several large zakah organizations with a request to conduct the interview with executives of the agencies. in the end, the author managed to interview 23 management personnel, mostly directors and operational manager, of seven largest zakah organizations in indonesia representing three types of zakah organizations in the country (i.e. government, corporate and private zakah agencies). the data collected are analyzed by employing thematic analysis. thematic analysis is defined as a method of organizing, describing, identifying, analyzing and reporting themes within qualitative data (boyatzis, 1998). it is considered to be the most appropriate method for analyzing the qualitative data obtained from the semi-structured interviews due to its ability to summarize, interpret and compare the key features (themes) from a large qualitative data set. this method is widely used in organizational and management studies (bryman & burgess, 2002; cassell & symon, 2004; miller, dingwall, & murphy, 2004). there are six phases in a thematic analysis, namely familiarization with data, generating initial codes, searching for themes, reviewing themes, defining and naming themes and finally producing the report (braun and clarke 2006). while all phases are important, coding is often seen as the primary process for developing themes within the raw data, through which important moments in the data are recognized and coded prior to interpretation. the code’s interpretation can include comparing theme frequencies, identifying theme co-occurrences and graphically displaying relationships between different themes (guest, et al., 2011). in this study, with support of nvivo9 software, thematic analysis is used extensively to identify approaches and evaluate practices and challenges in managing zakah distribution in indonesia. furthermore, since there are three types of zakah organizations in the country, analysis based on the organizational types are also conducted. thus, in presenting the coding results, both the identity numbers of respondents (r1, r2, etc.) and the combination of the respondents’ identities and the types of zakah agencies they represent (g1-1, g1-2, c1-1, etc.) are utilized. the results are described and analyzed in the subsequent sections. 4. results investigations into the approaches of distributing zakah in indonesia lead to a general understanding that there are at least two main approaches of zakah distributions implemented by zakah institutions in the country. as shown in table 2, the approaches include the consumptive disbursement approach and the productive utilization approach. each approach has several distinguishing features, particularly in relation to the purpose/expected impact, nature/types of programs and methods of distributing the proceeds. the categorization and general themes afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 6 suggested above were inferred from the interviews123as well as the different nature of the programs implemented under the approaches, which are explored in the next few tables. table 2 distribution approach interview question how do you distribute the zakah proceeds? (i.e. what are the approach of zakah distributions implemented in your organization?) focused coding subthemes/remarks 1 consumptive disbursement approach 2 productive utilization approach concluding remarks two approaches of zakah distribution were identified, namely consumptive disbursement and productive utilization approaches. the consumptive approach is usually intended to provide immediate relief that serves the short-term needs of mustahik, which are commonly consumptive in nature (see table 3). typically, this type of distribution is associated with education, healthcare, social, religious and disaster relief programs. under the model, a relatively small amount of money is usually distributed. however, for transparency and risk management purposes, some of the interviewees revealed that the money was increasingly given through bank transfer, paid directly to the relevant party or used to buy/provide the required items. table 3 focused coding 1 for the distribution approach subtheme consumptive disbursement approach interview with remarks r7 (g2-5), r11 (c21), r14 (p1-1) provides immediate relief which primarily serves the short-term need of mustahik r7 (g2-5), r8 (g2-6), r10 (c1-2), r22 (p31) charity type of assistance r1 (g1-1), r2 (g1-2), r4 (g2-2), r8 (g2-6), r9 (c1-1), r10 (c12), r11 (c2-1), r14 (p1-1), r19 (p1-6), r21 (p2-1), r22 (p31) usually associated with education, healthcare, socioreligious and disaster relief programs. r1 (g1-1), r8 (g2-6) , r11 (c2-1), r14 (p11) typically distribute a relatively small amount of money 1 2 it is notable that some of the agencies clearly used the term ‘consumptive’ and ‘productive’ distribution approach during the interview. for example, according to r7 (the executive of g2), “there are two principles for distributing zakah funds in our organization. first, we have the so-called charity or consumptive distribution. second, we have those [distribution] that are productive in nature, which we call empowerment programs...” management of zakah distribution: empirical evidence from indonesia 7 subtheme consumptive disbursement approach r1 (g1-1), r8 (g2-6), r11 (c2-1), r14 (p11) usually involve cash (monetary) distribution in contrast, the productive utilization approach aims to provide assistance that develops the long-term skills/capabilities of mustahik (see table 4). the program is usually designed as charity with social mapping and priority. under the program, the zakah recipients are expected to earn a higher income, experience better living conditions and eventually become more independent individuals/households. hence, it is hoped that the productive activities will have longer-term and more sustainable impacts on the lives of the mustahik and their communities. this is clearly emphasized by one of the respondent from private zakah agency, r14 (p1-1), “empowerment is usually done in economic program…usually the impact is relatively sustainable.” table 4 focused coding 2 for the distribution approach subtheme productive utilization approach interview with remarks r3 (g2-1), r7 (g2-5), r9 (c1-1), r10 (c12), r12 (c2-2), r14 (p11), r21 (p2-1), r22 (p3-1) provide assistance that produces longer-term and more sustainable impacts on the mustahik and (sometimes) their communities r4 (g2-2), r8 (g2-6), r9 (c1-1), r10 (c12), r11 (c2-1), r14 (p11), r21 (p2-1), r22 (p3-1) charity with social mapping and priority (productive almsgiving) r1 (g1-1), r4 (g2-2), r8 (g2-6), r9 (c1-1), r11 (c21), r14 (p1-1), r21 (p2usually associated with zakah utilization through economic and integrated/comprehensive programs afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 8 1), r22 (p3-1) r12 (c22), r16 (p1-3), r17 (p14), r21 (p2-1), r22 (p3-1) typically provides a relatively higher amount of money r1 (g1-1), r8 (g2-6), r12 (c22), r16 (p1-3), r17 (p14), r21 (p2-1), r22 (p3-1) combines both cash (monetary) and in-kind provision of goods furthermore, the productive model is usually associated with the economic and integrated (community development) programs which combine cash (monetary) and in-kind provision of goods/services to mustahik. with this approach, the amount of money distributed is usually higher than that of the noneconomic programs. an example of the program is the provision of productive goods such as agricultural machines, fertilizers, seed-livestock, sewing machines and wheel-barrows for small traders under the economic empowerment programs. meanwhile, under the integrated programs, the productive goods are often contributed along with other assistance such as scholarships for children and health assistance for members of the mustahik family. the programs are mostly regular in nature and well-planned. there are also some indications that different types of zakah organizations have focused on different approach in their zakah distribution programs. the private and corporate zakah agencies seem to focus on the productive approach, while the government agency seems to focus on the consumptive approach. in this respect, a corporate-based executive r9 (c1-1) stated that, “because our affiliation is financial institution, we direct the programs into economic empowerment program… [to create] economic independency of ummah…” another executive, r11 (c2-1) revealed that, “…our focus is indeed [islamic] microfinance”. meanwhile, ceo of p2 suggested that the focus of his organization was an integrated program combining economic empowerment (as main program) with other non-economic assistances. this type of program did not seem to be the focus of the government agencies, albeit it was also revealed during the interview that the government zakah agency (g2) has planned to implement the integrated program in the near future. in addition to the main findings, there are some areas of concern with respect to the distribution of zakah proceeds. first, during the selection of zakah recipients, the existence of ‘brokers of mustahik’ and poor targeting of the zakah recipients were identified. the existence of the so-called ‘brokers of mustahik’, or management of zakah distribution: empirical evidence from indonesia 9 the middle-men/women expecting to receive some kind of compensation for their 'services' in connecting the mustahik and amil (zakah agency), was recognized by the employees of g2 and c1. furthermore, although rare, poor targeting of zakah in which the agencies provide assistance to ‘undeserving’ recipients or give assistance not needed/requested by the recipients was also found.24 second, during the program implementation phase, threats from external parties were discovered. as explained by r9 (c1-1), the threat could come from ‘loan sharks’ who try to prevent potential mustahik from receiving zakah funds and from the ‘traditional’ muslim scholars who prefer direct distribution of the zakah money. finally, with respect to the zakah recipients or ‘targets’ covered by the distribution programs, it was recognized that there are ‘untapped’ potential to distribute the funds to a larger number of zakah recipients and to wider areas. these are some issues discovered from the interviews. 5. discussion from the results presented in the previous section, it could generally be concluded that there are two approaches in distributing zakah proceeds/revenues in indonesia, namely the consumptive disbursement approach and the productive utilization approach. each approach has several distinguishing features, particularly in relation to the purpose/expected impact, nature/types of programs and methods of distributing the zakah proceeds. the characteristics of each approach are summarized in table 5. table 5 approaches in distributing zakah proceeds in indonesia characteristics consumptive disbursement approach productive utilization approach purpose/expected impact short-term programs aimed to serve shortterm need longer term programs aimed to empower and create more sustainable impacts types/nature of program charity type of assistance; usually associated with education, healthcare, socio-religious and disaster relief programs. charity with social mapping and priority (productive almsgiving); usually associated with zakah utilization through economic and integrated/comprehensive empowerment programs methods of distributing proceeds usually involve cash (monetary) distribution; typically distribute a relatively small amount of money combines both cash (monetary) and in-kind provision of goods; typically provides a relatively higher amount of money 2 4 these include, for instance, social assistance for rich widows and group-based economic assistance for wife of rich man. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 10 under the consumptive disbursement approach, the main purpose is to serve immediate and short-term needs of mustahik. typically, this includes provision of consumptive and short-term basic needs related to education (such as school expenses), healthcare (such as medical expenses) and socio-religious (including provision of food, shelter, transportation, prayers devices/facilities, etc.). it is also given to mustahik who are victims of natural and man-made disaster (such as victims of flood, earthquake, fire, etc.); thus, it is also distributed under disaster reliefs program. these kinds of distribution is consistent with the teaching of islam as well as the practices of zakah distribution during the time of the prophet saw and the successive ruling caliphs (al-qardawi, 2000; ahmed 2004) as well as in contemporary muslim societies as documented in many studies (see, among others, beik 2013, kasri 2013, and ibrahim and ghazali 2014). these types of distributions could be considered as the main objective and reason det’re of zakah institution. particularly when directed to the poor and needy, it becomes a must to be managed effectively. with respect to the methods in distributing the zakah proceeds, the programs under the consumptive disbursement approach usually provide assistance in terms of cash (monetary) distribution and in relatively small amount. this ‘contemporary’ practice is slightly different with the earlier practices which focused on in-kind distribution. however, this is understandable because money is the major instrument/media of exchange today which provide convenience to people to do various transactions, including zakah payment. furthermore, the money is usually distributed directly (i.e. cash on hand) to the recipients. however, as revealed during the interview, it was increasingly given through bank transfer, paid directly to the relevant party or used to buy/provide the required items35 in order to increase transparency and prevent misused of the funds. hence, it becomes a part of risk management conducted by zakah organizations. nevertheless, it is notable that in certain conditions and/or under certain program (such as disaster reliefs programs), the distribution could also be given in-kind. these methods of distributions have also been documented in earlier studies (ibrahim and ghazali 2014, kasri 2015). in contrast, under the productive utilization program, zakah proceeds are primarily given to provide assistance that develops the long-term skills/capabilities of mustahik with the main purpose to empower and create more sustainable impacts for the recipients. under the program, the zakah recipients are expected to earn a higher income, experience better living conditions and eventually become more independent individuals/households. hence, it is hoped that the productive activities will have longer-term and more sustainable impacts on the lives of the mustahik and their communities. these kinds of programs are consistent with zakah utilization through economic programs. examples of such programs are the provision of working capital using islamic contracts (particularly qard hasan loan) for small business and productive goods (such as agricultural machines, fertilizers, seed-livestock, and sewing machines and wheel-barrows) for small traders. arguably, such practices are rarely found in classical islamic literature due to the conditions at that time which requires more consumptive-based supports for relieving immediate needs of the recipients (al-qardhawi 2000). however, the use 3 5 for example, tuition fee invoice is often paid directly to school or given through bank transfer; medical cost is often paid directly to the hospital; etc. management of zakah distribution: empirical evidence from indonesia 11 of zakah for productive purposes has been agreed by contemporary muslim scholars. al maududi and al qardhawi, for instance, suggested the use of qard hasan from zakah revenues (al-qardawi 2000:634). the fiqh academy of the oic (organization of islamic conference) also allowed the utilization of zakah funds for investment/productive purposes as it might help the mustahik, particularly the poor and needy, to escape poverty and empower them to be more productive (in ahmed 2004). the impacts of such programs have been investigated by several studies cited earlier (see, for example, beik 2013 and kasri 2015), with a clear indication that the productive programs indeed provide more sustainable impacts to the recipients than the consumptive programs. more recently, zakah organizations started to introduce the integrated/comprehensive economic empowerment programs. under this program, economic assistance programs are combined with education/healthcare/social programs. thus, cash assistances are provided alongside with in-kind zakah assistances. these kinds of programs were initially initiated as a response to the findings that cash zakah funds have been misused in certain cases. for example, cash working capital was used to pay for school fees or medical expenses, which was needed immediately by zakah beneficiaries. later, it is also expected to provide more impacts for alleviating poverty of the recipients. by combining the programs, it is hoped that the recipients could use the cash-based economic assistance for its intended purpose because at the same time they also get additional supports from education/healthcare/social programs to meet their consumptive needs. ultimately, in a longer term, it is hoped that such programs could result in more sustainable impacts and transformation of mustahik into muzakki. another main finding of the study indicates that there are differences in the approach of distributing zakah proceeds amongst different types of zakah institutions. in particular, it could be suggested that the government zakah agencies tend to implement the consumptive disbursement approach, whereas their nongovernment counterparts tend to implement the productive utilization approach. in this respect, it is argued that the distribution model is strongly affected by the agencies’ affiliation. as mentioned earlier, a director of a corporate zakah agency mentioned that the focus on the economic program was primarily based on the fact that it is a social unit of an islamic bank. similar experiences were indicated by the zakah units of islamic banks in other countries such as faisal islamic bank and nassir social bank in egypt (kahf, 2000). likewise, the focus on social/education programs implemented by the government institution was related to the attempts to contribute to the authority’s countrywide social program, which is mostly consumptive in nature. this style is predominantly implemented in countries where zakah is controlled by the government (imtiazi, 2000). in addition to the main findings, the existence of ‘brokers’ of mustahik and the poor targeting of zakah recipients were also identified. these problems have been documented in other countries such as pakistan, kuwait and saudi arabia (al-ajeel, 1995; al-sakran, 2001; arif, 2006) and is said to be one of the main reasons for the ineffectiveness of the zakah institution in those countries. tendency for ‘ignorance’ from the management of zakah organizations in indonesia was also identified and believes to be potentially worsening the situation.46 4 6 it is also notable from the interview that, according to r7 (g2-5), no legal actions were taken against the broker. when such cases occur, usually the brokers are simply advised not afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 12 to solve the issue satisfactorily, it is necessary to plan and implement better strategies in selecting mustahik. for example, zakah organizations could create clearer mechanism and sop for selecting mustahik for each type of zakah disbursement programs. additionally, since one of the reasons of existence of such brokers are outreach and asymmetric and/or limited information regarding zakah organizations, it might be necessary for them to increase its outreach and information availability. this could be done, among others, by opening more offices/branches or providing an online platform which enable potential mustahik to directly apply for the assistance online. arguably, the latter is increasingly important since today people are more connected online. more, since many studies discussing efficiency of zakah organization noted on possible higher costs of opening office or additional branches of zakah organizations (see, for example, noor et al 2015), the online platform could potentially increase efficiency of managing a zakah organization. other interesting findings are threats from external parties and tendency for ‘competition’ in distributing zakah funds. the threat from ‘loan sharks’, who try to prevent potential mustahik from receiving zakah funds, is usually related to the capital support from zakah organization through its islamic microfinance programs. this finding is quite surprising, since loan sharks are usually considered as ‘competitor’ of banks or other formal financial institutions. however, as zakah organizations also offer financial supports for the poor and needy, apparently they also compete head to head with the loan sharks who are making profit from their business. furthermore, ‘threat’ from traditional muslim scholars, such as traditional kiyai who prefer the zakah money to be distributed directly to the poor regardless of the recurrent negative social impacts created by such a distribution style, is also evident.57 however, different from the loan sharks, the kiyai did not look for profit in their actions. in this regard, it is firstly suggested to continuously educate the external parties regarding the importance and expected impacts of zakah distributed through formal zakah institutions, particularly in providing reliefs and reducing poverty of the poor. this might not be something easy, especially for the loan sharks who are making profit from their business. therefore, it has to be done together with other relevant parties such as government and academic institution. furthermore, since it is clear that many poor people deserving zakah recipients are in need of working capital (which sometimes they get from the loan sharks), it might be necessary to increase allocation to productive zakah assistance and enhance the system to reach the poor. zakah organizations could also consider establishing zakah-based baitul maal wat tamweel or other similar institutions. all in all, relevant strategies to increase outreach and impacts of zakah distribution could be considered by zakah organizations to enhance their effectiveness in distributing zakah proceeds. to do it again. furthermore, for the case of poor targeting, r14 (c1-1) believed that they should be considered simply as ‘marginal errors’ in the selection process because, at some point, all zakah agencies experienced these problems. 5 7 the negative social impacts, such as ‘riots’ and casualties during the direct distributions of zakah, occur almost every year in indonesia. however, such a distribution style continues to be practiced in society. management of zakah distribution: empirical evidence from indonesia 13 6. conclusion based on the findings and analysis explained above, a number of conclusions could be derived. first, zakah distribution in indonesia follows consumptive disbursement and productive utilization approaches. each approaches is different in terms of purpose/expected impact, types/nature of programs and methods of distributing the zakah proceeds. second, different types of zakah organizations tend to focus on different approach in distributing zakah, albeit there is a trend of divergence towards the productive approach. finally, some challenges are identified particularly in relation to selection/coverage of mustahik and threat/competition in distributing zakah funds. from the study, it could be suggested that productive utilization approach is increasingly important in zakah distribution, particularly in achieving poverty alleviation goals. importance of enhancing outreach and availability of information related to zakah programs (including through online platforms) are also emphasized to reduce selection/targeting problems. educations and advocacies to all zakah stakeholders, particularly (traditional) muslim scholars and muslim society (one of which might have profession as loan sharks), also need to be conducted continuously. overall, it is expected that the strategies could enhance effectiveness of zakah distribution and ultimately support zakah institution in achieving its noble objectives. references abdullah, l. h., ahmad, w. m. w., rahman, n. n. a., ali, a. k., nor, m. r. m., khalil, s. a., & al-nahari, a. a. a. q. 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(2013). economic role of zakat in reducing poverty and income inequality: a case study in the province of dki jakarta, indonesia. lap lambert academic publishing. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 14 boyatzis, r. e. (1998). transforming qualitative information: thematic analysis and code development. london, sage publications. braun, v. and v. clarke (2006). "using thematic analysis in psychology." qualitative research in psychology 3(2): 77-101. bryman, a. and b. burgess (2002). analyzing qualitative data. london, routledge. cassell, c. and g. symon (2004). essential guide to qualitative methods in organizational research. london, sage. guest, g., k. m. macqueen, et al. (2011). applied thematic analysis. london, sage. ibrahim, p., & ghazali, r. (2014). zakah as an islamic micro-financing mechanism to productive zakah recipients. asian economic and financial review, 4(1), 117. imtiazi, i. (2000). introduction. management of zakah in modern muslim society. i. imtiazi, m. mannan, m. niaz and a. deria. jeddah, islamic research and training institute, islamic development bank: 1-28. indonesia zakat outlook 2017 (2016), jakarta: baznas. islamic social finance report 2015 (2016), jeddah: irti-idb and thomson reuters. kahf, m. (2000). zakah management in some muslim societies. islamic research and training institute, islamic development bank. kasri, r. (2013). "giving behaviors in indonesia: motives and marketing implications for islamic charities." journal of islamic marketing 4(3): 66. kasri, r., & ahmed, h. (2015). assessing socio-economic development based on maqāṣid al-sharīʿah principles: normative frameworks, methods and implementation in indonesia. islamic economic studies, 23(1), 73-100. miller, g., r. dingwall, et al. (2004). using qualitative data and analysis: reflections on organizational research. london, sage. noor, a. h. m., rasool, m. s. a., ali, r. m. y. s. m., & rahman, r. a. (2015). efficiency of islamic institutions: empirical evidence of zakat organizations’ performance in malaysia. journal of economics, business and management, 3(2), 282-286. nurzaman, m. s. (2016). evaluating the impact of productive based zakat in the perspective of human development index: a comparative analysis. kyoto bulletin of islamic area studies, 44-62. obaidullah, m., & shirazi, n. s. (2014). integrating philanthropy with microfinance: models of community empowerment. in social impact finance (pp. 75-96). palgrave macmillan uk. management of zakah distribution: empirical evidence from indonesia 15 pebs-feui and imz (2010). indonesia zakat and development report 2010. m. e. nasution, n. mintarti, a. juwainiet al. jakarta, pebs-feui and imz. saad, r., & haniffa, r. (2014). determinants of zakah (islamic tax) compliance behavior. journal of islamic accounting and business research, 5(2), 182-193. samad, a., & glenn, l. m. (2010). development of zakah and zakah coverage in monotheistic faiths. international journal of social economics, 37(4), 302-315. sari, m. d., bahari, z., & hamat, z. (2013). review on indonesian zakah management and obstacles. social sciences, 2(2), 76-89. shaikh, s. a., & shaikh, s. a. (2017). poverty alleviation through financing microenterprises with equity finance. journal of islamic accounting and business research, 8(1), 87-99. zaim, s. (2000). recent interpretations of the economic aspects of zakat. management of zakah in modern muslim society. i. imtiazi, m. a. mannan, m. niaz and a. deria. jeddah, islamic research and training institute, islamic development bank: 101-120. the influence of profit sharing, trade financing, and the non performing financing ratio to the return on asset of islamic rural banks in central java (2013-2015 period) 81 the influence of profit sharing, trade financing, and the non performing financing ratio to the return on asset of islamic rural banks in central java (2013-2015 period) nur hayati371*, umiyati2, and ilhamdi3 1 depok islamic economy academy, indonesia abstract this study examines how profit-loss sharing (pls) and trade financing as well as non performing financing (npf) can affect the return on asset (roa ) of islamic rural banks in cental java (period of 2013-2015). the sample selection method used is the purposive sampling. the data analysis method used a multiple regression dated panel with a significance level of 5% (0.05). the result of the data analysis showed that the suitable model used in this study is the common effect model (cem). simultaneous independent variables significantly influence roa. the partial, variable of pls has negative effect on the roa of islamic rural banks ,while trade financing dan npf did not have a significant effect on the roa of islamic rural banks. keywords: non performing financing (npf), profit-loss sharing financing, return on asset (roa), trade financing 1. introduction the growth of syariah banking in indonesia continues to experience development. government support and a positive welcome from the indonesian society made syariah banks as the syariah financing institution that is proven to stand in the economic crisis condition. islamic rural banks became one of the syariah financing institutions which is potent in the development of syariah banking today. according to act no. 21 year 2008 islamic rural banks are syariah banks whose activities do not provide service the payment traffic. islamic rural banks have a specific goal, which is to provide service and banking products to the economically weak society and small businesses in the city and the rural areas. the small business market potential which banks can penetrate is large enough, because there are still many performers of small businesses which are not yet reached by syariah banks, in the capital specifically. the islamic rural bank fund distribution consists of trade financing (murabahah, salam, ishtishna). profit sharing financing (musyarakah and mudharabah), lease financing (ijarah imbt) and qardh financing. yet the distributions that lslamic rural banks mostly use are the murabahah financing (mrbh), mudharabah financing (mdrbh) and the musyarakah financing (msa). the primary income of islamic rural banks is from the markup/margin * corresponding author. email address: nhayadhana@gmail.com afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 82 from the murabahah financing pact and the profit sharing income which is obtained from the mudharabah and musyarakah financing pacts. the benefit obtained from the murabahah (mark up/margin murabahah) is deterimined by the deal in the pact by islamic rural banks with the customers and the income characteristic which is definitely recognized for the benefit value. meanwhile the profit from the mudharabah and musyarakah financing activities is a nisbah profit sharing which is agreed in the contract by the islamic rural bank and the customer with the profit sharing value undetermined because this contract is an investment contract. an investment contract means that profit or loss is very much possible in the contract period so it is stated that the mudharabah and musyarakah is more risky than the murabahah financing. because of that, islamic rural banks need to be active in anticipating the financing loss of profit sharing since early in the fund distribution. the islamic rural bank profitablility is not only as a cause of fund distribution or financing. another factor which influences is the risk of fund distribution, which is bad credit or a non performing financing increase. for making the provison for impairment losses to increase so it causes a decrease in capital, rentability or profitability and the syariah banking efficency (financial services authority, 2016, p.34). the research of yulianto (2014) with a case study of syariah public banks in indonesia stated that profit sharing financing has a negative influence while trade financing and npf does not influence profitablity. in contrary with the research result of rochmatika (2014) where npf has a positive influence to profitability and trade financing has a negative influence to profitability. while in the research of hidayati (2013) the result showed that npf and mudharabah has a positive influence to bmi profitability and musyarakah financing has a negative influence to profitability. the difference of previous research results were related with which variable influences profitability in syariah public banks. the researcher selected islamic rural banks as the research object because islamic rural banks are present as the syariah banks that directly interacts with the lower middle income society (serving banking needs of small businesses in cities and rural areas) which is expected to raise the indonesian economy. the small business activities are mostly done by the indonesian people, which need support from financial institutions for the financing. 2. framework and hypothesis formulation syariah financing public banks based on the republic of indonesia act no. 21 year 2008 about syariah banking it is stated that islamic rural banks are syariah banks which in their activities do not provide service in payment traffic. the goals of establishing islamic rural banks are as the following (sudarsono, 2012): a. to increase the economic welfare of muslims, especially the lower income society which are generally in the rural areas b. to increase jobs especially in the district level so it can decrease the urbanization flow. c. to maintain the spirit of ukhuwah islamiyah through economic activities in the frame of increasing per capita income to an ideal life quality. according to bi regulation no.6/17/pbi/2004 the business activities of islamic rural banks covers: the influence of profit sharing, trade financing, and the non performing financing ratio to the return on asset of islamic rural banks in central java (2013-2015 period) 83 a. collecting funds from society in the forms of: 1) savings based on the wadhiah and mudharabah principles 2) long term deposits based on the mudharabah principle 3) other forms that use the wadhiah and mudharabah principles b. distribute funds to society in the forms of: 1) trade transactions based on the principles of murabahah, ishtishna and/or salam. 2) leasing transactions with the ijarah principle. 3) profit sharing financing based on the principles of mudharabah and/or musyarakah. 4) financing based on the qard principle. c. doing other activities which are not contradictory with banking acts and the syariah principle. according to the act no. 21 article year 2008 islamic rural banks have a prohibition for doing the following activities: a. doing business activites which are prohibited by the syariah principle. b. accepting savings in the form of accounts and participate in the payment traffic. c. doing business in foreign currency, except foreign currency exchange with the permission of bank indonesia. d. doing insurance business, except as agents of marketing syariah insurance products. e. doing capital inclusion, except in institutions that are formed for overcoming the liquidation difficulty of islamic rural banks; and f. doing other activities outside of the business activities as intended in act no. 21. factors that influence profitability of profit sharing financing according to the islamic commerce law, a partnership and all forms of business organizations are established with one goal, which is profit sharing through common participation. mudharabah and musyarakah are financing capitals of profit sharing which are suitable for the goal. mudharabah is a contract between two parties, which are the first party as the capital owner (shahibul mal) and the second party as the fund manager (mudharib) for managing a business by an agreement of the nisbah profit sharing of the obtained profit, while the loss that occurs is the risk of the fund owner as long as it is not proven that the mudharib is cheating or performing a misconduct. (wardiah, 2013). while a musyarakah is a cooperation pact between two or more parties for a certain business where each party provides a fund contribution (competence, expertise) with the agreement that the profit and risks will be taken responsible together according to the agreement (djuwaini d., 2007) trade financing murabahah is a trade contract between two parties and both agree on the selling price which consists of the buying price added by the buying fare and a profit for the seller. the forms of murabahah can be done in cash or by paying in installments. (wardiah, 2013). in the murabahah transaction banks do not take responsibility of profit and loss such as in the profit sharing financing afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 84 (mudharabah and musyarakah) the mark-up or margin is different from interest because in the markup/margin it is not explicitly connected with financing time but based on the transaction for the service provided or also known as commodity trading. (djuwaini, 2007, p.60). non performing financing ratio (npf) non performing financing is bad credit which consists of substandard, doubtful, and loss classifications. when associated with the npf ratio, this non performing financing category is the financing in the 3,4, and 5 collectabilities (ilham, 2016, p.5). bad credit or problematic financing are categorized as productive assets where the collectability is doubted. for maintaining the dpk safety, syariah banks are obliged to form a reserve of the problematic financing. the more the funds are reserved, the more funds that will be taken responsible for the problematic financing reserve. the problematic financing reserve is obtained from company profit and this influences the profitability of the bank (financial services authority, 2016). the npf is known by counting the substandard financing to the total financing. if the npf is low, the profit is high. if the npf is high, the bank will experience loss caused by the return level of bad credit. the equation is illustrated as the following: 𝑁𝑃𝐹 = substandard financing total financing source: suprapto (2015) return on assets (roa) ratio return on assets or roa is a form of profitability ratio for measuring company ability in producing profit by using the total assets that are present after the capital costs (costs which are used to fund assets) which is known from the analysis (ilham, 2016). roa is chosen as an indicator of measuring bank financial performance because it measures company effectiveness in producing profit by using the assets owned. roa assists companies which already implement accounting well for measuring the efficiency of capital use as a whole, which is sensitive to all matters that influence a company’s situation so the company’s position to the industry can be known. this is a step in strategy planning (suprapto, 2015) roa is formulated in the following picture. 𝑅𝑂𝐴 = profit before tax total assets source: suprapto (2015) a positive roa shows that the total assets used in the company’s operational activities are able to provide profit or an advantage for the company. while a negative roa shows the total assets used in the operational activities do not provide profit or causes a loss to the company. (ilham, 2016). hypothesis influence of profit sharing financing to roa profit sharing financing is an asset forming component in islamic rural banks. the profit sharing financing consists of the mudharabah and the influence of profit sharing, trade financing, and the non performing financing ratio to the return on asset of islamic rural banks in central java (2013-2015 period) 85 musyarakah pacts. the profit sharing financing is a financing that is based on the profit and loss sharing (pls) principle. so islamic rural banks obtain incocome from profit sharing financing activities in corresponding with the agreed nisbah with the customers. the income obtained influences the profit size that islamic rural banks obtain with the profit sharing, mudharabah and musyarakah financing. influence of trade financing to roa murabahah is an alternative capital of the funding activity that syariah banks implement. murabahah is an islamic investment that is not based on the profit and loss sharing (pls) principle. in the investment activity, murabahah distances the present uncertaitnity in incomes from businesses with the pls system, because the murabahah principle is tha the cost plus is recognized as the income. the additional income of this cost can be named as the murabahah mark up/margin. the fund distribution in the murabahah financing is one of the largest asset forming components in syariah financial institutions that produces income in the form of margins/mark ups. the obtained income of the mark up/margin will influence the profit size obtained. and in the end it is able to influence the profitability increase which is reflected from the roa (return on asset). influence of non performing fiancing ratio to roa non performing financing is a ratio that is used for measuring the management ability of the bank in managing the present probelmatic financing, it can be fulfilled by the productive assets that a bank has. the problematic financing that grows can eventually influence the probability of a reduction of profit/income that a bank obtains. because in the problematic fund financing reserve or npf this is considered as a cost where the percentage is taken directly from the operational profit or income of the bank. islamic rural banks have a function as an intermediate institution like banks. for that this statement can be applied in islamic rural banks. influence of independent variable simultants to dependent variables the last test is a test of independent variables that are present simultaneously or together, whether they have a significant influence to the profitability of islamic rural banks of central java in the 2013-2015 period. a hypothesis is a statement that states the expected relation logically between two variables or more in a formulatic proportion which can be tested empirically. the hypothesis in the qualitative research is developed from theoretical research so the temporary answers from the problem or statement needs to be tested empirically. the hypotheses which can be proposed in this research are: afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 86 h01: the profit sharing financing variable, trade financing and npf does not influence partially to the roa of islamic rural banks in central java in the 2013-2015 period. ha1: the profit sharing financing variable, trade financing and npf influences partially to the roa of islamic rural banks in central java in the 2013-2015 period. ha2: the profit sharing financing variable, trade financing and npf does not influence simultaneously to the roa of islamic rural banks in central java in the 2013-2015 period. ha3: the profit sharing financing variable, trade financing and npf influences simultaneously to the roa of islamic rural banks in central java in the 2013-2015 period. 3. research method the method used in this research is the qualitative method which has a goal to obtain the result from data processing in the form of numbers and analyzed using statistics (sugiyono, 2016). the research type is the associative because it observes the relation of variables to the research object and is causal in character, so in the research there are independent and dependent variables. from those variables, it is then searched about how is the financing influence of the independent variables to the dependent variables (sugiyono, 2016). the variables used in this research consists of three independent variables which are profit sharing financing, trade financing, non performing financing (npf) ratio; and one dependent variable which is the return on asset (roa). this research is implemented to seek the influence of the independent variables to the dependent variable. data types and source the data type used is the secondary data, in the form of a three-month financial report of islamic rural banks in central java from 2013-2015. sourced from the official site of the financial services authority (ojk) www.ojk.go.id. the data gathering technique used in this research is the documentation method, which is by gathering islamic rural bank three-month financial reports in central java which were obtained from the official financial services authority (ojk) www.ojk.go.id. population and sample the population in this research are the islamic rural banks in central java which total at 26. the sample gathering technique in this research is the purposive sampling. based on the purposive sampling the total islamic rural banks that are samples in this research are as the following: table 1 research samples and objects criteria which is the consideration in determining samples total islamic rural banks in central java province 26 islamic rural banks in central java that publish the three-month financial report for the research period which is in the quarter 1 2013 until quarter 4 21 2015 islamic rural banks in central java which have data comprehensiveness 21 islamic rural banks in central java that have total assets more than 20 billion 7 total periods studied (three-month period in 2013-2015) 12 total research data 7x 12 = 84 source: processed data (2016) http://www.ojk.go.id/ http://www.ojk.go.id/ the influence of profit sharing, trade financing, and the non performing financing ratio to the return on asset of islamic rural banks in central java (2013-2015 period) 87 based on the purposive sampling result, seven islamic rural banks are obtained which are islamic rural bank buana mitra perwira, islamic rural bank artha surya barokah, islamic rural bank suriyah, islamic rural bank sukowati sragen, islamic rural bank gunung slamet, islamic rural bank insan madani, and islamic rural bank bina amanah satria. data analysis technique this research uses the data panel regression analysis method processed using the eviews 9 program. the goal is for finding the profit sharing financing influence (x1), trade financing (x2) and npf ratio (x3) to roa (return on asset). yet before the data panel regression analysis is done, the stationarity test and classic assumption test is previously done. stationarity test a data is said to be stationary if the average error value and variant value of the variable is constant for the time. the stationarity test is importantly done to know if there is a breach in the regression assumption. the primary problem that occurs is that the data used in the regression analysis is not stationary, the estimated value result becomes biased (spurious regression), so it causes mistakes in the analysis result interpretation (winarno, 2011). there are several methods of the stationarity test in the data panel, among them is the unit root test. as for the method used for examining the unit root test in this research is by usingthe augmented dickey-fuller (adf). classic assumption test a model is said to be suitable for a predicting instrument if it has the best nonlinear characteristics of an interpreter. other than that a model is said to be suitable enough and can be used to predict if it passes the series of classic assumption tests that underlies. the classic assumption test is used to ensure that the regression model already fulfills the basic assumption so it can be used for testing the hypothesis. the classic assumption test needs to be implemented because in the regression model there needs to be attention to the presence of deviations of the classic assumption. because basically, if the classic assumption test is not fulfilled, the explaining variables become inefficient (setiawan, 2015), the classic assumption test consists of: a. normality test b. multicolinearity test c. heteroscedascity test d. autocorrelation test double regression linear test the regression analysis is needed for finding the independent variable influence in influencing dependent variables partially and simultaneously. the data panel regrsion equation in this research: in yit= β0 + β1inxi+ β2inx2 + β3inx3 +eit remarks: y : return on asset β0 (roa) :constant β123 : regression coefficient of each variable x1,x2,x3 : profit sharing financing, trade financing. non performing financing (npf) ratio e : error afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 88 hypothesis test 1. determination coefficient test (r2) 2. partial test (t test) 3. simultant test (f test) 4. discussion stationarity test analysis a data is said to be stationary if the average value and the variants for several different lags have a continous constant value. for finding the data stationarity of profit sharing financing, trade financing, npf ratio, and roa, the augmented dickey-fuller (adf) test is implemented. the adf test is implemented with the quarterly series data from 2013-2015. the following is the result of the stationarity data test using the adf test in the level phase: table 2 level phase stationarity test adf statistical test: (max lag = 11) stationarity phase level no variable adf t-statistic t-statistic (a = 5%) remarks 1 roa -4.12306 -2.896779 stationary 2 pby_basil -2.58578 -2.896779 not stationary 3 pby_jb -2.03303 -2.896779 not stationary 4 npf -3.42135 -2.896779 stationary source: processed data (eviews 9 output) the adf test result to the variables in the level phase shows that the profit sharing financing and trade financing variables are not stationary in the level phase. this is shown by the smaller adf test statistical value than the critical value (for a = 5%, as large as -2.896779). the research with non stationary data can produce a false regression (spurious regression). so, the test in the first difference phase needs to be implemented. with the note that if one of the variables were increased to the first difference phase, all variables have to be tested in the first difference phase. table 3 difference phase stationarity test adf statistical test: (max lag = 11) stationarity phase 1st difference no variable adf t-statistic t-statistic (a = 5%) remarks 1 roa -11.64478 -2.897223 stationary 2 pby_basil -8.348644 -2.897223 stationary 3 pby_jb -10.08221 -2.897223 stationary 4 npf -10.56075 -2.897223 stationary source: processed data (eviews 9 output) the influence of profit sharing, trade financing, and the non performing financing ratio to the return on asset of islamic rural banks in central java (2013-2015 period) 89 the table above is the unit root test result in the first difference phase. from the table it can be seen that in the test in the first difference phase, all variables have a larger probability value than the critical value (for a = 5% as large as -2.896779). therefore it can be interpreted that all variables in this research were already stationary in the same integration degree, so an analysis for the further phase can be done, which is the classic assumption test by using differentiated data in the stationarity test in the first difference phase. classic assumption test analysis normality test the following is the normality test result table by using eviews 9, which is: figure 1 normality test series: residuals sample 2.84 observations 83y mean -3.34e18 median 0.073875 maximum 2.606122 minimum -2.591747 std. dev. 1.075285 skewness -0.266870 kurtosis 3.639674 jarque-bera 2.400299 probability 0.301149 source: processed data (eviews 9 output) the normality test result is seen through the j-b test and probability. based on the result ithe j-b test value is 2.4002 and the probability is 0.301149, 20 afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 90 so with that result, the value can be interpreted as > 0.05 (more than 5%) so the data is distributed normally (h0 accepted ha rejected). multicolinearity test the following is the table of the multicolinearity test by using eviews 9, which is: table 4 multicolinearity test correlation matrix between variables variable pby_basil pby_jb npf pby_basil 1.000000 -0.470055 0.379628 pby_jb -0.470055 1.000000 0.354128 npf 0.379628 0.354128 1.000000 source: processed data (eviews 9 output) for detecting multicolinearity, the correlation matrix is used. and the correlation matrix result is presented in table 4.3, so it can be analyzed that the correlation matrix result of every variable does not have a value of more than 0.90 (< 0.90). this means multicolinearity does not occur in the model (h0 is accepted ha rejected). this means this research is free from the multicolinearity problem and worthy to be continued to the next phase. heteroscedascity test the following is the table of the heteroscedascity test result by using eviews 9, which is: table 5 heteroscedascity test f-statistic 1.040257 prob. f (3.79) 0.3795 obs*r-squared 3.154184 prob. chi-square (3) 0.3685 scaled explained ss 3.771425 prob. chi-square (3) 0.2872 source: processed data (eviews 9 output) the result of the heteroscedascity test using the white test. the obs*rsquared is as large as 3.134184 (more than 5%) so this means that heteroscedascity does not occur (h0 is accepted ha rejected). this means that this research is free from the heteroscedascity problem and worthy to be continued to the next phase. autocorrelation test the following is the autocorrelation test result table by using eviews 9 which is: the influence of profit sharing, trade financing, and the non performing financing ratio to the return on asset of islamic rural banks in central java (2013-2015 period) 91 table 6 autocorrelation test f-statistic 4.369565 prob. f (2.77) 0.0159 obs*r-squared 8.459939 prob. chi-square (2) 0.0146 source: processed data (eviews 9 output) based on the autocorrelation test result by using the breusch-godfrey test above, the obs* r-squared value is as large as 8.459939 and the obs* rsquared is > 0.05 (more than 5%) this means that autocorrelation does not occur (h0 accepted ha rejected). this means that this research is free of autocorrelation problems and worthy to continue to the next phase. double regression analysis and hypothesis test result in the model selection test, the model used in this research is the common effect model (cem), so the following equation result is obtained: y= 0.053009 c + (-1.119295) x1 + (0.293246) x2 + (-0.020162) x3 in the common effect model equation the data is connected without observing the time and individual difference. so the behavior of data between islamic rural banks are the same in several time periods, because of the permanent intercept. remarks: y : return on asset (roa) c : constant x1, x2, x3 : profit sharing financing, trade financing, non performing financing (npf) ratio determination coefficient (r2) the following is a presentation of the determination coefficient result for observing how far are the independent variables which are profit sharing financing (x1), trade financing (x2), and npf in explaining the dependent variable which is return on asset (roa). the determination test result by using eviews 9 can be seen in the table below: table 7 determination coefficient test result r-squared 0.103236 mean dependent var 0.033506 adjusted r-squared 0.066382 s.d. dependent var 1.078101 s.e. of regression 1.041703 akaike info criterion 2.970141 sum squared resid 79.21564 schwarz criterion 3.091898 log likelihood -110.3504 hannan-quinn criter. 3.018843 f-statistic 2.801257 durbin-watson stat 2.574277 prob (f-statistic) 0.045848 source: processed data (eviews 9 output) afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 92 the counting result of the r2 value and adjusted r-squared based on table 7 were the numbers of 0.103236 or 10% and 0.066382 or 7%. this is the relation of the independent variable to the dependent variable. value based, the adjusted r-squared showed the variables of profit sharing financing, trade financing and the npf ratio can explain 7% of the roa variable. the other 93% are explained by other factors or other variables outside the model. the adjusted r-squared value is relatively low because the data used is a cross section where there are large variations between each observation. (ghozali, 2013) also, because the variable used is limited only from the financing element for explaining the roa of islamic rural banks. partial tests to regression coefficients (t tests) a. profit sharing financing variable test the profit sharing financing probability value of 0.0070 is less than the significant 5% (0.05) so h0 is rejected and ha is accepted, this means the profit sharing financing (independent variable) has a significant influence individually to the roa (dependent variable) with a coefficient value of 1.119295 and a t-statistic value of -2.776849. the influence of profit sharing financing to roa is negative in character (tstatistic value of -2.776849) this value illustrates that the higher the profit sharing payment distribution to customers (mudharabah and musyarakah financing), the higher the chance of producing a low roa value. this can be caused by: first, customers that obtain financing (mudharabah and musyarakah) in certain periods do not all return the funds and provide the result in the period. second, customer character. not all customers are devout in returning funds according to the contract. third, the theory correspondence that profit sharing financing is an investment activity where the profit sharing value is fluctuative (uncertain, high and low) depending on the condition of customers and the high risk of funds not returning. the result of this research supports the research of rochmanika (2012) and yulianto (2014) which stated that profit sharing financing has a negative influence to roa (object of syariah public banks in indonesia). b. trade financing variable test the trade financing probability value of 0.293246 is more than the significant 5% (0.05) so h0 is accepted and ha is rejected, this means the trade financing (independent variable) does not have a significant influence individually to the roa (dependent variable) with a coefficient value of 0.293246 and a t-statistic value of 0.321295. this is because the markup income that islamic rural banks obtain are certain in value, and this is a trade contract, other than that, because the financing is distributed the value is the finished price (cost + markup) in corresponding with the theory. the result of this research supports the research of yulianto (2014) which stated that trade financing does not influence roa (object of syariah public banks in indonesia). c. non performing financing (npf) ratio variable test the npf probability value of 0.5759 is more than the significant 5% (0.05) so h0 is accepted and ha is rejected, this means the npf (independent variable) does not have a significant influence individually to the roa the influence of profit sharing, trade financing, and the non performing financing ratio to the return on asset of islamic rural banks in central java (2013-2015 period) 93 (dependent variable) with a coefficient value of – 0.020162 and a t-statistic value of 0.561968. this can be a cause of the npf condition which is larger in one period and does not directly provide a profit decrease in the same period. when islamic rural banks have a high number of problematic financing, they will first attempt to evaluate their performance with their policies while stopping their financing distribution activities until the npf decreases or issue a financing efficiency policy. simultaneous regression coefficient test (f test) the f test result showed that the f-statistic value is 0.045848. this fstatistic probability number is less than the significance level of 0.05 (<5%) meaning that all independent variables (trade financing, profit sharing financing, and non performing financing (npf) ratio) in this research have a simultaneous influence to return on asset (roa). 5. conclusion based on the research result done in this research a conclusion can be drawn, where what is patially obtained is the profit sharing financing variable (0.0070) which has an influence to roa. this is because there are customers that do not fulfill the pact provisions or even skip the agreed pact. while the trade financing (0.7489) and npf ratio (0.5759) do not have significant influences to roa. while simultaneously the independent variables ( profit sharing financing, trade financing, and npf ratio) have significant influences to the roa of islamic rural banks in central java with an f-statistic probability value of 0.045848. the counting result of the r2 and adjusted r-squared values are each 0.103236 or 10% and 0.066382 or 7% in numbers. this means that there is a relation between the independent and dependent variables. based on the adjusted r-squared value, it shows that the variables of profit sharing financing, trade financing and npf ratio are able to explain 7% of the roa variable. the other 93% is explained by other factors or other variables outside the model. the adjusted r-squared value is relatively low because the data used is a cross section, where there is a large variation between each observation (ghozali, 2013). other than that, because the variable used is limited only from the financing element for explaining the roa of islamic rural banks. the suggestion for further research is to add samples of other variables other than the variables in this research, lengthen the sample observation period, and also to use different measuring instruments or in different objects for finding whatever factors that influence the return on asset (roa) value. references agustiningrum, r. 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(n.d.). http://elc.stain-pekalongan.ac.id/230/10/bab%203.pdf. retrieved january 12, 2017 from the repository of iain pekalongan: http://elc.stain-pekalongan.ac.id/ http://zonaekis.com/ http://www.ojk.go.id/ http://www.bprsarthasuryabarokah.com/ http://www.bprsbmp.com/ http://bprgunungslamet.com/index.php/2017-04-26-02-45-45.%20retrieved%20april%2030 http://bprgunungslamet.com/index.php/2017-04-26-02-45-45.%20retrieved%20april%2030 http://bprgunungslamet.com/ http://banksyariahku.com/tentag-suriyah.html http://elc.stain-pekalongan.ac.id/230/10/bab%203.pdf an islamic economic perspective on public finance revenue in indonesia 134 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) an islamic economic perspective on public finance revenue in indonesia baitul hamdi1)*, tika widiastuti2) 1,2islamic economics departement, faculty of economics and business, airlangga university, indonesia abstract this paper discusses sources of islamic public finance income based on the ideas of abu ubaid and ad-dawudi in the al-amwal book and makes them relevant to sources of income from indonesian public finances. the writing uses a qualitative method with a literature study approach to analyze the thoughts of abu ubaid and ad-dawud. the results showed that the sources of public financial income according to abu ubaid are zakat, fa'i, and khumus. while according to ad-dawudi in the book al-amwal, the source of state income is divided into periodic income (jizyah and kharaj and usyur) non-income periodic (ghanimah, fa'i, and zakat). in general, it has relevance to public sources of finance in indonesia, it's just that the system or amount is different. kharaj, fai, usyur, khumus in the form of mining taxes, jizyah in the form of visas, ghanimah there are differences of opinion that can be equated with confiscated goods from the state due to violating the law while other opinions say they are irrelevant because they support war actions to acquire wealth, lastly, zakat is still practiced in indonesia and managed by baznas and laz. keywords: source of state income, public finance, abu ubadi, ad-dawudi. 1. introduction islam is a perfect religion that governs every aspect of the life of its people, from the smallest or the individual to the largest such as the state. this is because the state is a group or organization that should protect, serve and guarantee the rights of every citizen. in running an organization or state, islam has provided an example through the figure of the prophet and was continued by the khalifah urasyidin regarding state governance, especially in the field of state income and expenditure or better known as public finance. public finance is a very vital matter and needs extra attention by the government because if the management and regulation of public finances are managed properly, it will increase people's welfare and good economic growth, but if it is mismanaged it will have a bad effect on the economy of one. countries such as poverty, unemployment will increase and corruption will be rampant which will certainly harm the state and the people(arfah 2020) seeing the importance of public financial management arrangements, long before the modern economy developed, many muslim scholars devoted their time, energy, and thoughts to studying islamic public finance including abu ubaid with the book al-amwal, books or books providing a lot of important information on the success of the government in implementing various policies such as the success of the government umar ibn khattab *corresponding author. email address: baitul.hamdi-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:baitul.hamdi-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 135 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in building the foundation of the tax system as one of the state revenues (ghozali and khoirunnisa 2018). in addition to abu ubaid there is also ad-dawudi with a book whose title is the same as abu ubaid, namely al-amwal, in the book al-amwal ad-dawudi describes state income and expenditure, and this book is famous for ad-daudi's courage to criticize the government's economic policies. fatimiyah dynasty (atmaja, et al. 2019). therefore, looking at the contents of these thoughts the writer explores the works of ad-dawudi and abu ubaid with the context, events, and financial policies in indonesia which can be said to be almost similar. other than that in recent decades the growth of the islamic economy has been very rapid, especially in indonesia as a country with the largest muslim population in the world, but unfortunately, the financial system in indonesia is still heavily influenced by the capitalist and socialist financial systems which are often shaken by the global crisis such as what happened in countries in europe, and america. therefore, the author wants to analyze the sources of income in islamic public finance based on the thoughts of abu ubaid and ad-dawudi and make them relevant to public finance in indonesia. 2. literature study etymologically, public finance is defined as state finance, government finance or better known as government financial activities, while in terms of public finance it is defined as all forms of finance that originate from the public or society, which are obtained based on the authority and legislation given by the public and are used effectively. directly or indirectly for the public interest as well. broadly speaking, public finance can be seen from 2 sides, namely state revenue or incomes, state use or expenditure (wasistiono 2002). islamic public finance is state finance that is managed and used for the benefit of the community, its management can be done individually, collectively, or managed by the government. similar to public finance in general, islamic public finance also includes two things, namely the revenue and expenditure sectors. as for what makes the difference between islamic public finance and others is that islamic public finance has principles based on the qoran and sunnah or islamic values in carrying out policies, including (ririn tri puspita ningrum 2014): a. the supreme power belongs to allah and allah is the absolute owner of all that exists. b. humans are the leaders (caliph) of allah on earth but are not the true owners. c. everything that humans have and get is because of the permission of allah, therefore people who are less fortunate (poor) have the right to part of the wealth owned by the more fortunate (rich) community. d. prohibition of accumulating wealth (ikhtikar). e. wealth must be rotated. f. prohibition of economic exploitation in any form. https://creativecommons.org/licenses/by/4.0/ an islamic economic perspective on public finance revenue in indonesia 136 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) g. eliminating the gap between individuals in the economy and eliminating conflicts between groups by distributing one's ownership after death to his heirs. h. establish mandatory and voluntary obligations for all individuals, including poor members of society. state revenue is all forms of income from deposits or income that go into the state treasury and recognized as an addition to the value of the state's net assets, usually sourced from taxes, levies, corporate profits, fines, etc. which are used as a source of funding for activities and state needs for state development (huda, 2012). in the early days of the islamic state led by the prophet, islamic public financial income came from alms, zakat, waqf, and ghanimah (spoils of war) (tika widiastuti, et al., 2020). with the growing development and breadth of islamic power and the birth dynasty or new kingdom then the source of islamic public financial income also developed. abu ubaid with the book al-amwal, books or books providing a lot of important information on the success of the government in implementing various policies such as the success of the government umar ibn khattab in building the foundation of the tax system as one of the state revenues (ghozali and khoirunnisa, 2018). apart from abu ubaid, there is also ad-dawudi with a book whose title is the same as abu ubaid, namely al-amwal. the book of al-amwal by ad-dawudi is a written work on islamic public finance. in it describes state income and expenditure. this book was written with an interdisciplinary approach covering economics, politics, ethics, and islamic law. and this book is famous for ad-daudi's courage to criticize the economic policies of the fatimid dynasty. at that time famous for corruption, abuse of authority and power (atmaja et al. 2019). rizki hasanah, titin supryin, and nunung nurhayati (2017) conducted an analysis of abu ubaid al-qasim's thought about zakat on imported goods and excise and related it to law number 17 of 2006 concerning customs and law number 39 of 2007 concerning excise. the results of the analysis found that abu ubaid al-qasim's thoughts regarding the zakat of imported goods and excise as a whole were almost the same as the customs policy applied by umar bin khattab ra. during his reign, including the concept, tariffs were differentiated according to the religion of the subject and the subject was differentiated based on religion, and the object was merchandise brought into the territory of the islamic state. meanwhile, in law no. 17 of 2006 concerning customs and law no. 39 of 2007 concerning excise in which includes the procedures for collection, the amount of the tariff, the sanctions, as well as the subject and object, all of which are not based on the religion of the subject. then between the thoughts of abu ubaid al-qasim and the law have similarities, namely, the two is a form of tax which is a source of state revenue. and there are differences, namely including import duties, export duties and excise, the size of the nominal tax rate equation, objects or goods, and the sanctions given for violations. mohammad ghozali and ria khoirunnisa (2018) researched the concept of islamic financial management according to abu ubaid's thought, the results of this study are https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 137 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the essence of abu ubaid's thoughts on state financial management including abu ubaid stated that the function of money has no intrinsic value as a standard of exchange and as a medium of exchange, the government is obliged to guarantee a decent standard of living for every individual in a muslim society. in abu ubaid’s thought about state revenue (fai', khumus, sadaqah, and zakat), that must be managed by the state and allocate to the public. fajar fandi atmaja and asmuni, yuli andriansyah (2019) analyzed ad-dauwudi's thoughts on public finance based on the source of a country's income, its distribution, and basic ethical assumptions underlying his thinking. the results of this study indicate that ad-dawudi arranged the sources of national income into periodic and non-periodic types. then he emphasized the role of zakat for social and economic purposes. for government spending, ad-dawudi noted state defense, general administration, and development tasks as the main types of spending. ad-dawudi also pays attention to the importance of government duties to the community so that the state budget must be spent as well as possible to ensure welfare. as for what distinguishes this research from previous research, here the author focuses on sources of islamic public finance income based on the thoughts of abu ubaid and adduaudi, then it is relevant to public financial policies in indonesia. 3. research methodology this study uses a qualitative method intending to describe the writings and thoughts of certain figures, in this case, abu ubaid and ad-dawudi. then a literature review was carried out from various journals and books on the thoughts of abu ubaid and ad-dawudi regarding the sources of islamic public finance income. data were collected through the documentation method, in which primary and secondary sources were carefully read, described, and analyzed. the results of the analysis are described critically to deal with the main findings and confront them with other ideas and thoughts related to sources of public financial income in indonesia to find comparisons, relations, and other rational ways. 4. result and discussion a. sources of islamic public financial revenue with the development and extent of islamic rule and the birth of a new dynasty or kingdom, the source of public islamic financial income also developed. this is evidenced by the number of scientists or figures who spend their time studying islamic public finance. among them, those who are famous for their thoughts about public finance are abu ubaid and ad-dawudi. according to abu ubaid in al-amwal's book, he explained that the sources of public islamic financial income consist of shodokah including zakat, fa'i, khumus (ghozali and khoirunnisa, 2018). meanwhile, according to ad-dawudi in the book al-amwal, the https://creativecommons.org/licenses/by/4.0/ an islamic economic perspective on public finance revenue in indonesia 138 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) sources of state income are divided into groups, namely periodic income, namely income from jizyah or personal taxes, kharaj and usyur (syahputra, 2013) on-periodic income, namely income from ghanimah, fa'i, and zakat (atmaja et al., 2019). based on the above ideas of abu ubaid and ad-dawudi, we can conclude that the sources of islamic public finance income consist of zakat/sadaqah, fa'i, khumus, jizyah, kharaj, usyur, and ghanimah. 1) zakat and shodakah. zakat comes from arabic, namely zaka, yazku-zakay which means holy, besides that zakat also means al-numuw wa al-ziyadah. (growing and developing) it is hoped that by spending zakat, it can grow an economy that gives zakat and receives zakat. in terminology, according to sulaiman rasjid zakat is the level or size of certain assets, which are issued or paid to those entitled to receive them (musathiq), with certain conditions such as sufficient haul and nisab (ridlo, 2013). zakat is a source of state income in islamic public finance as well as the main fiscal policy in islamic economics. in the early days of islam, zakat was a source of state income that played an active role in empowering and building the welfare of the people, especially in the economic sector. according to (huda, 2012), there are at least three aspects related to the implementation of the obligation of zakat: first, moral and psychological aspects in this aspect it is hoped that zakat can erode the greed and greed of the rich who tend to love wealth and the world. second, the social aspect in this case zakat acts as a unique tool given by islam to eradicate the level of poverty in society and at the same time make rich people aware of the social responsibility that religion has imposed on them. third, the economic aspect in this case zakat prevents the accumulation of wealth in certain groups only and obliges the rich to distribute their assets to the poor or better known as mustahiq. zakat is one of the instruments with great potential to alleviate poverty because zakat can function as working capital for the poor to create jobs. so that mustahiq can earn income and be able to meet their daily needs or as additional capital for someone who lacks capital so that their business can run smoothly, their income increases, and can meet their daily needs. thus, the burden on the state in terms of unemployment and poverty can be reduced. besides, in the monetary economy, zakat can also curb the inflation rate caused by unbalanced currency circulation and a more even distribution of income. apart from distribution purposes, analysis of fiscal policies and economic systems is carried out for the stability of economic activity. (rozalinda, 2014) given the importance of the role and benefits of zakat so that during the time of the prophet muhammad and the caliph afterward did not just give authority to manage zakat to individuals but became the responsibility of the state (an institution appointed by the state) or known as baitul maal, both in the collection and distribution process. even when he became caliph, he fought against people who were reluctant to pay zakat. based on the description above, we can conclude that zakat can be a momentum for the birth of an islamic economy as an alternative https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 139 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) to the capitalist and socialist economies that dominate the world economy today. therefore, the revival of islam is a revival of an economy based on zakat, and this is very relevant to the needs of the ummah today. 2) fa'i fai means to return everything. according to the term fai, all assets obtained or confiscated from the enemy in the form of land, as well as the movable assets in it (huda, 2012)were conquered without any war (tika widiastuti, sri herianingrum, wisudanto, sri ningsih 2020). fai is an islamic public financial income and a source of state financing or funding as the word of allah in q.s. alhashr: 6: "and whatever booty (fai-i) that allah gave to his messenger (from their property), then to get it you did not mobilize a horse and (not also) a camel, but allah gave the power to rasulhim for whatever he wants. and allah has power over all things. " according to abu ubaid fai, it includes general state income like kharja or taxes, except for zakat (tika widiastuti, 2020). in line with abu ubaid, addawudi also stated that fai assets are state income other than zakat, namely kharaj, jizyah, ghanimah, ushur, and income from government commercial businesses (huda, 2012). 3) jizyah jizyah in language comes from arabic, namely jaza which means replacement (compensation), repayment for a good or bad thing. according to the terminology, jizyah is a levy or tax imposed on non-muslims who live in an islamic country as a reward for life insurance and social security.(yuliadi, 2019) or more simply, jizyah is a life tax, protection for non-muslims living in a muslim country (tika widiastuti, 2020). jizyah is collected by the state from non-muslim citizens who agree with the government as a form of their loyalty to the islamic government, the consequences of protection, security of life and property, economic and social facilities provided by the islamic government, and as compensation, they are exempted from the obligation to participate in war. their obligation to pay jizyah is considered a fair thing because the muslim population is also subject to several costs that must be incurred as citizens such as zakat, kharja, and others, it is only fitting that those who are not muslims can also be protected to pay for it.(rahman, 2015). jizyah is mentioned in surah at-taubah: 29. "fight those who do not believe in allah and do not (also) in the next day, and they do not prohibit what is forbidden by allah and his messenger and do not have religion with the true religion (the religion of allah), (i.e. people). which al-kitab gives them until they pay jizyah obediently while they are in a submissive state. " https://creativecommons.org/licenses/by/4.0/ an islamic economic perspective on public finance revenue in indonesia 140 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) at the time of the prophet, the amount of jizyah collected from the ahli kitab was 1 dinar per year for capable adult males, then if they had 30 heads of reach the jizyah was 1 tabi 'cow (1-year-old) if they had 40 cows. then the jizyah of 1 cow is destroyed (2 years old), and if they have income that comes out of the land, then the jizyah is 1/10 if the land is irrigated by rain and 1/5 if using irrigation.(ghozali and khoirunnisa 2018). while during the umar caliphate, the area of islamic dominion was wider, umar determined various jizyah based on the non-season economic ability of the taxpayer. according to abu ubaid as quoted by (syahputra 2013), if one of them is unable to pay, then baitul mal will be assisted. in a study conducted by nafis irkhami, it was found that in collecting jizyah, umar gave a group or sweating to the public who are obliged to jizyah with the following conditions: first, poor citizens who do not have income, work and do not have expertise. second, religious leaders in this case priests, temple guards who live in the places of worship they guard. third, men who are unable to work and do not have assets to spend. the fourth people have no sense or memory loss (irkhami, 2016). however if the four groups have the ability and decent economic life, they will be subject to jizyah. this obligation to pay jizyah will end when they convert to islam (tika widiastuti, 2020). following the hadith of the prophet: "there is no obligation of jizyah for people who have converted to islam" (hr. ahmad and abu daud) the rate of jizyah per year applied during umar bin khattab's time was as follows (rozalinda, 2014): table 1. rate of jizyah population levels wealthy non-muslim citizens 48 dirhams middle economic non-muslim citizens 24 dirhams farmers, laborers, poor people 12 dirhams in modern times, the term jizyah is no longer heard. however, the practice still exists, namely in the form of a visa which is a guarantee or life tax imposed on foreign nationals who enter a certain country (karim 2006). 4) kharaj kharaj comes from arabic, namely kharaja-yakhruju-khurujan which means to come out. according to the term, etymologically kharaj is a type of tax imposed on land conquered by force of arms, regardless of whether the owner is a muslim or not (mannan, 1993). kharaj can also be defined as a tax issued on land conquered by islamic armies (tika widiastuti, 2020). the term kharaj was first introduced by the apostle allah at the end of the khaibar war, at which time the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 141 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) prophet permitted the khaibar jews to have their land back on the condition that they surrender part of their harvest to the islamic government as kharaj (tax). kharaj began to be arranged systematically and administratively during the caliphate of umar bin khattab by establishing diwan al kharaj. kharaj at that time was abundant because the area that was conquered by islam was getting wider, roman and sasanid spet so that it was felt necessary to have an orderly system of collection and distribution. according to adiwarman karim (2006), three factors must be considered in the collection of kharaj, namely first, soil fertility level. second, the types of plants produced both in terms of the amount produced and the purchasing power. third, type of irrigation or irrigation, namely land irrigated by rivers or springs, irrigated by human and animal power, rainwater, and artificial irrigation. here the author attaches the size and number of kharaj at the time umar bin khattab: table 2. rate of kharaj rate of kharaj (umar bin khattab) types of plants levels grapes and dates cane alfafa (horse and cow food) wheat barley 10 dirhams / jarib 6 dirhams / jarib 5 dirhams / jarib 4 dirhams / jarib 2 dirhams / jarib rate of kharaj in iraq wet wheat 2 dirhams/bushel wet corn 4 dirhams/bushel wet wine 5 dirhams/bushel wet chrome wood 10 dirhams/bushel rate of kharaj (ali ibn abi talib) productive wheat field 1.5 dirham / jarib and 1 sa '/ jarib less productive wheat field 1 dirham / jarib slightly productive wheat field 1/3 dirham / jarib rate of kharaj based on irrigation agricultural produce taught by rainwater 40% agricultural produce taught by artificial irrigation 30% source: kitab al kharaj abu yusuf quoted by (rozalinda, 2014) 5) usyur etymologically, usyur means one-tenth. in terminology, 'usyur means a tax imposed on merchandise that enters an islamic country or is in an islamic state itself (tika widiastuti, 2020). usyur or it can be called trade tax or customs has https://creativecommons.org/licenses/by/4.0/ an islamic economic perspective on public finance revenue in indonesia 142 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) been known long before islam developed. for example, the greek government levies taxes on merchandise that comes from outside athens. in the islamic financial system, the usyur began to be known during the caliphate of umar bin khattab, which was based on the background of musa al-asy'ari's report that muslim traders who traded in non-muslim areas were subject to trade taxes by the local government. so that umar bin khattab also decided to collect taxes from non-muslims who traded in islamic territory so that there would be justice in international trade. for smooth and orderly implementation of usyur (tika widiastuti, 2020). at first, the usyur was a trade tax imposed on non-muslims who traded in islamic territory, but over time the usyur was also imposed on traders who were diverse in islam for the sake of justice and welfare of the people. in collecting 'usyur, umar bin khattab considered two things, namely, first, the goods subjected to' usyur were only trade goods (not necessities). second, the value reaches 20 dinars or 200 dirhams. table 3. rate of ‘usyur the level of 'usyur time traders 2.5% year muslim 5% year zimmi 10% year harbi source: kitab al kharaj abu yusuf quoted by (rozalinda, 2014) the table above provides us with information that the caliph umar bin khattab in applying usyur always tried to apply the principle of justice. where muslim traders are subject to one-fourth of the harbi traders' obligations, namely 2.5%, this is because muslim traders, in addition to paying usyur, are also required to pay zakat on trade each year.(tika widiastuti, sri herianingrum, wisudanto, sri ningsih 2020) 6) ghanimah ghanimah is a source of state income obtained from the war or better known as the spoils of war (rozalinda, 2014). "they ask you about (the distribution of) the spoils of war. say: "the spoils of war belong to allah and the messenger, therefore fear allah and improve the relations between your neighbors; and obey allah and his messenger if you are a believer." the fifth part of this becomes state revenue and is included in the state treasury, namely the baitul mal. meanwhile, the 4/5 belonged to soldiers divided according to their position in battle. the cavalry had two shares (for soldiers and horses), one part for the foot soldiers, one part for the other (rozalinda, 2014). in ghanimah there are several types of division, namely first, nafal, namely an award given to a soldier in the form of distribution of ghanimah assets which is more than the average number of both state leaders and field leaders. second, salab, personal items that the soldier seized from the enemy he killed. third, safi ' is the leader's choice of goods taken from the ghanimah for himself (huda, 2012) https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 143 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in today's modern economy, state income from the ghanimah may be equated with confiscated goods due to violations of state law (rahman, 2015). meanwhile, according to fajar fandi atmaja (2019), ghanimah is no longer relevant because it does not directly support war actions to gain wealth. b. indonesia's public financial revenue sources in-law number 17 of 2003 concerning state finances, state revenue is all revenue originating from taxation revenues, non-tax state revenues, and grant receipts from within and outside the country. based on the above law, it can be seen that the country's income is divided into 3, namely: 1) the source of state revenue comes from taxes. taxes are the people's compulsory contribution to the state, in this case, it can be enforced and obligatory to pay it according to the laws and regulations without receiving reciprocal services or recompense (counter-achievement), which are directly appointed and used to finance general expenditures related to state duties in the framework of administering government (waluyo, 2013). according to law no. 17 of 2003, the source of tax revenue consists of domestic taxes and international trade. domestic taxes come from income tax, value added tax, sales tax on luxury goods, land and building tax. meanwhile, international trade taxes come from import duties, customs, exports, and imports. until now, indonesia's income was still dominated by taxes, especially domestic taxes. 2) the source of non-tax state revenue, according to law no. 17 of 2003 nontax state revenue is all revenue received by the state from natural resources, profit sharing from state-owned enterprises, and other non-tax revenues such as royalties for natural resource management ranging from fisheries, forestry and mining, loans, confiscated goods, the printing of money or donations of abandoned assets, retribution. 3) grant, which is a gift given to the government but not a loan. grants are voluntary and given without any special contract. state revenue in the form of this grant can be from within and outside the country, either private or government, except for the grant for customary natural disaster pandemic outbreaks that cannot be input as state revenue. generally huda (2012) explain the difference between the sources of modern state income and classical muslim countries as follows: table 4. sources of modern state income and classical muslim countries modern country classic muslim country types of charges definition types of charges definition personal charges for personal zakat on state levies on https://creativecommons.org/licenses/by/4.0/ an islamic economic perspective on public finance revenue in indonesia 144 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) income tax. income. individual income muslims and religious/religious implications, on income from individual businesses. corporate income tax. levies on company income. zakat on changes in capital for business institutions. charges for muslim businesses, such as agriculture, trade, and industry, have implications for worship. sales tax. levies on the purchase/consumption of a type of goods. 'usyur. excise/levies on various merchandise as retaliation or retribution for taxes from other countries. domestic sales tax in islam is not recognized. property tax. levies on land, buildings, and building contents. zakat on property. levies because someone keeps property (gold, silver, houses, livestock, securities, and so on). levies, local taxes, taxes on direct government services, government regulations. charges are generally associated with government services, such as the use of public facilities, driver's license, id card, and so on. kharaj. levies on the use of land/state assets, such as agricultural compensation, logging rights, and so on. jizyah. state levies on nonmuslim residents, as a counterweight to muslim obligations related to religious obligations. surtax. additional liability if zakat and non-zakat instruments are insufficient. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 145 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) abu ubaid and ad-dawudi's thoughts regarding the source of revenue or income in islamic public finance generally have relevance to public sources of finance in indonesia, but the system or amount is different. fa'i and kharaj in the form of land and building tax, usyur in the form of customs, jizyah in the form of a visa, especially in the form of land and building tax and the mining tax. meanwhile, there is a difference in income between rahman (2015) and fajar fandi atmaja (2019), where according to rahman ghanimah is equated with state confiscated goods due to violating the law while fajar fandi atmaja ghanimah is no longer relevant because he does not directly support war actions to obtain wealth and it also contradicts the preamble to the constitution of the republic of indonesia in 1945, namely to participate in implementing world order based on independence, eternal peace, and social justice. finally, zakat is still practiced and managed for indonesia. it is managed by baznas and laz but unfortunately, its use is no longer a source of income for the government. however, the goal is still the same to be distributed to mustahiq to increase their standard of living. .in the public financial system in indonesia zakat is one of the potentials for state revenue that has not been managed by the government and can even be said to tend to be neglected. (subeka, 2016) whereas the potential for zakat in indonesia is enormous considering that indonesia is one of the countries with the largest muslim population in the world. nationally, based on reports from the national zakat agency (baznas), the total potential for zakat in indonesia in 2020 reaches idr 233.84 trillion, but the realization of zakat can be collected by baznas only reaches idr 10.166 trillion. the low number of realization compared to the existing potential is caused by many things, including low awareness of the people in tithing, weak trust of the people towards zakat managers, lack of resources and infrastructure for managing zakat, and so on. 5. conclusion state revenue is all forms of income from deposits or income that go to the state treasury, usually sourced from taxes, levies, company profits, fines, etc. which are used as a source of funding for state activities and needs in the framework of state development. according to abu ubaid in kitab-amwal explained that the source of public islamic financial income consists of alms including zakat, fa'i, and khumus. meanwhile, according to david in the book of al-amwal, the sources of state income are divided into groups, namely periodic income, namely income from jizyah or personal taxes, kharaj, and usyur. non-periodic income, namely income from ghanimah, fa'i, and zakat. in general, it has relevance to public sources of finance in indonesia, it's just that the system or amount is different. kharaj, usyur, khumus in the form of mining taxes, jizyah in the form of visas, ghanimah there are differences of opinion that can be equated with confiscated goods from the state due to violating the law while other opinions say they are irrelevant because they support war actions to acquire wealth. fa'i is no longer relevant, lastly, zakat is still practiced in indonesia and managed by baznas and laz. https://creativecommons.org/licenses/by/4.0/ an islamic economic perspective on public finance revenue in indonesia 146 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) reference arfah, tina arfah. 2020. “keuangan publik dalam perspektif ekonomi islam.” jurnal islamika 3(2):24–35. doi: 10.37859/jsi.v3i2.2121. atmaja, fajar fandi, asmuni, and yuli andriansyah. 2019. “an islamic economic perspective of public finance in indonesia based on ad-dawudi‘s thought in kitab al-amwal.” international journal of scientific and technology research 8(6):276– 79. ghozali, mohammad, and ria khoirunnisa. 2018. “konsep pengelolaan keuangan islam menurut pemikiran abu ubaid.” jurnal ekonomi dan bisnis islam (journal of islamic economics and business) 4(1):64. doi: 10.20473/jebis.v4i1.10068. huda, nurul. 2012. keuangan publik islam. jakarta: kencana. karim, adiwarman a. 2006. sejarah pemikiran ekonomi islam. jakarta: rajawali pers. mannan, m. abdul. 1993. teori & praktek ekonomi islam. jakarta: pt. 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ningsih, arin setyowati dkk. 2020. keuangan publik syariah teori dan pratek. surabaya: cv. naraya. waluyo. 2013. perpajakan indonesia. jakarta: salemba empat. wasistiono, sadu. 2002. “keuangan publik dan sumber daya manusia.” 102–14. yuliadi, i. 2019. teori ekonomi makro islam. depok: pt rajagrafindo persada. https://creativecommons.org/licenses/by/4.0/ model management zakat productive for mustahik empowerment (case study: rumah amal salman itb and dpu daarut tauhid, bandung, indonesia) 79 12 model management zakat productive for mustahik empowerment (case study: rumah amal salman itb and dpu daarut tauhid, bandung, indonesia) gina noviana yuniar 1*, hani hanifah2, and bagdja muljarijadi3 1, 2, 3 padjadjaran university, bandung, indonesia abstract there are various ways to reduce poverty, one through the distribution of zakat funds for economic empowerment of the poor. the distribution of zakat funds require institute amil zakat (laz) are professional and focus on the allocation of zakat funds to productive sectors. by based on financial inclusion, laz has function as mediator between the one who gave zakat funds (muzzaki) with the one who received zakat funds (mustahik) hopefully can be an institution which increase productivity of mustahik analythic-method descriptive and comparation are used to seen the efeciency of funds management model which come from zakat to poor people by microfinance institution by applied local culture approach as basis connection between microfinance and their client. survey of field did based on purposive smpling to the amount of microfinance which based on akat, infaq, and shodaqoh (laz) were ini bandung city such as laz rumah amal salman and dpu daarut tauhid. as a basic for assessment the efectivity channelization microfinance service by use result chain methods that can described the achievement of success through input – output – outcome stages. the result of research showed that local culture has big influence against the achievement from these two microfinance. coaching and mentoring activities provision values of akhlak became local cultural traits in laz rumah amal salman itb, able to creates independent mustahik and has akhlakul karimah. meanwhile, in dpu daarut tauhid adaptation with local culture made trhough facilitation and business choacing to all mustahik has increase their confidence at beginner stemming from poor society groups. in addition, dpu daarut tauhid also do review an evaluation to all mustahik to control mustahik hearts leverage the capital that has given, so that the program can realize the aim to produce zakat productive. keywords: institute amil zakat, local culture, zakat produktif, 1. introduction zakat is now proven to have a domino effect in the life of society, especially in terms of poverty reduction. this potential if we continue to optimize it will help affect the indonesian economy, especially in freeing the poor from the poverty line, increasing the income and consumption of small communities. currently, the potential * corresponding author. email address: noviana_gina@yahoo.com mailto:noviana_gina@yahoo.com afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 80 of zakat in indonesia could reach 217 trillion. of the 217 trillion is one of them are in west java which nationally has a large proportion amounting to 3 trillion each year is utilized by institutions zakat (ahmad heryawan: 2016). total fundraising zis in indonesia increased from year to year. here is a collection of data zis in indonesia the period 2011 to 2015: table 1 total collection zis in indonesia no. year total zis annual growth (%) 1. 2011 1.73 triliun 2. 2012 2.2 triliun 27.16% 3. 2013 2.4 triliun 9.09% 4. 2014 2.77 triliun 15.41% 5. 2015 4.22 triliun 52.34% source: baznas 2015 the existence of the phenomenon of an increasing number of zis as the description proceeds table above, shows the potential utilization of zakat funds in the economic empowerment of mustahik very large. so the emergence of amil zakat (laz) is expected to be a medium for bridging the achievement potential of zakat in indonesia. laz their chances in encouraging optimization of distribution and utilization of zakat funds indicated by the process and management system that is open and transparent, so as to reach the target mustahik predetermined. zakat fund distribution models are applied in most laz done through a direct approach with mustahik interpreted by existing programs. the approach taken here is based on the integration of local culture-based financial inclusion. one of the goals of financial inclusion program is to provide access to financial services to the poor in accordance with their affordability. so it is believed the program would be used as one tool to alleviate poverty. the existence of aspects of local culture in the development model of utilization of zakat funds was believed to be able to create a system that iklusif laz. the success of the approach through local culture has also been felt by the grameen bank shows that understanding the local culture helps the effectiveness of utilization of zakat funds in the community. this paper attempts to examine the extent to which local cultural factors influence the development of laz and make mustahik can be more productive when getting zakat. 2. literature review amil zakat institute (laz) formation badanamil zakat can’t be separated from the issuance of law no. 38 of 1999 on zakat management (uupz). based on the act in indonesia there are two institutions that have the task of managing, distributing, and allocating zakat namely badanamil zakat (baz) and the institute amil zakat (laz). baz is manage zakat institutions established by the government which was established at the proposal of the ministry of religious affairs and approved by the president. while laz is zakat management institutions established by the private sector or outside government. some laz nationwide namely rumah amal salman itb and dpu daaruttauhid model management zakat productive for mustahik empowerment (case study: rumah amal salman itb and dpu daarut tauhid, bandung, indonesia) 81 equally has the objective to become the locomotive of empowerment, of the development of life and self-reliance, which is based on local resources, towards equitable economic system. empowerment empowerment in zakat is closely related to how it is distributed. the condition is caused when the distribution targeted and appropriate, the empowerment of zakat will be optimized. in law no. 38 of 1999 on zakat management, described the utilization is the result of collecting zakat utilized to mestahiq accordance with the provisions of the religion. utilization of the results of the collection of zakat based on priority needs mustahik and can be utilized for productive enterprises. the requirements and procedures for utilization of the results of the collection of zakat as referred to in paragraph (2) shall be regulated by a decision of the minister. as for the types of activities the utilization of zakat funds, namely: 1. based social zakat distribution of this type carried out in the form of direct funding in the form of compensation for the fulfillment of basic needs mustahik. 2. based economic development this type of zakat distribution is done through the provision of venture capital to mustahik directly or indirectly. the distribution of zakat funds is geared towards productive economic activities, which may also be lifting the welfare of society. local culture cultural factors, concept, and practices therefore need to be addressed, particularly in the relation to microfinance roles in development. kohls and wederspahn defined culture as shared values of a society. they defined culture as an integrated system of learned behavior patterns that are characterised the members of any given society. culture refers to the total way of life for a particular group of people. it includes [what] a group of people thinks, says, does and makes-its customs, language, material artifacts and shared systems of attitudes and feelings. according to this the definition, cultural factors and practices in agriculture areas would definitely differ from those who are stay in coastal area. in practice, culture adopted by farmers is not similar to culture of fisherman, traders or government officials for instance. the following chart shown us how internal and cultural aspects affect and be affected by microfinance. both cultural aspects of laz determine the outreach of laz as well as their sustainability. as illustrated in the following picture, we could see how cultural aspects related to microfinance. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 82 figure 1 cultural aspect of microfinance institution (laz) leonard (2010) and hofstede (1984), lewis (1998) and misbach (2009) stated that, at least there are several cultural aspects that can be identified before microfinance based on culture model created, as follows: 1. internal culture; includes organization culture, institutions ability of product innovation and impact analysis of lazs. 2. external culture; includes client and ethnic groups, clients profession, cultural geographic, and business environment. by identifying cultural factors, managers of lazs would be more culturally sensitive, so that public services will take habits and demands of the society in which mfis operate into their consideration. figure 2 local culture analysis model management zakat productive for mustahik empowerment (case study: rumah amal salman itb and dpu daarut tauhid, bandung, indonesia) 83 result chain theory result chain is a logic diagram showing the assumption by connecting input (in this case zakat), activity output (program owned by each laz like, coaching), results (the results of the coaching that has been done like, for home charity salman expect the mustahik become more dpu independent and daarut tauhid expect mustahiknya able to develop new businesses started or are being pioneered.), and the impact of their activities is expected mustahik input can improve their quality of life to be better than the previous ones (oecd, 2009). result chain used to make the first assumption about how the activities planned by each laz and the possibility to contribute to the stated objectives and how the possibility to translate from the initial assumption in various desired effects or undesirable. by identifying the main indicators to evaluate and monitor the impact of a planned activity can be any part of the analysis result chain (ferretti et al, 2012). 3. research methodology design of research this research is naturalistic research, with qualitative-descriptive research, means a research that efforted to make description and scurpulous social phenomena without intervenced and hypothesis. sample decided by usepurposive-sampling technique. here are amil zakat organization that observed: table 2 amil zakat intitution (laz) no. representation classification target 1. rumah amal salman itb amil zakat organization (laz) a. alumni of bandung institute of technology (itb) b. alumni of salman c. lecturer itb d. parents of itb students e. jamaah salman f. citizen of bandung city g. activist of salman 2. dompet peduli umat (dpu) daaruttauhid amil zakat organization (laz) a. dpu dt school b.activist of dt mosque c. some area of bandung regency kind, source and collecting data technique in this research, kind of data tha will use are primary data and secondary data. the method to collected data are variative and use many technique, depends on data that we use and source of data. primary data will collected by survey and get deeper with indepth interview. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 84 indepth interview, we had some conversation with head of director and human resources manage. beside primary data, this research use secondary data which got from publication, that published by government, laz, book,journal, and websites. processing and analysis data primary data processed by resumed an interviewed from interviewees. whereas secondary data processed by excel program to get trend and growth. for designed the right reconstruction model, we use comparative analysis. by use comparative analysis hopefully known unic, we use comparative analysis. by use result chain analysis hopefully known uniquely and excellence scores of each model empowerment of zakat for mustahik, tha be done in amil zakat organizations. 4. finding the reconstruction model of zakat for poor people is a program that used the benefit of zakat funs to help mustahik have their own business. the zakat appearance not only fulfilled consumtion needs of mustahik. at first, zakat potential has aimed to eradicate poverty, had generated thoughts and innovation in fund distribution of zakat, such as economic aid like had a productive business. productive business ini this case be related with development and growth especially on economic, and wealth on citizen. in broad outline, zakat fund can distributed in two kind of activities such as, activities whigh is consumptive and productive activities (nasution, 2008). consumtive activites are activities that temporary succor to solve temporary problem and directly gone at the same time (short term). meanwhile, productive activities are allocation of support that amied to productive business therefore can give long term effect for mustahik. source: nasution (2008) almost all amil zakat institution applied distribution methods of zakat consumptive and zakat productive. in general both of these zakat categories can be different with channelization of zakat dan using zakat fund by mustahik. each of consumptive and productive needing can be separate became 2 categories, such as traditional consumptive and creative consumptive, whereas zakat productive separate become conventional productive and creative productive. model management zakat productive for mustahik empowerment (case study: rumah amal salman itb and dpu daarut tauhid, bandung, indonesia) 85 table 3 format of allocation program of empowerment zakat fund in amil zakat no. kind of empowerment institution rumah amal salman itb dpu daaruttauhid 1. emergency response social care service traditional service humanity care service consumtive salman volunteer corps qurban 2. qurban tough mosque (masjid caring my environment tangguh) my scholarships creative konsumtive salman scholarships my creative association school assistance car love mosque program 3. livestock enterprises conventional independently (utm) productive farming enterprises independently (utama) 4. micro finance creative productive organization (lkm) sharia microfinance salman entrepreneur syariahcommunity-based club distribution of laz support in bandung city, did by four kind of empowerment mostly still used scattered and partial trend. it depends on mustahik for each program. poor infrastructure and skill of assistants become obstacles for snatch of laz. this matter become difficulties in controlling, evaluation and measurements of successing program. in the future changes of consumption pattern, become productive pattern can be an alternative for empowerment zakat fund in the future. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 86 to see how the relationship between each process being undertaken by the achievement of the desired benefits, it can be seen in the following chain models result: figure 3 result chain flowchart of rumah amal salman itb the entry of local cultural aspects into the model of utilization of zakat funds in house charities salman itb shows the terintegritasnya each element. where in any activity distribution of zakat funds were implemented through this scholarship program, aspects of local culture is always inserted. this means that the presence of the local culture that is capable of creating an inclusive distribution of zakat funds, it is characterized by the involvement of many parties in the sustainability of program. so mustahik who receive zakat funds will be more productive, because they know what they should do after receiving the zakat funds. aspects of local culture by rumah amal salman itb namely their coaching and mentoring activities as well as providing the moral values that are expected to be ingrained in mustahik. model management zakat productive for mustahik empowerment (case study: rumah amal salman itb and dpu daarut tauhid, bandung, indonesia) 87 figure 4 result chain flowchart of dpu-daarut tauhid while optimalization zakat fund model social economy dimensional become top priority in dpu dt, because by observing the optimal social economy has potential to reduce poverty and unemployment. dpu daarut tauhid has measures that have been applied so zakat productive can be channeled and utilized properly by mustahik, such as by mentoring and choacing to mustahik. it means one day if mustahik start their own business, they didn’t confused what should they do at first and they started they business full with confidence in the utilization capital which has given. in addition to mentoring and coching dpu daarut tauhid also conduct review and evaluation to mustahik. this review and evaluation are a survey program that carried out by dpu daarut tauhid to control mustahik in the utilization capital that has been given. this was done because one of their team (from dpu dt) found that there some of mustahik who not utilize the capital very maximum, because mustahik thinks that they have full authority to used zakat that already given without maximize the fund by run the business. by this review and evaluation, dpu daarut tauhid had a solution to handle mustahik who doesn’t maximize capital well and provide an approach to the mustahik and help to directed them to the objectives to be achieved, namely to increase their economic and wealthyness their family. 5. conclusion laz is a chance to encouraging optimalization distribution and optimalization zakat funds that shown by open and transparency process and management system, so that can reach the target of mustahik predetermined. the distribution zakat fund model that applied by most of laz did by direct approach to mustahik which intrepetation by programs. the approach that used are based on local culture and financial inclusion. optimalization model zakat fund that applied by laz rumah amal salman and dpu daarut tauhid can be example alternative model so that the distribution zakat fund can be more effective and efficient. the existence of local culture can create inclusive distribution of zakat fund, it is characterized by the involvement of many parties in program. so mustahik who received skat fund will more productive, because afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 88 they knew what should they do after get the zakat fund. aspect local culture that shown by rumah amal salman itb namely their coaching and mentoring activities as well as providing moral values that are expected to be ingrained mustahik thus creating an independent and akhlakul karimah. meanwhile in dpu daarut tauhid by mentoring and coaching to mustahik. this meant oneday if mustahik start their own business, they didn’t confused what should they do at first and they started they business full with confidence in the utilization capital which has given. beside that dpu daarut tauhid conduct review and evaluation to all mustahik to control mustahik in the utilization of capital which has been given. references antonio, m. s. (2011). bank syariah dari teori ke praktik. jakarta: gema insani. dpu daarut tauhid. (2015). laporan zakat nasional 2011-2015. ferretti, j., guske, a.l., jacob, k., & quitzow, r. (2012). trade and the environment. frameworks and methods for impact assessment. ffu-report 05_2012. retrieved from: www.polsoz.fuberlin.de/polwiss/forschung/systeme/ffu/publikationen/2012/ferretti_guske_ jacob_quitzow_ffu_report_2012_05_trade_and_the_environment/index.htm l hendri, n, et al. (2015). analisis model pendayagunaan dana zakat produktif dalam pemberdayaan masyarakat. jurnal akuisis, 11(2). maulana, r, et al. (2015). optimalisasi pendayagunaan dana zakat produktif dalam pemberdayaan mustahik. prosiding keuangan dan perbankan syariah, oktober 2015 oecd (organisation for economic cooperation and development) (2009). managing for development results. policy brief march 2009, paris. retrieved from: www.oecd.org/development/aideffectiveness/42447575.pdf the champion team salman itb. (2016). zakat criteria for performance exellence 2015-2016. versi 1.0. bandung world bank institute. (2007). module 2: results chain: the world bank group yudomartono, hilmiana, kurniawan saefullah, imas soemaryani, asep mulyana. building an inclusive microfinance model in poverty allevation: integration between local culture and microfinance institutions. http://rumahamal.org/ https://dpu-daaruttauhiid.org/web/ http://www.polsoz.fu-berlin.de/polwiss/forschung/systeme/ffu/publikationen/2012/ferretti_guske_jacob_quitzow_ffu_report_2012_05_trade_and_the_environment/index.html http://www.polsoz.fu-berlin.de/polwiss/forschung/systeme/ffu/publikationen/2012/ferretti_guske_jacob_quitzow_ffu_report_2012_05_trade_and_the_environment/index.html http://www.polsoz.fu-berlin.de/polwiss/forschung/systeme/ffu/publikationen/2012/ferretti_guske_jacob_quitzow_ffu_report_2012_05_trade_and_the_environment/index.html http://www.polsoz.fu-berlin.de/polwiss/forschung/systeme/ffu/publikationen/2012/ferretti_guske_jacob_quitzow_ffu_report_2012_05_trade_and_the_environment/index.html http://www.polsoz.fu-berlin.de/polwiss/forschung/systeme/ffu/publikationen/2012/ferretti_guske_jacob_quitzow_ffu_report_2012_05_trade_and_the_environment/index.html http://www.polsoz.fu-berlin.de/polwiss/forschung/systeme/ffu/publikationen/2012/ferretti_guske_jacob_quitzow_ffu_report_2012_05_trade_and_the_environment/index.html http://www.oecd.org/development/aideffectiveness/42447575.pdf http://rumahamal.org/ https://dpu-daaruttauhiid.org/web/ influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable 53 influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable (empirical study of mining companies listed on the list of islamic securities years 2016-2018) muhammad faizul mamduh1, ratno agriyanto2, dessy noor farida3 1,2,3faculty of economics and islamic business, walisongo state islamic university abstract companies in carrying out their business have obligations to stakeholders in any form. csr is one of the company's responsibilities for the activities carried out so far to the surrounding environment. in reality the csr program has not been able to speak much in helping to improve the welfare of the community through sustainable development. this can be seen from the percentage of poverty in indonesia that is still quite high. bps noted that the highest poverty rate was in eastern indonesia, namely the islands of maluku and papua with a percentage of 21.45%. this study aims to determine the effect of corporate social responsibility disclosure on sustainable economic development with financial performance as an intervening variable (an empirical study of mining companies listed on the 2016-2018 syariah securities list). the method used in this study is a quantitative method using the warp pls 4.0 application. the results of this study state that there is a significant influence and positive relationship between corporate social responsibility and sustainable economic development. there is a significant influence and positive relationship between corporate social responsibility and financial performance. and financial performance as an intervening variable significantly and positively influences between corporate social responsibility and sustainable economic development. keywords: corporate social responsibility, sustainable economic development, and financial performance. 1. introduction existence of the company in the midst of the rampant issue of csr that is widely discussed and received attention from many circles because there are many misconceptions about the conception of csr. that happened because the constitutional court (mk) at that time refused a number of business associations and companies to revoke article 74 of law no.40 of 2007 concerning limited liability companies (uupt), csr was the company's obligation. not only in indonesia, csr has also become a global issue that has received attention from market leaders and leaders of state institutions at the united nations. *corresponding author. email address: faizfama16@gmail.com mailto:faizfama16@gmail.com afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 54 the emergence of the global compact, global reporting initiatives (gri), and iso 26000 on csr shows that csr becomes a crucial issue and a global business agenda that must receive serious attention from business people and the business world (lako, 2011). in the implementation of the implementation of csr in indonesia is still far from optimal in the use of funds. quoted from kompas.com indonesian chamber of commerce and industry (kadin) assesses the need for the government's active role in the use of csr funds so that the money spent can be right on target. it was revealed that csr funds are considered as excess money for companies that are thrown away for regional governments, without knowing what they are used for. deputy chairperson of the indonesian chamber of commerce and industry, benny soetrisno, said that the government asked the company's csr not only in the form of barracks assistance and there needs to be synergy between kadin, the local government and ngos in the field of csr. company. quoted from kompas.com former deputy governor of dki jakarta sandiaga uno said, many programs in the form of corporate social responsibility or csr are actually used to portray the company, it is actually not csr but advertising (putra, 2017). companies that take advantage of these conditions are certainly not in line with the objectives set by csr that function for community development in the economic, social and environmental spheres. the world also responded in this regard with the existence of sustainable development goals (sdgs) which were ratified at the united nations general meeting on 25 september 2015 in new york. the sdgs contain 17 development goals and 169 goals that are expected to answer the underdeveloped development of countries around the world. this is in line with the concept of csr that was agreed upon in the world summit on sustainable development (ws-sd) in johannesburg, south africa in 2002 aimed at encouraging all companies in the world in order to create a sustainable development. the role of csr can be seen as an effort to create good corporate governance, good corporate citienship and good business ethics of a business entity (andi, 2009). research conducted by the united nations shows that approximately 1,000 ceos from more than 100 countries conclude that around 89% of ceos have realized that the company's commitment to the sdgs can have an impact on their industry. pwc researched in 2017, out of 470 companies in 17 countries, found that 62% of companies in the world had included sdgs in company reports. however, only 37% are serious in establishing the sdgs target as a priority for the company. and the rest, which is 63% of companies do not include a link between sdgs and company targets in the company report (farida, 2019). this proves that the company leaders are only aware without giving a real implication on the application of sdgs in the scope of exploitation. indonesia is an archipelago country with a very wide area and has abundant natural wealth, of course many investors are investing their capital in influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable 55 indonesia. many companies stand in indonesia from various sectors to utilize natural resources in indonesia, both domestic and foreign companies. quoted from republika.com, most companies in indonesia have high financial performance, so they can play a role in the realization of non-tax state revenues. even the media from the united states forbes released there are 200 companies in asia that get profits above 1 billion us dollars and 11 companies from indonesia are included in the list. pt adaro energy tbk is one of them, over the past 5 years based on accumulative rti, adaro recorded a profit growth of 24.37% and net income over the past 5 years grew 112.1%. forbes noted, adaro earned a profit of 2.9 billion us dollars with a total assets of 4.5 billion us dollars (wulandari & yolanda, 2019). the condition of companies in indonesia with very high profits is inversely proportional to the percentage of fisheries in indonesia that is still quite high. bps recorded that as of march 2017 the percentage of poverty has averaged above 10% based on the islands. the percentage of poverty in java is 10.01%, sumatra 10.97%, bali and nusa tenggara 14.71%, sulawesi 11.05%, maluku and papua 21.45% and kalimantan 6.25% (rachman, 2017). these figures indicate that poverty levels in indonesia are still quite high. in addition to government policies as an effort to reduce poverty, the role of companies that have operational activities in the territory of indonesia also plays an important role in this regard. csr programs as a form of corporate concern for the environment and surrounding communities over operational activities are certainly one of the ways in supporting poverty alleviation, sustainable development and realizing sdgs. the synergy of companies and policy makers in this case the government is needed in realizing all the objectives that have been listed. companies get legality in carrying out operational activities of their companies and the government indirectly helped by the existence of the csr program. the triple bottom line concept (profit, planet, people) initiated by john elkington provides an explanation that csr is not only a program that benefits companies but also benefits the environment and society. (husnan, 2013) this research is based on previous research conducted by (wahyuningrum, noor, & wachid, 2014) who said that there was a significant influence between csr and community empowerment and research conducted by (retnaningsih, 2015) which revealed that the concept of csr was good, but unfortunately until now many companies have not implemented it well. the difference between this study and previous research is by using financial performance as an intervening variable that has not been done much by previous researchers. 2. literature study and hypothesis development legitimacy theory the legitimacy theory provides an explanation that the influence of society at large can determine the allocation of financial resources and other economic resources, companies tend to use environmental-based performance and afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 56 disclosure of environmental information to justify or legitimize company activities in the eyes of the public. furthermore dowling and pfeffer said: "legitimacy is important for the organization, the limits are emphasized by social norms and values, the reaction to these limits encourages the importance of organizational behavior analysis with regard to the environment". meanwhile ghozali and chariri explained that what underlies the theory of legitimacy is the social contract that takes place between the company and the community in which the company operates and uses economic resources. explanation of the concept of social contract was revealed by shocker and sethi: "all social institutions are no exception companies that operate in the community through explicit or implicit social contracts in which their survival and growth are based on the final output (output) that can be given socially to the community that the extent and distribution of economic, social or political benefits to groups according to their strength " (husnan, 2013). corporate social responsibility csr according to iso 26000 is the responsibility of an organization for the impacts of decisions and activities on society and the environment which is manifested in the form of transparent and ethical behavior that is in line with sustainable development and public welfare taking into account stakeholder expectations, in line with established laws and norms. international norms of behavior, and integrated with the organization as a whole (wardhani, 2013). the entire implementation of social responsibility that has been carried out by the company will be socialized to the public one of them through social disclosure in the annual report (annual report) issued by the company. the annual report provides an overview of the company's comprehensive performance in terms of financial information and non-financial information that needs to be known by shareholders, potential investors, the government or even the public. therefore, disclosure of information made by the company in the annual report becomes one of the considerations for investors to invest in the company concerned. the purpose of financial statements is to report the activities of companies that affect the community, which can be determined and explained or measured, and important for the company in its social environment. (arifin & wardani, 2016). according to wardhani, csr is a balanced approach for organizations to address economic, social and environmental issues in ways that benefit individuals and society. over the past decade, many countries have given importance to this concept to deal with issues concerning unemployment, poverty, pollution and other social and environmental problems. furthermore, the recent financial crisis has drawn widespread attention to the socioeconomic dimension in finance and banking. then, it is now agreed that the lack of ethics and low influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable 57 business morality hasconsequences damageable that not only occur in finance, but also socially and environmentally (wardhani, 2013). sustainable development sustainable development was popularized through the world commission on environment and development report in 1987. the sustainability perspective is defined as the capacity for renewal and evolution in ecosystems, as well as innovation and creativity in social systems. this concept arises from a mutual agreement between commission members, that many development activities result in poverty and deterioration as well as environmental damage, so that new paths for development that bring progress to humans should not only be made for a short time but for a longer period of time (adharani, 2017). in indonesia, the term sustainable development is officially included in law no.4 of 1982 concerning environmental principals article 1 paragraph 3 of the pplh law: sustainable development is a conscious and planned effort that integrates environmental, social, and economic aspects into a development strategy for guarantee the integrity of the environment as well as the safety, ability, welfare, and quality of life of present and future generations (helmi, 2011). two key concepts that are rarely cited are that sustainable development is related to the first, human needs in developing countries to meet their needs and secondly, the limitations of technology and social organization relating to environmental capacity to meet the needs of present and future generations. this results in different emphases in sustainable development in developed and developing countries. developing countries give priority to sustainable development in meeting the basic human needs at the moment, as well as ensuring the sustainability of economic development. this emphasis places integrated economic and environmental considerations as a sustainable development strategy (adharani, 2017). financial performance according to the decree of the minister of finance no. 740 / kmk.00 / 1989 dated june 28, 1989, what is meant by performance is the achievement achieved by the company in a certain period that reflects the level of health of the company. performance bank as a whole is a picture of the achievements of the bank in its operations, both related to financial aspects, marketing, collection and distribution of funds, technology and human resources (sulhan & halimah, 2013). financial performance is a determination of certain measures that can measure the success of a company in generating profits. in measuring financial performance, it is necessary to link the company with the responsibility center. financial performance appraisal is one of the ways undertaken by management in order to fulfill its obligations to the owners of the company. in evaluating financial performance, of course, it requires certain standards, both external and internal. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 58 external standards refer to competitive benchmarking which is a comparison of companies with major competitors or industry. company evaluations that refer to external standards through competitive benchmarks provide ideas for developing an analysis of individual company financial ratios by considering industry ratios (husnan, 2013). in other literatures the performance appraisal of each company is different because it depends on the scope of the business it runs. if the company is engaged in the mining business sector, it is different from companies engaged in agriculture and fisheries. so it is also the case with companies with financial sectors such as banking which clearly have different business scope with other business scopes, because as we know, banking is a mediation that connects those who have excess funds (financial surplus) with those who have lack of funds (financial deficits ), and the bank's duty is to bridge the two (fahmi, 2017). hypothesis development effect of disclosure corporate social responsibility on sustainable economic development csr is a company's social responsibility to stakeholders consisting of 3p (profit, people, planet). in essence, csr is how a company has responsibility for the welfare of the people (people) and environmental sustainability (the planet) around them while still not forgetting to take into account the profits long-term to be gained. csr itself is regulated in law no. 40 of 2007 concerning limited liability companies, the obligation to grant csr is only limited to companies or companies whose business activities are related to natural resources (sda). according to kim, the company's csr practices can be identified in a variety of objectives, namely law, economics, morals, and philanthropy. however, these goals can still be developed in accordance with the actual conditions in society related to the pressures that occur in community life. one of the csr goals that is very urgent, especially in developing countries, is to improve the quality of public education. therefore the application of csr in indonesia basically can be directed at strengthening the people's economy based on small and medium-sized businesses and improving the quality of community human resources through the improvement of educational facilities and infrastructure (andi, 2009). brundtland explains sustainable development as follows: "sustainable development is the development that meets the needs of the present without compromising the ability of future generations to meet their own needs." this means that sustainable development is development that is in line with the needs of future generations. john mcmurty, a philosopher explained that sustainable development is related to the development of civil commons, general needs, where everyone in the community can access the necessities of life, so that everyone can develop and express themselves as human beings. these general influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable 59 needs include public education, health, environmental legality, health and safety regulations, and general broadcasts (suparno, 2012). the description above can be explained that the company has obligations to the environment and the community for its activities that utilize natural resources and are carried out in the form of csr. csr programs run by companies must have an impact on the survival of the community and the surrounding environment. expectations from the implementation of csr will be prioritized to strengthen the economy and improve the quality of human resources which will later become the foundation in implementing sustainable development. according to the research of (wahyuningrum, noor, & wachid, 2014) csr has a significant and simultaneous significant effect between social, economic and environmental variables on increasing community empowerment. in another study conducted by (setyaningrum, 2011), it was shown that showed that all variables used, namely the corporate social responsibility goal, corporate social issues, and the corporate social program had a significant positive effect on improving the welfare of the community. based on the description, the researcher took the following hypothesis: h1 : csr disclosure has a significant effect on sustainable economic development effects of disclosure corporate social responsibility on financial performance measures commonly used to assess company performance are expressed in financial ratios. the ability of a company to generate profits in its operations (profitability) is the main focus in evaluating company performance because corporate profits are not only an indicator of a company's ability to meet obligations for funders as well as an element in value creation company that shows the company's prospects in the future. the level of profitability can be used as a basis for investment decision making to measure a company's ability to produce a rate of return on investments made. deegan highlighted that csr has become an driver important in influencing the opinions of stakeholders regarding the fulfillment of company obligations. maignan points out that stakeholders refer to those who directly or indirectly influence or are influenced by company activities. in communicating activities csr, many companies use their annual reports as disclosure media. (arifin & wardani, 2016) according to ahmad husnan's research (2013), the results of testing show that csr has a significant effect on return on assets (roa), but does not have a significant effect on return on equity (roe). this explains that if the company implements a csr program, it will attract investors to invest in the company and add value to the company's assets. based on the description above, the researcher takes the following hypothesis: afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 60 h2 :disclosure corporate social responsibility has a significant effect on financial performance effects of disclosure corporate social responsibility on sustainable economic development through financial performance corporate social responsibility (csr) is currently a concept that is often heard, although the definition itself is still a debate among practitioners and academics. csr is considered by the company to increase the burden and reduce the profit company's. csr programs made by the company become a long-term investment that is expected to increase profits company. according to the theory of legitimacy that there is an interaction between the company and the community. dowling and prefer provide logical reasons for the legitimacy of the organization as follows: "the organization seeks to create harmony between social values inherent in its activities with the norms of behavior that exist in the social system of society where the organization is part of the system. as long as the two value systems are aligned, we can see this as the company's legitimacy. when actual and potential inconsistencies occur between the two systems, there is a threat to the legitimacy of the company (husnan, 2013). csr disclosure in a company is a disclosure of environmental, social, and economic performance in annual financial reports or selected reports reflecting accountability, responsibility, and transparency corporate to investors and stakeholders other. the disclosure has a good and effective communication relationship between the company, the public, and stakeholders other about how the company has integrated corporate responsibility social environmental in every aspect of its operations. in a study conducted by rulyanti susi wardhani (2013) resulted that the effect of csr disclosure on company value through financial performance and going concern value had a positive and significant effect (wardhani, 2013). from the description, the researchers formulated the hypothesis: h3: financial performance as an intervening variable has a positive and significant effect between disclosure corporate social responsibility and sustainable economic development 3. research methodology this research is an empirical study using warp pls 4.0 software with outer models, inner models and hypothesis testing (abdillah & hartono, 2015). which test examines the relationship between disclosure corporate social responsibility on sustainable economic development and financial performance as an intervening variable. population, samples and sampling techniques influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable 61 the population of this study is mining companies registered in the list of sharia securities (des). while the sample is a mining company listing in des 3 years in a row from 2016-2018. the sampling method by purposive sampling with the criteria determined as follows: a. companies that are consistently registered in des in 2016-2018 b. companies that publish annual reports in 2016-2018 c. companies that get an unqualified opinion from independent auditors during 2016-2018 d. companies whose exploitation areas are in kalimantan island operational definition and measurement of variables corporate social responsibility (csr) information about corporate social responsibility based on gri (global reporting initiative) standards. gri consists of 3 disclosure focuses (mubarok, 2013) namely: a. economy the economic dimension concerns the sustainability of an organization that impacts the economic conditions of stakeholders and the economic system at the local, national and global levels. economic indicators describe: • capital flows among the various stakeholders, and • the main economic impact of the whole community organization. financial performance is fundamental to understanding the organization and its sustainability. however, this information is usually already reported in the financial statements. b. environment the environmental dimension concerns the sustainability of an organization's impact on life in natural systems, including ecosystems, soil, air, and water. environmental performance indicators are related to inputs (materials, energy, water) and outputs (emissions / gas, river waste, dry waste / garbage). in addition, their performance includes performance related to biodiversity, environmental compliance, and other relevant information such as environmental waste and the impact of products and services. c. social the social dimension concerning the sustainability of an organization has had an impact on the social system that operates. gri's social performance indicators identify key aspects of performance that include labor / labor practices, human rights, community / social, and product responsibilities. the csri calculation uses a dichotomous approach in which each csri item is given a value of 1 if disclosed, and a value of 0 if not disclosed. each item will add up to get the overall company score (rakhiemah & agustia, 2009). afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 62 csr is calculated using the formula: description: csrij : corporate corporate responsibility disclosure index j nj : number of items for company j, nj ≤ 78 xij : dummy variable: 1 = if item j was disclosed; 0 = if the item was not disclosed (mertasari & suaryana, 2013) index csr disclosure by standard gri (global reporting initiative), as follows: a) indicators of economic performance (economic performance indicator) b) performance indicators environment (environment performance indicator) c) performance indicators of labor (labor practices performance indicators) d) human rights performance indicators (human rights performance indicator) e) social performance indicators (social performance indicators) f) product performance indicators (product responsibility performance indicators) sustainable economic development sustainable development is sustainable development popularized through the world commission's report on environment and development in 1987. the perspective of sustainability is defined as the capacity for renewal and evolution in ecosystems, as well as innovation and creativity in social systems. for this research, sustainable development is measured from community empowerment using the level of education and health level of the local community. taking these indicators is based on previous research that only uses 2 indicators. according to law no. 36 of 2009 on health it is explained that health efforts are every activity and / or series of activities carried out in an integrated, integrated and continuous manner to maintain and improve the degree of public health in the form of disease prevention, health promotion, treatment of diseases and health recovery and / or the community. therefore the indicators taken from the health level are the percentage of children aged 12-23 months who received basic immunization complete with the lowest 40% welfare rate and the percentage of households that have access to proper and sustainable sanitation services (lower 40%). the understanding of education according to presidential instruction no. 15 of 1974 is all efforts to foster the personality and develop the ability of indonesian people, physically and spiritually which lasts a lifetime, both influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable 63 inside and outside the school in the context of building the unity of indonesia and a just, prosperous society based on pancasila. measurement of education level from this study is taken from the indicators of the pure participation rate (apm) of sma / ma / equals (40% and below) and literacy rate (amh) for population aged 15 years and over. financial performance measurement of financial performance can be done by assessing financial ratio analysis. financial ratio analysis is the basis for assessing and analyzing company operating achievements or company performance. financial ratios are designed to evaluate financial statements, which contain data about the company's position at a point and the company's past operations. analysis of financial statements is the beginning of the future when viewed from the perspective of investors, while for management, it is useful to help anticipate future conditions and become a starting point for planning actions that will affect the course of future events. the variables in this study are the company's financial performance represented by roa, and roe. mathematically roa can be formulated as follows: 𝑅𝑂𝐴 = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡 while the roe calculation is: (husnan, 2013) 𝑅𝑂𝐸 = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝐸𝑞𝑢𝑖𝑡𝑦 4. results and discussion research results this research was conducted at mining companies listing on des (syariah securities register) which consistently report financial statements in 2016-2018. based on the purposive sampling method, the total sample used in this study is 10 sample companies. discussion influence of corporate social responsibility toward sustainable ecnomic development at this time, companies are no longer faced with responsibilities that are grounded in the aspect of economic benefits only, namely the value of the company that is reflected in financial conditions, but also must pay attention to social and environmental aspects, or what is commonly called the three bottom line. the synergy of these three elements is the key to the concept of sustainable development (wahyuningrum, noor, & wachid, 2014). the csr program conducted by the company is expected to have a good impact on society from the economic, social and environmental aspects in realizing a sustainable life. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 64 the first hypothesis proposed states that csr disclosure has a significant effect on sustainable economic development. based on the results of the study the significance value of the csr variable of <0.001 is smaller than 0.005, the variable corporate social responsibility affects the sustainable economic development. based on the fit model picture above, the analysis of the influence of corporate social responsibility has a positive relationship to the variable sustainable economic development shown by which has a positive value of 0.33. based on these results h1 is accepted namely the disclosure of corporate social responsibility has a significant influence and positive relation variable sustainable economic development. this study supports previous research conducted by (wahyuningrum, noor, & wachid, 2014) which states that csr has a significant and simultaneous significant effect between social, economic and environmental variables on increasing community empowerment. and supporting research conducted by (setyaningrum, 2011) results in showing that all variables used, namely corporate social responsibility goal, corporate social issues, and corporate social programs significantly have a positive influence on improving people's welfare. the effect of corporate social responsibility on financial performance. the company's main goal is to increase the value of the company, because the value of the company can be said to be good if the financial performance of the company is also good. the company's performance will be ensured sustainable growth if the company pay attention to the economic, social and environmental as sustainability is a balance between the interests of economy, environment and society. with good csr practices, it is expected that the company's performance will be assessed well by investors. (mubarok, 2013) the second hypothesis proposed states that disclosure of corporate social responsibility has a significant effect on financial performance. based on the research results obtained by the value of the p value of csr variables of <0.001, the variable corporate social responsibility influences financial performance. based on the image of the column path coefficients, an analysis of the effect of the corporate social responsibility variable on financial performance variables shows that corporate social responsibility has a positive relationship with the financial performance variable shown by which has a positive value of 0.27. based on these results h2 is accepted namely disclosure corporate social responsibility has a significant effect and has a positive relationship on financial performance. this study supports the research of husnan (2013) giving test results that csr has a significant effect on return on assets (roa), but does not support other indicators, namely return on equity (roe) which in this study roe significantly influences and has a relationship positive but it is inversely influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable 65 proportional to research husnan (2013) states that csr has no significant effect on return on equity (roe). the influence of financial performance as an intervening variable between disclosure corporate social responsibility and sustainable economic development the third hypothesis proposed states that financial performance as an intervening variable has a positive and significant effect between disclosure of corporate social responsibility and sustainable economic development. based on the results of study the p value of the financial performance variable of <0.001 smaller than 0.05, then the financial performance variable as an intervening variable influences the variable corporate social responsibility with sustainable economic development. based on the column picture path coefficients, analysis of financial performance as an intervening variable between variables corporate social responsibility and sustainable economic development has a positive relationship shown by which is positive at 0.37, then the financial performance variable as an intervening variable has a positive relationship between variables corporate social responsibility with sustainable economic development. from these results it can be concluded that h3 is accepted, namely financial performance as an influential intervening variable and has a positive relationship between the variable corporate social responsibility and sustainable economic development. the relationship of financial performance as a mediating variable (intervening) between the variable corporate social responsibility and sustainable economic development has a significant influence and positive relationship because financial performance indirectly impacts on sustainable economic development. in theory the legitimacy of the relationship between the company's interaction with the community. the company's efforts to follow changes to gain legitimacy is a process that is carried out continuously. the process of gaining legitimacy relates to social contracts between those made by the company and various parties in the community. csr funds that are used by companies indirectly depend on the company's financial performance which in the future the program will impact on community empowerment through csr programs that are run. this study supports previous research by wardhani (2013) which results in the effect of csr disclosure on company value through financial performance and going concern value that has a positive and significant effect. however, this study distinguishes on one of the variables, namely the company's value which is replaced by researchers into sustainable economic development. 5. conclusions and suggestions conclusions based on the results of research and discussion of the effect of disclosure corporate social responsibility on sustainable economic development with afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 66 financial performance as an intervening variable (empirical study of mining companies listed on the sharia securities list in 2016-2018) the following conclusions can be drawn: 1. there is a significant influence and positive relationship between the variables corporate social responsibility on sustainable economic development. based on the results of the study the significance value of csr variables of <0.001 is smaller than 0.005, the variable corporate social responsibility influences the sustainable economic development. based on the fit model picture above, the analysis of the influence of corporate social responsibility has a positive relationship with the variable sustainable economic development as indicated by which has a positive value of 0.33. so it is said that corporate social responsibility has a significant effect and has a positive relationship on sustainable economic development. 2 there is a significant influence and positive relationship between variables corporate social responsibility on financial performance. based on the research results obtained by the value of the p value of csr variables of <0.001, the variable corporate social responsibility influences financial performance. based on the image of the column path coefficients, an analysis of the effect of the corporate social responsibility variable on financial performance variables shows that corporate social responsibility has a positive relationship with the financial performance variable shown by which has a positive value of 0.27. so it is said that corporate social responsibility influences and has a positive relationship on financial performance. 3 there is a significant influence and positive relationship between financial performance as an intervening variable between the variable corporate social responsibility and sustainable economic development. based on the results of study the p value of the financial performance variable of <0.001 smaller than 0.05, then the financial performance variable as an intervening variable influences the variable corporate social responsibility with sustainable economic development. based on the column picture path coefficients, analysis of financial performance as an intervening variable between variables corporate social responsibility and sustainable economic development has a positive relationship shown by which is positive at 0.37, then the financial performance variable as an intervening variable has a positive relationship between variables corporate social responsibility with sustainable economic development. suggestions the suggestions made from the research that has been done are as follows: 1. academics a. find out more about the use of csr for companies and the public by increasing literature from books, journals and other references. influence of disclosure corporate social responsibility toward sustainable economic development with financial performance as an intervening variable 67 b. be more knowledgeable about the broader csr disclosure indicators because there are many versions related to csr disclosure indicators 2. practitioner a. this research can be used as a comparison for other mining companies in implementing strategies to enhance their activities in the form of csr and carry out sustainable activities. b. companies must further enhance csr activities by sharing strategies, because in csr disclosures mining companies only have 2 high categorized companies, namely pt indo tambang raya megah tbk and pt tambang batubara bukit asam (persero) tbk 3. next researcher a. for further researchers the company can determine broader criteria both from the type of company and its territory b. in determining the variables for further research can be more diverse and more numerous 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(2019, september 10). republika.co.id. retrieved from masuk 11 perusahaan terbaik, adaro terus pacu kinerja: https://republika.co.id/berita/pxlezo370/masuk-11-perusahaan-terbaikadaro-terus-pacu-kinerja comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 63 comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks ima maspupah51* and shofia mauizotun hasanah2 1 universitas siliwangi, tasikmalaya, indonesia 2 institut agama islam hamzanwadi nw, pancor, indonesia abstract as part of the corporate organization, islamic banks are encouraged to create good performance. but in the benchmark, there are still islamic banks that assess the performance of banks using conventional measuring instruments. so in this study using maqashid index approach to measure the performance of islamic banks. in addition to creating good performance, the obligations of business organizations are also to take part in activities aimed at protecting and improving the welfare of society as a whole and creating good corporate governance. banks in indonesia have poor corporate governance rankings compared to neighboring countries such as malaysia. so the purpose of this comparison study, it is hoped that there will be some advantages between them that can be identified. the method used in this research is quantitative method by using mann-whitney test. the data used are annual reports from three indonesian islamic banks and three malaysian islamic banks. the results obtained no significant differences in good corporate governance between indonesian and malaysian islamic banks. while the achievement of maqashid shariah both have differences. this is because, firstly, the difference between banking history and the second, the difference of implementation of shariah compliance in both countries. keywords: good corporate governance, islamic banking, maqashid shariah 1. introduction islamic banks are financial institutions that perform the function of financial intermediation primarily aimed at the wider community for financial transactions selected in accordance with islamic principles. in its implementation, this islamic shari'a-based banking system has expanded widely in various countries including in western countries. syariah banks are growing very rapidly around the world. according to eagle, the number of sharia banks in the world in 2010 is 300 banks with total assets worth us $ 700 billion in 70 countries in the world such as indonesia, malaysia, saudi arabia and united kingdom.16 particularly in indonesia, otoritas jasa keuangan (ojk) recorded as of june 2016, the sharia banking sector has total assets of rp306.23 trillion consisting of 12 sharia (islamic) branches, 22 sharia business units (sharia divisions) and 165 shariah financing banks (bprs).27 islamic banks, seen from the asset side has grown quite rapidly with an estimated growth of 17.6% increase over the last 4 years with the ability to * corresponding author. email address: maspupahima@gmail.com 1 eagle, l, exporting islamic banking from the middle east, (. london: banker’s academy briefings, 2010). p.55. 2 www.ekbis.sindonews.com accessed november 13, 2016. http://ekbis.sindonews.com/ afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 64 generate profits of 12.6%. the performance is predicted to increase along with the interest of the community towards sharia bank.38 this increase should also be accompanied by improvements in the welfare of internal and external parties that can be seen in corporate governance or good corporate governance. without effective corporate governance implementation, sharia banks will be difficult to strengthen their position, expand their networks, and demonstrate their performance more effectively. the need for sharia banks for corporate governance is becoming more serious as the complexity of the problems faced, which will undermine the bank's ability to face long-term challenges. thus, it is imperative for sharia banks to use a measure that can help improve their role through good corporate islamic business.49 in 2014, the asian corporate governance association (acga) reported the results of the study on the implementation of gcg in asia, showing that indonesia is at the bottom or worst in asia with a score of 39% far below malaysia which has a score of 58%. from 2010, indonesia still remains at the bottom of asia, as shown in the table below.510 table 1 market ranking and scores, 2014 corporate governance watch market scores: 2010 to 2014 2010 2012 2014 change 2012 vs 2014 trend of cg reform hongkong 65 66 65 (-1) weak leadership, tough enforcement singapore 67 69 64 (-5) international vs local contract continus japan 57 55 60 (+5) landmark changes, can they be sustined? thailand 55 58 58 improving, but new legislation needed malaysia 52 55 58 (+3) improving, but still too top-down taiwan 55 53 56 (+3) bold policy moves, can they be sustained? india 48 51 54 (+3) bouncing back, delhi more supportive korea 45 49 49 indifferent leader, more active regualtion china 49 45 45 focus on soe reform, enforcement philippines 37 41 40 (-1) show reform, improved company reporting indonesia 40 37 39 (+2) big ambitions, can they be achieved? source: asia corporate governance association (acga), 2014. based on the data in the above table it shows that weak legislation in the country of indonesia governing business activities and coupled with law enforcement is very weak compared with other asian countries. based on this, the disclosure of good corporate governance needs to be discussed in this 3world islamic banking competitiveness report 2013-2014, p.08. 4 umer chapra dan habib ahmed, (2008). corporate governance lembaga keuangan syariah, jakarta: bumi aksara, p.13. 5 www.acga-asia.org accessed october 21, 2016 at 18:47. http://www.acga-asia.org/ comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 65 study by selecting the most acclaimed syariah bank object in corporate governance reporting. in the management of sharia banks should meet the objectives of sharia (maqasid shariah). furthermore, mannan states that sharia banks must contribute to the improvement of the welfare of the community (ummah) and are not allowed to operate if only to obtain maximum profit.611 achieving the goal of the islamic banks itself is maqashid shariah. to be able to achieve the maqashid shariah, a shariah business institution must be able to take care of alaql (mind), addien (religion), nafs (soul), nasl (descent), and maal (treasure). in the context of sharia business practices, the achievement of maqashid shariah can be measured through the achievement of the goals of individual education, the creation of fairness and the achievement of the public interest. malaysia and indonesia are two muslim countries in southeast asia, which, when examined, have many similarities. both countries are dominated by the malay population, many follow the shafi'i madhhab as well as the existence of strong adat influence in the legal system.712 malaysia is the first country to introduce sharia banking system in southeast asia. in harmony with its rapid development and planning the various plans and efforts that have been implemented. it is evident that malaysia is still listed as the country with the largest sharia financial assets in southeast asia and in the world. the value in december 2014 even reached us $ 423.2 billion.813 with the second rank in the world in 2015. more details can be seen in the table below: table 2 ifci rangking 2014 & 2015 countries score 2015 rank 2015 rank 2014 changes iran 856 1 1 0 malaysia 803 2 2 0 saudi arabia 736 3 3 0 united arab emirates 380 4 6 +2 kuwait 367 5 5 0 bahrain 263 6 4 -2 indonesia 247 7 7 0 qatar 209 8 10 +2 source: global islamic finance report, 2015. table 3 top 10 fastest growing islamic windows rank institution country sharia compliant assets $m % change 1 habib bank limited pakistan 1.159,67 127,31 2 export-import bank of malaysia malaysia 781,14 52,88 3 bank muscal oman 1.122,63 43,01 4 national commercial bank saudi arabia 46.365,61 38,92 5 saudi hollandi bank saudi arabia 8.560,00 31,99 6 muhammad abdul mannan, (1980). the objective of islamic banks, dhaka, bangladesh: ins thought of islamic banks, p.89. 7 agus triyanta, “implementasi kepatuhan syariah dalam perbankan islam (syariah) (studi perbandingan antara malaysia dan indonesia)”, jurnal hukum no. edisi khusus vol. 16 oktober 2009: p.209 – 228. 8 http://finance.detik.com/read/2015/06/13/160254/2941564/5/aset-keuangan-syariahmalaysia-terbesar-di-dunia-10-kali-lipat-dari-ri. accessed on april 28, 2016 at 08.37. http://finance.detik.com/read/2015/06/13/160254/2941564/5/aset-keuangan-syariah-malaysia-terbesar-di-dunia-10-kali-lipat-dari-ri http://finance.detik.com/read/2015/06/13/160254/2941564/5/aset-keuangan-syariah-malaysia-terbesar-di-dunia-10-kali-lipat-dari-ri afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 66 6 saudi invesment bank saudi arabia 8.158,13 31,55 7 bank pembangunan malaysia malaysia 2.105,15 26,80 8 samba financial group saudi arabia 18.393,87 25,77 9 arab national bank saudi arabia 17.626,67 25,19 10 rhb capital malaysia 10.347,61 23,96 source: maris strategies & the banker, 2015. in this case, indonesia is very far behind with asset value of only us $ 35.62 billion. the asset value in the neighboring country is 10 times that of the sharia finance industry in indonesia. yet the muslim community in indonesia is bigger. when viewed from the labor and office network of islamic banking from 2010-2015 is increasing. in the sense that people's access to transactions in sharia banking is easier. this can be seen in the picture below:914 figure 1 labor and network of sharia banking offices source: statistics of islamic banking, ojk. but in fact that, along with the proliferation of sharia banking institutions in indonesia over the last three years, the sharia banking sector has demonstrated a declining growth in assets, financing and third party funds. several years earlier growth of these three indicators is quite good even reached 50 percent in 2011. but entering the year 2012, there is a decrease in the growth of the plot decreases. this is evident in picture 1 below: figure 2 the growth of sharia banking 2010-2015 source: sharia economic outlook 2016 mes. 9 sharia economic outlook, 2016 mes, p.05. comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 67 therefore, this becomes academic anxiety at the practical level, could it be caused by the lack of gcg implementation and the achievement of sharia maqashid in sharia banks in that year ?. so the researchers are interested in doing comparative analysis with malaysian state which has the second rank in the world in shariah compliance. 2. literature study/hypotheses development a. good corporate governance bank indonesia regulation number 11/33 / pbi / 2009 concerning implementation of good corporate governance for sharia commercial banks and sharia business units mentioned that good corporate governance (gcg), is a bank governance that applies the principles of transparency, accountability, responsibility, professionalism, and fairness.1015 is a bank governance that applies the principles of transparency, accountability, by the forum to corporate governance in indonesia (fcgi) interpreted: "a set of rules governing relationships between shareholders, managers of companies, creditors, governments, employees and other internal and external stakeholders relating to their obligations and rights or in other words a system that controls the enterprise, where the objective of corporate governance is to create added value for all stakeholders.1116 implementation of gcg has been started by conventional banking, and started also implemented in sharia banking. of course, the implementation of the two is different in both types of banking. one of them is from the philosophy of gcg implementation in sharia banking. this begins from the philosophy of the existence of islamic banking, as the embodiment of muslim ideals to achieve falah (prosperity) in the world and in the hereafter. a business that is guided by spirituality and ethics will create a healthy and sustainable business climate with the realization of market discipline that is born from a good business governance culture. in order to realize the culture of governance in the business world, rasulullah saw is very concerned about the discipline in the implementation of business activities, both through direction and market inspection in the hope of the realization of business activities based on akhlaqul karimah so as to continue to provide benefit and expediency and avoid the harm.1217 b. maqasid shariah mohammed et al have developed a performance evaluation for sharia banking based on the maqashid index which refers to the concept of abu zahrah's shariah maqashid. maqashid index is divided into 3 variables namely individual education (tahdzib al-nafs), establishing justice (iqamah al-adl), and maslahah (welfare). then, of the 3 variables are transformed into ten performance ratios.1318 10 peraturan bank indonesia nomor 11/ 33 /pbi/2009 about pelaksanaan good corporate governance bagi bank umum syariah and unit usaha syariah section 1 paragraph 10. 11 anis wulandari, menyingkap nilai keadilan (dalam perspektif syariah islam) yang terkandung didalam gcg, jurnal investasi,vol.6 no.2 desember 2010, p.95-110. 12 ika yunia fauzia, abdul kadir, (2014), prinsip dasar ekonomi islam: perspektif maqashid al syariah, jakarta: prenada media, p. 283. 13 muhammad al ghifari dkk, analisis kinerja perbankan syariah di indonesia dan malaysia dengan pendekatan maqashid indeks, jurnal ekonomi dan perbankan syariah vol. 3. no.2, october 2015: p.47-66. afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 68 in this case, islamic bank is a islamic business institution that has a goal to contribute to achieve maqashid shariah. in developing the performance measurement of achievement maqashid shariah adopted abu zaharah's theory of al-maqashid. according to abu zahrah, he said that the achievement of maqashid shariah can be seen in at least three dimensions: tahdhib al-fard (individual education), iqamah al-'adl (creation of justice) and jalb almasahah (achievement of public interest).1419 3. research methodology the method used in this research is quantitative method by using comparative analysis. the analysis technique used is mann-whitney test. measurement of good corporate governance discussed in this research using indicator of good governance of sharia business (ggbs) while maqashid syariah using measurement maqashid index. 4. results 1) implementation of good corporate governance table 4 good corporate governance test results gcg mann-whitney u 31,500 wilcoxon w 76,500 z -0,829 asymp. sig. (2-tailed) 0,407 exact. sig. (2*(1-tailed sig.)) 0,436 source: processed results of spss data results obtained from the above statistical data processing using mann whitney test, obtained sig value of 0, 407 (0.407> 0.05). this shows that there is no difference between gcg implementation of indonesian islamic bank and malaysian islamic bank. table 5 application of gcg of indonesian islamic banks and malaysia 2012-2014 year indonesia islamic bank number of disclosures percent 2012 bsm (bank syariah mandiri) 34 90,48% bmi (bank muamalat indonesia) 34 90,48% bnis (bank negara indonesia syariah) 33 88,10% 2013 bsm (bank syariah mandiri) 34 90,48% bmi (bank muamalat indonesia) 34 90,48% bnis (bank negara indonesia syariah) 33 88,10% 2014 bsm (bank syariah mandiri) 34 90,48% bmi (bank muamalat indonesia) 34 90,48% bnis (bank negara indonesia syariah) 33 88,10% average 33,7 88,60% source: data processing annual report. 14 jumansyah dan ade wirman syafei, analisis penerapan good governance business syariah dan pencapaian maqashid shariah bank syariah di indonesia,jurnal al-azhar indonesia seri pranata sosial, vol . 2, no. 1, maret 2013,p.04. comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 69 year malaysian islamic bank number of disclosures percent 2012 bimb (bank islamic malaysia berhad) 33 88,10% rhb (rhb islamic bank berhad) 35 92,86% amb (ambank islamic berhad) 32 85,72% 2013 bimb (bank islamic malaysia berhad) 33 88,10% rhb (rhb islamic bank berhad) 35 92,86% amb (ambank islamic berhad) 32 85,72% 2014 bimb (bank islamic malaysia berhad) 33 88,10% rhb (rhb islamic bank berhad) 35 92,86% amb (ambank islamic berhad) 32 85,72% average 33,3 88,25% source: data processing annual report. table 6 average comparison of gcg disclosure annual report. islamic banks average disclosure indonesian islamic bank 33,7 malaysian islamic bank 33,3 total 67 average 33,5 source: processed results of spss data 1. structure and work mechanism of the board of commissioners a. name and status of the board of commissioners the six islamic banks that were subjected to research for the period 2012-2014, have disclosed the names and status of their respective board of commissioners. the researcher is of the opinion that the disclosure of the name and status of the board of commissioners in each annual report of sharia bank is one form of the implementation of good corporate governance that is transparency. disclosure of the name and status of the board of commissioners aims to enable stakeholders to know who is the board of commissioners, whether from internal company or from external parties who have qualified to become a board of commissioners and have fulfilled the fit and proper test. b. decomposition of the functions and work mechanism of the board of commissioners all sharia banks that are subjected to research have disclosed the functions and working mechanism of the board of commissioners. for example, the board of commissioners is generally responsible for collecting and providing advice to the board of directors and ensuring the company's gcg implementation at all levels and levels of the organization. c. number of meetings and attendance meetings of members of the board of commissioners almost all sharia banks that are subjected to research disclose the number of meetings conducted by the board of commissioners afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 70 and the number of attendance of the members of the board of commissioners in the meeting. for example, bank syariah mandiri discloses the number of meetings conducted by the board of commissioners for a period of 8 times, namely internal meetings of the board of commissioners while ambank islamic berhad holds 12 meetings in 2014 disclosed in the annual financial statements of pages 46-47. but there is one sharia bank that only disclose the number of meetings without disclosing the attendance of the board of commissioners of bank islam malaysia berhad. d. mechanism and self assessment criteria about performance of board of commissioners members this disclosure becomes important, as a form of accountability of members of the board of commissioners to stakeholders for the trust that has been given by stakeholders to them. e. explanation regarding supporting committees all objects in this study have revealed the names and composition of the committees supporting the board of commissioners and so are the functions of each of the committees established in assisting the execution of the duties of the board of commissioners. the committees that assist the execution of the duties of the board of commissioners are the audit committee, risk monitoring committee and remuneration and nomination committee. in relation to the progress of the organization and the demand for the company to form an effective committee, the board of commissioners at the indonesian mumalah bank (bmi) shall establish 1 (one) additional committee, the corporate governance committee disclosed in the financial statements page 46. 2. structure and work mechanism of dps with the disclosed name of dps, stakeholders know who is the dps that will ensure the operational kesalariahan and halal product and operational. of course, all parties that have been assigned to be members of dps have received recommendation from dsn mui and have adequate competence. in general, in the annual report of sharia banks, it is mentioned that dps has conducted guidance, giving consultation, evaluating, supervising and ensuring that bank operational activities have complied with sharia principles which have been determined by the fatwa of dsn mui and sharia of islam. 3. structure and mechanism of the board of directors a. name and position of each member of the board of directors all sharia banks that become the object of research 2012-2014 have revealed the names and positions of each member of the board of directors. for example, bank muamalah indonesia reveals the names and positions of each member of the board of directors on the financial statements page 14-15, further on bank islam malaysia berhad names and respective positions have been disclosed in the financial statements page 42. b. explanation concerning the work mechanism of the board of directors comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 71 the board of directors shall be the organ of the competent company and shall be fully responsible for the maintenance of the company for the benefit of the company in accordance with the intent and purpose of the company and to represent the company in accordance with the articles of association. explanation of the working mechanism of the board of directors can be seen as including the mechanism of decision making and the mechanism of delegation of authority. although there are some syariah banks that do not include the mechanism of delegation of authority such as bmi. c. number of meetings and attendance of members of the board of directors in the meeting almost all sharia banks disclose the number of meetings and number of attendance at the board of directors. as bsm discloses it in the financial statements page 200, whereas the board of directors has attended various meetings including 45 internal meetings of the board of directors, 12 times and joint meetings of the board of directors and board of commissioners. bmi and bnis are disclosed in the financial statements of pages 65 and 250. as for bimb is disclosed on page 43, while rhb islamic berhad is on page 20 of the gcg annual financial statements. d. mechanism and performance appraisal criteria members of the board of directors all sharia banks disclose the mechanisms and criteria for the performance assessment of the members of the board of directors of 2012-2014. this disclosure is a form of accountability of members of the board of directors to stakeholders for the trust that has been given. 4. other structures a. disclosure of vision, mission and corporate values in general, all sharia banks, especially those used as research objects, have expressed their vision, mission and value of each company. this shows that every business operational move from a mission and value for the sake of realizing the company's vision. however, there are syariah banks that do not disclose the values of the company ie rhb islamic bank and ambank islamic berhad. b. disclosure of majority shareholders as an element of corporate transparency, all sharia banks have disclosed the majority shareholders. c. policy and remuneration of board of commissioners, directors and dps almost all sharia banks disclose the total remuneration for the board of commissioners, directors and dps completely except in rhb islamic bank and ambank islamic berhad which do not fully disclose the amount of remuneration. d. transactions with conflict of interest parties in 2013, bank mandiri syariah revealed that there were 29 cases of permanent employees and 5 cases by non-permanent employees while in 2014 there were 22 cases of permanent employees and 3 cases by non-permanent employees. but this is not afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 72 explained in detail. while bnis discloses no conflict of interest involving directors and board of commissioners either directly or indirectly disclosed in the financial statements page 189. e. reporting on gcg implementation in the annual report all the sharia banks that are the object of research have revealed the reporting of gcg implementation. in the execution of duties and responsibilities supported by organizations and work tools such as work order, corporate governance guidelines (the set of basic management of the company, policy, and standard operating procedures (sop) as the implementation of gcg. f. obligation to pay zakah and implementation of csr all sharia banks during 2012-2014 have disclosed the implementation of zakah and csr payments in their respective annual reports. payment of zakat and csr is one form of social awareness of islamic banks to the surrounding environment. all sharia banks express it as a caring attitude that cares for the less fortunate and the environment, which is done with various forms of humanitarian and social activities as a form of social responsibility. based on statistical test results that gcg disclosure does not show significant differences. however, at the level of the sharia board, there are some differences. the sharia banking legal framework in both countries equally recognizes the existence of two levels of sharia supervision. the first level is the sharia board in the banking institution, and the second is the sharia council at the national level. in malaysia, the first level is called the shariah committee (sc), and the second is called the shari'ah advisory council (sac). in indonesia, the first level is named with the dewan pengawas syariah (dps) and the national level is named with the dewan syariah nasional (dsn).1520 nevertheless, the sac in malaysia, under the central bank act (cba) 1958 of article 16b, is positioned under the central bank and has the authority to regulate issues related to islamic banking.1621 while the dsn in indonesia, is part of the indonesian ulema council (mui), which is not a government agency but has the authority to issue fatwas related to the problems of islamic banking. with the birth of law no. 21 of 2008 on sharia banking, a sharia banking committee was established,1722 which became an institution that formulated a dsn fatwa into the pbi. 15 the term used in sharia banking in indonesia is the dewan pengawas syariah (dps). this is very clearly mentioned in the general definition of law no. 21 of 2008 concerning sharia banking as well as in the bank indonesia's two most important regulations, namely, pbi no. 6/24 / pbi / 2004 concerning commercial banks conducting business based on sharia principles as amended by bank indonesia regulation no. 7/35 / pbi / 2005, pbi no. 8/3 / pbi / 2006 concerning amendment of conventional commercial bank operations to commercial bank conducting business based on sharia principles and opening of bank offices conducting business based on sharia principles by conventional commercial banks. it should be emphasized that the presence of dps in sharia banking in indonesia is the most distinguishing aspect between sharia banks and conventional banks. didin hafidhuddin and hendri tanjung, manajemen syariah dalam praktik, jakarta, gema insani press, 2003, p. 39. 16 agus triyanta, implementasi kepatuhan syariah dalam perbankan islam (syariah) (studi perbandingan antara malaysia dan indonesia), jurnal hukum no. edisi khusus vol. 16 oktober 2009: 209-228. 17 low no 21 tahun 2008 about perbankan syariah, pasal 26 ayat (4) and (5). comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 73 research also shows that sharia council members in both countries have equal responsibility in ensuring or guarding shariah compliance, both in product and operation of islamic banking. to support sharia board members in carrying out their duties, both countries prepare the necessary rules, related to membership qualifications, duties and obligations, recognition of published fatwas, and their independence from various interventions.1823 in both countries, the qualifications set forth are not much different. the main qualification is that they have to master issues related to fiqh muamalah and knowledge or practice in the field of financial transactions. this qualification is in line with what is advised by experts in islamic law. however, if they do not perform the task well (misconduct) it will be disqualified, the rules in malaysia clearly mention the problem dismissal (expenditure) and membership termination.1924 while there are no related rules (expenditures) and dismissals in indonesia. indonesia and malaysia use different rules in the dual positions of sharia council members. members of the shariah committee (sc) in malaysia can not be appointed or appointed as a member of a supervisor at another bank. similarly members of the shariah advisory council (sac) also can not be appointed as members of sharia councils at any bank.2025 whereas in indonesia, members of shariah supervisors may serve double positions with similar positions in other banks and two non-bank syariah financial institutions, as well as members of dsn. the dual positions of a dps can be more than in previous years according to bank indonesia.2126 for example, bank muamalat indonesia (bmi) and bank negara indonesia syariah (bni syariah) have the same dps.2227 however, different approaches in sharia advisory and supervisory models between the two countries have led to different consequences. malaysia adopted an advisory model, where the sharia council is an advisory body, while indonesia adopts a supervisory model, in which the sharia council is a supervisory body. this has brought about different consequences, that the sharia supervisory board in indonesia of sharia banks offering sharia services is responsible for reporting shariah compliance issues to the central bank. based on the report, the central bank should conduct a makeshift investigation. 18 in malaysia, in the guidelines on unprecedented banking schemes (sptf) 1993, also, guidelines on the governance of shariah committee for the islamic financial institutions (bnm / gps1) 2004. in indonesia, bank indonesia governor circular letter no. 8/19 / dpbs. about: guidelines for sharia supervision and procedures for supervisor result reporting for the sharia supervisory board, look at agus triyanta, the implementation of shariah compliance in islamic banking; the role of the of the shariah board (a comparative study between malaysia and indonesia), dissertation international islamic university malaysia, 2009. 19 guidelines on the governance of shariah committee for the islamic financial institutions (bnm/gps1) 2004. 20 bnm/gps1, 19.b. and cba 1958, section 16b (6). 21 pbi no. 7/35/pbi/2005, section of 26. 22 dual position dps, k.h ma'ruf amin at pt bank muamalat indonesia, pt bank negara indonesia syariah, pt bank mega syariah, pt asuransi jiwa bringin life (syariah business unit), and pt bni life insurance (sharia business unit), look at the bnis financial report p.217. afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 74 while in malaysia, not by members of the shari'ah committee (sc) who must handle the issue but the supervisory department of the central bank.2328 in addition to strengthening local banks and financial systems, malaysia has launched a globalized islamic banking business. this plan is in accordance with the initiative for the process of harmonizing fatwas with global standards. this has been supported by the pioneering presence of members of the shari'a advisory council (sac) from outside malaysia. in contrast to indonesia, which further strengthens its national foundations, including by establishing the sharia banking committee, as an effort to bridge the dsn fatwa with the pbi. this shows a step further in resolving the conflict about the authority of dsn which is part of the mui, a non-governmental institution.2429 2) achieving maqashid shariah table 7 result mann-whitney for achieving maqashid shariah maqasid index mann-whitney u 16,000 wilcoxon w 61,000 z -2,163 asymp. sig. (2-tailed) 0,031 exact sig. (2*(1-tailed sig.)) 0,031 source: spss data processed results results obtained from the above statistical data processing, obtained sig value of 0.031. where the significant value is smaller than the level of significance (0.031 <0.05), this shows that there is a difference between the achievement of maqashid shariah in islamic banks in indonesia and islamic bank in malaysia. financial ratios of maqashid performance can be seen in the table below: table 8 first indicator of banking performance maqashid shariah (education) bank ratio pi 2012 pi 2013 pi 2014 average bsm education 0,004439 0,002682 0,001773 0,002964 bmi education 0,004518 0,005444 0,003646 0,013608 bnis education 0,008901 0,006343 0,005662 0,020906 bimb education 0,028472 0,063675 0,051909 0,048018 rhb education 0,006732 0,006999 0,006631 0,006787 amb education 0,016013 0,014362 0,014733 0,015036 source: processed data results maqashid index from the above table it can be seen that bank islam malaysia berhad has the best average performance indicators of the first maqashid in providing educational assistance, conducting research and development, training and 23 agus triyanta, the implementation of shariah compliance in islamic banking; the role of the of the shariah board (a comparative study between malaysia and indonesia), dissertation international islamic university malaysia, 2009. 24 agus triyanta, implementasi kepatuhan syariah dalam perbankan islam (syariah) (studi perbandingan antara malaysia dan indonesia), jurnal hukum no. edisi khusus vol. 16 oktober, p.224. comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 75 promoting sharia banks with an average indicator of 0.048018 or 4.8%. the next best performance indicator is bni syariah with an average indicator of 0.020906 or 2%. followed by amislamic bank and bank muamalat with an average indicator of 1.5% and 1.3%. furthermore, rhb is 0.6% and bsm is 0.2%. from the results of performance indicators of all sharia banks in indonesia 2012-2014 the average performance indicators of all sharia banking above 1 percent except in rhb and bsm. this proves quantitatively, the achievement of the first shariah maqasid: education is in accordance with the expected. as a percentage of malaysian sharia banks are superior to indonesia in achieving maqashid shariah in the first aspect (education). table 9 the second indicator of banking performance maqashid shariah (fairness) bank ratio pi 2012 pi 2013 pi 2014 average bsm fairness 0,186887 0,185036 0,184648 0,185524 bmi fairness 0,214710 0,221353 0,220445 0,218836 bnis fairness 0,177302 0,176419 0,176924 0,176881 bimb fairness 0,312957 0,276316 0,271862 0,287045 rhb fairness 0,263773 0,229283 0,160378 0,217811 amb fairness 0,249664 0,325054 0,359082 0,311267 source: processed data results maqashid index the maximum performance value of the achievement of the second maqasid (fairness) in weighting is 41 percent, so that quantitatively the achievement of the second maqasid performance indicator is better than the performance of the first maqasid. the highest achievement was obtained by amislamic bank in 2014 of 35.90 percent. while the lowest average performance indicator recorded by bni syariah with a value of 0.1768 or 17.68 percent. this is because bni syariah is one of the new islamic banks in indonesia compared to bank islam malaysia berhad and bank muamalat indonesia. however, overall, both of the above performance are led by malaysian sharia banks. table 10 the third indicator of sharia banking performance maqashid: maslahat bank ratio pi 2012 pi 2013 pi 2014 average bsm maslahat 0,061737 0,061850 0,066074 0,06322 bmi maslahat 0,070057 0,071522 0,083189 0,074923 bnis maslahat 0,038501 0,044883 0,048837 0,044074 bimb maslahat 0,177354 0,011786 0,090880 0,090334 rhb maslahat 0,000860 0,000844 0,000924 0,000876 amb maslahat 0,001782 0,001624 0,001389 0,00160 source: processed data results maqashid index. based on the above calculation results, the overall value of bimb is the highest during 2012-2014 with a value of 9%. followed by bmi and bsm with 7% and 6% respectively. meanwhile, the lowest value is rhb islamic only reach 0.08%. afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 76 this shows the development of sharia banking should pay attention to the ratios in the third maqashid. profit must be increased so that the development of sharia banking can maximize profits for income redistribution. the increasing profit of sharia banks will certainly increase the paid zakat so that the function of zakat that is as wealth distribution can be implemented by sharia banking. sharia banking products should also focus their activities on real sector investments so that the ongoing economy will not only revolve in the financial sector but also in sectors that have a direct impact on the economy of the small people. table 11 performance of maqashid syariah index bank mi 2012 mi 2013 mi 2014 average rank bsm 0,253062 0,24958 0,252496 0,251709 4 bmi 0,289284 0,298320 0,307280 0,298295 3 bnis 0,224704 0,227644 0,231423 0,227924 5 bimb 0,518784 0,351777 0,414651 0,428404 1 rhb 0,271365 0,237126 0,167932 0,225475 6 amb 0,267458 0,341039 0,375204 0,327900 2 source: processed data. table 12 comparison of maqashid sharia on indonesian islamic banks and malaysian islamic bank. indonesia islamic bank value malaysian islamic bank value bsm 0,251709 bimb 0,428404 bmi 0,298295 rhb 0,225475 bnis 0,227924 amb 0,327900 average 0,259309 0,327259 source: processed data. from the table above can be seen that bank islam malaysia berhad became the highest sharia bank with average maqasid syariah index of 0.4284 or 42.84 percent and then amislamic bank berhad of 0.3272 or 32.72 percent, then muamalat of 0.2982 or 29.82 percent, bsm 25.17 percent, bni syariah and rhb islamic berhad become syariah bank with the lowest maqasid performance that is 227924 or 22.79 percent and 225475 or 22.54 percent. this result also shows that there are no islamic banks that get high performance from maqashid index. the highest index is only 42.84 percent while the lowest value of 22.54 percent. but, the average malaysian islamic bank has a better performance in achieving maqashid sharia than in indonesia. this result has the same tendency with the results of thuba jazil and syahruddin's research that found no sharia bank in malaysia and indonesia are able to recognize high performance in all 10 performance ratio of maqashid syariah, except on interest-free income ratio.2530 there are several reasons behind the difference between the performance of maqashid sharia in indonesia and malaysia, including: 25 thuba jazil and syahruddin, the perfomance measures of selected malaysian and indonesian islamic banks based on the maqasid al-shari’ah approach, volume 7 nomor 2, sya’ban 1434/2013. comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 77 1. the development of islamic banking in both countries historical analysis of the development of islamic banking reveals that the two countries differ in that the political situation has significantly affected the growth of financial institutions in general, and islamic banking institutions in particular. strong political support in malaysia has provided access to the rapid development of this institution, for example, with its excellent establishment process both in regulatory and management fields.2631 conversely, the lack of political support from the government during the early days of islamic banking in indonesia has resulted in slow progress for islamic banking.2732 the different political approaches to the economic development of the colonial period have made a difference to the different outcomes of the two countries. in this case, malaysia is more benefited than indonesia, it is evident from the establishment of a long-term plan of economic development of malaysia by the colonial.2833 this has resulted in a stable economic development, which in turn also facilitates the pioneering path for the development of islamic banking in malaysia. while in indonesia, the dutch government has exacerbated the country's economic development in the early stages by stopping the role of the central bank. meanwhile, the new government of indonesia is required to nationalize the bank owned by the netherlands to be then made the central bank.2934 2. implementation of sharia compliance this study also reveals the differences in several aspects related to the implementation of sharia compliance between islamic banking business in malaysia and in indonesia. the islamic banking in malaysia has been supported by a strong legal instrument since its pioneering work, in indonesia, the new law on sharia banking has only been published more than 26 before the establishment of bank islam malaysia berhad, as the first islamic bank in malaysia, the government has completed in a very fast time the related legislation, which came to be known as the islamic banking act (iba) 1983, in fact, the government also amends various other laws to smooth islamic banking projects, which at least include amendments of banking act 1973 (section 2, section 9 and section 59), amendment of companies act 1965 (section 4, section 218), amendment of the central bank of malaysia ordinance 1958 (section 2, section 37, section41 and section 42) serta. amendment of finance companies act 1969 (section 2). look at islamic banking act (iba) 1983, section 57-60. 27 in regulatory aspects, amendments to the law for banking are made, is the issuance of law no. 7 of 1992 on banking, the beginning of the operation of bmi. in,zainul arifin, dasardasar manajemen bank syariah, jakarta: alfabet, 2005, p.5-6. 28 british colonizers in malaysia have provided a relatively well-established foundation for malaysia's economic development. for example, bank negara malaysia (bnm) was established during the colonial period, january 24, 1959 based on the central bank of malaya ordinance 1958. it is important to note also that the malaysian economy itself has been designed by british colonials since 1930, in agus triyanta, the implementation of shariah compliance in islamic banking; the role of the of the shariah board (a comparative study between malaysia and indonesia), dissertation international islamic university malaysia, 2009. 29 the dutch who had colonized indonesia for about 3.5, did not recognize independence at the time of the proclamation of independence of indonesia in 1945, in fact, the dutch are still doing aggression to take control of the republic of indonesia. this situation concludes with the round table conference, konferensi meja bundar (kmb) in 1949. one of its decisions is that indonesia must stop the operation of the central bank which has been operating for about 3 years, namely bank negara indonesia, and then have to nationalize the dutch-owned bank, de javasche bank to serve as the central bank. afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 78 15 years after sharia banking started operating in the country. in addition, to see the framework of sharia banking regulation in indonesia is relatively complicated because it spread in various rules, from the act, bank indonesia regulation (pbi) and circular letter, which sometimes happens ambiguity in the setting (defining something).3035 in issues related to fiqh, the two countries face different problems. the most notable issues in malaysia are bayñ al-ênah, bayñ al-dayn and settlement of islamic banking disputes.3136 while the issues that appear in indonesia is more elementary, is about usury on bank interest, affiliated madhhab in sharia banking development model, and so-called "conventional" contract on sharia banking. in terms of emerging issues, it appears that the two countries are in different stages of development. malaysia is more on practical issues, while indonsia is still philosophical and principle. 5. discussion malaysia and indonesia are two muslim countries in southeast asia, which, when examined, have many similarities. the two countries are dominated by the malay population, adopting the shafi'i madhhab in the majority and the strong adat influence in the legal system. so it is important to examine the financial business systems that occur in both countries. a business that is guided by spirituality and ethics will create a healthy and sustainable business climate with the realization of market discipline that is born from a good business governance culture. the two countries adopt the rules of corporate governance by applying the principles of transparency, accountability, responsibility, professionalism, and fairness. evident from the research results of both countries above, that in the disclosure of good corporate governance in islamic banks of each country complements all items of good governance business sharia (ggbs) and does not show a significant difference. sharia council members in both countries have the same responsibility in ensuring or guarding shariah compliance, both in the products and operations of islamic banking. to support sharia board members in carrying out their duties, both countries prepare the necessary rules, related to membership qualifications, duties and obligations, recognition of published fatwas, and their independence from various interventions. as a business institution, sharia banks have a goal to contribute to achieve maqashid shariah. indonesia and malaysia have differences in achieving maqashid shariah. this is due to differences in the development of islamic banking and the difference in implementation of sharia compliance. the differences in political approach underlie the development of banks in both countries from colonial times until now. in the framework of islamic banking regulation, malaysian islamic bank has been supported with strong rule of law since its pioneering. while indonesia's special law on sharia banking has been issued more than 15 years after sharia banking began operations. 30 for example, the definition of "sharia financing" and "principles of sharia" in law no.10 of 1998 concerning banking, section 1, paragraph 12 and section 2, paragraph 13. 31 agus triyanta, implementasi kepatuhan syariah..... p.222. comparison of good corporate governance disclosure and achievement of the maqashid shariah between indonesian and malaysian islamic banks 79 in issues related to fiqh, the two countries face different problems. the most notable issues in malaysia are bayñ al-ênah, bayñ al-dayn and settlement of islamic banking disputes. while the issues that appear in indonesia is more elementary, is about usury on bank interest, affiliated madhhab in sharia banking development model, and so-called "conventional" contract on sharia banking. in terms of emerging issues, it appears that the two countries are in different stages of development. malaysia is more on practical issues, while indonsia is still philosophical and principle. 6. conclusion based on the results of research and discussion, can be concluded that there is no significant difference between the disclosure of good corporate governance between indonesian and malaysian sharia banks. but have differences in the level of sharia board. as well as differences in the achievement of maqashid shariah. references al ghifari, m. et al. (2015). analisis kinerja perbankan syariah di indonesia dan malaysia dengan pendekatan maqashid indeks. jurnal ekonomi dan perbankan syariah. 3(2). . antonio, m. s. et al. (2012). an analysis of islamic banking performance: maqashid index implementation in indonesia and jordania.journal of islamic finance, 1(1), 012-029. arifin, z. (2005). dasar-dasar manajemen bank syariah. jakarta: alfabet. eagle, l. (2010). exporting islamic banking from the middle east. banker’s academy briefings. london. fauzia, i. y., & kadir, a. (2014). prinsip dasar ekonomi islam: perspektif maqashid al syariah. jakarta: prenada media. guidelines on the governance of shariah committee for the islamic financial institutions (bnm/gps1), 2004. hafidhuddin, d., & tanjung, h. (2003). manajemen syariah dalam praktik. jakarta: gema insani press. jumansyah., & syafei, a. w. (2013). analisis penerapan good governance business syariah dan pencapaian maqashid shariah bank syariah di indonesia. jurnal al-azhar indonesia seri pranata sosial, 2(1). komite nasional kebijakan governance, (2001). pedoman good corporate governance. jakarta. indonesia. maksum. (2016). perbandingan debt financing dan equity financing pada perbankan syariah di indonesia dalam pencapaian tujuan ekonomi islam perspektif maqashid syariah. tesis magister studi islam. afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 80 mannan, m. a. (1980). the objective of islamic banks. dhaka, bangladesh: ins thought of islamic banks. mohammed, m. o., & razak, d. a. (2008). the performance measures of islamic banking based on the maqasid framework. the iium international accounting conference (intac iv), 25 june. peraturan bank indonesia nomor 11/ 33 /pbi/2009 tentang pelaksanaan good corporate governance bagi bank umum syariah dan unit usaha syariah pasal 1 ayat 10. sharia economic outlook 2016 mes. thuba jazil and syahruddin, (2013). the perfomance measures of selected malaysian and indonesian islamic banks based on the maqasid alshari’ah approach, volume 7 nomor 2. triyanta, a. (2009). the implementation of shariah compliance in islamic banking; the role of the of the shariah board (a comparative study between malaysia and indonesia). dissertation international islamic university malaysia. triyanta, a. (2009). implementasi kepatuhan syariah dalam perbankan islam (syariah) (studi perbandingan antara malaysia dan indonesia). jurnal hukum no. edisi khusus, 16, 209-228. uu no 21 tahun 2008 tentang perbankan syariah, pasal 26 ayat (4) dan (5). world islamic banking competitiveness report 2013-2014. wulandari, a. (2010). menyingkap nilai keadilan (dalam perspektif syariah islam) yang terkandung didalam gcg. jurnal investasi, 6(2). analysis of zakat and tax policies during the covid-19 pandemic 29 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) analysis of zakat and tax policies during the covid-19 pandemic nuzulia1)*, muhammad nafik2) 1islamic economics departement, faculty of economics and business, airlangga university, indonesia abstract the relationship between zakat and tax dates back to the early days of the development of islam. zakat is one of the pillars of islam whose obligation is absolute upon one's assets according to certain rules that have been regulated in the al quran and hadith. meanwhile, taxes are contributions issued by the public to be deposited with the government as state treasury, which is allocated to meet state expenditures. since covid19 was declared a pandemic, indonesia has been affected by the covid-19 virus. impact arising from various sectors such as health, education, socio-culture and economy. various policies issued by the government to cut the spread of the covid-19 virus, such as social distancing, studying or working from home and psbb. other than that, the government issued policies to restore the economy such as zakat and tax policies. this research was conducted to map and analyze zakat and tax policies issued by the government in order to reduce the economic impact of the covid-19 pandemic. the research used a qualitative method with a descriptive approach obtained by studying the literature. the results of the study state that indonesia has issued policies to help people affected by covid-19 through zakat and tax policies. the research used a qualitative method with a descriptive approach obtained by studying the literature. the results of the study state that indonesia has issued policies to help people affected by covid-19 through zakat and tax policies. the research used a qualitative method with a descriptive approach obtained by studying the literature. the results of the study state that indonesia has issued policies to help people affected by covid-19 through zakat and tax policies. keywords :zakat, tax, policy, impact, pandemic 1. introduction since 2020, the world has been shocked by the outbreak of a virus called the corona virus (covid-19). the world health agency or often referred to as who (world health organization) officially announced the corona virus (covid-19) as a pandemic on march 9, 2020. based on data from the covid-19 handling task force as of march 3, 2021, it shows that there are 1,414,741 people. confirmed positive cases of covid-19 in indonesia. the corona virus is a type of virus that is easily transmitted so limiting contact with other people is a way to cut the spread of the covid-19 virus. therefore, the president of in the economic sector, the various kinds that have been caused by covid-19, such as having a terrible impact on investment, make people choose to be very careful in buying goods so *corresponding author. email address: nuzulia-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:nuzulia-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 30 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) that it has an effect on decreasing people's purchasing power. in investing, it has an influence on market projections. investors may tend not to invest due to changing market assumptions and unclear supply chains (pepinsky & wihardja, 2011). covid-19 has also had an impact on indonesia's export and import sector and the trade sector. in the trade sector, from the side of tax revenue has decreased. in addition, covid-19 caused an increase in the number of unemployed in indonesia. based on data from the central statistics agency (bps), the unemployment rate in indonesia for august 2020 was 7.07 percent, an increase of 1.84 percentage points compared to august 2019. the increasing number of unemployed will have an impact on decreasing economic growth. reporting from kontan.co.id inspector general of the ministry of finance sumiyati said that the poverty and unemployment rates are expected to rise quite significantly due to the pandemic. the unemployment rate will increase by around 3.02 to 5.71 million and unemployment will increase by approximately 4.03 million to 5.23 million. this is in line with research conducted by indiyani (2020) regarding unemployment amid the covid-19 pandemic showing that the increase in unemployment is due to employees being laid off from office. the majority of layoffs occurred in the micro-scale business aspect, in the informal aspect, reaching 56.7% of the total workforce. increasing the number of unemployed in indonesia can have various impacts such as increasing poverty, lack of public purchasing power, low state income so that it will weaken indonesia's economic growth. of the various impacts caused, several policies were issued by the government to restore indonesia's economy. in indonesia, state revenue comes from taxes that people pay to the state, while in the islamic economic system, the zakat instrument is present as an economic driver that can provide benefits. zakat and taxes are obligations that must be paid, but zakat and taxes have different meanings and different characteristics. because in essence, zakat and taxes have the same order to issue some assets according to certain rules. zakat is paid according to the orders of islamic law while taxes are according to government regulations. in islam, zakat is used as a distribution of wealth from the giver (muzakki) to the recipient (mustahik). meanwhile, in state regulations, funds obtained from taxes are allocated for infrastructure development. zakat and taxes play an important role in the country's economy, zakat solves problems on a micro level, while taxes solve problems at a macro level. with the existence of zakat and tax policies, it is hoped that it can help to answer the challenges of the economy in indonesia today. zakat and taxes play an important role in the country's economy, zakat solves problems on a micro level, while taxes solve problems at a macro level. therefore, the author raises the theme analysis of tax zakat policy during the covid-19 pandemic. zakat solves problems on a micro level, while taxes solve problems at a macro level. with the existence of zakat and tax policies, it is hoped that it can help to answer the challenges of the economy in indonesia today. zakat and taxes play an important role in the country's economy, zakat solves problems on a micro level, while taxes solve problems at a macro level. therefore, the author raises the theme analysis of tax zakat policy during the covid-19 pandemic. https://creativecommons.org/licenses/by/4.0/ analysis of zakat and tax policies during the covid-19 pandemic 31 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) zakat solves problems on a micro level, while taxes solve problems at a macro level. with the existence of zakat and tax policies, it is hoped that it can help to answer the challenges of the economy in indonesia today. zakat and taxes play an important role in the country's economy, zakat solves problems on a micro level, while taxes solve problems at a macro level. therefore, the author raises the theme analysis of tax zakat policy during the covid-19 pandemic. 2. literature study the position of zakat and taxes in islam is not only a source of state revenue but also as an effort in economic development. several previous studies have found that zakat and taxes have an important role in the country's economic growth but still have several obstacles such as being obstructed in their collection, where zakat is only collected about 3% of the existing potential, while taxes only collect 83.4% of the total tax revenue collected. targeted (hidayatulloh, 2019). the management of zakat and taxes in various muslim countries has different policies. saudi arabia has a single obligation, in the sense that if a muslim has paid zakat, then they are not taxed. and zakat in saudi arabia is collected by the ministry of finance and distributed through the ministry of manpower and social security. meanwhile, malaysia enforces another provision, namely zakat deducting taxes borne by the muslim community, provided that zakat is paid in official government institutions. indonesia applies a tax deduction system, meaning that zakat paid only reduces taxable income (ridwan, 2014). the emergence of the notion that zakat can be deducted from taxable income in the calculation of personal or corporate income tax can spur the public's enthusiasm to pay zakat through legal institutions, even though zakat itself cannot be directly deducted from income tax. this of course needs to be disseminated to the public at large so that people can take advantage of zakat facilities as a deduction from taxable income. (nasruddin, 2011) in the midst of the covid-19 pandemic, zakat and tax policies certainly contributed to restoring the indonesian economy. before the covid-19 virus pandemic, the recipients of zakat funds were only for 8 groups, as confirmed in the surah at taubah. in current conditions, zakat is used as an instrument for funding sources in dealing with covid-19. however, the use of zakat funds for these conditions is carried out freely, but must be based on clear criteria so as not to leave the zakat function itself (saputra, 2020). the indonesian government with laws and regulations as a product of policies relating to the public interest, has formulated policies in order to stimulate the situation during the pandemic for all lines affected by a decline or a slowdown in order to increase again and the rate of growth to stabilize again. in handling the impact of the covid-19 outbreak, the government also provides incentives to taxpayers who help in handling covid-19 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 32 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) such as lowering rates and exemption from pph, aiming to accelerate handling of the impact of covid-19 (pandyanoor, 2020). 3. research methodology this study used a descriptive qualitative method, which is a study that used qualitative data and then described it descriptively. qualitative research is a study that is used to examine natural objects where the researcher is the key instrument, the data collection technique is carried out in combination, the data analysis is inductive, and the results of qualitative research emphasize meaning rather than generalization. qualitative research aims to maintain the form and content of human behavior and analyze its qualities, instead of turning it into quantitative entities (mulyana, 2008: 150). in this study using a literature study instrument. this research is obtained from the results of literature studies obtained from studying various reference books as well as the results of similar previous studies which are useful for obtaining a theoretical basis for the problem under study. 4. result and discussion a. definition of zakat and tax according to qardhawi quoted from (ismail, 2018), the word zakat has several meanings, namely an-namaa (growth and development), ath-thaharatu (holiness), albarakah (blessings), katsrah al-khair (many), and ash-shalahu (success) 10. something is zaka, means to grow and develop, and a person who is given the character of zaka, means a person s is good. meanwhile, in terms of zakat, although the scholars put it differently from one another, the principle is the same, namely zakat is the transfer of ownership rights over certain assets to certain people who have been determined by the shari'a, solely because of allah. zakat is an ijtima'iyyah maliyyah worship that has a very important, strategic and decisive position, whether seen from the teachings of developing the welfare of the people. this has proven that in the history of the development of islam, zakat has become a source of state revenue and a very important role as a means of spreading the islamic religion, developing the world of education and knowledge, building infrastructure, providing islam or the cultural side, developing science, building infrastructure for providing social welfare services. (ministry of religion, 2013). meanwhile, tax in arabic is known as "adh-dhariibah" which means: "the levies drawn from the people by tax collectors." experts have different opinions in defining taxes, adriani defines taxes with; public contributions to the state (which can be imposed) which are owed by those who are obliged to pay them according to general regulations (laws) with no return that can be directly appointed and whose use is to finance general expenses related to the state's duty to organize the government . rochmat soemitro is of the opinion that taxes are the people's contribution to the state treasury based on law https://creativecommons.org/licenses/by/4.0/ analysis of zakat and tax policies during the covid-19 pandemic 33 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) (which can be enforced) without receiving lead services (counter-performance) which can be directly demonstrated and which are used to pay for general expenses (ridwan, 2014). yusuf qardhawi argues: "taxes are obligations imposed on taxpayers, which must be deposited to the state in accordance with the provisions, without getting any performance back from the state, and the result is to finance general expenses on the one hand and to realize some of the economic, social, political and economic objectives. the goals to be achieved by the state. b. the relationship between zakat and taxes from the above understanding, it can be concluded that zakat and taxes are individual expenditures or mandatory deposits to community institutions designated for central and regional states with the aim of general welfare by sharing different provisions. afzalur rahman once mentioned the difference between the concept of zakat and the concept of tax (1996: 243-245), as follows: table 1. the relationship between zakat and taxes no. description concept of zakat tax concept 1. nature religious obligations and a form of worship economic policy to generate revenue for the government 2. subject mandatory for all muslims in a country it is obliged to all society regardless of religion, caste, and others. 3. liability status liabilities that must be paid under any circumstances are inevitable. liabilities that the incumbent government can defer 4. rates the source and amount are determined by the koran and the sunnah, it cannot be changed by anyone the source and amount of taxes can be changed from time to time according to government requirements 5. use of funds items of expenditure and mustahik zakat are stated in the qur'an and hadith, no one has the right to change them tax spending can be changed or modified according to government needs 6. benefit recipients zakat is obtained from the rich and is given to the poor taxes provide benefits to both the rich and the poor. under certain conditions it is more profitable for the rich. 7. acquisition objective zakat is imposed to prevent irregularities and imbalances in the distribution of wealth and to prevent the accumulation of assets in the hands of a few people taxes are levied for the main purpose of obtaining income or income as for yusuf qardhawi, he sees the issue of zakat and tax from several sides. according to qardhawi, there are sides to the equation between zakat and taxes (qardhawi, 1994: 2 / 997-1004), namely: https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 34 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1) the element of coercion 2) paid to local or central government 3) there is no compensation from the payment of obligations (zakat or tax) 4) there are social, economic and political goals, as well as financial goals the sides of the differences are: 1) name and meaning indication; zakat is more focused on the meaning of purification, growth and blessings. while taxes are more focused on the imposition of obligations. 2) substance and goal. zakat is worship as a form of gratitude and taqarrub to allah, while tax is only a civil obligation as a citizen. 3) determination of nishab or minimum limit of obligations and the amount issued 4) immutability and immutability. 5) the object of zakat is different from taxes. 6) the relationship of obligations, taxes is the relationship between a citizen and the ruler, while zakat is the relationship between a person and his god. 7) purpose, zakat has elements of spiritual and moral (khuluqiyyah) objectives whereas tax does not. 8) legal principles, taxes have different legal principles in theory, while zakat is clear, the legal principle is that it comes from allah alone. c. zakat and taxes in islamic economics zakat as the third pillar of islam has references and a strong legal basis, namely the koran and al-hadith. some of the verses of the al-qur'an regarding zakat came down in makkah and some came down in medina. the verses of the koran and the hadith of the prophet muhammad about zakat are all present in general / global forms. this shows the desire of allah swt so that zakat is always dynamic, always varied and productive throughout the ages. the following are arguments that strengthen the law of zakat qs attaubah verse 71: “and people who believe, men and women, some of them become helpers for others. they command (do) what is wrong, and prevent what is wrong, pray, pay zakat, and obey allah and his messenger. they will be given mercy by allah. truly, allah is all-powerful, all-wise.” surah at-taubah 103 "take zakat from their property, to clean and purify them, and pray for them. in fact, your prayer (brings forth) peace of mind for them. allah is all-hearing, all-knowing. " qs al-baqarah 43 "and do the prayers, pay zakat, and bow with the people who bow." al-bayyinah 5 https://creativecommons.org/licenses/by/4.0/ analysis of zakat and tax policies during the covid-19 pandemic 35 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) meaning: "whereas they are only ordered to worship allah sincerely to obey him solely because of (practicing) religion, and also to pray and pay zakat; and that is the true religion. " according to the narration of tirmidhi from ibn umar, ra: "whoever utilizes (develops) property, is not obliged to do zakat on it unless it has reached a period of one year." mauquf hadith in system islamic economics and conventional economics recognize the existence of taxes. as stated by prof. rahmat soemitro taxes are defined as compulsory levies in the form of money that must be paid by residents as compulsory contributions to the state or government in connection with income, ownership, purchase price of goods, and others. tax law in islam, there are two views that can emerge. the first view is to agree with the permissibility of the existence of taxes, while the second view is that which views that tax collection is an act of tyranny and it is haram. the choice of tax liability as a solution has sparked debate among islamic jurists and economists: according to abu yusuf in in his book al-kharaj states that all khulafa ar-rashidin, especially umar, ali and umar bin abdul aziz are reported to have emphasized that taxes must be collected with justice and prosperity, not allowed to exceed the ability of the people to pay, nor do they make them unable to fulfill their basic daily needs. abu yusuf supports the ruler's right to increase or decrease taxes according to the capacity of the burdened people (chapra, 2000). marghinani in his book al-hidayah, argues that: if state resources are insufficient, the state must collect funds from the people to fulfill public interests. if these benefits are enjoyed by the people, they are obliged to pay the costs. (chapra, 2000) m. umer chapra, in islam and the economic challenge stated: the right of the islamic state to increase resources through taxes in addition to zakat has been defended by a number of jurists who in principle represent all fiqh schools. this is because zakat funds are used in principle for the welfare of the poor, even though the state needs other sources of funds in order to carry out the functions of allocation, distribution and stability effectively. this right is defended by the jurists based on the hadith, "on your property there are other obligations besides zakat." (chapra, 2000). tax law is a collection of regulations governing the relationship between the government and the people or taxpayers. the government as tax collectors and taxpayers or the people as taxpayers. the main points of national legal products regulating taxation can be stated as follows: 1) law no. 36 of 2008 concerning the fourth amendment to law number 7 of 1983 concerning income tax 2) law no. 28 of 2007 concerning general taxation provisions. amendments to law no. 6 of 1983 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 36 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 3) law no. 12 of 1985 concerning land and building taxes 4) law number 42 of 2009 concerning third amendment to law number 8 of 1983 concerning value added tax for goods and services and sales tax on luxury goods. 5) law number 21 of 1997 concerning fees for the acquisition of rights to land and / or buildings (amended to law number 20 of 2000) 6) government regulation (pp) number 25 year 2009 entitled income tax (pph) on sharia-based business fields. 7) more details regarding statutory regulations in the form of laws (uu) and government regulations (pp) can be seen on the website http://www.pajakonline.com/ and http://www.pajak.go.id/. referring to data released by the directorate general of taxes, in 2008, taxes contributed nearly 70% of the total funds from the apbn where as is known, there are many sectors that still need funds from the apbn, such as the education, health and security sectors. it is in these sectors that apbn funds will be distributed. the tax is paid according to the law because the tax will ultimately be enjoyed by the public in the form of services provided by the state. as long as the tax is still running in accordance with the principle of justice, it is okay for us to pay taxes in accordance with applicable regulations. without taxes, the government will not be able to run properly and of course this will have an impact on society. although tax and zakat are basically almost the same in their goal of increasing social welfare through funds obtained from the community, there are actually some striking differences that make the position of tax and zakat not equal (surahman, 2017). d. zakat and tax policies during the covid-19 pandemic. since the declaration of covid-19 as a pandemic in march 2020 by who, it has had various impacts in all sectors, from social, employment education to industrial performance in all sectors in the country. to reduce the spread of the covid-19 virus, the government has begun to implement several policies such as psbb or large-scale social restrictions, social distancing, studying or working from home. the government as the policy maker has made every effort to reduce the impact. during the current pandemic, many policies were made to stimulate the situation for all affected lines to experience a decline or a slowdown so that they can rise again and their growth rate will return to the corridor desired by the government. covid-19 has been considered a disaster, therefore zakat funds can be used to help people affected by covid-19. al qardhawi (2005) also discusses that zakat is one of the sharia social security funds which is very much needed by the community, especially for the poor. zakat institutions must pay attention to the needs of the community and fulfill their basic needs such as food, health, etc. the concept of zakat itself is a fundamental foundation of islamic economics to bring balance between rich and poor people and to strengthen the entire nation. al anshory et al. (2020) said that zakat institutions have an https://creativecommons.org/licenses/by/4.0/ http://www.pajak.go.id/ analysis of zakat and tax policies during the covid-19 pandemic 37 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) important and strategic role to help the government in preventing covid-19 considering its position as a philanthropic organization. the indonesian ulama council has allowed the use of zakat funds to deal with the covid-19 pandemic. the fatwa is contained in no. 23 of 2020 concerning the use of infaq, alms, and zakat funds to deal with the impact of the covid-19 pandemic. baznas and laz have shown their involvement in pandemic response activities, both in terms of health programs and socio-economic programs. based on data from baznas and the distribution of zakat funds for handling covid-19. table 2. distribution of zakat funds for handling covid-19 no. program area amount (in idr) 1. health emergency a. health promotion (education, phbs, spraying disinfectants, etc.) 268,777,411 b. curative (ppe, health workers, rsb isolation room, etc.) 1,823,852,122 2. socio-economic emergency a. family logistics package 933,710,000 b. cash for work 170,868,000 c. zakat fitrah 3,830,125,000 d. btm 70,200,000 3. existing program security 480,928,530 total 7,578,461,063 sources : baznas, 2020 from the table above, baznas has distributed funds in several sectors, first the health emergency sector, to stop the distribution of the covid-19 virus, zakat funds are used to buy ppe, establish isolation rooms, spray disinfectants, and provide education to the public. second, the social and economic emergency sector, to help restore economic conditions caused by the covid-19 virus, zakat funds are channeled to provide family food assistance, cash for work, zakat fitrah, btm, as well as for assistance for laid-off employees or workers. third, the existing program sustainability sector. for this sector, baznas disbursed rp. 480,928,530. the total distribution of funds for the three sectors reached rp. 7,578,461,063 (baznas, 2020). baznas ri has also collaborated with daily workers such as online motorcycle taxi drivers and others to cooperate with baznas in carrying out environmental cleaning such as spraying disinfectants in public areas and for this cooperation baznas provides wages to them. baznas has also realized an economic emergency program by prioritizing zakat fitrah funds for those families affected by covid-19. and baznas also provides direct assistance to people in need in order to maintain their purchasing power during this pandemic. besides that, baznas also distributes zakat funds to protect the businesses of partners affected by covid-19. baznas made adjustments such as business adaptations during the covid-19 pandemic and provided product innovations to partners such as sewing machines for making masks, this is done so that business partners https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 38 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) continue to run even when the covid-19 pandemic (baznas, 2020). the use of zakat for handling the covid-19 disaster carried out by baznas has seen many benefits. this is in accordance with the maqashid sharia in islam. the purpose of maqashid sharia is to safeguard and protect the general needs of humans. the level of needs, namely, the needs of dharuriyyah, hajiyyah, and tahsiniah. in addition to zakat funds, from the tax side, the government has implemented policies amid the covid-19 virus outbreak, one of which is the tax policy that is enacted. the government through the ministry of finance has issued several incentive and relaxation policies in the field of taxation for taxpayers affected by the covid-19 outbreak. the tax incentives imposed by the government during the pademi include: 1) income tax incentives (pph) article 21. pph article 21 is borne by the government for the tax period january 2021 to june. this incentive only applies to employees with certain criteria, including those who have a taxpayer identification number and receive a regular annual gross income of not more than idr 200 million. 2) article 22 import income tax incentives. the government exempts pph article 22 import on taxpayers who: o have a business field classification code according to the pmk attachment 9/2021; o it has been designated as an export destination ease company (“kite”); or o has obtained a bonded zone operator license or a bonded zone entrepreneur license or an entrepreneur in a bonded zone concurrently as an operator in a bonded zone ("pdkb") at the time of releasing goods from the bonded zone to other places in the customs area. 3) income tax installment incentives article 25 the government has also issued a policy to reduce the article 25 income tax installments by 50% of the installments that should have been poured, which are given for the tax period from january 2021 to june 2021. taxpayers who take advantage of the deduction of article 25 income tax installments must submit a report. realization every month using the available form no later than the 20th of the following month after the tax period ends. 4) value added tax (vat) incentives. taxable entrepreneurs (pkp) can be given a preliminary refund of overpayment of taxes as low-risk pkp, which is given for the tax period from january 2021 to june 2021. pkp that meets the criteria can be given a preliminary refund of overpayment of tax as a low-risk pkp with the following conditions: o pkp does not need to submit a request for designation as a low-risk pkp o the director general of taxes does not issue an ex officio decision as a low-risk pkp; and o pkp has a business field classification in accordance with the attachment listed in appendix pmk 9/2021, kite facilities or bonded area operator permits, bonded area entrepreneur permits, or pdkb permits granted to pkp are still valid at the time of submission of restitution overpayment notification. https://creativecommons.org/licenses/by/4.0/ analysis of zakat and tax policies during the covid-19 pandemic 39 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) then the government also set some relaxation, including: o decrease in corporate income tax rates o extension of time in tax administration o granting customs facilities o tax on electronic transactions. there is a tax policy that is very helpful for taxpayers, especially corporate taxpayers, in terms of reducing the corporate income tax rate. this step taken by the government to help and protect the taxpayer's business from liquidation in the future will be even more severe. tax-related policies, taken with the main objective by the government, are the basis that is affected by the covid-19 pandemic, which is related to supporting the health system which assists in handling and overcoming the covid19 pandemic outbreak. the government provides tax incentives for goods and services intended to tackle the covid-19 pandemic, including value added tax, business income tax and import tax issued by pmk no. 28/2020. tax-related policies as referred to in ps. 1 paragraph (4) perppu no. 1 of 2020, namely the adjustment of the income tax rate for domestic corporate taxpayers and permanent establishments. this represents a change in ps. 17 paragraph (1) regarding income tax, which initially the tax rate is subject to 25% (twenty five percent) will become 22% (twenty two percent) which is valid in the 2020 tax year and 2021 tax year, and 20% (twenty five percent). percent) which comes into force in the 2022 tax year. applies to corporate taxpayers who have listed on the stock exchange with certain conditions for the adjustment of the excess rate of 3% (three percent) low income tax of 19% (nineteen percent) in effect in the 2020 and 2021 tax, and 17% (seventeen percent) starting in the 2022 fiscal year. benefits for corporate taxpayers is a reduction in tax rates on their business income and it can affect cash flow in doing business. the impact of the covid-19 pandemic has disrupted company cash flows, the government has formulated policies to stimulate conditions during the pandemic for all affected lines to experience a decline or slowdown so that they can return and move towards stability. the plan that has been announced is also related to increasing the restitution of tax refunds paid by taxpayers. currently, the maximum refund for individual non-employee income tax is rp.100,000,000.00 (one hundred million rupiah), for corporate taxpayers rp.1,000,000,000.00 (one billion rupiah), and taxable entrepreneurs (pkp) rp.1,000. .000,000.00 (one billion rupiah). the increase is up to idr 5,000,000. this policy was issued by the government to support the handling of the covid-19 pandemic to trigger the impact of the covid-19 pandemic to be reduced so that the minister of finance regulation no. 28/2020 concerning the provision of tax facilities for brand and services needed in the context of handling the 2019 covid-19 disease pandemic (minister of finance of the republic of indonesia, 2020b). policy benefits for taxpayers, namely a reduction in rates to an exemption from taxes imposed in connection with income obtained by the taxpayer. the point is to provide additional income for personal taxpayers (wpop) because they bear taxes on their income. additional capital in cash flow for corporate taxpayers (corporate taxpayers) https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 40 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) is used as a decrease in the payment paid for pph ps. 25 and a decrease in tax rates on business income because there has been a reduction in activities or even stopping businesses due to the impact of covid-19. the government also provides incentives for msme taxpayers, namely a reduction in tax rates so that the benefits can be used as innovation in business and survive during a pandemic like this. in handling the impact of the covid-19 outbreak. 5. conclusion zakat and taxes are two different things but both have a positive impact on the country if managed wisely. zakat is a muslim expenditure whose allocation has been stipulated in the qur'an. meanwhile, taxes are public contributions to the government. the government is authorized to collect taxes and issue policies on the allocation of tax funds. zakat has a high spiritual and moral purpose. taxes aim to generate money to fill the state treasury which will later be used for state spending. zakat and tax have several basic elements in common, zakat and tax also have several differences, the differences between zakat and tax are the use of funds, the purpose of obtaining, beneficiaries, tariffs, and others. between these differences, the two systems have the same main elements among them is that in terms of compulsion, zakat and tax are both obligations that one day must be or are forced to issue by the owner, in terms of their management, zakat and taxes can also be managed and regulated by state institutions. to be able to reduce the impact of the covid-19 pandemic, the government of indonesia with laws and regulations as a product of policies relating to the public interest has exerted its efforts in formulating policies to stimulate economic growth through tax zakat policies that will have an impact on indonesia's development. reference ac al anshory, fa hudaefi, ul junari, mh zaenal, r ramdhoni. (2020). “the role of zakat in institution in preventing covid-19. international journal of muamalat november 2020, vol. 4, issue. 1 issn: 2590-4337. aditia, dito. nasution, darma. erlina. iskandar. dampak pandemi covid-19 terhadap perekonomian indonesia. jurnal benefita. volume, 5(2) juli 2020 (212-224) lldikti wilayah x 212. al-mamun, a. & haque, a. (2015). “perception of muslim consumers towards tax deduction through zakat in malaysia: an empirical investigation of muslims in malaysia”. proceeding the first international conference on shari’ah oriented public policy in islamic economic system (icosopp 2015), pp.532-549. ahmad satori dkk. 2018. fikih zakat konstektual indonesia. jakarta pusat: penerbit: badan amil zakat nasional. isbn : 978-602-60470-4-5 badan amil zakat masional. 2020. indonesia. https://creativecommons.org/licenses/by/4.0/ analysis of zakat and tax policies during the covid-19 pandemic 41 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) hidayatulloh, m haris. peran zakat dan pajak dalam menyelesaikan masalah perekonomian indonesia. al-huquq: journal of indonesian islamic economic law, 1 (2), 2019: 102-121 issn: 2715-0003; e-issn 2714-5514. kusuma, h. 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(2011). decentralization and economic performance in indonesia. journal of east asian studies, 11(3), 337–371. rahman, afzalur. 1975. economic doctrines of islam (islam publication). doktrin ekonomi islam. yogyakarta: pt.dana bhakti wakaf, 1996 saputra, h. 2020. zakat sebagai sarana bantuan bagi masyarakat berdampak covid-19. al-ijtima`i: international journal of government and social science, 5. ridwan, murtadho. zakat vs pajak: studi perbandingan di beberapa negara muslim. jurnal ziswaf, vol. 1, no. 1, juni 2014. surahman, maman & ilahi, fadilah. 2017. konsep pajak dalam hukum islam. amwaluna: jurnal ekonomi dan keuangan syariah vol. 1 no.2 (juli, 2017), hal 166. issn : 2540. sugarda, p. p., & rifky, w. m. (2017). strengthening indonesia’s economic resilience through regulatory reforms in banking, investment and competition law. journal of economic & management perspectives, 11(3), 1093–1103. https://www.hukumonline.com/klinik/detail/ulasan/lt5facf01d6ff5f/ragam-kebijakaninsentif-dan-relaksasi-pajak-selama-pandemi/ diakses pada 18 april 2021 http://www.pajak.go.id/. diakses pada 18 april 2021 https://creativecommons.org/licenses/by/4.0/ https://www.hukumonline.com/klinik/detail/ulasan/lt5facf01d6ff5f/ragam-kebijakan-insentif-dan-relaksasi-pajak-selama-pandemi/ https://www.hukumonline.com/klinik/detail/ulasan/lt5facf01d6ff5f/ragam-kebijakan-insentif-dan-relaksasi-pajak-selama-pandemi/ http://www.pajak.go.id/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 42 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) https://analisis.kontan.co.id/news/dampak-ekonomi-pandemi-covid-19. https://creativecommons.org/licenses/by/4.0/ https://analisis.kontan.co.id/news/dampak-ekonomi-pandemi-covid-19 the effect of return on assets, company size and financial leverage on smoothing measures (empirical study on state-owned construction companies listed in the jakarta islamic index for the 2015-2018 period) 70 the effect of return on assets, company size and financial leverage on smoothing measures (empirical study on state-owned construction companies listed in the jakarta islamic index for the 2015-2018 period) ari kristin prastyoningrum1, dessy noor farida2, vanila hapsari3 1fakultas ekonomi dan bisnis islam, uin walisongo semarang, indonesia 2fakultas ekonomi dan bisnis islam, uin walisongo semarang, indonesia 3fakultas ekonomi dan bisnis islam, uin walisongo semarang, indonesia abstract the indonesian government announces that indonesia will have a new national capital, one of it’s aims is to smooth the people's economy. many companies in the construction sector owned by bumn have long been listed on the sharia stock exchange. with the existence of this mega project, the recording of profits of go-public companies as well as government-owned companies will receive special attention related to the recording of profits in several previous periods. however, investors must be observant regarding the possibility of companies taking income smoothing actions, some of which are through return on assets, size of the company and financial leverage. the object of research is bumn construction companies listed in the jakarta islamic index (jii) from 2015 to 2018. the samples used 3 companies based on purposive sampling. hypothesis testing uses multiple linear regression to test the effect of return on assets, size of the company and financial leverage on income smoothing actions by calculating income smoothing using the eckel index, the analysis technique used is linear regression and the hypothesis testing tool is spss 16. the results showed that return on assets and size of the company had no effect on income smoothing. meanwhile, financial leverage affects income smoothing. keywords: return on asset, size of the company, financial leverage, income smoothing. keywords: return on asset, ukuran perusahaan, financial leverage, income smoothing. 1. introduction indonesia is one of the countries that has a dense population. in 2017, the population was recorded at 264,000,000. along with the growth of indonesia's population, the government plans to move the state capital (ikn) to the north penajam paser city, east kalimantan province. one of the goals of the ikn line is for the indonesian economy to grow evenly, not centered on java island, while java island, especially dki jakarta, is already very dense and the economies of other islands are lagging behind. the economy is an important instrument for every country to prosper its people. one of the ways to achieve economic distribution outside java is that infrastructure must also supported. the state prioritizes the development of public infrastructure because it is in a development that can increase economic growth and public services equitably *corresponding author. email address: ari_kristin@walisongo.ac.id mailto:ari_kristin@walisongo.ac.id afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 71 in the long run. this prediction is evident from the fact that investment in the infrastructure sector increases every year. the impact of priority infrastructure is to provide accelerated growth for various related industries, but will also provide complexity through increased risk. infrastructure in this case is through state-owned construction companies that will plan and carry out the construction of the ikn. after it was announced that the ikn would move to north penajam paser city in 2024, now the land price in the area has increased dramatically even though the construction of the ikn plan will only begin in 2020. some of these bumns include publicly traded companies listed on the jakarta islamic index (jii), namely pt. waskita karya (persero) tbk, pt. waskita beton precast (persero) tbk and pt. wijaya karya (persero) tbk. the three companies are companies that will contribute to building a new ikn, this project can make share prices soar along with the ikn project agreement. investors are increasingly interested in investing in the three state-owned construction companies because they have large projects, and of course investors hope to get large dividends as well. oftentimes investors only look at annual reports in the profit and debt section, but it is likely that the company "makes" its financial statements with the aim of attracting investors by smoothing income. the aim is to prove to outsiders that the company has a low risk, provide relevant information in predicting future earnings, increase business relationship satisfaction, increase positive thinking from external parties regarding company performance. the practice of income smoothing carried out by management is a rational and logical action because there is a reason to reduce the current year's profit and expenses so that the tax payable on the company is smaller. this means that the company does not convey the company's financial condition so that investors only see reports made by management so that they can manipulate. on the other hand, hr. bukhari stated that ت سػ ػ يسٕئل ساء كمٔ ساء كهكى meaning: "each of you is a leader, and every leader will be held accountable" (narrated by bukhari) in the context of this research, the hadith states that the leader in this case is the one who manages finances and must be accountable to internal and external parties regarding the financial statements of the company one leads. 2. hypothesis agency theory agency theory is a relationship or contract between the owner (principal) and the agent, this is what happens in modern companies. the principal is the individual who invests in a company while an agent is a person who works for the principal and provides information to the principal about how the company is doing. agency theory assumes that each individual acts in accordance with their own personal interests, so that it can create a conflict of interest between the owner (principal) and the agent. the difference in interests between each party, especially from the manager whose performance is measured based on the profit generated makes the manager try to achieve his desires easily through the manipulation of earnings contained in the financial statements with income smoothing. the effect of return on assets, company size and financial leverage on smoothing measures (empirical study on state-owned construction companies listed in the jakarta islamic index for the 2015-2018 period) 72 perataan laba (income smoothing) income smoothing is an action to minimize fluctuations in earnings that will be reported in each period. income smoothing is used to smooth the fluctuations in earnings that occur each period so that the amount of profit generated for each period does not overly fluctuate. so that users of financial reports assess that the company's management performance as seen from the profit shows a definite performance, so that potential investors are sure of the profits that will be generated by a company. methods often used to distribute profits: 1. companies now prefer discount and credit policies. at the end of the quarter period, the amount of accounts receivable and sales and profits will appear stable at a certain period position. 2. smoothing through the timing of transactions or transaction acknowledgments. smoothing through allocations for certain periods. return on asset return on asset is a ratio used to determine the ratio of net profit after tax to total company assets. the company's ability to generate profits on the basis of its assets shows the value of roa. the variable return on asset (roa) is measured by earning after tax (the ratio between profit) after tax and total assets, the calculation of roa uses a ratio scale. return on asset (roa) = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 x 100% 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 company size the size of the company or firm size is the size or size of the company which is assessed in terms of total assets consisting of sales, total assets and others. financial leverage leverage can occur when a company in its operations uses assets and sources of funds. the use of assets that cause fixed expenses is called operating leverage, while the use of funds with fixed expenses is called financial leverage. definition of profit accounting profit has characteristics, including: a. accounting profit is based on actual transactions primarily those that arise from the sale of goods or services. b. accounting profit is based on the periodization postulate and refers to the company's performance in a certain period. c. accounting profit is a measurement of expenses in the form of historical costs. purpose of profit reporting indirectly, earnings information can be used to fulfill various purposes including: a. the basis for making business decisions by the company management b. management achievement measure. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 73 c. the basis for determining the amount of corporate tax. d. determine the dividends to be distributed. islamic view of profit in the national sharia council fatwa no. 87 / dsn-mui / xii / 2012 allows income smoothing by taking into account: a. decree of aaoifi (accounting and auditing organization for islamic financial institutions) in syari's syari, number: 12 (number 3/1/5/14) which states if: "based on the company's articles of association or the decision of the shareholders, the company may hold company profits without being shared, or set aside a certain amount of profit periodically to strengthen the company's performance (solvency reserve) or form a special reserve to mitigate the risk of capital loss (investment risk reserve). or to maintain the stability of the profit sharing (profit equalization reserve) " b. opinion of wahbah al-zuhail in kitabal-fiqhal-islami wa adillatuhu (juz v, p. 3939): “the hanafiah ulama is exaggerating to make a condition that one of the parties with the contract receives a certain amount of dinar which is known in terms of business profits exceeding a certain value. this requirement is considered valid and does not affect the validity of the mudharabah contract, because it does not lead to unclear profit (share). " decided that: the income smoothing method is an arrangement for the recognition and reporting of profit or income from time to time by retaining a portion of the income in one period and diverted it in another period with the aim of reducing excessive fluctuations in profit sharing between islamic financial institutions ( lks) and customers who deposit funds (third party funds or dpk) theoritical framework : return on asset (roa) relationship with income smoothing changes in roa indicate changes in management's ability to generate profits by utilizing assets used in operating activities. if the change is bigger, it shows the greater the fluctuation in management's ability to generate profits. this situation affects investors when predicting profit and also predicting risk in investment so that it has an impact on investor confidence in the company. meanwhile, on the other hand, management is motivated to carry out income smoothing practices so that reported earnings do not company size financial leverage return on asset income smooting the effect of return on assets, company size and financial leverage on smoothing measures (empirical study on state-owned construction companies listed in the jakarta islamic index for the 2015-2018 period) 74 fluctuate so as to increase investor confidence in companies that have invested capital. in addition, a management practices income smoothing so that investors who have already invested in the company will continue to the next period and also attract new investors. h1: return on assets has an effect on income smoothing. hubungan ukuran perusahaan dengan perataan laba one of the reasons for involving company size as an estimate of the effect of income smoothing is because small companies (the number of assets) have a tendency to carry out income smoothing practices compared to companies with relatively high total assets. this is because large companies get more "attention" (from investors) than small companies. the bigger the company, the greater the attention paid by the public or investors to the company, so that the bigger the size of the company, the less chance for managers to take income smoothing actions. h2: firm size has no effect on income smoothing. relationship between financial leverage and income smoothing debt level or better known as financial leverage reflects the extent to which the company's assets can overcome the debt owned by the company. financial leverage can be detrimental to the company if the company cannot get income from the use of these funds in the amount of fixed expenses that are regularly paid. companies with low financial leverage ratio analysis have a smaller risk of loss, but also have lower returns. if the company has an analysis of financial leverage ratios or high debt levels, but also has the opportunity to earn a higher profit, and vice versa. h3: financial leverage affects income smoothing action 3. methodology this study uses secondary data, considering that secondary data obtained from the jii website is in the form of annual financial reports from 2015 to 2018 as well as other supporting data from the official websites of the related companies. the data collected is the annual report data and financial reports from construction companies owned by bumn which are registered in jii from 2015 to 2018. the population is bumn-owned construction companies whose shares are listed on the jakarta islamic index from 2015 to 2018. meanwhile, the sampling technique used is all bumn-owned construction companies listed in jii. from the above characteristics, it is found that companies engaged in construction owned by bumns registered in jii from 2015 to 2018, there are 3 construction companies owned by bumn, namely pt waskita karya (persero) tbk with the ticker code wskt, pt wijaya karya (persero) tbk with the ticker code wika and pt waskita beton precast tbk with the ticker code wsbp. this study uses purposive sampling technique, with the criteria applied are: 1. state-owned construction company registered in jii 2015-2018. 2. bumn-owned construction companies that are not bumn subsidiaries. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 75 3. companies that report audited annual financial statements for the 2015-2018 period. 4. availability and completeness of audited 2015-2018 data. research variables and measurement variables are presented in the table below : table 1. variables and measurement variables variable operational definition measurement income smoothing income smoothing is an action to minimize fluctuations in earnings that will be reported in each period. measurement of income smoothing uses the eckel index (1981) using the index coefficient variation (cv) income smoothing = cv δi cv δs where : δi : change in profit over a period of time s δs : change in operating income for a period cv : the coefficient of variation of the variable, namely : 𝐶𝑜𝑒𝑓𝑓𝑖𝑐𝑖𝑒𝑛𝑡 𝑣𝑎𝑟𝑖𝑎𝑡𝑖𝑜𝑛 = standard deviation 𝐸𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 thus, cv δi = coefficient of variation for changes in earnings cv δs = coefficient of variation for changes in income cv δi or cv δs can be calculated as follows: cv δi and cv δs = √∑ ( δx − δx ) n−1 if the eckel index value is ≥ 1, then the company does not do income smoothing and is given the symbol 0. whereas if the eckel index value is <1, then the company practices income smoothing and is given symbol 1. return on asset return on asset is a ratio used to determine the ratio of net profit after tax to total company assets. return on asset (roa) = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐴𝑓𝑡𝑒𝑟 𝑇𝑎𝑥 x 100% 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 company size the size of the company or firm size is the size or size of the company which is assessed in terms of total assets company size = total assets financial leverage use of funds with fixed expenses. 𝐷𝑒𝑏𝑡 𝑡𝑜 𝑒𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 = total liabilities asset capital the effect of return on assets, company size and financial leverage on smoothing measures (empirical study on state-owned construction companies listed in the jakarta islamic index for the 2015-2018 period) 76 the research data will be analyzed using the spss analysis tool to test the hypothesis. 4. analysis descriptive statistics table 2. descriptive statistics source: processed data, 2019 the minimum value for the variable return on asset in bumn-owned construction companies is 0.3 and the maximum value is 0.11 with an average value of 0.559. this means that the ratio of the smallest net profit after tax is 0.3 and the largest net profit ratio is 0.11. the standard deviation of 0.0226 shows the variations contained in the return on assets of construction sector companies. from the data on return on assets or profitability, it can be seen that the average value is 0.559 with a standard deviation of 0.0226, a standard deviation value that is smaller than the average indicates that the construction company being the sample is less varied or the sample lacks many values to be tested. the average value of return on assets of 0.559 is closer to the maximum, so that the average value of return on assets in this sample is quite high. fixed assets in each sample company from year to year tend to increase. there are several factors that influence this, namely an increase in asset value, an increase in fixed assets which increases in value every year and so on. the firm size variable has the smallest value of 10.32 and the largest value is 18.64 with an average value of 16.6378. thus the value of company size affects the cv∆i calculation which will also affect the income smoothing calculation. however, with an average value of 16.6378 this figure is not yet close to negative, so that the average company size value in the sample used is quite varied. variable financial leverage of the company, the greater the value of these variables, the greater the value of the ratio of debt to total assets. the smallest type of construction business was 0.45 and the largest value was 3.31 with an average value of 1.8672. this means that the sample companies have the least ratio between debt to total assets is 3.31. the standard deviation value for the financial leverage variable is 1.0621, which is greater than the mean value of 1.8672. this result shows that the construction companies owned by the bumns sampled in this study have on average financial leverage or use sources of funds from investors to finance operational activities. the company has a mean result of 1.8672 which is greater than the mean firm size. this result n min max mean std. deviation return on asset 12 .03 .11 .0559 .02264 company size 12 10.32 18.64 16.6378 2.20768 financial leverage 12 .45 3.31 1.8672 1.06218 income smoothing 12 -4.82 2.01 -.3178 1.62733 valid n (listwise) 12 afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 77 is due to an increase in accounts payable experienced by each sample company. however, the increase in trade payables is directly proportional to the increase in construction work income. descriptive analysis test for the dependent variable, namely income smoothing, it can be seen that the standard deviation value is 1.627 and the mean value is -0, the smallest is -4.82, this means that most of the sample companies through the eckel index calculation do not perform income smoothing. the highest value of the income smoothing variable was 2.01, which means that from all data samples of construction companies owned by bumn that were listed in jii, there was only 1 company in 1 period that carried out income control measures. low income smoothing reflects the high level of honesty and transparency of management in the financial statements presented. classic assumption test normality test the normality test is carried out to test whether the regression model is normally distributed or not. normal distribution is detected using nonparametric statistical analysis kolomogorov-smirnov (k-s) with the decision rule if the significant value is more than alpha = 0.05, it can be said that the data is normally distributed. based on the spss output table, it is known that the significance value of asymp.sig (2-tailed) is 0.704> 0.05. based on the decision making in the kolmogorov-smirnov normality test in the table, it can be concluded that the data is normally distributed, meaning that the companies that are the sample are normally distributed. multicollinearity test the multicollinearity test was carried out using the vif value. a variable shows multicollinearity symptoms seen from the vif (variance inflation factor) value greater than 10, then multicollinearity occurs. following are the multicollinearity test results: table 3. one-sample kolmogorov-smirnovvtest unstandardized residual n 12 normal parametersa,b mean 0e-7 std. deviation ,76707224 most extreme differences absolute ,203 positive ,144 negative -,203 kolmogorov-smirnov z ,705 asymp. sig. (2-t ailed) ,704 a. test distribution is normal. b. calculated from data. the effect of return on assets, company size and financial leverage on smoothing measures (empirical study on state-owned construction companies listed in the jakarta islamic index for the 2015-2018 period) 78 tabel 4. coefficientsa model unstandardized coefficients standardized coefficients collinearity statistics b std. error beta tolerance vif 1 (constant) -.221 2.130 return on asset -17.731 12.825 -.247 .872 1.147 companiy size .145 .128 .196 .918 1.089 var_x3 -.425 .081 -.965 .824 1.213 a. dependent variable: perataan laba based on the output table "coefficients'' in the "collinearity statistics'' section, it is known that the vif value for the variables return on asset (x1), company size (x2) and financial leverage (x3) <10. so it can be concluded that all independent variables are used in the research regression model. it is free from multicollinearity. heteroscedasticity test the glejser test is a hypothesis test to determine whether a regression model has an indication of heteroscedasticity or not in the presence of an inequality of variants of the residuals for observations in the regression model. tabel 5. coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) .486 .830 .586 .574 return on asset 5.508 4.995 .318 1.103 .302 company size .001 .050 .005 .018 .986 var_x3 -.050 .031 -.470 -1.585 .152 a. dependent variable: abs_res2 heteroscedasticity test with glejser test saw the output table "coefficients" with the variable abs_res2 acting as a role as the dependent variable. based on the output, it is known that the significance (sig) for the variable return on assets (x1), company size (x2) and financial leverage (x3) which has been transformed has a significance value greater than 0.05, so according to the basis for decision making in the glejser test, it can be concluded that there are no symptoms of heteroscedasticity. autocorrelation test i the autocorrelation test is carried out by using the run test, the results are as follows: afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 79 tabel 6. runs test unstandardiz ed residual test valuea .10877 cases < test value 6 cases >= test value 6 total cases 12 number of runs 8 z .303 asymp. sig. (2tailed) .762 a. median based on the "unstandardized residual" output, the asymp value is known. sig. (2-tailed) is 0.762> 0.05, which means that the null hypothesis failed to be rejected. thus, the data used is quite random or random so that there is no autocorrelation problem in the variables being tested. hypothesis testing hypothesis testing is a process to test the significance of multiple linear regression coefficients partially related to the hypothesis statement used in the study. tabel 7. coefficientsa model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) -.221 2.130 -.104 .920 return on asset -17.731 12.825 -.247 -1.382 .204 company size .145 .128 .196 1.129 .292 var_x3 -.425 .081 -.965 -5.258 .001 a.dependent variable:perataan laba the variable return on assets with income smoothing and company size has a value of sig> 0.05, which means that there is no significant effect between return on assets and company size on income smoothing. financial leverage variable with test value = 0.001> 0.05, which means that financial leverage has a significant effect on income smoothing. the results of the simultaneous significant test (f test) produce a sig. with a value of 0.005 ˂ 0.05, it can be concluded that there is an influence between return on assets (x1), company size (x2), and financial leverage (x3) on income smoothing action (y). the effect of return on assets, company size and financial leverage on smoothing measures (empirical study on state-owned construction companies listed in the jakarta islamic index for the 2015-2018 period) 80 based on the model summary table, it is known that the magnitude of the influence of return on assets, company size and financial leverage (simultaneously) on the performance calculated by the correlation coefficient is 0.778, this indicates a moderate effect. meanwhile, the simultaneous contribution or contribution of the variable return on assets, company size and financial leverage to income smoothing is 77.8% while 22.2% is determined by other variables. the probability value (sig f change) = 0.005 ˂ 0.05, the decision is that simultaneously return on assets, company size and financial leverage have a significant effect on income smoothing actions in bumnowned construction companies listed in jii from 2015 to 2018. the standard error of the estimate value results in a value of 0.8994, this indicates a value that is not too large so that it can be concluded that the regression model is suitable to be used to predict the dependent variable. meanwhile, the r value of 0.882 shows that the relationship between the dependent variable and the independent variable (roa, company size and financial leverage) is quite strong. 5. results income smoothing referring to the results of this study's calculation, it shows that the majority of state-owned construction companies are classified as non-grading. there is only 1 company in 1 period that is classified as a leveler, namely pt waskita beton precast (persero) tbk in 2017. from these results, the calculation of income smoothing, that later the red plate construction company will spearhead the development of a new capital free from income smoothing, so that the government will be able to make correct and accurate decisions regarding everything related to development expenditures. based on the results of the eckel index test using categorized samples, in this study most companies did not perform income smoothing. however, there are other variables that can prove that the sample does income smoothing through the variables used in this study. return on asset (roa) return on asset is a ratio used to determine the ratio of net profit after tax to the total assets of the company. the roa value shows the company's ability to generate profits based on the assets owned by each company. tabel 8. model summary model r r square adjusted r square std. error of the estimate change statistics r square change f chang e df1 df2 sig. f change 1 .882a .778 .694 .89947 .778 9.335 3 8 .005 a. predictors: (constant), var_x3, ukuran perusahaan, return on asset afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 81 based on the results of the analysis carried out on 3 construction companies owned by bumn, the jakarta islamic index for the 2015-2018 period obtained results that describe the level of income smoothing. the smoothing index value of the smallest construction company is 0.482936 which is obtained from the comparison of the coefficient of variation (cv) of change in earnings (∆i) and the coefficient of variation (cv) of change in sales in one period owned by pt wijaya karya (persero) tbk. meanwhile, the largest smoothing index is 0.556366 at pt waskita karya (persero) tbk. the results of descriptive statistics in this study show that the average construction company owned by bumn has the value of sig. 0.204 ˃ 0.05 then there is no effect of the roa variable on income smoothing. this indicates that the income smoothing action for construction companies owned by bumn is low. this is probably due to the assumption that income smoothing is an act of fraud that is prohibited and must be prevented. however, in this study using an object on sharia stocks, specifically the jakarta islamic index, where if the company is going to enter or list the sharia securities, of course, it has met the predetermined requirements. mui dsn fatwa no. 87 / dsnmui / xii / 2012 has considered if the company is allowed to save or reserve profits with the intention of guarding against possible unfavorable conditions in the next period so that it can make a company's profit decline and also the company's operational continuity. in addition, this can also indicate that management is less able to reduce the fluctuations in reported earnings. the best of all things considered, this article was originally published in indonesian language. the results of this study are contrary to the hypotheses that have been formulated, but are in line with the results of research conducted by shanie sukmawati, kuasmuriyanto and linda agustina (2014) which result that return on assets has no effect on income smoothing. company size in the t test it is known that company size has an effect of 0.292 ˃ 0.05, so there is no effect on income smoothing action. this result is in line with the hypothesis stated in the previous chapter if h2: firm size has no significant effect on income smoothing. the results of this study, which means that the bigger the company, the less chance the company manager will practice income smoothing. the insignificance of the size of the company in this study is probably due to the fact that company managers in terms of income smoothing practices have different personal interests regardless of whether the company is large or small, which means that large and small companies have the opportunity to carry out income smoothing practices depending on the personal manager of each company. in addition, company size has no effect on income smoothing because the income smoothing carried out by the sample companies is not triggered by the size of the sample companies, but on the basis of the company's goal of wanting a larger investment. during this research, the company had high assets because there was also an increase in projects in line with the central government's work program, namely infrastructure development to support the indonesian economy. this result is the same as the research conducted by shanie sukmawati, kuasmuriyanto and linda agustina (2014) which results that company size has no effect on income smoothing. in addition, research conducted by harris prasetya and shiddiq nur rahardjo (2013) also shows that there is no effect. the effect of return on assets, company size and financial leverage on smoothing measures (empirical study on state-owned construction companies listed in the jakarta islamic index for the 2015-2018 period) 82 financial leverage financial leverage is measured by using total debt (liabilities) divided by total capital (equity) to produce a debt to equity ratio (der). in calculating the der, the composition of debt and equity is shown. the debt every year at each company tends to increase every year. this is the impact of routine activities of construction sector companies, namely other trade payables and equipment lease payables. in addition, there was also an increase in short-term bank debt by third parties. based on the test results of the influence of the financial leverage variable using the der calculation on earnings after transforming the variable using the variance, it is known that the t test for the financial leverage variable has a sig value. 0.001 ˂ 0.05, then there is an effect of the variable financial leverage on income smoothing. this result is in accordance with the hypothesis that "financial leverage affects income smoothing action" is accepted. this is consistent with research conducted by sartono (2001) in diastiti (2010) that financial leverage shows the portion of debt use to finance investment. in addition, research conducted by siti, muslih and wiwin (2019) also stated that der has an influence on income smoothing. in addition, there is research from nur fitri, eyo astro sasmita and amir hamzah (2018) which also shows that financial leverage has an effect on income smoothing. the results showed that the financial leverage variable has an effect on income smoothing action, this means that if the company's debt is high, the company's risk is also high. companies that have a high risk can make investors get more dividends from the investment they have given to the company. this can make managers practice income smoothing, so that the resulting profit looks stable (profit fluctuations are not too high or too low between periods). if the manager records a stable profit, investors will assume that the company is able to reduce risk. 6. conclusion 1. generate analysis showing that return on asset has no significant effect on income smoothing actions in bumn-owned construction companies listed in jii 2015-2018. this indicates that management is less able to reduce reported fluctuations in earnings, because within a certain period of time it is likely that a company will experience fluctuations in earnings. 2. the results of the analysis show that company size has no effect on income smoothing actions in state-owned construction companies listed in jii 20152018. this proves that big or small a company has the opportunity to take income smoothing action depending on the personal manager of each company. 3. the results of the analysis show that financial leverage has an effect on income smoothing action in state-owned construction companies listed in jii 20152018. from these results it can be concluded that the higher the level of financial leverage of the company, the company chooses to practice income smoothing. limitations this study has limitations, namely: afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 83 1. using the eckel index (1981) which may have an insignificant effect on research conclusions. 2. the number of research objects only focuses on 3 companies for 4 periods so that the sample that can be used is 12. 3. only use three variables of return on assets, company size and financial leverage suggestion 1. future research, if you want to use state-owned companies, can combine it with private companies with similar fields so that a larger number of samples can be obtained. 2. research that focuses on income smoothing should use an index or other calculation similar to the eckel index (1981). 3. for research that will test income smoothing as the “y” variable, it is necessary to use other variables or add variables, such as type of business, net profit margin (npm), ownership structure or other variables. reference ari kristin prasetyoningrum, “pengaruh ukuran perusahaan, leverage , efisiensi biaya , dan umur perusahaan terhadap islamic social reporting ( isr 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(2013). faktor-faktor yang mempengaruhi perataan laba perusahaan manufaktur yang terdaftar di bursa efek indonesia. e-jurnal akuntansi. behavior of stock return ; evidence from indonesia and malaysia shariah stock market 19 behavior of stock return ; evidence from indonesia and malaysia shariah stock market helma malini universitas tanjungpura, indonesia abstract this study aims to determine stock return behaviour in indonesia and malaysia shariah stock market. indonesia and malaysia are selected based on the countries level of development and geographical factor, since both countries are emerging market with a rapid growth of shariah stock market not only in term of listed companies but also in term of number of investor. based on geographical proximity, both countries close to each other and have a strong bilateral relationship which makes their stock market return behaviour influence by many factors. this studies relies on two major time series investigation techniques, namely economteric modeling of returns; the autoregressive model, assumption of linearity, volatility modeling of garch and its extension. the result showed that stock return behavior happening in indonesia and malaysia shariah stock market. keywords : behavior of stock return, integration, shariah stock market, volatilities 1. introduction the study of stock return behaviour related with information availability and how market prices fully reflect all available information particularly price reaction toward news and events that known as stock return behavior has evolved over the years. the evolution of these studies has contributed to the development of emh as a theory into many concepts and areas of research interest. several studies have focused on the role of emh toward investor behavior and stock return behavior, such as return behavior, seasonal anomaly, equity market integration and stock market volatility. several major events hits stock market all over the world, followed with the instability of political and social economic condition forced capital market industry particularly investor to seek stable platform of portfolio (see trihadmini, 2011). the stability toward financial crisis can be found in the portfolio of investment that offer less shocking volatility toward news and events that happened in one country. financial crisis that hit the world in 1997 and 2008 has proven a setback for asset gatherers of all kinds in all marketplaces, but it is possible for stock market to derive a long-term benefit because of the capability to serve as an optional investment that is more prone to crisis (price water house coopers, 2009). *corresponding author. email address: helma.malini@ekonomi.untan.ac.id mailto:helma.malini@ekonomi.untan.ac.id afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 20 table 1. characteristics of indonesia and malaysia shariah stock market country s&p category capitalization (end 2019 uss million) change % value traded (end 2019 uss million) turnover ratio listed companies indonesia emerging 172 -22 211.1 2.1 502 malaysia emerging 389 -30 2.198.4 6.2 925 source: standard & poor’s (2012) table 1. describes the characteristics of indonesia and malaysia shariah stock market in terms of capitalization, trading value, turnover ratio and number of listed companies. as emerging markets1, indonesia and malaysia are in the process of rapid growth in shariah financial industry. financial industry growth particularly the growth of capital markets in term or rules, policy, product and socialization. the growth of capital market in indonesia and malaysia depends on several factors such as political stability, domestic infrastructure development, currency volatility, seasonal anomaly, integration with other countries and several other correlated and uncorrelated factors. those factors will eventually create efficient market in indonesia and malaysia shariah stock market. stock return behavior is a result from investor behavior; investors tend to response toward news and events in certain pattern that will influence stock price. “good” or “bad” news often forming “up” or “down” trends in stock market. stock return behavior is an equilibrium price from supply and demand mechanism in stock exchange, where intrinsic value of stock price describes the present value from cash flow that should be received by investor in the future. present value of stock price should have represented risk and time of the stock price. when new information is arriving to stock market, investor will adjust by buying or selling the securities, resulting to changing of current price at real value. on the contrary, uninformed investor in stock market, response with a delayed toward information either because the cost of acquiring information is high or information is unreliable. therefore, the relationship between prices and information flow in stock market may be non-linear. the level of market efficiency in indonesia and malaysia shariah stock market depends on whether the news incorporates all available information in the stock markets (ardiansyah and qoyum, 2011). however, the implementation of trading system in shariah stock markets makes the dependency level toward macro variable very high. the volatility of conventional stock market will directly influence the level of shariah 1 emerging stock markets are defined by the standard and poor‟s emerging markets database (emdb) to consist of stock markets in the developing countries, i.e. lowand middle-income economies. the standards and poor’s emerging market database classifies a stock market as `emerging’ if (i) it is located in a low or middle income economy (which, according to the world bank high income economies, are those with gross national income (gni) greater than $9,386 as of 2003); (ii) its investable market capitalization is low relative to its most recent gni figures, see s&p (2005 p. 70). this definition effectively puts indonesia and malaysia markets in our sample into the category of emerging market economies. behavior of stock return ; evidence from indonesia and malaysia shariah stock market 21 stock return behaviour. in stock market, company performance is a valuable tool not only to measure the level of profit that will be earned by the investors but also as a measurement for a proper trading mechanism in stock market. while, in shariah stock market, efficient stock market should describe the real and most current condition of the company that listed in the stock market that eventually will form the real stock price that is based on fairness and transparency. 2. literature review given the volatility of indonesia and malaysia shariah stock market, detected episodes of non-linearity is the result toward market adjustment described in stock price. in stock market, large movement of stock return or asset prices is important to analyze to measure the cause and impact to stock market. hsieh (1990) noted that there are several news and events that can influence stock price behavior. the 1987 financial crisis is major events that brings extreme bearish or bullish to stock market. hsieh (1990), also marked the beginning of non-linear behavior, hsieh stated that large moves in stock market due to chaotic dynamics that will always follow nonlinear dynamics through a process that will never down. remembering that indonesia and malaysia have experience two major crises, the 1997 monetary crisis and subprime mortgage crisis in 2008, study about stock return behavior is very important considering indonesia and malaysia stock market uniqueness; large population, behavioral investing culture and volatile investing environment (michayluk and neuhauser, 2006; otchere and chan, 2003) among comprehensive study on stock return behavior, attempts to further reveal stock return behavior in term of stylized facts and news events are still limited, particularly research that focusing on return behavior. lim and hinich (2005) study the market behavior of asian stock market indices using hinich portmanteau bi-correlation test in conjunction with the windowed testing procedure to examine the cross-temporal universality of non-linear serial dependencies. the result confirms that all asian stock market indices are appeared to be stable showed by the non-existence of non-linear serial dependencies. as the measurement tools to forecast volatility, non-linearity can capture the dynamics of feature of return; however, this model should be using high frequency data. volatility of stock returns behavior toward news and events also describing the availability of public information. the process of measuring stock return behavior toward news and events is by examining time lag between how long information is available to stock price adjustment. in efficient market context, efficient information happened if stock market price change immediately and unbiased upon the arrival of new information (gaunt, 2000; lai, et al., 2003 and lihara et al., 2004) the changing showed that the volatility of price through normal condition, seldom lead investor to earn abnormal profit (meidawati and harimawan, 2004). several news and events are considered to have significant influence, particularly to stock return behavior. other than financial information, news and events in politics, economy and national securities issue will also reflected in stock price. according to hadi (2006) market price adjustment depends on how rapid and accurate the information delivered to investor. several factors contribute to the accuracy of information delivered to investor, including time, place and technology. choo and loo (2011) investigates the existence of spillover effect in malaysia stock market. specifically, they study the return and volatility spillover effects between afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 22 bursa malaysia composite index (klci) and bursa malaysia main board index. multivariate garch model employed in the study and reveal that small stocks that less government intervention and less restricted compared to larger stocks tend to have more loyal investor, less frequent “buying and selling” strategy and difficult to accumulate public fund for business. thus, small stocks companies are characterizing with volatility in stock price. the result also proved the dominance effect of large stocks in malaysian market indicates that information is first incorporated into prices of larger stocks before being explicitly embedded into prices of smaller stocks. hence, these stocks are interrelated and the spillover effect should be taken into consideration during investing in malaysian market. however, the testing of spillover effect is more precise if using risk premium as a default to measure the volatility and dynamics of stock market price. 3. research method 3.1 data table 2. selected countries for return behavior research country indices number of listed companies indonesia (id) indonesia shari’ah compliance (isc) 502 malaysia (my) kuala lumpur shari’ah compliance (klsi) 925 3.2 methodology the discussion is channeled towards return behavior in indonesia stock exchange shariah stock market and bursa malaysia shariah stock market. previous empirical evidence concentrates on the behavior of individual stock price or stock price index followed a random walk by using standard statistical techniques such as serial correlation tests (munir et al., 2012; lim et al., 2007; cheong, 2007). 3.3. econometric modeling of returns 3.3.1. the autoregressive model the methodology is consisting of; fitting an ar(p) to the return series and check the whiteness of the residuals, and following a finding of no further residual autocorrelation, continue with subject the residuals of the ar(p) to a battery of test to ensure that the residuals are independently and identically distributed (ii). if the result fails to explain the behavior of the data and there is evidence against iid, then the process continues with looking beyond the linear model to explain the remaining structure of the series. after the assumption of linearity is fulfilled number of possible ways of modeling a time series increases dramatically, covering such classes as chaotic dynamics. (mills, 1995). let ∆ log pt be stock returns: the ar (p) model is then ( ) ttp plogl  = behavior of stock return ; evidence from indonesia and malaysia shariah stock market 23 where the ar polynomial in l of order ρ is ( ) p p1p l...l1l  −−−= and εt satisfies the white noise properties       ts 0e ande,0e nt 22 11 ===  3.3.1.2. testing the assumption of linearity interest toward non-linearity and chaotic processes increased after a large movement of stock price because of severe crisis and stock market crash (hsieh, 1990). the indication of large movement in stock market in term of capital has triggered unanticipated decision toward news and events particularly news and events with a huge shock and impact to stock market. as a form to challenging emh and forecasting stock price movements, chaos and non-linearity observed the chaotic toward a large movement of stock price due to response of “bad or good” news. however, the assumption of non-linearity is limited in financial time series, (particularly in term of autocorrelation-based procedures in testing the weak-form emh). 3.3.1.3. volatility modeling modeling and forecasting stock return volatility is central to modern finance because risk volatility increased due to market uncertainty and the attempt from market participant to manage asset pricing, asset allocation and risk management. two approaches generally used are the garch and stochastic volatility (sv) models. in their standard forms, the ensuing volatility processes are stationary and weakly dependent with autocorrelations that decrease exponentially (lu and perron, 2009). arguably, volatility, as measured by standard deviation or variance of returns where there is a dispersion of returns for a given security or market index. 3.3.1.4. wild bootstrapped automatic variance ratio (wbavr) test let yt be an asset return at time t, where t = 1,2,...,t. choi‟s (1999) avr test statistic takes the following form:  − − += 1 1 )(ˆ)/(21)( t i ikimkvr  where )(ˆ i is the sample autocorrelation of order i. these estimations follow choi (1999) and use the quadratic spectral kernel for the weighting function so that ( ) ( )      −= 5/6cos 5/6 5/6sin 12 25 )( 22 x x x x xm     according to choi (1999), vr(k) is a consistent estimator for the normalized spectral density for yt at zero frequency. under the null hypothesis that yt is serially uncorrelated, choi (1999) shows that:   ( )1,02/1)(/)( nkvrktkavr d⎯→⎯−= afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 24 as k , t , t k , when yt is generated from a martingale difference sequence with proper moment conditions. in order to choose the value of lag truncation point (or holding period) k optimally, choi (1999) adopts a data-dependent method of andrews (1991) for the spectral density at the zero frequency. the automatic variance ratio test statistic with the optimally chosen lag truncation point is denoted as avr( k̂ ). to complement the avr( k̂ ) test, the normal critical values are used at 2.576 and -2.576 for 1% level of significance. this is based on the asymptotic approximation using the limiting distribution given in. however, this approximation can be inadequate in small samples, especially when yt is subject to conditional heteroscedasticity. following kim (2006), the wild bootstrap for avr( k̂ ) is conducted in three stages as below: (i) form a bootstrap sample of t observations ttt yy = * t 1,...,t where t  is a random sequence with ( ) e ( ) t  = 0 and e ( )2t =1; (ii) calculate avr* ( k̂ *), the avr statistic obtained from   t tt y 1 * − ; and (iii) repeat (i) and (ii) b times to form a bootstrap distribution . the two-tailed p-value of the test is obtained as the proportion of the absolute values of ( ) b j jkavr 1 ** ; = greater than the absolute value of avr( k̂ ). the 100 1 2 % confidence interval for the test can be obtained as the interval [avr*(x), avr*(1 – x)], where avr*(x) represents the α the percentile of ( ) b j jkavr 1 ** ; = . if the test statistic avr( k̂ ) lies outside this interval, the null hypothesis is rejected at the 1 2 level of significance. 3.3.1.5. the garch model and its extension for return volatility, particularly type of models for conditional heteroscedasticity, omitted in review article of fama (1991) are the so-called garchm models (engle et. al, 1987), in which the conditional variance can be used as a predictor for returns. the mean equation of stock returns can be described as ( ) −++= t11t,i-tit h0, nid~plogplog t ttt hz= where, z is iid with zero mean and unit variance. the conditional variance [ ht ] is ( ) ( ) t 2 t q 1i p 1i i-ti1t 2 it hll hh   ++= ++=   = = − ( ) b j jkavr 1 ** ; = behavior of stock return ; evidence from indonesia and malaysia shariah stock market 25 the αi in modeling the short run persistence of shocks while the βi represent long run persistence. the parameters α (l) = α1l + …αqlq and β(l) = β1l+…+βplp are equivalent to an arma (p, q) if all the roots of 1-β (l) lie outside the unit circle. the conditional variance must be non-negative. this necessitates the following restrictions on the parameters: ω > 0, α > 0 and βi ≥ 0. the condition is:   == + j p 1j1 q 1i  imply that garch process is weakly stationary since mean, variance, and auto covariance are finite and constant over time. however, this condition is not sufficient for weak stationary in the presence of autocorrelation. when the garch process is stationary, the unconditional variance of ɛᵗ, is computed as ( )       − =  = = q 1i p 1j j1 t 1   v the standard garch often produces evidence that the conditional volatility process is highly persistent and possibly not covariance-stationary, suggesting that a model in which shocks have a permanent effect on volatility might be more appropriate. one limitation of this process, when applied to financial data, is that the garch model has short-memory because volatility shocks decay at a fast-geometric rate. another problem encounter when using garch model is that they do not always fully embrace the thick tails property of high frequency financial time series. in other meaning, a way to represent the observed persistence of volatility in the returns is to approximate a unit root. the result is the integrated garch (igarch) model,  = = =+ q 1i j p 1j1 1 in this formulation, shocks to current volatility are highly persistent. this suggests that current information remains important for forecasts of the conditional variance for all horizons (engle and bollerslev, 1986, and bollerslev et al., 1992). ( )( )( ) ( )( ) t 2 t d vl1l1 l1  −+=−− with a (l) and, β (l) being polynomials of order q and p, and 0 < d < 1 is the fractional integration parameter. defining vᵗ = ɛᵗ² hᵗ and rearranging the igarch (p, d, q) model can be expressed as ( ) ( ) ( )( )( )( ) 2 t d tt l1 l1l 1h l h  −−−−++= the advantage of the figarch is that it parsimoniously decouples the long-run and short-run movements in volatility by adding an additional parameter to garch (1, 1) model. the long-run component is captured by the fractional differencing parameter d and the short-run component by the lag polynomials. for the case of d=0, the figarch reduces to the standard garch model. however, many models of asset afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 26 pricing relate expected returns to some measure of risk (e. g., the capital asset pricing and arbitrage pricing models). t titit εhploglogp +++= −  in indonesia and malaysia shariah stock market, daily data for nominal risk-free returns are not available and therefore empirical testing of the risk premium hypothesis is indirect. the garch-m specification provides a convenient measure since it connects conditional volatility and equation which is used as a proxy for the risk premium. since the garch model was developed, a huge number of extensions have been proposed in the literature, resulting from perceived problems with the standard garch (p, q). non-negative constraints under garch may be violated. a number of asymmetric garch models have been proposed. this research employs the gjrlarch, due to glosten et al. (1993), and the exponential garch (egarch) model, due to nelson (1991). the gjr adds a term to the conditional variance equation to account for possible asymmetries. this is expressed as t-i hαh p 1i iit 2 q 1i it  = − = ++=  where, 0if1i 1-t1-t =  = 0 otherwise and α¹, ß¹, and γ are non-negative parameters satisfying conditions similar to are non-negative parameters satisfying conditions similar to those of larch. a positive ɛᵗ ¹, contributes a α¹ ɛᵗ-¹² to hᵗ whereas a negative ɛᵗ ¹ has a larger impact (α¹ +γ) ɛᵗ ¹² when γ > 1 the model uses zero as its threshold to separate the impacts of past shocks, although other threshold values can also be used. the egarch is specified as ( ) ( ) ( )  = = ++= q 1i p 1j j-tji-tit hlnzhin  g where ( )   ttttttt h/z,zezzzg  =−+= the coefficient of the second term in g(zᵗ ) is set to be 1 (γ = 1) in the formulation. note that ε │ζᵗ │ = (2 / π) ½ if zᵗ ͂ n (0, 1). the function g (zᵗ) is linear in zᵗ with slope coefficient ө + 1 if zᵗ is positive and ө – 1 if zᵗ is negative. suppose ө = 0. large innovations increase the conditional variance if │zᵗ │ε │zt│> 0 and decrease the conditional variance if │zᵗ│‒ ε │ζᵗ│< 0. suppose that ө < 1. the innovation in variance, g (zᵗ), is positive if the innovations zᵗ are less than (2 / π) ½ / (ө – 1). therefore, negative innovations in return cause the innovations to the conditional variance to be positive if ө is much less than 1. behavior of stock return ; evidence from indonesia and malaysia shariah stock market 27 3.3.1.6. parameter estimation of garch models to predict volatility of time series, the garch model has to be fitted into time series in question. the family of garch models is estimated by the maximum likelihood (ml) method. the ml method is the procedure of finding the most likely values of the parameters given the actual data. the log likelihood function is computed from the product of all conditional densities of the prediction errors. if we assume conditional normality, the likelihood function is specified as ( ) ( ) ( )( ) t 2 t t 1t t h hin 2 1 2in 2 t l   +−−=  = where it1t1 plogplog = −=  and hᵗ is the conditional variance. when the garch (p, q) ‒ m model is estimated, tit1t1 hplogplog  −−= = it is, however, very unlikely that stock return in emerging market such as indonesia and malaysia to follow normal distribution because of the market is undergoing constant changes and makes the market difficult to adjust historical information to create correlation between events and returns. moreover, since the background of this study is shariah stock market in indonesia and malaysia that requires stability in term of stock price toward volatility in news and events. ( ) ( )             + −            += 2 1v in 2 v ln22-vin 2 t l 2/1  ( ) ( ) ( )=                 +++− t 1t t 2 t t 2-vh 1in1vhin 2 1  where ᴦ (•) is the gamma function and v is the degrees of freedom (v > 2). under a conditional t-distribution, the additional parameter 1/v is estimated. the log likelihood function for the conditional t-distribution converges to the log likelihood function of the conditional normal garch model as 1/v → 0. 4. result and discussion descriptive statistics are given in table 4.1. from the table, several conclusions can be made. first, total number of observations used in this research is 11 years. the daily average return of malaysia is higher than indonesia, showed by the value of mean in kuala lumpur around 3 percent while in indonesia is 1 percent. the most volatile shariah stock market is malaysia, showed by the value of standard deviation. highest afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 28 volatility in malaysia shariah stock market refers to the vulnerability towards the changing of their stock market environment. while, indonesia shariah stock market showed stability during period of observation. the volatility of stock price in indonesia and malaysia shariah stock market showed that stock price volatility depends on several factors including the availability of information to investor, whether the information is in form of past, public or private information. table 3. descriptive statistic (logarithmic returns) of indonesia and malaysia shariah stock market item indonesia malaysia mean 0.1411 0.3872 median 0.4500 0.3700 maximum 0.4900 0.4800 minimum 0.0956 0.3300 standard deviation 0.0426 0.9224 skewness 0.0206 0.8608 kurtosis 2.3836 3.0325 jarque-bera 0.1898 1.3592 probability 0.9094 0.5068 sum 1552 2626 sum sq. dev. 0.9871 0.0182 observations 11 11 notes: number of observation is 11 years while data for statistical process is using daily data. the results in table 4.1 also strengthen to the common belief that higher risk will lead to higher return. malaysia shariah stock market based on the standard deviation offering highest volatility but also offering highest daily average return compared to the indonesia shariah stock market. the distributional properties of returns appear to show extreme observations. the highest kurtosis in the sample occurs in malaysia shariah stock market, and indonesia shariah stock market having the lowest. however, if kurtosis in one country exceeds the threshold of 3, implying that the returns have fatter tails than would be expected from a normally distributed variable. with the exception of indonesia, all the return series are positively skewed. the jarque-bera (jb) is 0.189865 for indonesia and 1.359244 for malaysia. behavior of stock return ; evidence from indonesia and malaysia shariah stock market 29 4.1. preliminary evidence: ar (p) model an ar (p) model was fitted to the returns of indonesia and malaysia shariah stock market to ensure the pre-whiten residual before testing the evidence of non-linearity. stock market returns are of the modeled as autoregressive time series with random disturbances having conditional heteroscedastic variances, particularly with garch type processes. this research is analyzing two data sets of stock prices, fitting an ar (p) model to the series by ordinary least squares regression yielded the results in table 3. table 4. ar (p) pre-whitening model (indonesia and malaysia shariah stock market) indonesia malaysia µ 0.191(42) 0.197(68) ϕ1 0.1033.756 0.835553 ϕ2 0.0000 0.053332 ϕ3 0.1809.230 0.550776 ϕ4 0.0542380 0.055294 ϕ5 0.19199 0.592207 ϕ7 0.10366 0.522513 ϕ8 0.039207 0.05294 ϕ10 0.014153 0.056241 dw 2.017035 1.765597 b.g(5) 0.73[0.424] 0.25[1.641] lbq(12) 2.13[0.621] 3.16[0.531] lbq(24) 12.121[0.761] 12.033[0.261] notes: *, **, and *** indicates significance at 10%, 5% and 1% levels respectively, µ is the constant. ϕ indicate the ar coefficients. b.g. is breusch-godfrey test for higher order serial correlation; d. w is the durbin-watson test for autocorrelation; lbq (12), lbq (24) indicates the ljung-box statistics for 12 and 24 lags respectively. test statistics are shown in ( ) while p-values are shown in [ ]. both shariah stock market in indonesia and malaysia following the low order autoregressive with general assumption that indonesia is follows the ar(1) process afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 30 while malaysia is follows the ar(2) process. having fitted an ar (p) model, it is now necessary to examine an adequate and useful functional form for the data generating process. to eliminate of spurious autocorrelation, ar (p) also has a function to investigate and examine whether the nonlinear dynamics are localized in time. in the case of stock price in indonesia and malaysia, the dynamics volatility of the stock price can be minimized by taking an integrated screening process to the listed company, as precautions steps toward volatility. in order to examine further the properties of the data, the research employed the nonlinear diagnostic tests outlined in table 5.a and 5.b. table 5.a. nonlinearity test on ar (p) residuals item indonesia malaysia mcleod-li (20 lags) mcleod-li (24 lags) bicovariance (17 lags) asymptotic 0.000 0.000 0.000 bootstrap asymptotic bootstrap 0.000 0.000 0.000 0.017 0.017 0.000 0.000 0.000 0.005 engle lm 1 0.000 0.000 0.000 0.000 2 0.000 0.000 0.000 0.000 3 0.000 0.000 0.000 0.000 4 0.000 0.000 0.002 0.005 5 0.000 0.000 0.000 0.000 tsay 0.000 0.000 0.010 0.002 behavior of stock return ; evidence from indonesia and malaysia shariah stock market 31 table 5.b. bds test on ar (p) residuals dimension indonesia malaysia eps= 1 eps=2 eps=5 eps= 1 eps=2 eps=5 bootstrap 2 0.000 0.000 0.000 0.000 0.000 0.000 3 0.000 0.000 0.000 0.000 0.000 0.000 4 0.000 0.000 0.000 0.000 0.000 0.000 asymptotic 2 0.000 0.000 0.000 0.000 0.000 0.000 3 0.000 0.000 0.000 0.000 0.000 0.000 4 0.000 0.000 0.000 0.000 0.000 0.000 notes: only p-values are reported under the null hypothesis that the time series is a serially iid process. all calculations are done using the non-linear toolkit by patterson and ashley (2000). the existence of linearity in indonesia and malaysia shariah stock market shows that both stock market open for gaining abnormal return, where in the case of market efficiency, gaining abnormal return is prohibited. moreover, the existence of linearity in stock market also showed the capability of predicts returns and lead to inefficiency in stock market showed by the value of eps and bootstrap modeling process in the table. since information are not available to all investor. the existence or non-existence of nonlinearity in stock market is crucial not only for stock market but also for investor to determine appropriate strategy for trading. for example, if stock market follows nonlinear behavior, it is not profitable for investor to use linearity based on trading strategies. furthermore, nonlinearity test are very effective tools that can be used as diagnostic test to explore and understand the nature of the underlying dynamics in stock returns. a strong evidence of non-linearity in indonesia and malaysia shariah stock market shows that emh is rejected in both stock market. the result implies that stock market in indonesia and malaysia are potential for testing the predictability in stock returns (antoniu et al., 1997; petterson and ashley, 2000) and the conventional linear statistical test based on autocorrelation coefficients and run test are not capable of capturing nonlinearity, as they are designed to uncover linear pattern in the data. 4.2 results of fitting garch models the objective of this section is to deal with the practical issue of estimation and to conclude the distinction between estimation of the two models that used for indonesia and malaysia shariah stock market. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 32 table 6. results of fitting garch models item indonesia malaysia garch egarchm gjrgarch -m garch egarchm gjrgarchm µ 0.064(1.22 2) 0.024* 0.02(0.3 3) 0.325**(6. 67) 0.012(0.01 /0 0.61(0.05) δ 0.022* 0.71(0.6 6) 0.22475.87 ) 0.022(0.01 /0 0.041(0.07 ) ϕ¹ 0.1202(4.4 04) 0.1125(1.3 65) 0.657(3. 21) 0.1701(4.4 05) 0.8761(1.1 65) 0.221(0.21 ) ϕ² ϕ³ ω 0.064**(0. 61) 0.283(6.23 1) 0.0344 0.05281 0.87645 0.876** α¹ 0.327*** 0.211*** 0.681*** 0.897*** 0.545*** 0.7865 β¹ 0.7801* 0.42377 0.54222 0.54907 0.6712** 0.9873** γ 0.138(33) 0.271(612) 0.679(55 ) 0.872*** 0.321** aic 2.215 2.654 1.239 3.765 1.873 0.243 sbc 2.068 1.682 1.765 2.943 1.376 1.543 lbq²(1 2) 09.712 7.281 5.763 4.869 1.879 1.543 lbq²(2 4) 32.285 16.421 11.074 0.654(0.00 0) 1.903(0.61 ) 1.243(000 0) arch(1 0) 0.613(0.21 8) 0.641(0.68 5) 0.289(87 1) 0.453(0.89 6) 0.765(876) 0.7811(0.0 00) ν 1.821 1.612 1.654 3.289 3.876 1.652 ll -123.11 -344.55 -432.33 -184.98 -765.22 -874.78 α +β 0.18 1.48 1.75 0.67 0.78 0.29 ***,**,* indicates significance at 1%, 5%, and 10% levels respectively. aic, sbc represent the akaike and schwart criterion. lbq is the ljung-box statistics. test behavior of stock return ; evidence from indonesia and malaysia shariah stock market 33 statistics are reported in ( ) while p-values are reported in [ ] beside the calculated coefficient. ν is the scale parameter of the distribution of the error term (ie. the student t-distribution). the majority of volatility studies in stock market apply the garch (1, 1), due to large number of parameters to be estimated in indonesia and malaysia shariah stock market, the order of lags cannot be restricted only to the variance model of garch (1, 1). the result from the table show that from garch model specification capture volatility in malaysia shariah stock market, while for indonesia shariah stock market the result from garch model specification show that the volatility is ranging and cannot provide forecasting tools in the future. 4.3 test for asymmetry for risk adverse investor, the volatility of stock market will have triggered them to move their funding from one portfolio to another portfolio, in order to take advantages of gaining benefit from one portfolio volatility, if volatility is highly correlated between portfolios to other portfolios. the existence of volatility in stock market implies that a large stock movement in conventional stock market will have implication to return. however, during financial crisis, stock market showed good performance in terms of volatility, where, volatility that caused by financial crisis do not has significant impact to the listed stocks in stock market (romli et al. 2012). table 7. asymmetry test result diagnostic test indonesia stock exchange ρ-values bursa malaysia ρ-values sign bias 0.345 0.367 positive size bias 0.227 0.336 negative size bias 0.326 0.337 sign and size bias 0.256 0.146 notes: the estimation using garch (1, 1) models, for daily isc and klsc returns using qmle algorithm. the existence of the asymmetric volatility response is then checked using the sign bias, the negative size bias, and the positive size bias tests. the diagnostic tests are reported. to give more clear explanation, three diagnostic tests for volatility models: the sign bias test, the negative size bias test, and the positive size bias test. the sign afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 34 bias test shows whether positive and negative innovation affect future volatility differently from the prediction of the model. in the negative size bias test, shows whether larger negative innovations are correlated with large biases in predicted volatility. in the positive size bias test shows whether larger positive innovations are correlated with large biases in predicted volatility. the asymmetry test results indicate that the sign and the size of the unexpected return shock do not influence current volatility differently which contradicts the presumption that there are asymmetric effects in the stock market volatility. negative size bias and positive size bias test are not significant. the joint test is not also significant. a rejection of the asymmetry test showed that stock market return was response to the positive and negatives shocks on volatility and providing the same impact towards stock return. these results are response from investor towards volatility that happened in indonesia and malaysia. in portfolio that represent strong growth of shariah stock market in indonesia and malaysia, both countries should establish efficient and regulated trading platform, minimizing transaction cost, availability of information that reflected in price. in particular the findings have similarity to the pattern that investor overreacts or under react to good and bad news (spyrou, 2001). 5. conclusion stock return behavior in this paper is acknowledging by modeling stock price and return of companies that classified in indonesia and malaysia shariah stock market. after conducting and examining three model analyses, summarization can be made that to reach the stage of return behavior in term of information, indonesia and malaysia shariah stock market obligate to increase flow of information by improving trading system, setting legal transaction framework, and minimizing transaction cost. lim (2009) stated that several factors can contributes to return volatility in term of information: opening domestic stock market to foreign investors, changes in regulatory framework, adoption of electronic trading systems2, and the implementation of price limit system. the above factors already implement by stock exchange in indonesia and malaysia, however, further improvement need to adjust, such as changes in regulatory framework and the implementation of price limit system in order to prevent arbitrage and gambling activities. indonesia and malaysia shariah stock market should also open the market for foreign investor to gain benefit from portfolio diversification, eliminating policy that slowing down the growth of investor and giving incentive in form of tax to stimulate growth of foreign investor. changes in regulation should implement to stock exchange, eliminating regulation such as broker commission, giving protection to investor, reducing systematic risk and ensuring fair, efficient and transparent condition. changes in regulatory also can be interpreted that stock market in indonesia and malaysia should focusing more on developing trading system in shariah stock market, meaning that conventional stock market should eliminate the possibility of trading mechanism. by doing so, stock market in both country will reach efficient trading environment in term of information. while, the adopting of electronic trading system to 2 both stock exchange in indonesia and malaysia already implemented electronic trading system. jakarta automated trading system (jats) for indonesia stock exchange and system on computerized order routing and execution (score) for bursa malaysia. behavior of stock return ; evidence from indonesia and malaysia shariah stock market 35 ensure fair and transparent trading system that linked directly to investor is to ensure fair and transparent market price followed with the implementation of price limits system to ensure price stability and as action against price speculation from investor. references andrews, d.w.k. 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(2011). contagion dan spillover effect pasar keuangan global sebagai early warning system. jurnal ekonomi dan pembangunan indonesia, vol. 11 no. 2. sharia property business development strategy: ifas and efas matrix model 24 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) sharia property business development strategy: ifas and efas matrix model juliana juliana1)*, hilda monoarfa2), rika jarianti3) 1,2,3islamic economics and finance, indonesian education university, bandung, indonesia abstract the phenomenon of population growth is not in line with housing growth in indonesia, which is the problem in this research. besides, the current concept of homeownership still tends to use a conventional pattern based on ribawi, which is an obstacle for a muslim to own a house. the purpose of this study is to determine the strategy of developing the islamic property business from internal and external factors. the research method used is a quantitative method with data analysis techniques using the swot matrix analysis of ifas (internal strategic factors analysis summary) and efas (external strategic factors analysis summary). the population in this study were developers in the greater bandung area and the sampling used the convenience sampling method with a total sample of six expert respondents who were ready and willing to become respondents who represented academics, practitioners, and regulators. based on the swot analysis with the ifas and efas matrices, the results show that the position of the islamic property business is in quadrant 1a, which is experiencing rapid growth. this quadrant shows that the right choice of strategy is rapid growth. the alternative strategy that is used as input is the s-o (strength-opportunities) business strategy so that the development strategy formulated is to use all strengths to seize and take advantage of the greatest possible opportunities. this research implies that the existence of business development efforts through swot analysis can strengthen the strategy to increase islamic property and overcome the buying and selling of homeownership that is not yet following islamic values. keywords: sharia property, swot, ifas, efas 1. introduction the need for housing has increased every year. calculation of housing needs in metropolitan bandung raya is carried out with basic assumptions that are considered, among others; the number of households, the number of residents, the average number of family members, namely 4 people, and the number of available houses. (wjp-mdm-2013 analysis team, 2013). the number of households in metropolitan bandung raya in 2010 reached the number of 1,453,317. meanwhile, based on the percentage calculation in west java, the number of houses available in metropolitan bandung raya was 75.67 percent of the number of corresponding author. email address: juliana@upi.edu https://creativecommons.org/licenses/by/4.0/ mailto:juliana@upi.edu 25 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) households in west java, resulting in a figure of 8,133,251 houses. furthermore, the number of houses in each city and district was calculated based on the percentage of the population, so that the number of houses in metropolitan bandung raya was 1,099,725. when we compared the number of housing needs to the number available, there was a housing backlog of 353,593 houses. the need for housing each year reaches 800,000 1,000,000 units per year in indonesia. meanwhile, the government and developers only have the capability of 400,000 units per year. if the condition persists, the national housing backlog will be higher, especially if it is associated with the average population growth in indonesia which reaches 1.49 percent per year. (dja the ministry of finance, 2015). also, west java province is one of the provinces that becomes the development center because its large population and competent economic growth which is increasing every year from the price to be paid under high-level government policies. many strategic economic sectors are located in west java province (nurjanah, kusnendi, & juliana, 2019). from this statement, it can be concluded that people are in desperate need of houses because it is a place to live and fulfill the needs of hajiyat. the increasing population in west java precisely in the city of bandung will have an impact on the need for housing that will increase. data from the central statistics agency (bps) in 2011-2016 stated that the population in bandung increased in the last year of 2016 with a total of 2,490,622 million people. (bps) based on bi survey, residential property development data as of december 2011, in the second quarter of 2010, shows that out of the 14 regions sampled, the top 5 highest price increase occurred in the areas of surabaya, makassar, bandung, yogyakarta, and manado. based on the type of houses, price increase occurred in all types of houses with the highest increase occurring in small type homes by 1.37 percent. meanwhile, by region, the highest price increase occurred in the bandung area of 1.78 percent, especially in small type houses of 3.46 percent. (rill bi sector statistics team, 2010). indonesia is one of the countries with a majority muslim population. from the religion based data population taken from (open data bandung city, 2017) in the city of bandung states that the number of the muslim population is more than the number of people of other religions of 2,207,375. this indicates that the majority of the population in the city is islam when reviewed from per sub-district in the city. as a muslim majority population, islamic value-based transaction becomes a principle. (muflih & juliana, 2020) however, this cannot corroborate the assertion that the muslim population in indonesia uses sharia home ownership credit or sharia property with a developer system. mortgages include; not everyone has access, costs are often high, problems with payments with installments that are often in bills or installments experience cases such as goods confiscated because they cannot afford to pay or need time to raise the necessary funds, this is related to the literacy of information of the consumer to the principle of debt in the https://creativecommons.org/licenses/by/4.0/ sharia property business development strategy: ifas and efas matrix model 26 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) purchase of a property. whereas hadith shahih bukhari has explained the ethics of how to behave to people in debt. there are many solutions in buying a house based on islamic law including sharia mortgages using banks and buying and selling houses with sharia principles by directly paying to developers because conventional mortgages are riba. therefore, a muslim must know that usury is a sin and must be abandoned. if it is clear that usury is illegal and we are prohibited from participating in usury transactions including being borrowers, then it is appropriate for us as muslims to find a way in fulfilling this primary need. juliana (2017), in her research, confirmed that the concept of islamic-based entrepreneurship, namely shariapreneur in the field of property is expected to be the answer to the problem, where riba and things that are contrary to islamic shari'a can be avoided and can provide benefits for the community. sharia property with a sharia property developer system is the solution to the problem in buying and selling houses for both muslims and non-muslim with all problems that occur in bandung raya. this solution needs to be developed by analyzing swot (strength, weakness, opportunities, and threats) using ifas and efas matrix which is a factor of the internal and external environment of sharia property. also, the rapid growth of the islamic financial industry requires sharia economists to be able to understand the demands and needs of consumers/customers as a top priority. customer preferences for a product will continue to change over time. therefore it is essential to understand consumer preferences for a product otherwise the company's performance can be hampered or even collapsed (dwihapsari, suryana, & juliana, 2019). using swot the problems can be analyzed, for example, in terms of strength, can be seen from strong government support so that sharia property can be developed and expanded. in terms of weaknesses, it can be seen from the halal side of sharia property, whether it has been consistent or not. opportunities come from the growth of muslims so there are many opportunities to choose sharia properties that are not usury-based. the last is the threat that can be seen from the uniformity of each sharia property with a sharia property developer system that stands on halal standards. research on some target respondents or sources will be conducted to reveal further detailed information. it is also aimed at entrepreneurs who have the potential to develop sharia property business with a developer system. buying a house is not about financial and fastness competition, other than, it is supposed to be an underselling and buying system that is in line with islamic law. furthermore, property developers must also implement a sharia principle-based selling and buying system. how should the purchase decision be under the provisions of sharia? if the property selling and buying system is following islamic procedures, then blessings will be obtained. https://creativecommons.org/licenses/by/4.0/ 27 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 2. literature review 2.1 swot analysis swot analysis is the systematic identification of various factors to formulate the company's strategy. this analysis is based on a logic that can maximize strengths and opportunities but can also minimize weaknesses and threats. (rangkuti, 2017). swot stands for internal environment strengths and weaknesses as well as the external environment opportunities and threats facing the business world. swot analysis compares opportunities and threats with internal strengths and weaknesses. (rangkuti, 2017). quadrant 1: supporting an aggressive strategy because this quadrant is a very favorable situation. the company has the opportunity and strength so that it can take advantage of the existing opportunities. the strategy that must be implemented in this condition is to support an aggressive growth-oriented strategy. quadrant 2: supporting a diversification strategy means that despite facing various threats, the company still has internal strengths. the strategy that must be applied is to use strength to take advantage of long-term opportunities utilizing diversification strategies (products /markets). quadrant 3: supporting a turn-around strategy is when the company faces enormous market opportunities, but on the other hand, it faces some internal constraints/weaknesses. the focus of the company's strategy is to minimize the company's internal problems to seize better market opportunities. quadrant 4: supporting a defensive strategy in this quadrant is a very unfavorable situation because in this quadrant the company faces various threats and internal weaknesses. 2.2 business strategy sedarmayanti (2014) explained that strategy is a process of determining the plans of top leaders that focus on the long-term goals of the organization, along with an arrangement, way, or effort of how to achieve those goals. anoraga (2004) added that strategy is a process of evaluating the company's strengths and weaknesses compared to the opportunities and threats that exist in the environment faced and deciding on a product market strategy that adapts the company's capabilities to environmental opportunities. furthermore, david (2011) explained that the strategic process consists of three stages, namely: a. strategy formulation. strategy formulation is an early stage in strategy management, which includes developing vision and mission, identifying the organization's external opportunities and threats, determining internal strengths and weaknesses, setting long https://creativecommons.org/licenses/by/4.0/ sharia property business development strategy: ifas and efas matrix model 28 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) term goals, producing alternative strategies, and selecting specific strategies to achieve goals. b. strategy implementation. the implementation of the strategy is the next stage after the formulation of the specified strategy. the implementation of this strategy requires a decision from the authorities in making decisions to set annual goals, develop policies, motivate employees, and allocate resources so that formulated strategies can be implemented. at this stage, cultural support strategies are developed, planning an effective organizational structure, reorganizing marketing efforts, preparing budgets, developing and utilizing information systems, and connecting employee compensation to organizational performance. c. strategy evaluation. strategy evaluation is the final stage in strategic management. managers desperately need to know when certain strategies aren't working properly; strategy evaluation is the primary tool for obtaining this information. this can be done by assessing or evaluating strategies. in the assessment of the strategy, there are three fundamental assessment activities, namely: a review of external and internal factors that form the basis for the current strategy, performance measurement, and corrective action is taken. strategy assessment is very necessary for a company because a recent successful strategy does not necessarily work for the future. straub and atner (1994) business is an organization that runs the production and sale of goods and services desired by consumers to make a profit. anoraga and soegiastuti (1996) have a very basic meaning as "the buying and selling of goods and service.” 2.3 sharia property concept with developer system sharia property is a property concept with a sharia theme by offering a variety of islamic facilities in terms of transactions and built-environment. sharia property transactions have the concept of no usury, no banks, no fines, and no problematic contracts that become a solution for the muslim community to own property without violating sharia rules (aziz, 2015). the concept of sharia property needs to be supported by all parties so that the muslim majority community can own property to support its life under sharia rules so that it will form an islamic environment of the smallest scale. the explanation of the sharia property concept is presented by aziz (2015) as follows: a. the concept of no riba in sharia property indonesia's muslim-majority public awareness of the importance of ensuring every transaction is free from usury is increasing over time. however, presenting an understanding of the usury-free trade in property ownership is something new even at the beginning of its presence is considered impossible. this is shown in the data that says people prefer to transaction through conventional banks. however, as time goes by it becomes increasingly apparent that there is always a solution for those who are resilient. this includes property ownership affairs https://creativecommons.org/licenses/by/4.0/ 29 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) under the sharia, free of usury (agung, 2015). as stated in the quran surah al-baqarah [2]: 275 : those who eat usury will not arise except as he who enters satan because of madness. that is because they say, "trade is the same as usury, whereas allah has permitted trading and forbidden usury. for those who have come to him are forbidden by their lord and then continue to cease (from taking usury), for him is what he took before; and its affair is with allah. then he is the dwellers of the fire. god is pleased with them and they are pleased with him. (qs. albaqarah verse 275). b. the concept of no bank in sharia property the concept of no bank brought by sharia property developers (dps) is to eliminate the role of banks in financing activities and other transactions that intersect with the principles and concepts of conventional banks that endanger the faith of the society. the existence of sharia banks is not or has not been an actual solution to free people from economic activities against islamic sharia. (agung, 2015). technical activities such as the use of money transfer services or other activities that do not harm the aspects of the faith principle can still be utilized. (supreme, 2015). c. the concept of no fines in sharia property the concept of no fines is the differentiator of sharia property developers with conventional property developers. in the context of conventional property transactions, fines are incurred due to the consequences that must be borne by consumers caused by late payment of installments in the credit scheme. many consider this fine to be reasonable. (supreme, 2015). in fact, from the point of view of islamic shari'a, fines with money in the time of companions, either tabi'in or tabiut tabi’in never existed and this kind of fine is part of riba which is immoral and prohibited in islam. (aziz, 2015). imam ath-thabari explained: "that riba jahiliyyah is a person who buys until a certain period of the agreement and if it is due and he does not have the money to pay, then he adds (the payment) and ends from the due date." (imam ath-thabari in interpreting qs.2:275). a constrained borrower in payments may be subject to punishment. however, it is not permissible to impose financial penalties since it is usury even for certain purposes such as discipline and so on (aziz, 2015). d. concept without problematic contract in sharia property the solution to this problem can be done by using collateral in the form of other own goods. if you do not have your property or collateral, you can request collateral belonging to your parents, families, or relatives. however, if there is no one, one can also use others as a guarantor (personal warranty) (aziz, 2015). often found in conventional property ownership credit transactions, the collateralized goods are transacted properties, whereas in islam this kind of https://creativecommons.org/licenses/by/4.0/ sharia property business development strategy: ifas and efas matrix model 30 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) thing can cause the contract invalid. in sharia credit transactions, the clarity of agreements is important to acknowledge so that the agreements are trouble-free. (supreme, 2015). in addition to collateral problems, the existence of preliminary agreements on murabahah schemes is often carried out on sharia banks. it is because the bank aims to avoid risk and the bank regulation forbids the purchase of goods for sale, then the bank binds it with a preliminary agreement so that the buyer does not cancel the purchase of property that has been purchased by the bank (aziz, 2015). this is confirmed in the hadith saheeh which means: "do not sell something that is not yours." (abu dawood. an-nasa'i, ibn majah, al-bayhaqi. ahmad and at-tirmidhi). the hadith explains that in fact, the bank does not sell a property. banks only bind consumers with preliminary agreements. whereas the principle of murabahah agreement is, property or house to be purchased must exist before the akad (contract) is done. meanwhile, consumers also have khiyar rights as an option to decide the transaction (aziz, 2015). 2.4 sharia property business strategy based on the previous discussion on the understanding of business strategy and sharia property concept, it can be concluded that sharia property strategy is a series of integrated and coordinated actions that become the main basis of thinking in making strategies to gain a competitive advantage in sharia property business which includes operational strategy, human resources strategy, financial strategy, marketing strategy, and promotion strategy that can be explained as follows: a. operational or management strategy. these strategies include: • control system both in terms of price and business object. (juliana, 2017) • the process and terms of direct purchase between developers and consumers require developers to connect with a consultant before transacting with prospective customers. • sharia property system that is free from usury and unjust economics. • pay attention to regional policies by observing and analyzing the amdal before conducting operational activities. (aziz, 2015) https://creativecommons.org/licenses/by/4.0/ 31 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) • arrange a safe property design in case of natural disasters to minimize losses of material and non-material aspects. (aziz, 2015) b. human resources strategy. these strategies include: • improving the quality of developers to behave in moral values in doing business so they do not violate sharia rules. • improving developers' and consumers’ understanding of sharia property through seminars and discussion forums. • create an alliance forum for sharia property developers as a means of problem solving and finding the right solution for sharia property development. c. financial strategy. these strategies include: • using a cooperation system or syirkah to strengthen the capital value so not only parties with funds or large capital are capable to run the property business. (aziz, 2015) • increasing the value of sharia property to be a greater added value than the capital value by building or renovating constructions so that the useful value increases. (juliana, 2017) • using the principle of cash flow on properties such as rent while waiting for prospective consumers, considering the property business is difficult to be liquid (creating capital gains). (aziz, 2015) d. marketing strategies. these strategies include: • continue to innovate to create more useful value to maintain the increasing price value of property to attract the consumers’ attention so that it can facilitate and develop sharia property business. (juliana, 2017) • cooperation with the government to expand the sharia property market share so that it can be affordable for the low-income communities, moreover, it can be a solution for the muslim community to own property that does not violate sharia rules. • change the principle of competition among sharia property developers into a pattern of cooperation and coordination to expand the market share of the sharia property business. e. promotion strategy. these strategies include: • education on the importance of transacting and sincere interaction under sharia rules to indonesia’s muslim-majority community. • provide an overview of the importance of owning sharia property both in terms of transactions and environmental facilities as solutions of conventional systems in the process of property ownership. • establish broad relationships to strengthen access to investment, education, and solutions for sharia property development by holding seminars about sharia property and discussion forums offline and online. (aziz, 2015) https://creativecommons.org/licenses/by/4.0/ sharia property business development strategy: ifas and efas matrix model 32 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 3. research methodology this research uses a quantitative approach which is an approach using number-based data analysis. besides, this research also uses the swot analysis method that analyzes the strengths, weaknesses, opportunities, and threats in sharia property companies by using ifas and efas measurements or matrices where each indicator on internal and external factors will be evaluated and alternative strategies or solutions to problems in each indicator will be sought. (rangkuti, 2017). the population in this study is expert judgment, competent parties, and knowledgeable of the condition of sharia property thoroughly both internally and externally in the greater bandung area. this study uses a sample size of willing 6 sharia property respondents that have a project in bandung and become expert judgment (expert assessment) from several parties who play an important role in the sharia property company, namely the owner and top management. the method used in this research is a quantitative method with a non-probability sampling technique and the sample type used is convenience sampling with respondents who are used as samples in this research is a sample tailored to the needs of research with respondents who are ready and willing to be the object of research. (cooper & schindler, 2014). here are the test stages: 3.1 expert validity test validity test in this instrument using expert validation test, namely experts (expert judgment) or experts selected based on the related fields to test the instrument to be developed. the selected expert judgment consists of two people, namely experts in the field of sharia property, which consists of academics and practitioners. this expert validation test uses the delphi technique which is a verification process by involving selected experts to inquire, find, collect and develop expert opinions individually based on empirical data related to the instrument to be developed. the delphi technique is carried out in several stages and has been through instrument revision twice on the first expert judgment, and two revisions on the second expert judgment before the instrument is given to other respondents. 3.2 ifas and efas matrix input stage the ifas (internal strategic factors analysis summary) matrix or the ife (internal factors evaluation) is based on the concept by fred r. david (2017) is a matrix used to determine the company's internal factors related to strengths and weaknesses that are considered important to the company or research object. https://creativecommons.org/licenses/by/4.0/ 33 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) data and information of the company’s internal factors can be excavated from several functional companies, for example from aspects of management, finance, hr, marketing, information systems, and production/operations (husein, 2008). the efas (external strategic factors analysis summary) or efe (external factors evaluation) matrix based on the concept of fred r. david (2017) is a matrix used to identify and evaluate the company’s external factors related to opportunities and threats of the companies or research objects. external data is collected to analyze matters related to economic, social, cultural, demographic, environmental, political, government, legal, technological, and competition in the industrial market where the company is located, as well as other relevant external data. this is important because external factors affect the company directly or indirectly. external factors of the company are related to opportunities and threats (husein, 2008). the input stages of ifas and efas data are as follows: a. weighting is determined based on the urgency of importance on a scale of 1 to 5 (1=unimportant, 5=very important). b. summarize the weight of strengths and weaknesses. then, calculate the relative weight on each indicator so that the total weight value becomes 1. perform the same calculations on opportunities and threats indicators. relative weight is used in the calculation of weight value multiplied by rating value. c. the third step is to determine the rating value. rating is rated from 1 to 5. (1=bad, 5=very good). if the strength indicator is rated 5 it means that the performance indicator is getting better, if it is rated 1 then the performance of the indicator is poor or decreasing. the provision of this value is the same as the provision of value on the indicator of opportunity. in the weakness indicator, is the reverse, if it is scored 1 then the more or higher the weakness and the score 5 if the weakness decreases. it is the same for a rating on threat indicators. d. the score is obtained based on the result of weighted value multiplied by rating value. the total score for internal factors indicates that the closer the value to 1, the more internal weakness it has than the strength. whereas the more the value is close to 4, the more strength it has than the weakness. likewise the total score for external factors. the closer the total score to 1, there are more threats compared to opportunities. whereas if the total score is close to 4, it means more chances than threats. 3.3 the company's strategy identification the company's strategy identification uses an internal-external (ie) matrix. this external internal matrix was developed from the general electric (ge-model) model. the parameters used include the parameters of the internal strength of the company and the external influences https://creativecommons.org/licenses/by/4.0/ sharia property business development strategy: ifas and efas matrix model 34 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) encountered. the purpose of using this model is to obtain a more detailed business strategy at the corporate level. (rangkuti, 2017). the company's strategy identification by using an ie matrix analyzed in the form of a diagram containing quadrants is conducted after evaluating the above strategic factors to determine the position of quadrants and determine the assessment of ifas and efas sharia properties. (rusydiana & firmansyah, 2018). 3.4 swot matrix analysis swot matrix analysis is used as a tool to compile the company's strategic factors after going through the previous calculation stage. this swot matrix can produce four cells of possible alternative strategies consisting of quartet and opportunity strategies (so), weakness and opportunity strategies (wo), strength and threats strategies (st), as well as weakness and threat strategies (wt) (rangkuti, 2017). a. so strategy this strategy is based on the company's way of thinking, namely by using all the power to take advantage of opportunities. b. st strategy this strategy uses the power the company has by avoiding threats. c. wo strategy this strategy is implemented by utilizing existing opportunities, by overcoming weaknesses. d. wt strategy this strategy is based on defensive activities and aimed to minimize existing weaknesses and avoid threats. 4. results and discussion 4.1 ifas and efas assessment a. evaluation of internal factors the result of the table is the power factor that has the highest degree of interest is virtuous developer, attentive to the islamic values, direct process and terms purchase to the developer, and free of usury and unjust economics, each has a weight of 0.064 meaning that these factors need to be maintained to be further enhanced so that the sharia property business continues to grow and become a usury-free solution to meet the needs of the muslim community. while the strength factor with the lowest degree of interest is not requiring large capital with a https://creativecommons.org/licenses/by/4.0/ 35 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) weight of 0.44 means there are many alternatives to build sharia property businesses besides the initial capital such as marketing or sharia property agencies. the results of ifas analysis also showed that virtuous developers, attentive to the islamic way, direct process and terms of purchase to developers, and free of usury and unjust economics have the most influence from the internal side in the development of sharia property with a developer system with a rating of 5.0. this indicates that the current condition on the factor of a virtuous developer, attentive to the islamic way, direct process, and terms purchase directly to the developer, and free of usury and unjust economic is already in good condition and following the provisions of the sharia property business. while the lowest influence is on the factor of not requiring large capital with a rating value of 3.0 means that currently, building a sharia property business does not necessarily require large capital because becoming a marketing or sharia property agency can be the initial step to encounter the business. the weakness factor that has the highest degree of interest in sharia property development is the problem with the perception that only the talented can run a sharia property business with a weight of 0.062 meaning that the perception of only the talented who can run a sharia property business is still a strong perception among the community and there should be a change in the mindset as other factors such as knowledge and experience can also be factors to run a sharia property business. while the lowest factor that weakens sharia property development with an average weight of 0.045 is that property is difficult to be liquid. this indicates that although the property is difficult to liquidate, it does not have a major influence in weakening the development of sharia property, sharia property business will remain profitable as its selling value continues to increase. in terms of weakness, the rating provision is if the value closer to 1 means the more weaknesses. on the contrary, if the value is close to 5 means that the value is decreasing (rangkuti, 2017). in the weakness factor, it is known that the factor that has the most influence in weakening the development of sharia property is the assumption that engaging in numerous relations is a necessity, with a rating of 1.7. this shows that currently, the community’s assumption about having relations is greatly influential in weakening the development of the property. having numerous relations today according to developers is needed in property development because it supports marketing systems such as architects, notaries, investors, mediators, and other business relations. therefore, this factor must be continuously improved among sharia property business companies to escalate the working system of sharia property to keep progressing and developing. meanwhile, the current least influence is the perception that only capitalists can run a sharia property business with a rating value of 3.0 meaning that running sharia property, besides the large capital, also requires experience, knowledge, and expertise. therefore, large capital has a small influence in weakening the development of the sharia property business. https://creativecommons.org/licenses/by/4.0/ sharia property business development strategy: ifas and efas matrix model 36 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) b. evaluation of external factors based on the table result, we can see that the opportunity factor that has the highest degree of interest is applying the sharia system with an average weight of 0.066. this shows that the sharia system implementation has been competent and needs to be maintained to be further to continue to be a good opportunity from the external side of the sharia property business. meanwhile, the opportunity factor with the lowest degree of interest is that conventional systems managed by developers do not apply sharia principles with an average weight of 0.059 meaning that this factor does not have much influence from the external side in the development of sharia property. the results of efas analysis showed that in terms of opportunities, the factor of sharia system implementation also has the highest rating of 5.0 which means that currently sharia property has implemented sharia system properly and turns out to be a good opportunity in sharia property development and has the most influence. meanwhile, the factor that has the least influence is access to low economic communities with a rating of 2.8. this shows that currently, the sharia property market share is still very small. furthermore, the capital and investment value have not been able to design usury-free housing ownership that can be reached by low-income muslim communities. therefore, it needs attention and assistance from the government to actualize the fulfillment of housing ownership needs. the threat factor that has the highest degree of interest is the dispute with the local community with a weight of 0.066. this indicates that the dispute in the local community needs to be concerned so it can be avoided by paying attention to environmental factors before building a property. meanwhile, the threat factor with the lowest degree of interest is competition with fellow sharia developers with a weight of 0.055. this is because it should not be a competition that should be built between sharia developers but rather coordination and cooperation in developing sharia property, a property ownership solution for the muslim community. in terms of threats, the provision of rating value with a value closer to 1 means more threat. on the opposite, if the value is close to 5 means that the value is decreasing. (rangkuti, 2017). in terms of threats, it can be known that property can be destroyed by natural disasters. it is the highest factor that threatens the development of sharia property with a rating of 1.7. this indicates that natural factors are not predictable and have a significant impact on sharia property objects. while the lowest factor is the dispute with the local community and the presence of distrusted buyers with a rating of 2.5 each. this shows that in the current condition, disputes in the local community can be minimized and avoided by applying sharia business ethics. while the distrusted buyer factor can be overcome by analyzing consumers with the help of several consultants. https://creativecommons.org/licenses/by/4.0/ 37 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 4.2 ie matrix quadrant position after knowing that the value of internal factor evaluation (ifas) is 3,309 and external factor (efas) is 3,127, it is seen in figure 4.1, this value is in quadrant i which is "growing and developing. ifas 4.0 3.0 2.0 1.0 i ii iii iv v vi vii viii ix this quadrant explains the existence of sharia property with a developer system in bandung raya is undergoing a growth stage and must be developed. this shows that this business has a strong potential to be developed and becomes a huge opportunity to become an alternative to buying and selling usury-free syar'i houses. furthermore, determining the choice of strategy is carried out in several stages. the quadrants ifas and efas are given weight and rating on the swot component. it can be seen in table 4.3 that from the swot value obtained, namely s= 2,216, w= 1,093, o=2,141 and t=0.986, ifas and efas strategic positions are obtained in the growth position in determining the strategy election by seeing the internal score of s is greater than w and external score o is greater than t. internal score external score choice strategies s>w (+) o>t (+) growth s= 2,216 s<w (-) o<t (-) survival w= 1,093 s>w (+) o<t (-) diversification o= 2,141 e f a s 1 .0 2 .0 3 .0 https://creativecommons.org/licenses/by/4.0/ sharia property business development strategy: ifas and efas matrix model 38 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) s<w (-) o>t (+) stability t= 0,986 furthermore, to determine the technical strategy after it is known that sharia property is in a growth position with the appropriate score is s greater than o. this position is represented in the quadrant ia quadrant ia is on the upper right of the bottom close to internal forces. quadrant ia also indicates the right strategy choice is rapid growth, seen in table 4.4. this strategy option aims to determine the right alternative strategy in sharia property business development. technical strategies score quadrant choice strategies growth s>o i a rapid growth s<o i b stabel growth survival w>t iii a turn around w<t iii b guerilla diversification s>t iv b conglomerate s<t iv a concentric stability o>w ii a aggressive maintenance o<w ii b selective maintenance this strategy option shows that the existence of sharia property is experiencing rapid growth with excellent strength from the internal side and large opportunities from the external https://creativecommons.org/licenses/by/4.0/ 39 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) side in sharia property development. the statement shows that the value of power is greater than the opportunity, therefore sharia property only needs to increase the chances so that sharia property with a developer system can continue to grow and increase. however, it must remain vigilant because if it fails to regulate and optimize the strength and take advantage of opportunities then it is feared that the growth of sharia property development in bandung raya is decreasing. further, the alternative strategy used as input is the s-o strategy. the s-o strategy is a strategy to harness all the power to seize and take advantage of the most opportunities. 4.3 swot analysis results based on the strengths, weaknesses, opportunities, and threats that have been identified, we can formulate 10 alternatives strategies through swot analysis. the 10 alternative strategies can be described into 3 combined strategies of strength and opportunity (s-o), 2 combined strategies of weakness and opportunity (w-o), 3 combined strategies of strengths and threats (s-t), and 2 strategies combined between weaknesses and threats (w-t). a. strategy 1 1) sharia property implements the sharia system and has virtuous, knowledgeable developers of the sharia system so they review matters in an islamic way and educate muamalah in an islamic way. this is useful in the development of sharia property to become a da'wah media through the development of islamic civilization starting from creating an islamic environment or housing complex. (s4-o8) 2) property prices continue to increase so that it affects the value of the investment that also increases. this condition can be utilized by the wealthy muslim community to invest it in sharia property business so it continues to grow. (s5-o3) 3) sharia property is free of usury and economic unjust. it is not applied in the conventional property so it is a solution for the muslim community in choosing homeownership. (s9o5) b. strategy 2 1) the property business is profitable although the property is difficult to liquidate because its high selling value causes the purchasing power of consumers to be highly segmented. therefore, it needs support from the government so that sharia property can be enjoyed by all lines of society. (w6-o2) 2) currently, many relations are needed in the sharia property business because the small market share requires support both material and non-material from the muslim community to develop sharia property as a usury-free property ownership solution. (w7-o6) c. strategy 3 1) competition with fellow sharia developers is not interpreted as common business competition, rather coordination and cooperation as a form of moral and ethics in https://creativecommons.org/licenses/by/4.0/ sharia property business development strategy: ifas and efas matrix model 40 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) developing sharia property business to expand market share and disseminate information to the public regarding the importance of transacting or doing business free from usury. (s4-t4) 2) overcome amdal problems by controlling property/building so that problems can be solved. the importance of this controlling activity is also aimed to solve potential amdal problems effectively and efficiently. (s7-t6) 3) the direct process and terms of purchase to the developer without intermediaries such as banks allow the developer to transact directly with prospective consumers. then, it is consulted and analyzed whether the consumer is fit or not to transact sharia property, especially with the credit system or installments so that the character of the buyer can be figured out and distrusted buyers are avoided. (s8-t3) d. strategy 4 1) the existence of regional development policies, especially related to amdal issues and building permits require proper analysis so that when the property has started to be built there are no constraints in the future such as errors in the amdal analysis. (w8-t6) 2) the absence of guarantees from buyers makes management require some consultants to avoid consumer incomprehension of the laws and procedures that have been established by the property. (w9-t2). 5. conclusion based on research that has been done on several expert judgment sharia property business developers in bandung raya to know and analyze swot in sharia property business development with developer system using ifas and efas matrix, it can be concluded as follows: sharia property development strategy with developer system in bandung raya was obtained by paying attention to internal factors as strengths and weaknesses and external factors as factors of opportunity and threat. currently, the evaluation of internal factors shows the highest strength of sharia property, namely virtuous developers, the concern of the islamic way, the direct process and terms of purchase to developers, as well as free of usury and economic unjust. the evaluation of external factors shows that the highest opportunity is the factor of implementing the sharia system. the highest-ranking result is that implementing the sharia system is the factor that has the highest influence in becoming the sharia property development strategy from the external side. https://creativecommons.org/licenses/by/4.0/ 41 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) sharia property development strategy with developer system in bandung raya was obtained by paying attention to internal factors as strengths and weaknesses and external factors as factors of opportunity and threat. sharia property development strategy in bandung raya was obtained using swot analysis. the results of swot analysis are formulated into 4 classifications of development strategies, a combination of 10 alternative joint strategies. they are: a. 3 combined strategies of strength and opportunity (s-o) b. 2 combined strategies of weakness and opportunity (w-o) c. 3 combined strategies of strength and threat (s-t) d. 2 joint strategies between weakness and threat (w-t). references agung. 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(2010). survey harga properti residensial. retrieved from bi,go,id: http://www.bi.go.id/id/publikasi/survei/harga-properti primer/documents/93ead866daa344699aac2d9ae48ea0f0shprtw2.pdf https://creativecommons.org/licenses/by/4.0/ http://data.bandung.go.id/dataset/jumlah-penduduk-berdasarkan-agama http://www.bi.go.id/id/publikasi/survei/harga-propertian empirical study of islamic microfinance performance for poor family: maqashid al-sharia perspective 46 an empirical study of islamic microfinance performance for poor family: maqashid alsharia perspective aas nurasyiah 1*4 1 universitas pendidikan indonesia, bandung, indonesia abstract this research motivated by islamic microfinance performance measurement which still adopting on the performance measurement of microfinance in general that limited to the measurement of material. therefore, efforts urgently needed to introduce more holistic measurement in assessing the performance of islamic microfinance based on tawheed principle. thus, this study aims to measure the performance of islamic microfinance institutions based on maqashid al-sharia. this research method uses quantitative approach with descriptive quantitative research design, which measures variables based on certain indicators. the location of the research is kopmu-dt as one of the islamic microfinance institutions located in bandung. the population of the study was the members kopmu-dt wide-spread, among thousand people, but the withdrawal sample technique uses non-probability sampling with a sample of 100 members, based on the criteria that have been determined. based on the research result, generally the members of kopmu-dt increased living standards of the family economy and the performance of running microbusinesses. in maqashid al-sharia perspective, the members experience a change in the principles of ad-din al-aql, a-nafs, an-nasl and al-maal. however, among five principles, al-aql increases lower than other principles. in the future, to improve the performance of islamic microfinance, especially in kopmu-dt, needs technical effort / business of accompaniment improvement to develop entrepreneurship from members. in addition, needs to give appreciation to the consistent members and disciplined in order to refund to add its financing to stimulate the operating business, without losing spiritual accompaniment to strengthen the achievement of maqashid al-sharia of the empowerment members of islamic microfinance institution. keywords: islamic microfinance, maqashid al-sharia, performance 1. introduction islamic microfinance has been proven empirically as the hacker of poverty and improved the welfare of the people in general (mizanur rahman, 2010; durrani et.all 2011; aslaam, 2014). islamic microfinance has different characteristics with microfinance. according to ahmed (2002) conclude some differences among the islamic microfinance and microfinance, conventional microfinance based on interest while islamic microfinance should eliminate interest and use profit-sharing in its operation. besides, islamic microfinance could utilize the islamic deed form such as zakat, infaq, shodaqoh and waqaf as the financial source in social service to fulfil the basic needs and improve the * corresponding author. email address: asnur.fna@upi.edu afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 47 participation of poor’s. so, in the program development of islamic microfinance, make sharia values integrated in the form of conduct, ethics and social. thus, the main characteristic of the microfinance sharia performance (islamic microfinance) is to extent which people can obtain financing to achieve the goals of sharia (maqashid al-sharia). maqashid al-sharia terminologically comes from two syllables, namely maqashid and sharia. maqashid is jama form of maqsud meaning intent or purpose. the sharia means the path to the water, or path to the source of life. thus, terminologically maqashid al-sharia meaning of allah as the creator of sharia provide benefit to humans with the fulfilment of the needs dharuriyah, hajjiyah and tahsaniyah in order to obtain a good life and hereafter (fauzia, 2016). according to imam al-ghazali that maqashid al-sharia is to maintain sharia goals, which: 1. protection of religion (ad-din); 2. protection of life (annafs); 3. protection of intellect (al-'aql); 4. protection of descent / honour (annasl) ; and 5. protection of assets (al-maal). in its implementation, in indonesia maqashid al-shariah goals attainment is not always illustrated by the performance of baitul maal wat tamwil (bmt) or sharia cooperative as a manifestation of islamic microfinance institutions. based on the results of the study authors (nurasyiah, et.all, 2016) in some bmt that the majority of islamic microfinance institutions still focus on its business orientation, namely to achieve the target of many members, the achievement of high financing to gain a huge advantage. as for assistance or empowerment of member in economy and social, including spiritual guidance is still rarely performed. based on the interview results there are some possibilities of this problem, such as the absence of intention of the management of the islamic microfinance institution to pay attention of members in terms of maqashid sharia, so the implementation of program activities are not portrayed leads to maqashid sharia overall , or on the other hand islamic microfinance institutions find it difficult to collect or request time from members to routinely get assistance in business, technical and spiritual aspects. according to choudhury (2010, 2011) said that to understand epistemology tawheed is very substantial in the implementation of islamic financial institutions, including islamic microfinance program for poor’s. he said each program should be aimed at achieving the maqasid al-sharia principles. if the conventional microfinance approach adopted by the islamic microfinance without the concept of tawheed, the result is only the rich and those who have gained great importance who can get service from islamic financial institutions. among the substances that must exist in the islamic microfinance based on the principle of monotheism, that is the maqasid sharia, trust, qard-hasan and cooperative. fight to against interest; and the process of learning / shuratic process (abdullah and ismail, 2014). thus, incorporating elements of maqashid al-sharia in islamic microfinance becomes an important thing, because the purpose of all islamic financial institutions should be holistic, overarching achievement of welfare, welfare that is both material and spiritual. there must be a balance between the two, because the islamic view of the economic achievement relating to wealth, in its principle is a test, not becoming rich then abandon the principles of sharia, as happens in programs of conventional microfinance systems, because the focus is only serving on economic aspects and generally performed by housewives. for example, the grameen bank program, the economic condition an empirical study of islamic microfinance performance for poor family: maqashid al-sharia perspective 48 of housewives from poor families rose sharply, but became inattentive to the main tasks in the household and tends to be selfish and trigger a high divorce rate. therefore, islamic microfinance model is needed which include compliance based on the perspective of monotheism. during this time microfinance islamic studies only focus on financial instruments which should be free of usury, not pay attention to sharia compliance in all aspects of islamic microfinance and how the achievement of the members who get financing (abdullah and ismail, 2014). a lot of studies have evaluated the role of islamic microfinance program using conventional approaches. however, socio-economic measurements in conventional systems cannot evaluate the performance of islamic microfinance which more holistic based on sharia goals. therefore, this study wants to examine further the role of islamic microfinance is based on the achievement of maqashid al-sharia. previous research conducted by dar (2004), which has justified maqashid al-sharia as the basis of a theory that can be used for analysis and measure empirical studies, alam et.all (2015) who has researched empirically on islamic microfinance program amanah ikhtiar malaysia. in this research, the author wants to examine empirically how islamic microfinance role to poor families based maqashid al-sharia. research was conducted on one of islamic microfinance institutions in indonesia, namely kopmudt, as islamic microfinance institutions that are already running on the empowerment of poor families for almost less than ten years. 2. literature study 2.1 the development of islamic microfinance in indonesia according to rahman & dean (2013) products of conventional microfinance institutions have had great success in muslim majority countries, particularly the grameen bank was initiated by muhammad yunus in bangladesh. although, according to karim, tarazi, & reille (2008) conventional microfinance clients around 44% live in muslim countries, but conventional microfinance clients do not fulfil the needs of many muslims because they saw conventional financial product choices which not suitable with the principles in sharia (komi & croson, 2005), islamic microfinance is a branch of islamic finance which foundations are embedded in the qur'an and sunnah. islamic microfinance institutions are present and thrive to deliver services to the people especially the poor to obtain the factors of production sharing system, sale, and lease which emphasize on ethical and moral values in business (usman & tasminn, 2016). islamic provisions which prohibit usury, speculation and uncertainty are the issues that distinguish islamic microfinance with conventional microfinance institutions. it is built on the concept of social justice of islam which prohibits the exploitation behaviour, but encourage people to actively do good to poor’s with the concept of profit-sharing, so that the allocation of resources can be divided efficiently (rahman & dean, 2013), applicability of profit-sharing system on islamic microfinance institutions can lead to the equal distribution of income, control and resource allocation become more efficient. the development of islamic microfinance institutions has brought a positive influence to the benefit of each other within the community and have created real value on improving the living standards (morsid, 2014), afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 49 in indonesia, mursal (2016), said that the islamic economic system implemented through islamic banking institutions and various sharia microfinance institutions (lkms). the types of islamic microfinance institutions are islamic financial service cooperative (kjks) or better known as baitul mal wattamwil (bmt). based on the statistical data of islamic banking issued by financial services authority (2018) until 2018, there are 42 islamic microfinance institution to manage the assets of rp. 116 billion. 2.2 the role of islamic microfinance for the poor microfinance institution is an institution that provides financial services to low-income groups and the poor. the initial focus is on the micro loans are usually short-term working to finance small businesses that are usually operated by low-income people. however, microfinance has grown not only in the form of loans, but also include micro savings, micro-insurance, remittances and other payment all that have a major impact on the lives of the poor (ali, abu-hadi and ali, 2013), in indonesia, the definition of poverty is used by the central bureau of statistics (bps), which is the measurement of the basic needs. in this approach, poverty is seen as an economic inability to meet the basic needs of food and non-food (clothing, housing, education and health) as measured from the expenditure side. so, based on this approach, the concept of the poverty line (gk) built on two main foundations, namely the food poverty line (fpl) and non-food poverty line (gkbm) (bps, 2018). the role of islamic microfinance in reducing poverty has been proven by the results of research conducted by rena & tesfy (2006), which concluded that microfinance is the solution to poverty alleviation. their results have shown that there is a fundamental relationship between microfinance and poverty alleviation. it depends on the poor people who have access and control over productive resources in economy, which is one of financial resources. in addition, knight and farhad (2008) states that micro finance can directly increase the quality of life and push the poverty alleviation programs. by getting loans they can work and poverty declining so that people can live economically independent. in line with previous research results, shastri (2009) reveals that there is no better way than microfinance to fight poverty. as well as kumar, bohra & johari (2010) which found that microfinance is the only way to overcome poverty in india. in developing islamic micro-finance, government intervention in terms of economic growth and development is very important. it shows that access and efficient provision of micro-credit that can enable the poor to facilitate consumption, better manage risks, build assets gradually, develop microbusiness, increase revenue capacity, and improve quality of life (durrani, usman malik, and ahmad, 2011). 2.3 performance of islamic microfinance based on maqashid sharia islamic microfinance institutions (lkms) must keep the goals (maqashid sharia) in providing finance for the poor and needy. the results of research show that poor communities receive funding for a business is relatively trustworthy person. costs are low and qardhul hasan loans used to replace high interest rates charged by mfis conventional. with the consultation process, it an empirical study of islamic microfinance performance for poor family: maqashid al-sharia perspective 50 will help islamic mfis to understand the poor micro-entrepreneurs (abdullah and ismail, 2014). dusuki and bouheraoua (2011) define maqasid al-sharia as the ultimate goal of islamic law that serves the interests of all humanity (maslahah). the rules are designed to protect the interests of human life on earth and life thereafter, also to improve and enhance life. maqasid al-sharia is not only set the muslims, but also to humanity as a whole to adapt to the modernization of human needs. al-sharia principle maqashid built by a prominent islamic scholar, al-shatibi and al-ghazali (alam, hassan, & said, 2015). maqasid al-sharia has five basic principles (dusuki & bouheraoua, 2011) those are: 1. religion (ad-din): every muslim must worship allah (swt) and find for truth and justice. this principle must be maintained under all circumstances. 2. life (al-nafs): respect for human life must be observed to preserve and protect at all times. human existence must be upheld, and wellbeing of human should not be violated. 3. intellect (al-aql): behavior / association means right or wrong differentiated through freedom of thought, association, and speech. sharia encourages the quest for knowledge to ensure the intellectual development of muslims. 4. descendants (al-nasb): liabilities and legal obligations should be made to respect the human community based on the sanctity of life (as reflected in future generations). 5. wealth (al-mal): economic justice, especially in terms of creating money and wealth, should be established as an alternative to the previous wage system. 3. method this study design is a descriptive-quantitative, which describes a variable size based on certain indicators. in this study, the achievement maqashid alshariah measured from family members of islamic microfinance program. as for islamic microfinance institution for the study site is kopmu-dt. kopmudt as a business cooperative that focus on the economic empowerment of productive community particularly among mothers who have business activities or who is determined to have a business in order to improve the economy of families with a pattern of coaching and mentoring. therefore, kopmu-dt is present not only provide assistance with the ease of access to capital to the women who are members of kopmu-dt. the population in this study is a member of the program of kopmu-dt. the member kopmu-dt registered until the month of july 2018 was 2,023 people, but only 1,745 people who entered as an active member. members kopmu-dt is divided into several branches of the region, including a branch of bandung raya (bandung, bandung regency, and west bandung regency), south bandung branch, and the branch of garut. the number of samples taken based on sampling techniques of nonprobability sampling, where each member of the population does not have the same opportunity. it is in because of population spread across several regional coverage. the type of sampling is purposive sampling, which means that the sampling based on the research needs with specific goals that have specific information for researchers (sekaran, 2013). afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 51 required criteria sampling or respondents in this study were women as housewives who are members of kopmu-dt, who get sharia financing, and is active in mentoring programs initiated by kopmu-dt. based on this, the researchers will take a sample of 100 respondents representing branch bandung area. it is based on a suggestion of coordinator mentoring and empowerment kopmu-dt, arguing that branch bandung area has the most members in comparison with other regions branch which expected to represent the data required in the study. moreover, it also based on a limited number of researchers in terms of time, cost, and other things. the primary data obtained processed by change assessment and scoring tool (cast), which consists of five scales, those are "very negative", "negative", "no change", "positive" and "very positive" (alam, et. all, 2015). cast method built in the mid-1990s as a technique that focuses on a group / group to describe a person's perception of change. this method adopted from mikkelsen et.al. (2008) to evaluate the variation, poverty level reduction of implementation program of swedish development assistance. this study analysed achievement data of kopmu member-dt based on the achievement of five principles on maqashid al-sharia. data collected through the interview process to empowerment members of kopmu-dt that regularly gather for once a week. interviews conducted based on the guidelines of instrument that had been developed by researchers. the required time for the data collection process is approximately two weeks. after the data is collected, the researchers conducted a process of input, processing and analysis the data. input process and data processing using help from excel. based on the results of the analysis, the researchers create a data description of each maqashid-al sharia indicators. with data descriptions, researchers are able to make conclusions regarding the achievement of maqashid al-sharia of dt kopmu members. 4. result and discussion 4.1 socio-economic status of respondents based on previous exposure that targeted by kopmu-dt is to empower mothers, then all members of kopmu-dt consist of women who are married, whether its status is still in a state already married or a widow who has a business. the general characteristics of respondent section will describe the results of research findings related to respondents in the field, such as age, marital status, dependents number, education level, occupation, and length of participation in islamic microfinance institutions kopmu-dt. based on the findings from the field, the dominant age of the respondents from members kopmu-dt is in the age range 48-54 years (29%), 41-47 years (26%) and 34-40 years (16%). it means that about 71% were in the age range 34-54 years. this shows that most of the members are in the productive age and have a strong desire to actively participating in the economic activities of the family. that is because in the age range of the average member has schoolchildren dependents, which require relatively high cost. the reasons for members who no longer have a dependent child in school should stay in the program launched by the kopmu-dt is because they do not want to bother their children to bear family economy, so they choose to look for additional income to fulfil their daily needs. an empirical study of islamic microfinance performance for poor family: maqashid al-sharia perspective 52 the number of family member dependents mostly not much, an average of only 1-2 people (69%) even many who have no dependents. that's because some members have children who are married or work and earn their own income, so they are not borne by the parents, especially his father or the head of another household. most respondents in this study only complete school at elementary level, which is about 55%. at junior high school (smp) is 24%, senior high-school (sma / smk) 20%, and bachelor (s1) 1%. qualification may reflect members' knowledge in designing the orientation of life and the ability of members in developing their business. field findings indicate that most members of kopmu-dt just completed his education at primary school level. this reflects that most members of kopmu-dt had limited formal education background. based on author interviews with members known that low levels of education of members caused by several things, such as their ancient culture that considers higher education does not really matter, so that after the women graduated from primary school or junior high they immediately ordered to get married at very young age. limitation of cost also becomes one of the reasons why members do not continue their education to a higher level. in addition, the difficulty of road access to the school buildings, the distance from home to school that weakening member’s wishes to continue their education to a higher education level. low levels of education lead to lack of member’s ability to understand every contract deal offered by existing financial institutions, including from kopmu-dt. in addition, the cause is still lack of understanding on how to manage finances and grow their businesses. however, it did not discourage the members to be serious and diligent in following the empowerment and mentoring program initiated by kopmu-dt in order to develop the skills and knowledge to develop their business. types of jobs held by members of kopmu-dt is very diverse, ranging from vending and food products (jackets, bags, bed sheets, cosmetics, accessories, food, vegetable rice cake, children snacks, and many others); business services (laundry, therapists, farm workers, domestic assistants, and other services); to be farmers or just be a housewife who all have the potential for business development in order to improve the welfare of the family. based on the field findings, there are some differences between the characteristics of jobs in bandung raya and south bandung area. each area has its business potential of each, the majority of efforts undertaken in the area of bandung raya members are either in the form of trade credit grocery goods or shape. location effort undertaken by members of the majority to open a shop at home, some are selling at a place of recreation, schools, and sell around, as well as fields or gardens for the farmers. the reason members undergo additional effort is as family income or as a side income to help her husband provide for the family. another reason is as the major economic purpose to fulfil the needs of family life, this thing is usually because members are no longer have a husband. household expenses predominately used for food consumption in a day-school expenses of children and micro-financing instalment. the results are based on the average research consumer spending is less than 1 million are 15%, between 1-2 million is 50% and the average expenditure of 2-3 million is 35%. this means that the majority of respondents spending to be around 1-2 million. approximately 12% respondents earn income other than islamic microfinance afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 53 program. revenues from this poor family come also the government in the form of direct cash assistance (blt), zakat and waqf institutions or ngos. values help around 300-500 thousand / month. 4.2 islamic microfinance performance islamic microfinance performance, in this case, measured based on several indicators, as follows: 1) the length of participation, 2) the amount of financing, 3) administration financing, and 4) the rate of return. the following will explain the results of research and describe every indicator of islamic microfinance. the duration of participating members in kopmu-dt at least impact on the benefits perceived by members. most members kopmu-dt (74%) have followed a program initiated by the agency has been more than 3-4 years. only around 26% of the members who join about 1-2 years as dt kopmu membership. figure 1 respondents based on the membership period source: summary of results of research data processing the participation of members in kopmu-dt institutions mostly have been in a long time, more than three years. the duration of the participating members in kopmu-dt at least affect the benefits perceived by the members, in both term material as well as spiritual. most of the perceived benefits of the members in terms of material, such as an increase in the gain of family income, an increase in business turnover, the increase in business assets and assets of households, as well as an increased ability to develop business skills. in addition, with the mentoring program contains material that is not only business development, but also their moral guidance of the members will have great impact for spiritual life member. the change of the spiritual side member, namely an increase in the quality of worship, including the increasing intensity of charity members through the media such as moneybox in every weekly assembly meeting, it is expected to grow the spirit of generosity to each member. moreover, the intensity and quality of the qur'an together with members has increased, along with the delivery of material by the companion foster their increased knowledge of religion for members. the second indicator used in measuring the performance of islamic microfinance is the amount of financing that is measured by how much percentage of the amount of financing provided by kopmu-dt to members compared to the magnitude of the filing of the financing committed by members of the kopmu-dt. in addition, the indicator loan amount is also measured by how much of the perceived benefits from financial assistance provided by kopmu-dt. 26% 53% 3% 13% 5% 1-2 tahun 3-4 tahun 5-6 tahun 7-8 tahun 9-10 tahun an empirical study of islamic microfinance performance for poor family: maqashid al-sharia perspective 54 based on the findings from the field, as many as 67% of who get financial assistance in accordance with what they propose that approximately 81% -100% of the submission. funding proposed various kinds, some use murabahah which are commonly used by those members who have a business, especially in the field of trade, some use wakalah are usually submitted by members who will pay school fees for their children, or contract of ijarah are usually submitted by members who would renovate the house, and many other contracts. board-dt branch kopmu south bandung area revealed that giving financial assistance that has been done only with the confidence to members of the institution. this is done not without risks, financing problems must be found while in the field. however, by forming a small group that requires its own members selectively entering new members, their joint responsibility in the assembly group into one of the anticipations of financing problems, and the most important is the commitment of the members to be responsible for everything that is done including the obligation to pay. the third indicator is the administrative problems; it measured by the extent of ease administrative requirements that must fulfil in applying for financing members. please note financing specified by kopmu-dt is to use a 2-2-1 pattern, meaning of the five members in one group of eligible first get financing are two of the first, followed by the next two, then the last person the order agreed in advance. 2-2-1 pattern used only on the submission of financing the first stage, the next stage seen from the discipline of members in paying instalments and following the weekly meeting. based on author interviews to the members, the majority of members considered that the requirements set by kopmu-dt in obtaining financing are not difficult to be met by members, members are only required to collect cards (ktp), family card (kk), and members were asked to fill several sheets flap on administration of the board that was later discovered by a family member with a clear sign his name in the flap on. disbursement of financing will be made at the weekly meeting next in the presence of other members as a sign of approval from other members. therefore, the stages are considered easier for members kopmu-dt compared to apply for funding to other agencies. the last indicator, the rate of return is measured by how much it costs member for financing and the extent of the perceived ease of members in paying installments financing. it is important to the author discussed the reason that each different financial institutions in determining the amount of installments shall be members or customers to pay and determine the length of the installment payment term. based on field surveys, most of the members of financial institutions expect the amount of installments that are not too big and the period of time is not too fast from the financing process is done. it is felt alleviate the grounds that most of the members work in the informal sector whose income is uncertain each day, week or month, and income was on average not too big so blithely instalments and time-frame of instalment payment can alleviate the members in pay the instalments. based on the findings of a field that is based on mutual agreement between the member and kopmu-dt in the annual members meeting (rat), set the maximum term of installment payments for 50 weeks. repayment is done once a week at the time of maximum assistance activities undertaken by the payment of three installments. if there is one member who did not pay at the time of afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 55 counseling, it can be taken from savings installment in question or be borne jointly by all members of the board were present. the conclusion of islamic microfinance result description variables can be shown in table 1. table 1 description of islamic microfinance in kopmu-dt indicator indicators score category entanglement with kopmu-dt 1,166 high total financing 827 very high administration 1,578 easy return 838 very mild variable score σ 4,409 very high source: summary of results and data processing 4.3 the performance of micro business member in islamic microfinance micro business performance of the members of the islamic microfinance measured by several indicators, namely: 1) the financial resources, 2) revenue and 3) creating employment. the measurement of performance refers to the indicators proposed by alam et.all (2015). to obtain financial capital, mostly small businesses get funding from the government. therefore, the score is not worth, and then they took the initiative to engage in micro-islamic financing. the values of the micro financing they receive are as follows: table 2 number of islamic microfinance financing value financing total percentage (%) <1 million 20 20% 1-2 million 40 40% 2-3 million 32 32% > 3 million 8 8% 100 100% source: summary of results and data processing as for revenues, based on the results of this research is that 68% of respondents who are actively engaged as a member of the empowerment of micro businesses, while the remaining status as a housewife, assistant household and farm workers. the respondent's status as micro businesses engaged in the trade with the micro-scale, such as food vendors, toys, clothing and so forth, but it is also engaged in services, such as services of make-up, services of a therapist, sewing services and other so. of the respondents who have a job or perform micro, then the average income earned is 27% with an average income of about rp 500,000, to. rp 1.000.000, -; 49% with an average income of rp 1,000,000, to rp 2,000,000. an empirical study of islamic microfinance performance for poor family: maqashid al-sharia perspective 56 table 3 respondents based on types of employment no. employment type frequency (person) percentage (%) 1 enterprises products and food 46 46% seller of cosmetics, accessories, jackets, sandals, credit items and others seller child snacks, snacks, meatballs, fried foods, whole milk, vegetable rice cake, chips, etc. 2 business services 32 32% teacher art, farm labourers, catering, acupuncture therapist, boutique, wedding organizer, tailors, production of shoes and bags, garment, laundry, etc. 3 more 22 22% housewife bird breeders, farmers total 100 people 100% creating employment, almost 68% of respondents noted that after obtaining islamic micro financing, they can run the business independently. of the total who run micro-enterprises, then the 50% run the business with her husband and 18% doing business with family members. thus, microfinance creates jobs not only in the micro-finance borrowers, but for other family members. although, creating employment in new micro businesses is still limited on their own families. 4.4 achievement maqashid al-sharia achievement maqashid al-sharia in kopmu-dt member empowerment refers to the proposed as-syatibi (dusuki & bouheraoua, 2011) and technically based on what has been developed by alam et.all (2015) in measuring the performance of islamic microfinance by maqashid al-sharia. based on the research results, it can be seen maqashid al-sharia achievement that the member kopmu-dt. 1) religion (ad-din), changes in religious practice. among the respondents agreed that islamic microfinance programs have positive impact on the practice of religiosity better. religiosity in this study measured using three indicators, namely indicators of appreciation or the islamic faith, worship or implementation of sharia and practice or morals. all three indicators are broken down into 25 grains of questions used as a measure of the level of religiosity in kopmu-dt. appreciation or the islamic faith indicated by how often respondents remember and associate everything that happened in his life that everything afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 57 happens by the will of allah. worship or implementing sharia intensity indicated by how often and how much the quality of the respondents in performing activities of daily worship either mandatory or sunnah, while practice or morals is indicated by how often the implementation of additional practice daily as the implications on the islamic faith and confidence in the implementation of worships. indicators of appreciation or islamic aqeedah on members of kopmudt are in the range of medium categories. the indicator of worship or the implementation of sharia in-dt kopmu members belong to the higher category. indicators of worship include the intensity and quality of ritual worship both mandatory or sunnah. the form of implementation includes several things, including the accuracy of the implementation of fardhu prayer and improving quality by carrying out it in congregation and coupled with the intensity of the implementation of the sunnah prayer. in addition, there are also exercising their mandatory or sunnah fasting, generous attitude towards each other, together with the intensity and quality of the qur'an, the intensity and quality pray, obedience to avoid usury, and that made the difference for a muslim woman is obedience in maintaining veil. based on the findings from the field, most of the members have to follow-dt kopmu membership in more than three years. it has affected the pattern and quality of worship of members. habituation koran every weekend accompanied by guidance counsellor’s material by any court to be one of the medias for members to have an opportunity to learn islam better. from interviews with members, implied the more prominent is the intensity and quality of togetherness with the koran and the habituation to giving charity for others. several members mentioned that earlier they were not able to read the qur'an, but with the weekly council meetings makes the members more determined to learn the koran. other than that, practice indicator values or morals in-dt kopmu members belong to the higher category. indicators practice or this character including the implementation belief in allah and worship rituals are applied in everyday life or in other words, a person's attitude on good terms with each other. this can be reflected in their attitude, generous and help each other to others, honest and fair in the act. 2) life (an-nafs) changes in family living standards. almost all respondents agreed that participation in islamic microfinance programs have a positive impact on their lives. everyone said that their condition of life has significantly better after being involved in islamic microfinance program, as well as their health status. nearly 90% of respondents believed that microfinancing that they receive to add the cost of health control them effectively. everything stated that his health condition is now better than ever. although, most among respondents stated that their health condition could not be as good as before due to aging. change in social participation. almost all respondents agreed that their increased social participation after being involved in islamic microfinance program. the majority of respondents have a good relationship with the brothers and participates in various community activities. they are present in mentoring activities on a regular basis to discuss issues that are run at the same business together the same study the science of religion. through this program, the housewives are becoming more open to the public in the surrounding an empirical study of islamic microfinance performance for poor family: maqashid al-sharia perspective 58 environment, sharing affection and motivate each other to change a better life. at any given times a companion or caretaker of the empowerment group provides training skills for mothers, such as making cakes, cooking, sewing, making skills and others to inspire women in running businesses that can provide additional income. so, overall islamic micro finance could increase the positive social activities to its members. 3) property (al-aql) changes in education level. nearly 70% of respondents agreed that participation in islamic microfinance could increase knowledge. they acquire various types of knowledge they gained from a variety of economic activities through credit. although 30% of respondents said that they did not acquire new knowledge of their activities. change in skills and business experience. nearly 60% of respondents agreed that their involvement in the financing of islamic micro positive impact on the business skills and experience. among them, 20% experienced a positive change is very high. although, 20% found and skills and business experience they are not effective because the majority of their status as a housewife. besides that, assessment standards in this indicator based on the growing number of courses / trainings attended, the higher the ratings given. results of field interviews, the average respondent had difficulty of access and the ability to get the course / training. although course / training has started being implemented by the driver of the pkk in the village / village or other institutions, in general they are less motivated to attend the training. changes in knowledge about family, almost all respondents agreed that the involvement of islamic micro finance programs positing impact on the knowledge of their families. among them, 30 per cent showed a positive change in this aspect. many respondents who ultimately have the ability to deliver their children obtain a higher education. this indicator has indicated the respondent's role as wife and mother of his children to be madrasatul ula, the first educators for their families. this function is implemented on the involvement of the respondent to accompany their children to study, do homework from school, accompanying the children studied religion, a reminder of the family in performing worship. 4) lineage / honoraria (al-nasb) lineage changes / honor among family members. almost all respondents agreed that their involvement in the microcredit program to change the lineage among family members. among these respondents, 40 percent showed a very positive change. change public perception. about 80 percent of respondents agree that public perceptions with respect to their family increased positive for their involvement in the microcredit program. the majority of respondents stated that they received the award, which increased from society after their living conditions improved. however, 20 percent of respondents reported no change in perception 5) wealth (al-mal) changes in monthly household income. almost all respondents agreed that their household income had increased as a result of their involvement in a microfinance program (table 4). these findings also indicate that they are judiciously utilizing micro finance their economic activities. change in asset ownership. almost all respondents agreed that they acquire some assets from their business income with using micro-finance wisely for economic activities. they managed to buy some assets for themselves apart from capital expenditure on work, family and credit payments (table 4). about afebi islamic finance and economic review (aifer) vol.03 no.01, june 2018 59 50% of respondents reported a very positive effect on asset ownership because they have significant assets. for example, table 4 achievement of micro financing program based maqashid al shariah principle variable measurement scale data (%) 1 2 3 4 5 religion (ad-deen) changes in creed of islam 10 20 40 30 changes in worship practices 5 10 40 45 changes in morals 20 30 50 soul (an-nafs) changes in family living standards 10 60 30 changes in social participation 20 65 15 intellectual (al-aql) changes in the level of knowledge 30 70 changes in skills and business experience 40 60 changes in knowledge about family 10 20 40 30 descendants (annashl) changes lineage / honour among family members 10 50 40 change public perception 20 50 30 wealth (al-maal) changes in the family's monthly income 10 70 20 changes in ownership asset 25 60 15 information: 1 = very negative; 2 = negative; 3 = no change; 4 = positive and 5 = very positive 5. conclusion and recommendation all this time, the measurement of islamic microfinance performance similar with the other microfinance measurement in general. though the concept of tauhid as epistemology should be the main feature of islamic microfinance, not only the base funding that should be free of usury, but all aspects of the implementation of islamic microfinance program that should lead to the achievement of the objectives maqashid al-sharia. based on the results of the study, mothers who become agents of empowerment of poor families have actively pursued the development programs run by kopmu-dt. they have a strong attachment to kopmu-dt, because mentoring is done intensively per week to members of the empowerment of institutions. the collected data were analyzed based on the achievement of the five principles in maqasid al-shariah. almost all of the principles increased significantly after participating in islamic microfinance program. however, in between these five principles, indicators ad-din, al-nafs al-nasb and al-mal most improved sigifikan after participating in islamic microfinance program. however, al-aql indicator is not significantly enhanced by this program in comparison with the other principles. they assume that their involvement in islamic microfinance programs are not much help them gain additional knowledge or business skills. this is understandable, because it is based on field studies kopmu companion-dt does not give much general knowledge and business skills, because that is the focus of the program is how the members of the poor families assisted in financing that will support the family finances and provide spiritual guidance to strengthen faith. another factor is due to the limited time of the mentoring program is done. this is due to the limited number of escort while the number of auxiliaries that should be visited numerous and widespread in the area a suburb of bandung highway. an empirical study of islamic microfinance performance for poor family: maqashid al-sharia perspective 60 based on the results of the study, household income on average increased after following the islamic microfinance program, but the increase in this revenue has not significantly increase the assets owned by the family involved in islamic microfinance program. this is because the micro-financing provided by komu-dt is still very limited in number, so that only a relatively small capital increase for members. in addition, increasing the amount of financing for members who successfully returns smoothly financing tends to be slow. the main factor of the cause is due to the limited capital owned by kopmu-dt that amount should be divided equally among the members in all regions of the auxiliaries. forward, to improve the performance of islamic microfinance, especially in 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(2016). the role of micro-finance islamicc in enhancing human development in muslim countries. journal of islamic finance, 5(1), 53-62. islamic public finance instruments according to kitab al amwal by ad dawudi 1 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) islamic public finance instruments according to kitab al amwal by ad dawudi siti mudrikah1)*, muhamad nafik2 1,2department of islamic economics, faculty of economics and business, airlangga university, indonesia abstract islamic public finance is a theme that has been discussed by several previous scholars, such as ad dawudi in his book al amwal. in this paper, the author examines his writings on the source of state finance through state revenue, namely zakat. zakat according to ad dawudi has a role to eliminate social disparities between the rich and the poor, creating a high sense of solidarity. this study uses a literary study of the book al amwal by abu ad dawudi as the first source. his thinking said that zakat was able to provide economic support, even his thoughts were used in the fatimid government. at that time, his country was experiencing the chaos of corruption and social inequality. then the incident is relevant to the state of declining economic growth in indonesia, one of which is marked by increasing poverty. ad dawudi's thought regarding zakat is expected to be able and relevant to be used to make policies in indonesia, especially indonesia has the largest muslim community. keyword: ad dawudi, islamic public finance, zakat, poverty, islamic economics 1. introduction economic conditions are not the only main indicator to measure the level of people's welfare. a country will be seen as a country that is prosperous when it has an established economic system and sufficient income. the country's economic success can be seen in the welfare of its people. whether from the poverty level, the unemployment rate, the health level, or the income level of people living in a country. for this reason, economics is important in human life. if a country must have a source of wealth or income that is used for economic activity in that country, it is called, to run it, the state needs a system that regulates state finances. public finance is a part of economics that studies government financial activities. it also discusses the rules regarding fiscal policy, namely policies related to government spending and revenue (m & syahputra, 2013). s as complete teaching of life, islam guides activities that humans need, including the economy. the goal of islam is to achieve falah, namely prosperity in the world and the hereafter, that is the reason why islamic public finance is important to study. * corresponding author. email address: mumuds294@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:mumuds294@gmail.com afebi islamic finance and economic review (aifer) volume 6, no 1 2021 2 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in this paper, the writer examines public finances based on ad dawudi's thoughts. ad dawudi gave his thoughts on how to manage the income and expenditure of a country. he classified income for the non-zakat category into two categories, namely periodic and nonperiodic income. periodic income (jizyah, kharaj, ushr) includes, fai and ghanimah. at the point of spending, ad dawudi divided it into 5 categories, namely military, development, administrative and civil servants, social support, and special zakat expenditures. furthermore, this paper will analyze the relevance of ad dawudi's thought, especially (state financial revenue) on poverty in indonesia. at that time ad dawudi's thought was based on a case or history during the fatimid reign. 2. literature review islamic public finance according to arifin p. soeria (1986), atmadja defines state finances in terms of accountability by the government, that state finances that must be accounted for by the government are state finances that only come from the state budget. so that what is meant by state finance is finance originating from the state budget. arifin p. soria atmadja describes the dualism of the definition of state finance, namely the definition of state finance in a broad sense and the meaning of state finance in a narrow sense. finance originating from the apbn, apbd, finance for state business units or state-owned companies, and essentially the entire state assets. meanwhile, the definition of state finance in the narrow sense is finance originating from the apbn only (arfah, 2020). islamic public finance is finance that is managed for the benefit of society, whether managed individually, collectively, or managed by the government. according to monzer kahf, the issue of public finance that includes public revenues (public revenueserlu) and public expenditure (public expenditure) has two criteria, that is: a. to serve well the interests of all members of the muslim community. b. to organize these interests based on revelatory sources, namely al-quran and hadith (gultom, 2019). islamic public finance includes two things, namely the revenue and expenditure sectors. before the next discussion, it is necessary to know that islam has the principles of islamic economic policy which form the basis of economic activity, including: the supreme power belongs to allah and allah is the absolute owner of all that exists a. humans are the leaders (caliph) of allah on earth but not the less fortunate owners have rights over some of the wealth owned by the more fortunate groups b. wealth must not be accumulated and hoarded c. wealth must be rotated d. economic exploitation in all its forms must be eliminated https://creativecommons.org/licenses/by/4.0/ islamic public finance instruments according to kitab al amwal by ad dawudi 3 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) e. eliminating the gap between individuals in the economy can eliminate conflict between groups by sharing one's own after death with his heirs f. establish obligations that are mandatory and voluntary for all individuals, including poor members of society principles of acceptance of islamic public finance from a historical review of the public acceptance of islam, it can be shown that the various forms of public funding sources have been determined by the current government such as kharaj, khums, jizyah, and so on (ningrum, 2014). zakat a. definition of zakat etymologically zakat in the book mu'jam wasit as quoted by dr. yusuf qardawi is a basic word which means blessing, growing, clean, and good. quoting the opinion of sulaiman rasjid that zakat in terminology is a certain level of the property, which is given to those who are entitled to receive it, with several conditions (ali, 2014). meanwhile, according to hafidhuddin (2008) in language, zakat means to grow and develop. the word zakat has several meanings, namely al-barakatu which means blessing, an-namaa which means growth and development, at-thaharatu which means purity, and ashshalahu which means success. in terms, zakat is defined as assets with certain conditions, which allah swt requires to the owner (muzakki) to be submitted to those who are entitled to receive it (mustahik) with certain conditions (beik, 2009). the groups who are entitled to receive zakat have been regulated in the teachings of islamic law, namely, there are eight groups, namely poor, poor, amil, converts, niqab (slaves), gharimin, fi sabilillah (people who struggle in the way of allah), and ibnu sabil (people who are on his way) (mubarokah et al., 2018). this provision is regulated in the qur'an, letter at-taubah, verse 60, which means zakat is only for the needy, the poor, amil zakat, who softens his heart (converts), for (frees) the slave, for (frees) those who are in debt, for the way of allah, and for those who are on their way, as duty from allah. allah is all-knowing, all-wise. (translated by kementerian agama, 2002). b. wisdom of zakat there are 3 pearls of wisdom of zakat according to (ali, 2014) that is: 1) faidah diniyyah (religious aspect) a. tithe delivers a servant to the happiness and salvation of the world and the hereafter. b. means for servants to taqarrub (get closer) to allah, will increase faith because of its existence which contains several kinds of obedience. c. zakat payers will get a large reward that is multiplied, as in the word of allah swt which means, https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 2021 4 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) "allah destroys usury and fertilizes alms. and allah does not like everyone who remains in wisdom, and always sins ". d. zakat is a means of removing sins. 2) faidah khuluqiyyah (in terms of morals) a. instilling the nature of nobility, tolerance, and generosity in the individual paying zakat. b. the payer of zakat is usually identical with the nature of mercy (compassion) and gentle towards his brother who does not have it. c. it is a reality that contributing something of the body to the muslims will enlarge the chest and expand the soul because it is certain that he will become a person who is loved and respected according to the level of sacrifice. d. in zakat there is a purification of morals. 3) faidah ijtimaiyyah (social aspect) a. zakat is a means to help fulfill the needs of the poor who are the majority group of most countries in the world. b. provide strong support for the muslims and elevate their existence. this can be seen in groups of zakat recipients, one of which is mujahidin fi sabilillah. c. zakat can reduce social jealousy, resentment, and resentment that exist in the chest of the poor because the lower class will be easily drowned in hatred and hostility if they see high economic groups squandering such abundant wealth to alleviate poverty, harmony, and love will certainly be established. the love between the rich and the poor. d. zakat will spur the economic growth of the perpetrators and what is clear is that the blessings will be abundant. e. paying zakat means expanding the circulation of property or money because when assets are spent, the circulation will expand and more parties will benefit (ali, 2014). poverty according to spicker and gaiha (1993) in the coordination team for the formulation of poverty reduction policies (2004), it is said that poverty is better understood together with other social problems, such as hunger, disease, unemployment, overpopulation, environmental destruction, the consequences of conflict social. the central bureau of statistics (bps) defines poverty with the food and non-food poverty line standards. the food poverty line, namely the value of consumption expenditure on basic food needs equivalent to 2100 calories per capita per day. the non-food poverty line is the amount of rupiah to meet the minimum non-food needs such as housing, health, education, transportation, clothing, and other goods/services. https://creativecommons.org/licenses/by/4.0/ islamic public finance instruments according to kitab al amwal by ad dawudi 5 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) meanwhile, the bkkbn uses the household unit to measure the level of poverty. poverty lies with the pra sejahtera (pra ks) and the i prosperous family (ks 1) which are marked by the difficulty of fulfilling economic and non-economic needs. besides referring to poor individuals and households, poverty measures are also approached by observing poor areas. there is a strong relationship between poor areas and poor people, so knowing the poor areas can be expected to find the majority of the poor (rejeki, 2006). therefore, an adequate definition of poverty must include a definition of poverty which has various dimensions (smeru, 2001), including: a. inability to meet basic consumption needs (clothing, food, shelter) b. lack of access to other necessities of life (health, education, sanitation, clean water, and transportation); no guarantee of the future (because there is no investment in education and family) c. vulnerability to shocks that are both individual and mass d. low quality of human resources and limited natural resources; not involved in community social activities e. lack of access to employment and sustainable livelihoods; social disabilities and disadvantages (neglected children, women victims of domestic violence, poor widows, marginalized and isolated groups) (rejeki, 2006). factors causing poverty sharp in mudrajad (1997) tries to identify the causes of poverty from an economic perspective. a. on a micro level, poverty arises because of the unequal patterns of resource ownership which result in an unequal income distribution. the poor have only a limited number of resources and are of low quality. b. poverty arises from differences in the quality of human resources. low quality of human resources means low productivity, which in turn low wages. the low quality of human resources is due to low education, unfortunate fate, discrimination, or heredity. c. poverty arises due to differences in access to capital. these three causes of poverty will lead to the vicious circle of poverty theory. the existence of underdevelopment, market imperfection, and lack of capital cause low productivity, which in turn, result in the low income they receive and will have implications for low savings as well as investment (rejeki, 2006). 3. research methodology this research is qualitative and uses library research (library research). qualitative research is a research procedure that produces descriptive data in the form of written or spoken words from people and observable behavior according to moleong (2008: 9). this https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 2021 6 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) research methodology is called qualitative research because it maintains the originality of the data in its qualitative form. sources of data in this study consist of primary data and secondary data. the primary data source in this study is ad dawudi's book, al amwal. secondary data in this study are used to complement and support information on the object of research in the form of books, papers, and articles related to the object of research. the data collection method used in this research is the documentation method. the data obtained in this study were further analyzed using the content analysis method (arfah, 2020). 4. discussion a brief history of abi ja'far ibn nasr ad dawudi abi ja'far ibn nasr ad dawudi al-asadi al musili at-tharabulusi at tilimsani al maliki or another name, ad dawaudi, who composed a book entitled al-amwal. he is well known as a hadith expert from the maliki school of thought who was born in biskirah. according to salahuddin husain khudair, he lived during the fatimid dynasty in northern africa which was founded in (296 h / 910 m567h / 1173m) which had cities in raqqadah, then mahdiyyah, and mashuriyah. during this reign, the school used was shia which also became the official school of the country. this school of thought contradicts the sunni school of thought so that there is a conflict in the process of spreading the shia school of thought. ad dawudi is a figure who fortifies the ahlussunah and strongly opposes the shia group during the bani ubayd government (razali & febriansyah, nd). the political development at that time illustrated that the official school of the state was the ismaili shiite sect. this school is very contrary to the sunni school which has existed for a long time in the maghrib region, so it is not surprising when the spread of this shia school has fallen victim, especially from scholars who have different directions from them. the sunni schools that were scattered were the hanafi and maliki schools, but the followers of the hanafi school became a little less with the fading of the abbasid daulah. there are also other schools such as the ibadhiyah school and mu'tazilah. it was very different from the time of lidinillah's mu'iz as caliph, which was the golden age in fatima's reign. because he really loved knowledge and honored scholars, so he was tolerant towards scholars of the sunni sect in particular. in the daily economic development, the main livelihood for the maghrib population at that time was agricultural products, because the results of agriculture were more developed than other incomes. however, there are also other economic activities such as imports, as well as the area around the north of ifriqiya which is mostly engaged in fishermen with income like pearls. historians and scholars have different opinions about the year he died. ibn makhluf argues that he died in 440 h. zarkaly determined it in 307 ah while the majority of scholars https://creativecommons.org/licenses/by/4.0/ islamic public finance instruments according to kitab al amwal by ad dawudi 7 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) argue that ahmad ibn nasr al-daudi died in 402 ah (1011 ad) .26 among them al-qadhi 'iyadh, ibn farhun and zahabi. he died in tilimsani (m & syahputra, 2013). islamic public finance the discussion in this paper examines public finance in indonesia which will then be analyzed using ad-dawudi's thinking. a. state finance in indonesia definition of state finance according to soeriaatmadja (2010) are rights and obligations that can be valued in money and everything in the form of money or goods is made "state property rights". meanwhile, the scope of state finance includes state revenue, state expenditure, state debt and loans, financial policy (fiscal, monetary, and international financial policy). according to research conducted (atmaja et al., 2019) said that there are three sources of state income, namely: 1) taxes a. domestic trade tax. a) oil and gas tax, b) value-added tax including luxury tax, c) land and property tax, d) ownership tax on land and building, e) customs, and f) other taxes including interest payments. b. international taxes come from import and export tariffs, not taxes, and grants. then based on a report from soeriaatmadja (2010) states that in the category of state revenue or revenue, namely: a. the benefits of companies include: bumn, both pma and pmdn companies b. tax c. creating new money d. borrow from the bank e. loans to the community f. fines 2) non-tax revenues include: a. natural resource revenues including oil, gas, mining, forestry, and fisheries. b. dividends for state-owned enterprises. c. other income includes sales and rent, service income, interest and education, and d. income from public service agencies. 3) grants come from within and outside the country for various purposes such as funding education programs, village development, and urban planning, water and sanitation programs, subsidies, and others. such grants can be managed by ministries or local governments. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 2021 8 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in islam there are also several alternative sources of state revenue that can be taken. the source of state revenue has been determined in the koran and made clear in the hadith. one of the main state revenues in islam is zakat. zakat is the axis and financial center of the islamic state. zakat has different benefits in terms of certain fields, among others. moral, social and economic fields. zakat in the moral field, namely zakat can erode and eradicate greed. in the social field, zakat acts as a mediator which is used to realize that fellow humans must have a sense of social responsibility with one another. in the economic sector, zakat has many functions, among others. first, as an instrument to close the gap between the rich and the poor. second, distributing income so that the assets do not stop in the hands of a mere few people (m & syahputra, 2013). public finance according to ad dawudi there are 2 categories of public finance according to ad dawudi, namely state-specific income and general state income. the general state income is included in the matter of zakat. and zakat is very popular as an instrument in islamic public finance. 1. zakat distribution ad dawudi mentioned the argument about zakat distribution as written in chapter x about zakat: "in fact, zakat is taken from the muslims as purification for them" source ahmad ibn nasr al dawudi, al amwal, p. 151 in (m & syahputra, 2013). 2. types of zakat according to ad dawudi, there are many types of zakat, but here the author will focus on zakat as a source of state financial revenue. in the state there is a difference between state revenue and revenue, revenue is money that goes to the state treasury, that is, all forms of deposits that are received and entered into the state treasury account, while state revenue is the right of the central government which is recognized as an addition to the value of net assets, meaning all state revenue. be the right of the central government relating to the implementation of the main tasks and functions of the office/work unit/state ministry/institution (m & syahputra, 2013) ad-dawudi's thoughts in the book al-amwal which he wrote are divided into four (4) parts. first, special ownership and prohibition of infringement of property rights. second, income and expenses, this chapter deals with offices, payroll, and land law in northern africa. third, zakat, ghanimah and jizyah, fathu makkah, wages for mujahidin, gifts for umara, wars and peace in daulah islamiyyah. fourth, assets whose growth value is unknown (syahputra, 2013). as long as he was alive, his thoughts could be accepted and practiced by the government to collect ghanimah and fai 'as income for the government, but in a modern https://creativecommons.org/licenses/by/4.0/ islamic public finance instruments according to kitab al amwal by ad dawudi 9 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) world like this, it would be seen as something backward considering that thought was related to war for the purpose of wealth, so that the addawudi regarding sources of income (ghanimah and fai) can be considered irrelevant for current practice in the modern world. however, zakat as an annual obligation of muslims is still practiced and managed today, but its use no longer reflects the original idea of being a source of income for the government. however, the aim of being distributed to mustahiq in the present is generally in line with the life of ad-dawudi. ad-dawudi also emphasized that spending on national defense must be balanced with spending on social services. ad-dawudi discusses the inequality in society which can mainly be seen between the rich and the poor. although many scholars of his time debated whether to be rich or poor was preferable, ad-dawudi intends to discuss more about what can be done to solve social and economic problems in society. ad-dawudi's efforts will reduce the inequality between the rich and the poor and in the end, will bring more justice to the social life of a country. like what is being experienced by indonesia at this time of increasing poverty (atmaja et al., 2019). with ad dawudi in mind, namely the importance of kafāf or sufficient income as a basis for social security. kafāf according to ad-dawudi reflects the minimum condition of a muslim's income which allows him to pay zakat as the main obligation in islam. the ability to pay zakat is expected to prevent muslims from being exploited by the misery of poverty. poverty at some point may lead poor people to take to the streets asking for help from others or becoming beggars. to avoid family and community members trapped as beggars, ad-dawudi emphasized the importance of economic support as part of social solidarity, to create the good character and not make begging (begging) as a source of income (atmaja et al., 2019). ad-dawudi's ideas regarding inequality, social security and social solidarity are still relevant when practiced with the current situation and condition of public finances in indonesia. ad dawudi's thoughts on zakat are expected to be a solution to the problems experienced in indonesia today. if you look deeper into the concept of zakat, it is to give your property to others without expecting the money to come back, or without giving any conditions to people who receive zakat. according to the author, this is the reason why zakat has a big role in the economy, especially in indonesia. adam smith theory relationship with zakat m. a mannan said that there is a difference between zakat and conventional sources of state finance. ma manan linked zakat with adam smith's theory of taxation. first, according to the norm of equality. the purpose of the equation here is that the equation is not in the amount issued by each individual. each individual should have a different proportion or amount that must be spent. analysts like this between the rich and the poor have different proportions in paying taxes, and automatically there will be more to the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 2021 10 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) rich than the poor. likewise with zakat. a richer person will have more wealth than a poor person, even these assets will be given to the poor following the provisions of the tithe. second, the norm of certainty. in indonesia, taxes are regulated by the government, the amount to be paid, the time of payment, etc. neither is zakat. even in the koran and hadith, it is stipulated how much assets are spent on various types of zakat along with the time (haul). third, the norm of convenience. this norm says that there is convenience regarding then in paying taxes (m & syahputra, 2013). meanwhile, according to adam smith (1723-1790) in (razali & febriansyah, nd) regulations in taxation must have basic principles, namely: 1. taxes may not be made by bargaining, taxes are regulated in law and the regulations are binding in general, clear and firm. this means that here it does not have a double meaning, cannot be interpreted and must be transparent. likewise, zakat also has clear rules, the consequences of not paying zakat when it reaches the nisab have also been explained in islamic law. sources of islamic law al quran and hadith are sources that are binding, firm, clear, do not contain multiple meanings, cannot be interpreted, are transparent and visionary. 2. the principle of equalization. according to adam smith, equalization means that people who are in the same situation must be subject to the same tax. tax collection in the community should be carried out with capability and in balance with the income that is owned by the community. zakat payments are made when the nisab limit has been reached. regardless of whether he comes from a different ethnicity and race, when the property has reached its nisab, the property must be zakati. in other words, the more property a person has, the more zakat is issued. 3. the principle of convenience is the tax collection carried out by the government when society is experiencing an economic recovery. from that understanding, it can be interpreted that tax collection is carried out when people receive income. so flexibility and the right timing must also be considered when collecting taxes. for example, with a pandemic like this, tax collection requires new regulations, such as relief. the prophet muhammad saw also underestimated the estimates of plants and fruits when there was a famine (razali & febriansyah, nd). the outbreaks that occurred in various countries have had a very strong impact, including indonesia, so it is not wrong for the government to provide relief on electricity tax collection. 4. the principle of economic efficiency. this principle says that the collection of taxes is carried out economically. in this case, the benefits of tax and zakat must reach the community, do not run out for operations and management alone, so that the initial purpose of the benefits of zakat and zakat is not conveyed properly. https://creativecommons.org/licenses/by/4.0/ islamic public finance instruments according to kitab al amwal by ad dawudi 11 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) poverty and zakat the number of poor people in march 2020 was fantastic, reaching 26.42 million people. this number experienced an increase of 0.56 percent or 1.63 million people when compared to 2019 an increase of 1.28 million people. the factors that cause the poverty rate to increase in 2020 are first, there is a slowdown in the growth of household consumption expenditure in the first quarter of 2020. second, there has been a decrease in the number of foreign tourists visiting indonesia so that supporting indicators are also affected. third, there was an increase in retail prices for several main commodities, including rice (1.78 percent), broiler chicken (5.53 percent), cooking oil (7.06 percent), sugar (13.35 percent), and eggs. purebred chickens (11.10 percent) (source: money.kompas.com). apart from the above factors, the disparity in poverty between urban and rural areas is still high, given the geographical condition of indonesia which is composed of various islands so that this disparity occurs. bps noted that the number of poor people in urban areas increased by 1.3 million to 11.16 million people, which initially reached 9.86 million poor people in 2019. meanwhile, the number of poverty in rural areas reached 333.9 thousand people, from the original 14.93 million people in 2019 to 15.26 million people in 2020. the pandemic has hit all levels of society, especially the lower class. source: bps.go.id after mentioning several factors that cause poverty in indonesia, islamic economics provides an alternative, among others, through zakat. maximizing the potential for zakat. according to a study conducted by puskas baznas, the potential for zakat in indonesia reaches 233.8 trillion, while it is known that the national zis collection in 2019 through official opz has reached 10 trillion or still 5.2 percent of the zakat potential (source: baznas.go.id). although the potential for zakat is very https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 2021 12 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) high, in reality it is still far from expectations. the absorption of this potential is not an easy matter requiring the role of the government and society as the perpetrators. in indonesia, the government does not provide zakat obligatory regulations such as tax obligations. most people still pay zakat to mosques or are given lasung to mustahik, for reasons of distrust of institutions, the absence of institutions to remote areas, lack of socialization or many other reasons that the writer analyzes based on the experience of the surrounding environment. so it can be said that there are still several factors why the potential for zakat is not maximally absorbed. when muzakki gives lasung to mustahiq, what happens here will appear only the consumptive value, so that zakat funds have no continuation of benefits. when zakat only has consumptive benefits, this will not be able to reduce poverty continuously or the benefits of zakat will not last long. the benefits of zakat can be felt by mustahiq in just a matter of days. even though it is not that simple, if zakat is managed properly, the value of benefits is developed, it will be useful in the future so that the benefits of zakat funds will be more productive. for example, it is given in the form of capital for msme players. so zakat funds which initially only have a consumption value will switch to productive value, resulting in a circulation of money. especially in the current pandemic era, zakat should have a very superior role. because providing capital assistance does not require excessive money first. for example, msmes that need capital support to get back up after experiencing shocks for about 2 years. the poverty that occurs today must receive attention from above (government) and from below (neighbors, small communities, and the entire indonesian nation). following ad dawudi's thinking, the government must take a role, but the community must also take a role. increase a high sense of solidarity and understanding of the problems currently being faced. conclusion ad dawudi's thoughts on public finance are indeed very important to study. because of his extraordinary thoughts about the concept of zakat. the concept of zakat is relevant to the current situation. even his thoughts were used in the government of the fatimid dynasty. this study will analyze abu dawudi's thoughts on its relevance to the existing situation in indonesia, which is currently experiencing problems, namely poverty. zakat is one of the superior instruments when viewed from its potential and existence for the indonesian nation, the majority of whom are muslims. reference ali, r. (2014). zakat dalam perspektif ekonomi islam ali ridlo. jurnal al‘adl. https://creativecommons.org/licenses/by/4.0/ islamic public finance instruments according to kitab al amwal by ad dawudi 13 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) arfah, t. arfah. (2020). keuangan publik dalam perspektif ekonomi islam. jurnal islamika, 3(2), 24–35. https://doi.org/10.37859/jsi.v3i2.2121 atmaja, f. f., asmuni, & andriansyah, y. (2019). an islamic economic perspective of public finance in indonesia based on ad-dawudi‘s thought in kitab al-amwal. international journal of scientific and technology research, 8(6), 276–279. gultom, r. z. (2019). keuangan publik islam: zakat sebagai instrumen utama keuangan negara. hukum islam, 19(2), 100. https://doi.org/10.24014/jhi.v19i2.7977 m, a. i. b. n. n. a. w. h., & syahputra, r. (2013). analisis pemikiran tentang keuangan publik studi kitab al-amwal. institut agama islam sumatera utara. mubarokah, i., beik, i. s., & irawan, t. (2018). dampak zakat terhadap kemiskinan dan kesejahteraan mustahik (kasus : baznas provinsi jawa tengah). al-muzara’ah, 5(1), 37–50. https://doi.org/10.29244/jam.5.1.37-50 ningrum, r. (2014). refleksi prinsip-prinsip keuangan publik islam sebagai kerangka perumusan kebijakan fiskal negara. el wasathiya: jurnal studi agama, 2(1), 86–103. razali, r., & febriansyah, s. (n.d.). eksistensi keadilan sosial dalam keuangan publik islam, ramadhan razali. 40–56. rejeki, d. p. s. (2006). analisis penanggulangan kemiskinan melalui implementasi program p2kp di kota semarang analisis penanggulangan kemiskinan melalui implementasi program p2kp di kota semarang. ali, r. (2014). zakat dalam perspektif ekonomi islam ali ridlo. jurnal al‘adl. arfah, t. arfah. (2020). keuangan publik dalam perspektif ekonomi islam. jurnal islamika, 3(2), 24–35. https://doi.org/10.37859/jsi.v3i2.2121 atmaja, f. f., asmuni, & andriansyah, y. (2019). an islamic economic perspective of public finance in indonesia based on ad-dawudi‘s thought in kitab al-amwal. international journal of scientific and technology research, 8(6), 276–279. gultom, r. z. (2019). keuangan publik islam: zakat sebagai instrumen utama keuangan negara. hukum islam, 19(2), 100. https://doi.org/10.24014/jhi.v19i2.7977 m, a. i. b. n. n. a. w. h., & syahputra, r. (2013). analisis pemikiran tentang keuangan publik studi kitab al-amwal. institut agama islam sumatera utara. mubarokah, i., beik, i. s., & irawan, t. (2018). dampak zakat terhadap kemiskinan dan kesejahteraan mustahik (kasus : baznas provinsi jawa tengah). al-muzara’ah, 5(1), 37–50. https://doi.org/10.29244/jam.5.1.37-50 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 2021 14 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ningrum, r. (2014). refleksi prinsip-prinsip keuangan publik islam sebagai kerangka perumusan kebijakan fiskal negara. el wasathiya: jurnal studi agama, 2(1), 86–103. razali, r., & febriansyah, s. (n.d.). eksistensi keadilan sosial dalam keuangan publik islam, ramadhan razali. 40–56. rejeki, d. p. s. (2006). analisis penanggulangan kemiskinan melalui implementasi program p2kp di kota semarang analisis penanggulangan kemiskinan melalui implementasi program p2kp di kota semarang. ali, r. (2014). zakat dalam perspektif ekonomi islam ali ridlo. jurnal al‘adl. arfah, t. arfah. (2020). keuangan publik dalam perspektif ekonomi islam. jurnal islamika, 3(2), 24–35. https://doi.org/10.37859/jsi.v3i2.2121 atmaja, f. f., asmuni, & andriansyah, y. (2019). an islamic economic perspective of public finance in indonesia based on ad-dawudi‘s thought in kitab al-amwal. international journal of scientific and technology research, 8(6), 276–279. gultom, r. z. (2019). keuangan publik islam: zakat sebagai instrumen utama keuangan negara. hukum islam, 19(2), 100. https://doi.org/10.24014/jhi.v19i2.7977 m, a. i. b. n. n. a. w. h., & syahputra, r. (2013). analisis pemikiran tentang keuangan publik studi kitab al-amwal. institut agama islam sumatera utara. mubarokah, i., beik, i. s., & irawan, t. (2018). dampak zakat terhadap kemiskinan dan kesejahteraan mustahik (kasus : baznas provinsi jawa tengah). al-muzara’ah, 5(1), 37–50. https://doi.org/10.29244/jam.5.1.37-50 ningrum, r. (2014). refleksi prinsip-prinsip keuangan publik islam sebagai kerangka perumusan kebijakan fiskal negara. el wasathiya: jurnal studi agama, 2(1), 86–103. razali, r., & febriansyah, s. (n.d.). eksistensi keadilan sosial dalam keuangan publik islam, ramadhan razali. 40–56. rejeki, d. p. s. (2006). analisis penanggulangan kemiskinan melalui implementasi program p2kp di kota semarang analisis penanggulangan kemiskinan melalui implementasi program p2kp di kota semarang. https://creativecommons.org/licenses/by/4.0/ zakat management: update-to-down zakat governance in the amil zakat agencies in indonesia, malaysia and brunei darussalam 15 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) zakat management: update-to-down zakat governance in the amil zakat agencies in indonesia, malaysia and brunei darussalam i.g. marshall1*, sri herianingrum1 islamic economic department, faculty of economics & business, airlangga university abstract islam invites, recommends and obliges all of its people to do zakat, infaq, alms and waqf (ziswaf) as an effort to provide a sense of justice and equality among humans in order to increase gratitude to هللا. one of the efforts is by means of zakat, how is a mu'min who has reached the nisab of zakat to give zakat. with the current condition of indonesia, which already has baznas (national zakat agency) and many amil zakat institutions (laz) which are managed by various types of communities, organizations, institutions and institutions, it should decrease the poverty value and increase the level of welfare every year. but the reality is the opposite. the central statistics agency (bps) released data on the number of poor people in march 2020 amounting to 26.42 million people, even though indonesia's muslim population is approximately 220 million people who should have good and healthy management and management to reduce the number of poor people in indonesia in order to increase welfare of indonesia. even good governance is the main key in increasing welfare in indonesia. keywords: zakat, baznas, poverty, welfare, zakat management 1. introduction the problems faced by every country, both developed and developing countries, are poverty and unemployment. these two things are wrongly related and become the main reason for the difficulty of a country to achieve individual welfare and state prosperity. if you pay attention, the level of poverty always increases and is also accompanied by an increase in the number of unemployed, this is due to the increasing number of populations in indonesia, although in percentage there is a reduction of one to two percent each year released by the indonesian central statistics agency (bps). furthermore, indonesia's gini ratio is at the level of 0.381 in the first semester of 2020. according to bps, this figure shows that inequality in indonesia is still at a moderate or medium level. even though they are at the middle level, there must be real efforts to reduce this inequality so that the rich get richer and the poor get richer. one of the efforts that can be done is by giving zakat. as one of the countries with the largest muslim population in the world, islamic principles and values should have a positive impact in various aspects of social life, nation, state and of course religion itself. as a religion *corresponding author. email address: imam.gracia.marshall-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:imam.gracia.marshall-2020@gmail.com afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 16 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) that has been perfected by هللا making all his commands are things that are sure to bring goodness and blessings to his servants and no one will be harmed even though the size of the seeds of zarah. indonesia is not an islamic country. this should have a real impact on reducing the existing poverty level. islam always provides solutions that provide benefits for those who practice it, both benefits in the world and in the hereafter. zakat and of course also infaq, alms and waqf (ziswaf) is a dimension, where its use has been well regulated in the al-quran and hadith. (ummah, riyadi &herianingrum, 2018). the principles and values that exist in islam are very many and comprehensive, one of which is the feeling of helping, caring for others and sharing in a very universal sense. one way is through zakat, where this zakat can be used to measure indicators of the welfare of the community, especially muslims. in general, zakat aims to increase the values of justice and reduce the deviations that occur as a result of the less prosperous society. as one of the countries with the largest muslim population in the world, islamic principles and values should have a positive impact in various aspects of social life, nation, state and of course religion itself. as a religion that has been perfected by هللا making all his commands are things that are sure to bring goodness and blessings to his servants and no one will be harmed even though the size of the seeds of zarah. this is made clear by هللا in q.s. al-maidah (5): 3 as follows: it is forbidden for you to (eat) carcasses, blood, pork, (animal meat) that were slaughtered in a name other than allah, those who were strangled, those who were beaten, those who fell, who were gored, and were killed by wild animals, except those you had time to slaughter them, and (it is forbidden for you) to be slaughtered for idols. and (it is also forbidden) to draw fate with arrows, (to draw fate with arrows) is wickedness. on this day the disbelievers have given up (overcoming) your religion, so do not fear them and fear me. on this day i have perfected your religion for you, and i have filled you with my favors, and i have accepted islam as your religion. so, whoever is forced due to hunger accidentally commits sins, verily allah is forgiving, most merciful. zakat, alms, and waqf are a dimension, where their utilization has been well regulated in the al-quran and hadith. (ummah, riyadi & herianingrum, 2018). the principles and values that exist in islam are very many and comprehensive, one of which is the feeling of helping, caring for others and sharing in a very universal sense. one way is through zakat, where this zakat can be used to measure indicators of the welfare of the community, especially muslims. in general, zakat aims to increase the values of justice and reduce the deviations that occur as a result of the less prosperous society. how does islam provide the best solution (best solution) without harming anyone, هللا immediately gave orders about zakat contained in q.s. at-taubah: 103-104 https://creativecommons.org/licenses/by/4.0/ zakat management: update-to-down zakat governance in the amil zakat agencies in indonesia, malaysia and brunei darussalam 17 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) meaning: take zakat from some of their assets, with that zakat you clean and purify them and pray for them. indeed, your prayer (becomes) peace of mind for them. and allah is allhearing, all-knowing. (103) do they not know that allah accepts repentance from his servants and accepts zakat and that allah is the most merciful and the recipient of repentance? (104) through law number 23 of 2011 as a substitute for law number 38 of 1999 has regulated the management of zakat which is expected to be better able to manage directed, measured and controlled in upstream and downstream implementation, starting from data collection, collection and distribution of zakat. in this effort, the national amil zakat board (baznas) was formed, which is a non-structural government institution that is independent and responsible to the president of the republic of indonesia through the minister of religion. baznas was established through the decree (sk) of the president of the republic of indonesia no. 8 of 2001. (baznas.go.id) indonesia as one of the countries with the largest muslim population in the world currently has a number of poor people of 26.42 million people (bps.go.id) or approximately 10% of the total population of indonesia. the current population of indonesian muslims is approximately 230 million people. for example, if 150 million muslims carry out zakat activities, the poverty rate can be reduced and of course the level of welfare will increase and can prosper indonesia. this welfare is a problem for every country because there is an imbalance between the people. this creates a large gap and has a socio-economic impact on the nation. this can be seen from indonesia's gini ratio of 0.382, which has passed 0.25, which means that the level or gap between the poor and the rich is too large. (bps.go.id, accessed from https://www.bps.go.id/pressrelease/2019/07/15/1630/gini-ratio-maret-2019tercatat-sebesar-0-382.html, 01 january 2021). baznas is currently performing well but it is not yet considered optimal. with so many amil zakat institutions (laz) it should also be able to increase the values of zakat and be able to achieve the goals of why zakat should be done by muslims who have reached the nisab of their assets for tithing. the author tries to identify what problems happen to baznas in managing zakat and strives to have a functional zakat system to find solutions to the never ending poverty problem. how are the barriers of the currently active zakat system and the extent to which the identified barriers can affect the zakat management system in indonesia. it is hoped that this zakat system can reduce poverty and improve the welfare of the muslim community as well as the nation and state. 2. literature review 4.1 zakat zakat is one of the pillars of islam (part of the pillars of islam) in the islamic economic system to serve the social welfare of muslims. one of the main goals of zakat institutions is to alleviate poverty among people in need, thus resulting in a better quality of life. (hambali https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 18 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) et al, 2016). furthermore, ahmad (2019) mentions zakat as an islamic social fund that serves as an effective tool to achieve financial inclusiveness and poverty alleviation. zakat is the activity of issuing certain assets for a muslim which will be given to those who are entitled to receive it. according to the institute for research and community studies (lppm), bandung islamic university / unisba (1991) the definition of zakat in terms of language is as follows: (mursyidi, 2003) 1. growing, meaning that the property which is zoned has an impact on the growth and development of other assets, not a shortage or loss of assets. both by itself and by effort, the more so with a mixture of the two; and cultivate the human and religious mentality of the owner (muzakki) and the recipient (mustahik). 2. good, meaning that the assets given are assets of good quality and quality. when the recipient and giver of zakat give and receive good zakat, then there is good quality between the two. 3. blessings, which means showing that objects subject to zakat are objects that contain blessings. a potential for the economy, and brings blessings to everyone involved in it if the object has been paid zakat. 4. sacred, which means that objects subject to zakat are holy objects. pure from haram business, and smooth from pests and diseases, and if it has been zakat, it can purify muzakki mentally from bad morals, indecent behavior and sin, also for the mustahik. 5. excess, means that the object that is zakat is an object that exceeds the basic needs of muzakki, and is expected to fulfill the basic needs of the mustahik. it is not worth a zakat if it causes misery, but it will even spread out the welfare and happiness together. 3. research methodology this paper discusses literature review as a methodology for conducting research and offers an overview of the different types of reviews. this study wants to analyze the existing literature on behavioral finance and behavioral islamic finance that can contribute to future studies in the field of behavioral islamic finance. 4. discussion 4.1 zakat for welfare zakat is one of the many ways that mu'min can reduce the number of relatives or closest neighbors who are underprivileged or do not have the decent life they deserve. with this zakat, the number of underprivileged muslim population should be overcome or, more precisely, rebalance the gini ratio to a position where all people benefit and begin to productively build their lives. from the reduced level of poverty, it is impossible for a country, nation and state to achieve prosperity. development and poverty have become essential issues in economic, social and political studies around the world, especially in developing countries including countries with muslim populations. many parties from various organizations such as the united nations have https://creativecommons.org/licenses/by/4.0/ zakat management: update-to-down zakat governance in the amil zakat agencies in indonesia, malaysia and brunei darussalam 19 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) worked hard to eradicate poverty through various activities, service programs and policies. poverty is a problem that must be taken seriously. it needs efforts from all parties, both government and non-government. philanthropic institutions and zakat managers have a moral responsibility in improving the standard of living because the core of the spirit of islam in alleviating poverty is inclusive, which must be attached to the development of islamic finance (obaidullah, 2008) (quoted from rahmat & nurzaman, 2019). this means that islamic finance must be linked to poverty alleviation programs as a basic social responsibility in achieving the maqhasid of sharia or sharia objectives. zakat has been recognized as a major component in the islamic social security system and has been shown to be able to reduce poverty levels and minimize income inequality gaps. furthermore, the famous ulama yusuf al-qardawi (2011) (quoted from owoyemi, 2018) talks about zakat as a solution to poverty problems that have existed since time immemorial. this shows how important zakat is socially to alleviate poverty among muslim communities. of course, islam and other religions are concerned with the suffering of the poor. islam has determined that sharing is voluntary, such as infaq, almsgiving and endowments, but there are also those that are obliged, namely zakat. in order to provide equality to the poor or those who need help. in this way show them compassion by feeding, clothing and helping them when needed. for someone who has fulfilled the requirements to give zakat, it is obligatory to pay it not solely on the basis of generosity such as infaq, gifts and alms. because of that religion determines amil or special officers who manage it, in addition to imposing worldly and ukhrawi sanctions against those who are reluctant, as practiced by the first caliph abu bakr ash-shiddieq ra. the obligatory zakat is every muslim, physically and mentally healthy. have sufficient assets according to the provisions (nishab) and have arrived for one full year (haul). zakat is taken from people who are able for the welfare of the community both physically and spiritually. (zuhri, 2011). the law of zakat is absolutely obligatory and it should not be postponed or deliberately postponed, if it meets the requirements related to that obligation. there are several goals to be achieved by islam behind the obligation of zakat, which are as follows: (sari, 2006) 1. raise the poor and help him out of life's hardships and sufferings. 2. helping solving problems faced by gharim, ibnussabil, and mustahik and others. 3. stretching and fostering brotherhood among muslims and humans in general. 4. eliminating the miserly nature and / or profit of the owner of the property. 5. cleansing jealousy and envy (social jealousy) from the hearts of the poor. 6. bridging the gap between the rich and the poor in a society. 7. develop a sense of social responsibility in a person, especially those who have property. 8. educate humans to be disciplined in fulfilling their obligations and surrendering the rights of others to them. 9. means of equal distribution of income (sustenance) to achieve social justice. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 20 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) based on the description above, in general zakat aims to help fulfill the needs of people in need as a form of social feeling among fellow muslims. of course, zakat has many wisdoms, both relating to the relationship between humans and god, as well as social relations between humans, such as: (sari, 2006) 1. purifying oneself from sins, purifying the soul, cultivating noble morals to be generous, having a high sense of humanity, and eroding hunks (miserly), and being greedy so that they can feel inner peace, because they are free from the demands of allah and the demands of obligations to society. 2. helping, fostering, and building the weak to meet their basic needs, so that they can carry out their obligations to allah swt. 3. eradicating the disease of jealousy and envy that usually arises when he sees people around him full of luxury, while he himself has nothing and no helping hand from them (the rich) to him. 4. towards the realization of an islamic community system that stands on the principles of one people (ummatan wahidatan), equality, rights and obligations (musawah), islamic brotherhood (ukhuwah islamiah), and shared responsibility (takaful ijtimai). 5. creating social welfare characterized by harmonious, peaceful, and harmonious relationships between a person and another, so as to create peace and inner peace. according to ulwan (2008) those who are entitled to receive zakat are as follows: a. needy and poor b. amil c. converts d. riqab e. gharim f. fisabilillah g. ibn sabil 4.2 problems in zakat in indonesia the main problem of zakat in indonesia is related to the content of law no. 23 of 2011 concerning zakat management which should be revised. reporting from the zakat forum, there are three main obstructing problems, namely (1) regarding the permit to establish the amil zakat institution (laz). (2) regarding the formation of a national laz representative with only one representative in each province, and each representative must also apply for another permit to the office of the ministry of religion in that area, and (3) the authority for sharia auditing is delegated to the ministry of religion. (forumzakat.org, accessed from https://forumzakat.org/tiga-masalah-utama/, 02 january 2021). this problem resulted in the existing laz being less than optimal in their work and seemed to be only an extension of the regional or central baznas. on the other hand, according to dr. nurhidayat who was quoted from monitor.co.id who is also the head of zakat and waqf management study program of fai umj, dai https://creativecommons.org/licenses/by/4.0/ zakat management: update-to-down zakat governance in the amil zakat agencies in indonesia, malaysia and brunei darussalam 21 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ambassador dompet dhuafa, head of lazismu tangerang selatan, secretary of iaei dki jakarta and adpisi jabodetabek said there are four problems related to zakat in indonesia, namely (1) understanding the community regarding zakat, (2) the unprofessional management of zakat related to the immunity of zakat institutions, (3) inadequate human resources in managing and distributing zakat, and (4) public awareness of zakat is still low even though there has been an increase in the last few years. (monitor.co.id, accessed from https://monitor.co.id/2020/05/13/problem-zakat-di-indonesia/, 02 january 2021) news reported from republika.co.id, there are four challenges in collecting zakat, namely (1) human resources and capacity of amil zakat that have not been fulfilled and evenly distributed, (2) the capabilities, programs and good skills in indonesian amil institutions have not been evenly distributed, (3) lack of collaboration or synergy in equal distribution and distribution of programs and (4) accountability of zakat management organizations. (republika.co.id, accessed from https://republika.co.id/berita/prjq1o458/empat-tantangpengumpul-zakat-di-indonesia, 02 january 2021). this challenge is inseparable from the existence of various problems, from upstream to downstream processes in the management of zakat. according to wahab and rahman (2011) the main problems faced in this zakat in all countries, especially malaysia, are the distribution of funds and the lack of good governance mechanisms. from this, there are still many people who deliberately or unintentionally do not pay their zakat to existing and official institutions (basir et al., 2017). it could also begin to decline in public trust to pay zakat to official institutions. people want to transact in an easy, safe and comfortable way because zakat is included in the process of worship which is also included in the five pillars of islam. 4.3 zakat institutions the existence of the zakat institution as one of the institutions / institutions that manages people's funds, plays a very important role in maintaining the social integrity of the developing community accompanied by awareness of religion and sophisticated technology. zakat as an effort to reduce social disparities that arise in society is a social phenomenon that is so worrying that if it is not addressed it will have the potential to trigger an explosion or a large time bomb. economic stability and development stability are among the many crucial issues in community empowerment to improve their standard of living. according to holil (2019) zakat institution is an agency that manages the source of zakat funds received from muzakki where the receipt of zakat is in accordance with applicable islamic principles or amil who receives zakat, both zakat fitrah and zakat on assets and zakat in other forms (in indonesia it is perceived as infaq. and shadaqah). the zakat institution is also one of the institutions that has the role of receiving zakat or distributing funds from parties who have excess funds (muzakki) to those who are short of funds (mustahik). a. indonesia/national zakat agency (baznas indonesia) quoted from baznas.go.id, the national zakat agency (baznas) is an official body and the only one formed by the government based on presidential decree no. ri. 8 of 2001 which https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 22 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) has the task and function of collecting and distributing zakat, infaq and alms (zis) at the national level. the issuance of law number 23 of 2011 concerning zakat management further strengthens the role of baznas as an institution that has the authority to manage zakat nationally. in this law, baznas is stated as a non-structural government institution that is independent and accountable to the president through the minister of religion. thus, baznas together with the government are responsible for overseeing the management of zakat based on: islamic law, trust, benefit, justice, legal certainty, integration and accountability. (baznas.go.id, accessed from https://baznas.go.id/profil, 03 january 2021) national zakat agency (baznas) domiciled in the national capital, provincial baznas, and district / city baznas. in addition to the establishment of baznas which is an independent institution, the public can form an amil zakat institution (laz) which is led by a private party which must obtain permission from an authorized official such as the minister or an official appointed by the relevant minister and must report its activities periodically to the authorized official. apart from receiving zakat, baznas or laz can also receive infaq, alms, and other socio-religious funds. the distribution and utilization of infaq, alms, and other socio-religious funds is carried out in accordance with islamic law and carried out in accordance with the designation promised by the giver and must be recorded in a separate bookkeeping. baznas plays an important role in the framework of collecting and distributing zakat funds. given the important role of baznas, the efficiency of baznas performance must be well managed, especially in terms of collecting and distributing zakat funds. (budiantoro, luthfi & herianingrum, 2018) b. malaysia state zakat center by the state islamic religion council (main) malaysia is a federation of 14 states, 12 of which are located on the malaysian peninsula, while sabah and sarawak, two states in east malaysia, are located on the island of borneo. until recently, zakat administration was under the jurisdiction of the states, except in kuala lumpur and labuan, where zakat law and administration are regulated by the federal government. as for other states, they have assigned tasks to their respective islamic religious councils. so, there are a total of 14 zakat institutions in malaysia, each of which carries out zakat affairs. (wahab & rahman, 2012) thus, each country has different zakat management laws from other regions. this raises several coordination problems between regions where there are differences in determining the nishab, compulsory zakat assets, and even the definition of the eight ashnaf who are entitled to receive zakat. in general, the law imposes a penalty of 1,000 ringgit and / or six months imprisonment if it is proven that there has been misappropriation of zakat payments. (ridwan, 2014) c. zakat institute by majlis ugama islam brunei (muib) in terms of managing zakat in the state of brunei darussalam, the kingdom plays an active role. because zakat is handled directly by the kingdom under the responsibility of majlis ugama islam brunei (muib). muib has a work unit called the majlis ugama islam position. under the position of majlis ugama islam there is a section called the quotations https://creativecommons.org/licenses/by/4.0/ zakat management: update-to-down zakat governance in the amil zakat agencies in indonesia, malaysia and brunei darussalam 23 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) and collection of zakat (bakaz), which is the part of collecting and distributing zakat. the zakat quotation and collection section is responsible for carrying out daily collection and distribution in the state of brunei darussalam. (febrianti, 2011). the zakat utilization program in brunei darussalam consists of five, namely social service programs and community welfare programs for the economic development of the ummah, programs for improving the quality of education, programs for da'wah and syiar islam and assistance for converts. all of these programs are given directly from zakat funds. the distribution of zakat in this country is still a consumptive pattern. because the sultan of brunei darussalam has the principle that the collected zakat must be directly given to those who are entitled and should not be deferred, especially to poor people and gharimin asnaf. so that there is no productive zakat in brunei darussalam. in terms of managing zakat in the state of brunei darussalam, the kingdom plays an active role. because zakat is handled directly by the kingdom under the responsibility of majlis ugama islam brunei (muib). that way zakat management is centralized in one door. so that there are no independent institutions that take care of zakat. 4.4 zakat governance model the following is an overview of the models of zakat management and systems in the state: a. zakat management model in indonesia, zakat management in indonesia according to law no. 38 of 1999 is carried out by the zakat agency (baz) which was formed by the government. besides baz, zakat management can be carried out by the amil zakat institution (laz) which was formed purely on the initiative of the community or private sector. the existence of law no. 23 of 2011 has certainly revised this rule, although we also have to see what the constitutional court's decision regarding judicial review is currently taking place. b. malaysia, zakat is not managed nationally. in 14 states in malaysia each is granted the right to manage its own zakat. some use one door through the baitul maal (government agency) and some are private. there are four malaysian government policies in terms of zakat management. first, the government approves the legal status and position of zakat levies (ppz) as a pure company that specifically collects zakat funds. second, allowing ppz to take 12.5% of the total zakat levy each year to pay employee salaries and operational costs. third, the government sets zakat as a tax deduction. fourth, the government budgeted funds to assist activities such as malls in overcoming poverty problems. c. zakat management model in brunei darussalam, zakat management in brunei darussalam is handled by a body appointed by the government. but the problem of poverty there is not a challenge for zakat management institutions. 4.5 recommendations for reorganizing upstream downstream governance at baznas indonesia https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 24 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in general, the process of zakat in indonesia is the collection, management and distribution. however, before entering into the process of managing and distributing zakat, baznas must improve its internal and external systems in an effort to improve performance in the management of the zakat funds that have been collected. baznas must also propose revisions to improve the regulations related to zakat management, especially law no. 23 of 2011 which are considered to be still multiple interpretations and less precise. the author himself provides suggestions for the integration of all amil zakat institutions into an extension of baznas in managing zakat funds. this means that laz cannot determine who the zakat funds will be given to. laz is only devoted to recording the mustahik and muzakki in the environment around the laz. laz is also at the forefront of providing education to the public to increase public awareness of zakat. laz after collecting data and information then submits it to city / regency baznas and forwarded to provincial baznas and finally checked and verified by central baznas to really prevent one individual from getting more zakat funds. this means that the central baznas will accommodate and collect all zakat funds before they are handed over nationally to those who are entitled to receive them. it is true that there are doubts if all the funds are put together nationally, what kind of system should baznas develop, even though currently there are low human resources, the capacity of baznas that is not yet capable is difficult to repair. like direct cash assistance (blt) when a natural disaster occurs or when the covid 19 pandemic occurs, this big data system can be implemented. recipients of zakat funds are required to create an account at a sharia bank that has become a partner of baznas, every receipt of zakat will be automatically transferred to that account. not only that, the system used by the lpdp of the ministry of finance of the republic of indonesia can also be used by baznas in managing and distributing zakat funds in a more orderly, targeted and right-on-target manner. changing to this system requires a lot of socialization, funds and time, but if this is done it is impossible for the unemployment rate, poverty to be reduced and reduced and it can also improve the welfare of the community. therefore, the initial process that must be done is to improve the system, performance and regulations related to zakat management, but the authors consider it not zakat management that laws or regulations need to be made but the baznas institution as a strengthening of the foundation for work. the establishment of the supervisory board, the national zakat sharia audit committee, integration of laz into baznas. https://creativecommons.org/licenses/by/4.0/ zakat management: update-to-down zakat governance in the amil zakat agencies in indonesia, malaysia and brunei darussalam 25 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) indonesian zakat institution structure after baznas has a strong foundation, the next process is only a technical matter. like data and fund collection, this collection can be divided into two activities, namely data collection (pdt) of people who are entitled to these funds (mustahik) and fund collection (pdn) of people who are obliged to provide zakat funds (muzakki). these two activities are the first steps in the upstream to downstream process of zakat management. baznas must have a big data system that is integrated with the identity card as a single identification number which may not be manipulated in the future. this big data system prevents fraud that will occur in the future in raising funds and distributing them. with the new baznas system, fraud that will occur can be minimized. from this collection, baznas issues a card like a taxpayer identification number to all mature muslims who are marked by obtaining an id card by a citizen. we can call this card as the zakat obligatory identification number (npwz). from this npwz, baznas can track who are the individuals who are obliged to pay their zakat and who are the individuals who must receive zakat every year. indonesian president religion minister baznas baznas in 34 province baznas 514 city/district laz supervisory board sharia audit committee https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 26 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) data and fund collection activities after this activity, the receipt, management and distribution of zakat can be done properly. in malaysia, this zakat activity has increased significantly every year in every state (noor et al, 2005). the index he shows has also risen in the zakat management strategy in malaysia (wahab & rahman, 2012). 5. conclusion each country has its own rules for receiving, managing and distributing zakat (pppz). indonesia has a style that tends to be free and irregular, too many lazs and the low role of baznas makes zakat less influence on the welfare of individuals (mustahik) and the country at large. in contrast to brunei darussalam, whose kingdom plays an active role in the affairs of zakat. the existing zakat institutions are directly controlled by the kingdom under majlis ugama islam brunei with branches in each region of brunei. it is different from malaysia which has handed over zakat affairs to the states and allied countries under the state islamic religious council but strongly supports the private sector in establishing zakat centers. management in indonesia cannot fully replicate that of other countries. indonesia has its own challenges in the process of giving zakat and its distribution. the feeling of insecurity and comfort in giving zakat is one of the reasons why the development of the level / value of the collected zakat funds is still low. the government must pay more attention to this zakat laz as the smallest unit of baznas collects information data of every muslim in the environment (can be from the local mosque management or laz organization formed by the community) the data and information that has been compiled are submitted to city / regency baznas (checked) then submitted to provincial baznas (re-checked) and finally to central baznas central baznas carries out verification and validation, who has the right to become muzakki and mustahik based on mutually agreed zakat principles. baznas will send an npwz card to muzakki and mustahik facilitated to create a zakat fund collection account at a sharia bank laz will continue to provide education and data checking once a year as data updates. because the previous year's muzakki could become mustahik this year or vice versa. https://creativecommons.org/licenses/by/4.0/ zakat management: update-to-down zakat governance in the amil zakat agencies in indonesia, malaysia and brunei darussalam 27 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) activity because it will indirectly reduce the burden on the state in reducing unemployment and poverty rates. starting from the improvement / revision of regulations and laws related to zakat management, vertical and horizontal systems for receiving, managing and distributing, sophisticated and up to date systems, and improving the system every year. when the system is at the national level, migrants who are muzakki will still feel comfortable giving zakat because they are sure that they will be channeled properly and on target. likewise, migrants who mustahik will feel comfortable speculating their fate in other areas, because their lives will be assisted by more or less zakat. because the flow of population movement from one region to another often occurs in indonesia and this has been massive lately. if all the elements in the pppz, the poverty and unemployment rates can be kept low in the next 5 to 10 years. references source from journal: ahmad, m. 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(2018). “measuring the efficiency of baznas in managing zakat funds with stochastic frontier approach analysis 2002– 2016”, international journal of zakat 3(1) 2018 febrianti, (2011), “praktek pengelolaan zakat di negara muslim (studi pada negara brunei darussalam)”, skripsi diajukan untuk memenuhi persyaratan memperoleh gelar sarjana ekonomi syariah. universitas islam negeri syarif hidayatullah, jakarta. hambali @ khambali, m. k.b., hamzah, z.l., daud, m.z. dan johari, f. (2016), “managing the institution of zakat: case study of muallaf in selangor, malaysia”, mutum, d.s., butt, m.m. and rashid, m. (ed.) advances in islamic finance, marketing, and management, emerald group publishing limited. holil, (2019), “lembaga zakat dan peranannya dalam ekuitas ekonomi sosial dan distribusi”, al-infaq: jurnal ekonomi islam, vol. 10 no. 1 2019 (p-issn: 2087-2178, e-issn: 2579-6453) noor, a.h.m., ahmad, m., bahrom, h. and kaslam, s. (2005), “prestasi pengagihan dana zakat di malaysia”, isu-isu kontemporari zakat di malaysia, 1st ed., ikaz, uitm, melaka. owoyemi, m., y., (2018). “zakat management: the crisis of confidence in zakat agencies and the legality of giving zakat directly to the poor”, journal of islamic accounting https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 28 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) and business research vol. 11 no. 2, 2020, emerald publishing limited. doi 10.1108/jiabr-07-2017-0097 rahmat, r., s. & nurzaman, m., s. 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(2012). “productivity growth of zakat institutions in malaysia: an application of data envelopment analysis”, studies in economics and finance vol. 29 no. 3, 2012. emerald group publishing limited. doi 10.1108/10867371211246876 mursyidi. (2003), “akuntansi zakat kontemporer”, bandung: pt. remaja rosdakarya ridwan, m. (2014). “zakat vs pajak”. ziswaf. sari, e., k. (2006). “pengantar hukum zakat dan wakaf”, jakarta: pt. grasindo. ulwan, a., n. (2008). “zakat menurut 4 mazhab”, jakarta: pustaka al-kausar. zuhri, s. (2012). “zakat di era reformasi”, semarang: fakultas tarbiyah iain walisongo. “empat tantangan pengumpulan zakat di indonesia”. republika.co.id. 15 mei 2019. 02 januari 2021. https://republika.co.id/berita/prjq1o458/empat-tantangan-pengumpulanzakat-di-indonesia “gini ratio maret 2019 tercatat sebesar 0,382”. bps.go.id. 15 juli 2019. 01 januari 2021. https://www.bps.go.id/pressrelease/2019/07/15/1630/gini-ratio-maret-2019-tercatatsebesar-0-382.html “problem zakat di indonesia”. monitor.co.id. 13 mei 2020. 02 januari 2021 https://monitor.co.id/2020/05/13/problem-zakat-di-indonesia/ “tentang baznas”. baznas.go.id. 03 januari 2021. https://baznas.go.id/profil “tiga masalah utama”. forumzakat.org. 01 juli 2015. 02 januari . https://forumzakat.org/tiga-masalah-utama/ https://creativecommons.org/licenses/by/4.0/ https://doi.org/10.1108/17590811111129508 https://republika.co.id/berita/prjq1o458/empat-tantangan-pengumpulan-zakat-di-indonesia https://republika.co.id/berita/prjq1o458/empat-tantangan-pengumpulan-zakat-di-indonesia https://www.bps.go.id/pressrelease/2019/07/15/1630/gini-ratio-maret-2019-tercatat-sebesar-0-382.html https://www.bps.go.id/pressrelease/2019/07/15/1630/gini-ratio-maret-2019-tercatat-sebesar-0-382.html https://monitor.co.id/2020/05/13/problem-zakat-di-indonesia/ https://baznas.go.id/profil https://forumzakat.org/tiga-masalah-utama/ the state as a market supervisor in islamic perspective 86 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the state as a market supervisor in islamic perspective muhammad fathrul quddus1)*, tika widiastuti2) 1,2 airlangga university, surabaya, indonesia abstract market participants can take various methods, ranging from acceptable practices to fraudulent methods. the state is expected to take on the role of market supervisor so that both sellers and buyers can feel justice. the state has the right to regulate the course of the economy but with limits that are not detrimental to market players. in islam, the market is controlled so that competition is carried out voluntarily. there must not be a party that is harmful to the party that is injured. this study aims to determine the role of the state as a market supervisor from an islamic perspective. this study uses a descriptive method with a qualitative research approach. the data collection technique in this research is literature search from journals, books, electronic books, articles, and other information media related to the state's role in market supervision. the market supervisor in islam is known as al-hisbah. the main task of al-hisbah is to invite the truth and forbid munkar. in addition, al hisbah has three main functions, namely economic, social and moral functions. in contemporary times the position of al-hisbah can be a complementary role for a ministry or state agency. keywords: the state, market supervisor, al-hisbah 1. introduction today's modern economy tends to give birth to competition between many parties (makhtum & mukhlis, 2016). business people in running their business need a specific strategy so that business goals can be achieved. this encourages a business person to try hard to find ways to dominate the market and beat his competitors. the path they take can vary, from a fair and healthy way to one that deviates from business ethics. if business actors use the right direction, the business world will run conducive and appropriate. conversely, if they take the wrong path, the business world will only be controlled by a handful of entrepreneurs and attract unhealthy business practices. (zakiyah et al., 2019). due to economic demands, individuals will do whatever it takes to meet their needs. until sometimes the individual forgets and is negligent in what he has done, it turns out to be contrary to the provisions of the shari'a. or because ignorance and ignorance of the shari'a make people go beyond their limits by taking action as they please. sometimes it is also because economic activity makes individuals interact with non-muslims and various other problems (herianto et al., 2017). apart from the point of view of individual problems, there are still other problems, namely supervision. sofyan s. harahap in fitri (2012) mentioned that one of the weaknesses in this life is the supervisory function. *corresponding author. email address: muhammad.fathrul.quddus-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:muhammad.fathrul.quddus-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 87 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) this can be proven by the prevalence of immorality that occurs in the practice of buying and selling, such as the existence of elements of riba (usury), gharar, and fraud in the standards of the scales and sizes used, besides that there is still hoarding of goods, selling goods that are haram, and other scams that occur (fitri, 2012). contrary to the rules in islam so that this can be unsettling and detrimental to society. supervision is needed to control so that there is no deviation from the goals to be achieved and from the rules that have been set. supervision is also an activity of correction and improvement of regulations and objectives known to be deviant (nurhasanah, 2013). in addition, control is also an essential element in forming a work culture of islamic management to ensure the basic design and achieve predetermined goals. islam comes with a system of influence that includes all aspects of human professionalism. therefore, the basis of islam is global and can be applied in all fields (abu yazid & aziz, 2015) imam al ghazali argues that religion is the foundation or principle, while in power (the state) is the guardian of the foundation or principles earlier. so that there is a mutually beneficial and strengthening relationship. on the one hand, religion is the foundation for the state to act toward prosperity. meanwhile, on the other hand, the state is also a tool for religion to spread and be implemented efficiently and adequately. nejatullah siddiqi emphasized that society could not be organized or regulated using islamic principles unless using the state as a medium (miftakhul huda, 2019). the state, economy, and market are essential parts of each other that have a role in realizing economic balance or in an islamic economy, also known as economic justice. (nashihah, 2018). even though the state is in a unified market system, islamic financial analysts still believe that the state guarantees the market its freedom. the free market determines the production methods and prices. there should be no disturbances that can damage the market balance, including by the state itself (wahid, 2019). based on the rules in muamalah, namely that the basis in muamalah is permissible as long as there are no things in the form of arguments that explicitly prohibit the muamalah activity. this means that people are given the freedom to carry out economic activities as long as these activities are not strictly forbidden in the texts, both the al-quran and the hadith. however, freedom in economics does not mean freedom without values, but the freedom in question is freedom that upholds the values of justice and honesty. therefore, every individual is required to uphold these values in carrying out economic activities (rida, 2011). 2. literature study 2.1 the state role in the economy the state is the holder of the highest authority in formulating a policy. government policies that often intersect directly with and influence the climate of community activity are policies in the economic sector (fathurrahman, 2012). market failure is the background of the need for the role of the state in the economy. the market fails to solve economic problems due to the inability and inability of the market mechanism to work efficiently. the state's role is treated in the instrument and functionalization of islamic economic values in its legal, planning, management, and supervisory aspects. therefore, https://creativecommons.org/licenses/by/4.0/ the state as a market supervisor in islamic perspective 88 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the government becomes the manager of the benefits of public financial resources, including production and distribution and a supervisory institution for economic life. interfering with the government does not mean that the government has the right to monopolize all of the country's financial resources. all the results of government intervention are aimed at producing good individuals and societies (sofyan, 2016). the state is the party that has the authority to lay the foundations for regulations that support and protect economic growth and activity (hidayatullah, 2015). the state plays a role in regulating economic activities to maintain financial stability and the welfare of its people so as not to experience poverty and unemployment (isnaini, 2017). in general, there are at least the forms of government involvement and intervention in the economy (beik & arsyianti, 2016), that is: 1. become a direct actor in the economy (through the establishment of bumn) 2. as an economic regulator, which is based on statutory instruments and other regulations 3. as a supervisor of economic activities and can take corrective actions if economic activities do not run by the corridors of the prevailing constitution 4. intervention through tax instruments, subsidies, and other policy instruments if necessary 5. as the spearhead of economic diplomacy and marketing of domestic products to international markets the functions of the state in an islamic perspective include the role of allocation, part of the distribution, and operation of stabilization and protection (beik & arsyianti, 2016): 1. allocation function the allocation function is closely related to natural resources and financial resources. the government must ensure that natural resources are appropriately allocated and accessed by all levels of society. in addition, the allocation function can also be applied in the state budgeting policy, or known as apbn. through the apbn, the available state money can be used for various programs, such as assistance for the family hope program, people's business credit program, rice for poor, and etc. 2. distribution function the distribution function is the function of the state in ensuring that all levels of society can enjoy income and wealth. therefore, the state must provide a flow of wealth from affluent groups to underprivileged groups to minimize income disparities between community groups. in carrying out this function, the state can optimize the zakat distribution instrument and strengthen the p to p transfer (people to people transfer). 3. stabilization and protection function this function is a function of the state in creating socio-economic stability and providing protection and security assurance against various domestic and foreign threats. strength is essential because it will affect economic growth. the government is responsible for the welfare of all its citizens in various fields, especially the economic sector, which is the backbone of life. state intervention is a form of state responsibility in ensuring the benefit of the people (isnaini, 2017). according to https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 89 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) islam, the state has the right to interfere in economic activities carried out by individuals, either to supervise activities or to regulate or carry out several kinds of economic activities that individuals cannot carry out (hidayatullah, 2015). 2.2 market in islam the market is a mechanism for exchanging goods and services that is natural and has been going on since the earliest human civilization (farida, 2012). in simple terms, a market is a place where sellers and buyers meet. with the times, the market can be interpreted as an institution or institution managed by the government so that trade transactions can occur properly. in a modern sense, the market is a mechanism that allows supply and demand to meet, both physically and non-physically. initially, the market is an open place where traders and buyers meet according to an agreement or custom that applies to a particular area (natadipurba, 2015). in the islamic concept, the meeting of demand and supply must occur voluntarily; neither party is disadvantaged(karim, 2017). as allah swt says in qs an-nisa: 29: ْنُكْم ۗ َوََل تَْقتُلُْوٰٓ ٰيٰٓاَيَُّها الَِّذْيَن ٰاَمنُْوا ََل ٰٓ اَْن تَُكْوَن تَِجاَرةً َعْن تََراٍض م ِ ا اَْمَوالَُكْم بَْينَُكْم بِاْلبَاِطِل اَِلَّ ا اَْنفَُسُكْم ۗ تَأُْكلُْوٰٓ َ َكاَن بُِكْم َرِحْيًما اِنَّ ّٰللاه o you who believe! do not evilly eat each other's wealth (not correct), except in consensual trade. and don't kill yourself. indeed, allah is most merciful to you (qs an-nisa: 29). in connection with this verse, ibn katsir explained that allah swt had prohibited his believing servants from evilly eating other people's property. all forms of business bring in non-mandatory assets such as usury in all its variants, gambling, and all forms of transactions that contain fraud and speculation. even though by birth only allah knows that the perpetrators carried out the trade to avoid usury. (wahidin, 2018). abdul aziz inside abd ghafur (2019) write down some of the principles of the concept of market mechanisms in islam, namely: 1. ar-ridhaa, namely transactions that must be carried out based on the willingness of each party (freedom contract) 2. competition (fair competition), the market mechanism will be hindered if there is hoarding or monopoly 3. honesty is an essential pillar in islam. because honesty is another name for truth itself 4. openness and justice. the implementation of this principle is that transactions carried out are required to be correct in disclosing the valid will and condition the islamic market mechanism regulates that competition in the market is fair. every form of business that can cause injustice will be prohibited, such as talaqqi rukban, reducing scales, hiding defective items, exchanging good goods for bad ones, najasy transactions, ihtikar, and ghaban fahisy (kusumawati, 2015). in addition, ibn taimiyyah opposed the act of monopoly on human needs. if a group of people exercises a monopoly, it is obligatory for the government to regulate (regulation) prices. this is done to apply a fair price. a trust is an act that is unfair and very detrimental to others, and it is an act of wrongdoing (amalia, 2015). https://creativecommons.org/licenses/by/4.0/ the state as a market supervisor in islamic perspective 90 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) islamic economics considers that the market, the state, and the individual balance (iqtishad). there should be no subordinates so that one of them becomes dominant over the others (jaelani, 2011). in a communist society, the market is designed through central planning to fail to achieve economic justice because it is inefficient and expensive. communist ideology also goes further by nationalizing all capital and placing humans only as material or a factor of production. that is why society is controlled according to a totalitarian, monolithic, and oppressive government system. meanwhile, in a capitalist society, the market is designed based on freedom (liberalism). however, the freedom that is made the goal is that the rich are free to accumulate wealth (hoetoro, 2017). in addition, the capitalist economy requires a free market to solve economic problems, starting from production, consumption to distribution (jaelani, 2011). the views of capitalism and socialism bring disadvantages where humans, on the one hand, have the freedom to act economically, even though these actions are contrary to moral values or religious values. on the other hand, they are positioned as robots who cannot create and obey whatever is necessary. it is the government's economic policy, especially those related to the market. these two world economic paradigms then have an increasingly significant impact on the nation's economy, which is increasingly sinking, especially in developing countries (jaelani, 2011). 3. research methodology this study uses a descriptive method with a qualitative research approach. the illustrative method is intended to describe or describe a situation or series of processes, which only describes what happened and does not explain whether what happened was good or bad and positively or negatively impacted (ferdinand, 2014). the data collection technique in this research is literature search, and in this case, discourse identification will be carried out from journals, books, electrical books, articles, and other information media. the data collected is data relating to the role of the state in market supervision. 4. result and discussion this part should describe informative results of empirical research which are written systematically and critically. tables and figures can be presented in this part to support the discussion, for examples table of statistics-test results, figures of model test results and etc. in general, journal papers will contain three-seven figures and tables. same data cannot be presented in the form of tables and figures. 4.1 market supervisor in islam in conducting economic transactions, there are two types of supervision, namely internal and external supervision. internal control is self-monitoring that arises from the understanding that allah swt constantly monitors every human behavior. all the actions that humans do will be measured in the hereafter. meanwhile, external supervision is a component consisting of the community and official agencies from the government apparatus. supervision is practical because it involves official observation and monitoring. these two forms of supervision guarantee justice and complement each other (ibrahim, 2015). external surveillance in the early days of islam was known as al-hisbah. al-hisbah is an economic institution whose function is to supervise economic activities https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 91 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in the market, such as monitoring prices, measurements, and scales, illegal trading practices, etc. this institution also functions to increase productivity and income (rozalinda, 2016). the al-hisbah institution is led by an officer named muhtasib. in the early days, the prophet saw himself became his muhtasib and often made sudden inspections to the market to ensure no transactions violated the prevailing rules. the prophet (pbuh) once dipped his hand in a food item to sell and found that the food was counterfeited. he also told the traders not to withhold milk from the animals to be sold to show that the animals were full of milk. the prophet saw also told anyone who saw the crime being committed then he had to change it with his hand or mouth if he did not have the authority or ability. lastly, he hated the offense committed if he could not oppose it by speaking (haqqi, 2017). the prophet (pbuh) also prohibited the practice of buying goods from farmer producers at the city entrance before they reach the market for fear that they would sell at a lower price (zada et al., 2016). as the prophet was busy delivering the mission of islam, the management of the alhisbah institution was handed over to five permanent officers consisting of three men and two women. the three male officers were sa'id ibn al-'ash ibn umayyah who was assigned to the markets of mecca, 'abd alloh ibn sa'id ibn usayhah ibn al-'ash, and umar ibn khattab to oversee the madina markets. the two female officers, namely samra bint nuhayk al-asadiyah and shifa bint abd alloh, are assigned to oversee the markets devoted to muslim women(hoetoro, 2017). to become muhtasib, several requirements must be met (noviyanti, 2015), among others: a. muhtasib should be a mukallaf, muslim and able to carry out his duties, not required for small children and unbelievers b. muhtasib should be faithful, so people who are fasiq are not allowed to become muhtasib c. muhtasib should be fair d. knowing and understanding islamic law e. can be trusted in delivering news news 4.2 duties and functions of al-hisbah as the market supervisor the responsibilities of the al-hisbah institution can generally be divided into two categories (aisyah & ismail, 2018), that is: 1. rule good (amar ma'ruf) the command to do good (amar ma'ruf) consists of three parts: first, divine law or those related to the rights of god almighty. this law focuses on the obligations of society, such as in the case of not leaving friday prayers. second, community rights (huquq ul adamiyyin) consist of public rights and private rights. this is related to the weight and size determination as well as honesty in transactions. third, linking the two rights intermittently (musytarak), such as finding a guardian for an orphaned marriage, keeping roads clean, and advising moral values in society. 2. forbid evil (nahi munkar) https://creativecommons.org/licenses/by/4.0/ the state as a market supervisor in islamic perspective 92 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) just as in the deeds of maruf, they are prohibiting crime also consists of three categories: first, the right of god almighty (huquq ul allah), which is included in the material of worship, and material prohibitions (muamalat), which are generally related to economic activities or market supervision. second, community rights, which means actions that disturb other parties, such as concerning neighbors' safety. third, the two rights are mixed (musytarak). al-hisbah institution has several functions, including: 1. economic function in particular, ibn taymiyyah explained that the economic function of the muhtasib was as follows (rozalinda, 2016): a. they are ensuring the fulfillment of basic needs. muhtasibmust continuously checks the availability of necessities. if there is a shortage in service needs, the muhtasib has the power in his capacity as a state institution to meet those needs directly. b. supervision of industry. in industry, the main task of muhtasib is to oversee product standardization. muhtasib also has the authority to impose sanctions on industries that harm consumers. muhtasib can resolve disputes that arise between employers and employees and can set regional minimum wages c. supervision of services muhtasib has the authority to see whether a doctor, surgeon, or another service professional has carried out his duties properly or not. d. control over trade regarding trade supervision, muhtasib is the holder of the authority to oversee various transaction practices and activities between sellers and buyers in the market to follow the shari'a rules strictly. muhtasib is also authorized to supervise the goods entering the market and loading and unloading at the market. in managing market activity, muhtasib has the following duties: i. control of prices, sizes, measurements, and scales islam has provided rules regarding the problem of measuring and weighing. in the al-quran, it is clearly stated that the command to perfect the measure is fair and a threat to those who commit fraud. there is a norm that every muslim must improve the measurements and weights moderately. as in qs al-an'am verse 152: اَْوفُوا اْلَكْيَل َواْلِمْيَزاَن بِاْلِقْسِطَۚ ....... ..... َوَۚ …… and perfect the measures and scales somewhat…… (q.s. al-anam:152) in islamic economics, the problem of size, measurement, and scale is a state affair. the government has the task and authority to regulate, supervise measures and weights (rozalinda, 2014). reducing the scale and reducing the effort is a classic example that is always used for fraud in terms of quantity of goods. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 93 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) therefore, since more than 1300 years ago, islam has taken steps to make the scales standardized as a measuring tool (nasution, 2012). ii. supervise illegal buying and selling market distortions that often occur in transactions are tadlis, gharar, maysir, ihtikar, and bay najasy. market participants often carry out this market distribution to seek quick or above-reasonable profits at the expense of other parties. this distortion creates injustice and imbalance in the market. beneficial for one party but detrimental for another, to make an islamic market in the secondary market. market distortions can be avoided and overcome by prohibiting all kinds of deliberate market distortions and punishing market participants who do so. in addition, efforts can be made to open access to information for all market players. iii. supervision of the practice of usury, maysir, and gharar transactions must be free from usury, maysir, and gharar, or otherwise, the transaction will be invalid and canceled. in addition, transactions in islam must be free from these elements because of the injustice inherent in the mechanism. riba, maysir, and broader gharar also create social losses in forming unemployment, inflation, volatility, instability, and even environmental degradation (uddin, 2015). iv. overseeing the standards of halal, health, and hygiene of a commodity islam has clearly defined what is allowed and prohibited as guidelines for humanity. azzah kamri in mustafar & borhan (2013) states that every muslim consumer must choose products and services that are halal and good and avoid products and services prohibited and do not follow islamic specifications. from the benefit aspect, the guarantee of halal products will undoubtedly play a significant role in providing certainty and confidence in the community to consume products that are guaranteed to be halal. this can also cause people to avoid consequences and syubhat or whose halalness is not clear (murjani, 2015). v. beauty and convenience market setting muhtasib is in charge of regulating the beauty and comfort of the market. muhtasib holds traders not to erect tents or buildings resulting in narrow public roads and markets. muhtasib also controls the market layout so that it is easier for muhtasib to carry out market surveillance (rozalinda, 2016). vi. overcoming disputes and injustice between traders and between traders and buyers al-hisbah is the implementation of al-amru bial-ma'ruf wa nahyu an al munkar and reconciles between disputing humans. the al-hisbah institute is also in charge of monitoring measures and scales, supervising the market for fraud and https://creativecommons.org/licenses/by/4.0/ the state as a market supervisor in islamic perspective 94 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) fraud. thus, this al-hisbah institution has to assist people who cannot claim their rights, resolve disputes between humans, and invite goodness (rozi, 2019). vii. perform market and price interventions under certain conditions in general, most scholars agree that price-fixing is a policy that is not recommended by islamic teachings if the market is under normal circumstances. however, if the market is in an abnormal situation, there needs to be a policy from the government. there are at least three objectives of market intervention carried out by the government according to ibn qudamah, namely: first, price intervention is in the interests of the community, then to prevent ikhtikar and ghaban fahisy or to take profits above-normal profits and selling above-market prices, and the third is to protect the interests of the wider community (son, amelia, and putri 2019). 2. social functions the social function of the al-hisbah institution is to create social justice and distributive justice in society. he provided information to traders and consumers, providing equal opportunities to everyone and eliminating unilateral control over the production and distribution lines in the market. then, eliminate market distortions and intervene in certain circumstances to minimize unequal distribution in the market by creating a fair price (rozalinda, 2016). apart from that, al-hisbah also plays a role in safeguarding the public interest, including maintaining infrastructure to support economic activities by prioritizing the benefit of all people. checking, protecting from people who do nothing and drop everything that is harmful. because this can affect the smoothness of the production and distribution process (juhro et al., 2019). the al-hisbah institution also plays a role in collective efforts to assist muslims (attahiru et al., 2016) by the direction of qs al-maidah verse 2: ثِْم َواْلعُالتَّْقٰوۖى َوََل تَعَاَونُْوا َعلَى اَْلِ ..... ثِْم َواْلعُْدَواِ َوتَعَاَونُْوا َعلَى اْلبِِر َوالتَّْقٰوۖى َوََل تَعَاَونُْوا َعلَى اَْلِ …...and help you in (doing) goodness and righteousness, and don't help in sin and enmity. fear allah. indeed, allah is very heavy in torment (qs al-maidah: 2) helping fellow human beings is a sunnatullah that cannot be avoided. every human being is free in choosing the desired livelihood and will get a share of his efforts. a person will not get more than what he has done (delvia, 2019). 3. moral functions every market participant must know for himself the application of business ethics in trading life in the market. this means that every seller is allowed to trade for profit, but islam is looking for profit and blessing. religion brings not only ethical dimensions but also moral values in doing business. islam encourages every business behavior to uphold moral values, which include honesty, fairness, and transparency. these values are essential and become the responsibility of market players to reflect a muslim's faith in allah (zafar & sulaiman, 2019). for the market mechanism to run well and provide https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 95 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) mutual goodwill for the perpetrators, then the absolute value of morality must be upheld (sukamto, 2012). as representatives of allah, humans are expected to act and behave following sharia. humans must ensure that the sources of islam remain the only guide and source of reference in all areas of their life. the main goal must be the desire to seek the pleasure of allah swt which can only be achieved if a person does not commit all forms of immorality (crime) which are prohibited by islam and adhere to moral behavior as regulated by islamic law (hizqil, 2016). even though there is a code of ethics that regulates it, many muslims deviate from the primary business norms and rules permitted by sharia (mohiuddin & haque, 2013). the al-hisbah institution functions as a supervisor for implementing islamic morals and morals in various transactions and behavior of consumers and producers in the market. its task is to create a moral economy based on the koran and the sunnah. at a broader level the task of al-hisbah is amar ma'ruf nahy mungkar. the market is the main target of al-hisbah's supervision because fraud, cheating, hoarding, usury, coercion, and arbitrariness to impose laws often occur (rozalinda, 2016). hisbah institutions deal with community safety issues differently, dedicated to the elimination of brewing and consumption of beer, the restriction of bad work, and the control of the moral order based on sharia (olaniyi, 2011). adhering to the principle of amar ma’ruf nahi munkar is a way of carrying out the commands of the al-quran, which strive for someone to do good and not do wrong. the awareness of muslims towards fulfilling this responsibility must be nurtured to revive this institution and, with maximum efforts (ijtihad), develop this concept to suit the current situation while the community enjoys its benefits. the more specific aim of the institution of hisbah will be to form a society that is highly moral and capable of abstinence and wrongdoing, which in turn will only guarantee the wrath of allah swt. this is important to ensure the welfare of human life in this world and the hereafter (ibrahim, 2015). as exemplified by umar bin khattab ra who sent his messengers to expel people who were not knowledgeable from the market, he even beat people in the market while he did not know the sharia law. reflected in the words of umar, "do not buy and sell in our market unless someone knowledgeable, if not, he will eat usury whether intentionally or not" (juhro et al., 2019). muhtasib may impose penalties for various criminal offenses that occur in the market. the sentences imposed must pay attention to their compliance with maqashid sharia. muhtasib must consider that with this punishment, the offender can deter and not repeat it. therefore, muhtasib is free to choose the sentence imposed on the offender ranging from light to severe punishment (rozalinda, 2016). 4.3 the contemporary al-hisbah institution although the concept of hisbah has been around for a long time, namely at the prophet muhammad, the ideas and philosophy that teach in it should be relevant to be applied in the scope of the current situation (shah et al., 2013). according to khan in hassan & ilias (2019), the institution of al-hisbah has persisted throughout muslim history, although under different names and descriptions. however, after the arrival of western imperialism and the loss of political stability, the institution of al hisbah https://creativecommons.org/licenses/by/4.0/ the state as a market supervisor in islamic perspective 96 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) experienced a decline because its existence depended on the power of the government. deep glick dogarawa (2013) mentioned that europe adopted the hisbah system from muslims in the middle ages, especially during the crusades. during their occupation of jerusalem, the european cross armies maintained their offices. they ordered officers to go to the market in the morning to inspect meat and beverage and other food stores, deal with counterfeit goods, and ensure that the bread was always available on the market and that the weight of the bread met the standard weight. the governing council determined them. the flexibility of sharia allows the evolution of this institution to suit current circumstances. although the structure may differ from the original form, the aim of enjoining good and prohibiting evil (amar ma’ruf nahi munkar) must be preserved as its fundamental characteristics. the contemporary trend in building an institutional framework demands a transformation of al-hisbah into a new paradigm (hassan & ilias, 2019). contemporary muslim economists attribute hisbah's existence as a reference for the function of the state towards the economy, especially in the market (sukamto, 2016). however, the elaboration of al-hisbah in practical policy can take several forms. there is an opinion that al-hisbah must be an extraordinary independent institution to avoid the interests of particular groups or the government itself (sukamto, 2012). however, some contemporary economists argue that many of the supervisory functions of the al-hisbah institutional business are carried out under the control of various government agencies and departments because of the complexity and sophistication of modern economic activities. they observe that running the market today is not limited to checking the quality of the commodity, weight, size, and cleanliness of the shop, but is broader than that. the hisbah institute will play a complementary role for the ministries and government agencies (dogarawa, 2013). the emergence of various institutions that oversee ethics and economic justice is a consequence of the dynamics of people's increasingly fast, sophisticated, and complex lives. the presence of supervisory institutions is very significant and cannot be denied (noviyanti, 2017). 5. conclusion it should illustrate brief and clear results of study, contributions to new theories, and new ideas for future researches. here, the theoretical and practical implications should be written in paragraphs the market supervisor in the early days of islam was known as al-hisbah. the alhisbah institution is led by an officer called muhtasib. in the early days, prophet muhammad saw himself became his muhtasib. the main task of the institution of al hisbah is to command the good (amar ma’ruf) and prohibit evil (nahi munkar). each of these tasks has three parts: the right to god almighty, the right to society, and the third are to link the two rights intermittently. furthermore, al hisbah has three main functions, namely economic, social and moral functions. the economic function is concerned with ensuring the fulfillment of basic needs, supervision of industry, supervision of services, and supervision of trade. in the supervision of trade, al hisbah has duties such as monitoring prices, measurements, measurements, and scales. the second is to supervise prohibited buying and selling, then prohibiting usury, gharar, maysir, fourth is monitoring https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 97 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the standards of halal health and hygiene of a commodity, then regulating the beauty and comfort of the market, overcoming disputes and injustice, and the last is intervening in market and price certain conditions. in social functions, al hisbah has to realize social justice and distributive justice in society. al hisbah, with its moral function, functions as a supervisor for the implementation of islamic morals and morals in consumer transactions and behavior. the flexibility of sharia allows the organization's evolution to suit current circumstances. although the structure might differ from the original form, the aim of enjoining the good and forbidding the bad must be preserved as its fundamental characteristic. the emergence of an institution that monitors ethics and economic justice is a consequence of the dynamics of people's increasingly fast, sophisticated, and complex lives. the presence of supervisory institutions is very 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(2019). al-hisbah contextualization in the business competition law in indonesia. al-’adalah, 16(2), 249–262. https://creativecommons.org/licenses/by/4.0/ the marketing concept in islamic perspective: a literature review 20 4the marketing concept in islamic perspective: a literature review mirza tabrani1* and marlizar2 1,2 syiah kuala university, banda aceh, indonesia abstract the objectives of this paper is to review some researches on marketing concept in islamic perspective. the expected of this review is to provide benefits for related researches in the future. this study uses some review papers, empirical studies and books related to marketing concept in islamic perspective. the analysis allows identifying interesting points for future research on the topic of marketing concept in islamic perspective. this paper provides a better understanding on how islamic perspective on marketing concept. this paper only reviewed concerned articles from science direct, emerald insight and books. the results of the review showed that the limited studies about the marketing concept in islamic perspective (islamic marketing concept). result of this study is believed to give worth understanding about actual situation in this field of research. it proposed some notions that will stimulate more intensive researches in this field in the future. keywords: islamic perspective, literature review, marketing concept, marketing mix 1. introduction islam religion sees business activities as an important resource for someone to make a living during this process in accordance with islamic teachings related to the proper ways to do business. allah ordained prophet muhammad to be a successful businessman before his prophetic life (antonio, 2007). because islam is the way of life, a code of conduct marketing should be guided by the quran and hadith, which are the two main sources of reference for muslims in order to be succeed in life and hereafter. islamic perspective guarantees the important things in the field of global business for several reasons. first, islam provides a framework that forms the moral and ethical behavior of the growing number of muslim consumers worldwide. second, an increasing number of muslim population represent some of the most affluent consumers in the world. third, there has been an increase in the level of foreign investment in muslim countries in recent years. fourth, there is a growing momentum towards the establishment of muslim trading zone. finally, the current political situation indicates that there seems to be the definite impetus towards greater islamization of the countries that are predominantly muslim in the form back to the application of islamic law (sharia) to all aspects of life (saeed et al, 2001). * corresponding author. email address: mirzatab@unsyiah.ac.id mailto:mirzatab@unsyiah.ac.id the marketing concept in islamic perspective: a literature review 21 islamic marketing (sharia marketing) are becoming interested issue among academicians, students, practitioners and consumers as demand for an interest in a particular issue become questionable among the countries of the muslim minority and muslim majority countries (wilson, 2012). however, marketers play an important role in providing products and services to keep pace with customer expectations today. as a result, companies are expected to deliver their products and services in a way that is morally acceptable. therefore, islamic marketing provides a way for the implementation of the way marketing is morally acceptable. islam is a comprehensive way of life that provides rules for everything including commercial activities (arham, 2010). islamic marketing concept evolved over the development of islamic economics. some companies and sharia banks have applied this concept and have yielded positive results. islamic marketing predicted to be growth and trusted by the people because of the values that correspond to what the community needs, namely honesty. in general, islamic marketing is a business discipline strategy that directs the process of creation, bidding, and change the value from the initiator to its stakeholders that the entire process in accordance with the contract and the principles muamalah in islam. this means that in the marketing of islam, the whole process of the both creation process, the bidding process, and the process of change in value should not be contrary to islamic law. the purpose of this article is to explore the concept of marketing in the perspective of islam. in order to have a good discussion, this article is organized as follows: the first section discusses the preliminary literature study why this needs to be done. the second section discusses the methodology used in conducting the study of this literature. the third section discusses the results and discussion and part four express a conclusion on this article. 2. methodology literature search methods the main literature conducted in science direct and emerald insight and other sources. keywords used in the literature search are "marketing concept", or "islamic perspective". search by coating the next step is to check the reference lists of relevant articles were obtained. then look for articles that are listed in the reference list of the main articles obtained with the help of search engine google.com. the literature search of the book was done by online and also textbooks. inclusion and exclusion criteria this study is limited to literature published in sciencedirect and emerald insight with the full text of articles are accessible available. some titles of articles found that appeared as a keyword is the marketing concept and the islamic perspective. then after the study abstract and its contents, only a few articles that met the inclusion criteria (relevant topics of study literature). therefore, the article is deemed not relevant were excluded from further review. the analysis method the marketing concept in islamic perspective: a literature review 22 this article is a review of the literature and not any empirical studies by examining primary sources related to the topics covered to extract and analyze the concept of marketing in the perspective of islam. therefore, the method used in this paper is an explorative descriptive method. secondary data has been collected from relevant sources such diverse journals, textbooks, and others described in the narrative argumentative based on the theoretical study. there is no statistical or mathematical modeling methods are used to support the discussion of this article. 3. result and discussion marketing definition literature from conventional perspective the literature on the definition of marketing from the perspective of conventional states marketing is an important aspect of any business in a highly competitive environment today. marketing is the backbone of any organization. marketing also something that affects every one of us in every moment of our lives. but the history of the creation of a marketing term, especially in the early 20th century. since then marketing has traveled far in the concept and definition. a different era presents concepts and definitions that differ from a different perspective. but in all of them there reflect the changing view of the phenomenon of marketing. it should also be developed so as to strengthen the role of marketing in organizations with alluring reality. if we look into the various definitions of marketing, we will find not a single definition that includes the total well-being of individuals, communities, society, and country or planet as a whole. it is important to understand marketing as dynamic and not static subjects (cooke et al. 1992). this discussion covers some alternative definitions of marketing of literature known business that is recognized around the world, namely the definition of the american marketing association and the definition of renowned marketing experts that phillip kotler. the american marketing association (ama) is the leading organization in the united states, representing the academic side of marketing. this organization consists of and is mainly influenced by the people who teach marketing at the college level. from 1938, the ama participates to unify the definition of marketing. in 1948, ama defines marketing as follows: marketing is the performance of business activities directed to the event flow of goods and services from producer to consumer or user (ama 1948). in 1960, the definition was slightly changed to: marketing is the performance of business activities that direct the flow of goods and services from producers to consumers or users (ama 1960). in 1985, the ama to change the definition of marketing into: the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy the objectives of individuals and organizations (ama 1985). a new definition of marketing was developed by the ama in 2004, namely: the marketing concept in islamic perspective: a literature review 23 marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders (ama, 2004). in 2007, introduced a new definition of marketing (approved october 2007) by the ama: marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings have value for customers, clients, partners, and society at large. (american marketing association 2007 in yudi fernando et al, 2012). in 2013, a new definition of marketing introduced by ama (approved july 2013), namely: marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings have value for customers, clients, partners, and society at large. modern marketing expert philip kotler provides the latest definition of the marketing in 2004 was slightly modified as follows: a social and managerial process by which individuals and groups obtain what they need and want through creating and exchange products and value with others (kotler, 2004) all these definitions have focused on the concept and philosophy of conventional marketing. according to that definition, marketing has been considered a special function or process of creating and exchanging a few supplies (goods and services) that meet customer and company goals. this broader definition has highlighted the secular and materialistic worldview that has attracted the maximum attention to the material aspects of human well-being and to maximize their wealth and want a sheer satisfaction. this definition has given the idea that marketing is based on desire, not the necessity as companies seek profits and customers want satisfaction needs. so the company provides customer satisfaction and through which the company will realize a profit. the conventional marketing social views as the exchange relationship start with the basic idea that the behavior of some humans is planned, directed and they always want to find satisfaction; and individual acts to satisfy their wants and desires. goods and services and commodities are the sources of satisfaction (cooke et al. 1992). in addition, marketers also spent huge amounts for reform, modify, affect the desire and demand through promotional activities budget amount in excess of the total budget of a country's education sector has a greater impact to affect taste and consumer spending (durning, 1992). it also creates a number of special wishes unwarranted, not related to the real needs of human beings through advertising in pursuit of goals that marketers maximize profits. the need still exists in the market; marketers only affect desire (kotler et al. 2010). the desire of customers for a product translates into demand only if they are willing and able to pay for it. so a product can meet the desire, but if there is no real demand, marketers will not be able to fulfill that desire profitably. the the marketing concept in islamic perspective: a literature review 24 marketers practicing different marketing orientation to create demand. marketing may affect the customer's desire to make the product attractive, appropriate, affordable and easily available. the modern world increasingly concerned with the process of providing products and services to people who want to satisfy man (sharif, 1996). however, human desires are almost unlimited. on the other side of the basic human needs are limited, and the resources and products, which they call the goods and services, which would be enough to meet the basic human needs. it is possible to meet all basic human needs completely. basic human needs as human beings are not increased. the exchange is the heart of conventional marketing. traditionally the exchange is regarded as the central concept of marketing (bagozzi, 1975; hunt, 1976). but in the process of this exchange, the customer is free to choose the type of goods and services; even there are no restrictions for suppliers. in conventional marketing, alcohol, magic, etc. also exchanged if it maximizes profits and utilities. no matter if the goods are harmful or beneficial to the buyer. if something has economic utility can be exchanged in the market. pursuing the production and exchange of products and services are not guided by ethics (code of conduct) in the form of a real, though, the concept of social marketing, a little attention to social welfare has indicated. define marketing of islamic perspective lack of significant efforts that have been done on the topic of islamic marketing and limited to find the exact definition of a book or other source makes the marketing of islam as a newly emerging field, and will take a long time to realize it as a great potential. more serious efforts are needed to do, because if handled the properly marketing of islam will hold the key to creating a successful system to meet the needs of the muslim population worldwide (hussnain, 2011). islamic marketing analyzed and built on the philosophy that is based on a basic motif purpose of human creation. islam set the overall life (qs3: 19 qs16: 52, qs98: 5, and qs110: 2). it means peace; at peace with yourself, peace with other human beings, peace in this life and peace in the hereafter and complete submission to god's will. in islam, every aspect of human life must be in accordance with the will of god. in islam, the marketing is not limited to the sale or imaging to benefit from the goods and services in all businesses. in islam all activities and transactions considered as worship (qs2: 30). islam is a way of life that is governed by rules that limit, which is explained and practiced by prophet muhammad saw. even nature and human behavior should not be against the islamic faith, sharia, and akhlaq. in addition to this, islam set some rules of food meant to improve human welfare, also from allah (qs5: 48). here are some definitions of marketing that quoted several articles about islam marketing include: hussnain (2011) defines islam as marketing: the process of identification and implementation of value maximization strategy for the welfare of stakeholders in particular, and societies, in general, are governed by the guidelines given in the quran and sunnah. the marketing concept in islamic perspective: a literature review 25 alom & haque (2011) explains that islam marketing can be defined as: processes and strategies (hikmah) fulfillment through products and services that are halal (tayyibat) by mutual consent and welfare (falah) of both parties that the buyer and seller for the purpose of achieving the material and spiritual welfare in this world and hereafter. abuznaid (2012) argues that islam marketing can be defined as: wisdom satisfying customer needs through good conduct in providing products and services that are halal, healthy, holy and legitimate by mutual consent of sellers and buyers for the purpose of achieving the material and spiritual well-being in this world and hereafter and make consumers aware of it through the good behavior of ethical marketers and advertising. there are some keywords/mentioned core aspects of this definition: a. wisdom (hikmah) in islam the word hikmah very close to the strategy (alom and haque, 2011). b. needs islamic marketing is based on two basic requirements as mentioned in the quran that the physiological needs of food, water and clothing and security needs (qs, 20: 118-119; qs17: 29) while conventional marketing based on a desire (cooke et al.1992). c. muslim consumers is defined by consumption is not excessive, lifestyle and financial rules of the muslim faith; they are far from homogeneous (kearney, 2006). muslim consumers speak different languages, wear different styles of clothes and eat different food, for example in turkey, pakistan, bangladesh, kurdistan, algeria, morocco, palestine and saudi arabia, the gulf, etc. it is important to note that not all arabs are muslims and not all muslims are arabs. d. market muslim market complies with the principles of sharia in all sectors. there is a religious viewpoint is received on this matter. for example, in muslim countries the product non-halal or products that do not comply with islamic principles that are sold in restaurants and hotels as alcohol and pork, some muslim consumers do not have a problem eating in the hotel and restaurant for what they ordered and ate not contain pork or alcohol. while in many countries such as malaysia, the restaurant must be free from pork before muslim consumers will eat in it. e. good attitude good behavior is ethical behavior. f. halal (tayyibat) products offered to contain virtue, pure, safe, lawful and profitable (qs 2; 172, qs 2: 168). the word "tayyibat" is mentioned eighteen times in the qur'an. g. convenience fair and between buyers and sellers are free to choose without coercion (qs 4:29). h. welfare (falah) success and well-being (qs 2: 201) and (hadith). sattar (1988), described falah as the achievement of prosperity in this world and hereafter. the marketing concept in islamic perspective: a literature review 26 i. ethical advertising no action is misleading, deceptive or unfair on advertising (qs 3:77). the basic philosophy of islamic marketing the highest and most important concept in islam is tawheed or oneness, the underlying message that must be understood from the concept of tawheed is that, from an islamic perspective, the dichotomy between science and religion is clearly not possible. (alhabshi, 1987; haneef, 1997). this is the most important concept that should be known by muslims for the safety of life in this world and hereafter. rice (2001) stated that the concept of tawheed is the most important ingredient in the trade. furthermore, according to abu sulayman (1998), the concept of tawheed is vertical and horizontal relationships. a vertical relationship describes the relationship between man and his creator, while horizontal linkages depict human relationships under the law of god. the principle of tawheed also requires muslims believe that allah is the sole architect of the universe and human beings because it is god's representative to manage this world and all its contents with how (abu sulayman, 1998; badawi, 2002). in terms of marketing, arham (2010) argues that justice can be applied to smooth the flow of goods, among others. by smoothing the flow of goods, the company will enable customers to meet their needs. the smooth flow of goods could prevent hoarding practices condemned by islam. by eliminating the practice of hoarding, one has managed to show a person's actions of fraternity (both inter-human relations) to other people and also set a justice to the community. because all people are basically the same, all customers have equal rights to obtain the desired product in order to meet their needs. hoarding will raise prices and create injustice for those who cannot afford to buy a certain product they need. islamic marketing characteristics in general, there are four characteristics that surround the marketing concept in islam, the religious, ethical, realistic, and humanistic (sula and kartajaya, 2006). if one gives the four characteristics of the mind, one will get a good relationship between the five pillars of islam and the implementation of it. a. religious, islam marketers must fully believe that islamic law is the supreme law should be used as guidelines only, perfect, and the source for all the goodness b. ethical, spiritual increase in the islamic marketing will establish islamic ethics in business transactions. one of the characteristics of islamic marketers is full of ethical considerations c. realistically, islamic marketers should not be so "rigid" in islamic marketing practice, as long as it does not violate islamic law. the content is more important than appearance. however, it should be noted that being realistic does not mean that in the case of "emergency", the muslim marketer can do something that violates the principles of islamic law. d. humanistic, islam as other religions, came in order to teach people the values that can distinguish people from each other creatures that inhabit this world. therefore, one should be able to keep out of a desire that such inhuman greed. islamic marketing objectives the islamic marketing objectives cannot be separated from the purpose of sharia. based on the islamic marketing philosophy, it is clear that the man was a messenger of god in this world. god entrusts the human being to control and the marketing concept in islamic perspective: a literature review 27 manage the world according to his will (khan, 1991; haneef, 1997; hassan and lewis, 2007). this view is rather different from ours in conventional economics, as quoted by haneef (1997: 45) as follows: "this is of course, completely different from the" economic man, "that is modern is not obliged to consider the form of submission to allah". therefore, the belief that god is giving should be used in all aspects of life, including marketing. although in reality, different ways may be taken to take advantage of the belief that as long as they meet certain principles. the principles, according to ahmad (1989: 26), are as follows: "agree with the principles of islamic law or sharia. achieve economic and social goals of the islamic civilization". arham (2010) argues that the goal of marketing is to bring islam to the new world of marketing theory, in which the modern marketing theory associated with the teachings of islam. islam marketing should be able to take part in the realization of social justice. marketing mix in the islamic perspective in islam any commercial activity governed by two principles. first, compliance with the order of allah, second, empathy and compassion for god's creation which implies refraining from doing harm to others and thus prevent the spread of unethical practices (niazi, 1996). the marketing mix may vary according to consumer perception, consumer behavior, characteristics, culture, religion, politics, and habits. a sound ethical marketing-mix which states that freedom of decision making of customers should be protected from all the elements of coercion (abul hassan et al, 2008). saeed et al (2001), analyzing the islamic perspective of the marketing mix to see the general aspects of the marketing mix are product, price, promotion, place and people. according to abuznaid (2012) states there is nine marketing mix from the viewpoint of islam which are product, price, place, promotion, process, people, physical evidence, promise, and patience. product the production process in islam is a part of the worship of allah (al-faruqi, 1992). this is very different compared to western thought. in islam, the production decision-making process is guided by the principles of legality, purity, existence, delivery, and the right determination (al-misri, 1991). these principles indicate that the product must: 1. halal does not cause problems with thinking in any form, especially in a society (immoral). 2. the product must be wholly owned by owner 3. the products must be submitted after the sale and the product is not valid if it cannot be submitted as an example of selling fish in the river. 4. goods are bought and sold must include the quantity and quality (al-ukhuwa, 1983 as cited in abuznaid, 2012). the main purpose of the production process is to provide, improve and meet basic human needs. miller and deiss (1966) showed that the main force behind ethical decision making suboptimal production is cost leadership strategy. on the the marketing concept in islamic perspective: a literature review 28 contrary, islam encourages the perspective of welfare and social approach rather than a decision based on the maximization of profit (miller and deiss, 1996). product quality is very important in the ethics of islam (qs 2: 172, 7). price price is the most flexible element of the marketing mix. it should be clear that in islam takes into account the attention of shoppers is not less important than considering the attention to the seller. in islam god is a price maker. prophet muhammad said in a hadith "allah is the creator of the price; god gives wealth and hold it, and i hope to meet god if there is no complaint that i have been unfair to money or blood". however, when retailers and traders set the price of unfair, is important in islam that the rulers (government) intervene for the sake of the population and to prohibit monopolies. today, a lot of the fact that many businesses are purely profit-oriented, in the view of the islamic government must intervene to protect the interests of citizens, taking into account that some customers are not aware of the price and can be fooled by marketers; therefore, intervention is required. a role for the welfare of the community is to ensure that prices remain fair and just by limiting any ethical loopholes in the regulation of prices. all deviations are not ethical in prices is tantamount to injustice and sin. pricing policy must be free from predatory pricing. changes in prices should be consistent with changes in the quantity or quality of the product. islam forbids false propaganda or publicity relating to price, demand, and supply. however, islam does not forbid price control and manipulation to meet market needs. however, islam prohibits extortion or making high profits at the expense of consumers (koku, 2011) .to achieve positive results, there should be no hoarding, no price manipulation is justified and there are no restrictions on trade (niazi, 1996). in addition, “selling on credit should be documented and should be seen by others. taking goods or goods of the buyer as security for payment recommended "(qs 2: 282). therefore, the pricing policy in islam should: 1. do not cheat customers by giving the false impression that they are getting a bargain price (shaw, 1996). 2. prohibit get something too easily without hard work (maisir), or receive benefits without working for it (shaw, 1996). 3. do not change the price without changing the quantity or quality of the product. 4. not easy to deceive customers to benefit easily 5. there should be no discrimination between bidders and non-bidders to sell the same merchandise for different prices. 6. prohibit false propaganda on the part of international marketers on demand supply position through the media. 7. having control and manipulation of prices to meet the needs of this market as a result of the natural scarcity of supply is not prohibited. 8. prohibit accumulation of any product to influence prices. place (distribution channels) in islam, marketing decisions pertaining to distribution is important. decisions regarding the distribution of the product or service must consider that maximizing profits are not necessarily the most appropriate for the welfare of the community. according to the principles of islam, distribution channels should not create burdens for the end consumer, in terms of higher prices and delays. ethical irregularities in the distribution channel as causing unnecessary delays in the the marketing concept in islamic perspective: a literature review 29 delivery of customer entice them to come back repeatedly and thus causing them unnecessary discomfort and are not allowed. islam does not prohibit the institutions and representation of the channel as a go-between to facilitate the movement and acquisition functions. unethical practices in the distribution of packaging could be weaker without adequate protection for the product; packaging inappropriate, and dangerous and toxic products have to be transported very carefully without any negligence. harming people in the street, when transporting dangerous goods is equivalent to unfair marketing practices. distributors must not use coercion; they also do not have to create a burden for the end customer in terms of higher prices and a delay (al-ukhuwa, 1938 in abuznaid, 2012).. facilitation of the delivery of goods and the acquisition of products by agencies are not prohibited in islam. finally, it should be emphasized that the ultimate goal of distribution in islam is to create value and to provide the ethical satisfaction of products and services. within the framework of islamic ethics, however, the main purpose of distribution channels should create value and raised the standard of living by providing the ethical satisfaction of products and services (saeed et al, 2001). promotion marketing communications about goods and services are not to deliberately deceive or mislead. in islam, the seller and the buyer are responsible to god. both have, to be honest, and fair in their marketing activities. in the promotion of products, there should be no room behavior sale to cover or hide defects in the product. all forms of false statements, praise the product in excess and connected to the quality they have, the charges baseless and false testimony is condemned (qs 33:58; qs58: 17-19). it is not allowed to praise the product or service redundant. swear in the name of god in order to promote their products and persuade shoppers to buy goods not only allowed but also would revoke the blessing of god. give the wrong impression whatsoever to promote products is prohibited. in addition, all the things that have an element of coercion and are considered the unethical way of advertising is prohibited. false and misleading advertising and promotions were deceptive and manipulative should be avoided. the correct information that reveals the exact specifications e.g. quantity and quality should be disclosed. stimulates lust, deceit, betrayal, theft or injustice is not allowed. disclosure of all hidden flaws in a product and service is a must. islam condemns all promotional manipulative behavior. prophet muhammad said, "the person who cheats is not one of our groups". in an effort to persuade people to buy their products, advertisers are prone to exploit ambiguity, concealing the fact by eliminating information that does not appeal to their products, exaggerating to make a claim that is not supported by evidence, and using her psychological entice customers with exciting requirements their emotional and unreasonable. furthermore, islamic ethics prohibits female stereotypes in advertising, the use of excessive fantasies, use of language and misconduct, and the use of women as objects to lure and attract customers (erffmeyer et al, 1993; beekun, 1981; razzouk, 1993). people the marketing concept in islamic perspective: a literature review 30 employees are an integral part of the service process and play an important role in the marketing process. employees have to be patient, honest, fair, and accountable. islam emphasizes independent appraisal on the part of the customer; rational thinking when making decisions related to marketing is a prerequisite in islamic law. it is the responsibility of the marketer to not use any form of coercion (ikrah) by forcing someone to do something without his consent, and marketers should have the intellectual integrity and consumer awareness to ensure that consumers hard earned money and no waste (abul hassan, chachi and abdul latiff, 2008). in islam, a marketer must be polite, gentle, honest, smiling. marketers must be able to think rationally and care about the feelings and attitudes of customers. marketers also need to have a good appearance. women need to wear the hijab and to distance themselves from the actions excessive. marketers’ women should not wear tight clothing that can be seductive. the female staff is required to dress in clothing appropriate to the muslim culture. islam also ordered merchants to cease trading on friday, especially on the eve of friday prayers to finish friday prayers. the quran states: "o you who believe, if called upon to perform the friday prayers, then you made haste remember allah and leave your trading, which is better for you if only you know” (qs 62: 9). any unethical marketing practices do injustice, which, by definition, negates the concept of brotherhood and common humanity that make up the core vision of islam (saeed ahmad and mukhtar, 2001). within the framework of islam, marketers should show a sense of responsibility in four things: responsibility towards god, responsibility to society, the welfare of the marketer itself and environmental responsibility (saeed et al, 2001). violation of any of the above constitutes a violation of islamic principles of individual marketers. process the process is an element of the marketing mix and other elements known as the development of the marketing mix. the elements of the process including the procedures, mechanisms and flow of activities in which the services are provided. the process also means how the product will reach the end user. in fact, this process is critical of the marketing mix for customer satisfaction as waiting times, the information provided to customers, the efficiency in providing services, and the interaction of staff in the proper way, all this is important to maintain customer satisfaction. customers are not interested to know in detail how the business is run by the seller. the important thing for the customer is a working system. in islam, there are many surahs in the qur'an that describes the trade as a noble act and the desired activity. the main concern is to regulate the market to eliminate fraudulent transactions and exploitation of monopoly power and not remove the trade market (uddin, 2003). physical evidence physical evidence is an element of implicit meaning the ability and the environment in which the service is delivered. physical evidence both tangible goods and intangible experience of existing customers and the ability of the business to deliver customer satisfaction to potential customers can assist in the the marketing concept in islamic perspective: a literature review 31 provision of communications services. physical evidence is an important element of the services mix that allows consumers to make an assessment of the organization. services cannot be felt before it is served. selecting services can be the risk because buying something intangible. this uncertainty can be reduced to help potential customers to see what they would buy. because intangibility these services, it is difficult for consumers to evaluate quality objectively. as a result, consumers often rely on real evidence surrounding services to assist them in evaluating them. physical evidence can be categorized into three categories 1. exterior amenities include exterior design, signposts, parking lots, landscaping, and the surrounding environment, such as building facilities overlooking the lake. in some muslim countries such as bank buildings, shopping centers takes the form of islamic architecture. 2. interior amenities include elements such as interior design, equipment used to serve customers directly or used to run a business, direction, layout, air quality and temperature (hoffman and bateson, 2006). in muslim countries will find a quoted verse of the quran and hadith, greeting placed on a wall. mushalla facility or even a mosque for prayers. 3. other things tangible, which is part of the company's physical evidence, including items such as business cards, stationary, invoices, reports, employee performance, uniform and brochures (bitner, 1992). because of the unique characteristics of islamic marketing, the customer will get a natural satisfaction of most aspects of products and services because it reflects a strong loyalty to the islamic products and services. the atmosphere is courteous and facilities were not mixed to encourage customers to be more loyal. promise the promise is the original elements of the islamic marketing mix elements. talking about the elements promise to speak of "management promises" that the change of the marketing mix to build relationships. an integral element of the marketing relationship approach is a "concept promises" very stressed by henrik calonius, which claimed responsibility for marketing not only make promises that they persuade the customer as a passive partner in the market to act in a certain way. a company that is busy with giving promises may attract new customers and build relationships first. however, if the promises are not kept, the relationship that has been built cannot be upgraded and maintained (calonius, 1983 as cited in grönroos, 2006). fulfilling the promises given is the same importance as a means to achieve customer satisfaction, retention of the customer base and long-term profitability. it should be stressed that promises must be kept and maintained. marketers should not give false promises. allah has commanded the faithful to honor the promises. al quran states: "o ye who believe, fulfill it aqad (appointment) (qs 5: 1)," o ye who believe, why do not you say something that you do? it is most hateful in the sight of allah that you say anything that you do not (qs 61: 2-3), "o ye who believe! fear allah and be with those who are true (qs 9: 119). the importance of keeping the promise has been emphasized in the sunnah. prophet muhammad said in his hadith: "the signs of the hypocrite are three, namely: when he said a lie, when he reneged on promises, if believed it treason” (hadith narrated by bukhari muslim as cited in abdul baqi, 2012). from an islamic perspective, every promise made to customers must be preserved and respected. the marketing concept in islamic perspective: a literature review 32 patience patience is another element of the islamic marketing mix. this element is very important in the service industry. islam teaches people to be patient in serving customers. patience is the key characteristic of good communication. because of the importance of patience, allah mentions in particular verse about patience in the qur'an. allah has commanded us to be patient quran states ".... allah loves those who are patient" (qs 3: 146), "..... and be patient. allah is with those who patiently persevere" (qs 8: 46)," be patient, there...not patience, but with the help of god ... " (qs 16: 127), allah is indeed rewarded believers to be patient, quran states: "the properties are good it was not granted, but to those who are patient and do not confer but to those who have the great fortune" (qs 41: 35). table 1 marketing mix in islamic marketing no element islamic ethics 1 product o compliance with sharia o do not use god's name in the brands and labels o halal (holy and lawful) o accurate labeling o here are no weak packaging o do no harm to customer o no thought is dull o no products obsolete o value resistance o the environmental impact 2 price o fear of allah (allah is a price setter) o fair and there should be no cheating o approach public welfare o maximizing profits simply not a priority. o no price is justified o there is no price manipulation o no predatory prices o there are no feed prices 3 place o do not harm others streets o no delay unnecessary o there is no compulsion o the distribution channel is not encumbering customers o closure during friday prayers o avoid suspicious location 4 promotion o complying sharia o women should not be used to attract or lure customers o no use suggestive language and behavior o there is no concealment of facts and information (disclosure errors and defects) o no promotion of manipulative behavior o no sexual appeal o there is no oath in the name of god o attribute not excessive o no ad was misleading o there is no fraud o no obscene ads 5 people o complying with islamic law (shari'a) o polite, friendly o offers smile, honest the marketing concept in islamic perspective: a literature review 33 no element islamic ethics o clad and look good o there is no fraud o do not harm customers o there is no compulsion o respect for private property o avoid actions and behavior suspicious 6 process o compliance sharia o shaking hands with men o saying greetings (assalamu'alikum) o the hospitality of islam o no bribes, no sexual offenses o honesty, justice, respect for the customer o do not sell liquor, not detrimental, o there is no compulsion o information correct marketing o there are no pressing technical sales o there is no oath in the name of god o there is no exploitation of monopoly power o there are no fraudulent transactions o efficiency of interaction staff o the use of customer waiting time is right o respect a time 7 physical evidence o obeying the law o there are no gambling halls o there is a mosque in the company o islamic architecture o emblazoned o quranic verses, hadith and greeting on the wall o image founders (not mandatory) o documentation and testimony credits o taking the goods as collateral for credit payments 8 promise o complying with islamic law (sharia) o respect pledge o no false promises o respect a time o manage appointments o relationship marketing o good communication o persuasion passive 9 patience o complying with islamic law (sharia) o be patient with a wide range of customers o good communication skills o listening to customers o be helpful source: abuznaid, 2012 the main difference between islamic marketing and conventional marketing adnan (2013) states that difficult to find a contradiction between the islamic and conventional definition of marketing. the only difference is the guarantee halal according to islamic law for goods and services. there are several different views about the difference between islam marketing with conventional marketing. however, based on literature review has been conducted, the authors explore and identify at least there are some things that can differentiate between sharia the marketing concept in islamic perspective: a literature review 34 marketing and conventional marketing, for more details can be seen in the following table: table 2 the differences between islamic marketing and conventional marketing no aspect islamic marketing conventional marketing 1 the scope of the definition broader maximizes the value of the welfare of stakeholders and the general public in accordance with the quran and hadith. narrow and does not include the total well-being of individuals, communities and the country as a whole 2 the concept and basic philosophy ethics and islamic values in its activities non-value and not based on the deity in its activities 3 marketers ethics tied to islamic ethical adaptive, situational and conditional 4 the approach to consumer business partners is aligned target sales 5 the perspective of competitors business partners and not an opponent to be defeated an opponent to be defeated 6 marketing objectives not only material gains alone but also spiritual gain advantage through customer satisfaction 4. concusion from the above discussion, it can be said that the islamic perspective to marketing, it can be used as a marketing tool and construct new knowledge called "islamic marketing" as another way to understand the science of marketing. islamic approach to the business is regulated by two sources, namely the qur'an and the hadith of the prophet shaped guide how islam entire life. the practice of islam is based on the divinity and faith, and does not recognize the separation between the earthly dimension and hereafter; it is different with western contemporary marketing practices based on profit maximization. according to the islamic perspective, activities are based on the goal of satisfying the material alone will inhibit rational thinking people and will make them into slaves of a marketing company. islam respects freedom and offers free mankind from all shackles of slavery, including from international marketers. as for the fundamental differences between islam marketing with conventional marketing is situated on the ethics and values of islam in any marketing activities based on the qur’an and the hadith. the purpose of this article is only reviewing the literature theory of marketing concept in the islamic perspective; this article describes several perspectives from previous literature and not to formulate a comprehensive new model of marketing islam. although the field of marketing islam has laid down some clear theory, further research is still needed to understand islam in a comprehensive marketing. the marketing concept in islamic perspective: a literature review 35 some of the future research have been identified and the chance to do such research literature review about the marketing practice in islamic law, islamic rent and sale, the islamic concept of halal market and branding islam and other topics. in addition, empirical research to find out the perceptions and attitudes of non-muslim customers in choosing products and services of islamic halal, perceptions and attitudes towards marketers muslim women in an islamic society. future research should not be limited to muslim consumers’ comparison with non-muslims in muslim countries, but more widely to explore the muslim minority which describes the role of islam and the adaptation of consumption culture brand strategy for different muslim consumers. 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(2012). new marketing definition: a future agenda for low cost carrier airlines in indonesia. business strategy series, 13(1), 31 – 40. the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 38 5the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches1 ahmad mikail1* and kenny devita indraswari 2 1,2 university of indonesia, depok, indonesia abstract the study identifies the effect of the fed fund rate (ffr) normalization toward the financing growth of islamic banks as well as toward the industrial credit growth in indonesia. to acquire better understanding about the effect of the increasing ffr, vector error correction model is being utilized in order to identify short run and long run effects. the data employed are the quarterly data of total credit in banking industry, total financing in islamic banking industry, ffr, real gdp growth, real interest rate, exchange rate and indonesian composite index from 2003 2015. to forecast the dynamic effect of the rising ffr towards financing growth in the islamic banks, impulse response function is being applied. the result from the long run estimation suggests that the fed’s monetary policy has negative effect toward the indonesian banking credit growth as well as the islamic financing growth. moreover, the estimated coefficient shows that the effect is quite low in the long run for the conventional bank and relatively high for the islamic banks. from the short run dynamic analysis, the study reveals that the islamic banks financing growth is mostly determined by ffr where islamic financing growth affects indonesian composite index and real interest rate. however, the impulse response function result exhibits that the fed’s monetary policy normalization will not affect islamic banks financing in indonesia. keywords: fed fund rate, financing growth, islamic banking, indonesia, monetary policy 1. introduction the issue of us monetary policy normalization by the federal reserve in the end of 2015 has created turbulence in global financial market. this condition also affects indonesian macroeconomic in the whole year of 2015. the uncertainty about the fed policy directly or indirectly affected indonesian economy by several channels. firstly, the capital outflow from portfolio investment is inevitable if the fed finally increases the fed fund rate (ffr) in the end of 2015 or in first quarter of 2016. we have been witnessing that the capital outflow has surpassed the performance of rupiah in 2015 due to tapering off quantitative easing by the fed in the end of october 2014. rupiah was depreciated 13.7% against us dollar until december 2015 (ytd). the amount of capital that already * corresponding author. email address: ahmadmikailzaini@gmail.com 1 this paper is a revised version of the paper presented by the authors at the 1st gadjah mada international conference on islamic economics and development, ugm campus, yogyakarta, 2016. mailto:ahmadmikailzaini@gmail.com the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 39 moved out of indonesian economy is accounted about 130 trillion rupiah as of september 2015. secondly, the increasing of ffr shall reduce the margin spread between doing investment in indonesia and other countries. it shall also reduce the interest of foreign investor to invest in indonesian real sector. these will lead to lower foreign direct investment (fdi) in indonesia. the turmoil of financial sector is directly affected upon indonesian exchange rate due to floating exchange rate regime. moreover, indonesia was suffering with current account and government account deficit until november 2015. until september 2015, the current account deficit has reached 1.86% of gdp. this deficit should be plugged by either portfolio investment or fdi. however, those variables are continuously declining since the third quarter of 2014 until the third quarter of 2015. figure 1 exhibits the trend of fdi and portfolio investment toward rupiah depreciation. figure 1 indonesian exchange rate, fdi, portfolio investment and current account source: bank indonesia, 2015 from figure 1, it can be identified that the declining on portfolio and foreign direct investment were followed by the rupiah depreciation in 2015. this trend indicates that indonesian economy depends heavily on the capital account to keep the value of rupiah. to overcome this problem, bank indonesia keeps the interest rate at high level to avoid further capital outflow. as consequences, indonesian economic growth started to fall from 4.92% in third quarter of 2014 to 4.73% in the third quarter of 2015 (yoy). moreover, the declining of indonesian economic (4,911) (9,588) (7,035) (5,952) (4,097) (4,477) 3,229 3,710 5,994 3,030 2,307 3,626 8,730 8,045 7,409 1,873 8,796 5,774 11,404 11,969 12,212 12,440 13,084 13,332 10,000 10,500 11,000 11,500 12,000 12,500 13,000 13,500(11,000) (6,000) (1,000) 4,000 9,000 14,000 q1-2014 q2-2014 q3-2014 q4-2014 q1-2015 q2-2015 current account direct investment portfolio investment exchange rate the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 40 growth is also being followed by the declining on credit growth in the banking industry as well as islamic banks financing (see figure 2). figure 2 gdp growth, credit growth and islamic banks financing growth, 2011 2015 source: bank indonesia and ojk, 2015 the previous discussion indicates that indonesian economy is highly sensitive to the global financial market volatility. any changes on the fed monetary policy will be channelized toward indonesian macroeconomic variables that finally lead to t h e s h o c k o n credit growth in the banking industry. as regards to islamic banking industry, general assumptions say that the responses of the islamic banks to macroeconomic variables fluctuations are supposed to be different from the conventional banks due to the interest-free instuments (khan, 1985 in kassim et al, 2009). based on this initial finding, the objective of this study is to analyze the short run and long run effect of any change on the federal fund rate toward islamic banks financing growth in indonesia. to achieve this objective, this study compares the impact of the change on ffr on the credit growth in islamic banks vis-a-vis in the banking industry level in indonesia. while most of the existing literatures put more focus on the effect of domestic monetary shocks on the islamic banks deposit and financing, this study adds foreign monetary policy variable into the model. therefore, it would give a preliminary findings on how sensitive is islamic banking industry to the global financial market volatility. in efforts to arrive at conclusion, this study utilizes investigation techniques by using vector error correction model (vecm) and impulse response function (irf) based on vector autoregressive (var) methodology. 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% g d p g ro w th c re d it g ro w th ( y o y ) credit growth gdp growth 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% credit growth ib financing growth the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 41 2. literature study the federal reserve policy for withdrawing monetary stimulus and increasing interest rates may have a reversal effect for capital flows to the emerging markets. small and open economy like indonesia is highly depending on global capital market due to the existence of interest rate disparities between domestic interest rate and foreign interest rate. this interest spread attracts small and open economy to access cheaper capital from international market. study by dornbusch (1985 in giovani and shambaugh, 2006) concludes that large countries business cycle influences the developing economies through commodity prices, debts and export of manufacture goods. morover, calvo, leiderman and reinhart (1993 giovani and shambaugh, 2006) find that low interest rate in large countries tend to send investor looking other countries which generate high yield investment. the spread between large open economy and small open economy generates capital inflows for developing countries. t h e p r o c e s s c a n be reserved when the interest rates in large countries increase. 𝑅𝑡 = 𝑅𝑡 𝑏 + 𝐸𝑡+1−𝑒𝑡 𝑒𝑡 (1) equation (1) explains the inter-relation between foreign interest rate and domestic interest rate whereby foreign interest rate serves as a rate basis. floating country allows the domestic exchange rate (𝑒𝑡) to depreciate and create smaller expected future depreciation and no change in 𝑅𝑡. in doing so, the cost of local borrowing has not changed and floating rates have served their isolating purpose (giovani and shambaugh, 2006). many previous studies use country’s gdp as indicator to assess the effect of foreign monetary policy towards domestic economy. for example, kim (2001) explores the effect of us domestic interest rate toward business cycle of the remaining g-7 countries. he identifies that us interest rate significantly determines the economic growth of g-7 economy. with regards to the effect of us monetary policy normalization on capital flows in emerging market economies, the study of dahlhaus and vasishtha (2014) record that the impact policy normalization shock on portfolio flows to emerging market economies is economically small. however, this study does not count the interaction between the fed’s monetary policy and country macroeconomic variables. in terms of effect of change in the federal fund rate on credit growth in philippines, tan (2012) reveals the coefficient for the ffr is statistically significant with the expected negative sign. this study finds that the most statistically significant variables that affect credit growth is the ffr. hence, it implies that variable which is beyond the policymakers’ control plays an important role in the credit growth in philippines. the result of this study confirms previous study conducted by guo and stepanyan (2011) which finds similar result on negative relationship between the changes in ffr toward credit expansion in emerging market economies. for the case of islamic financing, the existing literatures on the effect of foreign monetary policy towards the financing growth in islamic banking industry is still limited. given the limitation of the existing literatures under the same topics, for the basis of variables selection, this study selects several studies which discuss about the impact of monetary policy shocks on the islamic banks. for the case of islamic banking, it is commonly expected that the response of islamic banks to the monetary shocks will be different from the conventional banks since the islamic the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 42 banks are based on interest-free instruments. however, study by kassim, majid and yusof (2009) display the contrary result from the existence of dual banking system in malaysia. the study finds that the impact of monetary policy is more destabilizing for the islamic banks rather than for its counterpart, the conventional banks. the same findings appear for the case of other countries with dual banking system such as turkey (ergec and arslan, 2011) and pakistan (zaheer, ongena and wijnbergen, 2013; naveed, 2015). 3. research methodology to analyze the effect of foreign interest rate upon domestic economic variables, several studies apply vector autoregressive (var) method in order to identify the inter-relation between each variable (kim, 2001 and canova, 2005). based on those previous studies, this study applies var to analyze the short-run and long-run effect of ffr toward indonesian domestic economy especially for the credit growth in banking industry. moreover, this study also applies vector error correction model (vecm) if granger causality test shows the existing long run relationship between each variable at level. engle and granger (1987, in bekhet and yusop ,2009) show that in the presence of co-integration, there is always be an existence of a corresponding error– correction representation. this implies that changes in the dependent variable are a function of the level of disequilibrium in the co-integrating relationship which is captured by the error–correction term and changes in other explanatory variables. vector autoregressive (var) is the common ways to analyze several economic variables which are interrelated to each other. hence, the framework of var is suitable to achieve the aims of this study since it alows all variables to be potentially endogenous while minimizing the theoretical restrictions (ibrahim and shah, 2012). if we exploit that there may exist co-movements among a set of time series and possibilities that they will trend together in finding a long run stable equilibrium, by granger representation theorem, we may posit the following testing relationships which constitute the vecm (mukhtar and rasheed, 2010). consider a set of variables that are i(0) after applying the differencing filter once. provided that the variables in xt are also co-integrated of order r, we may impose this constraint upon our unrestricted var to enable a vecm formulation as: ∆𝑋𝑡 = ∑ ∆𝑋𝑡−1 𝑛 𝑖=1 + ∑ 𝛿𝑖 𝑟 𝑖=1 𝜃𝑡−1 + 𝑣𝑡 (2) this study replicates the vecm framework above to build the model. this study focuses on the credit and financing growth model as an indicator of banking industry performance. previous studies suggest that gdp, fdi, inflation, interest rate set by the central bank, exchange rate are the variables which determine the credit growth as well as financing growth. accordingly, this study estimates a six-variable var using credit growth in banking industry (creditg), financing growth in islamic banking industry ( libf), real gdp growth (rgdp), real interest rate (rint), fed fund rate (ffr), indonesian composite index (lihsg), exchange rate (lexch) as the variables in the system. therefore, this study focuses on the following basic functions: the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 43 x1 = {rgdp, rint, ffr, lihsg, lexch, creditg} x2 = {rgdp, rint, ffr, lihsg, lexch, libf} the credit (creditg) and financing (libf) variables are based on year on year basis. these variables are expected to be influenced by all other variables in the var system. real gdp growth (rgdp) is gdp growth deducted by inflation rate. the relationship between real gdp growth and credit growth as well as financing growth is estimated to be positive. moreover, real interest rate (rint) is calculated from the bi rate deducted by inflation rate. rint and ffr are expected to have negative relationship with credit growth and financing growth. lihsg is captured by the indonesian composite index in the natural log form. according to the tobin’s q theory, lihsg is estimated to have positive relationship with credit growth and financing growth. meanwhile, for exchange rate in the log natural form (lexch), the relationship is expected to be positive. the data are gathered from various publications of the central bank of indonesia, the national statistical bureau of indonesia and the financial service authority of indonesia. using quarterly data, this study covers the period from 2003 to 2015. 4. results and discussion 4.1 unit root test and co-integration test based on engle and granger (1987), the limitation of time series analysis is unit root problem as it may generates a spurious regression. to identify the unit root problem, this study applies the widely used augmented dickey fuller (adf) and philip-perron (pp) tests to detect the existence of autocorrelation between error terms. each test includes intercept and trend in every diagnostic process. the result shows that for the credit growth and financing growth models, all of the data are non-stationary at level nevertheless, critical value of those variables cannot reject the null hypothesis in all of adf test. furthermore, null hypothesis can be rejected at first difference in adf and pp test. therefore, it implies that the data of rgdp, rint, ffr, lihsg, lexch, creditg, libf are stationary at first difference (i). after knowing that all of data are stationary at first difference, the next step is to determine optimum lag of interest rate pass-through model. before using hamman-quinnon (h-q) or schwarz information criterion (sc), var estimation should be conducted and use its residual to implement the test. as regards to optimum lag, we find there are differences between credit growth model and financing growth model. for credit growth model, we have four maximum lag to avoid non-stationary problem in the data while the maximum lag for financing growth model is three. table 1 depicts the result of johansen-juselius cointegration test for the credit growth model and financing growth model. the result indicates that there are at least 2 or 4 co-intgeration in the long run for each model. hence, we may run the long-term model of credit growth and financing growth at level (ibrahim and shah, 2012). the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 44 table 1 johansen-juselius co-integration test credit growth model hyp othe size d tra ce ma xeig en critical values (5%) no. of ce( s) stat istic stat istic tr ac e m ax ei ge n r = 0 275. 6245 *** 90.0 2671 *** 95. 753 66 40. 077 57 r ≤ 1 185. 5978 *** 74.1 4253 *** 69. 818 89 33. 876 87 r ≤ 2 111. 4552 *** 53.8 3510 *** 47. 856 13 27. 584 34 r ≤ 3 57.6 2013 *** 32.3 9880 *** 29. 797 07 21. 131 62 r ≤ 4 25.2 2133 *** 21.2 7311 *** 15. 494 71 14. 264 60 note: *denotes significant at 10% significance level, ** denotes significant at 5% significance levels, *** significant at 1% financing growth model hyp othe size d tra ce ma xeig en critical values (5%) no. of ce( s) stat istic stat istic tr ac e m ax ei ge n r = 0 188. 9143 *** 78.2 1619 *** 95. 753 66 40. 077 57 r ≤ 1 110. 6981 *** 47.9 9946 *** 69. 818 89 33. 876 87 r ≤ 2 62.6 9866 *** 26.6 3577 * 47. 856 13 27. 584 34 r ≤ 3 36.0 6289 *** 21.2 1910 ** 29. 797 07 21. 131 62 r ≤ 4 14.8 4379 * 10.3 0830 15. 494 71 14. 264 60 note: *denotes significant at 10% significance level , ** denotes significant at 5% significance levels.*** significant at 1% 4.2 long-run relationship given the presence long term of co-integration among variables, we can see how these variables are tied in the long run. we normalize the long run relation on the credit growth and financing growth, as depicted below (*indicates significance at 10%, **significance at 5%, ***significance at 1%): credit growth model creditgt-1 = 39.33+0.26 rintt-1-0.09 ffrt-1***-0. 59 lihsgt-1***+125.6 rgdpt-1+4.05 lexcht-1* (3) s.e (1.21481) (0.01491) (0.07749) (12.5032) (0.47405) t-stat [-0.21771] [ 6.04518] [ 7.65115] [-10.0479] [-8.54778] islamic banks financing growth model libft-1 = 6.82-15.7 rintt-1-0.19 ffrt-1***+1.31 lihsgt-1**-62.70 rgdpt-1-0.25 lexcht-1 (4) s.e (2.95871) (0.03048) (0.12035) (14.8874) (0.82237) t-stat [ 5.29972] [ 6.31125] [-10.8492] [ 4.21170] [ 0.29940] the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 45 for the credit growth model, equation (3) exhibits that in the long run, exchange rate, ihsg and ffr play important role in determining banking industry credit growth. credit growth in banking industry is found to be positively related to exchange rate. this result concurs well with the result of arsana (2005) which finds that exchange rate depreciation increases the risk of non-performing loan, hence the banks reduce their loans. meanwhile, for the financing growth in islamic banking, the estimation result in equation (4) shows that in the long run, financing growth in islamic banks is negatively related to ffr but positively related to ihsg. with regard to ihsg, it is interesting to note that ihsg has different relation with credit growth and financing growth model. the plausible explanation for this result is the existence of trade-off from the perspective of corporations. negative sign between ihsg and credit growth indicates trade-off between borrowing money from banks and issuing equity in capital market. at the same time, islamic banks will get benefit from increasing capital inflow which is marked by the increasing of ihsg. it leads to higher amount of deposit for islamic banks hence it increases the capacity of islamic banks to give more financing. as expected before, credit growth in banking industry is negatively related to fed fund rate variable. from the coefficient, other variables remain constant, if the fed increases one basis point of its interest rate, credit growth in indonesia will reduce by 0.09 basis point. this result is in line with the previous studies for philippine (tan, 2012) and emerging economy countries (guo, 2011) cases. the same pattern also prevails for the case of financing growth in islamic banks. however, the estimated parameters indicate that ffr has stronger negative effect towards credit growth in islamic banking industry rather than in total banking industry. one basis point increase in fed fund rate will reduce financing growth in islamic banks by 0.19 basis point. nevertheless, it should be noted that the equation provides information on how credit growth and financing growth are related to ffr and other variables in the long run but it does not express the causal patterns among variables. 4.3 short-run relationship the short-run relationship is being determined by conducting granger causality test. the granger causality test portrays how each variable is related simultaneously since it is assumed that all variables are interdependent to each other. the result of granger causality test is exhibited in table 2. the significant relationship between variables could be traced by chi-sq probability. nevertheless, based on masih and masih (1996), we could not read the coefficient of granger causality test but we could only identify which of variables that determine the other. for instance, ffr is significant in determining the islamic banks financing growth in the short-run with alpha 10% (see table 2). the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 46 table 2 granger causality test matrix result for financing growth of islamic banks model independent variables dependent variable 2  -statistics of lagged 1st differenced term [p-value] ectt-1 coefficie nt (t-ratio) δlibf δrint δffr δlihs g δrgdp δlexch δlibf - 2.29 [0.51] 6.41* [0.09] 1.39 [0.71] 0.45 [0.92] 4.89 [0.17] 0.026*** (0.025) δrint 14.18** * [0.002] - 3.56 [0.31] 7.52* [0.06] 27.44* ** [0.00] 14.22* ** [0.003] 0.046*** (0.009) δffr 3.36 [0.33] 3.05 [0.39] - 5.91 [0.11] 2.57 [0.46] 0.69 [0.87] -0.404 (0.213) δlihsg 6.83* [0.07] 19.63*** [0.00] 11.91*** [0.007] - 1.71 [0.63] 2.60 [0.46] -0.084** (0.061) δrgdp 0.58 [0.90] 7.41** [0.05] 0.42 [0.93] 9.05** [0.03] -1.88 [0.59] 0.006*** (0.002) δlexch 2.62 [0.45] 6.39* [0.09] 1.43 [0.69] 1.15 [0.562] 2.39 [0.49] -0.057** (0.03) note: ***, **,* denotes significant at 1%, 5%, 10% significance level, respectively. number in the squared brackets […] represent as p-value. figure 3 mapping matrix result figure 3 depicts that ffr determines ihsg and islamic banks financing growth. according to the result, it can be inferred that within several months, any changing islamic banks financing real interest rate ihsg ffr exch real gdp the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 47 on the fed monetary policy (ffr) will change indonesian composite index and islamic banks financing growth significantly. as compared to the result of granger causality test for the credit growth model, it can be seen that the effect of ffr in the total banking industry and islamic banking industry has the same pattern. in both industries, ffr is significant to determine the credit growth and ihsg in the short run (see appendix 1). 4.4 forecasting analysis generalized impulse response function (girf) is conducted to gauge to what extent the shocks to certain variable are explained by other variable in the system. based on irf result in figure 4, we find that any positive shock of macroeconomic variables in islamic banking financing model is not positively or negatively responded by islamic financing growth. the effect of ffr does not affect the growth of islamic financing until the next ten quarter. it indicates that islamic financing is not correlated with global interest based transmission mechanism. hence, it indicates that islamic financing is not affected by us monetary normalization until the next ten quarter. islamic financing growth is only affected by previous islamic financing. the positive shock of previous islamic financing is positively responded by future islamic financing until the next five quarter. based on this result, it is important t o improve current islamic financing growth to accelerate the financing of islamic bank in the future. at the same time, girf for islamic banking financing model shows that any one standard deviation positive shock ihsg will be responded positively toward real gdp which is significant for the next four quarter and start to decline in six quarter. this resul t shows that indonesian economy is quite responsive with capital inflow due to current account deficit problem. portfolio investment is really helping to plug the hole of current account deficit which creates volatility toward indonesian rupiah. for islamic banks financing growth model for credit growth model figure 4 generalized impulse response function on the other hand, the irf result for the credit growth for the banking industry model shows the same result compared to islamic bank financing model. each the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 48 positive shock toward macroeconomic variables in the model is not significantly responded by credit growth for the next ten quarter. at the same time, any positive shock toward credit growth will be affected positively on credit growth for the next five quarter. this result shows that better credit growth today will help the performance of credit growth in the future since more credit growth means more liquidity in the market and it will possibly reduce the non-performing loans. 5. conclusion this study utilizes time series techniques of vector error correction model to evaluate the effect of us monetary policy normalization toward financing growth in islamic banks for indonesian case in the short run and long run. the federal fund rate (ffr) is being used as the indicator for the us monetary policy tool. the findings from the co-integration test suggest that there is a common path that ties these variables together in the long run. the estimated long run equation reveals that normalization of the fed monetary policy has negative effect toward indonesian banking credit growth and islamic financing growth. the coefficient estimation shows that the effect of the fed normalization is quite low in the long run for conventional bank and relatively high for islamic banks. this could be traced back in 2015 where the non-performing financing of islamic banks is relatively high compared to conventional bank. the fluctuation in ffr leads to the volatility of domestic exchange rate currency and increases the npf of islamic banks. from the short run dynamic analysis, this study finds that islamic banks financing growth is mostly determined by ffr where islamic financing growth affects ihsg and real interest rate. however, the girf result marks that the effect of the fed normalization will not affect islamic banks financing for the next ten quarters. it exhibits that the long term relationship between ffr and islamic financing growth is not quite strong although it is significantly correlated. however, several caveats limit the conclusion of the study. first, it covers limited number of observation because this study employs quarterly data. as consequence, this study cannot include more than 6 variables in the model. therefore, by extending the time period of the study, the effect of other macroeconomic variables toward financing growth in islamic banks can be captured. second, this study elaborates the effect of us monetary policy normalization on the financing side of islamic banks only. future studies may discuss the effect of such policy toward other variables in balance sheet of the banks, such as non-performing financing (npf). with the inclusion of npf variable, the effect of federal fund rate changes on islamic banks stability can be examined. references arsana, i.g.p. 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(2010). testing long run relationship between exports and imports: evidence from pakistan. journal of economic cooperation and development, vol. 31(1), 41 – 58. naveed, m. y. (2015). impact on monetary policy shocks in a dual banking system in pakistan: a vector auto regressive approach. european academic research, ii (11),14684-14700. tan, t. b. p. (2012). determinants of credit growth and interest rate margins in the pihilippines and asia. imf working paper, 12/123. zaheer, s., s. ongena., & sweder j.g. van wijnbergen. (2013). the transmission of monetary policy through conventional and islamic banks. international journal of central banking, 9(4), 175 – 222. the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 50 appendix 1. granger causality test matrix result for financing growth of islamic banks model independent variables dependent variable 2  -statistics of lagged 1st differenced term [p-value] ectt-1 coefficient (t-ratio) δcreditg δrint δffr δlihsg δrgdp δlexch δcreditg - 7.95* [0.09] 7.41* [0.12] 19.89*** [0.00] 9.22** [0.05] 11.1** [0.02] -0.132** (0.046) δrint 3.69 [0.45] - 0.43 [0.98] 4.67 [0.32] 7.05 [0.13] 1.45 [0.83] -0.006 (0.038) δffr 9.13** [0.05] 4.45 [0.34] - 6.14 [0.18] 14.02*** [0.007] 11.98*** [0.01] 0.061 (0.762) δlihsg 28.62*** [0.00] 31.57*** [0.00] 11.92*** [0.01] - 17.7*** [0.00] 5.28 [0.26] 0.335* (0.181) δrgdp 09.55** [0.04] 6.45 [0.17] 4.23 [0.37] 6.61 [0.16] -7.16 [0.12] 0.019*** (0.007) δlexch 8.48* [0.08] 5.07* [0.28] 6.35 [0.17] 1.33 [0.85] 3.88 [0.42] --0.153 (0.124) note: ***, **,* denotes significant at 1%, 5%, 10% significance level, respectively. number in the squared brackets […] represent as p-value. the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 51 appendix 2. girf for islamic banks financing model -.1 .0 .1 1 2 3 4 5 6 7 8 9 10 response of libf to libf -.1 .0 .1 1 2 3 4 5 6 7 8 9 10 response of libf to rdgp -.1 .0 .1 1 2 3 4 5 6 7 8 9 10 respons e of libf to lexch -.1 .0 .1 1 2 3 4 5 6 7 8 9 10 res ponse of libf to lihsg -.1 .0 .1 1 2 3 4 5 6 7 8 9 10 response of libf to ffr -.1 .0 .1 1 2 3 4 5 6 7 8 9 10 respons e of libf to rint -.004 .000 .004 .008 1 2 3 4 5 6 7 8 9 10 response of rdgp to libf -.004 .000 .004 .008 1 2 3 4 5 6 7 8 9 10 response of rdgp to rdgp -.004 .000 .004 .008 1 2 3 4 5 6 7 8 9 10 response of rdgp to lexch -.004 .000 .004 .008 1 2 3 4 5 6 7 8 9 10 res ponse of rdgp to lihsg -.004 .000 .004 .008 1 2 3 4 5 6 7 8 9 10 respons e of rdgp to ffr -.004 .000 .004 .008 1 2 3 4 5 6 7 8 9 10 respons e of rdgp to rint -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 response of lexch to libf -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 response of lexch to rdgp -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 response of lexch to lexc h -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 response of lexch to lihsg -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 respons e of lexch to ffr -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 respons e of lexch to rint -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 response of lihsg to libf -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 response of lihsg to rdgp -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 response of lihsg to lexc h -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 respons e of lihsg to lihsg -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 res ponse of lihsg to ffr -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 res ponse of lihsg to rint -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 response of ffr to libf -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 response of ffr to rdgp -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 res ponse of ffr to lexch -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 res ponse of ffr to lihsg -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 response of ffr to ffr -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 respons e of ffr to rint -.02 -.01 .00 .01 .02 .03 1 2 3 4 5 6 7 8 9 10 response of rint to libf -.02 -.01 .00 .01 .02 .03 1 2 3 4 5 6 7 8 9 10 response of rint to rdgp -.02 -.01 .00 .01 .02 .03 1 2 3 4 5 6 7 8 9 10 res ponse of rint to lexch -.02 -.01 .00 .01 .02 .03 1 2 3 4 5 6 7 8 9 10 response of rint to lihsg -.02 -.01 .00 .01 .02 .03 1 2 3 4 5 6 7 8 9 10 response of rint to ffr -.02 -.01 .00 .01 .02 .03 1 2 3 4 5 6 7 8 9 10 respons e of rint to rint response to cholesky one s.d. innovations ± 2 s.e. the effect of us monetary policy normalization toward the financing growth of indonesian islamic banking industry: short-term and long-term approaches 52 appendix 3. girf for credit growth model -.04 -.02 .00 .02 .04 1 2 3 4 5 6 7 8 9 10 response of creditg to cr editg -.04 -.02 .00 .02 .04 1 2 3 4 5 6 7 8 9 10 respons e of creditg to rin t -.04 -.02 .00 .02 .04 1 2 3 4 5 6 7 8 9 10 res ponse of creditg to ffr -.04 -.02 .00 .02 .04 1 2 3 4 5 6 7 8 9 10 respons e of creditg to lihsg -.04 -.02 .00 .02 .04 1 2 3 4 5 6 7 8 9 10 response of cr editg to rdgp -.04 -.02 .00 .02 .04 1 2 3 4 5 6 7 8 9 10 respons e of creditg to lexc h -.02 -.01 .00 .01 .02 1 2 3 4 5 6 7 8 9 10 response of rint to creditg -.02 -.01 .00 .01 .02 1 2 3 4 5 6 7 8 9 10 response of rint to rint -.02 -.01 .00 .01 .02 1 2 3 4 5 6 7 8 9 10 response of rint to ffr -.02 -.01 .00 .01 .02 1 2 3 4 5 6 7 8 9 10 response of rint to lihsg -.02 -.01 .00 .01 .02 1 2 3 4 5 6 7 8 9 10 respons e of rint to rdgp -.02 -.01 .00 .01 .02 1 2 3 4 5 6 7 8 9 10 respons e of rint to lexch -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 response of ffr to creditg -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 response of ffr to rint -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 respons e of ffr to ffr -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 res ponse of ffr to lihsg -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 respons e of ffr to rdgp -1.0 -0.5 0.0 0.5 1.0 1 2 3 4 5 6 7 8 9 10 respons e of ffr to lexch -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 response of lihsg to creditg -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 response of lihsg to rint -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 response of lihsg to ffr -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 respons e of lihsg to lihsg -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 res ponse of lihsg to rdgp -.2 -.1 .0 .1 .2 1 2 3 4 5 6 7 8 9 10 response of lihsg to lexc h -.004 -.002 .000 .002 .004 1 2 3 4 5 6 7 8 9 10 response of rd gp to creditg -.004 -.002 .000 .002 .004 1 2 3 4 5 6 7 8 9 10 response of rdgp to rint -.004 -.002 .000 .002 .004 1 2 3 4 5 6 7 8 9 10 response of rdgp to ffr -.004 -.002 .000 .002 .004 1 2 3 4 5 6 7 8 9 10 res ponse of rdgp to lihsg -.004 -.002 .000 .002 .004 1 2 3 4 5 6 7 8 9 10 res ponse of rdgp to rdgp -.004 -.002 .000 .002 .004 1 2 3 4 5 6 7 8 9 10 response of rdgp to lexch -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 response of lexch to creditg -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 respons e of lexch to rint -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 res ponse of lexch to ffr -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 response of lexch to lihsg -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 res ponse of lexch to rdgp -.08 -.04 .00 .04 .08 1 2 3 4 5 6 7 8 9 10 response of lexch to lexc h response to cholesky one s.d. innovations ± 2 s.e. the influence of managerial ownership, board of commissioners proportion, auditing committee independence, sales growth, company size to return of equity (roe) of state owned enterprises which is listed in the indonesian sharia stock index 2011-2014 period 16 8 the influence of managerial ownership, board of commissioners proportion, auditing committee independence, sales growth, company size to return of equity (roe) of state owned enterprises which is listed in the indonesian sharia stock index 2011-2014 period nisful laila 1*, idzal dwi nantyah2, and puji sucia sukmaningrum3 1 airlangga university, surabaya, indonesia abstract the aim of this study was to determine the effect of good corporate governance, growth of sales, and firm size on roe of state owned enterprises which hare listed on the indonesian stock exchange in the 2011-2014 period. the method used is the quantitative method with panel data regression techniques. the data used are secondary data by collecting annual financial data statements of state owned enterprises which hare listed on the indonesian stock exchange in the 2011-2014 period. panel data regression conduction showed that managerial ownership (x1) has a negative and significant impact on roe, the proportion of commissioners has a positive and significant impact on roe (x2), the independence of audit committee (x3)has a negative and significant impact on roe, growth of sales (x4 )has a positive and significant impact on roe, firm size (x5) has a positive and significant impact on roe as well as managerial ownership, the proportion of commissioners, the independence of audit committee, growth of sales, and firm size simultaneously affect the roe of state owned enterprises in the 2011-2014 period. keywords: firm size, growth of sales, managerial ownership, return on equity (roe), the proportion of board commissioners, the independence of audit committee 1. introduction the high increase of corporate values is a long term goal for companies, in the decision making of investors to companies, it is observed through corporate stock price movement which is transacted in the exchange for companies which already go public. according to jensen and meckling (1976) in maximizing corporate value a conflict of interest will appear between managers and stockholders (company owners) which is named the agency problem. good corporate governance is a corporate need which is closely related to corporate performance. according to the investment coordinating board, observed from experience the united states is the one which has to implement corporate governance restructuration as a cause of the 1929 market crash. a bad corporate governance is also signaled as one of the causes of the indonesian economic political crisis which began in 1997 and the effect is still felt today. the financial * corresponding author. email address: nisful.laila@feb.unair.ac.id mailto:nisful.laila@feb.unair.ac.id afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 17 crisis in the united states some time ago is also caused by not applying the gcg principles, several financial scandals such as enron corp., worldcom, xerox, and others are top executives in the companies where the companies illustrate that the gcg principles are not applied. (source: www.bpkp.go.id, accessed on september 1 2015). a chain of corporate failures from giant corporations such as enron, tyco, worldcom, pharmalat and others has already shaken the belief and trust of shareholders. as a cause, that matter brings attention increase to corporate governance issues. the disclosure of corporate governance implementation in yearly reports is one of the means implemented by companies to increase belief and trust of shareholders especially in transparency. information about corporate governance is very useful in financial information credibility assessment which is presented in the corporate yearly report. this is related with the disclosure of applying corporate governance so shareholders are able to assess information quality about corporate performance in the future (bhat and co., 2006). allah swt stated in surah al-baqarah: 282: o believers! when you enter in the transaction of any debt for a fixed period, then write it down. and a scribe should write between you justly; and the scribe should not refuse to write as he has been taught by allah, then he should write and let him on whom. the liability falls dictate and fear allah who is his lord and does not leave behind something out of the liability. then again he on whom liability falls be of low understanding or be weaker be unable to dictate; then let his guardian dictate justly. and make two witnesses from among your men,then if two men be not available then a man and two women such witnesses, as you like, so that either of the two women errs in memory, then the other may remind to that one. and when the witnesses are called, they should not refuse to come. and do not take it as a burden, the liability be it small or big, write it down along with its fixed period. it is more justified in the sight of allah, in it the evidence will be more suitable and it is nearer to itthat you may not be in doubt; save a ready merchandise which you give or take from hand to hand, there is no sin on you, if you write it not. and when you trade, make witnesses. and neither any scribe be harmed nor the witness (or neither the scribe do harm nor the witness). and if you do such then it would be yours in subordination. and fear allah and that allah teaches you and allah is the all-knowing of everything. transactions are such as selling and buying, debt, or leasing and the like. when there is an economic crisis in indonesia, plans and demands to corporate governance which has been paid less attention as of today increases, many companies public and private fall because of a weak corporate governance. corporate governance becomes a vital problem for welfare not just the owner, corporate shareholders, but also covers workers and people in society as a whole. in indonesia corporate governance truly becomes the center of attention since indonesia experienced an economic crisis mid-1997. some factors which cause the occurrence of an economic crisis according to harahap (2003) which is quoted by lastanti (2004), there are two aspects which are internal and external aspects. the internal aspect covers all fundamental economic problems of each country, while the external aspect covers the lack of supervision of traditional banking institution practices and less precise investment decisions. corporate governance or corporate management is a control mechanism for managing and processing businesses with the means for increasing ability and http://www.bpkp.go.id/ the influence of managerial ownership, board of commissioners proportion, auditing committee independence, sales growth, company size to return of equity (roe) of state owned enterprises which is listed in the indonesian sharia stock index 2011-2014 period 18 accountability of companies for considering the interests of parties which are related to the company (stakeholders), not only the shareholders. with a good company management the company’s value will increase among them is the company’s financial performance especially for corporate return of equity (roe). according to made (2011) roe shows corporate ability for producing profit after tax by using their own capital and this ratio is very important to the shareholder party for knowing effectiveness and efficiency of capital processing implemented by corporate management, then a good corporate governance is also able to decrease harmful risks as a cause of developer action which tends to benefit themselves and increase company stock prices in the long term such as the research implemented by mckinsey (2002) which stated that 51% of investors demand transparency as a reference in implementing corporate stock purchase by institutional investors. in other words corporate governance will create a good corporate performance and increase investor trust to corporate performance. in facing global competition every company is demanded to anticipate the rivalry which occurs between every company, so companies implement economic activities and manage functions in companies effectively and efficiently. in this matter the finance management has an interest with how to create and maintain economic value or wealth, so in decision making there is a purpose for maximizing profit, prospering company owners or shareholders and maintaining the survivability of the company and developing the business to reach the goal. murni and andriana (2007) stated, the approach of corporate growth is a component for assessing corporate prospect in the future. it is concluded that corporate growth is a component for assessing corporate prospect in the future and in financial management it is measured based on total sales alterations. corporate growth will cause consequences in investment and payment increase. brigham and houston (2006: 39) stated that companies with relatively stable sales are able to be more secure in obtaining more loans and bearing fixed loads which are higher compared with companies with unstable sales. this has to be supported with enough capital for fulfilling the company’s needs for increasing company sales. companies which grow rapidly will possibly choose to use external funds such as banks, capital market, and suppliers to fulfill capital compared with companies with slow sales growth. with the company entering the capital market, it can be said that the company desires to develop and compete globally, because of confidence in having a needed competitive advantage to still compete in the global market (bawden, 1992; and glancy, 1996). the expansion is also meant for obtaining economies of scale. the economies of scale of a company is reflected with production cost decrease (input) in line with the total production (output). if this economy of scale is reached, the companies which are diversified (diversified firms) have potential to be more profitable than small companies which are specialized (specialized firms). schmalensee (1989) found that large companies are more profitable than small companies in the same industry. like other researchers, schmalensee uses total assets as a projection of company size, and the measures of accounting profitability levels are represented by profit margin and return on asset. but the previous research implemented by schmalensee (1987) shows that company size (firm size) and profitability does not relate significantly if companies in one industry are grouped into sub industries. then the organization theory explains the afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 19 relation between profitability with company size which is attributed with organization transaction cost (williamson, 1985) research results of kumar, rajan, and zingales (2001) showed that company size increases if law institutions increase protection to the resources of the company. the critical resources theory also indicates that the larger the company scale the profitability will also increase, but in a certain point or number company size will decrease company profit. based on the explanations above the researcher intends to research good corporate governance quality (managerial ownership, board of commissioners proportion, auditing committee independence), company size and sales growth partially and simultaneously to the financial ratio variable which is return on equity in state owned enterprises which are listed in the indonesia sharia stock index years 2011-2014. 2. theoretical base and hypothesis development corporate governance is a concept which is proposed for increasing corporate performance through supervision or monitoring management performance and guaranteeing management accountability to stakeholders by being based on the regulation frame in indonesia regulated in act no. 40 year 2007 about private companies and copy of minister of state owned enterprises regulation number: per-01/mbu/2011 about the application of good corporate governance in state owned enterprises. according to the state development audit agency, generally the term good corporate governance is a system of corporate control and regulating which can be observed from the relation mechanism between several parties which manage the company (hard definition) nor observed from values contained in the management mechanism itself (soft definition). the state development audit agency gcg team defines good corporate governance from the soft definition view which is easy to understand by common people which is: “healthy and ethical commitment, regulations, and business implementation practice”, while the goal of good corporate governance is for creating additional values for all interest parties (stakeholders). as for good corporate governance is proxied with: 1. managerial ownership, managerial ownership is an important issue in the agency theory since published by jensen and meckling (1976) which stated that the larger the management ownership portion in a company the management will try more active for fulfilling the interests of shareholders which are also themselves. 2. board of commissioners proportion, the board of commissioners’ proportion holds an important role in good corporate governance implementation because it is the core of good corporate governance which is tasked for guaranteeing implementation of corporate strategy. for guaranteeing the good corporate governance implementation, board of commissioner members which have integrity, law abiding, and do not have business or other relations with shareholders (majority) are needed directly and indirectly. the board of commissioners is often considered to not provide benefit, this can be seen in the fact that many board of commissioner members do not have the ability and are not able to show their independence. the influence of managerial ownership, board of commissioners proportion, auditing committee independence, sales growth, company size to return of equity (roe) of state owned enterprises which is listed in the indonesian sharia stock index 2011-2014 period 20 3. auditing committee, the presence of the auditing committee is regulated through capital market supervisory agency circular number se03/pm/2002, in the implementation the auditing committee has tasks for aiding the board of commissioners for: 3.1 increasing financial report quality. 3.2 creating discipline and control which is able to decrease probabilities of the occurrence of violations in company management. 3.3 increasing effectiveness of auditing internal and external functions. 3.4 identifying matters which need attention of the board of commissioners. according to nalim (2009) good corporate governance is a new name for whichever science or religion including islamic teachings which have appeared before modern life, yet the value, content, and goal of good corporate governance is already discussed in the qur’an and hadith. although the term good corporate governance is still new, yet the concept is found in islamic teachings which is in the qur’an and hadith: 1. the qur’an in surah al-baqarah; 282-283, about the gradual transaction process. this verse explains the important meaning of keeping records right so there are no parties who get unfair treatment. 2. islamic corporate governance which tends to relate every concept and behavior in business management with matters that are transcendental and immanent. this is a consequence from the belief of a muslim to allah swt. so from here we know the tawheed value as a base for all beliefs, thoughts, and behaviors of a muslim, including in understanding corporate governance. one of the principles which is the largest derivative from the tawheed value is the principle of fair. the principle in good corporate governance is fairness which is meant for presenting a fair company management for all parties. the meaning of fair can be widened in every principle which is in corporate governance and other values which can appear as a cause of fairness implementation. there are some matters which are closely related with the corporate governance principle which are caliphates, accountability, reliability, transparency, and also trustworthiness. roe shows the company’s ability for producing profit after tax by using its own capital which the company has. this ratio is important for the shareholder party for knowing effectiveness and efficiency of their own capital management which is implemented by the company management. the higher the ratio it means the more efficient the capital use itself which is implemented by the company management party. the size of the company can be measured by using total assets, sales, or capital of the company. one of the benchmarks which shows the size of the company is the size of assets from the company. companies which have large total assets shows that the company has reached the mature phase where in this phase the cash flow of the company is already positive and considered to have a good prospect in a relatively long timeframe, other than that it also reflects that the company is relatively more stable and more able to produce profit compared with companies with small total assets (basuki, 2006). afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 21 higgins (2003) stated that sales growth comes from two sources which are sales volume increase and price increase. because all cost variables, the most current assets, and current obligations have tendencies to sales, so it is a good idea for observing growth which is based on company sales. based on the statement above it is seen that the growth level of a company is able to be observed from volume addition and price increase specifically in sales because sales is an activity which is generally implemented by companies for obtaining a goal which is desired to be reached, which is the expected profit. hypothesis based on the literature review above the hypotheses in this research are h1: managerial ownership has a partially positive influence to roe. h2: board of commissioners proportion has a partially positive influence to roe. h3: auditing committee independence has a partially positive influence to roe. h4: company size has a partially positive influence to roe. h5: sales growth has a partially positive influence to roe. h6: managerial ownership, board of commissioners proportion, auditing committee independence, company size, sales growth have positive influences simultaneously to roe. analysis model figure 1 research analysis model 3. research method research approach the approach used in this research is the quantitative approach where researched variables are identified for the influence and able to be measured clearly for the relationship between one variable and other variables. this research uses a quantitative approach because research data is in the form of numbers and the analysis uses statistics (sugiyono,2012;23). variable identification based on the research hypothesis and analysis model, the variables in this research consist of one dependent variable which is roe (y) and five independent the influence of managerial ownership, board of commissioners proportion, auditing committee independence, sales growth, company size to return of equity (roe) of state owned enterprises which is listed in the indonesian sharia stock index 2011-2014 period 22 variables (x) which are, managerial ownership, board of commissioners proportion, auditing committee independence, company size, and sales growth. operational variable definition 1. managerial ownership managerial ownership of shareholders and the management party which participates actively in company decision making (director and commissioner). managerial ownership is measured from total share percentage which managers own. (wahidahwati 2002:5) 2. auditing committee independence the committee which is formed by the board of commissioners for helping board of commissioners’ tasks in implementing the supervision function to the performance of the board of directors and the management team corresponding with the gcg principles. the measure of the auditing committee independence variable in this research uses a comparative ratio between the independent auditing committee with total auditing committee members (purwati, 2006 in manuputty, 2012), so it is formulated: = 𝑇ℎ𝑒 𝐼𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝐴𝑢𝑑𝑖𝑡𝑖𝑛𝑔 𝐶𝑜𝑚𝑚𝑖𝑡𝑡𝑒𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑢𝑑𝑖𝑡𝑖𝑛𝑔 𝑐𝑜𝑚𝑚𝑖𝑡𝑡𝑒𝑒 𝑚𝑒𝑚𝑏𝑒𝑟𝑠 3. board of commissioners proportion the board of commissioners independence is counted by dividing the total independent commissioners’ portion to the total commissioners present in the board of commissioners (haat, et al.2008) so it is formulated as the following: 𝑝𝑟𝑜𝑝𝑜𝑟𝑡𝑖𝑜𝑛 𝑜𝑓 𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑑𝑒𝑝𝑒𝑛𝑑𝑒𝑛𝑡 𝑏𝑜𝑎𝑟𝑑 𝑐𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 𝑝𝑟𝑒𝑠𝑒𝑛𝑡 𝑖𝑛 𝑡ℎ𝑒 𝑏𝑜𝑎𝑟𝑑 𝑜𝑓 𝑐𝑜𝑚𝑚𝑖𝑠𝑠𝑖𝑜𝑛𝑒𝑟𝑠 4. company size company size is shown by total assets owned by the company, the larger the company total assets the larger the company size(murdiyani, 2009). 5. sales growth swastha and handoko (2001), growth of sales is an important indicator from market acceptance of a product or service of the company, where income produced from sales will be able to be used for measuring the sales growth level. sales growth levels are counted with the following equation: g = 𝑠1−𝑠0 𝑠0 × 100 % g: sales growth level s1: total sales for the functioning period. 6. roe (return on equity) roe is the return of normal equity roe = 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦 4. results and discussion the data used passed the classic assumption test. the next step is the chow test for determining whether to use the pls or fem model. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 23 table 1 chow test output source: eviews 7 the chow test shows a p-value as large as 0.000 which means significant or less than the significance level used which is 5%. so the model used is the fixed effect model. next the hausman test needs to be implemented for determining the model used which is the fixed effect model (fem) or random effect model (rem). table 2 hausman test output source: eviews 7 based on test results a p-value of 0.0666 > alpha 0.05 is obtained so h0 is accepted and the model used is the random effect. next the t and f tests are implemented, managerial ownership has a significant negative influence to roe, board of commissioners proportion has a significant negative influence to roe, auditing committee independence has a significant positive influence to roe, company size has a positive influence to roe. source: eviews 7 based on the table above the x1 (managerial ownership) significant and negatively influenced variable is obtained with a t-statistic as large as -4.418513 and a p-value as large as 0.0001. the x2 (auditing committee independence) significant and positively influenced variable with a t-statistic as large as 4.042051 and a p-value as large as 0.0002. next the x3 (independent board of commissioners proportion) significant and negatively influenced variable with a t-statistic as large as -4.359087 and a p-value as large as 0.0001. the x4 (company size) in the logarithmic function significant and positively influenced variable with a t-statistic as large as 3.056231 and a p-value as large as 0.0037. lastly the x5 (sales growth) significant and positively influenced variable with a t-statistic as large as 3.681033 and a p-value as large as 0.0006. the influence of managerial ownership, board of commissioners proportion, auditing committee independence, sales growth, company size to return of equity (roe) of state owned enterprises which is listed in the indonesian sharia stock index 2011-2014 period 24 table 3 source: eviews 7 based on the count an f statistic value as large as 3.952890 > f table as large as 2.41 with a p-value as large as 0.004584 < alpha 0.05 so it is rejected and simultaneously there is an influence of managerial ownership, auditing committee independence, independent board of commissioners proportion, company size and x5 sales growth have influences to the roe dependent variable. based on the random effect model above it is known that the r-square value is as large as 0.300534 which means simultaneously the x1, x2, x3, x4, x5 variables have a contribution to explain y as large as 30.05% while the rest are as large as explained by other variables which are not researched or inputted in this research model. influence of managerial ownership to state owned enterprise roe which are listed in the indonesia stock exchange period 2011-2014 research results show the x1 (managerial ownership) significant and negatively influenced variable with a t-statistic as large as -4.418513 and p-value as large as 0.0001. based on that result the h1 which is proposed in the research is accepted. yet the negative value in the managerial ownership coefficient has the meaning that the larger the managerial ownership the company roe decreases. this is also supported by the research of dwi sukrini (2011) in her research it is concluded that managerial ownership has a significant negative influence to company value because there are not yet many management parties which have company shares in a significant enough amount. the low number of managerial ownership causes the management party to prioritize their own interests than company interests, the number of share ownership which is not yet significant causes managers to prioritize their goals as managers than shareholders. influence of auditing committee independence to state owned enterprise roe which are listed in the indonesia stock exchange period 2011-2014 research results show the x2 (auditing committee independence) significant and positively influenced variable with a t-statistic as large as 4.042051 and p-value as large as 0.0002. based on that result the h2 which is proposed in the research is accepted. this is also supported by research results of agung suryana (2003) which implements research about auditing committee, the higher the quality if the auditing committee the better the company profit quality which in the end is able to increase company value. the more independent the auditing committee, there is an increase of supervision in the decision making process which is better, rapidly detects misuse, and effective communication between internal auditing, external auditing and the auditing committee so the company is also audited by public accountants which are independent and produce a good financial report which is able to disclose and inform company activities beginning from planning, funding, credit, and investment and investors are able to assess well about the company’s condition for decision making of investment, if there are more afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 25 investors that invest capital in the company that matter also has a positive influence to company financial performance which is return on equity (roe). influence of board of commissioners proportion to state owned enterprise roe which are listed in the indonesia stock exchange period 2011-2014 research results show the x3 (board of commissioners proportion) significant and positively influenced variable with a t-statistic as large as -4.359087 and p-value as large as 0.0001. this is in line with the minimum condition of the independent board of commissioners as large as 30 percent which provides enough opportunities for independent commissioners to dominate policies taken by the board of commissioners. if independent commissioners are the majority party (>50%) they will be more effective in implementing their roles as company supervisors (siregar and utama, 2005) sylvia and siddharta (2005) also stated that the promotion of an independent board of commissioners by the company might only be implemented to fulfill regulations but it is not meant to enforce good corporate governance (gcg) in the company, then the research of charlie weir et al (2000) yermarck (1996), agrawal and knober (1996) bhagat and black in s. beiner et al (2003) results of the research show that based on data in the field there are still many shareholders that have dual positions as board of commissioner members. an independent board of commissioners generally has a better supervision to management, so decreases the chances of fraud in presenting financial reports implemented by managers (chtourou et al., 2001) or in other words the more competent the board of commissioners the less the chances of fraud in financial reports. influence of company size to state owned enterprise roe which are listed in the indonesia stock exchange period 2011-2014 research results show the x4 (company size) in logarithmic function significant and positively influenced variable with a t-statistic as large as 3.056231 and p-value as large as 0.0006. the objects in this research are state owned enterprises which are large companies with large total assets in line with the research of basuki (2006) companies which have large total assets show that the company has reached maturity where in this phase the company cash flow is already positive and considered to have a good prospect in a relatively long time period and relatively stable and more capable of producing profit. influence of sales growth to state owned enterprise roe which are listed in the indonesia stock exchange period 2011-2014 research results show the x5 (sales growth) significant and positively influenced variable with a t-statistic as large as 3.681033 and p-value as large as 0.0006. based on the research results the higher the sales growth the profit produced by the company will be more efficient so the roe value will also increase, so the sales growth variable has a positive influence to roe in this research. this is in line with the research of sugihen (2003) sales growth has a positive influence to financial performance measured from profitability. the influence of managerial ownership, board of commissioners proportion, auditing committee independence, sales growth, company size to return of equity (roe) of state owned enterprises which is listed in the indonesian sharia stock index 2011-2014 period 26 5. conclusion 1. managerial ownership and board of commissioners proportion have negative and significant influences to the return on equity of state owned enterprises which are listed in the indonesia stock exchange period 20112014. for companies it is expected that the implementation and application of good corporate governance is implemented well not only as mere formality so that matter is able to provide benefit not only to company reputation but also to stakeholders, shareholders, and society. 2. auditing committee independence, company size, and sales growth have positive and significant influences to the return on equity of state owned enterprises which are listed in the indonesia stock exchange period 20112014. references act no.40 year 2007 about private companies and copy of minister of state owned enterprises regulation number : per – 01/mbu/2011 about the application of good corporate governance in state owned enterprises. act number 19 year 2003 about state owned enterprises. alnasser, s. a. s., & muhammed, j. 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(www.worldbank.org.) accessed on october 24 2015. http://www.worldbank.org/ the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 55 the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) yoga fadhil nurfajri 1*11 1 padjadjaran university, bandung, indonesia abstract the objective of this research is to investigate the effect of halal-labeled food awareness towards purchase intention of indonesian muslim student in japan. survey data obtained from 101 indonesian students from all over japan and was analyzed with descriptive and verification methods, whereas smart-pls was utilized for hypothesis testing. in this research, halallabelled food purchase intention variable was derived from alam & sayuti (2011) and bone et al (2007). the result showed that all of halal-labelled food awareness influence indonesian muslim student purchase intention, with perception toward halal certification variable was the most significant factors for halal-labelled food awareness and perceive behavioral control as the most significant factor which influence halal-labeled food purchase intention. the limitation in this researched is the data was obtained through online questionnaire and using snowball sampling method, this method may cause bias since author was unable to control the spreading of the questionnaire and people who did not meet the criteria to fill the questionnaire may filled it. keywords: halal awareness, halal-food , islamic marketing, japan, purchase intention. 1. introduction halal is derived from arabic with literal meaning permissible or allowed, which means all of the things that allowed to consume, to wear, and to do (related to worship) under sharia rule. in the quran every food is categorized halal until those that are mentioned as haram (prohibited or unlawful to consume) such as pork, blood, corpse and etc. consuming halal food for muslim is not an alternative but a dietary standard prescribed in quran that they must follow anywhere and anytime as it does with kosher dietary standard for jew and vegan dietary for hindu. hence halal food industry become one of the developed and the biggest religion-prescribed dietary in the world with million consumers per day. *11 corresponding author. email address: yogafadhill@gmail.com mailto:yogafadhill@gmail.com afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 56 halal food industry is one of the biggest food industry in the world with a market size of us$ 1,245bn in 2016 (thomas reuters 2016). meanwhile, the total global spend for food on 2016 was reached us$ 7,323bn which mean that muslim consumption for halal foods & beverages contributed 17% of global consumption. with a steady growth of muslim population, this number is expected to grow into 1,930 billion us$ in 2022. this number was not a surprise since muslim population is accounted for 23.2% of total world population. in country like indonesia where muslim is a majority group the general problem is how to know the genuineness of their halal food, moreover in this modern era where foods and beverages were made and packed behind closed door. as a consumer that must ensure halal-ness of the food, modern muslim has heavily relied on the halal certification given by scholar or designated organization to decide which food they could consume. meanwhile, in a muslim minority country such as japan., the awareness of halal food and the availability to purchase halallabelled food has been happening as a problem for years. japan is a developed country which become one of the most popular destination to study for indonesian student. there are approximately 5,495 indonesian students in japan, this number was increased 18.7% from last year (jasso 2017) and will more likely increase in the upcoming years. in addition, japan was ranked 5th as the most popular study destination for indonesian student by unesco. besides its status as a developed country, japan has a lot more to offer such as its lifestyle, numerous scholarship provided both by the government and private companies, and popular japanese culture. even though japanese culture are admired and known by many indonesian youth it is just a tip of the iceberg. as a country with a different root with indonesia that has less than 1% muslim of its total population, japan’s culture and lifestyle become a double-edged sword for indonesian students who live in japan. it would widen their perception, but on the other hand, they would experience more hardship to perform religious practices since islam is still considered as an alien religion by most japanese who is having lack of interest to know about it. the implication of apathy towards islam in japan has led to a tougher time for muslim to fulfill their religious duties, hence, muslims often find that it is not that easy to travel or live while keeping their belief and consuming only halal foods (adidaya, 2016) especially for packed or canned food, which may cause their awareness of halal food decrease. a packed halal-labelled food is still limited in term of variety and availability, only certain shops that sell halal-labelled food such as asian stores and muslim stores with relatively higher price. it has been discussed that halal-labelled food is uncommon in japan both the variety and availability. regarding to those problem writer is curious to know whether indonesian muslim student still has good awareness for halal-labelled food and intention to purchase it, since doing it need extra effort and money. 2. literature study/hypotheses development awareness on buying and consuming halal food is important for every muslim, moreover in this globalization era where food product is ranging from a to z. the consequences of consuming non-halal food are harmful to our body and the worst thing is that the prayer (ibadah/shalat) that we performed will not be the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 57 accepted by allah. in indonesia, as a muslim majority country, finding halal food is effortless even we can assume that most food is halal due to the seller, but on the other hand, in a country where muslims are minority such as in japan, finding halal food can be quite challenging since the availability and exposure of halal food are limited. but no matter how hard it is, we must always aware the existence of halal food around us because it is important for muslims to have an understanding and knowledge on what halal is all about in measuring halal awareness (yunus et al, 2014). according to randolph (2003), awareness means the knowledge of some subject or situation. in halal context, it also means having special interest in or experience of something and/or being well informed of what is happening at present time on halal food, drinks, and product. furthermore, ambali & bakar (2014) stressed out that awareness is a relative concept where a person may partially, subconsciously, and acutely aware of an issue relating to halal aspects. in this paper, the variable used to measure halal food awareness by ambali & bakar (2014) will be utilized to measure halal-labelled food awareness for indonesian student in japan. there are 4 variables used, namely religious belief, perception toward halal certification, exposure and health reason. religion and belief are sources of awareness towards consumption behavior and the best guideline to determine the food consumption ambali & bakar (2014). perception toward halal certification becomes essential since it will directly alter people awareness on halal-labelled food and help them decide its importance. exposure measure how they get informed or be exposed about halal-labelled food and how strong it is. health reason: it is not only religious motives that can determine people awareness towards halal food or products for consumption, but also health issues related to religious identity and degree of acculturation in whatever we consume daily (bonne et al, 2007). it can be said that it’s not only the source of food that become the concern of muslim dietary but also the healthiness which becomes the reason why people aware of the existence of halal food. there are two theories which commonly served as a theoretical basis for explaining purchase intention namely aida (awareness, interest, desire, and action), tpb (theory of planned behaviour). aida is the oldest and the most popular marketing model that commonly use to capture consumer response toward the product. in principle, the idea of aida is to affect consumer awareness until they buy the product through several steps. schaefer, parker, & haytko (2011) used aida for their research about chinese and u.s. consumers’ perceptions of the effectiveness of celebrity athlete endorsers. meanwhile, tpb was developed by ajzen (1991) which relates to three factors or conceptually independent determinants of purhase intention, namely: 1. attitude, 2. subjective norm, 3. perceive behavior control. in this paper, a modified tpb with an extension model to capture the influence of the cultural and more specific religious context in which halal-labelled is consumed is investigated, as used by bonne, et, al (2007) which are self-identity, and dietary acculturation will be utilized as the predictors to measure purchase intention, since the tpb model could explains if an individual’s performance of a certain behavior is determined by his or her intent to perform that behavior (alam & sayuti, 2011). tpb has also become the basis for several studies on consumer food choices (sparks and shepherd, 1992; conner and sparks, 1996; karijin et al., 2007, alam & sayuti , 2011) and even cosmetics. bonne, vermeir, blackler, & verbeke, afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 58 (2007), used the tpb as the basis of their theoretical model to measure halal meat consumption in france. kim & chung (2011) used tpb to measure purchase intention for organic cosmetics. the variables utilized in this paper is based on classical tpb by alam & sayuti (2011) with an extension model in the context of religion and migration (bonne, et, al 2007). attitude may be defined as a degree to which a person has favorable or unfavorable evaluation or appraisal of the behavior in question alam & sayuti (2011). based on expectancy-value model, the total set of accessible behavioral beliefs which links the behavior to various outcomes and other attributes are important driving factors of attitude toward behavior. subjective norm definition is suggested by alam et al (2011) who saw it as a perceived social pressure to comply with expectation about engaging in the behavior which should influence the individual’s intention to perform or not to the behavior. the term subjective norm is used here to refer to the perceived social pressure that influences consumers’ decisions to purchase halal food. the term pbc encompasses two aspects: 1) how much a person has control over behavior, 2) how confident a person feels about being able to perform or not perform the behavior alam & sayuti (2011). the more control of an individual about making halal food purchases, the more likely he or she will do so. in this paper, the term that will be used to describe this phenomenon is the ability to purchase halal food. the term habit has been used to refer to situations in which a behavior has become automatic and is beyond an individual’s awareness bonne et al (2007). previous studies by biddle (1987) cited in bonne et al (2007) mostly defined self-identity as a label that people use to describe themselves. it is assumed to be the result of social interaction and the cause of subsequent behavior. the term dietary acculturation is defined as the process that occurs when members of a minority group adopt the eating pattern or food choices of the host culture (negy and woods, 1992; satia et al., 2000). 3. research methodology methodology exploratory research methodology is utilized for this paper, according to aaker, kumar, day dan leone (2011:72) exploratory is used when one is seeking insights into the general nature of a problem, the possible decision alternatives, and relevant variables that need to be considered. more specifically, descriptive research and verification research with quantitative approach will be utilized in this research. to find the correlation between variables surve methodology will also be utilized in this research. according to aaker, kumar, leone, & day (2011), descriptive research objective is to provide an accurate snapshot of some aspects of certain product condition. descriptive research is also utilized to better describe the characteristics of a population or studied phenomena to yield a clearer explanation result related with halal food awareness effect on halal food purchase intention. the verification research or correlational research aims to examine and reveal the clarity of the relationship of variables as well as the correlation which exists between the variables studied, in this case, to learn the effect of halal food awareness on purchase intention. the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 59 variables measurement for determining the dimension of both independent (x) and dependent (y) variables for operating variables, several previous researches were used as a referenced. dimensions for halal food awareness (x) is derived from ambali, a & bakar (2014), meanwhile for purchase intention (y), the dimensions are referring to classical component of marketing tpb’s purchase intention from alam and sayuti (2011) and bonne, et, al (2007). all items intended to measure the variables in this study are adopted from previously validated instruments semantic differential (sd) with zero to ten scales are utilized as the measurement scale for this paper. sd is one of the most accurate measurement tools for measuring outcomes emotional feedback from respondents. according to strungă (2014) semantic differential was developed for measuring social sentiments and attitude with profound consequences for the social research. with semantic differential, people's reactions are measured to determine the stimulus of words and concept in terms of rating on bipolar scales. it is defined with contrasting adjectives at each end. halal-labelled food awareness consist of four variables with thirteen indicators/measurements and measured by using 1-10 semantic differential measurement scale. religious belief construct consists of: the fulfillment of religious duties, commitment not to eat non-halal food, and consequence of eating non-halal. perception toward halal certification are made of: halal certification knowledge, halal certification urgency, halal certification importance, and product attraction. exposure: socialization/advertisement, access to information, family as the source of exposure, and friend as the source of exposure. last but not least health reason: healthy option/reason, hygiene option/reason, and disease prevention. meanwhile purchase intention variables are referring to alam & sayuti (2011) and bonne, et, al (2007) purchase intention variable which consists of six variables with twelve indicators or measurements and is measured by using 1-10 semantic differential measurements scale. attitude towards halal labeled food construct consists of: “interest to consume halal food, favorable-unfavorable decision to consume, and right-wrong decision to buy”. subjective norm constructs were measured with measurement from venkatesh and davis (2000) on 1-10 semantic differential measurements scale which consist of: “motivational to comply, and social perspective”. perceive behavior control was measured with measurements from taylor and todd (1995) on 1-10 semantic differential measurements scale consists of: “ability (financially) to purchase halal food, knowledge to purchase halal food, ability to consume halal food, and knowledge to consume halal food”. habit variables was measured with measurement from (verplanken and orbell, 2003; honkanen et al., 2005; bonne et, al., 2007) on ten scale semantic differential with indicator “likeliness to purchase halal food”. selfidentity was measured by using indicator “self-identification as muslim” on ten semantic differential scale (sparks and shepherd, 1992; povey et al., 2001; robinson and smith, 2002). for dietary acculturation indicator, respondents were asked their “preferred food type” on the semantic differential scale from indonesian cuisine or japanese cuisine. high score means higher dietary acculturation or the more accustomed someone with their local cuisine in migrated area. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 60 sample and data for this study, nonprobability sampling (purposive sampling) will be used as research technique and the data were gathered through primarily data collection method through personally administrated questionnaires and snowball sampling. this method is chosen because it is the most feasible alternative, due to the constraint of speed, costs, conveniences, and especially time in order to obtain enough respondents. sample criteria which applied for this research were: student that has been live in japan at least for three months, and muslim with consideration that by living three at least three months (90 days) someone’s behaviour has been accustomed with local culture or behavior. social media such as facebook, and twitter plus a social messenger like line, and whatsapp were utilized to spread the questionnaire. indonesian student association in japan (perhimpunan pelajar indonesia jepang), ppi sendai, ppi hokkaido, ppi fukuoka and several indonesian youtubers that studied in japan were among the main respondents and main sites to spreading the questionnaire. in three months period 101 responses were gathered. analysis and design hypothesis analysis both descriptive and verification analysis share a number of key features for this research. descriptive and verification analysis were utilized to better explain the result or phenomena happened in the research. the analysis was done to ensure the quality of the data so that the result generated was accurate. last but not least, the analysis was done to avoid or at least to minimize bias when interpret the result of the study descriptive analysis will be done first or before conducting more complex statistical analysis in this research to get the overview of the data. in addition, descriptive analysis was used to reveal the answer of research question about how halal-labelled food awareness level to purchase intention among urban muslim. the result would be analyzed towards the interpretation of frequency and percentage score obtained in the form of a sentence to reach conclusion. verification analysis was used to measure the relationship between the variables and how strong the relationship between them. structural equation model method will be utilized, and to determine the better accuracy, smart partial least square (pls) 2 software will be utilized. according to urbach & ahlemann (2010, p.12) the purpose of using structural equation model is to confirm the preferred theory used on research. model and design inner model design, outer model design and path diagram are used in this research. inner model design reflects the relationship between latent variable which based on the substantive of the theory. the design of structural model relationship between latent variable was based on the problem formulation problem or research hypothesis. the outer model or measurement model defines how each indicator blocks corresponds to its latent variable. the measurement model design will determine the indicators properties of each latent variable, is the model formative or reflective, and based on the definition of the operational variable. the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 61 path diagram is used as the research prototype of the model. the x and y in path diagram describe or symbolize the number of questionnaire which become the indicator of the variable of this research. figure 1 path diagram validity and reliability model validation denotes the process of systematically evaluating whether the hypotheses expressed by the structural model are supported by the data or not. in general, model validation is an attempt to determine whether the measurement models as well as the structural model fulfill the quality criteria for empirical work, urbach and ahlemann (2010, p.18). to test the data validation, there are several approaches generally used in research. first, pearson correlation formula is one of the most basic formula to test data validation, below is pearson correlation formula; rxy = 𝑵 ∑ 𝑿𝒀−(∑ 𝑿 .∑ 𝒀) √[𝑵 ∑ 𝑿𝟐−(∑ 𝑿)𝟐][𝑵 ∑ 𝒀𝟐−(∑ 𝒀)𝟐] the other test to determine data validity is through factor loading, the easiest way to obtained factor loading value is through smart-pls software. the analysis is valid if the factor loading analysis value is 0.5. if the value is 0.6 it could be categorized as high and if the value is below 0.4 it is categorized as low. the last approach is using average variance extracted (ave), ave may be used as a test of both convergent and divergent validity. ave reflects the average communality for each latent factor in a reflective model. the range value which recommended by urbach and ahlemann (2010: 21) for ave is ave > 0.5. reliability reliability test were conducted to know the consistency of response or answer from respondents, if the result of the questionnaire yields a random answer/point, then the questionnaire might be not reliable (gozali, 2005). there are two basic approaches currently used to measure reliability; the first one is cronbach’s alpha and the second one is composite reliability. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 62 cronbach’s alpha technique or formula will determine whether the research’s instrument would be reliable or not. according to sofyan siregar (2013) a research’s instrument could be determined as reliable if the cronbanch’s alpha value is higher than 0.6. meanwhile, composite reliability is generally used as an alternative or amplifier of the result yield by cronbach’s analysis technique. formulating from werts et al. and nunally and bernstein, internal consistency reliability has a composite reliability for their criterion, attempts to measure the sum of an lv’s factor loadings relative to the sum of the factor loadings plus error variance (urbach and ahlemann, 2010, p.18). it leads to value between 0 (completely unreliable) and 1 (perfectly reliable). alternative to cronbach’s alpha, allows indicators to not be equally weighted. proposed threshold value for confirmative (explorative) research: ca > 0.700) urbach and ahlemann (2010). values must not be lower than 0.600. hypothesis hypothesis testing will be conducted to test the significances of “halallabelled food awareness” towards “halal-labelled food purchase intention”. for this research, only t-test (partial test) will be utilized to test the hypothesis. hypothesis in this research are as follows: ➢ h0: there is no significant influence of halal food awareness on halal food purchase intention ➢ h1: there is significant influence of halal food awareness on halal food purchase intention. significant test toward research hypothesis is using t-test with 5% significant level. with decision making criteria based on probability value (p-value): o level of significance α = 0.05 o criteria: ho is rejected if p-value < 0.05 ho cannot be rejected if p-value ≥ 0.05 according to malhotra (2010, p.472) the formula of t-test which using only one sample is as follow: t = ẋ− 𝛍 𝑺 √𝒏 where: t = t-test coefficient ẋ = sample average µ = population average s = standard deviation n = total sample to determine whether the hypothesis is accepted or rejected, two-tailed hypothesis testing would be used. according to sugiyono (2011:97) two-tailed test is used if the null hypothesis (ho) statement is “equal to” (=) and the alternative hypothesis (h1) statement is “not equal to” (≠) so that the statement for ho and h1 respectively is (ho =, ha ≠). two-tailed test can be illustrated as the picture below: the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 63 figure 1 two-tailed analysis illustration figure 2 two-tailed analysis illustration 4. result descriptive analysis a total 106 respondents participated in respondents were excepted from the result due meet the criteria. the majority of the respondents are male (51.5 %), the age range of the respondents are 17-32 years old and dominated by people of 23-27 years old (45%) and followed by people with age group of 28-32 and >32 years old respectively 23,7% and 22,5%. the age range indicated that most respondents were either students of master degree or doctoral degree. most respondents are living on kyoto (10%), tokyo (10%), and sendai (10%) which mean that the respondents in this research mostly live in big cities that have numerous halal certificate food shop and restaurants. the overall result of responds on halal-labelled food awareness was very good with score level of 80.42%. respondent’s perception toward halal certification was really high (86,2%) and 96% of respondents think that halal logo on food was drawing their attention, which indicated that they really care about halal certification on their food. moving on now to halal purchase intention survey result, in general the survey yield a good result with 77,9% score among all variables. attitude towards halal food has the best response with 89% think it is important. structural inner model test reflective model is best suited for this model since in reflective models, indicators are representative set of items which all reflect the latent variable they are measuring. reflective models assume the factor as "reality" and measured variables as sample of all possible indicators of that reality. this implies that dropping one indicator may not matter much since the other indicators are also representative. the latent variable will still have the same meaning after dropping one indicator (g david 2016). to determine the significance effects of the indicators to reflect a variable, the t-statistic value must be higher than 1.96 (t-stat > 1.96). based on the calculation result, most variable shows a value higher than 1.96 which mean that the variables present were significant. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 64 figure 3 inner model smart-pls table 1 t-stat analysis validity test result explanation effect t-stat t-stat x1.1 <x1 4.087 significant x1.2 <x1 25.922 x1.3 <x1 24.365 x2.1 <x2 2.131 x2.2 <x2 21.738 x2.3 <x2 71.370 x2.4 <x2 18.512 x3.1 <x3 5.660 x3.2 <x3 7.342 x3.3 <x3 18.797 x3.4 <x3 22.044 x4.1 <x4 41.945 the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 65 validity test result explanation effect t-stat t-stat x4.2 <x4 22.629 significant x4.3 <x4 45.602 y1.1 <y1 30.829 y1.2 <y1 24.440 y1.3 <y1 48.062 y2.1 <y2 50.395 y2.2 <y2 42.002 y3.1 <y3 6.072 y3.2 <y3 21.641 y3.3 <y3 33.491 y3.4 <y3 42.131 y4.1 <y4 0.000 y5.1 <y5 0.000 y6.1 <y6 0.000 r2 and predictive relevance the direct influence of halal-labelled food awareness (x) toward halallabelled food purchase intention (y) is 71.8%, while the rest of 28.2% is influenced by other factors that are not examined. this result shows that the value of r2 is good since the criteria that applied for r2 is the higher the value is preferable (values between 0-1) (hair et al 2010). meanwhile, the prediction capability with blindfolding procedure shows that the model of analysis result could explain 71.8% of data diversity and it is able to observe the phenomenon in research, while 28.2% was explained by another component that is not observed in this model. table 2 r-square analysis variable r-square halal-labelled food purchase intention (y) 0.718 q2 = 1(1 – r12 ) q2 = 1(1 – 0,718) q2 = 0,718 (71,8%) galat model 100% 71,8% = 28,2% afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 66 structural (outer) model test outer model specifies the relationship between latent variable with the indicator or variable manifest. outer model defines how each indicator block corresponds to its latent variable. below is the figure of the initial model processed using smart pls 2.0 software figure 4 outer model smart-pls test convergent validity the model evaluation could be done by using convergent validity on the reflective model by looking at factor loading value. factor loading value valid criteria are varies but hair et al (2010) suggested the value of > 0.5 but according to gozali, (2014:24) convergent considered valid indicators, if the value of the loading factor > 0.7 categorized as high and if 0.5 to 0.6 considered sufficient, by looking at outer loading. in this research, each variable has been categorized as valid and has fulfilled the requirement since the values are > 0.5 and most of the variable could be categorized as high from all of the indicator, only one indicator that has a value under 0.5 (x2) but those value is still higher than 0.3, so that indicator is still considered to be remain used in the model. the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 67 table 3 convergent validity analysis validation result test criteria > 0.50 effect factor loading outer loading (convergent validity) x1.1 <x1 0.587 valid x1.2 <x1 0.894 valid x1.3 <x1 0.868 valid x2.1 <x2 0.326 valid x2.2 <x2 0.878 valid x2.3 <x2 0.945 valid x2.4 <x2 0.839 valid x3.1 <x3 0.616 valid x3.2 <x3 0.689 valid x3.3 <x3 0.840 valid x3.4 <x3 0.878 valid x4.1 <x4 0.935 valid x4.2 <x4 0.909 valid x4.3 <x4 0.913 valid y1.1 <y1 0.919 valid y1.2 <y1 0.916 valid y1.3 <y1 0.936 valid y2.1 <y2 0.927 valid y2.2 <y2 0.906 valid y3.1 <y3 0.644 valid y3.2 <y3 0.868 valid y3.3 <y3 0.910 valid y3.4 <y3 0.917 valid y4.1 <y4 1.000 valid y5.1 <y5 1.000 valid y6.1 <y6 1.000 valid discriminant validity the discriminant validity assessment has a goal to ensure that a reflective construct has the strongest relationships with its own indicators (e.g., in comparison with any other construct) in the pls path model (hair et al., 2017). indicator’s variable can also be measured by evaluating cross loading (discriminant validity) which shows that the correlation indicator’s value in the same variable is better than in the other indicator’s variable. the result shows that the squared correlations for each construct is less than the average variance extracted by the indicators measuring that construct. in other words, the measurement model reflects an adequate convergent validity and discriminant validity. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 68 table 4 discriminant validity analysis x x1 x2 x3 x4 y y1 y2 y3 y4 y5 y6 x1.1 0.386 0.587 0.287 0.214 0.273 0.304 0.128 0.341 0.296 0.180 0.227 -0.242 x1.1 0.386 0.587 0.287 0.214 0.273 0.304 0.128 0.341 0.296 0.180 0.227 -0.242 x1.2 0.737 0.894 0.595 0.452 0.603 0.623 0.505 0.413 0.582 0.386 0.508 -0.120 x1.2 0.737 0.894 0.595 0.452 0.603 0.623 0.505 0.413 0.582 0.386 0.508 -0.120 x1.3 0.827 0.868 0.804 0.458 0.683 0.699 0.666 0.311 0.694 0.276 0.524 -0.155 x1.3 0.827 0.868 0.804 0.458 0.683 0.699 0.666 0.311 0.694 0.276 0.524 -0.155 x2.1 0.253 0.132 0.326 0.221 0.157 0.312 0.318 0.198 0.316 0.108 0.149 0.088 x2.1 0.253 0.132 0.326 0.221 0.157 0.312 0.318 0.198 0.316 0.108 0.149 0.088 x2.2 0.766 0.711 0.878 0.417 0.574 0.644 0.575 0.322 0.604 0.399 0.438 -0.348 x2.2 0.766 0.711 0.878 0.417 0.574 0.644 0.575 0.322 0.604 0.399 0.438 -0.348 x2.3 0.877 0.724 0.945 0.601 0.684 0.723 0.701 0.422 0.643 0.356 0.479 -0.274 x2.3 0.877 0.724 0.945 0.601 0.684 0.723 0.701 0.422 0.643 0.356 0.479 -0.274 x2.4 0.746 0.617 0.839 0.489 0.563 0.671 0.672 0.323 0.656 0.180 0.459 -0.190 x2.4 0.746 0.617 0.839 0.489 0.563 0.671 0.672 0.323 0.656 0.180 0.459 -0.190 x3.1 0.384 0.222 0.234 0.616 0.261 0.394 0.221 0.387 0.368 0.332 0.305 -0.151 x3.1 0.384 0.222 0.234 0.616 0.261 0.394 0.221 0.387 0.368 0.332 0.305 -0.151 x3.2 0.537 0.288 0.463 0.689 0.393 0.430 0.381 0.279 0.385 0.260 0.263 -0.257 x3.2 0.537 0.288 0.463 0.689 0.393 0.430 0.381 0.279 0.385 0.260 0.263 -0.257 x3.3 0.649 0.452 0.469 0.840 0.484 0.491 0.452 0.376 0.385 0.230 0.447 -0.133 x3.3 0.649 0.452 0.469 0.840 0.484 0.491 0.452 0.376 0.385 0.230 0.447 -0.133 x3.4 0.701 0.487 0.529 0.878 0.525 0.592 0.508 0.439 0.528 0.298 0.484 -0.086 x3.4 0.701 0.487 0.529 0.878 0.525 0.592 0.508 0.439 0.528 0.298 0.484 -0.086 x4.1 0.826 0.613 0.640 0.578 0.935 0.713 0.679 0.558 0.613 0.372 0.417 -0.091 x4.1 0.826 0.613 0.640 0.578 0.935 0.713 0.679 0.558 0.613 0.372 0.417 -0.091 x4.2 0.774 0.610 0.603 0.464 0.909 0.629 0.673 0.479 0.504 0.232 0.344 -0.154 x4.2 0.774 0.610 0.603 0.464 0.909 0.629 0.673 0.479 0.504 0.232 0.344 -0.154 x4.3 0.814 0.693 0.626 0.505 0.913 0.703 0.682 0.504 0.592 0.356 0.470 -0.142 x4.3 0.814 0.693 0.626 0.505 0.913 0.703 0.682 0.504 0.592 0.356 0.470 -0.142 y1.1 0.750 0.592 0.701 0.499 0.724 0.803 0.919 0.478 0.648 0.302 0.447 -0.233 y1.1 0.750 0.592 0.701 0.499 0.724 0.803 0.919 0.478 0.648 0.302 0.447 -0.233 y1.2 0.643 0.446 0.598 0.466 0.639 0.771 0.916 0.433 0.621 0.380 0.356 -0.137 y1.2 0.643 0.446 0.598 0.466 0.639 0.771 0.916 0.433 0.621 0.380 0.356 -0.137 y1.3 0.765 0.635 0.749 0.506 0.681 0.840 0.936 0.442 0.728 0.338 0.479 -0.188 y1.3 0.765 0.635 0.749 0.506 0.681 0.840 0.936 0.442 0.728 0.338 0.479 -0.188 y2.1 0.553 0.385 0.424 0.496 0.560 0.680 0.511 0.927 0.440 0.426 0.515 -0.189 y2.1 0.553 0.385 0.424 0.496 0.560 0.680 0.511 0.927 0.440 0.426 0.515 -0.189 y2.2 0.462 0.410 0.324 0.380 0.461 0.601 0.376 0.906 0.426 0.361 0.414 -0.184 y2.2 0.462 0.410 0.324 0.380 0.461 0.601 0.376 0.906 0.426 0.361 0.414 -0.184 y3.1 0.593 0.622 0.559 0.411 0.439 0.628 0.422 0.466 0.644 0.339 0.428 -0.318 y3.1 0.593 0.622 0.559 0.411 0.439 0.628 0.422 0.466 0.644 0.339 0.428 -0.318 y3.2 0.603 0.524 0.574 0.465 0.482 0.764 0.617 0.413 0.868 0.302 0.459 -0.107 y3.2 0.603 0.524 0.574 0.465 0.482 0.764 0.617 0.413 0.868 0.302 0.459 -0.107 y3.3 0.693 0.617 0.670 0.486 0.573 0.809 0.679 0.350 0.910 0.330 0.560 -0.137 y3.3 0.693 0.617 0.670 0.486 0.573 0.809 0.679 0.350 0.910 0.330 0.560 -0.137 y3.4 0.678 0.599 0.629 0.481 0.586 0.826 0.682 0.386 0.917 0.394 0.566 -0.117 y3.4 0.678 0.599 0.629 0.481 0.586 0.826 0.682 0.386 0.917 0.394 0.566 -0.117 y4.1 0.417 0.363 0.353 0.354 0.350 0.554 0.367 0.431 0.404 1.000 0.446 -0.089 y4.1 0.417 0.363 0.353 0.354 0.350 0.554 0.367 0.431 0.404 1.000 0.446 -0.089 y5.1 0.589 0.559 0.514 0.502 0.447 0.710 0.464 0.510 0.601 0.446 1.000 -0.219 y5.1 0.589 0.559 0.514 0.502 0.447 0.710 0.464 0.510 0.601 0.446 1.000 -0.219 the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 69 x x1 x2 x3 x4 y y1 y2 y3 y4 y5 y6 y6.1 -0.239 -0.194 -0.284 -0.194 -0.140 -0.287 -0.202 -0.203 -0.191 -0.089 -0.219 1.000 y6.1 -0.239 -0.194 -0.284 -0.194 -0.140 -0.287 -0.202 -0.203 -0.191 -0.089 -0.219 1.000 average variance extracted (ave) according to the (urbach & ahlemann (2010: 21) the value of ave should be above 0.5. to determining whether the data is valid or not in discrimination validity, the condition that has to be met is root square of ave > correlation between lvs (fornell, claes; larcker, david f. 1981). the ave generated from this research shows only one latent variable that has an ave value below 0.5. however, it is considered to be used in the model, according to bagozzi (1998) if the ave value is less than 0.5 it still can be used unless the value is lower than 0.4 then it should be eliminated from construct. table 5 ave analysis variable ave ave root test criteria > 0.5 x 0.475 0.689 valid x1 0.633 0.795 valid x2 0.618 0.786 valid x3 0.583 0.764 valid x4 0.845 0.919 valid y 0.498 0.706 valid y1 0.853 0.924 valid y2 0.840 0.917 valid y3 0.709 0.842 valid y4 1.000 1.000 valid y5 1.000 1.000 valid y6 1.000 1.000 valid reliability test to measure result reliabilities, both composite reliability and cronbach’s alpha test were utilized. composite reliability measures internal consistency and its value should be above 0.7 (hair et al 2010). in this respect, results shown indicates that the composite reliability value for this research is reliable since the value fulfill the reliability criteria. these results are similar to cronbach alpha’s test, with minimal value of 0.7 most variable indicates a reliable result. afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 70 table 6 composite reliability test analysis variable composite reliability test criteria > 0.7 x 0.921 reliable x1 0.834 reliable x2 0.854 reliable x3 0.846 reliable x4 0.942 reliable y 0.908 reliable y1 0.946 reliable y2 0.913 reliable y3 0.906 reliable y4 1.000 reliable y5 1.000 reliable y6 1.000 reliable table 7 cronbachs alpha test analysis variable cronbachs alpha test criteria > 0.7 x 0.904 reliable x1 0.711 reliable x2 0.763 reliable x3 0.760 reliable x4 0.908 reliable y 0.877 reliable y1 0.914 reliable y2 0.811 reliable y3 0.856 reliable y4 1.000 reliable y5 1.000 reliable y6 1.000 reliable hypothesis test hypothesis test was conducted by looking at the results of data processing pls on the path coefficients. the table 8 shows that halal-labelled food awareness (x) has a significant effect on halal-labelled food purchase intention (y) with a coefficient of 0.847 and t-count of 24.859 (24.859> 1.96). referring to the chapter three to determine whether the hypothesis could be rejected or accepted, we used t-count and t-table as the provision below: the significance level α = 5%, with the degree of freedom (d.f) = n-1, hence: h0 is rejected if tcount>ttable or tcount < -ttable h1 cannot be rejected if -ttable ≤ tcount ≤ ttable the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 71 in short, we found that t-table value is lower than t-count (24.859> 1.96) hence h0 for this hypothesis is rejected and so the statement h0 “there is no significant influence of halal food awareness on halal food purchase intention” is rejected. table 8 hypothesis test relationship between variables original sample (o) tstatistics h0 conclusion halal-labelled food awareness (x) -> halallabelled food purchase intention (y) 0.847 24.859 rejected significant 5. discussion inner model a score of 24.8 from halal-labelled food awareness (x latent variable) to halal-labelled food purchase intention (y latent var) means that in every increasing of x variable affect (increase) the y variable, in other words the more people aware of halal-labelled food the higher their intention to purchase halal-labelled food (standard acceptance score: value >1.96). religious belief variable (x1 latent variable) correlation score with halallabelled food awareness (x latent variable) is 26.6 which also indicates that religious belief affect halal-labelled food awareness and for every increase of x1 will significantly affect x variables (the more conformity level of people belief towards their religion their awareness of halal food is higher). halal certification variable (x2 latent variable) is significantly correlated with halal-labelled food awareness (x latent variable) with value more than 1.96 which also indicates that halal certification affect halal-labelled food awareness and for every increase of x2 will significantly affect x variables (the higher their knowledge about halal certification the higher their awareness towards halal food). the x3 latent variable (exposure variable) score towards x latent variable (halal-labelled food awareness) is 16.7 which also higher than 1.96. this result means that exposure is also affecting halal-labelled food awareness and the higher or the more people exposed to halal food the higher their awareness would be. the x4 latent variable (health reason) score towards x latent variable (halal-labelled food awareness) is 23.8 which also higher than 1.96. this result means that health reason is also affecting halal-labelled food awareness and the more they trust that halal food is a healthy food the higher their awareness toward halal-labelled food. the y1 latent variable (attitude toward halal food variable) score towards y latent variable (halal-labelled food purchase intention) is 26.2 which is higher than the required score/value (1.96). this result means that halal-labelled food purchase intention was formed by the attitude towards halal food and significantly afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 72 correlated. this result also implies that the more positive someone’s attitude toward halal food the higher chance to purchase halal-labelled food. the y2 latent variable (subjective norm variable) score towards y latent variable (halal-labelled food purchase intention) is 8.94 which is higher than the required score/value (1.96). this result means that halal-labelled food purchase intention was formed by the subjective norm and significantly correlated. this result also implies that the more people engaged to the social expectation around their community (subjective norm) the more likely they will purchase halallabelled food. pbc variable (y3 latent variable) correlation score with halal-labelled food purchase intention (y latent variable) is 43.5 which also indicates that halallabelled food purchase intention affect pbc and for every increase of halal-labelled food purchase intention will significantly affect pbc variables (the higher someone willingness to purchase halal-labelled food, the better perceive behavior control). habit variable (y4 latent variable) correlation score with halal-labelled food purchase intention (y latent variable) is 5.59 which also indicates that halallabelled food purchase intention affect habit and for every increase of halallabelled food purchase intention will significantly affect habit variables (habit is measuring the automation process of purchasing halal food, the higher score on habit means that buying halal food is a process that does not need much consideration or the higher habit score indicates the more likely people would purchase halal food). si (self-identity) variable (y5 latent variable) correlation score with halal-labelled food purchase intention (y latent variable) is 10.24 which also indicates that halal-labelled food purchase intention affect si and for every increase of halal-labelled food purchase intention will significantly affect si variables (the higher score from halal-labelled purchase intention indicate a more confident their si as a muslim). da (diet acculturation) variable (y6 latent variable) correlation score with halal-labelled food purchase intention (y latent variable) is 2.10 for da this is a different case since da measures how acculturated the diet of migrated people. the higher da score does not always mean they consume or purchase halallabelled food and vice versa. so, the correlation between da and halal-labelled purchase intention is low or not too correlated. outer model x1 variables ➢ x1.1 variables manifest/indicators (obedience level) shows how much it relates with x1 latent variable (religious belief). from the analysis we found that the score of x1.1 to x1 is 0.587. this result means that the indicator is valid to be used as an indicator. hence, we could interpret the result as the higher obedience level the higher religious belief would be. ➢ x1.2 variables manifest/indicators (commitment not to eat non halal-labelled food) shows how much it relates with x1 latent variable (religious belief). from the analysis we found that the score of x1.2 to x1 is 0.894. this result means that the indicator is valid to be used as an indicator. this result also implies that the higher their commitment level to not eat non-halal-labelled food, the higher their religious belief. the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 73 ➢ x1.3 variables manifest/indicators (belief of consequences of eating non halal food) shows how much it relates with x1 latent variable (religious belief). from the analysis we found that the score of x1.3 to x1 is 0.868. this result means that the indicator is valid to be used as an indicator. this result also implies that the more people believe that the consequences of eating non-halal food does exist, the more religious they become. x2 variables ➢ halal certification knowledge variable (x2.1 variable manifest) is correlated with halal certification variable (x2 latent variable) with value of 0.36 which still higher than the minimum criteria. this result also indicates that halal certification knowledge affects halal certification and for every increase of x2.1 will significantly affect x2 variables (the higher their knowledge about halal food the more proficient they were to distinguish halal food with nonhalal food). ➢ halal certification urgency variable (x2.2 variable manifest) is significantly correlated with halal certification/logo (x2 latent variable) with value of 0.878. it indicates that the halal certification urgency affects halal certification variable and for every increase of x2.2 will significantly affect x2 variable (the more they think that halal food certification is urgent the more their awareness toward halal certification increase). ➢ halal certification importance variable manifest/indicators (x2.3 variable manifest) is significantly correlated with halal certification/logo (x2 latent variable) with value of 0.94. it indicates that the halal certification importance affect halal certification variable and for every increase of x2.3 will significantly affect x2 variables (the more they think that halal food certification is important the more their awareness toward halal certification increase). ➢ halal product attraction variable manifest/indicators (x2.4 variable manifest) is significantly correlated with halal certification/logo (x2 latent variable) with value of 0.84. it indicates that the halal product attraction affecting halal certification variable and for every increase of x2.4 will significantly affect x2 variables (the more they think that halal food is attractive the more their awareness toward halal certification increase). x3 variables ➢ halal-labelled food socialization variable (x3.1 variable manifestation) correlation score with exposure (x3 latent variable) is 0,61 which indicates that halal-labelled food socialization affects exposure and for every increase of halal-labelled food socialization will affect exposure variables (the more someone get information about halal food the more exposed they were). ➢ access of information to halal-labelled food variable’s (x3.2 variable manifestation) correlation score with exposure (x3 latent variable) is 0,68 which indicates that access of information to halal-labelled food variable affects exposure and for every increase of access of information to halallabelled food socialization will affect exposure variables (the more convenience access to halal food will increase people exposure to halal food). ➢ family variable’s (x3.3 variable manifestation) correlation score with exposure (x3 latent variable) is 0,68 which indicates that family variable affects exposure and for every increase of score of family variable will affect afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 74 exposure variables (the greater the role of the family to introduce or accustom halal food as daily diet the more exposed they are to halal food). ➢ friend variable’s (x3.4 variable manifestation) correlation score with exposure (x3 latent variable) is 0,87 which indicates that friend variable affects exposure and for every increase of score of friend variable will affect exposure variables (the greater the role of friend to introduce or accustom halal food as daily diet the more exposed they are to halal food). x4 variables ➢ healthy option food variable’s (x4.1 variable manifestation) correlation score with health reasons (x4 latent variable) is 0,935 which indicates that healthy option food variable affects health reason and for every increase of score of healthy option food variable will affect health reasons variables (the more they believe halal food is a healthy option food the more aware they are towards halal food as their healthy option). ➢ hygiene option food variable’s (x4.2 variable manifestation) correlation score with health reasons (x4 latent variable) is 0,909 which indicates that hygiene option food variable affects health reason and for every increase of score of hygiene option food variable will affect health reasons variables (the more they believe halal food is a hygiene option food the more aware they are towards halal food as their healthy option). ➢ disease prevention variable’s (x4.3 variable manifestation) correlation score with health reasons (x4 latent variable) is 0,913 which indicates that disease prevention variable affects health reason and for every increase of score of disease prevention variable will affect health reasons variables (the more they believe halal food is able to prevent disease the more aware they are towards halal food as their healthy option). y1 variables ➢ interest to consume halal-labelled food variable’s (y1.1 variable manifestation) correlation score with attitude toward halal food (y1 latent variable) is 0.919 which indicates that interest to consume halal-labelled food variable affects attitude towards halal food and for every increase of score of interest to consume halal-labelled food variable will affect attitude toward halal food variables (the more they interest to consume halal food the better their attitude towards halal food). ➢ favorable/unfavorable decision to consume halal food variable’s (y1.2 variable manifestation) correlation score with attitude toward halal food (y1 latent variable) is 0.916 which indicates that favorable/unfavorable decision to consume halal food variable affects health reason and for every increase of score of favorable/unfavorable decision to consume halal food variable will affect attitude toward halal food variables (the more they satisfy for consuming halal food the better their attitude towards halal food). ➢ right/wrong decision to buy halal food variable’s (y1.3 variable manifestation) correlation score with attitude toward halal food (y1 latent variable) is 0.936 which indicates that right/wrong decision to buy halal food variable affects attitude towards halal food and for every increase of score of right/wrong decision to consume halal food variable will affect attitude toward halal food variables (the more they think that consuming halal food is the right decision the better their attitude towards halal food will be). the effect of halal-labelled food awareness towards purchase intention among urban muslims (study of indonesian students in japan) 75 y2 variables ➢ motivation to comply variable’s (y2.1 variable manifestation) correlation score with subjective norm (y2 latent variable) is 0.927 which indicates that motivation to comply variable affects subjective norm and for every increase of score of motivation to comply variable will affect subjective norm variables (the higher their motivation to comply with their surroundings the better their subjective norm). ➢ social perspective variable’s (y2.2 variable manifestation) correlation score with subjective norm (y2 latent variable) is 0.906 which indicates that social perspective variable affects subjective norm and for every increase of score of social perspective variable will affect subjective norm variables (the better their social perspective the better their subjective norm). y3 variables ➢ ability (financially) to purchase halal food variable’s (y3.1 variable manifestation) correlation score with pbc (y3 latent variable) is 0.644 which indicates that ability (financially) to purchase halal food variable affects pbc and for every increase of score of ability (financially) to purchase halal food variable will affect pbc variables (the better someone’s ability to purchase halal food will make people have more control for their behavior). ➢ knowledge to purchase halal food variable’s (y3.2 variable manifestation) correlation score with pbc (y3 latent variable) is 0.868 which indicates that knowledge to purchase halal food variable affects pbc and for every increase of score of knowledge to purchase halal food variable will affect pbc variables (the better someone’s knowledge to purchase halal food will make people have more control for their behavior). ➢ ability to consume halal food variable’s (y3.3 variable manifestation) correlation score with pbc (y3 latent variable) is 0.910 which indicates that ability to consume halal food variable affects pbc and for every increase of score of ability to consume halal food variable will affect pbc variables (the better someone’s ability to consume halal food will make people have more control for their behavior). ➢ knowledge to consume halal food variable’s (y3.4 variable manifestation) correlation score with pbc (y3 latent variable) is 0.917 which indicates that knowledge to consume halal food variable affects pbc and for every increase of score of knowledge to consume halal food variable will affect pbc variables (the better someone’s knowledge to consume halal food will make people have more control for their behavior). y4 variables ➢ likeliness to purchase halal food variable’s (y4.1 variable manifestation) correlation score with habit (y4 latent variable) is 1 which indicates that likeliness to purchase halal food variable affects habit and for every increase of score of likeliness to purchase halal food variable will affect habit variables (the more likeliness someone purchase halal food without much consideration the more people think that purchasing halal food as an automatic process/as a habit). y5 variables ➢ self-identification variable’s (y5.1 variable manifestation) correlation score with si (y5 latent variable) is 1 which indicates that self-identification variable affects si and for every increase of score of self-identification afebi islamic finance and economic review (aifer) vol.02 no.02, december 2017 76 variable will affect si variables (the more someone’s identifying themselves as a good muslim the better their self-identity). y6 variables ➢ food type preferences variables (y6.1 variable manifestation) correlation score with da (diet acculturation) variable (y6 latent variable) is 1.00 for da, it indicates that food type preferences variable affects da and for every increase of score of food type preferences variable will affect da variables (the higher food type preferences score means samples prefer to eat the type of food/cuisine from where they live than from their hometown and means a better diet acculturation). 6. conclusion based on the results of research and discussion that have been described in the previous chapter with the aim to know how the affect of halal-labelled food awareness toward the purchase intention, the conclusion can be gathered as follows: 1. both halal-labelled food awareness and halal-labelled food purchase intention shows a result which can be categorized as very good. 2. overall, people still stick to halal food even though they are living outside of indonesia. their halal-labeled awareness also categorized high compared to the same research in the different country. halal certification knowledge has become the main source of awareness for halal food with a score of 30.52. 3. after analyzing the result of sem-pls. halal-labeled awareness and purchase intention are highly correlated which mean people may intend to buy halal food if they are aware of the halal product. 4. halal-labelled food awareness towards halal-labelled food purchase intention shows the determinant value of coefficient and predictive relevance value as much as 0.718 or 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(2010). structural equation modeling in information systems research using partial least squares. jitta: journal of information technology theory and application, 11 (2), 5. yunus, n.s., rashid, w.e., ariffin, n.m, & rashid, n.m. (2014). muslim’s purchase intention towards non-muslim’s halal packaged food manufacturer. malaysia. https://www.salaamgateway.com/en/story/reportstateoftheglobalislamiceconomy201617salaam03102016111130/ https://www.salaamgateway.com/en/story/reportstateoftheglobalislamiceconomy201617salaam03102016111130/ state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 1 state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison yusuf wibisono1 1universitas indonesia, indonesia abstract the aspect of zakāh management or administration is not regulated extensively in islamic law. since the dawn of islam, zakāh management has become the field of ijtihād based on mashlaḥah. and today, the practice of zakāh management in contemporary muslim countries has been incarnating a wider area of experiment. in contemporary indonesia, the law number 23 year 2011 concerning zakāh management has been passed. this law, which become effective since 2016, caused upheaval within national islamic philanthropy sector since it regulates national zakāh management currently dominated by civil society, based on “classical fiqh opinion” that only the state has authority to manage zakāh. this paper lift up an important conclusion that zakāh management entirely by the state is not be in effect unconditionally, but with many of qualifications. moreover, the effectiveness of zakāh management by state relies heavily on the level of public trust against government, not by enforcement of the state. zakāh management by the state is merely an instrument, not the goal itself. the ultimate objective that must be pursued is the delivery of zakāh to those who deserve it with optimum benefits. keywords: indonesia, islamic public finance, islamic philanthropy, zakâh law, zakâh management 1. introduction regarding its central position in islam as one of the most important formal rituals (‘ibâdah mahdhah), zakāh comes with comprehensive operational conditions, ranging from types of wealth on which zakāh is imposed on (mâl alzakāh), the amount of zakāh (miqdâr alzakāh), the limit amount of wealth before its zakāh is paid (nishâb), the time limit of wealth ownership before its zakāh is paid (haul), until the allocation of zakāh (mashârif al-zakāh). nevertheless, the aspect of zakāh management or administration is not regulated extensively in islamic law. the prophet muhammad is reported to have managed and regulated zakāh directly and treated it as part of public finance. but it happened in a time when the structure of the state was still trivial, the level of economy was low, and the territory was limited. in fact, islamic history recorded that along with expanding of territory, growing of economy, and an ever-increasingly complex structure of government, policies related to zakāh management have also changed dynamically from time to time, which seems to follow the principle of tasharruf al-imâm ‘ala ar-ra’iyyah manûth bi al-mashlahah (government’s policy related to its people is bound to public interest). *corresponding author. email address: wibisono16@gmail.com mailto:wibisono16@gmail.com afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 2 hence, since the beginning of islam, zakāh management has become the arena of ijtihâd based on mashlahah. the changing of government’s political and religious commitment greatly affected the dynamics of zakāh management by state and created a sharp discourse among fuqahâ’ as recorded in classical fiqh studies. in this modern era where most of muslim countries are secular, contemporary fiqh studies doesn’t give enough attention to the issue. the practice of zakāh management by contemporary muslim countries becomes a subject of experiment. in contemporary indonesia, the law number 23 year 2011 concerning zakāh management has been passed by the parliament. the law, which regulates zakāh management in democratic and secular indonesia, raises heated debates since it claims to be based on “classical fiqh opinion” that only the state has authority to manage zakāh. the formal, and explicit, argumentation of indonesian government regarding centralization of zakāh management entirely by the state, as adopted by law number 23/2011, is officially written in dim (daftar inventarisasi masalah – list of problem inventarization) of zakāh management bill, based on fiqh, history and contemporary practice arguments. it argues that1: (i) according to sharia law, zakāh management fell into state’s authority. the concept is in line with al-qur’ân 9: 103 which states:”khudz min amwâlihim shadaqah ...” that the word “khudz” which means “taking” contains an order addressed to the authority or ruler; (ii) zakāh management conducted by government is also exemplified by the prophet and his companions who established bayt al-mâl which was a state institution; and (iii) today, “islamic” countries, especially in the middle east such as saudi arabia, kuwait, qatar, yemen, egypt, libya, sudan, iran, pakistan, and malaysia also apply zakāh management system run by a state institution. the law, which was issued on 27 october 2011, abolishes the decentralization system of national zakāh management previously maintained under the regime of law number 38/1999 which accommodated a synergy between government entity and civil society groups in national zakāh management. long before the law number 23/2011 issued, civil society have widely and massively participated in zakāh management, even long before the independence of indonesia. the practice which taking rooted hundreds of years, then was wisely formalized by the law number 38/19992. the participation of civil society in the management of socio-religious fund in indonesia has contributed positively in revitalizing religious institution for social welfare. accommodating civil society groups in national zakāh management has increased transparency as well as accountability of socio-religious fund management. the participation of civil society has also decreased the level of potential abuse of socioreligious fund while increasing its effectiveness. the involvement of civil society in national zakāh management has also introduced a climate of competition within the bureaucracy, related to the management of socio-religious fund. under the regime of law number 23/2011, the regulatory and institutional framework of national zakāh is focused on the centralization system where the authority of national zakāh management is held entirely by the state through its official zakāh operator, baznas (badan amil zakat nasional). in this new architecture, zakāh operators from civil society, namely laz (lembaga amil zakat) and traditionalindividual ‘amil, are basically prohibited from managing zakāh. as the consequence, 1 see commission viii of indonesian parliament (dpr ri). (april 2011). “daftar inventaris masalah (dim) ruu tentang pengelolaan zakat, infaq dan shodaqoh”, dim no. 56. 2 see republik indonesia. undang-undang no. 38 tahun 1999 tentang pengelolaan zakat and republik indonesia. undang-undang no. 23 tahun 2011 tentang pengelolaan zakat. state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 3 every civil society groups that want to participate in national zakāh management, only allowed to “assist” baznas with limited authority. with the main idea that zakāh management is the exclusive authority of government, the entire law number 23/2011 significantly strengthen and gives privileges to the government-owned zakāh operator (baznas) as the sole holder of authority in national zakāh management. under the law number 23/2011, central baznas acts as operator as well as regulator for other operators, while the ministry of religious affairs runs the functions of supervision, coaching, and execution of sharia compliance for all operators, baznas and laz alike. national zakāh governance is built through reporting and accountability to higher structure and regulator, namely central baznas, and administrative sanctions for non-compliance by the ministry of religious affairs. at the same time, law number 23/2011 marginalizes and extremely limits civil society-based zakāh operators (laz) which currently are the main players in national zakāh, to the point that it’s potentially “lethal”. it is an irony, considering that in the last three decades, indonesia has been experiencing a resurgence of zakāh after managed by civil society. with a transparent and professional conduct based on modern management principles, laz has been utilizing zakāh as an economic power for social change in indonesia. zakāh of indonesia, which was originally circulated only in the realm of individual charity, has now been transformed to reach the realm of public empowerment. along with the raising of public trust and the growing muslim middle class in indonesia, the potential of zakāh funds are explored becomes even greater. amid this resurgence, law number 23/2011 then appeared, seeming to want to seize the enormous potential of national zakāh from laz. the national debate over law number 23/2011 was eventually brought to the constitutional court (mahkamah konstitusi). judicial review over the law made by civil society in the mid-2012 ending in disappointment: the main substance of the law number 23/2011 remained valid. in its decision on october 31, 2013, the court rejected all major lawsuits against the law number 23/2011. steep road now awaits indonesia’s zakāh sector, which currently relies heavily on laz. this study will challenge the main hypothesis of the law number 23/2011, that only the state has the authority in the management of national zakāh. the research adopts methodological pluralism, using historical, fiqh, and economic approaches. besides being in line with the nature of the problem studied, the methodological pluralism will also guiding us closer to the meaning and purpose of islamic law. section 2 reviews the history of zakāh management particularly in early periods of islamic civilization. section 3 discusses fiqh discourse among jurist, across schools and ages, about management of zakāh entirely by the state. section 4 analyses recent practices of national zakāh management in contemporary islamic world. section 5 concludes. 2. zakāh management in islamic history the collection of zakāh has been started since the dawn of islam by the prophet muhammad, beginning in the 2nd year of hijra (624 ad) according to the majority’s opinion. zakāh on the soul (zakāt al-fithr) is a voluntary act, closely associated with the feast of ‘id al-fithr, and done individually. this is diametrically opposed to zakāh on wealth (zakâh al-mâl), which has been obligatory since the prophetic age. the collection of zakāt al-mâl from the very beginning has been regulated and managed directly by the afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 4 prophet muhammad 3. with the increasing population of muslim community and territorial expansion of islamic state, the prophet then appointed "a large number" of zakāh officers, including the famous companions of the prophet such as 'umar and 'alî, to collect zakāh from the muslim community. it can be said that the prophet has appointed zakāh officers for the entire arabia in his time. it thus becomes the general basis for the opinion, that since the time of prophet muhammad, zakāh has been an affair and duty of the government4. but what is clearer is, the appointment of "special officers" of zakāh by the prophet marked a new era in which zakāh was no longer managed personally by the prophet, but collectively managed by professionals who received a share of the collected zakāh revenue under the allocation of ‘âmilîn. the prophet muhammad himself as zakāh organizer did not receive a share of zakāh revenue, neither did the prophet's family and relatives during his lifetime. thus, there has been a transformation of zakāh management which led to the formal, collective, organized and permanent structure since the time of the prophet muhammad. some other characteristics of zakāh management in the time of the prophet are the detailed regulations regarding the collection and distribution of zakāh, including the etiquette of zakāh officers and the ideal public attitude towards zakāh officers, separation of zakāh from other state revenues along with its separate distribution, the general principle of local collection and distribution where zakāh is distributed in areas in which it is collected without being deposited centrally, zakāh calculation which is generally done by zakāh payer (self-assessment), and compulsory zakāh collection by officer which is only applied to livestock and crops5. when the prophet muhammad demised, there were some who raised questions as to whether zakāh is paid to the prophet personally or to the government. during the time of caliph abû bakr, some arab bedouin tribes refused to pay zakāh on the assumption that zakāh is the prophet’s personal income, so that when the prophet passed away, zakāh is no longer mandatory6. it is recorded in history that abû bakr declared war on those who refused to pay zakāh, an incident known as the riddah war. the event is often misunderstood by some people, particularly the orientalists, as the evidence that the nature of zakāh was still unclear at the time of prophet muhammad and, as the consequence, abû bakr was the person who responsible for the institutionalization of zakāh as a permanent obligation in islam. al-qaradhâwî argues that the incident happened not because the concept of zakāh was unclear at that time, but rather because those tribes were recently converted to islam and still highly affected by their previous bedouin life7. this historical event the decision of caliph abû bakr to fight those who refused to pay zakāh is also widely used as a justification for the forced zakāh collection by the 3 amelia fauzia. (2013). faith and the state: a history of islamic philanthropy in indonesia.leiden: brill academic publishers, page 45. 4 yûsuf al-qaradhâwî. (1988). fiqh al-zakâh (indonesian translation). bogor: pustaka litera antarnusa, page 738739. 5 monzer kahf. (1993). “zakah management in some muslim society”, irti-idb background paper, no. 11, page 15-18. 6 negative attitude of the bedouins towards zakāh has been noticeable since the time of the prophet muhammad (p.b.u.h). they saw zakāh they paid as a loss or fine/penalty (maghram). see al-qur'ân 9: 98. the nomadic life and its inherent difficulties made bedouins harder to accept ethical obligations that were not directly related to their interests. 7 al-qaradhâwî. fiqh alzakâh. page 92-93. state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 5 state8. however, abû 'ubayd (d. 224/838) informed that abû bakr only gave battle those who refused to pay zakāh on livestock (shadaqah al-mawâsyî), while those who refused to pay zakāh on gold and silver (money) were left and not fought by abû bakr9. this indicates that zakāh as part of public finance institution in islam has a dual dimension, the ritual and political dimension. when the prophet muhammad passed away, the phenomenon of riddah (apostasy) erupted. there are two cases here, those who were apostates and claimed the status of prophethood, and those only who rejected the sharia law, including refusing to pay zakāh to the government. the act of "departing to obey the just ruler" as done by the revolters (ahl al-baghy) who refused to pay zakāh had different consequences from the apostates (ahl al-riddah) who left islam. ahl al-riddah were much more dangerous to islamic state at that time, since they rejected not only the political authority but also religious authority. hence, ahl al-baghy who refused to pay zakāh to the authorities hadn’t been categorized as apostates. that’s why ’umar advised abû bakr not to fight them. if then abû bakr insisted to fight ahl al-baghy in the same way as he fought ahl al-riddah, it was his political decision as a ruler to keep the integration of the newly formed state, not an ideological one10. the political dimension of zakāh is also visible in the decision of abû bakr to fight only those who refused to pay zakāh on livestock (al-mawâsyî) while leaving those who refused to pay zakāh on money (shâmit). livestock, which at that time consisted of camels (ibil), cows (baqar), and sheeps (ghanam), is a form of wealth that is clearly visible and not easily hidden. since the socio-political purpose of zakāh is to transfer wealth from the rich to the poor, the government as political authority was justified to use its power to achieve this goal. in this spirit to realize the distributive economic justice, abû bakr fought those who refused to pay zakāh on livestock11. the political authority of government to implement forced zakāh collection is limited to visible wealth (amwâl al-zhâhirah) only. whereas for the form of wealth that is invisible and can easily be hidden by its owner (amwâl al-bâthinah), the government does not have the political right to force people and should leave the zakāh payment for this form of wealth as a personal matter, unless the person voluntarily submits it to the government. if amwâl al-zhâhirah is within the political dimension of zakāh, then amwâl al-bâthinah is within the ritual dimension. abû 'ubayd confirmed that this is the sunnah of the prophet muhammad, where he sent zakāh officers to livestock owners to collect zakāh from them, either voluntarily (ridhâ) or forcibly (kurh). but there is no evidence that the prophet has ever forced people to pay zakāh on currency12. this is the reason that made abû bakr only fought those who refused to pay zakāh on livestock and left those who did not pay zakāh on money. abû bakr did not want to go too far into the area where he as a ruler did not have authority. the concept that 8 fauzia (2013) argued that the riddah war could not be used as justification for the implementation of forced zakāh collection by state for three reasons. first, the policy of abû bakr was not supported by other caliphs like 'umar who, during his reign, freed the prisoners who refused to pay zakāh and restored some of their possessions that were previously confiscated. second, the riddah war was more addressed to five tribes who claimed the new status of prophethood than to those who refused to pay zakāh. third, zakāh at that time was seen as as a form of political loyalty to islamic state. in that sense, the refusal to pay zakāh implied the rejection of sovereignty of the prophet’s successor. see fauzia. faith and the state. page 46. 9 abû ‘ubayd al-qâsim. (2009). al-amwâl (indonesian translation), jakarta: gema insani press, page 691-692. 10 ugi suharto. (2005). kitâb al-amwâl: abû ‘ubayd’s concept of public finance, kualalumpur: the international institute of islamic thought and civilization international islamic university malaysia, page 174-176. 11 suharto. kitâb al-amwâl, page 177-178. 12 abû ‘ubayd. al-amwâl, page 547. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 6 distinguishes amwâl al-zhâhirah and amwâl al-bâthinah which determines the political and ritual character of zakāh, and therefore determines the role and position of the government in implementing its political power, is generally accepted by islamic jurists in the field of public law, such as al-mâwardî. al-mâwardî clearly stated that the owner of amwâl al-bâthinah has more authority than the zakāh officers to pay its zakāh out 13. thus, through riddah war, abû bakr has an important role in saving the original character of zakāh. had abû bakr did not fight those who refused to pay zakāh amwâl al-zhâhirah, zakāh would have lost its political character and only become a personal ritual. and therefore, zakāh would be meaningless as part of islamic public finance institution. and had abû bakr fought all who did not pay zakāh without discriminating between the owners of amwâl al-zhâhirah and amwâl al-bâthinah, then zakāh would have been equated with tax in general, in which the basis is entirely political14. in the context of state’s political power over the collection of zakāh amwâl alzhâhirah, we can understand the policy of caliph 'umar to give a dispensation of zakāh payment for livestock during the economic crisis known as the year of ramadah in 18 h. a long drought sweeping the whole hejaz made 'umar decided to postpone the collection of zakāh on livestock in the year of ramadah by not sending zakāh officers. a year after, when the long drought has passed, zakāh officers came to the livestock owners and collected their zakāh of two years15. 'umar is also recorded as the person who responsible for the institutionalization of zakāh collection by placing officers on roads, bridges, and ports to collect zakāh on commerce from muslim merchants at the rate of 2.5% while also collecting taxes from non-muslim merchants, both local (dzimmî) and foreign (harbî), with a rate of 10% (’usyr)16. the implementation of state’s political power over zakāh of amwâl al-zhâhirah faced great challenges after the reign of caliph 'utsmân. the dynamics of zakāh management in early days of islam is narrated in detail by abû 'ubayd (d. 224/838). at first, zakāh was paid directly to the prophet muhammad or to someone who was trusted to manage it. in the time of abû bakr, zakāh was paid to abû bakr or to someone who was trusted to manage it. similarly, during the time of 'umar, zakāh was also handed to ‘umar or to someone who was appointed to manage it. the practice continued in the time of 'utsmân, where zakāh was handed to 'utsmân or to someone who was appointed to manage it. but after 'utsmân was killed, starting from the reign of ‘alî, muslim community began to divide in their opinion. some still paid their zakāh to the ruler; others distributed their zakāh directly to mustahik17. after the era of khilâfah al-râsyidah (guided caliphate), political conditions and public trust to government did not improve. the situation got worse with the growing perception in the wider muslim community that government after khilâfah al-râsyidah did not have religious commitment anymore. during umayyad dynasty, rulers were portrayed as untrustworthy, failing to deliver zakāh to those who deserve it (mustahik). they lived luxurious lifestyles with expensive clothes and perfumes, drank khamr 13 see al-mâwardî. (2014). al-ahkâm al-sulthâniyyah (indonesian translation), jakarta: qisthi press, page 205. 14 suharto. kitâb al-amwâl, page 180-181. 15 jaribah ibn ahmad al-haritsi. (2006). al-fiqh al-iqtishâdi li amîr al-mu’minîn ‘umar ibn al-khaththâb, (indonesian translation). jakarta: khalifa, page 382-383. 16 a. zysow. (2002), “zakât”, in p.j. bearman, et. al. (eds.), the encyclopaedia of islam: new edition, vol. xi, leiden: brill academic publishers., page 409. 17 abû ‘ubayd. al-amwâl, page 685. state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 7 (alcoholic beverages), and appointed non-muslims as zakāh collectors18. all these things only increased the muslim community's reluctance to pay zakāh to the government. this reluctance to pay zakāh to the authority is reflected in the attitude of early islamic jurists such as ibn' umar (d. 73/692). in spite of those facts, zakāh management by the government, both ritually and politically continued to run and evolve, while trying to maintain common pattern practiced in the time of the prophet and khilâfah al-râsyidah. caliph mu’âwiya is recorded as the first person to collect zakāh by deducting it directly from the salaries of state employees. a special government office to receive the payment of zakāh, dîwân alshadaqah, was established during the time of caliph hisyâm (d. 125/743). however, abû yûsuf (d. 182/798) informed that zakāh management system at that time was corrupt and inefficient. zakāh collection was conducted by kharâj officers who did not record zakāh revenue separately as specified by sharia, whereas zakāh on commercial goods were collected by 'usyr officers ('usysyâr) and managed separately from other types of zakāh. the joint management office of zakât and awqâf (dîwân al-birr wa al-shadaqah), introduced in 315/927, showed a decrease of zakāh revenue19. in the manner of a centralized management of public finance, all fiscal revenues (huqûq) in bayt al-mâl, like khums, kharâj, jizyah, ‘usyr and zakât, were spent without differentiating the type of expense. this raised a strong suspicion that the process of zakāh distribution did not comply with sharia law. sharia provisions, which require zakāh to be distributed only to 8 groups (ashnâf) and be prioritized to be spent at the local level, seemed to be abandoned. the only source of public revenue to be managed in accordance with sharia was waqf, which was not part of the fiscal revenue but under the state’s control, generally through qâdhî20. by means of zakāh administration united generally in tax administration, then there are no case of zakāh being regarded as special management by state, which implies the existence of zakāh officers. al-ghazâlî (1058-1111) confirmed that in most countries in his time, one couldn’t found anymore two groups of zakāh receiver, namely mu’allaf and ‘âmil 21. ibn taymîyya (1263-1328) reported that in egypt during the mamlûk dynasty, zakāh management by the state contained a lot of violations of the provisions. zakāh was often collected from improper types of wealth, even from types of wealth excluded by sharia. rate of zakāh was not limited to the maximum rate of 2.5% of the wealth value in general, or 10% for agricultural products. zakāh was also often collected before a year passed22. there’s almost no adequate information regarding the details of zakāh management in islamic history. but the practice of zakāh management in the islamic world – in arabia, turkish ottoman, and indian mughal – shows several unique common patterns23: (i) zakāh collection by the state is only applied to “visible” wealth (amwâl al-zhâhirah) with or without being called as zakāh, while zakāh on “invisible” wealth (amwâl al-bâthinah) is paid voluntarily; (ii) zakāh collection by the state is not carried out by a special 18 abû ‘ubayd. al-amwâl, page 686-689. 19 zysow, “zakât”, page 409. 20 cl. cahen. (1986). “bayt al-mâl”, in h.a.r. gibb, et. al. (eds.), the encyclopaedia of islam: new edition, vol. i, leiden: brill academic publishers., page 1146. 21 abû hâmid al-ghazâlî. (1994). ihyâ’ ‘ulûm al-dîn (indonesian translation), vol. 2, semarang: cv asy-syifa’, page. 18. 22 abdul azim islahi. (1988). economic concepts of ibn taimîyah, leicester: the islamic foundation, page 203. 23 fauzia. faith and the state., page 75. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 8 institution, but is included in the government administration in general; and (iii) zakāh on the soul (zakâh al-fithr) is always voluntary. it is seen clearly that the political character of zakāh – the payment of zakāh of amwâl al-zhâhirah to the authority – has its ups and downs. it is not always observed by the muslim community. the implementation of political zakāh depends much on the level of muslim public trust to the state. while the ritual character of zakāh –the payment of zakāh of amwâl al-bâthinah and its delivery to mustahik– is always observed by the muslim community throughout history as personal matter, without any state intervention. 3. zakāh management entirely by the state: a fiqh discourse the jurists in general agreed that the ruler has to appoint and send officers to collect zakāh. since there are those who have wealth but do not know about the obligation of zakāh or those who know about the obligation but are too stingy to pay it, it is obligatory to have zakāh collectors24. the mention of those who administer zakāh using the term ‘âmilîn ‘alayhâ in al-qur’ân 9: 60 indicates that zakāh should be managed in the best possible way. the majority of ‘ûlamâ agreed that the instruction “khudz min amwâlihim” (“taking zakāh from their wealth”) in al-qur’ân 9: 103, is addressed to the prophet muhammad and to everyone who hold the affairs of muslim community after him25. the case of riddah war corrected the misinterpretation of al-qur’ân 9: 103 that zakāh collection is merely the prophet’s personal authority. the instruction “khudz min amwâlihim” (al-qur’ân 9: 103) descended in the context (asbâb al-nuzûl) of acceptance of repentance of the prophet’s companions who didn’t fight with him in the battle of tabuk. after allâh accepted their repentance (al-qur’ân 9: 102), they brought their wealth to the prophet and asked him to donate it on behalf of them while asking forgiveness for them. but the prophet refused to do it, causing the descent of al-qur’ân 9: 103, which says: “taking zakāh from their wealth by which you cleanse and purify them”26. then, when the prophet demised, some of bedouin tribes thought that zakāh no longer compulsory since there’s no prophet’s prayer anymore to cleanse and purify them. the policy of caliph abû bakr to fight against those who refuse to pay zakāh of livestock has saved the political character of zakāh, a type of zakāh which has to be paid to the government to be managed. the majority of ‘ûlamâ agree that the management of zakāh of amwâl al-zhâhirah is the sole authority of ruler, where the ruler has a right to collect it forcefully. while regarding the management of zakāh of amwâl al-bâthinah, there are differing opinions. hanafî and syâfi‘î school considered the management of zakāh of amwâl al-bâthinah to be the domain of the wealth owner. mâlikî school said that one should hands over all of their zakāh, zhâhir as well as bâthin to the ruler even though they’re zhâlim, so long as they are trustworthy to manage zakāh. meanwhile, hanbalî school stated that handing over zakāh to the ruler is not obligatory, but is permissible, whether it’s just or zhâlim (unjust) ruler, and whether it’s zakāh of zhâhir or bâthin wealth27. 24 al-qaradhâwî. fiqh alzakâh. page 545-546. 25 al-qaradhâwî. fiqh alzakâh. page 733-734. 26 jalaluddin as-suyuthi. (2008). lubâb al-nuqûl fî asbâb al-nuzûl (indonesian translation). jakarta: gema insani press, 2008, page 300-301. 27 al-qaradhâwî. fiqh alzakâh. page 745-749. state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 9 al-qaradhâwî chose and supported two opinions regarding zakāh management in islamic fiqh28. first, zakāh management is part of muslim government authority, where the government is entitled to collect zakāh of all types of wealth, be it zhâhir or bâthin, especially when the ruler knows that their people abandon zakāh payment. second, the government’s failure to manage zakāh, by abandoning and not collecting zakāh from society, doesn’t nullify the individual responsibility to pay zakāh, where muzakki still have to count the amount of zakāh they have to pay and distribute it themselves to mustahik. when defining the government’s authority, and even making it imperative, to manage zakāh according to the provisions of sharia, al-qaradhâwî required qualification that the government should let the wealth owner to share one third or a quarter of their zakāh obligation by themselves, in accordance with the tradition of the prophet. moreover, al-qaradhâwî also required that the authority to collect zakāh only applies for islamic government where islam is defined as the legal basis of government and statehood, including political, economic, social, and cultural aspects. the secular government which based itself on non-islamic ideology has no right and is prohibited from collecting zakāh29. nevertheless, the information from abû ‘ubayd suggests that the discourse of zakāh management by ruler cannot be separated from disagreements and is full of dynamics, even in the early days of islam. the fiqh discourse regarding the handing over of zakāh to ruler is coined for the first time after the assassination of caliph ‘utsmân. the discourse dynamics of handing over of zakāh to the state can be well observed in the attitude of ibn ‘umar. at first, ibn ‘umar clearly stated that zakāh must be handed over to the ruler, even though they no longer have religious commitment. so long as the ruler is muslim (observing prayer), it is mandatory for people to submit their zakāh to them. however, after following the dynamics in society, ibn ‘umar finally revised his opinion by no longer requiring people to hand over zakāh to the ruler, but rather distributing it directly to those who deserve it (mustahik)30. this clearly indicates that when the ‘ûlamâ assert the obligation to hand over zakāh of amwâl al-zhâhirah to the ruler, they assume that the government has islamic characteristics. when the ruler’s religious commitment degrades significantly, they no longer require people to observe the political dimension of zakāh, but rather the ritual dimension of it by distributing zakāh directly to mustahik. this fiqh dynamics confirms the character of zakāh as a special public finance institution, in the sense that zakāh should be distributed to public, whether through the government or not. the distributive aspect of zakāh is much more important that its collective aspect31. al-qaradhâwî strongly asserted that the religious commitment of the ruler to islamic teachings is the requirement for the handover of zakāh to them. but if the zhâlim ruler still collects zakāh according to the provisions of sharia, then it is considered as legitimate and the wealth owner may pay their zakāh to them. the wealth owner is also permitted to hand over their zakāh to ruler even if they’re zhâlim so long as the ruler distributes zakāh to the right target group. therefore, if the ruler is zhâlim and doesn’t 28 al-qaradhâwî, fiqh al-zakâh, page 752-753. 29 al-qaradhâwî. fiqh alzakâh. page 762. 30 abû ‘ubayd. al-amwâl, page 686-689. 31 suharto. kitâb al-amwâl, page 183-184. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 10 distribute zakāh to those who deserve it, then it is better for the wealth owner to distribute zakāh by themselves to mustahik, if it is not collected by the ruler32. abû ‘ubayd required further qualification that the obligation to hand over zakāh to the ruler is limited only to zakāh al-amwâl al-zhâhirah, while the payment of zakāh of amwâl al-bâthinah is within the individual domain, unless they hand over it voluntarily to the ruler. abû ‘ubayd asserts that it’s the sunnah of the prophet, where the prophet muhammad sent zakāh collectors to the owners of amwâl al-zhâhirah, that is livestock, and collected zakāh from them, either voluntarily or forcefully. but there’s no record stating that the prophet forced people to pay zakāh al-amwâl al-bâthinah, that is gold and silver coins33. al-qaradhâwî specifically refuted abû ‘ubayd who distinguished between amwâl al-zhâhirah and amwâl al-bâthinah, and stated that zakāh collection by the ruler is limited only to zakāh al-amwâl al-zhâhirah while zakāh al-amwâl al-bâthinah is paid voluntarily by individuals. al-qaradhâwî argued that the prophet didn’t send officer to collect zakāh al-amwâl al-bâthinah because people have handed over their zakāh to the prophet voluntarily and the abandonment of zakāh al-amwâl al-bâthinah was to raise the conscience of his companions. furthermore, al-qaradhâwî took the case of ‘umar as justification for zakāh collectors to collect zhâhir as well as bâthin of wealth and didn’t leave it as personal choice of the owner. caliph ‘umar is recorded to have collected a type of amwâl albâthinah, namely commercial wealth from muslim merchants at the rate of 2.5% and also collect tax from non-muslim merchants, both local (dzimmî) and foreign (harbî), each at the rate of 5% and 10% (’ushr). during the era of caliph ‘utsmân, the state treasury in baytal-mâl became more abundant and there seemed to be difficulty in collecting zakāh al-amwâl al-bâthinah, so ‘utsmân decided to collect zakāh al-amwâl al-zhâhirah only while leaving zakāh al-amwâl al-bâthinah within the domain of its owner as a form of trust and also to ease them. thus, the original law of this matter is for the ruler to collect all type of zakāh on wealth, be it zhâhir or bâthin34. however, al-qaradhâwî’s criticism to abû ‘ubayd seems to contain several weaknesses. first, the distinction between amwâl al-zhâhirah and amwâl al-bâthinah in general is adopted by the jurists to define the implication over the government’s authority in collecting zakāh forcefully. the government is entitled to forcefully collect zakāh alamwâl al-zhâhirah only. but this distinction doesn’t imply that the government is prohibited from managing zakāh al-amwâl al-bâthinah. the government is still allowed to manage zakāh al-amwâl al-bâthinah, but its collection should be based on voluntarism, not coercion. society could manage it themselves or hand the zakāh al-amwâl al-bâthinah over to the government voluntarily. second, the use of the case of commercial zakāh collection by caliph ‘umar as justification, that the ruler is entitled to collect zakāh al-amwâl al-zhâhirah and al-amwâl al-bâthinah forcefully, is not appropriate. the jurists, especially those of hanafî school, justified the collection of commercial zakāh, which is part of amwâl al-bâthinah, based on the protection (himâya) provided by the government over that type of wealth. when the owner of commercial goods carries their wealth on public roads, they have brought their wealth into the area of government’s protection. for the same reason, similar 32 al-qaradhâwî. fiqh alzakâh. page 777-779. 33 abû ‘ubayd. al-amwâl, page 547. 34 lihat al-qaradhâwî, fiqh al-zakâh, page 756-761. state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 11 treatment is also applied to commercial wealth owned by non-muslim, in form of ‘usyr35. by collecting zakāh on commercial goods on roads, bridges, or ports, ‘umar seemed to hold opinion that commercial wealth is no longer categorized as amwâl al-bâthinah when it’s brought by its owner into public places. furthermore, ‘umar’s adoption of opinion that the ruler collects zakāh al-amwâl al-zhâhirah only is proven in the case of dispensation of zakāh payment to the state during the crisis of ramadah year which was applied only to zakāh on livestock, which is an amwâl al-zhâhirah36. the case of crisis in ramadah year clearly shows that when ’umar made zakāh as an instrument of fiscal policy, a tool to fight against crisis (counter-cyclical policy), he only used a type of zakāh which is under the domain of government, that is zakāh al-amwâl al-zhâhirah only, which in this case refers to zakāh on livestock. third, the policy of distinction between zakāh of amwâl al-zhâhirah and of amwâl al-bâthinah was not merely an ijtihâd from caliph ‘utsmân, but rather the confirmation of what has been set by the prophet and previous caliphs, abû bakr and ‘umar. the prophet muhammad is recorded to have collected zakāh forcefully on livestock only, and didn’t do the same on gold and silver. abû bakr waged war against those who refused to pay zakāh on livestock and spared those who refused to pay zakāh on currency. meanwhile, ‘umar gave dispensation during the time of economic crisis by postponing the payment of zakāh on livestock only. from the above fiqh discourse, it thus can be seen that zakāh is part of islamic public finance institution, where the government has authority to manage it. but the authority to collect zakāh requires that the government should have islamic characteristics and is not zhâlim. furthermore, the government’s authority is limited only to zakāh al-amwâl alzhâhirah. therefore, the political character of zakāh, that is the handover of zakāh to ruler, depends on the level of the ruler’s religious commitment and public trust to them. when most of muslim nations in this contemporary era are secular, which don’t use islam as their national principle, and some are even under zhâlim authoritarian regimes, it is easy to understand why zakāh management in modern muslim society becomes an arena of experiment. all of the above discussion shows that in exercising the authority of zakāh collection, islamic government have to show their strong commitment to religious teachings, govern justly, collect and distribute zakāh according to the provisions of sharia, collect zakāh forcefully on amwâl al-zhâhirah only, and give a chance to zakāh payer to distribute one third or a quarter of their zakāh directly. if the above qualifications are not met, then the political dimension of zakāh is no longer compulsory, leaving only its ritual dimension: zakāh shall be distributed to public, whether through government or not. in other words, zakāh management by the state is not the goal, but rather a means. the ultimate objective of zakāh management is the delivery of zakāh to the right zakāh receiver (mustahik) with optimal benefit. this conclusion is in line with contemporary fiqh principle, al-’ibrah bi maqâshid al-syarî’ah (historical lessons has to refer to higher objective of law) and the intent and purpose of sharia. this conclusion, that zakāh management by the state is merely an instrument and not the goal, will be better at protecting mashlahah by encouraging the formulation of sharia-oriented policy (siyâsah shar’iyyah), which is focused on benefit (shalâh) and avoids harm (fasâd). 35 zysow, “zakât”, page 411. 36 al-haritsi. al-fiqh al-iqtishâdi li amîr al-mu’minîn ‘umar ibn al-khaththâb, page 382-383. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 12 4. national zakāh management in contemporary era: international comparison most of muslim states today are national-secular states, which do not use islam as their national principles, and some are even governed under zhâlim authoritarian regimes. in relation to zakāh management by secular state, the condition is not discussed much in classical fiqh studies. it is not surprising, then, that zakāh management in contemporary muslim societies becomes a subject of various experiments. based on its collection, contemporary zakāh management in general can be divided into two categories37. first, the obligatory system where zakāh payment to the state is implemented forcibly and there is penalty for non-compliance. such system is recorded to be implemented in six muslim nations, namely saudi arabia, pakistan, sudan, libya, yemen and malaysia, where these countries made islam as their national principle. second, the voluntary system where collection and distribution of zakāh is done voluntarily. zakāh management is run by both government and civil society and there is no legal penalty for not paying zakāh. this system is applied in the majority of muslim nations which are secular in general, not using islam as their national principles, such as kuwait, bangladesh, jordan, indonesia, egypt, south africa, and non-muslim countries where muslim is the minority. the rise of western imperialism since 16th century and the fall of the last islamic caliphate, the turkish ottoman, in 1924, made almost all muslim nations entered the 20th century as colonies. under the rule of non-muslim colonialists, zakāh management in general disappeared from public sphere and entirely became a voluntary activity on individual level. after world war ii, muslim nations which gained their independence, started to pay attention again to zakāh management. some muslim nations, which generally made islam as their national principle, chose obligatory system with collective management by the state such as saudi arabia (1951), libya (1971), yemen (1975), pakistan (1980) and sudan (1984). in three countries (yemen, sudan, and pakistan), the implementation of zakāh is enshrined in the state constitution. most of other muslim nations, secular in general, chose voluntary system with several variations. at least there are three variants of zakāh management in this voluntary system. first, zakāh management by non-governmental charitable organization, which exists in many muslim countries and communities. this charitable organization is characterized by donor’s high level of confidence, strong local character, and high operational efficiency. second, zakāh management by semi-governmental institution which collects zakāh voluntarily and distributes it to those who deserve it. the only example for this is nasser social bank (1971) in egypt. third, zakāh management by governmental institution established specifically by the state to receive and distribute zakāh. several countries established zakāh management institutions which are legally and financially independent, such as kuwaytî zakāh house (bayt al-zakât) in 1982 and zakāh fund (shundûk al-zakât) in jordan (1978), bahrain (1979), tunisia, and bangladesh. some countries exhibited specific experiences which are interesting. in several countries, voluntary system with collective management by the state became the preparation stage towards obligatory system, as in the case of sudan where the establishment of shundûk al-zakât (1980) preceded zakāh law (1984) which adopted obligatory system. jordan is the only country which turned back from obligatory system 37 see monzer kahf. (1990). “applied institutional models for zakah collection and distribution in islamic countries and communities”. proceeding on third zakah conference, 14-17 may 1990, kualalumpur, malaysia, page 197-228. state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 13 to voluntary system, where shundûk al-zakât (1978) replaced zakāh law (1944) which was abolished in 1953 by social service tax law38. figure 1. pattern of zakāh management in contemporary muslim society source: author’s assessment, adapted from wibisono (2015) 39 from the experiences of muslim countries which adopted obligatory system, it can be seen that the implementation of the system varied widely. the scope of wealth on which zakāh is imposed on in yemen includes zakāh al-fithr and zakāh al-mâl. in saudi arabia, libya, pakistan, and sudan, the obligation of zakāh includes zakāh al-mâl only. meanwhile in malaysia, the obligation of zakāh applies only on zakāh al-fithr. regulations regarding types of wealth on which zakāh al-mâl is imposed on also vary. in sudan and yemen, zakāh al-mâl is imposed on types of wealth contained in classical fiqh rules; in saudi arabia, zakāh al-mâl is imposed on agricultural products, livestock, and tradable goods; in pakistan, zakāh al-mâl is also imposed on financial and monetary assets, as well as agricultural products40. the distinction also exists in the aspect of zakāh collection and distribution. regarding zakāh collection, saudi arabia and sudan base the amount of zakāh paid on self-assessment by muzakki. if the amount seems to be unreliable, official zakāh collector may recount it. meanwhile in pakistan, zakāh on financial assets will be collected directly by institutions which manage the assets (deduction at sources). regarding zakāh collection on agricultural products and livestock, saudi arabia appoints zakāh officer to make calculations on zakāh obligation of muzakki, and distribute it directly to mustahik, with the exception applied on wheat, where the zakāh payment is performed at the marketing stage. on the other hand, pakistan requires that zakāh calculation on agricultural products be paid through local zakāh committee which calculate and collect 38 zysow, “zakât”, page 420. 39 yusuf wibisono. (2015). mengelola zakāh indonesia: diskursus pengelolaan zakāh nasional dari rezim undangundang nomor 38 tahun 1999 ke rezim undang-undang nomor 23 tahun 2011. jakarta: prenada media, page 152. 40 abu al-hasan sadeq. (1994). “a survey of the institution of zakah: issues, theories and administration”,irtiidb discussion paper, no. 11, page 45. voluntary system obligatory system individual collective obligatory system with collective (state) management voluntary system with collective management voluntary system with individual management nature of management nature of collection general pattern special pattern afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 14 zakāh in form of cash. meanwhile in sudan, zakāh on agricultural products is collected by tax institution in form of goods or cash at its marketing stage41. the obligatory system, where the state’s role in zakāh management is dominant and significant, theoritically has many justifications. first, to implement zakāh effectively in social life, a power is needed to force and manage. the state has power to force and manage. second, the state has a system and resource needed to manage zakāh effectively and efficiently. government’s system and resource also spread all over the country which ensures that zakāh is run in a fair way. third, the state can also provide legal certainty and harmonize between zakāh and tax. this will eventually strengthen zakāh institution. comparison between the performance of compulsory system and voluntary system reveals ambiguous result. from the aspect fund collection, the performance of compulsory system is better than voluntary system, even though fund collection under compulsory system is still lower than the potential of zakāh that could be achieved. however, from the aspect of fund distribution, the performance of compulsory system is lower than voluntary system, which is caused by low capacity, weak initiative, and insufficient supervision. regarding the work scope, the ability of compulsory system to reach muzakki and mustahik is indeed wider than that of voluntary system, since the system applies nationally and is supported by government’s bureaucracy from the highest to the lowest level42. nevertheless, the execution of compulsory system in some countries triggers lots of problems and technical complexities which cannot be ignored. in pakistan, the execution of obligatory zakāh system creates segregation in pakistani society since shia muslims are excluded from zakāh obligation. the integration of zakāh in pakistani taxation system also creates difficulties for most of muslims who are illiterate and not educated, who cannot understand many regulations and administrations of zakāh which become complicated under obligatory system. zakāh avoidance is also rampant, committed by not saving wealth in form of assets on which zakāh is imposed on, or moving zakāh out of the institution which will collect zakāh right before the collection is performed every 1st of ramadhan. obligatory zakāh system has also created a harsh political competition to control zakāh fund which is a significant economic resource for both the ruling and opposition parties43. in kedah, malaysia, there has been a peasant resistance against obligatory agricultural zakāh collection, especially zakāh of rice. the peasant resistance against obligatory agricultural zakāh collection is expressed by refusing to register their total cultivated land area to officer. they registered it but reduced their land area and amount of harvest. the actual rice zakāh paid is lower than the official report which also has been reduced, and rice zakāh paid is often defective or rotten, soggy, contains straw, mud, or gravel. the peasant resistance against ”royal zakāh” under a centralized obligatory system, to distinguish it from ”personal zakāh” which is based on voluntarism and decentralized on individual level, is rooted in the perception of unfairness in zakāh obligation regulation, indifference to local needs, and the perception of corruption in its collection44. 41 sadeq. “a survey of the institution of zakah”.page 46. 42 kahf. “zakah management in some muslim society”,page 41-45. 43 see arskal salim. (2008). challenging the secular state: the islamization of law in modern indonesia. honolulu: university of hawai’i press, page 118-119. 44 see james c. scott. (1987). ”resistance without protest and without organization: peasant opposition to the islamic zakat and the christian tithe”, comparative studies in society and history, 29 (3), 417-452. state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 15 furthermore, obligatory and voluntary system can be sorted by judging its collection organization. from this perspective, there are five forms of contemporary zakāh management. first, obligatory zakāh collection system performed by the state such as in pakistan, sudan, and saudi arabia. the variant of this type is an obligatory system with the collection performed by religious authority like what happened in several states in malaysia. second, obligatory zakāh collection, but is performed by private company such as in malaysia (selangor). third, voluntary zakāh collection performed by the state such as in kuwait and jordan. a variant of this is voluntary zakāh collection by religious authority such as in singapore. fourth, voluntary zakāh collection performed by private institution such as in egypt. fifth, voluntary zakāh collection performed by civil society such as in south africa, indonesia, and algeria45. contemporary zakāh management becomes more complex if we sort it based on the zakāh distribution organization. in pakistan, zakāh is collected and distributed by the state. in malaysia, zakāh is managed on state level with different institutional arrangements. in kuala lumpur and negeri sembilan, zakāh collection is performed by company while the distribution is performed by government. in selangor, company even manages all zakāh operational activities. meanwhile in south africa, zakāh management is performed entirely by civil society through non-profit organizations46. 5. conclusion zakāh management in indonesia is unique. before the enactment of law number 38/1999, zakāh in indonesia was entirely voluntary on individual level. but since 1990s, it has been experiencing resurgence as socio-economic movement in the hand of civil society through various professional ‘âmil organizations. after the passing of law number 38/1999, zakāh management in indonesia is officially affiliated with the state authority, but still voluntarily and include the role of civil society groups widely. in this context, the law number 38/1999 was wise because the prevalent practice that has been running well for a long time was not disturbed and the state chose to strengthen the system. from this perspective, the centralization of zakāh management entirely by state promoted by the law number 23/2011 has many qualifications. first, the institutional centralization of zakāh by government doesn’t guarantee performance improvement, and even can be a boomerang. in many muslim countries, zakāh collection done by governmental institution is small compared to its potential47. even when the centralization is followed by sanctions for negligent muzakki, it still cannot guarantee the improvement of zakāh revenue performance satisfactorily. in pakistan, sudan, and saudi arabia which implement compulsory system, zakāh collection is still relatively much smaller compared to its potential. but the performance of compulsory system is indeed better than that of voluntary system48. 45 see i.a. imtiazi. et. al. (eds). (1989). management of zakah in modern muslim society., jeddah: irti-idb. see also proceeding on third zakah conference, 14-17 may 1990, kualalumpur, malaysia. 46 see habib ahmed. (2004). “role of zakah and awqaf in poverty alleviation”,irti-idb occasional paper, no. 8, jeddah: irti-idb, page 77-107. see also monzer kahf. (1990). “applied institutional models for zakah collection and distribution in islamic countries and communities”, proceeding on third zakah conference, 14-17 may 1990, kualalumpur, malaysia, page 197-228. 47 see ahmed. “role of zakah and awqaf in poverty alleviation”, page 65-71. 48 see abdin ahmad salama. (1990). “empirical economic effects of obligatory and non-obligatory payment of zakah to state”. proceeding on third zakah conference, 14-17 may 1990, kualalumpur, malaysia, page 151-161. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 16 second, management centralization to increase zakāh performance in indonesia is invalid, ahistorical, and denies the role of civil society in a democratic nation. the performance of zakāh collection and utilization is determined more by the legitimacy and reputation of collection institution, not by institutional centralization by government. the transparent operational activities of company and non-profit organization are preferred and foster trust of muzakki. trust is the keyword here. amid the ugly reputation of bureaucracy and low level of public confidence, it is difficult for us to to hope that zakāh performance would increase after the centralization49. this centralization system is also a historical, considering the long track record of laz since three decades ago in indonesia’s zakāh management, and negates the participation of society which is an important component in national development. this conclusion is in line with the latest study findings that the success of zakāh management is not determined by whether the operator is from government or private sector. it is determined by credibility and trust of muzakki, which are the functions of integrity, transparency, and good governance. the coexistence of governmental and private zakāh operators is desirable because it will increase fund collection, foster efficiency, and provide wider options for muzakki. when governmental operator acts as regulator, then it should limit itself as regulator only, leaving its role as operator to private operators50. the main argumentation which paved way for the passing of law number 23/2011 in indonesia is the idea that zakāh management is the sole authority of government. this notion is claimed to be based on al-qur’ân and hadîth, as well as historical practices in the islamic world, from classical to contemporary era. a profound research found that, apart from its central position and completeness of operational provisions in islam, the practice of zakāh management is something dynamic, open to many fiqh interpretations and empirically became a subject of experiment throughout islamic history. zakāh, along with other instruments of islamic philanthropy, which are moral obligations of muslim to do good materially in the name of god, is determined more by individual willingness and faith than by enforcement of state authority. from historical perspective, zakāh management by the state depended much on the level of public trust to the government. according to fiqh judgement, zakāh management by the state is justified when its qualifications are met: a government which is committed to religious teaching, collects zakāh only from amwâl al-zhâhirah, and manages zakāh according to sharia provisions. in today’s context, zakāh management in contemporary muslim nations has become a subject of experiments, whether in obligatory system or in voluntary system. the article concludes that zakāh management exclusively by state is not generally applied without exception, but is full of qualifications. moreover, the success of zakāh management by state relies heavily on the level of public trust in government, not state coercion. in other words, zakāh management by state is merely an instrument, not the goal itself. the ultimate objective is the delivery of zakāh to those who deserve it (mustahik) with optimal benefit. 49 faiz showed that after the implementation of obligatory zakāh payment system in pakistan, most of zakāh is received through deduction at the sources, and only a very little amount of payment is paid voluntarily to governmental zakāh institution. people keep paying voluntarily to credible charitable organization in a big amount. see faiz muhammad. (1990). “the relationship between obligatory official zakah collection and voluntary zakah collection by charitable organizations”. proceeding on third zakah conference, 14-17 may 1990, kualalumpur, malaysia, page 163-195. 50 see irti and thomson reuters. (2015). islamic social finance report 2014, page 15. state authority and public trust in national zakāh management: historical lessons, fiqh discourse, and international comparison 17 references ahmed, h. (2004). role of zakah and awqaf in poverty alleviation. irti-idb occasional paper, no. 8. jeddah: irti-idb. isbn: 9960-32-150-9. al-ghazâlî, a. h. (1994). ihyâ’ ‘ulûm al-dîn (indonesian translation), vol. 2, semarang: cv asy-syifa’. al-haritsi, j. i. a. (2006). al-fiqh al-iqtishâdi li amîr al-mu’minîn ‘umar ibn alkhaththâb, (indonesian translation). jakarta: khalifa. isbn: 978-979-1164-03-7. al-mâwardî. (2014). al-ahkâm al-sulthâniyyah (indonesian translation), jakarta: qisthi press. isbn: 978-979-1303-72-9. al-qardhâwî, y. (1988). fiqh alzakâh (indonesian translation). bogor: pustaka litera antarnusa. isbn: 979-8100-34-4. al-qâsim, a. u. (2009). al-amwâl (indonesian translation), jakarta: gema insani press. isbn: 978-979-077-129-1. as-suyuthi, j. (2008). lubâb al-nuqûl fî asbâb al-nuzûl (indonesian translation). jakarta: gema insani press. isbn: 978-979-077-075-1. bearman, p.j., et. al. (eds.). (2002). the encyclopaedia of islam: new edition, vol. xi, leiden: brill academic publishers. isbn: 90-04-12756-9. dewan perwakilan rakyat republik indonesia. (2011). daftar inventaris masalah rancangan undang-undang tentang pengelolaan zakāh, infaq dan shodaqoh. fauzia, a. (2013). faith and the state: a history of islamic philanthropy in indonesia. leiden: brill academic publishers. isbn: 978-90-04-24920-2. gibb, h.a.r., et. al. (eds.). (1986). the encyclopaedia of islam: new edition, vol. i, leiden: brill academic publishers. isbn: 90-04-08114-3. imtiazi, i. a., et. al. (eds). (1989). management of zakah in modern muslim society. jeddah: irti-idb. isbn: 9960-32-096-0 irti and thomson reuters. (2015). islamic social finance report 2014. jeddah: irti. islahi, a. a. (1988). economic concepts of ibn taimîyah. leicester: the islamic foundation. isbn: 0-86037-182-4. kahf, m. (1990). applied institutional models for zakah collection and distribution in islamic countries and communities. proceeding on third zakah conference, 1417 may 1990, kualalumpur, malaysia, page 197-228. kahf, m. (1993). zakah management in some muslim society. irti-idb background paper, no. 11. jeddah: irti-idb. isbn: 9960-32-088-x. muhammad, f. (1990). the relationship between obligatory official zakah collection and voluntary zakah collection by charitable organizations. proceeding on third zakah conference, 14-17 may 1990, kualalumpur, malaysia, page 163-195. republik indonesia. undang-undang no. 38 tahun 1999 tentang pengelolaan zakat. afebi islamic finance and economic review (aifer) vol.3 no.2, december 2018 18 republik indonesia. undang-undang no. 23 tahun 2011 tentang pengelolaan zakat. sadeq, a. a. h. (1994). a survey of the institution of zakah: issues, theories and administration. irti-idb discussion paper, no. 11. jeddah: irti-idb. isbn: 9960-32-120-7. salama, a. a. (1990). empirical economic effects of obligatory and non-obligatory payment of zakah to state. proceeding on third zakah conference, 14-17 may 1990, kualalumpur, malaysia, page 151-161. salim, a. (2008). challenging the secular state: the islamization of law in modern indonesia. honolulu: university of hawai’i press. isbn: 978-0-8248-3237-7. scott, j. c. (1987). resistance without protest and without organization: peasant opposition to the islamic zakāh and the christian tithe. comparative studies in society and history, 29 (3), 417-452. suharto, u. (2005). kitâb al-amwâl: abû ‘ubayd’s concept of public finance, kualalumpur: the international institute of islamic thought and civilization international islamic university malaysia. isbn: 983-9379-38-0. wibisono, y. (2015). mengelola zakāh indonesia: diskursus pengelolaan zakāh nasional dari rezim undang-undang nomor 38 tahun 1999 ke rezim undangundang nomor 23 tahun 2011. jakarta: prenada media. isbn: 978-602-1186-497. sharia compliance and asymmetry ipo information on the indonesia stock exchange 23 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) sharia compliance and asymmetry ipo information on the indonesia stock exchange afira rohmahtunisa*, shoimatul fitria islamic economics, faculty of economics and business, diponegoro university, semarang, indonesia abstract this study aims to analyze the effect of shariah compliance status, and information asymmetry as a proxy for institutional ownership variables, and company size on excess demand in initial public offerings on the indonesia stock exchange. this study uses 51 companies that conduct initial public offerings on the indonesia stock exchange as research samples obtained through the purposive sampling method. the research method used in this study is a quantitative method with secondary data. the analytical tool in this research is ibm spss version 28 using classical assumption detection in the form of normality detection, heteroscedasticity detection, autocorrelation detection, and multicollinearity detection. this study also used multiple regression analysis and hypothesis testing using a t-test, f-test, and coefficient of determination test. the results of this study show that shariah compliant status does not affect excess demand in initial public offerings, while institutional ownership variables positively and significantly affect excess demand in initial public offerings and company size negatively and significantly affects excess demand in initial public offerings on the stock exchange indonesia. keywords: initial public offering, shariah compliant status, institutional ownership, company size, oversubscription ratio 1. introduction investor demand is important for the success of initial public offerings to companies that have just expanded, whether they are sharia-labeled companies or not. investors can be interpreted as parties who invest their funds in the issuer company. according to data from the indonesian central securities depository, the number of investors on the indonesia stock exchange in 2020 increased by 200%, or 2,495,351 from 2017. the increase in the number of investors from year to year was also followed by an increase in companies that went public/ipo or offer their shares to the public. companies that carry out ipos certainly expect the best results from the implementation of the ipo, therefore the performance of the ipo plays an important role in this. ipo performance can be seen from various things, one of which is the characteristics associated with each country (tajuddin et al, 2019). indonesia is one of the centers of islamic finance in the world, this is supported by the majority of the indonesian population who adheres to islam. sherif and lusyana (2017) assume that along with the increasing development of the islamic financial system, companies that go public can experience growth. in addition to the characteristics of the indonesian state that determine the performance of the ipo. there is also a form of success for ipo companies in attracting investors, namely the ipo oversubscription. initial public offerings in indonesia in 2020 experienced oversubscription with a ratio of 67 times and a ratio of 124.09 times. not only in indonesia, but the phenomenon of high oversubscription is also experienced in several *coressponding author. email address: afirarohmahtunisa@students.undip.ac.id countries such as the uk, china, and the united states which have osr levels of 20,10, https://creativecommons.org/licenses/by/4.0/ mailto:afirarohmahtunisa@students.undip.ac.id afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 24 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 1200, 600.5, 763, and 30. countries that experience high levels of oversubscription generally also experience high levels of underpricing. according to sautma (2003), most of the theories that explain the underpricing of initial offering prices are based on the assumption that there is a difference in information between various parties regarding the value of a new share. this difference in information causes the issuing company to prefer to distribute ipo information to the company or usually known as institutional investors as informed investors. in addition to institutional investors, the existence of information asymmetry can also be seen from the size of the company which is seen from the assets owned by the company. research on the shariah-compliant status and asymmetric information on ipo oversubscription has been carried out in several countries, namely malaysia and saudi arabia. research in malaysia conducted by tajuddin et al (2019) and cheong (2021) found that the subject of finding the status of sharia compliance had a positive and significant effect on ipo oversubscription. in addition, tajuddin et al (2019) also found that institutional ownership has a positive and significant effect on ipo oversubscription, and company size negatively affects ipo oversubscription. research in saudi arabia conducted by alqahtani and boulanouar (2017), found that regarding sharia compliance, institutional investors and company size both have a positive effect on the demand for initial shares. based on the problems that have been described, this study aims to analyze the effect of shariah compliance status, information asymmetry that is proxied by institutional ownership variables, and company size on excess demand in initial public offerings on the indonesia stock exchange. 2. literature study signal theory the signaling theory was first put forward by spence in 1973 which explains that the sending party (the owner of the information) gives a signal or signal in the form of information that reflects the condition of a company that is beneficial to the recipient (investor). according to brigham and houston (2006), the signal theory is the action of company management in providing instructions to investors about the company's prospects. connelly et al (2011) argue that signal theory is useful for explaining behavior between two parties (individuals or organizations) who have access to different information. bandwagon theory the bandwagon theory first appeared in american politics in 1848 during the presidential campaign by zachary taylor. bandwagon theory is the tendency of individuals to acquire a certain style, behavior, or attitude because everyone else does it (robert, et al, 1994). according to bandwagon theory, buyers will buy when they see previous buyers investing in a new stock offering. this occurs even when potential buyers have favorable information about something new, thus rationally ignoring their information (ljungqvist, 2006). information asymmetric theory information asymmetry theory was first expressed by george akerlof in 1970. according to jensen and meckeling (1976), information asymmetry is a condition that occurs when two groups (agents and principals), where the principals are people who are trying to maximize their utility, then there is a reason to try to convince the agent to buy shares in the company because the agent has less information than the principal. this study uses information asymmetric theory to describe the research variables of institutional ownership and firm size. https://creativecommons.org/licenses/by/4.0/ sharia compliance and asymmetry ipo information on the indonesia stock exchange 25 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) literature review and formulation of hypotheses sharia compliance status research on ipo oversubscription has been conducted by tajuddin et al (2019) in malaysia using the variable shariah-compliant status to see its effect on investor demand when the company conducts an ipo. the results of this study are that shariah-compliant status has a positive effect on ipo oversubscription. a similar study was also conducted by alqahtani and boulanouar (2017) in saudi arabia who used the variable shariah-compliant status to see its effect on investor demand when the company conducted an ipo. the result of this study is that sharia compliance has a negative effect on ipo oversubscription. based on this, the research hypothesis on sharia compliance indicators is as follows: h1: shariah-compliant status affects ipo oversubscription on the indonesia stock exchange institutional ownership research on ipo oversubscription has been carried out by (tajuddin et al., 2019) in malaysia by using institutional ownership as a proxy for information asymmetry. the result of this study is that institutional ownership has a positive effect on ipo oversubscription. a similar study was also conducted by imamah et al (2019) in saudi arabia by using the variable of institutional ownership to see its effect on investor demand when the company conducts an ipo. the result of this study is that institutional ownership has a negative effect on ipo oversubscription. based on this, the research hypothesis on indicators of institutional ownership is as follows: h2: institutional ownership affects ipo oversubscription on the indonesia stock exchange company size research on ipo oversubscription has been carried out by tajuddin et al (2019) using firm size as a proxy for information asymmetry. the result of this study is that company size has a negative effect on ipo oversubscription. a similar study was also conducted by alqahtani and boulanouar 2017 in saudi arabia by using the firm size variable to see its effect on investor demand when the company conducts an ipo. the result of this study is that company size has a positive effect on ipo oversubscription. based on this, the research hypothesis on firm size indicators is as follows: h3: the size of the company affects the ipo oversubscription on the indonesia stock exchange https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 26 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 3. research method research methodology this research uses a descriptive quantitative research method using secondary data. sources of secondary data were obtained through the official website of the idx and the financial statements of companies conducting ipos. data collection technique this study uses a population of all companies that conduct initial public offerings on the indonesia stock exchange, which are 247 companies. the sampling technique in this study was purposive sampling, with the following criteria: table 1. research sampling process no. description quantity 1. companies conducting initial public offerings in indonesia 247 2. companies whose prospectuses can be accessed through the official website of the indonesia stock exchange (www.idx.co.id) (0) 3. companies that do not conduct initial public offerings from july 2020 t o august 2021 (196) number of samples 51 research methode this research uses multiple regression analysis models and classical assumption detection. multiple regression analysis was conducted to test hypotheses, primarily aiming to investigate the effect of sharia compliance status and the effect of information asymmetry on investor demand at the time of the initial public offering on the indonesia stock exchange. the regression model in this study analyzes three independent variables and one dependent variable. the equation of the analytical model in this study can be described as follows osr = α + β1 shariah compliace status + β2 institutional ownership+ β3 company size + e ........................................................................................................... (1) based on this equation, the dependent variable in this study is ipo osr which is represented by investor demand, with the following equation osr = number of shares requested at ipo×100% .................................................... (2) number of shares offered at ipo the independent variables in this study are shariah compliance status, institutional ownership, and company size. the variable shariah compliance status is measured using a dummy by giving a score of 1 and 0. a score of 1 is given to companies that pass the sharia screening, and a score of 0 to companies that do not pass the sharia screening. meanwhile, information asymmetry is determined by two variables, namely institutional ownership and firm size. the institutional ownership variable is measured by the number of investors, institutional investors in this study are measured by the institutional ownership ratio which can be seen in the prospectus, with the following equation: https://creativecommons.org/licenses/by/4.0/ sharia compliance and asymmetry ipo information on the indonesia stock exchange 27 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) rasio inst = total institutional ownership ×100%.................................(3) number of shares offered at ipo firm size variable in this study was measured using the natural log of the company's total assets. natural logs are used in calculating the size of the company to reduce the level of excessive fluctuations in the data. the company size equation is as follows: company size = ln (total assets) .................................................................................. (4) 4. result and discussion descriptive statistical analysis descriptive analysis according to sugiyono (2017) is used to analyze data by describing or describing the collected data. the results of the descriptive analysis in this study are presented in table 2 below. table 2. descriptive statistical analysis results descriptive statistics n minimum maximum mean std deviation ln_oversubscr iption 51 0.00 6,10 2,4268 2,08185 shariah compliant status 51 0 1 0,57 0,500 company size 51 23,4842844 30,7008369 26,6010818 1,728612 36 institutional ownership 51 0,00% 95,64% 55,0807% 29,08746 % valid n (listwise) 51 based on table 2 above, the results of the descriptive statistical analysis in this study are the variable shariah-compliant status which shows an average value of 0.57. the company size variable has an average of 26.6010 or equivalent to rp. 1,575,153,612,570. the institutional ownership variable has an average of 55,0807%, which means that the average sample company has a share of 55,0807% for institutional investors. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 28 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) table 3. f test results anova model sum of squares df mean square f signifikansi 1 regression 75,421 3 25,140 8,363 <,001b residual 141,284 47 3,006 total 216,705 50 a. dependent variable : ln_oversubscription b. predictors : (constant), institutional ownership, shariah compliant status, company size based on the results of the f test, the results obtained a significance value of <0.001 which is less than 0.05, which means that the independent variable affects the dependent variable simultaneously. the t-test aims to measure whether an independent variable in a research model has a partial effect on the dependent variable. the results of the f analysis test in this study are presented in table 4 below. table 4. t-test results coefficientsa model unstandardized coefficients standardized coefficients b std. error beta t signifika nsi (constant) 20,554 2,848 5,341 <0,001 shariah compliant status -0,417 0,491 -0,100 -,849 0,400 company size -0,715 0,149 -0,594 -.2,798 <0,001 institutional ownership 0,021 0,009 0.289 2,337 0,024 dependent variable : ln_oversubscription the results of the t-test on the variable shariah-compliant status did not significantly affect ipo oversubscription on the indonesia stock exchange. the institutional ownership variable has a significant positive effect on ipo oversubscription on the indonesia stock exchange. the firm size variable has a significant negative effect on ipo oversubscription on the indonesia stock exchange. according to ghozali (2017), the coefficient of determination aims to measure how far the model's ability to explain variations in the dependent variable is. the results of the f analysis test in this study are presented in table 4.9 below. https://creativecommons.org/licenses/by/4.0/ sharia compliance and asymmetry ipo information on the indonesia stock exchange 29 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) table 5. the result of the coefficient of determination model summary model r r square adjusted r square std. error of the estimate 1 0,59 0 0,348 0,306 1,73380 the results of the analysis of the coefficient of determination above show the value of the coefficient of determination (adjusted r square) of 0.306. the coefficient of determination test in this study can be concluded that the contribution of shariah-compliant status, institutional ownership, and company size to ipo oversubscription is 0.306 or 30.6%, and 69.4% is influenced by other factors not included in this research model. interpretation of results sharia compliance status this study finds that the variable shariah-compliant status has no effect on ipo oversubscription on the indonesia stock exchange, therefore this study is not in line with research conducted in muslim-majority countries, namely malaysia, and saudi arabia, and bangladesh. this is because the number of sharia shares registered for initial public offerings in indonesia is still small compared to the number of shares on the exchanges of other countries where the majority of the population is muslim. this is also because the number of foreign investors who invest in the indonesia stock exchange is also quite large. the results of this study are not in line with signal theory, which means that investors do not catch the signal sent by the issuer to investors regarding the values applied by the company. this research is also not in line with the findings of alqahtani and boulanouar (2017), tajuddin et al (2019), and almansour, (2019) who found that there was an influence between shariah compliance status and ipo oversubscription in the indonesia stock exchange. institutional ownership in this study, it was found that institutional ownership variables influence ipo oversubscription on the indonesia stock exchange. the results of this study are in line with the bandwagon theory, which means that potential investors condition their investment decisions based on whether other investors buy/invest. this is because institutional investors can control and supervise the company's work system to avoid abuse of authority by the board of directors and can increase retail investor confidence in the shares of issuers who have just conducted an ipo (alqahtani and boulanouar., 2017). this study is in line with the findings of tajuddin et al (2019) and alqahtani and boulanouar (2017). this study is also not in line with the findings of imamah et al (2019) who found a negative effect between institutional ownership and investor demand. company size this study found that company size negatively affects ipo oversubscription on the indonesia stock exchange. this is because investors assume that companies that have large total assets tend to set higher retained earnings compared to dividends distributed to shareholders (nwamaka, 2017). the results of this study are in line with signal theory, which means that investors catch signals from the company regarding the company's prospects. this study is also in line with the findings of tajuddin et al (2019) and is not in line with the findings of alqahtani and boulanouar (2017) who found that there was a negative and significant effect between company size and ipo oversubscription on the saudi arabian exchange. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 30 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 5. conclusion this study found that the variable shariah-compliant status did not affect ipo oversubscription on the indonesia stock exchange, while the institutional ownership variable positively affected ipo oversubscription on the stock exchange and the firm size variable negatively affected ipo oversubscription on the indonesia stock exchange. provide useful insights for issuers to ensure good subscription of their issuers as these indicators are available in the prospectus. these findings can also help in the decision-making process of investors. the issuer can develop a strategy by increasing the number of shares owned by the institution in order to foster public investor confidence and to minimize the impact of losses due to the company's shares not being very attractive to the market. investors in determining whether to invest in companies conducting initial public offerings are expected to consider the amount of ownership by institutional investors because institutional investors can control and supervise the company's work system. in addition, muslim investors in indonesia are expected to support islamic issuers who conduct initial public offerings, to improve the performance of islamic issuers. reference alqahtani, f. dan z. boulanouar. 2017. "sharia compliance status dan investor demand for ipos: evidence from saudi arabia." pacific-basin finance journal, vol. 46, no. 10. brigham, e. f. dan j. f. houtsen, 2006. "dasar-dasar manajemen keuangan," edisi ke 10, jakarta : salemba empat cheong, c. w. h. 2021. "risk, resilience, and shariah-compliance." research in international business and finance, vol. 55, no. 7. connelly, b. l., s. t. certo., r. d. ireland, dan c. r. reutzel. 2011. "signaling theory: a review and assessment." journal of management, vol. 37, no. 1. farooq, o. dan a. alahkam. 2016. "performance of shariah-compliant firms and non-shariah-compliant firms in the mena region: which is better?." journal of islamic accounting and business research, vol. 7, no. 4. imamah, n., t. j. lin., suhadak, s. r. handayani, dan j. h. hung. 2019. "islamic law, corporate governance, growth opportunities and dividend policy in indonesia stock market." pacific-basin finance journal, vol. 55, no. 3. ghozali, i. 2017. aplikasi analisis multivariate dan ekonometrika dengan eviews 10. semarang: badan penerbit universitas diponegoro jensen. dan meckeling. 1976. "the theory of the firm: managerial behaviour, agency cost, and ownership structure." journal of financial and economics. vol. 3, no. 4. ljungqvist dan alexander. 2006. "ipo underpricing, handbook of corporate finance: empirical corporate finance." handbooks in finance series, elsevier/north-holland. vol. a no. 7. nwamaka, o. c. dan ezeabasili. 2017. "effect of dividend policies on firm value: evidence from quoted firms in nigeria." international journal of management excellence, vol. 8, no. 2. robert., shields., g. todd. 1994. "the vanishing marginals, the bandwagon, and the mass media." the journal of politics. vol. 56, no. 3. sherif, m. dan d. lusyana. 2017. "shariah -compliant investments and stock returns : evidence from the indonesian stock market." journal of islamic accounting and business research, vol. 8, no. 2. sugiyono. 2017. metode penelitian kuantitatif, kualitatif, dan rdand. bandung: alfabeta. https://creativecommons.org/licenses/by/4.0/ sharia compliance and asymmetry ipo information on the indonesia stock exchange 31 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) tajuddin, a. h., m. r. rashid., k. l. h. khaw, dan c. yahya. 2019. "shariah-compliant status and investors’ demand for ipos: the effects of information asymmetry." international journal of islamic and middle eastern finance and management, vol. 12, no. 4. https://creativecommons.org/licenses/by/4.0/ islamic financial behavior: literature review 132 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) islamic financial behavior: literature review herry ramadhani* faculty of economics and business, mulawarman university abstract the purpose of this research to analyze the existing literature on financial behavior and islamic financial behavior which can contribute to future studies in the field of islamic financial behavior. this research is based on a critical review of islamic financial behavior. research findings that there are two different directions between financial behavior and islamic financial behavior, further research is needed to develop and find new theories to advance knowledge in the field of islamic financial behavior that can provide information for a muslim to invest in accordance with sharia principles and provide a broader insight into investment in terms of psychology or behavior. keywords: investment, financial behavior, islamic financial behavior, sharia and psychology 1. introduction the development of behavioral financial science is growing rapidly, many experts are finally conducting research on the behavior of financial decisions that are different from traditional financial principles as done by baker and nofsinger, 2010; barberis and thaler, 2003; fama, 1998; miller, 1986; statman, 1995 and 1999; in previous research, many academics have included new variables of investment decisions to understand investment decisions such as the influence of investors' personal experiences regarding previous investments (gustaffson, 2006) investor tolerance factors for risk (gompers, 1995; wiltbank and boeker, 2007; wright and robbie, 1996), as well as syndication factors (admati and pfleiderer, 1994; lerner and gompers, 2001). researchers have also concluded that behavioral elements in decision making tend to be more influential on individual investors than large investors or institutional investors (barberis and thaler, 2003; fama, 1998; schleifer 2000; thaler, 1999). a new direction is developing throughout the muslim world with the phenomenon of hijrah in every aspect of life or sharia-based economy, including investment. in conventional economics, a person's motives for investing are different, including saving to get a bigger return, planning for retirement, speculation, and so on. which determines the success or failure of an investment in the future, namely the provisions and will of allah swt. the islamic economic paradigm reflects a view and behavior that reflects the achievement of falah. there are two points of view that underlie the islamic economic paradigm, namely the paradigm of thinking or behaving (behavior paradigm) and the general paradigm (grand pattern). it is very important for muslim investors to analyze investor psychology and investment decisions before investing, making islamic financial behavior a growing topic in the financial literature recently. the psychological factor of *corresponding author. email address: herry.ramadhani@feb.unmul.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:herry.ramadhani@feb.unmul.ac.id afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 133 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) investors, according to various sources, plays the most important role in determining investment. in muslim investors, economic decisions are made all the time such as work activities, earning, adding value to wealth and consumption. for a muslim investor, the aspect of rationality is not the only aspect that must be considered in his investment decision. there is another aspect that is no less important, namely spiritual morals which will filter out activities that are prohibited in investment. the behavior of a muslim investor is not the same as the behavior of conventional investors, because according to huda and nasution (2007), islam as a rule of life that regulates every aspect of human life, provides various choices and suggestions for living a life in accordance with the law of allah swt. allah swt and his apostles gave orders (guidance) and norms/signs to be obeyed by every muslim in investing and there was no element of usury, maysir (gambling), gharar (obscurity), and tadlis (fraud). 2. literature study traditional financial theories first introduced by harry m. markowitz in 1952. markowitz is known with its the markowitz model, providing a way of investing efficiently and optimally, by establishing an optimal portfolio. theories efficient market hypotheses by fama in 1970 assumes that efficient financial and investor markets in making their finances processes and applies based on complete information. markowitz's model portfolio theory was further developed by sharpe (1964), lintner (1965) and mossin (1966). when us stock crashes on september 11, 1986 (black thursday) and 19 october 1987 (black monday), the new york stock exchange (nyse) opened just a big storm, which is a kind of invisible hands that encourage investors to sell shares immediately, then there was panic selling and stock prices began to fall. there was a tremendous panic among investors that the market became uncontrollable. no one can rationally explain the background of the two events. von neumann and morgenstern (1944) wrote research on the theory of games and economic behavior, writing became the beginning or basis of how to describe a person's level of rationality when he was in two choices in making investment decisions. financial investors are consumers of financial products, which when they act are certainly influenced by financial behavior. behavioral finance emerged when slovic (1969 and 1972) discovered the psychological aspects of investment decisions, and subsequently financial behavior began to be discussed by academics. kahneman and tversky (1974) stated that an uncertain situation (uncertainty) would lead to heuristics or biases, then kahneman and tversky (1979) proposed a prospect theory, then thaler in 1985 presented the theory of mental accounting, while shefrin and statman (1985, 2000) succeeded in developing the science of financial behavior in various studies. bondt (1998) found the representation of individual investors. statman (1995) and forbes (2009) describe the theory of financial behavior. ritter (2003) said that there are cognitive illusions that affect investors' minds in the decision-making process, namely heuristics and mental frames. https://creativecommons.org/licenses/by/4.0/ islamic financial behavior: literature review 134 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 3. research methodology this paper discusses literature review as a methodology for conducting research and offers an overview of the different types of reviews. this study wants to analyze the existing literature on behavioral finance and behavioral islamic finance that can contribute to future studies in the field of behavioral islamic finance. 4. result and discussion religious behavior of investors islam is a teaching that controls life in all aspects including faith, worship and including muamalah, especially in economic matters. in economic development, sharia has an important role in shaping people's behavior. sharia prioritizes cooperation, instills virtues such as obedience, honesty, integrity, simplicity, tranquility, peace, and social harmony, and regulates one's behavior. according to ancok and suroso (1994), glock and stark's formulation which divides religiosity into five dimensions at a certain level is in line with with islam as follows: a. the dimension of belief (belief) can be equated with aqidah. a muslim's belief in the nature of his religious teachings is called the dimension of belief or aqidah, especially fundamental and dogmatic teachings. b. dimensions of religious practice (pratice) can be aligned with sharia. the level of obedience of a muslim in carrying out ritual activities in accordance with the instructions and recommendations of his religion is referred to as the dimension of worship (religious practice) or sharia. c. dimensions of experience (feeling) can be equated with ihsan. the extent to which a muslim feels and experiences religious feelings or experiences is called the experiential dimension or ihsan d. the dimension of knowledge (knowledge) can be equated with religious knowledge. the dimension of religious knowledge or knowledge refers to the level of knowledge and understanding of a muslim towards the teachings of his religion, especially the main teachings of his religion as stated in the holy book. e. dimensions of practice (effect) can be equated with morality. the dimension of practice which is also called morality refers to how a muslim behaves in accordance with the teachings of his religion, namely how individuals interact with their environment, especially with other individuals. a muslim can invest his funds in one of three ways such as in cash, in the form of non-producing assets, or in productive activities such as project ownership. sharia investment is a form of investment that adheres to sharia principles in both the real and financial sectors. therefore, seriousness is needed in managing, planning, controlling, organizing and it is intended as a form of worship to allah swt. in essence, investment is the placement of a number of funds in one or more assets over a certain period of time with the hope of generating income or increasing the value of the investment. investors need information that becomes the basis for making investment decisions. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 135 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the model of investment decision-making behavior is formed from available data in the form of investment appraisal criteria that allows muslim investors to choose the best investment among the available investment options. investors consider various factors in making investment decisions, one of which is psychological factors. according to psychological theory, a person will always be driven by his basic needs which are shaped by the environment in which investors are located. regarding behavior, practices and religious activities (religiosity) investors do not guarantee one hundred percent of them to choose investments that are in accordance with sharia principles. islamic financial behavior many studies have been carried out to examine investment decisions in islamic financial behavior in muslim investors, such as those conducted by haron and wan azmi (2008) wrote an article title measuring depositors' behaviour of malaysian islamic banking system: a co-integration approach, where they examined the role of religion to determine the saving behavior of customers at islamic banks in malaysia, and find that islamic banking customers place profit motives above their religious motives when making economic decisions. tahir and brimble (2011) wrote an article title islamic investment behavior with the research variables socio-deomographic, the level of profit and risk and conducted interviews with 446 respondents (210 muslims, 236 non-muslims) in brisbane. the results of their research found that the level of religiosity of muslim investors greatly influences investment decisions, risk factors and other factors such as ethics, social issues and environmental issues also affect muslim and non-muslim investment decisions. wahyuni (2012) wrote an article title moslem community behavior in the conduct of islamic bank: the moderation role of knowledge and pricing with variables of attitude, social influence, behavior intention and knowledge of product, using a questionnaire method as many as 195 muslim respondents in surakarta found that attitude, behavior intention and knowledge of product are very influential for decisions to use islamic bank products, but social influence variables have no effect on decisions to use islamic bank products. hanudin amin (2013) wrote an article title factors influencing malaysian bank customers to choose islamic credit cards empirical evidence from the tra model with variables of attitude, subjective norm and perceived financial cost. the results of the study show that attitudes, subjective norms and perceived financial costs have an effect on choosing a sharia credit card syukriah ali, rosliza m, zani and kartini kasim (2014) conducted a study in kedah malaysia with the research title factors influencing investors’ behavior in islamic unit trust: an application of theory of planned behavior and the research variables were intention attitude, social influence and perceived behavioral control, they found that the variables of intention attitude, social influence and perceived behavioral control affect investors' intentions to invest in islamic unit trust funds https://creativecommons.org/licenses/by/4.0/ islamic financial behavior: literature review 136 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) canepa and ibnrubbian (2014) wrote an article does faith move stock markets? evidence from saudi arabia, their findings show that religious teachings influence investors' behavior towards their chosen investment portfolio. mohammed hersi warsame and edward mugambi ireri (2016) conducted a study in qatar with the article title does the theory of planned behavior (tpb) matter in sukuk investment decisions, the variables studied were behavioral intention, attitude, subjective norms, perceived behavioral control. the results of their study found that the attitude and perceived behavioral control variables significantly influenced the intention to invest in sukuk, while subjective norms did not significantly affect investors' intentions to invest in sukuk. the researchers also found that the religiosity factor did not affect the decision to invest in sukuk. noraini yusuff, fadillah mansor and abu bakar hamed (2017) wrote an article title the measurement of islamic unit trust investment decision in malaysia: an exploratory factor analysis with research variables such as financial literacy, information sources, investment risk, religiosity, and product knowledge. the results of their research found that the variables of financial literacy, information sources, investment risk, religiosity and product knowledge had an effect on investment decisions nurul shahnaz mahdzan, rozaimah zainudin, rosmawani che hashim, and noor adwa sulaiman, (2017) wrote an article title islamic religiosity and portfolio allocation: the malaysian context with demographic, religiosity and risk tolerance variables. the results of their study found that religiosity variables in general had no effect on the allocation of portfolio assets, while individuals with high risk tolerance, income level and education level showed a tendency to allocate risky assets into portfolios. 5. conclusions financial behavior research was initially based on the theory of games and economic behavior written by von neumann and morgenstern in 1944 and continued by slovic in 1969 and 197 who discovered psychological aspects and then tversky and kahneman in 1974 and 1979 found heuristic theory and prospects which later became the foundation of the subsequent development of financial behavior, and in the end there were studies on financial behavior related to the islamic/muslim world (islamic financial behavior) which mostly focused on the theory of planned behavior as well as various variables such as islamic law, subjective norms , attitude, religiosity, etc. the results of this literature review the author concludes that there are two different directions between financial behavior and islamic financial behavior in terms of the theoretical foundation and also the variables studied in the research, it is highly expected for the development of islamic financial behavior theory and future studies on islamic financial behavior must adopt islamic theories that apply to financial and investment behavior that is consistent with sharia principles. in future research, it is expected to add to the results of the latest studies to obtain a comprehensive literature review. 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(2017). the measurement of islamic unit trust investment decision in malaysia: an exploratory factor analysis. ijib, 2(1), 38-45. https://creativecommons.org/licenses/by/4.0/ sharia mutual fund performance, foreign ownership and investment ability 140 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) sharia mutual fund performance, foreign ownership and investment ability siti saudah1), musdalifah azis2)* 1,2 faculty of economics, mulawarman university, indonesia abstract this study aims to analyze sharia mutual fund performance approaches from the effect of foreign ownership and investment ability. this research was conducted at equity mutual fund companies listed in financial services ototitas (ojk) for the period 2018-2019. this study used purposive sampling with a total sample of 33 equity mutual funds. the type of data used is quantitative data and the data source is in the form of company annual financial reports. the data analysis tools used were descriptive statistics and panel data regression. the results of this study indicate that foreign ownership has a not significant effect on and investment ability has a positive and insignificant effect on mutual fund performance. keywords: foreign ownership, investment ability, mutual fund performance 1. introduction mutual fund performance is considered important because it determines the ability of investment managers to manage portfolios by looking at returns and risks (deb, 2019). investment managers have to improve the performance of the fund and ensure that the invested survives over time so that the investment manager has prospects and can be the investor's choice in managing his portfolio (fabozzi, 2003). performance measurement is a control tool that includes the implementation and evaluation of the performance of employees and operations of the company by using information that can be financial and non-financial and can be based on internal or external measurements. the factors affecting mutual fund performance are foreign ownership and investment ability (nanda, narayanan & warther, 2000; lindemanis, loze & pajuste, 2019). theoretically, foreign ownership in mutual funds, can improve the performance of the mutual fund itself (bentivogli & mirenda, 2017). however, in fact, this does not affect all mutual fund products, for example in bnp paribas pesona syariah stock foreign-owned mutual fund products, but the company's performance decreased with sharpe ratio from 0.082 in 2018 to 0.530 in 2019. another factor that affects the performance of other mutual funds is investment ability, namely the ability of investment managers to manage portfolios through returns and risks (deb, 2019). two factors affect the ability of investment managers. the first factor is market timing ability, market timing is a measure of the ability of portfolio managers in terms of anticipation of market changes where if the market is going down then the manager changes the composition of the portfolio he manages to a lower *corresponding author. email address: sitisaudah228@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:sitisaudah228@gmail.com afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 141 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) volatility security and vice versa (shanmugham & zabiulla, 2012). the second factor to be examined is stock selection, stock selection is the ability of portfolio managers to choose the right securities (shanmugham & zabiulla, 2012). shanmugham & zabiulla, (2012) in their research in india stated that stock selection capabilities based on the jensen model have a significant alpha positive influence on mutual fund performance. theoretically if the ability of investment managers increases then the performance of mutual funds also increases (nanda et al., 2000). however, in fact, this does not affect all other mutual fund products. for example, lautandhana saham syariah mutual fund product, there is an increase in the ability of investment managers in 2018 by 0.000 to 0.010 in 2019 which is a measure of the value of jensen alpha. however, there was a decrease in mutual fund performance, in 2018 by – 0.610 to 0.672 in 2019 as measured by sharpe value (grau-carles, doncel, & sainz, 2019). this is inversely proportional to the theory described earlier. 2. literature review berkowitz & qiu, (2003) argues that managers' incentives to maximize shareholder value increase in line with their level of ownership. the greater the concentration of ownership, the better the performance of the company as well as the impact on the decreased risk-taking rate (yuan, xiao, & zou, 2008) the relationship between mutual fund performance and foreign ownership of management companies is through the relationship between historical fund performance and demand for funds by investors. as the fund's performance increases, investors increase their ownership of the fund so that the net asset value (nav) of the fund increases. since management companies receive a fixed percentage of nav, improved performance increases the flow of costs to management companies incurred after fees to management company owners (lindemanis et al., 2019). carney et al., (2019) found a negative relationship between the company's performance (tobin's q) and ownership. morck, shleifer, & vishny, (1989); lindemanis et al., (2019) found a significant positive relationship between the company's performance (measured by tobin's q) and ownership concentration. the ability of investment managers to manage portfolios can be determined by the performance of mutual funds by looking at the rate of return and risk (deb, 2019). investment managers carry out risk-containing strategies that will improve the company's performance. when companies with assets in place have committed investment opportunities, there will be less need to motivate managers to seek risky but profitable investments (nanda et al., 2000). previous research has shown that companies with good investment management tend to outperform similar companies, with high investment opportunities and low management shareholdings (hutchinson & gul, 2004). according to investment management theory, the greater the sacrifice (risk) then the greater the profit that will be earned, and the higher the rate of return and risk from the investment than the better the performance of the mutual fund (deb, 2019). it was found from previous research that https://creativecommons.org/licenses/by/4.0/ sharia mutual fund performance, foreign ownership and investment ability 142 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) there was a significant positive relationship between investment ability and mutual fund performance (chevalier & ellison, 1999; hutchinson & gul, 2004. 3. research methods in this study, two types of variables, namely dependent variables, and independent variables. dependent variables are mutual fund performance and independent variables consist of ownership and investment ability. as for this research mutual fund company in indonesia period 2018 2019 that we use. furthermore for variable measurement can be seen as follows: table 1. variable measurement of mutual fund performance, foreign ownership, and investment ability no variable variable measurement source 1 dependent variables;mut ual fund performance ( y ) rrd rrƒ srd = σ ket : srd = sharpe performance index rrd = return fortofolio or market rate of return rrƒ = return risk-free σ = standard deviation return (grau-carles et al., 2019) 2 independent variables; foreign ownership (x1) foreign and non-foreign ownership measured by variable dummy; 1 = foreign 0 = nonforeign (chevalier & ellison, 1999) 3 independent variables; investment ability (x2) α = 𝑅 ̅𝑃 − ( 𝑅 ̅𝑓 + 𝛽 ( 𝑅 ̅𝑚 − 𝑅 ̅𝑓 ) dimana: α = jensen alpha 𝑅 ̅𝑃 = average monthly return on mutual funds 𝑅 ̅ 𝑓 = average monthly risk-free investment return 𝑅 ̅𝑚 = market performance (𝛽) = portfolio beta value (panjaitan, 2012) the population in this study is all companies registered in money market mutual fund companies in indonesia listed on the website www.ojk.co.id period 2018 -2019. the sample used is purposive sampling i.e. using samples with certain criteria. the type of data used in this study is quantitative data. while the data source used in this study is secondary data derived from the website www.ojk.co.id www. pasardana.id www.idx.co.id www.ojk.co.id. the data required in this study include financial statements of mutual fund companies in indonesia. the method of data collection in this study is obtained from the population in stock mutual fund companies, with sharia type and research samples in the form of companies https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 143 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) that publish prospectus published by the financial services authority (ojk) during the period 2018-2019 or internet access in www.pasardana.id. calculation of mutual fund performance using the value of sharpe ratio on the daily data of mutual fund products. calculation of ownership using variable dummy seen from the prospectus data of mutual fund products. meanwhile, investment ability uses jensen alpha value in daily data of mutual fund products. the analysis tools that this research has are two descriptive statistics and regression data panels. descriptive statistics are used to analyze an event that occurs at present and occurs in mutual fund companies registered in www.ojk.co.id period 2018-2019. furthermore, there will be a regression data panel where there are three approach models: common effect model/cem, fixed effect model/fem, and random effect model/rem and random effect model/rem. of these three models can be selected by conducting the chow test and the hausman test (baltagi, 2002). before conducting the hypotheses test, the classic assumption test is done by doing three tests namely; multicollinearity test, heteroscedasticity test, and autocorrelation test. the model used for this study is as follows; mfp = α1 + β1 k + β2 ib + e where, mfr: mutual fund performance, α1 : constant, β1…β3: coefficient, k: foreign ownership, ib: investment ability, e: variable disruptor furthermore, hypothesis testing with test f and test t. statistical test f shows whether all independent variables included in the model have a simultaneous influence on dependent variables. 4. results and discussions stock mutual funds are one of the most widely diminasti investment instruments by the public due to the high return offer. stock mutual funds there offer a type of sharia mutual fund, which is the researcher's choice to research. sharia mutual funds are a type of investment in which the whole process qualifies halal. sharia mutual funds are the choice of researchers because the population in indonesia is more majority muslim. the annual growth of sharia mutual funds also increased judging by nab's total. the overall development of sharia mutual funds in 2019 has increased. but compared to other types of stock mutual funds, sharia stock mutual funds are at least interested in investors. this is due to various things such as low performance compared to other types of mutual funds. table 2. descriptive statistics mfp kpas inva mean -1.323.680 0.090909 -0.039773 median -0.160500 0.000000 0.011500 maximum 1.422.000 1.000.000 1.039.000 minimum -2.896.000 0.000000 -0.844000 std. dev. 6.104.261 0.289683 0.286915 https://creativecommons.org/licenses/by/4.0/ sharia mutual fund performance, foreign ownership and investment ability 144 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the performance of mutual funds is a reflection of the ability of investment managers in managing their portfolios. therefore, the performance value of mutual funds is one aspect to attract the interest of potential investors. with the value of a good performance, the increase from year to year indicates that this fund has a positive outlook. mutual fund performance can be driven by increasing human resources as well as existing technologies providing added value and high competitiveness, making it attractive for investors to invest. in addition, the investment manager needs to increase his ability to choose the right shares to put in his portfolio to potentially generate returns as expected by investors. descriptive statistics are used to view an overview of the data used in the form of the amount of data, the minimum value, the maximum value, the average value, and the standard deviation of each variable. the results of descriptive statistics show that mutual fund performance (mfp), foreign ownership (kpas) and investment ability (inva) variables have a mean value below the standard deviation value. models using data panel regression techniques can use three alternative approach methods in their processing. based on chow's test output results from the eviews tool occurs near the singular matrix, so the ols method is used compared to the fixed model. the hausman test was then carried out. based on hausman test output results with eviews tool version 9, it appears that the p-value is greater than 0.05 which is 0.7073. thus the null hypothesis is accepted, so the better use of methods in this study is the ols method compared to fem. the classic assumption test in this study uses the multicollinearity test, heterocredenticity test, and autocorrelation test. in the multicollinearity test, there was no relationship between free variables with a value of more than 0.90 so the panel data model in this study had no multicholineity issues. in this study, there was also no heterocedastisitas where the probability value of osb*r-squared was 0.1257 (greater than 0.05). furthermore, in the auto correlates test of dw value of 1.937305 which then refers to the durbin-watson benchmark, then the test results show that the dw value of 1.937305 is between -2 < dw < 2 where there is no autocorrelation based on the results of the data regression analysis panel by using the eviews tool version 9 obtained the following results: table 3. results of data panel regression analysis on mutual fund performance (mfp) variables, foreign ownership (kpas), and investment ability (inva) dependent variable independen t variable regression coefficient t-count prob. direction description constant -101.9329 -1.392457 0.1687 mutual fund performance foreign ownership 105.9337 0.440362 0.6612 (+) insignificant observations 66 66 66 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 145 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) investment ability 1007.360 4.245070 0.0001 (+) significant r–square 0.226982 adjust rsquare 0.202442 f-statistik 9.249393 f signifikan 0.000301 in the rem model, the determination coefficient value (r2) is 0.226982. this means dependent variables (mfps) can be affected by 22.6 percent by independent variables (kpas and inva), while the remaining 77.4 percent is explained by other variables outside the study model. the data panel's regression test results show that the statistical f value is 9.249393, with the same significance (f) value of 0.000301 which is smaller than 0.05 (0.0000 <0.05). the results explain that two independent variables namely kpas and inva simultaneously or simultaneously affect mfp on sharia stock mutual fund products 20182019 and have demonstrated a viable model. in test t, the kpas variable (x1) has a calculated t value of 0.440362 and a probability rate of 0.6612 > 0.05 which means partially the variable has a positive but insignificant effect on the mfp, at a significant rate of 5%. the inva variable (x2) has a calculated t value of 4.245070 with a probability value of 0.0001<0.05 which means partially the variable has a significant positive effect on the mfp, at a significant rate of 5%. based on the results of the regression test in table 4.1 shown then the model of this study is as follows: mfp = -101.9329 + 105.933 kpas – 1007.360 inva + e the researchers' test results showed a foreign ownership value of 105.9337 against mutual fund performance with a significance of 0.6612 >0.05. the results of the researchers showed an inva value of 1007,360 against mutual fund performance with a significance of 0.0001<0.05. foreign ownership has a positive but insignificant effect on mutual fund performance in sharia stock mutual fund products in indonesia. the results of this study differ from the hypothesis that foreign ownership has a significant effect on mutual fund performance. this result is in contrast to gede & artini research, (2018) which stated that foreign ownership negatively affects mutual fund performance. these results are also in contrast to lindemans, loze, & pajuste, (2019) smirnova & sprenger's research, (2009) which stated that foreign ownership has a positive and significant effect on mutual fund performance. the theory says that foreign ownership in investment managers can improve the performance of mutual funds. the average foreign investment manager is a large https://creativecommons.org/licenses/by/4.0/ sharia mutual fund performance, foreign ownership and investment ability 146 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) company and is experienced in terms of investment. this is in line with lindemans, loze, & pajuste's research, (2019) smirnova & sprenger, (2009) which stated that foreign ownership has a positive and significant effect on mutual fund performance. however, in this study, foreign ownership of investment managers had no or insignificant effect on mutual fund performance. foreign ownership does not affect the performance of mutual funds because foreign ownership is not the only ownership that moves the portfolio significantly. the absence of foreign ownership in an investment manager will not affect the performance of the mutual fund, as some local investment managers have an increased level of performance than the previous year. this is because the local investment manager offers sharia securities that are equity and have an increased sharpe value (mutual fund performance). for example, pinnacle indonesia sharia equity fund from 2018 (-0.134) to (0.113) in 2019. based on the results of this research, investment managers should be able to improve and maintain the level of performance of their mutual funds. the low interest of investors investing in sharia stock mutual funds makes the performance of this mutual fund one way to attract investors to invest in sharia stock mutual fund products. the more people who invest, the more mutual fund managers will get resources that can help the development of mutual fund managers. investment ability has a positive and significant effect on mutual fund performance on sharia stock mutual fund products in indonesia. the results of this study are similar to the hypothesis that investment ability has a significant effect on mutual fund performance. this result is in contrast to gede & artini research, (2018) (sari & faisal, 2018) which stated that investment ability does not affect mutual fund performance. however, the results of this study are the same as lindemans, loze, & pajuste, (2019) smirnova & sprenger research, (2009) which stated that investment ability has a positive and significant effect on mutual fund performance. the theory says that when an investment manager's ability increases it will improve the performance of mutual funds. the ability of investment managers in the management of securities portfolios greatly affects the performance of a mutual fund. investment managers who can choose the right shares to put in their portfolios and manage to generate the returns that investors expect can attract the interest of many other investors, so the more funds managed the higher the return will be received. this is in line with research (panjaitan, 2012) which stated that investment managers who can choose the right shares for portfolios to be managed, will increase the performance value of the mutual fund. based on the results of this research, investment managers should be able to improve and maintain the level of performance of their mutual funds. an investment manager must have good stock selection ability to be able to select and manage the right portfolio to improve the performance of the managed mutual funds. the low interest of investors investing in sharia stock mutual funds makes this one way to attract investors to invest in sharia stock mutual fund products. the more people who invest, the more mutual fund https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 147 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) managers will get resources that can help the development of mutual fund managers in terms of improving the performance of mutual funds. 5. conclusion positive and insignificant foreign ownership of mutual fund performance in sharia stock recryedsadana products. the results of this study reject hypothesis 1 because foreign ownership is not the only ownership that drives portfolio significantly. the absence of foreign ownership in an investment manager will not affect the performance of the mutual fund, as some local investment managers have an increased level of performance than the previous year. this is because the local investment manager offers sharia securities that are equity and have an increased sharpe value (mutual fund performance). the results showed that investment ability had a positive and significant impact on mutual fund performance. the results of this study received hypothesis 2. this is because the investment manager of sharia stock mutual fund in indonesia can choose the right shares for the portfolio to be managed, thus increasing the performance value of the mutual fund. sharia stock fund investment managers have good stock selection skills in this case can improve the performance of their mutual 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(2008). mutual funds’ ownership and firm performance: evidence from china. journal of banking and finance, 32(8), 1552–1565. https://doi.org/10.1016/j.jbankfin.2007.08.001 zhao, x., & wang, s. (2007). empirical study on chinese mutual funds’ performance. systems engineering theory & practice, 27(3), 1–11. https://doi.org/10.1016/s1874-8651(08)60020-4 https://creativecommons.org/licenses/by/4.0/ analysis influence of human resource management practices on study employee performance at po. haryanto kudus 74 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) analysis influence of human resource management practices on study employee performance at po. haryanto kudus novita yuliana1)*, fuad mas’ud2) 1,2 islamic economics departement, faculty of economics and business, diponegoro university, indonesia abstract islamic business management has begun to applied by several companies to set and achieve goals. the phenomenon shows that there are companies that implement islamic business management that can achieve success, growing rapidly, and compete with others companies that do not apply islamic business management principles. the company is po. haryanto kudus. the success of a business is supported by several factors, one important factor is the support of human resources. a company needs to pay attention to human resource management to achieve the goals. this study aims to analyze the effect of human resource management practices on employee performance on po. haryanto kudus. data collection method are done through interviews and questionnaires. the object of this research are 83 employees at po. haryanto kudus. this study uses multiple linear regression analysis techniques from the application of spss 23. the results of the analysis shows that employee recruitment and selection, performance appraisal, and compensation are in a positive and significant effect on employee performance in po. haryanto kudus. keywords: human resources, recruitment and selection of employee, performance appraisal, compensation. 1. introduction experts in the 20th century developed human resource management into a special field to be able to study the roles and relationships of humans to achieve organizational goals. human resources are a key or very important factor in an organization, as assets that make an organization or company move and achieve predetermined goals. the words human and human in the concept of human resources have the same meaning, in islam it is known as the concept of insan kamil, which means believers in whom there is the power of insight, action and wisdom. simanjuntak (2011) states that performance is the level of achievement of results for the implementation of a certain task. tr. michael quoted from ruky (2001) explained that the performance indicators are service quality, communication, speed, ability, and initiative. these indicators are used as a benchmark in achieving a performance. central java is an area that has the highest number of intercity and inter-provincial buses or akaps in indonesia. in addition, the number of bus companies (po) in central *corresponding author. email address: novitayulianaa5@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:novitayulianaa5@gmail.com afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 75 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) java is also the largest in indonesia. the number of akap buses in central java has reached 3,503 units, west java with 2,797 units, and dki jakarta with 2,622 units. the following is a breakdown of the number of akap central java buses during the 20142018 period: table 1 number of central java akap buses for the period of 2014-2018 year number of akap buses number of companies 2014 4165 146 2015 4542 149 2016 4199 139 2017 3632 113 2018 3503 113 source: ministry of transportation (kemenhub) data, 2014-2018 there has been a decrease every year in the number of akap buses in central java, but there has been an increase in the number of tourist buses for the 2014-2018 period by 5.66%. the largest number of tourist buses is in the dki jakarta area with a total of 5,914 buses, followed by central java with a total number 5,321 buses, then west java with 4,397 buses. if the akap and tourism buses are added together, central java is still the top with 8,824 buses and dki jakarta with 7,943 buses. po. haryanto kudus is an autobus company that implements sharia management in developing and managing its business, but is not included in a sharia company, which opens business opportunities by applying islamic teachings as a business foundation. according to a preliminary survey conducted by many autobus companies that were previously superior, they become sluggish, due to the many factors faced by these companies. there are also many bus companies that apply conventional principles in their business practices but experience a sharp setback even to the point of bankruptcy, perhaps in terms of company capital, services, human resource management, or from other factors, which can make consumers or passengers feel the quality is not good, or the bus company chooses to close it because it does not want to bear a sharp loss or reason that has been considered so that a major problem does not arise. table 2 po fleet data. haryanto kudus year total fleet po. haryanto kudus 2010 115 2011 120 2012 129 2013 135 2014 145 2015 155 2016 160 2017 168 2018 175 2019 186 source: employee interview of po. haryanto kudus, on january 18, 2020 https://creativecommons.org/licenses/by/4.0/ analysis influence of human resource management practices on study employee performance at po. haryanto kudus 76 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) fleet data shows an increase in the number of fleets each year, as evidence that more passengers trust the po. haryanto kudus. po. haryanto kudus has an applied organizational culture that has islamic values or elements. the employees at the po. haryanto kudus, who is in the office, is required to pray in congregation, especially men, arrive on time for work, when the time for prayer adhan has arrived, all activities in the po office. haryanto kudus stops, and the bus po. haryanto kudus, who was accompanying passengers on a long-distance trip, stopped at the nearest mosque to be able to carry out the obligatory prayer services. mr. haji haryanto as the owner of the po. haryanto has a program for employees, namely leaving for hajj or umrah, for employees who can do their job well, comply with existing rules, and are always diligent in worshiping not only to pray five times a day but also to pray sunnah and recitation, because every morning starts from the hour seven at the nurul huda mosque which was built in the po garage. haryanto kudus with the holding of the khatam al-qur'an which was carried out alternately by the students from the pesantren. the phenomenon that occurs at this time is po. haryanto kudus can develop rapidly and compete with other conventional businesses, seen from the number of fleets that increase every year, and many positive assessments have been shown from the responses of passengers, and not all businesses using sharia management principles will be defeated by conventional businesses, seen from both in terms of service, and poor performance. this phenomenon explains that what affects employee performance through human resource management practices at po. haryanto kudus, namely the process of recruitment and selection of employees, performance appraisal, and compensation. based on research from rambi, et al (2015) entitled the effect of human resource management practices on employee performance at pt. pln (persero) sulutenggo region shows that human resource management practices have a positive and significant effect on employee performance. in line with this research, a study entitled the effect of human resource management practices on employee performance at the manado state wealth and auction service office (kpknl) by fenina ezra wulan kasenda, christoffel mintardjo (2016) explains that human resource management practices have a positive effect. and significant to employee performance, and that does not affect employee training. the purpose of this study is to find out more about the influence of human resource management practices on employee performance at po. haryanto kudus. 2. literature study khan (2016), in islam recruitment is the process of attracting a certain group of prospective workers within an organization. islam describes the qualities of the right candidate for employment, namely pious, having good moral values, and a very competent player with the team. rahmany (2018), revealed that the existence of a strong relationship between the recruitment process and employee selection significantly affects employee performance, which allows an organization to get suitable and quality employees who can improve performance. based on these descriptions, the researcher developed a hypothesis: hypothesis 1: employee recruitment and selection has a positive and significant effect on employee performance. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 77 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) mullins (2002) states that the performance appraisal system is a basic benchmark in assessing an individual's performance, which highlights a potential for career advancement for the future and also improves performance. fahmi, et al (2014), explained that performance appraisal from an islamic perspective, in principle, is to plan, monitor and evaluate the islamic competence of employees at the company. according to sopiah (2016), there is a positive influence between performance appraisal and employee performance, both theoretically and empirically. hypothesis 2: performance appraisal has a positive and significant effect on employee performance. rivai, et al (2014), explain that compensation in an islamic perspective that is given to employees both financially and non-financially includes fair and transparent wages, holiday allowances, hajj and umrah pilgrimage facilities, islamic holidays, facilities for comfortable places of worship. to be able to carry out worship solemnly, including the implementation of activities such as khatam al qur'an, and so on. ra. ritawati (2015) states that compensation in the banking sector plays a very important role in improving employee performance. h 3: compensation has a positive and significant effect on employee performance. 3. research methodology the dependent variable in this study is the employee performance at po. haryanto kudus, while the independent variables are employee recruitment and selection, performance appraisal, and compensation. the population in this study were employees who worked at po. haryanto kudus consists of a driver, bus driver, and internal employees. the sampling method in this study was purposive sampling. the data collection method in this study was carried out conducted by interviewing, distributing questionnaires and studying literature from journals, internet, and books. the type of data in this study is quantitative. the data analysis used was the validity and reliability test, normality test, multicollinearity test, heteroscedasticity test, multiple linear regression, t test, f test, and the coefficient of determination (r2). 4. result and discussion this part should describe informative results of empirical research which are written systematically and critically. tables and figures can be presented in this part to support the discussion, for examples table of statistics-test results, figures of model test results and etc. in general, journal papers will contain three-seven figures and tables. same data cannot be presented in the form of tables and figures. overview of respondents table 3 distribution of questionnaires information total number of questionnaires distributed 83 number of questionnaires returned and filled in completely 83 source: primary data 2020, processed number of questionnaires given to po employees. haryanto kudus totaled 83, and the number of questionnaires that were returned and completely filled in was 83. the https://creativecommons.org/licenses/by/4.0/ analysis influence of human resource management practices on study employee performance at po. haryanto kudus 78 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) number of male respondents was 71 people, and 12 female respondents. based on the age of the respondents, the most filling results were 30-39 years old. based on the latest education, the results of the most respondents were smk. based on religion, the result is that all respondents are muslim or adhere to the islamic religion. judging by the job title of the respondent, namely the driver, bus driver, and internal company employees. validity and reliability test the validity test is to show the degree of accuracy between the actual data that occurs on the object and the data collected by the researcher. by comparing the calculated r value with the r table value for the degree of freedom d (f) = n 2 with an alpha of 0.05. if, r count is greater than r table and the value of r is positive, then the item or question is said to be valid. table 4 validity test results variabels indicator r calculate r table employee recruitment and selection (x₁) x1.1 0,815 0,216 x1.2 0,821 0,216 x1.3 0,780 0,216 x1.4 0,697 0,216 x1.5 0,775 0,216 x1.6 0,762 0,216 x1.7 0,543 0,216 x1.8 0,636 0,216 x1.9 0,657 0,216 x1.10 0,590 0,216 x1.11 0,556 0,216 performance appraisal (x₂) x2.1 0,771 0,216 x2.2 0,740 0,216 x2.3 0,644 0,216 x2.4 0,657 0,216 x2.5 0,750 0,216 compensation (x₃) x3.1 0,746 0,216 x3.2 0,715 0,216 x3.3 0,636 0,216 x3.4 0,803 0,216 x3.5 0,762 0,216 x3.6 0,721 0,216 x3.7 0,737 0,216 x3.8 0,683 0,216 employee performance (y) y1.1 0,733 0,216 y1.2 0,841 0,216 y1.3 0,899 0,216 y1.4 0,764 0,216 y1.5 0,933 0,216 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 79 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) variabels indicator r calculate r table y1.6 0,835 0,216 source: primary data (spss) 2020, processed based on table 4 that all the results of the calculation of r count are greater than r table, namely 0.216, it is known that all items of the instrument used are valid. reliability test is a series of measurements or a series of measuring instruments that have consistency if the measurements are made using the measuring instrument repeatedly. criteria in decision making in the reliability test, that is, if it provides value crobanch's> 0.70 then it is declared reliable, and if the value shows crobanch's <0.70 then it is not reliable. table 5 reliability test results variabels standart alpha cronbacnh’s alpha information employee recruitment and selection (x1) 0,7 0,893 reliabel performance appraisal (x2) 0,7 0,759 reliabel compensation (x3) 0,7 0,871 reliabel employee performance (y) 0,7 0,914 reliabel source: primary data (spss) 2020, processed based on table 5, it is shown that the variables of employee recruitment and selection, performance appraisal, compensation, and employee performance obtained cronbacnh's alpha value> 0.7. with the above results, all items from all the variables studied are reliable and can be analyzed further. classic assumption test the normality test aims to be able to test whether the dependent variable regression model and the independent variable are normally distributed or not. data normality testing uses the kolmogrov-smirnov test of normality in the spss program, the basis for decision making can be made based on probability (asymptic significance), namely: if probability> 0.05 then the distribution of the regression model is normal, and vice versa if the probability <0.05 then the distribution of the regression model is not normal. table 6 normality test results unstandardized residual n 83 test statistic 0,059 asymp. sig. (2-tailed) 0,200 source: primary data (spss) 2020, processed based on the data table 6 shows that the value of the kolmogorov-smirnov test has a significance> 0.05, namely 0.200, indicating that the dependent and independent variables have a normal distribution. https://creativecommons.org/licenses/by/4.0/ analysis influence of human resource management practices on study employee performance at po. haryanto kudus 80 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the multicoloniearity test aims to test whether or not the regression model is found in the correlation between the independent variables. if there is a correlation, it is called the multicollinearity problem. if, there is multicollinearity, preferably one independent is excluded from the model, and the regression modeling is repeated. to be able to detect the presence or absence of multicollinearity, it can be seen from the variance inflation factor (vif) value and tolerance. with the guidance of a regression model that is free of multicollinearity, it has a tolerance number close to 1. the vif limit is 10, if the vif value is below 10 then there are no symptoms of multicollinearity, and if the vif value is above 10, there will be a symptom of multicollinearity. table 7 multicollinearity test results collinearity statistics tolerance vif employee recruitment and selection 0,541 1,850 performance appraisal 0,651 1,536 compensation 0,538 1,860 source: primary data (spss) 2020, processed the multicollinearity test results in table 7 show that the vif value is <10 and the tolerance value> 0.10, thus it can be concluded that the independent variables used in the study do not have multicollinearity symptoms. the heteroscedasticity test aims to test whether in the regression model there is an inequality of variance from the residuals of one observation to another. in this study, two methods were used to test for heteroscedasticity, namely the scatterplot and glejser methods. the scatterplot method is as follows: picture 1 results of the scatterplot heteroscedasticity test based on figure 1, it explains that the distribution of points is above and below 0 on the y axis, does not gather only above or below, is not patterned, does not form a wave pattern, is straight or curved so it can be interpreted that the data collected does not have a wave heteroscedasticity. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 81 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the glejser method is as follows: table 8 heteroscedasticity test results independent variable sig. constant 0,303 employee recruitment and selection 0,852 performance appraisal 0,462 compensation 0,283 source: primary data (spss) 2020, processed based on table 8, it shows that the significance value is> 0.05, and it can be concluded that there is no heteroscedasticity between the variables used in the research model. hypothesis analysis multiple linear regression is a model used to analyze the effect of various independent variables on one dependent variable. table 9 multiple linear regression test results dependent variable independent variable standardize d coefficients sig. information beta employee performance employee recruitment and selection (x1) 0,345 0,000 significant performance appraisal (x2) 0,477 0,000 significant compensation (x3) 0,202 0,009 significant source: primary data (spss) 2020, processed the results are as follows: y = 0.345 x1 + 0.477 x2 + 0.202 x3 information : y: employee performance at po. haryanto kudus β₁, β₂, β₃: the coefficient of each variable x1: employee recruitment and selection x2: performance appraisal x3: compensation e: error based on the regression equation above, it can be perceived that: a. the regression coefficient on the employee recruitment and selection variable (x₁) is 0.345. positive coefficient means that there is a positive relationship between recruitment and selection of employees and employee performance, the recruitment https://creativecommons.org/licenses/by/4.0/ analysis influence of human resource management practices on study employee performance at po. haryanto kudus 82 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) and selection process carried out by the po will increase. haryanto kudus will have an effect on increasing employee performance. b. the regression coefficient on the performance appraisal variable (x₂) is 0.477. positive coefficient means that there is a positive relationship between performance appraisal and employee performance, the increasing process of the performance appraisal carried out by the po. haryanto kudus will have an effect on increasing employee performance. c. the regression coefficient on the compensation variable (x₃) is 0.202. positive coefficient means that there is a positive relationship between compensation and employee performance, the increasing compensation provided by the po. haryanto kudus to employees will have an effect on increasing employee performance. partial effect significance test (t test), the purpose of this test is to find out how far the influence of one independent variable (employee recruitment and selection, performance appraisal, and compensation) separately explains the variation of the dependent variable (employee performance at po. haryanto kudus) separately. or together. the criteria for this test are as follows: if t count > t table, then h0 is rejected and h1 is accepted, which means that each independent variable individually has a significant effect on the dependent variable. conversely, if t count <t table, then h0 is accepted and h1 is rejected, which means that each independent variable individually does not have a significant effect on the dependent variable. or it can also be as follows: if probability t is calculated > 0.05, h₀ is accepted and h₁ is rejected, and if probability t is calculated < 0.05, h₀ is rejected and h₁ is accepted. then the t table value is: df = 834 = 79. with this it is found that df is 79, and a = 0.05, then the t table is obtained at 1.990. table 10 t test results independent variable t hitung t tabel sig. information recruitment and selection of employees 4,560 1,990 0,000 h₀ ditolak, h₁ diterima performance assessment 6,925 1,990 0,000 h₀ ditolak, h₂ diterima compensation 2,666 1,990 0,000 h₀ ditolak, h₃ diterima source: primary data (spss) 2020, processed a. effect of employee recruitment and selection on employee performance in table 10, the t value of employee recruitment and selection (x₁) is 4.560 while the t table is 1.990 and significant at 0.00 <0.05, so ho is rejected and h₁ is accepted, which states that employee recruitment and selection (x₁) have a positive effect. and significant to employee performance (y) at po. haryanto kudus. b. the effect of performance appraisal on employee performance in table 10, it is obtained the t value of performance appraisal (x₂) of 6.925 while t table is 1.990 and a significance of 0.000 <0.05, then ho is rejected and h₂ is accepted, which states that performance appraisal (x₂) has a positive and significant effect on employee performance (y) at po. haryanto kudus. c. the effect of compensation on employee performance https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 83 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in table 10, it is obtained that the t value of compensation (x₃) is 2.666 while the t table is 1.990 and a significance of 0.009 <0.05, which indicates that h₀ is rejected and h₃ is accepted, which states that compensation (x₃) has a positive and significant effect on performance employee (y). the model feasibility test is used to determine whether the independent variables jointly or simultaneously affect the dependent variable. then the value of the f table is: df 1 = 4-1 = 3 df 2 = 83 4 = 79. and a = 0.05, then the f table is obtained at 2.72. table 11 anova test results source: primary data (spss) 2020, processed based on table 11, the calculated f value gives a value of 81.482, and the f table is 2.72, and a significant probability of 0.000 is less than 0.05 (the real level is equal to 5 percent) which means that simultaneously and together the recruitment and selection variables employees, performance appraisal, and compensation affect the performance of po employees. haryanto kudus. the coefficient of determination test is used to measure the ability of the model to explain the variation in the dependent variable. table 12 determination coefficient test results r 0,869 r square 0,756 adjusted r square 0,746 source: primary data (spss) 2020, processed based on table 12, it shows that the results of the multiple linear regression test above indicate that the value of the coefficient of determination (adjusted r square) regression is 0.746, which means that variations in employee performance changes can be explained by the variables of employee recruitment and selection, performance appraisal, and compensation of 74. 6%, while 25.4% was explained by other variables not examined. 5. conclusion based on the results of data analysis and the discussion that has been described regarding the analysis of human resource management practices on the performance of study employees at po. haryanto kudus, the following conclusions can be drawn: df f count f table sig. regression 3 81,482 2,72 0,000 residual 79 total 82 https://creativecommons.org/licenses/by/4.0/ analysis influence of human resource management practices on study employee performance at po. haryanto kudus 84 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) a) employee recruitment and selection have a positive and significant effect on employee performance at po. haryanto kudus. b) performance appraisal has a positive and significant effect on employee performance at po. haryanto kudus. c) compensation has a positive and significant effect on employee performance at po. haryanto kudus. reference ezra, fenina wulan kasenda, dan christoffel mintardjo. (2016). “pengaruh praktekpraktek manajemen sumber daya manusia terhadap kinerja pegawai pada kantor pelayanan kekayaan negara dan lelang (kpknl) manado”. jurnal emba. vol. 4, no. 4 : 1229-1248. kementerian perhubungan republik indonesia. rincian armada bus akap dan pariwisata indonesia. http://dephub.go.id/ppid/informasi/117. diakses tanggal 23 juli 2020. khan, raqibaz, sher kamal, zahid awan, shazia nasrullah, muhammad saqib khan, irfanullah khan, and khalid rehman. (2016). “the impact of human resource management practices on the organizational performance "a survey of commercial banks in dera ismail khan, khyber pakhtunkhwa, pakistan". journal of resources development and management. vol. 19, page : 1-8. mullins, laurie j. (2002). management and organisational and behaviour :6th edition. prentice hall. rahmany, said monawar. (2018). “the effect of recruitment and selection process on employees’ performance : the case study of afganistan civil servant”. international journal of business and management invention. vol. 7. issue 8 : 6171. rambi, rainer, victor p.k. lengkong, dan rotinsulu jopie jorie. (2015). “pengaruh praktek-praktek manajemen sumber daya manusia terhadap kinerja pegawai pada pt. pln (persero) wilayah sulutenggo”. jurnal berkala ilmiah efisiensi. vol. 15, no. 05. ritawati, ra. (2015). “the role of compensation for improving employee performance in palembang syariah bank”. journal of finance. vol. 1, no. 1 : 57-72. rivai, dr. h. salim, dan dr. h. natsir. (2014). islamic human capital management (manajemen sumber daya insani). rajawali pers. ruky, ahmad s. (2001). manajemen penggajian dan pengupahan karyawan perusahaan. gramedia utama. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 85 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) simanjuntak. (2011). manajemen dan evaluasi kinerja. fakultas ekonomi univeristas indonesia. sopiah. (2016). “the relationship between performance appraisal and job performance”. international journal of academic research in business and social sciences. vol. 6, no. 6 : 104-115. siswanto, agus, muhammad fahri farid, abdurahman misno, arijulmanan, achmad syarif, dan abu fahmi. (2014). hrd syariah teori dan implementasi. pt gramedia pustaka utama. https://creativecommons.org/licenses/by/4.0/ potential of zakat on msme growth in indonesia's economic recovery 86 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) potential of zakat on msme growth in indonesia's economic recovery ario hernest hadinata1)*, irham zaki2) 1, 2department of sharia economics, faculty of economics and business, airlangga university abstract this article explains how the potential of zakat, where indonesia is the country with the largest muslim population in the world. certainly with the largest muslim population. indonesia has great zakat potential. based on the research of baznas, bogor agricultural university (ipb), and islamic development bank (idb), the potential of national zakat amounted to rp 217 trillion. so in this case it takes planning how the program of distribution of zakat can be channeled in a directed manner and has a clear orientation where zakat will be distributed, not just on the distribution of a moment without any sustainable effect. the author has an idea about the system of distribution of zakat that can be channeled to msmes with a revenue-sharing system so that the zakat can later be re-collected and used for further purposes. in the end, the orientation of the idea of zakat distribution program to msmes can have a sustainable impact. then on the next side poverty can be resolved, unemployment can be realized, and welfare can be felt by all communities so that the expected benefits in the islamic economy can be realized. keywords: zakat, msmes, economic recovery 1. introduction micro, small, and medium enterprises (msmes) in indonesia have a strategic role. as of the end of 2013, the number of msmes in indonesia was 57.89 million units with a gross domestic product contribution of 59.08%. the contribution of msmes to the absorption of labor is about 97.16% or 114 million people (ministry of cooperatives and msmes, 2015). asean sme policy index data in 2014 stated that more than 96% of companies in asean are msmes. the contribution of msmes in asean to gdp is 30-57%, while the contribution of labor absorption is 50-98%. further data shows, about 17% of msmes have exported products. some things that should be underlined related to the importance of the msme sector in indonesia, namely msmes play a big role in absorbing unemployment, supporting poverty reduction programs and to facilitate the increase in income from exports (tambunan, 2006). some researchers have studied and tried to provide input for the development of msmes in indonesia. the research were conducted by supriyanto (2006:1) concluded in his research that msmes can be a solution to poverty alleviation in indonesia. poverty alleviation bydeveloping msmes has fairly good potential, because it turns out that the msme sector has a large *corresponding author. email address: ario.hernest.hadinata-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:ario.hernest.hadinata-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 5, no 2 2020 87 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) contribution in the absorption of labor, namely absorbing more than 99.45% of the workforce and contributing to a gdp of about 30%. efforts to advance and develop the msme sector will be able to absorb more existing workers and of course, will be able to improve the welfare of the workers involved in it to reduce the unemployment rate. and in the end, it will be able to be used for poverty alleviation. indonesia is the country with the largest muslim population in the world. in 2013 the muslim population of indonesia reached 87.21% (kemenag, 2013). certainly, with the largest muslim population, indonesia also has a large zakat potential. based on the research of baznas, bogor agricultural university (ipb), and islamic development bank (idb), the potential of national zakat amounted to rp 217 trillion. this figure should have a tremendous impact on poverty alleviation efforts in indonesia. however, the baznas report revealed that the potential of zakat that can be absorbed and managed by baznas institutions only reached rp. 450 billion for 2007, increased to rp 2.73 trillion in 2013 or only about 1% only. so far research on zakat discusses the potential of zakat, the impact of zakat on the welfare of the community and other social problems, or the study of the realization of the receipt of zakat funds separately. kahf (1987) estimates the potential of zakat in eight islamic countries, namely egypt, indonesia, pakistan, qatar, saudi arabia, sudan, syria, and turkey. the study estimated zakat in three ways: 1) based on traditional fiqh, 2) based on the calculation of qardawi i.e. zakat income is calculated at 2.5% while net profit on fixed assets is calculated at 10%, and 3) modification of qardawi version i.e. all zakat from fixed assets and revenue is calculated equally by 2.5%. the results showed that the potential of zakat in indonesia ranges from 1 to 2 percent of gdp. a study conducted by pirac in 2004 estimated the potential of zakat in indonesia to reaching rp. 6,132 trillion (kurniawati, 2004). meanwhile, firmansyah (2009) estimates the potential of zakat by using the assumption of a minimum zakat rate of 2.5% of each regional economic sector (gdp) as follows: 1) the level of agricultural zakat is 2.5% of the value of the agricultural sector gdp; 2) the level of mining zakat is 2.5% of the gdp value of the mining sector; 3) the zakat rate of other sectors is 2.5% each. a study conducted by firdaus et al (2012) showed the total potential of zakat in indonesia from various sources, namely household income, corporate income, and savings estimated at rp. 217 trillion or equivalent to 3.4% of indonesia's gdp in 2010 based on the research that has been studied and developed by researchers, it is necessary to develop zakat extension fund that has been collected so much. distribution mechanisms and most importantly the distribution of zakat not only for consumptive needs but more towards productive needs to prosper the community in a sustainable manner and improve welfare evenly. in this case, trying to see the potential of zakat owned is expected to influence the growth of msmes, where faced by msmes namely kurangnya capital both in number and source, the difficulty to obtain msme capital, the requirements of applying are so complicated, being the cause of the growth of msmes is not so rapid and has not contributed to the indonesian economy, coupled with the condition of the covid-19 pandemic that occurred in 2020 makes msmes in indonesia increasingly dimmed, but in 2021 and so on we are optimistic about the https://creativecommons.org/licenses/by/4.0/ potential of zakat on msme growth in indonesia's economic recovery 88 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) growth of msmes in the indonesian economic recovery. therefore, it is necessary to develop the potential of zakat to be channeled to productive things and the participation of the government in supporting the development of msmes can grow well so that it is expected that indonesia's economic recovery after covid 19 can be improved again. 2. literature review a. zakat the language of zakat comes from the form of the word "zakat" which means holy, good, blessing, grow and develop. in terminology, zakat is the activity of giving certain assets that are required by allah swt in certain amounts and calculations to be handed over to the rightful people (sri nurhayati and wasilah, 2009). in psak no. 109 it is explained that zakat is a property that must be issued by muzakki in accordance with sharia provisions to be given to those who are entitled to receive it (mustahiq). meanwhile, in article 1 (2) of law no. 23 of 2011 concerning the management of zakat, it is stated that zakat is a property that must be issued by a muslim or business entity to be given to those who are entitled to receive it by islamic law. the provision of zakat is based on the source of islamic law, namely the quran and assunnah (sri nurhayati and wasilah, 2009). in the qur'an, the word zakat is mentioned 30 times, which is 8 words contained in the letter makiyah while 22 words are in the letter madaniyah. one of the verses that explain zakat is qs. at tawbah verse 103 states: "take the alms out of their wealth, with which you purify and purify them, and pray for them. surely your prayer is a peace of mind for them. and allah is all-hearing, all-knowing." (qs) at tawbah: 103). in as-sunnah is also explained a lot about the obligation of zakat. one of them is the hadith narrated by imam al-bukhari as follows. the messenger of allaah (peace and blessings of allaah be upon him) said: "whoever allah has blessed with wealth but does not give his alms, on the day of resurrection he will be visited by a very venomous and terrifying bald male snake with two spots above his eyes." (hr. bukhari)" there are two types of zakat, namely zakat fitrah and zakat harta (maal) (sri nurhayati and wasilah, 2009). zakat fitrah is zakat that is required to muslims in the month of ramadan, precisely at sunset at the end of ramadan and more importantly paid before eid al-fitr prayers. zakat fitrah is obligatory for every muslim who has qualified, namely having excess staple food for himself and his dependents at the time of eid. zakat fitrah does not know nishab and is paid one sha' or the equivalent of 3.5 liters (2.5 kg) of community staple food. as for zakat wealth, this zakat is zakat on wealth that can be paid at any time as long as the object of zakat has been qualified. zakat includes business products, agriculture, mining, seafood, livestock products, property findings, gold, and silver, as well as the work of (professions) that have their calculations. along with the development of the times, the type of zakat wealth continues to grow. some potential zakat objects are related to modern sectors such as income earned from skills/professions, chicken farms, bees, plantations, property businesses, https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 2020 89 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) and securities such as stocks and others. zakat can be divided into two types, zakat fitrah and zakat maal. zakat fitrah is paid during ramadan for each individual while zakat maal is issued on the property owned. the conditions of wealth that must be paid are: 1) full property (almilkuttam), 2) developing, 3) simply nishab, 4) more than basic needs (alhajatul ashliyah), 5) free from debt, and 6) passed one year (al-haul) (qardhawi, 1999). the types of wealth that can be the object of payment of zakat maal can be distinguished into two, namely wealth in the traditional context (agricultural products, mineral resources, gold, jewelry, cash, business products, and livestock) and wealth in the modern context (income from assets, salaries, securities) (abu bakar, 2007; qardawi, 1999). b. micro, small and medium enterprises (msmes) according to the 1945 constitution, then strengthened through tap mpr no. xvi/mprri/1998 on economic politics in the framework of economic democracy, micro, small, and medium enterprises need to be empowered as an integral part of the people's economy that has the position, role, and strategic potential to realize a national economic structure that is more balanced, developed, and equitable. furthermore, the understanding of msmes is made through law no.9 of 1999, and because of the increasingly dynamic developmental circumstances changed to law no.20 article 1 of 2008 on micro, small and medium enterprises, the understanding of msmes is as follows: 1) micro enterprise is a productive business owned by individuals and/or individual business entities that meet the criteria of micro enterprises as stipulated in this law. 2) small business is a stand-alone productive economic enterprise, conducted by an individual or business entity that is not a subsidiary or non-branch company owned, controlled, or becomes a direct or indirect part of a medium or large business that meets the criteria of small business as referred to in this law. 3) medium enterprises is a stand-alone productive economic enterprise, conducted by an individual or business entity that is not a subsidiary or branch of a company owned, controlled, or part of either directly or indirectly with a small business or large business with the amount of net worth or annual sales proceeds as stipulated in this law. 4) usaha besar is a productive economic enterprise conducted by a business entity with a net worth or annual sales result greater than medium enterprises, which include state-owned or private national enterprises, joint ventures, and foreign businesses conducting economic activities in indonesia. 5) the business world is micro-businesses, small businesses, medium enterprises, and large businesses that conduct economic activities in indonesia and are domiciled in indonesia c. umkm criteria according to article 6 of law no.20 of 2008 the criteria of msmes in the form of capital are as follows: https://creativecommons.org/licenses/by/4.0/ potential of zakat on msme growth in indonesia's economic recovery 90 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1) micro business criteria are as follows: o have a net worth of at most rp50,000,000.00 (fifty million rupiahs) excluding land and buildings of businesses; o annual sales of at most rp300,000,000.00 (three hundred million rupiahs). 2) small business criteria are as follows: o have a net worth of more than rp50,000,000.00 (fifty million rupiahs) up to a maximum of rp500,000,000.00 (five hundred million rupiahs) excluding land and buildings of businesses; or o annual sales of more than rp300,000,000.00 (three hundred million rupiahs) up to a maximum of rp2,500,000,000.00 (two billion five hundred million rupiahs). 3) medium business criteria are as follows: o have a net worth of more than rp500,000,000.00 (five hundred million rupiahs) up to a maximum of rp10,000,000,000.00 (ten billion rupiahs) excluding land and buildings of businesses; or o annual sales of more than rp2,500,000,000.00 (two billion five hundred million rupiahs) up to a maximum of rp50,000,000,000.00 (fifty billion rupiahs). d. economic recovery the government regulation no. 23/2020 also stipulates that the government can conduct economic recovery programs through various means, namely allocating state spending by providing interest subsidies for groups of micro, small and medium enterprises affected by covid-19 and has attempted to restructure its credit to banks, apply for waivers to financing companies to obtain or obtain interest subsidy facilities for installment waivers, delays in repayment of principal debt or extended periods. as outlined above, to face threats that endanger the national economy and or financial system stability into law. therefore, the pen program is intended to help, encourage, increase the purchasing power of the people and restore the indonesian economy evenly and overall. focusing on the households of the people most vulnerable to the impact of covid 19 then on the business sector (msmes). the government will also focus on strategies to reduce the risk of economic contraction in the third quarter and the fourth quarter of 2020 by optimizing potential budgets that may not or may not be absorbed by re-allocation to programs that can be implemented and completed in 2020 so that the wheels of economic life are expected to spin again. national economic rescue program (pen) is referred to as follows: 1) budgeting spending on handling covid-19 2) social protection through social assistance to low-income communities 3) assisting local and sectoral governments with labor-intensive programs 4) msme interest subsidy 5) corporate financing 6) business incentives in the form of taxes https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 2020 91 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the national economic recovery program is expected to run by its objectives, pp no. 23/2020 regulates the principle of implementation of the pen program consisting of the principle of social justice as much as possible for the prosperity of the people. 3. research methodology this research is descriptive because it describes or describes the potential and realization of zakat acceptance in indonesia. the research approach used is the quantitative approach. the object of this research is the potential and realization of zakat acceptance in indonesia. the subject of this study was the acceptance of zakat from the people of indonesia. this study more specific to zakat maal or zakat on the property, especially zakat on income, because zakat fitrah is generally handed directly from muzakki to mustahiq without interference zakat institutions and has a time limit on collection and distribution. in this study, the data collection techniques used are documentation techniques. documentation techniques are used to obtain secondary data on the data of potential receipt of zakat and data on the realization of zakat receipts. data on the potential receipt of zakat using data on the number of working labor force, percentage of the muslim population and per capita income data of indonesian people. the data was obtained from the central statistics agency (bps), the ministry of religion, the national amil zakat agency (baznas), and also the national amil zakat institute (laznas) in 2011-2015. descriptive analysis is conducted to obtain an overview of the potential receipt of zakat and the realization of zakat receipts in indonesia. then modify the distribution of zakat to be channeled to productive things, in this case the msme program is expected to be able to direct the distribution of zakat can have a sustainable effect so that welfare can run onwards and be felt by many people. 4. discussion indonesia is the 4th largest country in the world. of the total population of indonesia about 48% are the labor force, namely, the working-age population (15 years and above) who work, have a job but are temporarily unemployed, and are unemployed (bps, 2016). msmes in indonesia has become an important part of the economic system in indonesia. this is because msmes are more business units than large-scale industrial businesses and have the advantage in absorbing more labor and also being able to accelerate the equalization process as part of development. based on this fact, msmes should be protected by laws and regulations related to operational activities and their development. several regulations have been issued by the government to protect msmes including the 1945 constitution is the foundation of the legal basis in indonesia article 5 paragraph(1), article 20, article 27 paragraph (2), article 33, law no.9 of 1995, decree of the people's consultative assembly of the republic of indonesia number xvi/mpr-ri/1998 on economic politics in the framework of economic democracy, micro, small, and medium enterprises need to be empowered as an integral part of the people's economy which has a position, role, and strategic potential to realize a more balanced, developed, and equitable national economic structure, presidential regulation no.5 of 2007 concerning small business credit program for msme operational financing, law no.20 of 2008 on the empowerment of msmes for economic workers in indonesia, and the latest is package 4 https://creativecommons.org/licenses/by/4.0/ potential of zakat on msme growth in indonesia's economic recovery 92 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) economic policy "people's business credit policy (kur) cheaper and broader" for msmes. this package was released by the coordinating ministry for economic affairs on thursday, october 15, 2015. the government hopes to launch this policy package as an instrument in addressing the need for the development of msmes. the government realizes that banking credit growth tends to slow in the past year. in mid-2014, credit annual growth was still 16.65% which subsequently fell to 11.6% at the end of 2014 and 10.4% at the end of the first semester of 2015. the trend also occurred in micro small and medium enterprises (msmes) loans that only grew by 9.2% (year on year) at the end of june 2015. the trend of slowing lending is certainly related to weakening economic growth. therefore, to encourage the economic wheel movement of the community, especially to msmes, the government provides greater interest subsidies for kur. based on the research of baznas, bogor agricultural university (ipb), and islamic development bank (idb), the potential of national zakat amounted to rp 217 trillion. this figure should have a tremendous impact on poverty alleviation efforts in indonesia. so in this case it takes planning how the program of distribution of zakat can be channeled in a directed manner and has a clear orientation where zakat will be distributed, not just on the distribution of a moment without any sustainable effect. the author has an idea about the system of distribution of zakat that can be channeled to msmes with a revenue-sharing system so that the zakat can later be re-collected and used for further purposes. in the end, the orientation of the idea of the zakat distribution program to msmes can have a sustainable impact. then on the next side poverty can be resolved, unemployment can be realized, and welfare can be felt by all people so that the expected benefits in the islamic economy can be realized. 5. conclusion indonesia is the country with the largest muslim population in the world. certainly, with the largest muslim population, indonesia also has a large zakat potential. based on the research of baznas, bogor agricultural university (ipb), and islamic development bank (idb), the potential of national zakat amounted to rp 217 trillion. msmes are one of the concerns of the government program seen from the national economic rescue, one of its programs pays attention to the development of msmes and is contained in presidential regulation no.5 of 2007 concerning the small business credit program for msme operational financing, law no.20 of 2008 on the empowerment of msmes for economic development in indonesia. so hopefully zakat can contribute more in all directions, in this case, msmes are the best sector developed through financing assistance from zakat. then it can affect poverty reduction, unemployment, and can prosper the community. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 2020 93 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) reference al qardawi, y., 1999. a comparative study of zakah, regulations, and philosophy in the light of qur'an and sunnah. translated by monzer kahf, 1. baznas. 2013. report on receipt of zakat national zakat agency amil zakat 2013. jakarta : baznas bps. 2016. indonesia statistics 2016. jakarta: bps firmansyah. 2009. potential and role of zakat in overcoming poverty, case study of west java and east java. jakarta: lipi kahf, m. 1987. zakah estimation in some muslim countries. jeddah: irti –idb. kurniawati. 2004. generosity of muslims: the potential and reality of zakat society in indonesia. jakarta: piramedia (pirac) ministry of cooperatives and smes. statistics of micro, small and medium enterprises year 2015. supriyanto.2006.empowerment of micro, small, and medium enterprises (msmes) as one of the poverty alleviation efforts. journal of economic education. vol.3.no(1). pp:1-16 sri nuhayati and wasilah. 2009. sharia accounting in indonesia. issue 2. jakarta: salemba four. tambunan, t. (2006, february 16). enterpreneurship development in indonesia. law of the republic of indonesia number 23 of 2011 concerning zakat management https://creativecommons.org/licenses/by/4.0/ the distortion of market prices in islamic microeconomic 77 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the distortion of market prices in islamic microeconomic achmad fadlil abidillah* sharia economics department, economic and business faculty, airlangga university, indonesia abstract this paper aims to describe how market price distortions are seen in islamic microeconomics. the method used in this research is a qualitative method. the data comes from documents in the form of books, journals, and other scientific writings. this paper contains several findings regarding some price distortions that can occur in the market such as supply-demand manipulation (bai' najasy, ikhtikar, and talaqqi rukban), tadlis or fraud, and taghrir or uncertainty. keywords: price distortions, manipulation, tadlis, and taghrir. 1. introduction market can be interpreted as a meeting place for sellers and buyers. in an economy, the ideal market is a perfectly competitive market, where prices are completely determined by supply and demand between sellers and buyers. however, the existence of a perfectly competitive market is often difficult for an economy to achieve. this condition causes the creation of a less competitive market. one form of less competitive market is monopoly, where there is no direct business competition. in a perfectly competitive market, equilibrium is established at the point where there is an agreement between the price and quantity supplied by sellers and those demanded by buyers. both parties are in a mutually beneficial condition, and neither party is harmed in the activity. the concept of islamic economy also regulates how an ideal market competes. the agreement on price and quantity is highly considered by market regulators. this agreement in islam is regulated so that it does not occur on the basis of coercion, fraud, or the error of the object of the transaction. therefore, islam guarantees the existence of a perfectly fair competition market, with perfect information, and the absence of dzalim or oppressed parties. the ideal conditions according to the above explanation can actually experience distortion. distortion is a disturbance in the market mechanism, so the market mechanism is interrupted and dropped out of its ideal condition. this disturbance occurs both from the side of the price agreement and from the unclear demand or supply. islamic economics identifies three forms of market distortion caused by sellers in the market: 1.) demand and supply engineering; 2.) fraud (tadlis); and 3.) obscurity (taghrir). engineering supply (false supply) in fiqh muamalah is better known as ikhtikar and tallaqi rukhban, while engineering demand (false demand) is called bai' najasyi. there are four kinds of fraud (tadlis), namely: quantity fraud, quality fraud, *corresponding author. email address: achmad.fadlil.abidillah-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:achmad.fadlil.abidillah-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 78 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) price fraud, and delivery time fraud. likewise ambiguity (taghrir), there are also four kinds: unclear quantity, unclear quality, unclear price, and unclear delivery time. both tadlis and taghrir both occur due to imperfect information (asymmetric information). 2. literature study market market is an economic element that can create benefit and welfare of human life. market in business reality is a mechanism that can bring together sellers and buyers to conduct transactions of goods and services, either production or price determination (nawawi, 2013). market is a place where people gather with aim of exchanging ownership of goods or services for money. market can also be interpreted as a place where people buy and sell which also means the power of supply and demand, a place for sellers who want to exchange goods or services for money, and buyers who want to exchange money for goods or services (untung, 2012; kadir, 2010). meanwhile, in the opinion of william j. staunton, market is a place for people who have a desire to be satisfied, money to buy, and a willingness to spend it. from this definition, there are three important elements in the market: 1.) people with all their desires; 2.) their purchasing power; 3.) willingness to spend it (siddiqi, 1991). trading is the most common activity in the market. hence, the qur'aan provides enlightenment on activities in the market with a number of signs and rules, with the aim of being able to uphold justice for the benefit of all parties, both individuals and groups. the qur'aan also explains that people who trade will not lose their charisma when carrying out economic activities in the market (nasution, 2006). in accordance with the instruction from allah swt in qur’aan surah al-furqaan verse 20: ۤ اِناُهۡم لَيَۡاُكلُۡوَن الطاعَاَم َويَۡمُشۡوَن فِى اَّۡلَۡسَواقِ َوَمۤا اَۡرَسۡلنَا قَۡبلََك ِمنَ َوَجعَۡلنَا بَۡعَضُكۡم ِلبَۡعٍض اۡلُمۡرَسِلۡيَن اَِّلا ا اَتَۡصبُِرۡونَ فِۡتنَة ﴾ 25:20﴿ ۚ َوَكاَن َربَُّك بَِصۡير means: “(o muhammad), we never sent any messengers before you but they ate food and walked about in the markets.29 we made some of you a means to test each by the other30 to see whether you remain patient.31 your lord is all-seeing” (25:20). market is a backbone of the community's economy, either people in the lower class or people in the upper class. all elements related to economic matters are in the market, ranging from elements of production, distribution, or elements of consumption. activities carried out in the market will basically involve producers and consumers. each of them has a very important role in the market. prices price is defined as amount of money that describes an exchange value of a goods. etymologically, price is defined as the comparative or exchange value for a commodity. price is always associated with the amount of money that must be paid as a purchase value for goods and services (chamid, 2010). many economists put forward a definition of price. according to syafei (2000), prices only occur in contracts, whether they are https://creativecommons.org/licenses/by/4.0/ the distortion of market prices in islamic microeconomic 79 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) less, greater, or equal to the value of the goods. according to him, the price is used as an exchange of goods agreed upon by the two parties to the contract. meanwhile, kotler (2005) argues that price is one of the marketing innovations that generate income. price is the easiest new element of marketing to adjust. price also communicates a company's intended value position to the market about its products and brands. from these price definitions, there are similarities, namely the price determines the value of an item or a service. while the elements of the marketing mix in question are price, product, promotion, and channel. price is the sacrifice that consumers must pay to be able to enjoy a desired product. the price in buying and selling is the price that has been agreed upon by the two parties who make the transaction on the basis of being both willing and without coercion from the transacting party. in the modern economic system, the level of commodity prices depends on various factors, one of which is the type of market. is it a perfect market, a free market, or a monopoly market? this relates to the economic system adopted by the state. countries that adhere to capitalist understanding will open the widest possible market for competition. so in this case the price in the market will be greatly influenced by supply and demand. meanwhile, a country that adheres to a socialist understanding of its economic system will show a form of market that is monopolized by the government because the government sets a reasonable price limit for certain commodities. in islamic jurisprudence, there are two different terms regarding the price of an item: as-ṣaman and as-si'r. as-ṣaman is a benchmark for the price of an item, while assi'r is the actual price in the market. fiqh scholars divide as-si'r into two types. first, prices that apply naturally, without government intervention. in this case, the merchant is free to sell the goods at a reasonable price, taking into account the profit. the government, at the price that applies naturally, should not intervene, because government intervention in this case can limit freedom and harm the rights of traders or producers. second, the price of a commodity is determined by the government after considering the capital and reasonable profits for traders and producers as well as looking at the real economic situation and people's purchasing power. the determination of government prices in the government is called at-tas'īr al-jabbari (utomo, 2003). ibn qudamah, ibn taimiyah, and ibn qoyyim divide the form of pricing into two categories. first, price fixing that is unfair (dzalim) and price fixing that is fair (‘adl). unfair (dzalim) pricing is price fixing by the government that is inconsistent and illogical with the conditions of the market mechanism due to the limited supply of commodities and the pace of goods or services, while the demand is very high and without regard to the benefit of the traders. according to them, the price fixing that is allowed is when there is a significant and drastic price spike according to accurate evidence caused by the actions of speculators and traders. however, the price fixing must also be carried out within fair limits, taking into account production costs, distribution costs, transportation, capital, and profit margins for producers and traders (anwar, 1997). https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 80 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) market mechanism market mechanism is the way where a market works, based on the existing market system. and the market system that we know today is a free market system that usually uses the principle of lassez faire et laissez le monde va de lui meme (let him do it and let it run, the world will take care of itself). that is, let the economy run normally without any government intervention, later there will be an invisible hand that will bring the economy towards equilibrium (karim, 2015). in conventional economic theory, the market mechanism is a way to achieve economic goals, which is welfare of the society, where the welfare of society is defined as material welfare. but the quality of human life is essentially not only determined by the ability to suffice material welfare, but also to suffice non-material welfare. islamic economics views that the market, state, and individual are in balance (iqtishad) there should be no distance between them, no one becomes dominant over the other. the market determines the price and method of production, there should be no disturbance that causes damage to the market balance. but in reality it is difficult to find a market that runs itself fairly. market distortions still occur frequently, which can be detrimental to various parties. the scholars in ancient times actually discussed a lot about islamic market mechanisms, including: a. abu yusuf abu yusuf was recorded as the earliest cleric who began to mention market mechanisms and at that time abu yusuf denied the public's understanding of the prevailing market mechanism, because in reality that understanding did not always occur. “sometimes food is plentiful but still expensive and sometimes food is very little but cheap” abu yusuf also denies that there is an inverse relationship between supply and price, which in fact does not always depend on demand but also on the strength of supply (karim, 2015). b. al-ghazali imam ghazali explicitly links all economic activities with the morals contained in the qur'an and hadith (based on the principle of islamic faith). in relation to market mechanisms, al-ghazali in ihya 'ulumuddin, has also discussed in detail about trade and markets. whose price always moves according to the forces of supply and demand. according to him, the market is part of the natural order. al-ghazali did not explain about supply and demand in modern terms, but in his writings he explained about the shape of the supply and demand curves. al-ghazali's thoughts on the law of supply and demand, for his time, were quite advanced and surprising. he seemed to understand very well about the concept of demand elasticity. imam al-ghazali, like other muslim scientists while discussing prices, always associated it with profits, but he has not linked the prices of goods with income and costs. for al-ghazali, profit is a compensation for the difficulty of the trip, business risks, and threats to the safety of the merchant (karim, 2015). https://creativecommons.org/licenses/by/4.0/ the distortion of market prices in islamic microeconomic 81 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) c. ibn taimiyah in a broader view, ibn taimiyah put the concept of market mechanisms in his book "alhisbah fil islam". he said that in a free (healthy) market, prices are influenced and considered by the forces of supply and demand. ibn taimiyah said that the rise and fall of prices is not always caused by the arbitrary actions of the seller. this could be due to a decrease in supply due to inefficiency or waste of production, a decrease in the number of imports of goods demanded, or also due to market pressures. therefore, if the demand for goods increases, while supply decreases, the price of goods will increase. in other hand, if demand decreases, while supply increases, the price will fall. a change in supply is described as an increase or decrease in quantity of goods offered, while a change in demand is determined by consumer tastes and income. the change of demand for goods was caused by several factors, namely the size of supply, the number of people who wanted the goods, tastes, the price of the goods themselves, and the prices of other related goods (karim, 2015). d. ibn khaldun ibn khaldun, in his monumental book al-muqoddimah, he divides goods into two categories, namely basic goods and luxury goods. if a city develops and the population increases, the prices of basic goods will decrease while the prices of luxury goods will increase. this is due to the increasing supply of food and other basic goods because these goods are very important and needed by everyone so that their procurement will be prioritized. meanwhile, the price of luxury goods will increase in line with the increase in lifestyle which results in an increase in demand for these luxury goods (karim, 2015). 3. research methodology this paper uses a descriptive qualitative method with a library research approach. qualitative research methods are research that produces findings that cannot be obtained through a statistical procedures or another quantitative procedures. in addition, qualitative research is also a research method that is able to produce descriptive data from the observed object (sidiq & choiri, 2019; nugrahani, 2014). the library research approach is a series of research activities related to the methods of collecting library data, reading and taking notes, and processing research materials. this approach is a research that utilizes library resources to obtain research data (zed, 2004). 4. discussion demand-supply engineering price distortion will lead to the failure to achieve an efficient and optimal market mechanism. one form of price distortion is market engineering. there are two models of market engineering that cause price distortions: demand and supply engineering. a. bai’ najasyi https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 82 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) bai' najasyi is a forbidden transaction, because in this transaction the seller asks other people to praise the goods he sells or bid at a high price, so that the original prospective buyer is attracted to the goods at the high price level, and then a false demand is created (karim, 2015). in addition, another form of bai 'najasyi is creating a goods scarcity issue. example of this case was during the 1997 monetary crisis, where rice and food were rumored to be in short of supply, so the prices increased. however, not long after, bulog informed that the rice stock in the warehouse was still sufficient. the prophet pbuh in a hadith prohibits the practice of bai 'najasyi: "let no one sell on the sale of his brother, do not do najasyi and do not become middlemen in the city to sell goods from the village" (narrated by bukhari and muslim). b. ikhtikar from said bin al-musayyab, from ma'mar bin abdullah al-adawi, that the prophet muhammad said: "it is not someone who does ikhtikar unless he is a sinner" (narrated by muslim, ahmad, and abu dawud). ikhtikar is actually different from the term monopoly or hoarding. karim (2015) explains that in islam, people are free to do business whether he is a sole seller (monopoly, because there are no other sellers) or there are other sellers in the market, as well as keeping stock of goods for inventory, it is legal. while ikhtikar is taking profits above the normal profits (dzalim), deliberately selling less stock of goods for very high prices. the economic term is monopoly's rentseeking. ikhtikar causes market prices to be distorted, so this practice is prohibited in islam. c. talaqqi rukban talaqqi rukban occurs where traders in the city market (who have complete information about the prices in the city market) intentionally buy goods from farmers or producers in the village (who do not have a complete information about the prices in the city market) in order to get cheaper prices. the prophet muhammad pbuh forbade this. from anas ra said: "the messenger of allah pbuh forbade the townspeople from selling the goods of the village people who had just arrived before arriving at the market, even though the person was his own brother" (narrated by bukhari and muslim). karim (2015) explains that the essence of this prohibition is that the actions taken by city traders are unfair because they do not inform the actual city market prices. looking for goods at low prices is not wrong, but if in a buying and selling transaction one party knows the market information perfectly while the other party does not, then there is injustice here. fraud (tadlis) the ideal condition in the market is when the seller and the buyer have the same information about the goods to be traded. if one of the parties in the sale and purchase transaction does not have the same information as the other party, it means that one of the parties has been harmed and a tadlis occurs. the qur'an clearly prohibits transactions that contain elements of fraud in any form against other parties. one of them is contained in qs. al-an'am verse 152 which means: "and complete the measure and the scales with justice. we do not carry a burden on a person but only his ability." https://creativecommons.org/licenses/by/4.0/ the distortion of market prices in islamic microeconomic 83 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) a. quantity fraud this tadlis occurs when a trader sells goods in small quantities at the agreed price level where the quantity should be more. for example, buying and selling oranges with an agreement of rp10,000,for 1 kilograms of oranges, but after purchasing it turns out that the orange scales did not reach 1 kilograms. this classic practice of manipulating scales and measurements has been going on for a long time, therefore, in islam it is known that there are institutions in the market whose function is to supervise this fraud. b. quality fraud this tadlis occurs when the seller intentionally hides defects or poor quality of the goods transacted with the buyer. for example, a used laptop seller sells his laptop at a price range of idr 4,000,000 for a laptop with equivalent qualifications, but he doesn't explain about the condition and performance of his used laptops, which apparently range from 75% to 90% condition. here the buyer is not able to distinguish the condition of each laptop and the seller does not provide an explanation about the condition of the used laptop he sells, so that in the end the buyer is persecuted and there is a tadlis of quality. c. price fraud ghaban by karim (2015) is described as buying and selling at a price higher than the market price due to buyer ignorance. an example is when a traveler has just arrived in a city, then he orders a taxi to go somewhere. the market fare for a taxi with such a distance is rp. 20.000,-. the taxi driver offered a fee of rp. 40.000,but after haggling, an agreement price of rp. 30.000,was reached. well, even though both parties are willing to deal, this is prohibited because the traveler is willing to be deceived. d. time fraud this tadlis occurs when the seller knows that he will not be able to complete or deliver the goods according to what is requested by the buyer, but he still agrees on the delivery time according to the buyer's request. this tadlis does not directly affect the price or quantity, but in a transaction, time is very important, so this is considered a fraud. uncertainty (taghrir) in terms of fiqh muamalah, taghrir means doing something blindly without sufficient knowledge, or taking one's own risk from an act that contains risks without knowing exactly what the consequences will be, or entering the arena of risk without thinking about the consequences. meanwhile, according to ibn taimiyah, gharar occurs when a person does not know what is stored for himself at the end of a buying and selling activity. just like tadlis, taghrir also occurs due to imperfect information, but the difference is that the imperfection of information on taghrir is faced by the two transaction actors. taghrir is generally described in terms of the various probabilities https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 84 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) (levels of probability) of a transaction. so it is possible for a transaction to produce events a, b, or c, each of this transaction has a varying probability, and if the probabilities of the three are added up, the result is equal to one (a+b+c=1). a. quantity uncertainty an example that is included in the quantity taghrir is the practice of bonding. for example, a farmer agrees to sell his harvest (quality a rice) to a middleman at a price of rp. 2,000,000, even though at the time of the agreement the farmer's rice fields cannot be harvested. this means that the sale and purchase agreement is carried out without specifying the quantity sold, even though the price has been set. so there is a quality taghrir. b. quality uncertainty an example of a quality taghrir is buying a calf that is still in its mother's womb. the agreement between the farmer and the buyer is an agreement on the price level which is not accompanied by an agreement on the condition of the calf, whether it will be born normal, born with defects, or stillborn. so there are three possible advantages. for example, breeders and buyers agree on a price of rp. 1.000.000,-. if the market for healthy young cattle is rp. 2,000,000, then the buyer makes a profit of rp. 1,000,000. then if the cow is defective, then the meat is only valued at rp. 500,000, and the buyer loses rp. 500,000, -. meanwhile, if the calf is stillborn, then the buyer loses idr 1,000,000. c. price uncertainty this taghrir occurs when there is an agreement on several prices in one transaction. for example, if in a sale and purchase transaction the price is determined at rp. 10,000,000, if paid in cash and the price is rp. 50,000,000, if it is paid in installments up to 1 year, then the seller and buyer agree. the question is what is the price of the item if it can be paid off tomorrow? what is the price of the item if it can be paid off in the third month? and what is the price of the item if it can be paid off 2 days before the end of the 5th month?. in this case, although the quantity and quality of the goods are clear, there is no certainty of price. neither the seller nor the buyer know how long this transaction will take to settle. d. time uncertainty an illustration of this model taghrir, for example, is when a loses his watch. b wanted a's watch which happened to be a limited edition. finally a and b make a deal. a sells his limited edition watch to b at a price of rp. 1,000,000, even though the original price of the watch is rp. 5,000,000, and the delivery time is when a's watch is found. this means that this transaction has an element of unclear delivery time, even though the quantity of goods is clear, the quality is also clear, and the price is clear, but this transaction does not result in an equilibrium and is a forbidden taghrir that distorts the market. the profit that b may receive if the watch is found is rp. 4,000,000, while b's loss if the goods are not found is rp. 1,000,000, -. https://creativecommons.org/licenses/by/4.0/ the distortion of market prices in islamic microeconomic 85 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 5. conclusion there are several economic practices that can distort prices. in general, they are: 1.) demand and supply engineering, 2.) fraud (tadlis), and 3.) uncertainty (taghrir). engineering supply (false supply) in fiqh muamalah is better known as ikhtikar and tallaqi rukhban, while engineering demand (false demand) is called bai' najasyi. there are four kinds of fraud (tadlis), namely: quantity fraud, quality fraud, price fraud, and delivery time fraud. likewise ambiguity (taghrir), there are also four kinds: unclear quantity, unclear quality, unclear price, and unclear delivery time. both tadlis and taghrir both occur as a result of imperfect information (asymmetric information). practices that can distort markets and prices must be eliminated from the economy so that the economy can run optimally and produce equitable welfare for the community. reference hakim, lukmanul. (2017). distorsi pasar dalam pandangan ekonomi islam. ekomadania. vol: 1, no: 1, hal: 1-15. karim, adiwarman a. (2015). ekonomi mikro islami, edisi 5, cetakan 7. rajawali pers: jakarta. muhammad. (2004). ekonomi mikro dalam perspektif islam, cetakan pertama. bpfe: yogyakarta. zed, mustika. (2004). metode penelitian kepustakaan. yayasan obor nasional: jakarta. nawawi, ismail. (2013). isu-isu ekonomi islam. cv. dwiputra pustaka jaya: jakarta. untung, budi. (2012). hukum dan etika bisnis. penerbit andi: yogyakarta. kadir, a. (2010). hukum bisnis syariah dalam al-qur’an: cetakan i. penerbit amzah: jakarta. .siddiqi, muhammad nejatullah. (1991). kegiatan ekonomi dalam islam. bumi aksara: jakarta. nasution, mustafa edwin. (2006). pengenalan eksklusif ekonomi islam. penerbit kencana: jakarta. chamid, nur. (2010). jejak langkah dan sejarah pemikiran ekonomi islam. pustaka pelajar: yogyakarta. syafei, rahmat. (2000). fiqh muamalah. pustaka setia: bandung. kotler, philip. (2005). manajemen pemasaran. gramedia: jakarta. utomo, setiawan budi. (2003). fiqih aktual (jawaban tuntas masalah kontemporer). gema insani: jakarta. islahi, abdul azim. (1997). konsepsi ekonomi ibnu taimiyah (terjemahan). bina ilmu: surabaya. https://creativecommons.org/licenses/by/4.0/ the effect of religiusity, halal label, brand image, and celebrity endorser on purchase decisions on shampo hijab products 119 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the effect of religiusity, halal label, brand image, and celebrity endorser on purchase decisions on shampo hijab products (the case of muslim consumer study in semarang) victorio aqsa falajabudien*, fuad mas'ud islamic economics, faculty of economics and business, university of diponegoro, indonesia abstract the demand for halal products is mandatory for every muslimah, including halal hijab shampo products. this study aims to determine the effect of religiosity, halal label, brand image, and celebrity endorser as independent variables in this study on purchasing decisions for hijab shampo products, which are the dependent variable. the data collection method was done through a questionnaire. the population in this study are muslim consumers who have bought and used shampo hijab products in the city of semarang. this study selected a sample of 100 respondents using a purposive sampling approach. the data are then analyzed using multiple linear regression analysis techniques. the results of the analysis show that the halal label and brand image variables have a positive and significant effect on purchasing decisions, while the religiosity and celebrity endorser variables have no significant effect on purchasing decisions. simultaneously, the results of the independent variable religiosity, halal label, brand image and celebrity endorser have a simultaneous effect on purchasing decisions. keywords: religiosity; halal label; brand image; celebrity endorser; purchase decision 1. introduction indonesia is a country with a fairly large population and one of the countries with the largest muslim population in the world, the number of muslims in indonesia reaches 207,176,162 people, out of indonesia's total population of 237,641,326 people, or around 87.1% of the total population. indonesia is muslim (bps, 2010). pew research center on religion & public life (2015) said that in 2010 indonesia was ranked first out of 10 countries with the largest muslim population in the world with a total of 209.120,000 people or 13.1% of the total muslims worldwide. the large number of indonesians who are muslim is certainly very influential on people's consumption. as a muslim, it is an obligation to consume products that are halal according to the established shari'a. it is important to pay attention to the halalness of a product in consuming these products to meet the needs of life.mas'ud (2017) explained that the halal aspects include delicacy, health, comfort, and safety. in connection with the halalness of a product, the indonesian government established the institute for the study *corresponding author. email address: aqsavictorio@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:aqsavictorio@gmail.com afebi economic and finance review (aefr) volume 5, no 2 (2020) 120 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) of food, drugs and cosmetics, the indonesian ulema council or commonly called the lppom mui in 1989. the potential of the halal hair care industry is growing, there are still many consumers who do not know the importance of the halal label of a product. noor's survey results inyuswohady, et al (2015) explained that the level of importance of halal hair care products is still at level two, while food and beverage products are at level one. source:yuswohady, et al (2015) figure 1. the importance of halal products for muslim consumers consumers' awareness about halal hair care is still smaller when compared to halal food products among muslim consumers. this rapid technological development has also had an impact on the fast moving consumer goods (fmcg) industry, one of which is the potential industry is the toiletries industry, where the industry produces daily needs for body cleaners such as soap, shampoo, toothpaste and other cleaners (sari & djatikusuma, 2012). advertising has a function to convey information about a product to the public, advertisements can be seen or heard anywhere because advertising is a form of promotion that exists in various places(alo liliweri, 1992). wicaksono (2007) revealed that the brand image of a product in purchasing decisions is an important thing, because the correct management of the brand image will have a positive effect on the sales of the product. in 2015, hijab care products also experienced a very rapid increase, demand increased by 400%, sales data for hair care products also increased from 2013 to 2015, where in 2013 it increased by 6.37%, then in 2014 it jumped to 43.2%, and in 2015 an increase of 12.47% (sa'diah, 2017). the ministry of industry noted that in 2019 the development of the toiletries industry market in indonesia reached an increase of up to 7.84%. the growth of the toiletries industry in 2020 is targeted to reach above 9% (ministry of industry, 2020). along with the increase in the level of demand for hijab care products, what hijab care manufacturers must do is to improve brand image, carry out promotions through celebrity endorsers, religiosity and include halal labels. https://creativecommons.org/licenses/by/4.0/ the effect of religiusity, halal label, brand image, and celebrity endorser on purchase decisions on shampo hijab products 121 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the results of previous research on brand image conducted by. the study shows that the halal label variable partially has a significant effect on the purchasing decision variable and the brand image variable also partially has a significant effect on the purchasing decision variable. the results show that the halal label, brand image, and product quality simultaneously have a positive and significant effect on purchasing decisions. the results of research conducted by imamuddin (2017) obtaining the results of the halal label has a significant effect on purchasing decisions, religiosity has a significant effect on purchasing decisions and collectively, the halal label and religiosity have a significant effect on purchasing decisions for instant noodles. this is inversely proportional to the research suggested byastogini et al., (2011) which states that partially religiosity has no and insignificant effect on purchasing decisions. the results of research conducted by bramantya & jatra (2016) shows the results that the celebrity endorser variable partially has a positive and significant effect on the purchasing decision variable and the brand image partially has a positive and significant effect on purchasing decisions, together the celebrity endorser variable and brand image have a significant effect on the purchasing decision variable. this result is not in line with the research conducted by munandar & chadafi (2016) stated that partially the celebrity endorser variable had no and insignificant effect on the purchasing decision variable. this research was conducted on hijab shampoo products where the researchers took samples from 3 products, namely sunsilk hijab, rejoice hijab, and sariayu hijab where sariayu is one of the local brands to be reckoned with, not only in indonesia but also whose products have been exported to other countries. however, sariayu in this case has not been included in the top brand category. while the two shampoo brands, namely sunsilk and rejoice, are included in the top 10 top brands of shampoo products in indonesia, as for the location, namely consumers in the city of semarang. semarang city is the capital of central java province. semarang city is one of the most developed cities on the island of java, with a fairly high population density. based on data from bps, in 2017 the population of semarang city was 1,610,605 people, while the number of muslims in semarang city in 2017 based on data from the ministry of religion of semarang city quoted in semarangkota.bps.go.id was 1,459,150 people. this shows that 90% of the population of semarang city is muslim. based on the description above, related to the marketing of sariayu hijab, sunslik hijab, and rejoice hijab shampoo, researchers are interested in knowing more and examining more deeply about the effect of the halal label, religiosity, brand image, celebrity endorser on purchasing decisions for female consumers wearing hijab in the city of semarang. https://creativecommons.org/licenses/by/4.0/ afebi economic and finance review (aefr) volume 5, no 2 (2020) 122 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2. literature study 2.1 purchasing decision purchase decision according to hasan (2013)is a decision to choose an action for several alternative choices in buying a product or service for consumption. purchase decision according to kotler, p. & armstrong (2008) is a process in which consumers recognize the problem, seek information about a particular product or brand, then evaluate how well each of these alternatives can solve the problem, then lead to a purchase decision. 2.2 religiosity jalaluddin (2010) states that religiosity is the consistency between belief in religion as a cognitive element, feelings towards religion as an affective element, and behavior towards religion, including the conative element. religiosity is an individual's commitment to his religion and this is reflected in his attitude and behavior (ramly et al., 2008). commitment to religion forms the basis of individual attitudes in making choices to consume something so as to guide them on the right path in making a decision(salman & siddiqui, 2011). 2.3 halal label ministry of religion (2003) said that the halal label is a written statement of halal on the part of the package issued on the basis of halal affirmation which is attached to the part of the product packaging and as proof of legal guarantee for use and consumption by the public in accordance with the provisions of islamic law and statutory regulations. yuswohady (2015) states that, the halal label is a guarantee provided by an authorized institution such as the indonesian ulema council (lppom-mui) food and drug research institute (lppom-mui) to ensure that the product has passed the halal test according to islamic law. 2.4 image brand kotler & keller (2009)argues that a brand image is a vision and belief that is hidden by a consumer as a reflection of an association that is held in the consumer's memory, and a process in which a person chooses about the process of that person selecting, organizing, and interpreting input information to create a meaningful picture. association has a role to form a brand, a brand image is a set of associations that consumers perceive a certain brand as known as a brand association, three indicators of brand image related to the brand association are as follows(kotler & keller, 2009): a. strength of brand associations (strength of brand associations) strength of association, this strength leads to advantages that are physical and not found in other brands. b. favorability of brand association (brand association excellence) the advantages of brand association relate to the ability of brands to be remembered by consumers such as ease of brand pronunciation. c. uniqueness of brand associations (brand association uniqueness) uniqueness relates to the ability of consumers to distinguish a brand among other brands in the same type of goods. https://creativecommons.org/licenses/by/4.0/ the effect of religiusity, halal label, brand image, and celebrity endorser on purchase decisions on shampo hijab products 123 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2.5 celebrity endorser shimp (2007) explained that an endorser is an advertising supporter or also known as an advertisement star to support a product. meanwhile, celebrities are figures (actors, entertainers or athletes) who are known for their achievements in fields different from the products they support. celebrities are seen as individuals who are liked by society and have attractive or attractive advantages that distinguish them from other individuals. meanwhile, according to(widyaningrum, 2016)celebrity is a spokesperson for a brand or brand. celebrities by definition are people who are widely recognized by the public, be they a movie star, singer, athlete, or model. according to belch (2004: 218) in (bramantya & jatra, 2016) the attributes of the endorser are: 1. credibility an endorser with more expertise is more likely to be trusted with persuasion than someone who is less skilled and cannot be trusted. 2. attractiveness endorsers with an attractive physical or non-physical appearance can support advertising 3. power power is the charisma emitted by sources to influence consumers, so that target consumers are influenced to buy products. 3. research methodology the dependent variable or dependent variable used in this study is the decision to purchase hijab shampoo. the independent variables or independent variables used in this study are religiosity, halal label, brand image, and celebrity endorser. the population used in this study is unknown in number, namely muslim consumers who have bought and used shampoo hijab products in the city of semarang. the sample used in this research is muslim consumer who has ever bought and used hijab shampoo products in the city of semarang. the sampling technique used in this study is a non-probability sampling technique with a purposive sampling approach, which is an approach that determines samples based on certain criteria or characteristics. the criteria referred to in this study are muslim respondents who become buyers and use hijab shampoo products in the city of semarang. the data collection method in this research is by distributing questionnaires and literature studies from journals, the internet, and books. the type of data in this study is quantitative. the data analysis used was the validity and reliability test, normality test, multicollinearity test, heteroscedasticity test, multiple linear regression, t test, f test, and the coefficient of determination (r2). 4. result and discussion 4.1 overview of respondents respondents in this study were muslim consumers who had bought and used hijab shampoo products (sunsilk hijab, rejoice hijab, sariayu hijab, etc.) in the last 1 month. in accordance with the sampling method used in this study, namely purposive sampling. https://creativecommons.org/licenses/by/4.0/ afebi economic and finance review (aefr) volume 5, no 2 (2020) 124 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) purposive sampling method with 100 respondents was used because, there are criteria proposed to be respondents, namely women who are muslim (muslim), have bought and used shampoo hijab and live in semarang. respondent description table 1 characteristics of respondents age no. age amount percentage 1 16-25 87 87 2 26-35 9 9 3 36-45 2 2 4 46-55 2 2 amount 100 100 source: primary data processed, 2020 table 4.2 below shows that the age of the most respondents is between 16-25 years old as many as 87 people, this is because the respondents who have bought and used hijab shampoo products in this study are mostly students and students, so the age range of respondents is students and students. table 2 respondent job characteristics no. profession amount percentage 1. student / student 87 87 2. entrepreneur 2 2 3. civil servants (pns) 1 1 4. private employees 1 1 5. others 9 9 amount 100 100 source: primary data processed, 2020. based on table 4.3, it can be seen that the most respondents were students with a total of 87 people as respondents in this study. this condition illustrates that the hijab shampoo product has popularity among students, it is undeniable that affordable prices are in great demand by the general public, especially students. table 3 respondent educational characteristics no. education amount percentage 1. high school 25 25 https://creativecommons.org/licenses/by/4.0/ the effect of religiusity, halal label, brand image, and celebrity endorser on purchase decisions on shampo hijab products 125 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2. s1 70 70 3. s2 4 4 4. s3 1 1 amount 100 100 source: primary data processed, 2020 table 4.4 shows that the most recent respondent's education is s1 with a total of 70 respondents followed by sma as many as 25 respondents, this is in line with the largest age group and most occupations, namely students or students aged 16-25 years. table 4 respondent income characteristics income per month amount percentage <idr 1,000,000 48 48 idr 1,000,000 idr 2,000,000 38 38 idr 2,000,000 idr 3,000,000 6 6 idr 3,000,000 idr 4,000,000 2 2 idr 4,000,000 idr 5,000,000 1 1 > idr 5,000,000 5 5 amount 100 100 source: primary data processed, 2020 the value of income per month obtained by respondents can be seen in table 4.5 below, as many as 48 respondents as the largest proportion had an income of less than idr 1,000,000 per month, followed by 38 respondents who had an income of idr 1,000,000 to idr 2,000 .000. this condition reflects that most of the respondents are students and college students where most of the income they get comes from their parents. this also reflects that the hijab shampoo product has consumers of all ages and incomes. 4.2 descriptive analysis descriptive analysis is a statistic that is used to analyze data by describing or describing the data that has been collected as it is without making general conclusions or generalizations (sugiyono, 2014). the average results for the descriptive analysis index can be seen in the following table: table 5 variable descriptive analysis variable index average category religiosity 95.1 high halal label 92.31 high brand image 87.24 high celebrity endorser 83.45 high buying decision 87.9 high source: primary data processed, 2020 https://creativecommons.org/licenses/by/4.0/ afebi economic and finance review (aefr) volume 5, no 2 (2020) 126 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 3 above shows that the average index value of all variables is included in the high or good category. this reflects that respondents gave a good assessment. 4.3 instrument test results validity test all results from testing the validity of all indicators used have a calculated r value greater than r table, namely 0.197 (r table value for n = 100), so all indicators are declared valid. reliability test the reliability test results explain that the cronbach's alpha value of all variables is greater than 0.60. based on this, it can be concluded that all variables are declared reliable. 4.4 classic assumption test normality test the results of the normality test using a histogram graph indicate that the distribution pattern that is formed is normal. with the histogram data it forms a bell. source: primary data processed, 2020 figure 2 detect normality using histogram normality test can also use the normal p-plot of regression standardized residual method. the test results show that the points are around the diagonal line and follow the diagonal line, so it can be concluded that the regression model is normally distributed. https://creativecommons.org/licenses/by/4.0/ the effect of religiusity, halal label, brand image, and celebrity endorser on purchase decisions on shampo hijab products 127 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) source: primary data processed, 2020 figure 3 detection of normality normal probability plot the normality test can also use the method through statistical analysis carried out with kolmogorov-smirnov a regression model is declared normal if the significance value is greater than 0.05. based on the test results, it is known that the value is 0.098> 0.05. so it can be concluded that the regression model is normally distributed. multicollinearity test table 6 multicollinearity testing variable tolerance vif religious 0.884 1,131 halal label 0.568 1,759 brand image 0.389 2,571 celebrity endorser 0.555 1,801 source: primary data processed, 2020 based on the multicollinearity test results above, it can be concluded that the independent variables used in this study are not correlated. it is known from a tolerance value greater than 0.1 and a vif value smaller than 10. https://creativecommons.org/licenses/by/4.0/ afebi economic and finance review (aefr) volume 5, no 2 (2020) 128 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) heteroscedasticity test source: primary data processed, 2020 figure 4 heteroscedasticity testing based on the results of the heteroscedasticity test which was carried out by looking at the scatterplot graph above, it can be seen that the distribution of points is above and below 0 on the y axis, does not gather only above or below, is not patterned, does not form wave patterns, is straight, or curved so that it can be interpreted that the data collected does not have the heteroscedasticity style. 4.5 hypothesis testing multiple linear regression test results in the consideration of multiple linear regression analysis, it can be included in the regression equation as follows: y = -0.057 x1 + 0.359 x2 + 0.341 x3 + 0.046 x4 the regression coefficient equation above can be interpreted as follows: 1. the regression coefficient on the religiosity variable (x1) has a negative effect on purchasing decisions (y) of -0.057, this indicates that if the religiosity variable increases by one unit, the level of decision to purchase hijab shampoo products has decreased by 0.057, assuming other variables remain ( do not change). 2. the halal label variable (x2) has a positive effect on purchasing decisions (y) of 0.359. this shows that if the halal label variable increases by one unit, the variable purchasing decision for hijab shampoo (y) products also increases by 0.359, https://creativecommons.org/licenses/by/4.0/ the effect of religiusity, halal label, brand image, and celebrity endorser on purchase decisions on shampo hijab products 129 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) assuming that the other independent variables of the regression model are fixed (unchanged). 3. the brand image variable (x3) has a positive effect on purchasing decisions (y) of 0.341. this shows that if the brand image variable increases, the decision variable for buying hijab shampoo products (y) will increase by 0.341, assuming that the other independent variables from the regression model are fixed (unchanged). 4. the celebrity endorser variable (x4) has a positive effect on purchasing decisions (y) of 0.065. this shows that if the celebrity endorser variable has increased, the variable purchasing decision for hijab shampoo products will also increase by 0.065, assuming that the other independent variables of the regression model are fixed (unchanged). partial hypothesis test results (t test) here is the df (degree of freedom) formula to find t table: df = (𝑛 𝑘) information: n: number of respondents k: the number of the dependent variable. based on the formula, df = 100 6 = 94. this shows that df is 94, and𝑎 = 0.05, then the t table is obtained at 1.985. table 7 t test results model t sig (constant) 0.953 0.343 religiosity -0.691 0.491 halal label 3,484 0.001 brand image 2,731 0.008 celebrity endorser 0.619 0.537 source: primary data processed, 2020 based on the results of the t test in table 4.17 it can be explained as follows: 1. the effect of religiosity on purchasing decisions based on the results of the t test in table 4.17, it shows that the t value of the religiosity variable (x1) shows a negative result of -0.691 with a significance level of 0.491. with t table 1.98522, then t count -0.691 <t table, using a significance limit of 0.05, the significance value is 0.491 <0.05. so it can be concluded that religiosity has a negative and insignificant effect on purchasing decisions, which means that hypothesis i is rejected. 2. effect of halal label on purchasing decisions based on the results of the t test in table 4.17, it shows that the t value of the halal label variable (x2) shows a positive result of 3.484 with a significance level of 0.001. with t table 1.98522 then t count 3.484> t table using a significance limit of 0.05, the significance value is 0.001 <0.05. so it can be concluded that the halal label has a positive and significant effect on purchasing decisions, which means that hypothesis ii is accepted. 3. the influence of brand image on purchasing decisions https://creativecommons.org/licenses/by/4.0/ afebi economic and finance review (aefr) volume 5, no 2 (2020) 130 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) based on the t test results in table 4.17, it shows that the t value of the brand image variable (x3) shows a positive result of 2.731 with a significance level of 0.008. with t table 1.98522 then t count 2.731> t table using a significance limit of 0.05, the significance value is 0.008 <0.05. so it can be concluded that brand image has a positive and significant effect on purchasing decisions, which means that hypothesis iii is accepted. 4. the influence of celebrity endorser on purchasing decisions based on the results of the t test in table 4.17, it shows that the t value of the celebrity endorser (x4) variable shows a positive result of 0.619 with a significance level of 0.537. with t table 1.98522, then t count 0.619 <t table, using a significance limit of 0.05, the significance value is 0.537 <0.05. so it can be concluded that the celebrity endorser has no partial and insignificant effect on purchasing decisions, which means that hypothesis iv is rejected. model feasibility test (f test) the following is the formula for the f table: df 1 = 𝑘 1 df 2 = 𝑛 𝑘 information: n: number of respondents k: the number of the dependent variable. then the values of the f table are: df 1 = 5 1 = 4 df 2 = 100 6 = 94 and𝑎= 0.05, then the f table is obtained at 2.31. it is found that the f value is 17.612 with a significance level of 0.000. f count 17.612 is greater than f table is 2.31 with a significance value of 0.000 which is smaller than 0.05. so it can be concluded that the independent variables, namely halal label, halal awareness, advertising, brand image and self-concept have a positive and significant effect simultaneously on purchasing decisions. determination coefficient test (r2) the result of the coefficient of determination test results in a value of r2 of 0.426. this shows that 42% of purchasing decisions are influenced by the variable of religiosity (x1), halal label (x2), brand image (x3), and celebrity endorser (x4), and the remaining 58% are influenced by independent variables not found in this study. 5. conclusion based on the results of data analysis and the discussion that has been described regarding the analysis of the effect of religiosity, halal label, brand image and celebrity endorser on purchasing decisions of muslim consumers in semarang for hijab shampoo products, the following conclusions can be drawn: https://creativecommons.org/licenses/by/4.0/ the effect of religiusity, halal label, brand image, and celebrity endorser on purchase decisions on shampo hijab products 131 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1. religiosity has no and insignificant effect on purchasing decisions for hijab shampoo products in semarang. 2. the halal label has a positive and significant effect on purchasing decisions for hijab shampoo products in semarang. 3. brand image has a positive and significant effect on purchasing decisions for hijab shampoo products in semarang. 4. celebrity endorsers have a positive and significant effect on purchasing decisions for hijab shampoo products in semarang. reference astogini, dwiwiyati, wahyudin, and dan siti zulaikha wulandari. 2011. “aspek religiusitas dalam keputusan pembelian produk halal (studi tentang labelisasi halal pada produk makanan dan minuman kemasan).” jeba. bps. 2010. “penduduk menurut kelompok umur dan agama yang dianut.” retrieved (https://sp2010.bps.go.id/index.php/site/tabel?tid=320&wid=0). bramantya, yan bayu, and made jatra. 2016. “pengaruh celebrity endorser dan brand image terhadap keputusan pembelian fakultas ekonomi dan bisnis universitas udayana ( unud ), bali , indonesia. hal ters.” 5(3):1745–71. hasan, ashfaq. 2013. marketing dan kasus kasus pilihan. imamuddin, m. 2017. “pengaruh label halal dan religiusitas terhadap keputusan pembelian mie instan mahasiswa iain bukittinggi t.a 2016/2017.” ekonomika syariah 1(1):34–47. indonesia, kementrian agama republik. 2003. pedoman labelisasi halal. jakarta: proyek pembinaan pangan halal direktorat jenderal bimbingan masyarakat islam dan penyelenggaraan haji. jalaluddin. 2010. psikologi agama. jakarta: rajawali pers. kotler, p. & armstrong, g. 2008. prinsip-prinsip pemasaran. edisi 12. jilid 1. jakarta: erlangga. kotler, philip, and kevin lane keller. 2009. manajemen pemasaran jilid 1. jakarta: erlangga. mas’ud, fuad. 2017. manajemen bisnis berbasis pandangan hidup islam. semarang: undip press. munandar, and chadafi. 2016. “pengaruh harga, celebrity endorser, kepercayaan, dan psikologi terhadap keputusan pembelian online shop di media sosial instagram.” visioner & strategis issn : 2338-2864 5(2):1–8. pew research center on religion & public life. 2015. “10 countries with the largest muslim populations, 2010 and 2050.” retrieved (https://www.pewforum.org/2015/04/02/muslims/). https://creativecommons.org/licenses/by/4.0/ afebi economic and finance review (aefr) volume 5, no 2 (2020) 132 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ramly, zulkufly, lau teck chai, and choe kum lung. 2008. “religiosity as a predictor of consumer ethical behaviour: some evidence from young consumers from malaysia.” journal of business systems, governance and ethics. sa’diah, fitriyana. 2017. “pengaruh inovasi produk dan kemasan produk terhadap niat beli konsumen pada produk shampo sariayu hijab (studi pada konsumen di wilayah surabaya selatan).” jurnal ilmu manajemen 05:1–8. salman, and siddiqui. 2011. “an exploratory study for measuring consumer awareness and perceptions towards halal food in pakistan.” 3:639–52. sari, dinny puspita, and edin s. djatikusuma. 2012. “pengaruh celebrity endorser ayu ting-ting dalam iklan televisi terhadap brand image produk mie sarimi.” jurnal manajemen dan kewirausahaan. shimp. 2007. perikanan promosi (aspek tambahan komunikasi pemasaran terpadu). sugiyono, prof. dr. 2014. metode penelitian kuantitatif, kualitatif,dan r&d. bandung: alfabeta. wicaksono. 2007. perilaku konsumen. jakarta: pt indeks. widyaningrum, premi wahyu. 2016. “pengaruh label halal dan celebrity endorser terhadap keputusan pembelian (survei pada koncumen wardah ponorogo).” jurnal ekonomi syariah indonesia volume vi(2):hal 83-98. yuswohady. 2015. marketing to the middle class muslimkenali perubahannya, pahami perilakunya, petakan strateginya. jakarta: gramedia pustaka utama. https://creativecommons.org/licenses/by/4.0/ determinants of cash holding from companies listed in jakarta islamic index 13 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) determinants of cash holding from companies listed in jakarta islamic index savilla azzahra, puji sucia sukmaningrum* sharia department, faculty of economics and business, airlangga university. abstract cash holding has a crucial role in every firm. there is a lot of consideration why companies keep their cash on hand. these situations depend on the motive of the firm and the condition that they have faced. this study aims to determine the effect of leverage, liquidity, growth opportunity, and firm size on firm cash holding. the sample of this study is listed firms from jakarta islamic index (jii) from 2012 to 2019. the research method is quantitative, using random effect model (rem). the number of observations reaches 80 data from the listed firm in jakarta islamic index from 2012-to 2019. sources of data were provided in the annual financial report from indonesia stock exchange (idx) or the official website. this study concludes that leverage and firm size have a negative significant effect on cash holding while growth opportunity and liquidity have an insignificant negative effect on firm cash holding. keywords: growth opportunity, leverage, liquidity, firm size, cash holding 1. introduction the firm policy can be generated from the components involved in the firm itself. the elements contained in the firm can be sorted from short-term to long-term. based on an empirical and theoretical basis, one of the crucial policies comes from liquidity management. companies that act as agents must allocate cash effectively and efficiently to generate maximum welfare for stakeholders. cossin and hcriko (2004) explain that cash ownership will result in optimal investment and avoid deficit price problems, but excess cash holdings are also considered inefficiencies. when a firm has a low level of cash holdings, liquidity risk will arise. sourced from susanto (2019), in 2018, the state court found 411 cases with a total of 297 pkpu with 194 bankruptcy cases. followed in 2019, the number of pkpu cases reached 425 cases and bankruptcy cases increased to 124 cases. if we look at the case, the number of companies that are unable to pay off their obligations tends to increase from year to year. an incident like this can be a consideration for agents to pay attention to liquidity management or cash management. bankruptcy often occurs due to the inability to pay off obligations due to an unwillingness to own cash. cash holding or cash ownership is explained by gill and shah (2011), namely money that is readily available for investment in physical assets and distribution to investors. with sufficient cash holdings, the firm can avoid the arrival of risks someday. allah has said in al qur'an surah al-hasyr verse 18 which means: "o you who believe, fear allah and let each one pay attention to what he has done for the next day (hereafter); and fear allah, allah knows best what you are doing. " (surah al-hasyr (59:18), interpretation of the indonesian ministry of religion). the verse contains a message to care about what has been done for tomorrow. this verse is in line with one of the firm's motives for cash holding, namely the precaution motive. based on the research of ali et al. (2016), the precaution motive reflects the idea that companies keep cash on the basis that they will fulfill future obligations when something is unpredictable. apart *corresponding author. email address: pujisucia@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:pujisucia@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 14 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) from precaution motives, according to shabbir et.al (2016) companies also have transaction motives. the purpose of this motive is cash storage for short-term needs. the firm's motive is of course related to the cash holding theory. the cash holding theory is closely related to the trade-off and pecking order theory. the trade-off theory recommends that companies consider the optimal level of cash holding by taking into account the marginal costs and costs of asset liquidity (al-najjar and belghitar, 2011). next up is the pecking order theory. this theory suggests a function of cash as a buffer for retained earnings and investment needs (myers, 1984). in practice, cash holding is used as a tool for investment, daily operational expenditures, and even business expansion. this study seeks to reveal the factors that influence cash holding, namely leverage, growth opportunity, liquidity, and firm size. leverage is a ratio to measure the amount of debt financed by assets (kashmir, 2019). in addition to leverage, the growth opportunity is symbolized by the firm's opportunity to achieve growth. this ratio explains the firm's ability to maintain its economic position amidst economic growth and the business sector. liquidity is used as a variable that reflects the firm's ability to pay off short-term obligations. meanwhile, firm size can be seen from the value of equity or the logarithm of total assets owned by the firm (riyanto, 1995). previous studies examined the determinants of cash holdings in leading countries such as switzerland (drobetz & grüninger, 2007), and turkey (uyar and kuzey, 2014). this study focuses on the state of indonesia, especially with a sample of companies recorded in the jakarta islamic index for the period 2012-2019. in addition, some inconsistencies in this research are interesting to explore, especially for application in indonesia. in leverage and cash holding, shabbir (2016) reveals a negative relationship, but gill and shah (2012) say the opposite results. furthermore, in a study of firm size in europe, ferreira, m.a., & vilela (2004) argued that firm size is negatively correlated with cash holding. however, in ali and ullah's research (2016) in pakistan, firm size has a positive relationship with cash holding. furthermore, in a study of firm size in europe, ferreira, m.a., & vilela (2004) argued that firm size is negatively correlated with cash holding. however, in ali and ullah's research (2016) in pakistan, firm size has a positive relationship with cash holding. 2. literature study a. trade-off theory this theory explains that the higher the firm makes debt funding, the higher the risk it will receive. modigliani and miller (1958, 1963), stated that the essence of the sacrifice of the cost of debt is the benefit output for the firm. a balance will be achieved if there are benefits and costs of debt in kind. b. pecking order theory pecking order is a firm choice regarding funding preferences to maximize shareholder welfare. this theory was first developed by myers and majluf (1984), that there are all steps a firm can take to expand funding. internal funding consists of issuing securities from internal funds, retained earnings, then low-risk debt, and finally equity. meanwhile, external funding is based on an internal funding deficit. c. cash holding kieso and e. donal in the book intermediate accounting explain cash is a liquid asset, a standard exchange media account, and an accounting measurement basis and all its items. cash https://creativecommons.org/licenses/by/4.0/ determinants of cash holding from companies listed in jakarta islamic index 15 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) holding is defined as cash on hand or readily available for investment in physical assets and distribution to investors. the keynesian postulation regarding the firm's motive for saving cash is as follows (isshaq & bokpin, 2009): make transactions (transactions), pay unexpected expenses (precautionary), needs of speculation (speculative), daniel and sibilkov (2009). d. leverage according to kashmir (2012: 151), leverage or solvency is a ratio that is used to measure the number of firm assets that are financed by debt. this comparison can be read as "how much debt expense incurred by the firm compared to assets". the majority of studies find that companies with high levels of leverage do not have a lot of cash reserves. in previous research, opler et al. (1999); ferreira & vilela (2004); ozkan & ozkan (2004); chen (2008); and drobetz & grüninger (2007) found no linear association between these two variables. leverage and cash holding have been studied in the case of turkey by uyar and kuzey (2014). the results reveal that leverage hurts the cash rate. this shows because companies with high leverage deal with financial difficulties and go bankrupt, and therefore they are expected to have more cash. consistent with the majority of studies, the hypothesis used is that there is a relationship between leverage and cash holding. h1: leverage has a negative effect on cash holding e. liquidity companies that can pay back their obligations are said to be in a liquid state. according to simamora in the book management accounting (2001: 524), liquidity is the firm's ability to meet its obligations in the near future. meanwhile, according to riyanto (1995), liquidity is the firm's ability to fulfill its financial obligations which must be fulfilled immediately. companies with smaller assets tend to have fewer cash reserves. the impact companies with more liquid assets are expected to have fewer cash deposits. according to ferreira and vilela (2004), their research shows that if a firm faces a cash shortage, its liquid assets can be easily liquidated so that they can be used as a cash substitute. therefore, several studies have found an opposite relationship between liquidity and cash holdings (gill & shah, 2012). h2: liquidity has a negative effect on cash holding f. growth opportunity growth opportunity is the opportunity for a firm to develop in the future (brigham and houston, 2001). companies with high growth characteristics will try to increase their fixed assets so that the firm needs more funds in the future with the hope of an increase in profits. therefore, companies with great opportunities tend to hold profits and add more funding from debt. myers and majluf (1984), state that the emergence of information asymmetry will have more impact on large companies. therefore, companies with high growth rates will certainly face higher external funding costs such as agency fees and bankruptcy costs. as a result, higher expected costs imply that the firm has a high chance of increasing cash holdings in order to prevent financial stress and bankruptcy. h3: growth opportunity has a positive significance on cash holding g. firm size firm size describes the size of a firm. brigham and houston (2010:4) firm size is defined as an indicator of the size of the business that can be predicted not only from total assets but also from total sales, total profits, and others. ozkan and ozkan (2004) argue that large-scale companies have more opportunities to obtain external funding. meanwhile, small companies. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 16 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) tend to suffer related agency fees or other high financial costs. this is due to the lack of access to financial markets, which results in high costs. therefore, the hypothesis is that the bigger the firm, the more cash holdings. this hypothesis is in line with previous research conducted by bates et al. (2009); kim et al. (1998); kim et al. (2011); ogundipe et al. (2012); and opler et al. (1999). h4: firm size has a positive effect on cash holding. h. jakarta islamic index (jii) the jakarta islamic index is a sharia stock index developed by the indonesia stock exchange and pt. danareksa investment management. based on the official explanation from idx, the jakarta islamic index is a sharia stock index launched by the idx in 2000. the constituency of the jakarta islamic index only consists of the 30 most liquid sharia stocks listed on the idx. idx determines the selection of islamic stocks twice a year in may and november. 3. research method based on the understanding of sugiyono (2013), this quantitative method is called a positivistic method because it is based on the philosophy of positivism. . this study uses the regression results of the random effect model. the random effect model is selected after passing several stages of the model suitability test. based on the hausman and lagrange multiplier tests, the random effect is the best model for this study because it has been proven through standard assumptions. the use of a random effect model is accessed through the gretl application to test the determinant influence of cash ownership in companies listed on the jakarta islamic index for the period 2012-2019. cshit = β0 + β1fszit + β2gthit + β3levit + β4lqdit + eit information: cshit: cash holding firm i in year t, β0: constant coefficient β1β5: the coefficient of each variable fszit: size of firm i in year t levit: leverage firm i in year t lqdit: the liquidity of firm i in year t gthit: growth opportunity for firm i in year t eit: the coefficient of error a dependent variable is a variable with the effect of other variables. cash holding which is proxied by the cash ratio represents the dependent variables. independent variables aim to detect effects that impact the dependent variable. there are leverage, growth opportunity, liquidity, and firm size .are the proxy of this research variable. table 1. formula of ratio dependent variable formula of ratio cash holding cash and equivalents / total assets independent variables leverage total debt / total assets https://creativecommons.org/licenses/by/4.0/ determinants of cash holding from companies listed in jakarta islamic index 17 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) ch gth lev firmsize liquid mean 0,13459 7,7393 0,42965 31,447 0,020526 median 0,12572 2,7884 0,42041 31,282 0,01703 minimum 0,018013 0,74009 0,15715 29,874 -0,27851 maximum 0,30892 82,444 0,74421 33,495 0,30908 std. 0,072252 15,564 0,1347 0,99557 0,13639 dev. 0,53684 2,011 0,31352 0,031658 6,645 c.v. 0,64581 3,2081 0,27102 0,39116 0,065226 skewness -0,06201 9,4509 -0,03423 -0,99875 0,22297 growth opportunity market price per share/book value per share liquidity current assetscurrent liabilities and total cash / total assets firm size ln (total assets) the type of data used is secondary data. the data source used is based on the firm's 2012-2019 annual financial statements that have met the sample criteria. the data was obtained from www.idx.co.id and the official website of each firm. the population is the accumulation of all samples used. the population used in this study is the jakarta islamic index 30. the technique used in sample selection is purposive sampling, which means the technique of determining the sample with consideration (sugiyono, 2013). according to subanti and hakim (2014) in the econometry book, panel data has several advantages, namely providing more data and can produce a greater degree of freedom due to the combination of time series and cross-sections. some of the advantages of using panel data have implications for the imperative to use classical assumption tests (verbeek 2000; gujarati, 2003; wibisono, 2005). 4. results and discussion the jakarta islamic index is a sharia stock index that is filtered with the highest market capitalization criteria on the stock exchange. this index was first established in 2000. this index consists of the 30 most liquid stocks and has the largest market share in each period. the sample of this study consisted of 10 companies for 8 years so it had 80 observations. this section aims to describe the description of each variable. the description of the variables listed in table 4.1 shows the minimum, maximum, mean, median, and standard deviation figures. the independent variables of this study are cash holding and the dependent variable is growth opportunity (gth), leverage (lev), liquidity (lqd), and firm size (size). table 2. statistical descriptive table source: gretl output results this table illustrates the distribution of numbers between variables. mean means the average value of a variable, the median is the middle value of the variable, and the minimum and maximum are the lowest and highest values of each variable. this analysis presents the results of the influence between the dependent variable on cash holding and the independent variables, namely leverage, liquidity, growth opportunity, and firm size. this test processing is carried out with a fixed-effect model. the software used is gretl for windows. in selecting the right regression model, this research goes through several test stages. this research data set passed the common effect model, fixed-effect model, and random effect model testing. the three models have been compared again through the chow test (test between https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 18 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) cem and fem), hausman test (test between brake and fem), and lagrange multiplier (test between cem and brake). based on this series of tests, the most appropriate model to use is the random-effects model. table 3. results of the random effect model analysis joint test on named regressors asymptotic test statistic: chi-square (4) = 14,8753, with p-value = 0,00496695 * at the 5% level of significance source: gretl output results the table above provides some key information on the effect of each variable regarding the t-test, f test, and the coefficient of determination. the t-test is used to see the partial effect where the level of significance reflects the strength of a variable. variables that have a probability below the level of significance mean that they have a strong influence on the independent variable. the dependent variables leverage (lev), liquidity (lqd), growth opportunities (gth), and firm size (fsz) have different effects on cash holding. the next variable is growth opportunities (gth) which have a coefficient of -0.00007 and a significance value of 0.2798. these results illustrate that growth opportunities have a negative and insignificant effect on cash holding. these results explain that h0 is accepted and h1 is rejected. in addition, the leverage variable (lev) has a negative coefficient of -0.22 and a significance value of 0.0161 <0.05, which means that h1 is accepted while h0 is rejected. this explains that the effect of leverage can reduce cash holding and have a significant impact. on the other hand, the firm size variable has a negative coefficient of -0.03 with a significance level of 0.0123 <0.05, which means that h1 is accepted and firm size has a significant effect on cash holding. finally, the liquidity variable (lqd) with a negative coefficient of -0.163 and a significance level of 0.126. this is not significant for cash holdings. random-effects (gls), using 80 observations included 10 cross-sectional units time-series length = 8 dependent variable: ch coefficient std. error z p-value const 1,32933 0,432021 3,077 0,0021 *** gth −0,000744314 0,000688753 −1,081 0,2798 lev −0,228268 0,0948784 −2,406 0,0161 ** firmsize −0,0345832 0,0138217 −2,502 0,0123 ** liquid −0,163770 0,107266 −1,527 0,1268 mean dependent var 0,134587 s.d. dependent var 0,072252 sum squared resid 0,337274 s.e. of regression 0,066617 log-likelihood 105,2403 akaike criterion −200,4807 schwarz criterion −188,5705 hannan-quinn −195,7056 rho 0,292294 durbin-watson 1,187267 https://creativecommons.org/licenses/by/4.0/ determinants of cash holding from companies listed in jakarta islamic index 19 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 67.85 52.02 97.71 82.39 89.81 109.47 68.53 33.72 1.52 1.3 1.36 1.54 1.49 1.42 1.06 1.060 10 20 30 40 50 60 70 80 90 100 110 120 2012 2013 2014 2015 2016 2017 2018 2019 growth cash holding the coefficient of determination or r-square aims to see how much the cash holding factor can be explained by the independent variable. the total coefficient of determination is 0.33 where leverage, liquidity, growth opportunities, and firm size can explain the contribution to cash holding. the variability of cash holding can explain its effect on cash holding by 33% while 67% is explained by exogenous variables that are not included in this study. the f test of this study has a probability value of 0.004 <0.05 where the test used is a representation of the simultaneous significance effect on cash holding. the results of significance confirm that each dependent variable has a simultaneous or simultaneous effect on the independent variable, namely cash holding. the growth opportunity coefficient has a value of -0.0007 and has a significant level of 0.2798. the regression results confirm that there is no significant effect on cash holding. figure 1. diagram between growth opportunity and cash holding growth opportunity reflects that there is no significant effect on the sample companies. this result is supported by research in the country of kenya by nduati and gregory (2015) and research in the country of nigeria by ogundipe (2012). in addition, basheer (2014) states that growth opportunity has an insignificant effect on cash holding. bigelli and sánchez-vidal (2012) show that companies will avoid using cash in investment opportunities. market capitalization is defined as growth opportunities does not have a significant impact on cash. market capitalization considered a reflection of the value of a firm does not reflect the amounts of cash holdings a firm has. companies are more interested in investing funds than holding large amounts of cash. the leverage variable is proxied by the debt-to-asset ratio which has a coefficient of 0.22 with a significance value of 0.0161 <0.05. this confirms that there is a negative influence between leverage and cash holding. there is an assumption that increasing debt will certainly reduce cash holdings from year to year. it is possible for the firm to have an obligation to provide cash funds as a payment of obligations that are due each year. this is what causes cash ownership to decrease. on the other hand, the results of this study indicate that there is a negative but insignificant effect. consistent with the research of opler (1999), chen (2008), and ozkan and ozkan (2004) that the leverage variable has a negative result on cash holdings. payable can be used as a substitute for cash and marketed securities. riyanto, b. (2008). base a negative coefficient can also indicate that the cost of holding cash will be greater than that of issuing debt. therefore, h1 is accepted with the result that leverage has a negative effect on cash holding. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 20 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 0.25 0.32 0.28 0.27 0.09 0.14 0.17 0.13 1.52 1.3 1.36 1.54 1.49 1.42 1.06 1.06 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2012 2013 2014 2015 2016 2017 2018 2019 likuiditas cash holding the liquidity variable (lqd) with a negative coefficient of -0.16 and a significance level of 0.126. this variable does not have a significant effect on cash holding due to fluctuations throughout 2012-2019. the following is an overview of the liquidity ratios and cash ratios. figure 2. diagram between liquidity and cash holding the existence of a pattern that tends to change illustrates that the effect of liquidity and cash holding does not have a significant effect. the regression results describe that there is no effect of current assets on cash holdings. the existence of current assets with different components has no effect on cash. in addition, data fluctuations between liquidity and cash holdings do not have a unidirectional pattern. the firm size coefficient is -0.003 with a significance level of 0.0123 <0.05. this confirms that there is a negative influence between cash holdings and business size. companies that have a large size tend to have an inverse comparison. miller and orr (1996) say that the demand for money can be influenced by the size of the firm and the scale of the firm's financial management. fereira and vilela (2004), drobertz and gruninger (2007), and najjar and belghitar (2011) say that firm size reflects a negative result on cash holdings. the sample firms have a firm size with a minimum of 29.8 and a maximum of 33.49. the sample firm with the minimum size has cash of as much as 2.44% while the firm with the maximum size has as much as 8.97% cash. in a firm with a minimum size, the firm keeps current assets at 53% and 45% in fixed assets. in addition, the characteristics of large companies are more interested in saving funds in current assets as much as 37.96% and 53% in fixed assets. this range reflects that companies that have a large size have a preference for investing in fixed assets for expansion. the firm also balances its balance sheet by having new current assets store cash. the assumption is that the firm's desire to increase market share is a reflection that firm size has a negative effect on cash holdings. 5. conclusion this study tested 4 variables, namely leverage, liquidity, growth opportunities, and firm size on cash holding. leverage has a significant and negative result because it is possible for the firm to pay off debt thereby reducing cash. on the other hand, liquidity also has an insignificant effect because companies tend to use current assets as a substitute for cash. growth opportunities also provide negative but insignificant results, it is possible that an increase in market capitalization can increase or decrease cash. firm expansion is useful for reaching new targets in order to increase profit, but the firm must sacrifice cash. the last variable is the firm https://creativecommons.org/licenses/by/4.0/ determinants of cash holding from companies listed in jakarta islamic index 21 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) size which has a negative and significant effect. companies that have a large size tend to have flat costs that can get funds that are not related to the size of the loan (peterson, 2003). this research is expected to facilitate parties for further recommendations such as firm managers and academics. the firm needs to conduct a review related to the additional debt policy because it can reduce cash. in addition, companies also need to pay attention to the fact that the larger the firm the more they pay attention to cash holdings. cash ownership also needs to be balanced with other assets and liabilities in order to avoid bankruptcy and difficulty in paying current liabilities. recommendations for further research are the addition of factor aspects that can add to the explanation of determining cash ownership. one of the researchers' recommendations is the addition of the dividend payment ratio, net working capital, and the ceo board structure. on the other hand, the addition of aspects in terms of sharia can also be a concern. variables that can be used such as sharia compliance, good governance, zis ratio, and so on are related to sharia. the last one is a factor in terms of macroeconomics that is also interesting to research and can be taken into consideration. examples of variables that can be used for future research are inflation, interest rates, etc. reference ali, shaukat., & ullah, m. (2016). determinants of corporate cash holdings "a case of textile sector in pakistan." international journal of economics & management sciences, 05 (03). https://doi.org/10.4172/2162-6359.1000334 basheer, m.f. (2014). impact of corporate governance on corporate cash holdings: an empirical study of firms in the manufacturing industry of pakistan. international journal of innovation and applied studies; rebates 7 (4), 1371-1383. baskin, j. (1989). an empirical investigation of the pecking order hypothesis. financial management. vol 18., 26-35. bigelli, m., & sánchez-vidal, j. (2012). cash holdings in private firms. journal of banking and finance, 36 (1), 26–35 brigham, e. f. (2006). fundamentals of financial management: fundamentals of financial management (10th ed). jakarta: four salemba. cossin, d. a. (2004). the benefits of holding cash: a real options approach. vol. 30 no. 5, pp. 29-43. chen, k. c. w., and b. k. church. 1992. "default on debt obligation and the issuance of going-concern report". auditing: a journal of practice & theory, fall. 30 49 denis, d. j., and v. sibilkov. 2010. financial constraints, investment, and the value of cash holdings. review finance study 23: 247-269 drobetz, w., & grüninger, m. c. (2007). corporate cash holdings: evidence from switzerland. financial markets and portfolio management, 21 (3), 293–324. https://doi.org/10.1007/s11408-007-0052-8 fatwa dsn / 124 / dsnmui / xi / 2018 ferreira, m. a., & vilela, a. s. (2004). why do firms hold cash? evidence from emu countries. european financial management, 10 (2), 295–319. https://doi.org/10.1111/j.1354-7798.2004.00251.x gill, a., & shah, c. (2011). determinants of corporate cash holdings: evidence from canada. international journal of economics and finance, 4 (1), 70–79. https://doi.org/10.5539/ijef.v4n1p70 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 22 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) isshaq, z. & bokpin. (2009). corporate liquidity management of listed firms in ghana. asia pacific journal of business administration, 1 (2), 189-198. ministry of religion. cited february 24, 2021, from https://tafsirweb.com/10816-quran-suratal-hasyr-ayat-18.html. ministry of religion myers, stewart c .; majluf, nicholas s. (1984). "corporate financing and investment decisions when firms have information that investors do not have". journal of financial economics. 13 (2): 187–221. doi: 10.1016 / 0304-405x (84) 90023-0. hdl: 1721.1 / 2068 nduati, k.s, gregory.m. (2015). determinants of corporate cash holdings: evidence from private manufacturing firms in kenya. international journal of advanced research in management and social sciences 4 (6). ogundipe, et.al (2012). cash holding and firm characteristics evidence from nigerian emerging market. journal of business, economics & finance (2012), vol. 1 (2). opler, t., pinkowitz, l., stulz, r. et al. (1999) the determinants and implications of corporate cash holdings, journal of financial economics, 52, 3–46. ozkan, a., & ozkan, n. (2004). corporate cash holdings: an empirical investigation of uk companies. journal of banking and finance. simamora, henry. (2012), management accounting. jakarta: star gate publisher https://creativecommons.org/licenses/by/4.0/ the comparison of islamic governance disclosure practices in indonesian sharia banks 123 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the comparison of islamic governance disclosure practices in indonesian sharia banks ahmad nurkhin1)*, agus wahyudin2), fachrurrozie3), anna kania widiatami4), puji novita sari5) 1, 2, 3, 4, 5fakultas ekonomi, universitas negeri semarang, indonesia abstract islamic banks in indonesia (bank syariah mandiri, bni syariah dan bri syariah) have merged in 2021 to become bank syariah indonesai (bsi). this study aims to compare the practice of islamic governance disclosure (igd) of idonesian islamic banks before the merger period. a descriptive quantitative research approach was used in this research. the sampling method used was purposive sampling with the criteria of three islamic banks that carried out a merger in 2021. islamic banks which were the samples of this study were bank syariah mandiri, bri syariah and bni syariah. the observation period is 5 years (20142018). the documentation method is used for data retrieval using the check list tool. content analysis method is used to analyze the data that has been obtained. this method is used to determine the igd index which consists of three main indices, namely the sharia supervisory board (dps) disclosure index, the dps report disclosure index, and the zakat disclosure index. the results showed that the three islamic banks had a fairly good igd index for 3 years. bank syariah mandiri and bni syariah show the highest and most consistent igd index for five consecutive years compared to bri syariah. the igd index for bank syariah mandiri and bni syariah are the same in 2015-2017. the igd index of bri syariah has fluctuated over the past five years. keywords : islamic governance disclosure, sharia supervisory board, islamic bank 1. introduction good corporate governance (gcg) is a mechanism intended for corporations to improve performance. wibowo (2010) argued that gcg was needed to provide a significant impetus to create an efficient, transparent and consistent market with applicable regulations. several researchers have conducted studies on gcg disclosures (gandia, 2008; green & graham, 2015; hassan, 2012; ntim et al., 2012; parsa et al., 2007; qu & leung, 2006; tsamenyi et al., 2007). qu & leung (2006) have conducted research to reveal gcg disclosure in public companies in china. tsamenyi et al. (2007) examined the factors that influence the disclosure of gcg. he found that ownership structure dispersion of shareholding, and firm size had a significant effect on gcg disclosure. parsa et al. (2007) examined the extent of compliance with governance regulations by small and medium enterprises (smes) listed on the alternative investment market (aim). on average, about 50% have disclosed governance items by msmes registered with the aim. gandia (2008) examined the practice of gcg disclosure through the internet in public companies in spain. companies that have the highest score on the aspect of transparency prefer to use the internet as a medium for disclosing corporate governance information. ntim et al. (2012) developed a cg disclosure index consisting of 50 cg provisions from the 2002 king report. hassan (2012) examined the extent of corporate governance reporting on companies. registered in the united arab emirates (uae). overall, the extent of governance disclosures was found to be the same for all economic sectors in the uae. within the framework of companies in indonesia, djakman, siregar, & harahap (2017) examined the *corresponding author. email address: ahmadnurkhin@mail.unnes.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:ahmadnurkhin@mail.unnes.ac.id afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 124 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) practice of gcg disclosure, particularly in the disclosure of audit committees and internal audits. the results of his research showed that the disclosure of these two things was still relatively low in 2012 and 2013. islamic banks also implement gcg in their operations. some researchers call it shari’ah corporate governance or shari’ah governance (ginena, 2014; z. hasan, 2010; muneeza & hassan, 2014). other researchers introduced it with the term islamic corporate governance (bhatti & bhatti, 2010; choudhury & alam, 2013; choudhury & hoque, 2006; elghuweel et al., 2017). wibowo (2010:127) stated that good governance was a very universal principle, therefore it becomes a reference for all religious people, and can be found in cultures anywhere. the thing that distinguishes gcg practice in a country is gcg as a system, due to the fact that it must always adapt to the legal system, the state and development of progress as well as the culture of the nation itself. shari’ah corporate governance differs from conventional gcg as a result of the fact that the objectives of both are very unique (alnasser & muhammed, 2012; muneeza & hassan, 2014). within the framework of shari’ah corporate governance, decision making for companies must be based on shura or consultation (muneeza & hassan, 2014). hassan (2009) proposes two structures in shari’ah corporate governance, namely the monotheism (tauhid) and shura approach and the stakeholder approach. similar to the implementation of gcg in conventional banks, the disclosure of gcg for islamic commercial banks is guided by bank indonesia regulation number 11/33/pbi/2009 which is still valid today (ardhanareswari, 2017). darmadi (2013) was the first researcher to try to uncover the practice of gcg in islamic bank in indonesia by using the corporate governance disclosure index (cgdi). the results indicated that bank muamalat and bank syariah mandiri, which were the two largest and oldest islamic banks, have the highest scores than other islamic banks. disclosure regarding the board of directors and risk management was found to be very high. meanwhile, disclosures regarding internal control and committees tend to be weak. abdullah, percy, & stewart (2013) compared sharia disclosure within the framework of the shari’ah governance system in islamic bank in indonesia and malaysia with the observation period in 2009. ardhanareswari (2017) conducted research on two sharia commercial banks, namely bni syariah and bri syariah. she found that the implementation of bri syariah’s gcg was in the good category. likewise with disclosures regarding gcg. howver, there were several indicators that have not been disclosed in the gcg report. this study seek to compare the implementation of igd in islamic banks in indonesia. this research was a continuation of previous research with a more recent observation period, namely in 2014-2018. the scope of disclosure of islamic governance is focused on dps activities, zakat performance, and disclosure of non-halal income. igd practices that have been implemented in sharia banks in indonesia (bri syariah, bank syariah mandiri and bni syariah). 2. literature review agency theory and good corporate governance agency theory describes that there is a relationship between one party giving authority to another party to complete an activity by delegating decision making (jensen & meckling, 1976). in practice, there are often unequal interests between the recipient of the authority (agent) and the giver of authority (principal), which will eventually lead to agency conflicts. jensen & meckling (1976) argue that companies should separate the management function from the ownership function to minimize agency conflicts. meanwhile, winarno (2010) https://creativecommons.org/licenses/by/4.0/ the comparison of islamic governance disclosure practices in indonesian sharia banks 125 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) revealed that the government, business world and society are interrelated parties in the practice of good governance. therefore, gcg practices should involve these three parties. shleifer & vishny (1996) explained corporate governance as a set of practical rules that can protect investors from behavior that is not in accordance with the interest of investors from the company’s management. gcg is a mechanism to protect shareholders from the tendency of management to make decisions that only benefit themselves. meanwhile, hasan & butt (2009) argue that gcg can be used to create value for shareholders. gcg is a process that can ensure that the company is better managed and will be able to provide a protective impact for all stakeholders. concept of islamic governance disclosure the development of gcg is also important for companies that run their business based on islamic sharia. muneeza & hassan (2014) revealed that shari’ah corporate governane was developed from islamic law. the goal is not only to work for the benefit of shareholders and stakeholders, but also to thank god and benefit the community. ginena (2014) stated that “sharı‘ah governance is the overall system that manages the conformity of islamic banks and ifis to the precepts of sharı‘ah pertaining to commercial transactions in all activities”. the model of shariah governance in islamic financial institutions does not yet exist (z. hasan, 2010). there are at least five (5) models for implementing the shariah governance, namely reactive approach (applied in uk and turkiye), passive approach (applied in saudi arabia), minimalist approach (applied in bahrain, dubai, and qatar), pro-active approach (applied in malaysia), and the interventionist approach (applied in pakistan). several international institutions issue standards and principles regarding gcg, such as the oecd, ifsb (islamic financial services board), ifi (islamic financial institution), and aaoifi (accounting and auditing organization for islamic financial institution). aaoifi adopted the statement on governance principles for islamic financial institutions (ginena, 2014). the implementation of gcg for sharia commercial banks in indonesia including its disclosure, refers to bank indonesia regulation number 11/33/pbi/2009 which came into force as of januari 1, 2010. based on the description above, it can be concluded that the islamic governance disclosure (igd) referred to in this study is the disclosure of the implementation of gcg in sharia commercial banks based on applicable regulations. the dimension that distinguish between gcg and igd disclosures regarding the existence of the sharia supervisory board or dewan pengawas syariah (dps), zakat performance, non-halal income, and other disclosure dimensions. 3. research methodology population and research sample this study was a quantitative descriptive research aimed at comparing the practice of implementing islamic governance disclosure (igd) in indonesia sharia commercial banks. the population in this study were indonesian sharia commercial banks which had the largest assets compared to other islamic banks. the sampling method used a purposive sampling method with the criteria of three sharia commercial banks and the annual report was available online for five years of observation. the three sharia commercial banks also had the largest assets and showed the best profitability performance than other islamic banks for approximately 5 years. focus of research https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 126 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the dimensions of the igd were developed from the research of abdullah et al. (2013) and based on bank indonesia regulation number 11/33/pbi/2009. he divided the igd as sharia governance disclosure and classified it into four namely, dps disclosure index, dps report disclosure index, zakat disclosure index, and disclosure regarding non-halal income. the disclosure index regarding the dps consists of 9 disclosure items. the dps report disclosure index consists of 18 disclosure items. the zakat disclosure index consist of 6 disclosure items. table 1 below shows a description of the igd measurements. table 1 description of the dimensions of islamic governance disclosure no. disclosure dimension operational indicator 1. general conclusion general conclusions from the results of self-assessment on the implementation of gcg sharia commercial bank (scb) 2. disclosure regarding sharia supervisory board or dewan pengawas syariah (dps) a. report of dps b. duties and responsibilities c. renumeration (award/honorarium) dps member background d. membership and certification e. educational background f. experience activities carried out g. dps meeting h. sharia audit i. sharia compliance procedures 3. dps report disclosure a. title b. report recipient c. opening paragraph (clear purpose of the agreement) d. scope of paragraphs describing the nature of the work performed e. a clear statement that islamic bank management is responsible for complying with sharia rules and principles f. confirmation that dps has conducted appropriate test, procedures and reviews generally transactions and agreements compliance with sharia basis for investment acoount allocation income (legal / prohibited) zakat compliance g. sharia opinion includes matters relating to comtract, transactions and agreements fair profit and loss allocation income (legal /prohibited) zakat h. report on violation of sharia compliance (if any) i. the dps report must be signed by all dps members j. report date https://creativecommons.org/licenses/by/4.0/ the comparison of islamic governance disclosure practices in indonesian sharia banks 127 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) data collection and analysis techniques the data obtained was using the documentation method. the sheet of documentation was developed from previous researchers to describe the application of islamic governance in indonesia sharia banks. the data analysis method used was descriptive statistical analysis and content analysis. it was used to describe islamic governance disclosure in the form of mean, minimum, maximum, and other data. meanwhile, content analysis was developed from applicable regulations and opinions from previous researchers. information on islamic governance disclosure was obtained from the annual report of each sharia commercial bank for three years. there were several sections, namely dps report and dps opinion, dps profile, the dps section of the corporate governance or good governance chapter, and the corporate social responsibility (csr) section. data was also obtained from disclosures on the renumeration and non-zakat income sections. each sharia commercial bank had different annual report characteristics, including disclosures regarding dps. information regarding zakat was obtained from the csr reporting section. 4. research results and discussion this research has been conducted to describe the comparison of islamic governance disclosure (igd) practices at three indonesian sharia banks. the observation period was five years, namely 2014-2018. the comparison of igd practice can be seen in figure 1 and table 2 below. figure 1. the comparison of igd practices in indonesian sharia banks no. disclosure dimension operational indicator additional disclosure: dps endorsement on financial statements 4. zakat disclosure a. statement of sources and uses of zakat b. policy on zakat c. amount of zakat d. beneficiaries of zakat e. dps endorsement on the calculation and distribution of zakat funds f. zakat calculation method 5. non-halal income disclosure a. description of non-halal income b. use of non-halal income https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 128 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) figure 1 shows that bni syariah and bank syariah mandiri were relatively similar banks and were consistent in igd practice. meanwhile, bri syariah was very volatile. for three years, bank syariah mandiri and bni syariah had always obtained the same igd index score, and had become sharia banks that were consistent in the implementation of igd in indonesia. 2016 was the best year for sharia banks that were able to disclose information about dps, zakat, and non-halal income more broadly than 2015 and 2017. bri syariah was a sharia bank that was less consistent in the implementation of igd. in 2014 and 2015, the bri syariah igd index was the lowest while the igd index of the other three sharia banks was the same. bri syariah did not disclose non-halal income in the 2015 annual report. in 2016, bri syariah became the islamic bank that obtained the highest igd index, which was 0.83. meanwhile, the two other sharia banks obtained the same igd index, which was 0.81. sharia banks began to expand disclosures regarding dps, zakat, and non-halal income. the bri syariah igd index in 2017 was lower than the igd index of bank syariah mandiri and bni syariah. in 2018, bri syariah became the sharia bank that obtained the highest igd score compared to two other sharia banks, which was 0.81. table 2 shows a more detailed comparison of the igd practices of the three sharia banks during 2014-2018. disclosure of the dps report was the lowest of any sharia bank during the five year observation period. as a result, reports revealing dps activities were limited to the general public. table 8 comparison of islamic governance disclosure practices of indonesia sharia banks 2014-2018 no. dimension of disclosure number of item bank syariah mandiri bni syariah bri syariah year 2014 1. gcg general conclusion 1 item 1 1 1 2. dps disclosure 9 item 8 9 8 3. dps report disclosure 18 item 10 9 9 4. zakat disclosure 6 item 4 4 3 5. non-halal income disclosure 2 item 2 2 2 number of items disclosed 25 25 23 number of items that should be disclosed 36 36 36 islamic governance disclosure index 0,69 0,69 0,64 year 2015 1. gcg general conclusion 1 item 1 1 1 2. dps disclosure 9 item 9 9 8 3. dps report disclosure 18 item 12 12 12 4. zakat disclosure 6 item 4 4 3 5. non-halal income disclosure 2 item 2 2 0 number of items disclosed 28 28 24 number of items that should be disclosed 36 36 36 islamic governance disclosure index 0,78 0,78 0,67 year 2016 1. general conclusion 1 item 1 1 1 2. dps disclosure 9 item 9 9 8 3. dps report disclosure 18 item 13 13 14 4. zakat disclosure 6 item 4 4 5 https://creativecommons.org/licenses/by/4.0/ the comparison of islamic governance disclosure practices in indonesian sharia banks 129 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the result showed that the three sharia banks had different igd index scores over the last five years. in general, sharia banks have carried out islamic governance disclosure (igd) quite well. bri syariah achieved the lowest igd index of 0.64 in 2014. the three sharia banks have disclosed adequate information about the profile and activities of dps. other information that was also disclosed was regarding the performance of zakat and non-halal income. the dps profile were also be found easily because the three sharia banks presented it well. educational background, experience, certification, and affiliation or involvement with other financial institutions were presented fairly by the three sharia banks. the sharia banks also disclosed the activities carried out by dps in detail. meetings and attendance of dps member meetings were well presented. the three sharia banks had also complied with regulations regarding gcg reporting. the gcg reports of the sharia banks were quite detailed and informative, in accordance with existing guidelines. the disclosure index of the dps report and the zakat disclosure index, were two items with low disclosures. the three sharia banks did not clearly disclose information about the involvement of dps with zakat performance. zakat management by sharia banks was carried out through the company’s laz or in collaboration with laz/bazns which should involve dps. dps could be asked to provide opinions or to provide advice related to zakat management. the amount of zakat funds managed was quite large, approximately 15 billion rupiah per year. the management of zakat in the three sharia banks was different according to the policies of each bank. bank syariah mandiri had a laz that was able to independently manage the zis funds obtained. bni syariah and bri syariah was cooperated with existing baznas or laznas to distribute the zakat they received. the two sharia banks acted as zakat collection units through their social foundations. in addition, not all sharia banks no. dimension of disclosure number of item bank syariah mandiri bni syariah bri syariah 5. non-halal income disclosure 2 item 2 2 2 number of items disclosed 29 29 30 number of items that should be disclosed 36 36 36 islamic governance disclosure index 0,81 0,81 0,83 year 2017 1. general conclusion 1 item 1 1 1 2. dps disclosure 9 item 9 9 8 3. dps report disclosure 18 item 12 13 14 4. zakat disclosure 6 item 4 4 2 5. non-halal income disclosure 2 item 2 1 0 number of items disclosed 28 28 25 number of items that should be disclosed 36 36 36 islamic governance disclosure index 0,78 0,78 0,69 year 2018 1. general conclusion 1 item 1 1 1 2. dps disclosure 9 item 8 9 9 3. dps report disclosure 18 item 10 10 12 4. zakat disclosure 6 item 4 4 5 5. non-halal income disclosure 2 item 2 2 2 number of items disclosed 25 26 29 number of items that should be disclosed 36 36 36 islamic governance disclosure index 0,69 0,72 0,81 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 130 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) required all dps members to sign the dps report document or dps opinion as well as financial reports. this was very important to provide information that all dps members knew and were responsible for reporting that has been carried out by sharia banks. 5. conclusion the three sharia banks in indonesia have carried out igd practices quite well for 5 years (2014-2018) with an average index of 0.75. bank syariah mandiri and bni syariah are banks that were relatively the same and consistentin igd practice. meanwhile bri syariah ws very volatile ad was the lowest in 2015 and 2017. bank syariah mandiri and bni syariah igd indexes were the highest and most consistent for three consecutive years. the lowets islamic governance disclosure item is the disclosure index of dps report. sharia banks did not disclose information regarding the involvement of dpsin the management of zakat funds received and distributed. thus, information on dps activities is becoming more limited. references abdullah, w. a. w., percy, m., & stewart, j. 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(2010). implementasi good corporate governance di indonesia. jurnal ekonomi dan kewirausahaan, 10(2), 129–138. https://creativecommons.org/licenses/by/4.0/ convergence and divergence analysis in islamic financing 17 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) convergence and divergence analysis in islamic financing ihdina sabilal haq1, sri herianingrum2 1master of science in islamic economics, 2department of sharia economics, faculty of economics and business airlangga university abstract this study aims to determine the convergence and divergence between the theory and practice of mudaraba and musyaraka financing in islamic banking. the method used in this study is a literature review of the existing references related the convergence or divergence between the theory and practice of mudaraba and musyaraka financing in islamic banking. the findings show that the divergence in the financing of mudaraba and musyaraka contracts tends to be less than the convergence. this can be caused by the times and the different needs of these developments, so there is a need for innovation and diversification of mudaraba and musyaraka financing which makes it slightly different between practice and theory. keywords: islamic banking, sharia financing, profit-loss sharing, mudaraba, musharaka. 1. introduction islam has a very broad scope, its teachings cover all aspects of human life in which there are aspects of muamalah. this aspect of muamalah is used by humans to organize their lives in socializing, because basically humans are social creatures who need help to maintain, protect and sustain life. in the aspect of muamalah, it has various activities, including financial transactions, commerce, trading and buying and selling which are the activities most often carried out by humans. along with the times, commercial activities have progressed very rapidly in their transactions. this is due to the large number of financial institutions that provide a stimulus to the community, namely by providing convenience in obtaining loans or financing for both business and personal needs. however, the loan installment payments are accompanied by a predetermined interest. this is certainly not in line with the islamic view because in islam interest is usury and usury is an act that is hated by allah swt, so it must be shunned. the strict prohibition related to usury is explained in the qur'an, surah al-baqarah, verse: 275. those who eat usury cannot stand but are like a person who has been possessed by a demon because he is mad. that is because they say that buying and selling is the same as usury. even though allah has made buying and selling legal and forbidden busury. *corresponding author. email address: ihdina.sabilal.haq-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:ihdina.sabilal.haq-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 18 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) whoever gets a warning from his lord, then he stops, then what he has obtained before becomes his and his business (up to) allah. whoever repeats, then they are residents of hell, they are eternal in it. apart from this verse, the hadith of the prophet was also mentioned regarding the strict prohibition against the practice of usury. from abdullah bin mas'ud ra from the prophet saw he said: from abu hurairah r. a said: the prophet said: "riba is seventy sins, the lightest sin is (the same as) the sin of a person who commits adultery with his own biological mother." (hr. muslim) therefore, in order for financing activities to be avoided from usury due to installment payments accompanied by predetermined interest, a sharia financial institution has emerged which provides a breath of fresh air for muslims. one of the subislamic financial institutions is sharia banking. this islamic banking strives for all financial transaction activities in it to be free from usury practices by providing products according to the sharia contract, thus providing security for mankind to avoid the grave sin of usury. there are three types of financing based on a contract in islamic banking, namely a profit sharing contract, buying and selling and leasing (peraturan otoritas jasa keuangan, 2014). the profit sharing contract is the main contract in islamic banking financing because it reflects the essence of islamic banking to encourage the smooth running of productive businesses in the real sector and is a differentiator from financing in conventional financial institutions. there are various financing products based on profit sharing contracts, namely mudharabah and musyarakah financing (muhammad, 2016). this revenue-sharing contract financing is iconic for islamic banking with principles that are very different from conventional financing. for this reason, the authors are interested in conducting research on the concepts and practices of financing based on the mudharabah and musyarakah agreement on islamic banking to explore and present the convergence and divergence of financing between concepts and practices. based on the above background, problems that will be used as research objects can be formulated, namely: what are the concepts and practices of financing based on the mudharabah and musyarakah contracts in islamic banking and where is the convergence and divergence? 2. literature review 2.1 financing in an islamic perspective financing in an islamic perspective is the provision of funds from a bank with another party (borrower), which requires the borrower to share the results of his business in accordance with a predetermined agreement (muhammad, 2016). this financing differs from conventional financing in several ways. interest which is strictly prohibited https://creativecommons.org/licenses/by/4.0/ convergence and divergence analysis in islamic financing 19 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) by islam is reimbursed using several financing schemes. the financing scheme is divided into 3 types based on the contract or principle that is the basis for sharia banking operations, namely: profit-loss sharing financing in the form of mudharabah and musyarakah contracts, buying and selling financing in the form of murabahah, salam and istishna contracts, and lease financing in the form of ijarah and ijarah muhtahiyya bittamlik contracts (imbt). of the three principles of financing, financing based on a profit sharing agreement is an iconic financing for islamic banking. 2.2 financing based on profit-loss sharing profit-loss sharing is financing that is characteristic of islamic banking because of its contribution to improving the economic activities of the community. this is because an increase in profit sharing means an increase in the profits obtained by the company, when the company's profits increase in aggregate, this increase will encourage economic expansion in the form of increased investment, production, supply demand and a decrease in unemployment (herianingrum, ratnasari, widiastuti, mawardi, rachmi, & fadhlillah, 2019). according to abdul rahman and nor (rahman & nor, 2016) said that the concept of profit-loss sharing financing is the spirit of islamic banking to increase economic activity and improve people's lives by increasing opportunities in the business sector for businesses that lack capital. the financing of profit-loss sharing will also encourage economic growth through industrial development and creating new entrepreneurs (afkar, 2017). 2.3 laws governing profit-loss sharing financing the practice or implementation of mudharabah and musyarakah contracts in the indonesian economy has been regulated and implementation in statutory regulations. among them are undang-undang nomor 21 tahun 2008 concerning sharia banking which explains in general terms the general provisions to the specifics of sharia banks covering definitions, duties, authorities, obligations, scope of financial services activities, to products and contracts contained in sharia banks. other laws and regulations that also regulate the practice of mudharabah and musyarakah contracts are peraturan otoritas jasa keuangan nomor 10/pojk.03/2019 concerning bussiness control of sharia financing companies and sharia business units of financing companies, sharia financing is the distribution of financing which is carried out based on the sharia principles distributed by sharia companies. as for the contracts is profit-loss sharing, buying and selling and leasing. 2.4 products from profit-loss sharing financing in practice, mudharabah and musyarakah contracts are widely used in the financing made by islamic financial institutions such as islamic banking and islamic financing institutions. based on undang-undang nomor 21 tahun 2008 concerning sharia banking, financing is the provision or provision of funds in profit sharing transactions based on an agreement or contract between islamic financial institutions such as sharia commercial banks, sharia business units, sharia financing institutions and other parties and parties provided with the provision of funds to return the funds given within a certain period of https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 20 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) time with an agreed rate of return/profit sharing/ujrah/reward (undang-undang republik indonesia, 2008). a. mudharabah financing mudaraba comes from the word adh-dharbu fil ardhi which means walking on the face of the earth. travel on earth is generally carried out in the context of conducting a business or jihad in the path of allah. etymologically, mudharabah is also called qiraadh which means al-qath'u (piece/piece), because the owners of the capital set aside part of their assets to be traded and they are entitled to a part of the profits from the trade. in terms of the mudharabah contract, it is a form of agreement between shahibul maal (the owner of the capital) who contributes to giving 100% of the capital with the mudharib (fund manager), then the funds are used for productive activities where the benefits of the activity are shared between the two parties according to the agreement at the beginning of the agreement. . when there is a loss and it is not the result of mudarib mistakes, then the loss is borne entirely by the shahibul maal. (muhammad, 2016). the legal mudharabah agreement may be based on the verses of the al-qur'an surah albaqarah, verse: 283. but, if some of you believe some of the others, let the one who is believed to fulfill his mandate (debt) and let him fear allah, his lord. in addition, in shuhaib radhiyallahu anhuma said: rasulullah said: "there are three things that contain blessings: buying and selling not in cash, muqaradhah (mudaraba) and mixing wheat with barley for household needs, not for sale." (hr. ibn majah) this contract brings together some people who have assets but do not have expertise in managing them and some people who do not have assets but have the expertise to manage and develop them. so islam allows this mudharabah contract because this contract contains elements of ihtisan to realize benefit, namely by taking advantage of both mudharib and shahibul maal. b. musyarakah financing musharakah comes from the word al-syirka which means alliance (ikhtitlath/mixing) of two or more parties. this contract is usually used for a business association or partnership of property rights (mas’adi, 2002). etymologically, musharaka is mixing, merging or unions, so it means partnership. (mardani, 2014). whereas in terms of the musyarakah contract, it is a form of cooperation between two or more parties, where each party contributes funds provided that the profit sharing is divided based on the agreement, while the losses are based on the contribution of funds. (muhammad, 2016). partners (providers of funds) together provide funds to fund a business, whether a new business wants to start or an existing business. the law of the musharaka contract may be based on the verses of the al-qur'an surah sad, verse: 24. in fact, most of those who have fellowship commit wrongdoing to others, except those who believe and do good; and only a few of them are like that. " https://creativecommons.org/licenses/by/4.0/ convergence and divergence analysis in islamic financing 21 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in addition, in the hadith narrated by abu hurairah: the messenger of allah said: "verily allah azza wa jalla said," i am the third party of two people who unite as long as one of them does not betray the other '"(h.r abu dawud). this qudsi hadith shows allah's love for his servants who practice association as long as they uphold the common trust and allah curses those who commit treason. so, this makes it clear that even though this contract is allowed, the parties must be trustworthy and cannot as long as cancel the agreement that has been agreed upon. 2.5 prohibition of maisyir, gharar and riba islamic economics upholds the nature of justice and balance, which places something in its place and gives something only to those who have the right to receive it and treat things according to their position. there are several elements that are prohibited in the transaction rules in islamic economics, among others (mursal, 2015): a. maisyir maisyir has the same meaning as qimar, namely gambling. maisyir is all forms of transactions or actions that have a speculative nature (chance) that are destined to gain material gain. b. gharar gharar has the meaning of danger or risk, then the word gharar is also formed from the word taghrir which means to give an opportunity for danger to occur. meanwhile, based on fiqh muamalah, gharar means that there is ambiguity when carrying out a transaction that can harm or endanger other parties. c. riba islam strictly prohibits transactions that contain elements of usury. riba has the meaning of zada wa nama which means to grow and increase. meanwhile, according to al-syirbashi said that usury is an addition given through the payment of something, where the additional is required when two parties make a transaction (contract). 3. research methodology the method used in this study is a combination of reviewing the existing literature and critical analysis of the results of several relevant studies to analyze the convergence or divergence between the theory and practice of mudaraba and musyaraka financing in islamic banking. 4. result and discussion 4.1 mudharabah financing practices mudharabah financing has been applied by the arabs since the arrival of islam. rich merchant who have more wealth can give part of their assets to be managed productively by other traders who need financial assistance in running or developing their business, based on the original contract and agreement in determining the margin or profit sharing rate, and are willing to take part in the losses that arise. (rammal, 2003). one of the conditions contained in the mudharabah contract is that the owner of the capital (mudharib) does not have the authority to determine the level of margin or fixed profit sharing and any additional to the principal he gives. (rammal, 2003). this is in https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 22 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) accordance with the rule of al-ghunmu bil ghurni, which means that risk always follows the yield or rate of return. and the rule of al-kharaj bid dhaman, where effort/result/return goes hand in hand with cost. in terms of the concept of mudharabah and musyarakah contract financing, it is similar to the profit lost sharing principle used. the main difference between the two is the operational or implementation aspects, where in the mudharabah contract financing, only one party contributes to the capital and the other party contributes to the business. meanwhile, the financing of the musyarakah contract requires both parties to contribute to capital and energy so that the relationship that exists is not a debtor-creditor but a partnership relationship. a. convergence of theory and practices of mudharabah financing interest-free financing carried out by islamic banking with a mudharabah profit sharing agreement is in theory and practice appropriate, that is, it is directed at the real sector and may not be used in investment activities that contain interest and speculation. herianingrum, et al. (2019) in their research entitled "the impact of islamic bank financing on business" found that in general, in the long term, islamic bank financing with mudharabah, musyarakah and murabahah contracts was found to have a significant positive relationship with business trends in indonesia. the results of this study indicate empirical evidence that not only in theory, but in practice, islamic banking can improve the banking sector through financing the real sector which can then also improve the economy of a country in general. sulayma (2015) also states that sharia banking profit sharing financing can create new investment opportunities and encourage people to do business. furthermore herianingrum, et al. (2019) explain that increasing islamic banking financing in indonesia can provide benefits to business development which in the long run can develop people's welfare. sharia financing with mudharabah and musyarakah contracts in theory and practice divides the nature or purpose of its use into two, namely productive financing such as business financing, capital procurement, trade financing, investment financing, and consumer financing for both primary and secondary needs. (supriyadi, 2003). abbas & arizah (2019) analyze marketability which is compiled from market share and concentration in it, and to test its effect on profitability mediated by production sharing financing with mudharabah and musyarakah contracts. the results show that the selling power of islamic banking in indonesia tends to be low. the ability to control the market (marketability) was found to have a positive effect on the level of profitability as measured by roa and roe. musharaka contract financing has a competitive effect on the relationship between market share and profitability, while the financing for a mudharabah contract has a partial effect. the results of this study also show the suitability of the practice and theory of mudharabah financing which has an influence on profitability through its relationship with the market share of islamic banking. the pillars and terms of mudharabah financing are also in practice in line with the theory, among others: https://creativecommons.org/licenses/by/4.0/ convergence and divergence analysis in islamic financing 23 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1) the parties who carry out the contract, namely the owner of funds (shahibul maal) and the capital manager (mudharib). those who are required to be legally competent (mukallaf). 2) capital (ra'sul maal), which must meet the provisions (1) in the form of a medium of exchange (money), (2) it is known so that it is easy to record, (3) in cash, (4) can be transferred from the owner of the capital to the capital manager. 3) business run (al-amal). 4) profit (ribh). 5) statement of consent and kabul (sighat akad). these pillars and conditions have been implemented by financial institutions that provide financing services such as sharia banking and other islamic financing institutions. because basically without these pillars and conditions, the financing of the mudharabah contract is not valid and cannot be accounted for later. b. divergence of theory and practices of mudharabah financing funding for mudharabah contracts has basically been implemented in accordance with the theory and principles of sharia. however, there are several things that need special attention in the practice of financing a mudharabah contract, such as the suitability of a customer profile with the actual situation. because islamic banking in the financing of mudharabah contracts is not directly involved in the business or business run by the customer, it is necessary to analyze a profile and business that is truly in accordance with actual field conditions in order to minimize the risk of future financing. 4.2 musyarakah akad financing practices in practice, musyarakah contracts are mostly found in financing schemes carried out by sharia banking and other sharia financial institutions which also provide sharia financing services. currently, islamic banking is a developing industry. more than fifty countries spread throughout the world have and apply this sharia system in their economic activities, especially in countries where the majority of their citizens are muslim, such as pakistan, malaysia, and indonesia. (sugema, bakhtiar, & effendi, 2010). musyarakah contract financing is the most important model in influencing islamic economic activity (adela, 2018). this is due to the financing of the musyarakah contract which is engaged in the productive sector with a profit sharing principle that replaces interest and with a more flexible scheme that benefits both parties in a certain proportion according to the agreement in advance. financing with a musyarakah contract can reduce risk, inefficiency, and effectiveness of capital management, because capital is fully used in one business. (almutairi, 2016). all parties share the profits according to the proportion agreed at the beginning of the contract and share the losses according to the amount of participation in the distribution of capital. rahman & nor (2016) explore the strategies used by venture capital (vc) and evaluate whether these strategies are in accordance with the concept of musyarakah contract financing. the results of the study found that islamic banking in malaysia has the potential to provide financing for musyarakah contracts including risk mitigation activities by adopting five strategies, namely, (1) selection methods; (2) distribution of funds; (3) monitoring; (4) non-capital assistance; and (5) investment period. sharia https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 24 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) banking can channel csr funds to finance musyarakah contracts as an initial step in implementing the vc strategy (almutairi, 2016). a. convergence of theory and practices of musharaka financing convergence or similarities between the theory and practice of musyarakah contract financing can be seen through the terms and conditions that must be met, among others: 1) ijab qabul (sighat), is an agreement between the two parties in cooperation. 2) two parties who have contracts and have the ability or ability to manage assets. 3) the object of aqad (ma'qud alaihi) which includes capital and involvement in business. where capital must be in the form of cash, gold, silver of the same value (patent rights and so on). the practice of financing the musyarakah contract is also in accordance with the theory used in productive activities or activities which can be found in two forms of financing, as follows (maruta, 2016): 1) project financing musyarakah contract financing can be applied to finance projects in which the customer and the sharia bank each contribute and/or their capital. after the project is completed, the customer will return the funds and share the profit proportion to the sharia bank according to the agreement 2) venture capital this financing is only carried out by specialized financial institutions that have the authority to invest in company ownership. the musyarakah contract financing will be used as the invested capital for a certain period of time and the financial institution will then sell its share. b. divergence of theory and practices of musharaka financing currently, the practice of financing for musyarakah contracts is much the same as conventional financing, which requires or promises a certain amount of profit in advance (rammal, 2004). this is of course different and not in accordance with the procedure for financing the musyarakah contract in theory, where the advantages and disadvantages of both parties must be borne jointly. sharia banking, which determines and guarantees the level of profit of the musharaka, makes these profits resemble interest and deviates from the rules of al-ghunmu bil ghurni and al kharaj bi dhaman. based on the islamic economic system, providers of capital as well as entrepreneurs or managers are an inseparable unit of production factors. both parties who contribute money and energy are entitled and obliged to share the profits proportionally at the beginning of the agreement based on the contract. (rammal, 2004). this will be different if the benefits have been determined, promised and guaranteed from the beginning, because basically the determination of profits in advance is not in accordance with the principles of islamic economics. another thing that is not in accordance with the theory in practice is the lack of knowledge and ability of islamic banking in analyzing the profile and conditions of the project to be financed. ahmed (2008) evaluates the performance of musyarakah financing https://creativecommons.org/licenses/by/4.0/ convergence and divergence analysis in islamic financing 25 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) against profitability and risk. musyarakah contract financing was found to have a higher preference than other financial models. lack of knowledge of bank employees in analyzing, evaluating, and managing projects is the main cause of the lack of profit that can be obtained or the incidence of losses in financing for results. the results of this study are also in line with the statement "high risk high return". another practice that also needs to be considered because it is not in accordance with the concept of musyarakah contract financing is the commitment of sharia banking which tends to be minimal for small entrepreneurs. the distribution of musyarakah contract financing tends to lead to businesses or businesses that are already large and stable. meanwhile, msmes are not given enough attention and are not given access or similar facilities (kayed, 2012). 5. conclusion the financing of mudharabah and musyarakah contracts has convergence and divergence in terms of theory and practice. based on the findings, the divergence in the financing of mudharabah and musyarakah contracts tends to be less than the convergence. this can be caused by the times and the different needs of these developments, so there is a need for innovation and diversification of mudharabah and musyarakah financing which make it slightly different between practice and theory. this research is only limited to the convergence and divergence of the mudharabah and musyarakah financing contracts in general. future research can focus on certain aspects such as juridical aspects, sanctions if there are parties who commit an achievement, historical aspects, aspects of legal sources and so on. references abbas, a., & arizah, a. (2019). marketability, profitability, and profit-loss sharing: evidence from sharia banking in indonesia. asian journal of accounting research. adela, h. (2018). the impact of musharakah financing on the monetary policy in the islamic economy. review of economics and political science. afkar, t. (2017). influence analysis of mudharabah financing and qardh financing to the profitability of islamic banking in indonesia. asian jurnal of innovation and entrepreneurship, vol. 2 no. 3. ahmed, g. a. (2008). the implication of using profit and loss sharing modes of finance in the banking system, with a particular reference to equity participation (partnership) method in sudan. humanomics. almutairi, m. (2016). regulating securities market abuse: a comparative legal study of united kingdom and kingdom of saudi arabia's financial regulatory systems. (doctoral dissertation, abertay university). https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 26 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) herianingrum, s., ratnasari, r. t., widiastuti, t., mawardi, i., rachmi, r. c., & fadhlillah, h. (2019). the impact of islamic bank financing on business. entrepreneurship and sustainability issues 7(1) , 133-145 . kayed, r. n. (2012). the entrepreneurial role of profit‐and‐loss sharing modes of finance: theory and practice. international journal of islamic and middle eastern finance and management. mardani. (2014). hukum bisnis syariah. maruta, h. (2016). akad mudharabah, musyarakah, dan murabahah serta aplikasinya dalam masyarakat. iqtishaduna: jurnal ilmiah ekonomi kita 5(2), 80-106. mas’adi, g. a. (2002). fiqh muamalah kontekstual. jakarta: pt. raja grafindo persada. muhammad. (2016). manajemen pembiayaan bank syari’ah. yogyakarta: upp stim ykpn. mursal. (2015). implementasi prinsip-prinsip ekonomi syariah: alternatif mewujudkan kesejahteraan berkeadilan. jurnal perspektif ekonomi darussalam, vol. 1, no. 1, 79. peraturan otoritas jasa keuangan. (2014). tentang penyelenggaraan usaha pembiayaan syariah., (hal. no. 31/pojk.05). rahman, a. a., & nor, s. m. (2016). challenges of profit and loss sharing financing in malaysian islamic banking. malaysian journal of society and space 2(2). rammal, h. g. (2003). mudaraba in islamic finance: principles and application. business journal for entrepreneurs 16(4), 105-112. rammal, h. g. (2004). financing through musharaka: principles and application. business quest. sugema, i., bakhtiar, t., & effendi, j. (2010). interest versus profit-loss sharing credit contract: effciency and welfare implications. international research journal of finance and economics 45(2), 58-67. sulayma, h. (2015). growth and sustainability of islamic finance practice in the financial system of tanzania: challenges and prospects. supriyadi, a. (2003). sistem pembiayaan berdasarkan prinsip syariah. jurnal almawarid 10 (45). undang-undang republik indonesia. (2008). tentang perbankan syariah., (hal. nomor 21). https://creativecommons.org/licenses/by/4.0/ zakat and waqf as an economic development 106 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) zakat and waqf as an economic development deva wijayanti1)*, tika widiastuti2) 1, 2master of science in islamic economics, faculty of economics & business, airlangga university, surbaya abstract the public financial sector is experiencing quite dynamic developments from time to time. its development is also influenced by the character of the system of government that occurs at a certain time. since the time of the prophet (s) until now, the dynamics of the public financial sector has undergone a definite change due to the different facts faced by each time. in its development there are fixed and some are changing. this study is use literature review method, literature review is a study conducted by researchers by collecting a number of books, magazines related to problems and research purposes. develop a sense of social responsibility in people who have excess wealth. this study found that zakat is a mandatory provision in the economic system so that in its implementation is carried out through official or legal institutions. waqf recipients from the community are done in an easy way, among others through mobile banking, short message service and waqf kiosks. in malaysia to develop waqf assets, investments are made through malaysian sukuk and capital market instruments issued by the securities commission in february 2001. keywords: zakat, waqf, financial public 1. introduction the public financial sector is experiencing quite dynamic developments from time to time. the development of this sector is very closely related to government policy in managing the economy of its people. its development is also influenced by the character of the system of government that occurs at a certain time. since the time of the prophet (s) until now, the dynamics of the public financial sector has changed definitively due to the different facts faced by each of them (dahlan: 2008). in its development there are fixed and some are changing. zakat and waqf are islamic social funds that serve as effective tools for the public financial sector and poverty alleviation. waqf practices can distribute wealth and generally help the socioeconomic development of muslim communities. waqf is an important institution in the framework of islamic social. waqf refers to property donated by the muslim community to charity. waqf is unique because its characteristics are permanent, irrevocable and irrevocable (hasan and sulaiman, 2016; ghazali et al., 2019). the growing research body has confirmed that the unique function of zakat is the provision of social services and the advancement of impartial wealth circulation to protect those who are vulnerable to risk; also important as a mechanism for poverty alleviation *corresponding author. email address: devawijayanti@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:devawijayanti@gmail.com afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 107 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in muslim communities (ahmad et al., 2017; ibrahim and ghazali, 2014). the system achieved enviable success throughout the golden era of islamic history. during the reign of caliph umar ibn abdul aziz for example, the results of zakat succeeded in eradicating the absolute poverty of society (ahmed, 2004). public finances in the context of sharia become an integral part of human life in making peace, especially the relationship of the state with its people, which will be accounted for before allah s.w.t, because in islam does not only study about worship alone or spiritual relationships but in islam examines all aspects of human life both in small and besal. but the reality for now is that public financial management is not in accordance with sharia guidance. therefore, it is necessary to examine how to manage public finances in an islamic economic perspective. today, as the times evolve, the islamic financial system is reformed. nevertheless, the technical mechanism of islamic public finance management that is built must instill principles that are in accordance with islamic objectives both in terms of acceptance and expenditure. therefore, this paper will discuss the principles of islamic public finance based on the history of islamic public finances in the past to be drawn to the present based on the values implied in it, and how the role of zakat and waqaf as a source of state financial management. 2. literature study islamic public finance is finance that is managed for the benefit of the community, either managed individually, collectively or managed by the government. islamic public finances cover two things, namely the revenue and expenditure sectors. from the historical review of islamic public acceptance can be shown the variety of forms of public funding sources, both predetermined by the current government such as kharaj, khums, jizyah and so on. from the various forms of public acceptance instruments, it can be analyzed economically the basic principles of public funding at the beginning of islam can be seen in the following table. table 1. state revenue and expenditure in islam no. source of acceptance key characteristics 1 zakat a. it is a direct obligation of allah (qur'an) b. zakat payers are special muslim individuals, able materially and exceeding one nisab. c. charged for the stock of wealth or profit, not on working capital. d. the higher the zakat rate is influenced by the higher the role of human management to nature, the smaller the zakat rate and the high rate is proportional. e. collected periodically according to the period https://creativecommons.org/licenses/by/4.0/ zakat and waqf as an economic development 108 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) of acquisition or harvest. 2 ushr a. it is an obligation imposed by the government to traders aimed at increasing trade. b. ushr payments are the trade of muslims and non-muslims. c. charged on trading volume. d. the amount of tariff is influenced by the tariff collected by trading partners, the ability to pay (not for small traders, 200 dirhams), the amount of services provided by the government (dzimmi tariff is greater because it requires higher security guarantees). e. temporary, when unfair trade occurs (tariffs are reduced to increase fair trade). 3 kharaj a. it is an obligation imposed by the government as a state land user or fai'. b. the high tariff depends on the higher conditions: soil quality and more bail soil type, lower production method/hr role, production value (max 50%). c. collected permanently periodically. 4 jizyah a. it is an obligation imposed by the government as compensation for the protection of life, property, worship and military responsibility. b. collected from non-muslims dzimmi living in the islamic state. c. the high rate is influenced by the material ability to pay jizyah, can be paid individually or collectively. d. d. permanently collected, unless dzimmi converts to islam, it is subject to obligation as muslim. 5 ghanimah a. it is a property obtained by force through war. b. intended primarily for war financing and army welfare (80%) c. some 20% is allocated to sabilillah, as is the zakat rate imposed on the property of rikaz findings. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 109 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 6 fai’ a. is a treasure obtained from non muslims peacefully or non-war b. the principle is the utilization of idle property. c. owned by the original owner if he is alive or converted to islam, and becomes state property if the original owner dies or remains a non-muslim. d. some income can be categorized as fai', such as jizyah, tribute, customs, fine kharaj, amwal fadhila, and so on. 7 charity a. it is a property that is voluntarily handed over by a muslim to another person or an islamic ummah or state. b. there is no provision concerning the amount depending on the will of the almsgiver. 8 wakaf a. it is a property that is voluntarily handed over by a muslim for the purpose of benefiting the muslim ummah. b. devoted to assets that have long-term benefits. c. there is no provision on the magnitude, depending on the will of waqif. 9 nawaib a. is a levy imposed by the government on a particular person for the purposes of a particular state, for example for the defense of the state. b. voting is conducted purposively, for emergency purposes (war). c. it applies to rich people only. 10 amwal fadhila it is an asset that is obtained because no one has either left his owner or without an heir. regarding islamic public acceptance can be shown the variety of forms of public funding sources, both that have been determined by the government at that time such as zakat, kharaj, khums, jizyah, ushur and so on. from the various forms of public acceptance instruments, it can be analyzed economically the basic principles of public https://creativecommons.org/licenses/by/4.0/ zakat and waqf as an economic development 110 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) funding at the beginning of islam can be seen in the following table: from muslims from non-muslim from other sources 1. zakat 2. ushur 3. zakat fitrah 4. waqf 5. amwal fadhla 6. nawaib 7. charity 8. khums 1. jizyah 2. kharaj 3. ushur 1. ghanimah 2. fai‟ 3. ransom 4. gifts from other leaders and other countries 5. loans from race muslim and non-muslim in general, there are syar'iyah rules that limit the state's revenue policy. kahf argues that there are at least three procedures performed by the modern islamic government in its fiscal income policy assuming that the government agrees with the tax levy (apart from the ikhtilaf ulama on taxes), among others: 1. syar‟iyyah rules relating to the policy of zakat levy the government has no right to change the provisions of zakat as determined by islamic teachings. however, the government can make changes in the structure of property that must be paid by sticking to the nashs. 2. the rules of syar‟iyyah relate to the proceeds of income derived from government assets. income from general government assets in the form of investment in government assets managed either by the government or the public. income from community assets according to the rule that people are united in having water, fire and salt. this rule in the modern context is the public facilities needed by the general public. thus the rule used in this case is the rule of maslahah. 3. the rules of syar‟iyyah relating to the proceeds of income from taxes. basicly islam prohibits the forced collection of muslim people's property. taxes in the modern economy are the most important and largest income sector on the grounds that taxes are allocated to publics goods and serve as redistribution, stabilization, drivers of economic growth. as muhammad baqir ash-shadr stated, tax is a fiscal obligation that is not only used to meet basic needs, but is intended to overcome poverty and improve the living standards of the poor in order to realize the social balance as aspired by islam. based on the economic analysis of the history of islamic public expenditure during the prophet muhammad and khulafaur rasyidin and the rule of fiqh muamalah, in fact the main principle in allocating public funds is the increase of the highest maslahat. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 111 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) related to state expenditures during the reign of rasululullah saw systematically used for certain things and the following will be explained: (karim, 2010) 3. research methodology the research design used is literature review method. the use of this method is related to the situation of the covid-19 pandemic which restricts researchers in data retrieval. literature review is a study conducted by researchers by collecting a number of books, magazines related to problems and research purposes. this technique is done with the aim to reveal various theories relevant to the problem at hand / researched as reference material in the discussion of research results. literature review can be done from several sources such as national and international journals conducted such as by using three databases (base, science direct, and neliti) and textbooks or handbooks concerned about the results of food sanitation hygiene research in tourist attractions and related policies. 4. result and discussion 4.1 zakat as an islamic public financial institution one of the efforts and obligations of the state is to regulate the economy with the aim of ensuring its people achieve prosperity. baqir ash-shadr saw that state intervention in economic life was necessary to ensure its alignment with islamic norms (chapra, 2001). therefore, the government plays a role in providing various public goods to encourage development and mutual welfare through its public and fiscal policies. zakat is a characteristic of the islamic economic system, this is because zakat is one of the implementation of the principle of justice in the economic system. mannan says zakat has six principles: a. the principle of belief in religion, meaning that the person who pays zakat is one form of manifestation of belief in religion. b. the principle of equality and justice, this is the social purpose of zakat, namely to distribute wealth that god has given more justly and evenly to fellow human beings. c. the principle of productivity, meaning that zakat must be paid because certain property has produced a certain product after a certain period of time (nisab and haulnya). d. the principle of reason, it is rational that zakat that produces wealth should be issued. e. the principle of freedom, zakat is only paid by the free person. f. the principle of ethics and fairness, namely zakat is not collected arbitrarily. according to kahf (1999), the main purpose of zakat is to achieve socioeconomic justice. zakat is a simple transfer of a part with a certain measure of wealth to be allocated to the poor and poor. then muhammad daud ali explained that the purpose of zakat is: a. lifting the ranks of the poor. https://creativecommons.org/licenses/by/4.0/ zakat and waqf as an economic development 112 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) b. help solve the problems of the gharimin, ibn sabil, and other mustahik. c. to build a brotherhood between muslims and humans in general. d. remove the miserliness of the owners of property. e. remove enviousness for the poor and the needy. f. bridging between the rich and the poor. g. develop a sense of social responsibility in people who have excess wealth. h. educating people to always fulfill their obligations. i. a means of income equality to achieve social justice. as a major component in islamic public finances as well as fiscal policy in the islamic economic system. zakat is a mandatory activity for all muslims and is an important element in the country's source of income. zakat is a mandatory provision in the economic system (obligatory zakat system) so that in its implementation is carried out through official or legal institutions. then the collection, management, and distribution can be on target. the implications of zakat in a special sense, in this case the economy, namely: first, zakat can meet the needs of people who have shortcomings. second, zakat can reduce the gap in economic inequality, between the rich and the poor. third, zakat can indirectly reduce the number of social problems, criminality, and others. fourth, zakat can maintain the purchasing power of the community in order to maintain the business sector, meaning that with zakat, people's consumption is maintained at a minimum level (can be controlled), so that the economy can run well. so this is where the importance of the government in encouraging people to pay zakat to the national zakat agency or certain laz that has been established in all provinces, districts and sub-districts. this means that by focusing on the collection of zakat, the funds obtained will be easy to distribute. so that the potential of zakat in indonesia can be managed well and most importantly on target. thus, zakat seeks to improve the standard of living of the poor and poor to a more decent level of life. zakat is also a means to bring closer the gap between the rich and the poor (qardhawi, 1996). regarding the fundamental problem called poverty remains the responsibility of the state. according to islam, in the eradication of poverty, the state must intervene in this issue. in the qur‟an taught the principle of al-ma'un or social responsibility can be realized into state institutions, because otherwise the whole society can be exposed to the predicate "denying religion". the state is actually only tasked with ensuring the implementation of this doctrine, whether by more direct action or encouraging the private and the public themselves to carry out the doctrine. islamic thinkers in general tend to place an active role of the state, both in controlling the economy towards more stable development, especially to prevent unemployment, directing the allocation of resources so that a balance can be achieved https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 113 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) between efficiency and broad community participation in business activities and redistribution of people's income and wealth so that there is no shock and social injustice. poverty is a very complex phenomenon. thus, poverty is not only a cultural problem, but also a structural problem that concerns how the state makes fiscal policies oriented towards poverty alleviation culturally, islam advocates to foster the role of each individual in improving his quality of life and fostering the process of social togetherness (care) through zakat, infak, alms and other instruments. islam places the central role of the state in creating a fair and equitable distribution of people's income and wealth and maintaining the stability and sustainability of economic development in the process of progress and equality as well as a facilitator of community empowerment in finding solutions to a more decent standard of living. 4.2 waqf as an islamic public financial institution it is understood that public financial institutions play a role in the economic empowerment of the community. in islamic society, public financial institutions can be seen from several models of islamic financial instruments that are useful to ensure welfare. among the islamic financial system there are mandatory (must be carried out) such as zakat there are also recommended such as infak, shadaqah, and waqf. but in general, the instrument has not really been considered capable of being a public financial institution in order to respond effectively to social problems because of its limited capacity compared to complex social problems. of the many public financial institutions that deserve to be in the spotlight more is waqf. because, waqf as zakat, infak, and other shadaqah, is one of the islamic financial institutions that aim to be socially religious. the difference, zakat, infak and shadaqah, can instantly be consumed while waqf property is not. therefore waqf is often referred to as shadaqah jâriyyah, meaning shadaqah which continues to flow benefits and is not cut off like a flowing spring. historically, waqf has been one of the main instruments for the welfare of the community. the role of waqf to build an established society is seen from the fulfillment of various aspects of people's lives in general. waqf can be used as a handle of the muslim community as donors who can facilitate a kind of construction of places of worship, places of stopover of travelers, places of dissemination of knowledge, schools, making scientific works, procurement of clean water, and the needs of the poor. universally waqf has a large role from the social dimension. that allah swt created people with a variety of characters, strengths and abilities. surely when interacting will be found those who are rich and poor, stupid and intelligent, strong and weak. in kontek maliyah level (wealth), allah swt shows the establishment of a neat, balanced life order, commanding the rich to pay attention to the poor. on the other hand, the intelligent must pay attention to the foolish, as well as the strong pay attention to the weak. the motivation of thewakafan shown by 'umar ibn khathab at the time of the destruction of the land in khaibar was to contribute to the needs of the community and the welfare of the people. if it is understood from the historical element, when 'umar https://creativecommons.org/licenses/by/4.0/ zakat and waqf as an economic development 114 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) intends to bershadaqah, he asked for the advice of the messenger of god. thus, some rawi stated that 'umar was the first to perform waqf. this spirit is one of them that grounded the next waqf practice. ibn 'umar, who was the manager of the waqf reported that the waqf results in khaibar reached 100 caplings used for the poor, poor, relatives, slaves, volunteers, travelers, guests, and honor managers. while the waqf results from the prophet saw as much as 38 kapling, 18 kapling used for the welfare of volunteers fath al-makkah while 18 more kapling for the public benefit. during the reign of caliph harun al-rashid. princess zubaydah (wife of the caliph) once built a highway from baghdad in iraq to makkah. the road was built to facilitate the journey of pilgrims who want to perform hajj in makkah. all of the construction costs came from waqf property managed by zubaydah's daughter. during ottoman rule in turkey, waqf funds managed to ease state spending, especially to provide educational facilities, urban facilities and other public facilities, while waqf in egypt has long been managed, and managed to build and finance lecturers, students and staff of al-azhar university (the oldest university in the world). all operational costs of university activities ranging from student fees (all scholarships), faculty, leadership and university development come from waqf assets. in a sense, that waqf is not limited to ritual aspects alone, but reaches the social aspects of humanity and even education and economics. kuwait, the public waqf foundation (al-amânah al-'âmah li al-awqaf) places self ification as an instrument of economic and social security. waqf recipients from the community are done in an easy way, among others through mobile banking, short message service (sms) and waqf kiosks. it is then managed professionally through several sectors of economic development. in malaysia to develop waqf assets, investments were made through malaysian sukuk and capital market instruments issued by the securities commission in february 2001. the issuance of waqf shares was carried out by several states such as johor, melaka, and selangor. this was done according to the decision of majma' al-fiqh al-islâmî on 24 november 2005. to ensure the management of waqf money in the country, takaful waqf was formed by takaful malaysia berhad company which was established in 1997. takaful company is operated based on the principle of mudlârabah. the advantages of investing in sharia financial portfolios are the sum of four portfolios, namely sharia banking deposits, sharia bonds and sharia capital markets. the profits will be combined with other portfolio profits then distributed to the poor. waqf management also occurs in the secular country of singapore. with a minority muslim population (±453,000 people) managed to build waqf treasures innovatively. through waress investment pte ltd has managed to manage and build waqf assets professionally. among other things, building a 12-storey apartment is worth about u$62 million. waress also managed to build a luxury housing project called the chancery residence. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 115 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 5. conclusion zakat is a characteristic of the islamic economic system, this is because zakat is one of the implementation of the principle of justice in the economic system. belief in religion, meaning that the person who pays zakat is one form of manifestation of belief in religion. equalization and justice, this is the social purpose of zakat, namely to distribute wealth that god has given more justly and evenly to fellow human beings. productivity, meaning that zakat must be paid because certain property has produced a certain product after a certain period of time. zakat is a simple transfer of a part with a certain measure of wealth to be allocated to the poor and poor. zakat is a mandatory activity for all muslims and is an important element in the country's source of income. zakat is a mandatory provision in the economic system so that in its implementation is carried out through official or legal institutions. second, zakat can reduce the gap in economic inequality, between the rich and the poor. zakat can indirectly reduce the number of social problems, criminality, and others. zakat can maintain the purchasing power of the community in order to maintain the business sector, meaning that with zakat, people's consumption is maintained at a minimal level, so that the economy can run well. so this is where the importance of the government in encouraging people to pay zakat to the national zakat agency or certain laz that has been established in all provinces, districts and sub-districts. this means that by focusing on the collection of zakat, the funds obtained will be easy to distribute. so that the potential of zakat in indonesia can be managed well and most importantly on target. thus, zakat seeks to improve the standard of living of the poor and poor to a more decent level of life. zakat is also a means to bring closer the gap between the rich and the poor. thus, poverty is not only a cultural problem, but also a structural problem that concerns how the state makes fiscal policies oriented to poverty alleviation culturally, islam advocates to foster the role of each individual in improving his quality of life and fostering the process of social togetherness through zakat, infak, alms and other instruments. it is understood that public financial institutions play a role in the economic empowerment of the community. in islamic society, public financial institutions can be seen from several models of islamic financial instruments that are useful to ensure welfare. among the islamic financial system there are mandatory such as zakat there are also recommendations such as infak, shadaqah, and waqf. but in general, the instrument has not really been considered capable of being a public financial institution in order to respond effectively to social problems because of its limited capacity compared to complex social problems. of the many public financial institutions that deserve to be in the spotlight more is waqf. because, waqf as zakat, infak, and other shadaqah, is one of the islamic financial institutions that aim to be socially religious. the difference, zakat, infak and shadaqah, https://creativecommons.org/licenses/by/4.0/ zakat and waqf as an economic development 116 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) can instantly be consumed while waqf property is not. therefore waqf is often referred to as shadaqah jâriyyah, meaning shadaqah which continues to flow benefits and is not cut off like a flowing spring. the motivation of the waqf shown by 'umar ibn khathab at the time of the destruction of the land in khaibar was to contribute to the needs of the community and the welfare of the people. if it is understood from the historical element, when 'umar intends to bershadaqah, he asked for the advice of the messenger of god. thus, some rawi stated that 'umar was the first to perform waqf. this spirit is one of them that grounded the next waqf practice. ibn 'umar, who was the manager of the waqf reported that the waqf results in khaibar reached 100 caplings used for the poor, poor, relatives, slaves, volunteers, travelers, guests, and honor managers. while the waqf results from the prophet saw as much as 38 kapling, 18 kapling used for the welfare of volunteers fath al-makkah while 18 more kapling for the public benefit. during the reign of caliph harun al-rashid. waqf recipients from the community are done in an easy way, among others through mobile banking, short message service and waqf kiosks. it is then managed professionally through several sectors of economic development. in malaysia to develop waqf assets, investments were made through malaysian sukuk and capital market instruments issued by the securities commission in february 2001. the issuance of waqf shares was carried out by several states such as johor, melaka, and selangor. this was done according to the decision of majma' al-fiqh al-islâmî on 24 november 2005. to ensure the management of waqf money in the country, takaful waqf was formed by takaful malaysia berhad company which was established in 1997. references amin muhtar. 2015. potensi wakaf menjadi lembaga keuangan publik (kajian kritis terhadap konsep dan praktik wakaf dalam hukum islam) al ma’arif ciamis : asy-syari‘ah vol. 17 no. 1. anwar allah, mohamed asmy mohd thas thaker, al amin mydin, zubir azhar, abdul rais abdul latiff. 2018. cooperative-waqf model: a proposal to develop idle waqf lands in malaysia. emerald publishing limited : isra international journal of islamic finance vol. 10 no. 2, pp. 225-236. as-shadr, muhammad baqir. 2008. buku induk ekonomi islam: iqtishaduna, terj. yudi. jakarta: zahra. chapra, m. umer. 2000. the future of economics: an islamic perspective. leicester: the islamic foundation. karim, adiwarman azwar. 2001. bunga rampai: sejarah pemikiran ekonomi islam, terj. tim international institute of islamic thought. yogyakarta: pt pustaka pelajar. karim, adiwarman azwar. 2006. sejarah pemikiran ekonomi islam. jakarta: pt raja grafindo persada. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 117 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) karim, adiwarman azwar. 2010. ekonomi makro islami. jakarta: rajawali press. kahf, monzer. 1998. public finance and fiscal policy in islam, dalam monzer kahf (ed.), lessons in islamic economic, qeddah: idb-irti. kahf, monzer. 1999. the principle of socioeconomics justice in the contemporary fiqh of zakah, iqtisad, journal of islamic economics, vol. 1. mannan, muhammad abdul. 1997. teori dan praktek ekonomi islam, terjemahan. m. nastangin, yogyakarta: pt dana bhakti wakaf. mahadi ahmad. (2019). an empirical study of the challenges facing zakat and waqf institutions in northern nigeria. isra international journal of islamic finance vol. 11 no. 2. doi 10.1108/ijif-04-2018-0044 new developments in islamic economics, 67–82. doi:10.1108/978-1-78756-283 720181005. nurudeen abubakar zauro, ram al jaffri saad and aidi ahmi and mohd yahya mohd hussin. (2020). integration of waqf towards enhancing financial inclusion and socioeconomic justice in nigeria. international journal of ethics and systems vol. 36 no. 4. doi 10.1108/ijoes-04-2020-0054. rifyal zuhdi gultom, muhammad rafi siregar, masrizal. 2019. keuangan publik islam: zakat sebagai instrumen utama keuangan negara. hukum islam, vol xix no. 2. saeed awadh bin-nashwan, hijattulah abdul-jabbar and saliza abdul aziz and k. kuperan viswanathan. (2020). a socio-economic model of zakah compliance. international journal of sociology and social policy vol. 40 no. 3/4. doi 10.1108/ijssp-11-2019-0240. saeed awadh bin-nashwan, hijattulah abdul-jabbar and saliza abdul aziz and adel sarea. (2020). zakah compliance in muslim countries: an economic and socio psychological perspective. journal of financial reporting and accountin. doi 10.1108/jfra-03-2020-0057. salami saheed adekunle, said adekunle mikail and muhammad ali jinnah ahmad. (2017). utilisation of zakāh and waqf fund in micro-takāful models in malaysia: an exploratory study. isra international journal of islamic finance vol. 9 no. 1. doi 10.1108/ijif-07-2017-010. siti nur asmad che hassan and asmak ab rahman. (2019). the potential of cash waqf in the socio-economic development of society in kelantan: a stakeholder’s perspective. tina arfah, putri jamilah. 2020. keuangan publik dalam perspektif ekonomi islam. jurnal islamika. vol. 3, no. 2. https://creativecommons.org/licenses/by/4.0/ zakat and waqf as an economic development 118 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) yuana tri utomo. 2017. kisah sukses pengelolaan keuangan publik islam (perspektif historis). at-tauzi’ : jurnal ekonomi islam. vol. 17. https://creativecommons.org/licenses/by/4.0/ the role of zakat institutions in supporting the economy during the covid-19 pandemic 94 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the role of zakat institutions in supporting the economy during the covid-19 pandemic aziz maulana akhsan*, muhammad nafik ryandono 1department of sharia economics, faculty of economics and business, airlangga university, indonesia abstract this study aims to analyze the role of the zakat institution in sustaining the economy during the covid-19 pandemic outbreak. . after the covid-19 outbreak at the end of 2019 and declared a global pandemic by who in january 2020, including in indonesia. the existence of this pandemic makes people have to do social distancing, physical distancing as an effort to break the chain of transmission. as a result of this policy, the economic pattern became sluggish and decreased so that many lost their jobs, small traders and income decreased drastically due to the low level of consumption. this requires social financial institutions such as ziswaf to play an active role in maintaining the economic resilience of the community. this study used a qualitative approach with a literature study model, data were obtained from 6 international journals, 4 national journals, social media, electronic media, books. the results showed that the role of the ziswaf institution was very urgent in supporting the economy of the people affected by covid-19. keywords: zakat, economy, covid-19 1. introduction wuhan, a city in the people's republic of china, suddenly became famous throughout the world. in this city of around 9 million people, the corona virus attack (covid-19) began. not only in mainland china, this virus has also spread to more than 180 countries / regions in the world until march 2020. the world health organization (who) finally announced the status of a global pandemic on march 11, 2020. based on existing data, the impact of covid-19 on the chinese economy resulting in a slowdown in economic growth from 6.1% last year to only around 3.8% this year, provided the pandemic is not getting worse. if things get worse growth can be only 0.1% or even minus. as a country with the second largest economy in the world, the decline of china's economy certainly has an impact on the global economy. the negative impact of this pandemic quickly spread throughout the world, not only because of its contagious nature, but also because of the mobility of the world's population and the global value chains which do have a very high level of connectivity. some of the world's credible research institutes predict the adverse effects of the spread of this outbreak on the global economy. jp morgan predicts the world economy will be minus 1.1% in 2020, eiu predicts minus 2.2%, fitch predicts minus 1.9%, and the imf predicts the world economy will be minus 3% in 2020. for indonesia itself, the minister of finance of the republic of indonesia, *corresponding author. email address: azizsawoo@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:azizsawoo@gmail.com afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 95 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) sri mulyani indrawati, predicts economic growth in the worst-case scenario will reach minus 0.4 percent. according to the world bank. the economic impact of covid-19 will halt the businesses of nearly 24 million people in east asia and the pacific. under the worst-case scenario, the world bank also predicts nearly 35 million people will remain in poverty. in fact, through a number of scenarios taking into account various poverty lines, the world bank estimates that the number of people living in extreme poverty will increase to 922 million worldwide. a fantastic number. among the forms of efforts called for and carried out by the world in order to reduce the spread of this epidemic is social or physical distancing. but unfortunately, this movement had the effect of decreasing overall economic activity. given that the vital aspects of the economy, namely supply, demand and supply chain, have been disrupted, the impact of the crisis will be felt equally to all levels of society. because the resilience of each layer or level is different, the middle to lower economic class, especially the micro and informal communities with daily income, are of course the group most vulnerable to the impact. the impact in the real sector will then spread to the distressed financial sector because a large number of investees will experience difficulties in paying their investors. with the above conditions, a big question arises: how can indonesia get through? what does this nation have to be able to survive in the midst of a wave of plague that is uncertain when it will end? a glimmer of great hope actually resides in the indonesian nation. as a country with the largest muslim population in the world, muslims can give their best role through various forms or models of philanthropy. in islamic economics and finance. islam as a religion that teaches humans to love, love and support each other, has a generous or philanthropic configuration from its teachings. in islam, one of the important religious and socio-economic practices intended to prevent the concentration of wealth in some hands is the imposition of zakat. zakat is the main topic; it can perform some of the main functions of modern society, finance, dealing with social security entitlements and social assistance grants in the welfare state. however, this issue has been sorely under-researched, underscoring the growing call for investigations of zakat in muslim countries (bin-nashwan et al., 2020). some experts believe that the efficient administration of zakat and its implementation can be a "silver bullet", yielding interesting results in the social security system of disadvantaged and disadvantaged communities overcoming poverty and achieving economic prosperity (sohag et al., 2015). based on bin-nashwan. in the future this pandemic institutions of zakat are required to contribute to the handling of the economic problems caused by the pandemic covid-19. which charity devoted to eight groups ashnaf course, but the conditions of pandemic covid-19 has implications for many things can the use of zakat funds be allocated for handling victims of the impact of covid-19. departing from this, this research was conducted with the aim of describing some of the solutions and roles of zakat policies that can be offered in sustaining the economy during the covid-19 era in indonesia. https://creativecommons.org/licenses/by/4.0/ the role of zakat institutions in supporting the economy during the covid-19 pandemic 96 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2. literature study 2.1 zakat the word zakat etymologically means pure, flourishing and blessing. (anshori, abdul ghofur, 2006). al-quran uses the word zakat with a holy meaning as stated in surah maryam verse 13: "and a deep sense of compassion from our side and holiness (and sin). and he is a pious person." zakat is an islamic obligation to represent one third of the five pillars of islam.this requires a 2.5% annual tax payment on the productive wealth of individual and commercial muslims who have reached nisab (full ownership) and haul (one lunar year) own the wealth (al-mamun et al., 2019; bin-nashwan et al. ., 2020; choudhury, 1989; raimi et al)., furthermore, zakat in islamic jurisprudence is charged to agricultural products 10% of zakat is needed for agricultural products irrigated with rainwater and 5% zakat is charged in addition to that. islam also requires zakat alfitr or fitrah who needs one sha 'compulsory levy equivalent to 2.5 kg of rice, wheat, palm, sago and other basic foodstuffs. zakat al-fitr should be paid before eid al-fitr (the islamic holy day). althe qur'an in surah al-tawbah verse 60 regulates asnaf (groups entitled to receive zakat). they; fuqara (poor people), masakin (poor), 'amillin (muslims who work to manage zakat), muallaf (muslims return), riqab (slaves), gharimin (people in debt), fisabilillah (muslims trying to convey messages islam) and ibn-sabil (tourists with financial problems) (al-mamun et al., 2019; asad ibrahim et al., 2014). asnaf from fuqara and masakin represent the relevance of using zakat in managing the consequences of covid-19. 2.2 zakat manager imam qurtubi in hafidhuddin (2002, 125) states that al-amil was assigned (by it / the government) to take, write, calculate, and record the zakat he took from muzakki to be given to those entitled to receive it. amil's role is currently being carried out by the amil zakat agency or the amil zakat institute. according to ad-dimasyqi (2005, 279), the definition of amil zakat according to jurisprudential terminology is the people appointed by the imam (government) to manage the zakat business, which includes the process of collecting, recording, distributing, and so on. an economic system can only be efficient if it can produce more goods and services for society with the same or lower amount of resources (wahab and rahman, 2012). 2.3 objectives and benefits of zakat distribution the benefits of zakat distribution according to qardhawi (in ardiani & herianingrum: 2018) can be divided into three, namely benefits for muzakki, mustahiq, and society in general. the benefits of zakat for muzakki are purifying the soul from being stingy, educating the spirit of philanthropy. for mustahik according to yusuf qardhawi, productive zakat seeks to alleviate poverty, wants the poor to be well off forever, find the root cause, and make the poor people able to improve their lives. 2.4 zakat in indonesia prior to the current pandemic, scientific work had the identity of realizing maslahah (public interest) donated by zakat to the indonesian economy. maulana et al. (2019) investigated the impact of zakat on macroeconomics in indonesia, in relation to zakat https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 97 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) collection and the reduction of the national poverty rate. they conducted a regression analysis using baznas ri panel data from 29 provinces during the period 2015 to 2018. from their findings, they explained that zakat funds managed by baznas was positively related to poverty reduction during the observed period (maulana et al., 2019). furthermore, at the microeconomic level, the contribution of zakat has at least been handled by rizkiningsih et al. (2019). they evaluated the impact of zakat on productive means by sampling a total of 243 low-income households from across indonesia who received zakat in 2018. this analysis uses several welfare measures and finds that zakat helps increase the average household income. 2.5 zakat collection in indonesia during the covid-19 pandemic in indonesia, the first covid-19 cases were reported on the first sunday of march 2020, and these cases have started to skyrocket since then. on april 13, 2020, presidential decree 12/2020 declared covid-19 a national disaster. from the weekend of april to early may 2020, the islamic holy month of ramadan has passed. information from baznas ri can explain zakat collections during a pandemic. this can be obtained from an online data center (https://pid.baznas.go.id/statistik/); that the zakat collection during the covid-19 period has experienced a considerable growth. figure 1 describes the five months to month (january to may) of zakat collections in 2019 and 2020. even the collection was reported to have decreased slightly by 5% in february 2020, in the following three months (march, april, may 2020), the collection experienced a significant decrease. significant. fi could not grow by 35%, 128% and 110% (month to month), respectively. this increase in zakat collections is highly correlated with zakat campaigns on social media (al anshory et al., 2020) source: baznas ri online data year 2020 2.5 the covid-19 covid-19 pandemic that is currently sweeping the world is part of a virus that causes changes in body conditions such as shortness of breath, coughing, fever, sore throat and changes in other body conditions. these viruses such as the common cold or colds and serious diseases such as mers and sars transmission from animals to humans (zoonosis) and transmission from human to human is very limited. the spread of the covid-19 virus is https://creativecommons.org/licenses/by/4.0/ the role of zakat institutions in supporting the economy during the covid-19 pandemic 98 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) still unclear how it is transmitted, the hypothesis of the spread of the covid-19 virus originated from mutual interactions between humans and animals, because the cases that emerged in wuhan all had a history of contact with the animal market in huanan. (ministry of health, 2020). in indonesia, the distribution of positive cases was first published on march 2, 2020. therefore the government immediately responded quickly by issuing various policy steps such as an appeal for physical and social distancing and serious steps taken by the government to break the chain of the spread of covid-19, namely by making large-scale social restrictions (psbb) policy. (baznas, 2020). picture. 2 recent covid-19 reports in indonesia data is processed in excel based on source: covid19.go.id the data above shows that positive victims of the impact of covid continue to grow. even the corona update in indonesia until july 6, 2020 positive cases increased by 1,209 people. so that the covid19 pandemic disaster that hit this country will have an impact on many things, especially the economic impact. 3. research methodology researchuses a qualitative approach with a literature study model, data obtained from 6 international journals, 4 national journals, social media, electronic media, books. the results of the study are aimed at finding out the role of the ziswaf institute in supporting the economy of the people affected by covid-19. 4. result and discussion the impact of covid-19 has greatly affected the economy of the community. the economy of the community during this pandemic resulted in a lot of efforts from the community being hampered, the economic competitiveness of the community was weakening, employees were laid off, transportation services also decreased, so that with this condition it resulted in decreased people's income or even none at all. this situation has an impact on increasing the number of poor people. people are very vulnerable to https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 99 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) being the group most affected by the covid-19 pandemic. those who work for daily pay automatically cannot produce anything amidst the appeal to stay et home and the psbb policy (baznas, 2020). table. 1 impact of covid-19 on the community's economy no economic activity impact of 1 msmes decreased activity of buying and selling transactions, raw materials for production are difficult to reach, product distribution is hampered, and service providers are also affected by covid-19 2 transportation services companies terminate employment ( layoffs) as a result of the covid-19 pandemic 3 employees have transportationstopped due to policies regarding social distancing and physical distancing 4 informal workers the most directly affected by the economic impact are informal daily workers. where they have to lose their daily work because of the stay et home policy or the psbb policy. such as pedicab drivers, parking attendants, online motorcycle taxis, snack vendors and others. according to the director of zakat and waqf empowerment at the ministry of religion, fuad nasar, that scholars such as the indonesian ulema council (mui), said that the use of zakat and waqf funds can be targeted at disaster victims because they are also categorized as ashnaf zakat, namely needy and poor. the reason for this is due to a disaster factor so that their property has been destroyed as a result of the disaster that befell them. this view is also found in the fatwa team tarjih and tajdid pp muhammadiyah (2009). (fuad nasar, 2019). the utilization of zakat funds for the benefit of disasters can be distributed to those in need, as is currently happening in the covid-19 pandemic disaster. the covid disaster has paralyzed the people's economy, which is vulnerable to an increase in the number of poor people. so that the victims of the covid disaster can be categorized as zakat asnaf for the needy and poor. https://creativecommons.org/licenses/by/4.0/ the role of zakat institutions in supporting the economy during the covid-19 pandemic 100 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) source: semeru working paper 2020 in the research of asep suryahadi et al, that the impact of covid-19 will result in a weakening of the economy. the impact of covid will result in a drastic increase in poverty. the hypothesis generated in this study says that the impact of covid has an impact on decreasing economic growth by up to 4%. the same thing was conveyed that 1.3 million people will fall simultaneously in poverty. (asep suryahadi. ridho al izzati, 2020). 4.1 zakat-based economic solutions among the solutions that can be offered within the framework of the concept of zakat in supporting the economy during the pandemic are: a. first, the distribution of direct cash assistance from zakat, infaq and alms, both from zakat collection units and from the community. facing the current situation, it is not only the government that is moving, the community is also expected to contribute according to their respective abilities and conditions. in this context, it takes sacrifice from the rich and the patience of the poor who are affected by the plague, on the basis of love which is manifested in the form of human solidarity, where the more fortunate people help those who are less fortunate (linge 2015). one form, in the midst of the covid-19 pandemic, is to pay zakat, donations and alms. especially for zakat that is paid, the distribution can be focused on the poor directly affected by covid-19, as one who is entitled to receive it (mustahik). this is an islamic economic philanthropic scheme that has great potential for the economy of the community. but unfortunately, the realization of zakat that goes to baznas is still far from expectations. realization of zakat at the end of 2018 was recorded at only rp. 8.1 trillion, even though the potential was rp. 252 trillion. (azwar iskandar 2020) said the importance of strengthening the campaign for zakat, infaq and alms funds can be continued. among the efforts that can be done are: 1) making the mosque the center of baitul maal for the surrounding community and must be registered as a zakat collecting unit (upz) under the coordination of the zakat management organization (opz). even though the current mosques are temporarily out of service, in this era of social media, mosque congregations can still be moved by paying zakat online; https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 101 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2) literacy related to zakat calculation can be strengthened by the establishment of zakat centers in mosques and campuses; 3) it is necessary to call for a massive national solidarity fund movement that can be led directly by the president of the republic of indonesia which is supported by all national mainstream media or official social media of the government and society. if zakat involves two parties, namely the government or its representatives, in this case amil zakat (baznas), and compulsory zakat (muzakki), then infaq and alms are more flexible, because they only come from one party, namely the payer / donor of donations or alms. , so that collection and distribution can be carried out more optimally for people affected by covid-19. b. second, superior business capital assistance during the crisis. in the midst of a crisis, many business sectors or micro, small and medium enterprises (msmes) are struggling to survive. this business is often difficult to survive due to limited capital. the existence of msmes as a non-muzakki group is a group that is very vulnerable to falling into the abyss of poverty and bankruptcy due to shocks or economic shocks. so that the number of mustahik can increase very sharply, while the number of muzakki can continue to decrease significantly (ascarya 2020). the existence of micro, small and medium enterprises, especially traders in traditional markets is a form of economic life for most indonesians. this position has placed traditional market traders as the main thing that needs attention, especially in terms of capital. the process of developing traditional market traders is a manifestation of economic development which has become very important. efforts to develop and strengthen the potential of traditional market traders as a strategic economic group must be oriented towards empowerment, so that independent and strong local economic actors are formed through micro finance institutions (mfis), especially islamic microfinance institutions (lkms) 4.2 conditions after ziswaf intervention when a mustahik receives zakat has the ability to spend assets to meet their needs, so the condition will cause the demand curve to shift to the right from d0 to d1. on the other hand, when a muzakki has assets, he is motivated to invest these assets into the real sector so that the supply of goods and services will increase and the supply curve will move to the right, from s0 to s1. figure 3. ziswaf intervention in demand and supply curves https://creativecommons.org/licenses/by/4.0/ the role of zakat institutions in supporting the economy during the covid-19 pandemic 102 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) then, in the next period of zakat payment, mustahik still have the ability to spend assets to meet their needs, so that the demand curve will continue to shift to the right from d1 to d2. this will continue. likewise, the supply side will also move to the right, from s1 to s2, and continue to move. in the end, the continuous movement of the demand and supply side to the right will gradually increase gdp or gdp per capita which will lead to welfare and prosperity (ascaya, 2020)implemented figure 3. final economic conditions with ziswaf intervention in the end, if the programs areabove, especially direct cash assistance, zakat, infaq, waqf, or csr, both for the community and the business sector or msmes, can really be encouraged, it is hoped that it will increase the aggregate demand and aggregate supply to the right, followed by the development of an online market that is focus on msmes that match supply and demand, so that the economic surplus is regenerated and helps accelerate economic recovery. 4.3 utilization of zakat during the pandemic this pandemic disaster has made social institutions such as zakat institutions, including baznas and other zakat institutions, to make quick steps and to respond to the current pandemic disaster. steps taken by baznas, such as distributing zakat funds, include assistance for health emergencies, socio-economic emergencies, and the sustainability of the existing program. this distribution can be seen in the diagram below: picture. 5 zakat utilization diagram https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 103 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) figure: 6 zakat distribution diagram source: baznas 2020 data when viewed from the presentation of the data above, baznas has distributed zakat funds to three distribution sectors, namely, health emergencies, economic emergencies, and the sustainability of the existing program, which is the total zakat fund distributed up to rp. 40,393,920,757 and 466,666 mustahik beneficiaries. this distribution program only applies during the pandemic period, namely in april, may, and june 2020. for the economic emergency response program, baznas has distributed funds of rp. 27,100,081,223 ,. for people whose businesses have been affected by covid-19, or assistance for those informal and formal workers, employees who have been laid off. and baznas has also expanded the point of micro outlets for micro entrepreneur partners to respond to the covid-19 pandemic in a number of areas. to distribute zakat funds to mustahik, baznas ri has grouped the beneficiaries during the covid-19 pandemic, the following are the clusters of the grouping of zakat recipients: table. 2 clusters and targets of zakat recipients in handling covid-19 no cluster target mustahik 1 educators and da'wah teachers / honorary lecturers, ustadz, teachers of koran, khatibs, lecturers, marbot mosques, etc. 2 micro and small businesses of salons, barbers, food stalls small, mobile traders, etc. 3 informal workers and informa workersworkers canteen guards, parking, pedicabs, opang, massagers, household assistants who go roundtrip, tenant guards, ob, angkot, bajaj, ojol, catering employees, etc. https://creativecommons.org/licenses/by/4.0/ the role of zakat institutions in supporting the economy during the covid-19 pandemic 104 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4 layoffs and unemployment victims of laid-off factory workers, etc. source: baznas ri 2020 data in the journal afifuddin kadir, miftahur rahman hakim, fahmi syam, murdiansah sa karim. the realization of the economic emergency program by baznas ri was primarily to meet basic needs, namely to maintain the resilience of the basic needs of the community. where the government has made policies regarding social distensing and the imposition of large-scale social restrictions to break the chain of spreading the covid-19 virus. baznas ri has also collaborated with daily workers such as online motorcycle taxi drivers and others to cooperate with baznas in carrying out environmental cleaning such as spraying disinfectants in public areas and for this cooperation baznas provides wages to them. baznas has also realized an economic emergency program by prioritizing zakat fitrah funds for those families affected by covid-19. and baznas also provides direct assistance to people in need in order to maintain their purchasing power during this pandemic. (baznas, 2020). 5. conclusion a. as a country with the largest muslim majority population, indonesia has great potential in overcoming the economic impact of the covid-19 pandemic with zakat. the concept of zakat that can be used to support the community's economy is, 1) by distributing direct cash assistance from zakat, donations and alms; 2). through superior business capital assistance for the business sector or micro, small and medium enterprises (msmes). b. the utilization of zakat includes collecting and distributing social funds such as zakat management organizations baznas and laz for handling covid-19 during this pandemic, but it needs to be continuously improved so that it can support the economy of the people affected by covid-19. references abdullahi, shafiu ibrahim. 2018. zakah as tool for social cause marketing and corporate charity: a conceptual study. journal of islamic marketing. 25 july. abulhasan m. sadeq, (1996), "ethico-economic institution of zakah: an instrument of self-reliance and sustainable grassroot development", humanomics, vol. 12 iss 2 pp. 47 69. aji, hendy mustiko. albari albari, muchsin muthohar, sumadi sumadi, murwanto sigit, istyakara muslichah and anas hidayat. 2020. investigating the determinants of online infaq intention during the covid-19 pandemic: an insight from indonesia. journal of islamic accounting and business research. 26 september. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 105 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ardiani, ninda., sri herianingrum. 2018. efficiency performance of dompet dhuafa zakat institutions: using data envelopment analysis approach. d international conference postgraduate school (icps 2018), pages 60-64. ascarya. (2020). the role of islamic social finance in times of covid-19 outbreak. pebs-ui. h. 29-30 asep suryahadi. ridho al izzati. daniel suryadarma. 2020. the impact of covid-19 outbreak on poverty: an estimation for indonesia. jakarta: smeru research institute. azwar. islamic economic and financial solutions during the covid-19 pandemic. https://www.kemenkeu.go.id/publikasi/artikel-dan-opini/solusi-ekonomi-dankeuangan-islam-saat-pandemi-covid-19/. accessed on january 6, 2021. national zakat agency. (2020). baznas report in handling the covid-19 pandemic. jakarta: puskas baznas. baldwin, r., mauro, bwd (2020). economics in the time of covid-19. new e-book. the graduate institute geneva. p. 1-10. bin-nashwan, saeed awadh. hijattulah abdul-jabbar and saliza abdul aziz. adel sarea. 2020. journal of financial reporting and accounting. 22 october. didin hafidhuddin. 2002. zakat in the modern economy. jakarta: echo of insani. hudaefi, fahmi ali. irfan syauqi beik. 2020. digital zakah campaign in time of covid19 pandemic in indonesia: a netnographic study. journal of islamic marketing. november 09. iskandar, azwar., bayu taufiq possumah., khaerul aqbar. (2020). eran of islamic social economy and finance during the covid-19 pandemic. regards; syarif hidayatullah islamic state islamic university syarif hidayatullah jakarta social & cultural journal. vol. 7 no. 7, pp. 625-638, kadir, afifuddin. miftahur rahman hakim., fahmi syam, murdiansah sa karim. (2020). use of zakat funds on victims of covid-19 sharia maqashid perspective. al-tafaqquh: journal of islamic law, faculty of islamic studies, umi. volume 1 number 2 july. world bank. (2020). world bank group and covid-19 (coronavirus). https://www.worldbank.org/en/who-we-are/news/coronavirus-covid19. retrieved january 6, 2021. https://creativecommons.org/licenses/by/4.0/ role and position of public debt in islamic fiscal policy in indonesia 43 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) role and position of public debt in islamic fiscal policy in indonesia roisatun kasanah1)*, muhamad nafik2 1,2department of islamic economics, faculty of economics and business, airlangga university, indonesia abstract this study tries to provide an overview of the role and position of public debt in islamic fiscal policy by collecting information from books, journals, scientific articles and official news related to fiscal policy in indonesia. from the results of the analysis, the researcher found that although there are several opinions that suggest the use of public debt is permissible in overcoming the budget deficit that occurs in the state, there are still provisions that must be considered such as debt schemes that do not use interest or the practice of usury and only carried out in circumstances emergency and intended for meeting the needs that are important to the community. in addition, although debt instruments have beneficial values for the economy, there are many things that must be considered such as good management of the government, good political conditions, and efficiency and the absence of corruption or other illegal acts. in islamic fiscal policy, there are various alternative sources of state income that have enormous potential through zakat, infaq, alms, and endowments. in addition, the use of debt instruments can be carried out in accordance with islamic rules through the concept of mudaraba, musyarakah, and buying and selling business contracts. keywords: public debt, fiscal policy, islam, indonesia 1. introduction the government has a very important role for the realization of the welfare of the people in a country. various regulations and policies are needed to achieve these goals, especially in the economic sector. the duties and roles of the government in the management of state finances are included in the field of public finance related to the management of resources owned by a country in order to achieve common goals, the welfare and benefit of all the people. islam is perfect religion which also regulates public finance with a comprehensive system according to the quran and sunnah one of the instruments for managing the country's economy is fiscal policy related to the revenues and expenditures of a country which in indonesia is regulated in the state budget (apbn/ anggaran pendapatan belanja negara) (supangat, 2013). fiscal policy instruments include the management of state businesses through bumn (state-owned *corresponding author. email address: roisatun.kasanah-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:roisatun.kasanah-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 44 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) enterprises), tax policies, and loans (karim, 2007: 255-257). fiscal policy is very important in relation to sources of state revenue and effective allocation of state expenditures so that public welfare can be achieved. one of the important issues related to fiscal policy is public debt, which is a financing instrument produced by the government to cover the state budget deficit through loans both from domestic and foreign sources (widiastuti, 2020). this financing instrument is still being debated because of the many differences of opinion both allowing and prohibiting. in indonesia, debt instruments have become a source of funding in overcoming the budget deficit in the apbn. government debt financing until the end of the 1990s was mostly in the form of foreign loans from bilateral and multilateral institutions and was non-tradable, while currently the composition of government debt was dominated by financial market instruments in the form of sbn (government securities). in 2020, indonesia's total outstanding loans were 791.85 trillion rupiah, with details of foreign loans of 782.04 trillion and domestic loans of 9.80 trillion. the outstanding value of sbn (government securities) is 4,472.22 trillion rupiah. in addition, to tackle the crisis caused by the covid-19 pandemic, indonesia also chose debt as one of the funding instruments along with making a budget reallocation. the funding requirement for the national economic recovery (pen) program reaches rp.695.2 trillion and according to a statement from the minister of finance sri mulyani, indonesia's debt ratio is predicted to reach 38.5 percent of gross domestic product (gdp) in 2020 (cnn indonesia). the increasing amount of debt is debated by many parties, on the one hand the debt instrument is needed to cover the budget deficit that occurs especially when there is a crisis like now, but on the other hand, debt will burden the community and cause concern for the future economic situation. a study conducted by susan george also concluded that repayment of foreign debt will be more burdensome for the indebted country (atmadja, 2000). this study tries to provide an explanation regarding the role and position of public debt in islamic fiscal policy and how solutions in islam are related to budget management in relation to fiscal policy. this study also provides an overview of the position of public debt in fiscal policy in indonesia to be associated with the rules in islam. 2. literature study https://creativecommons.org/licenses/by/4.0/ role and position of public debt in islamic fiscal policy in indonesia 45 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2.1 islamic fiscal policy fiscal policy is a rule or regulation decision from the government of a country related to adjustments in the field of income and expenditure which aims to direct economic conditions for the better (rahayu, 2014: 1). according to sukirno (2006: 184) fiscal policy is the steps taken by the government to make changes in the tax system or in its shopping aimed at overcoming economic problems. based on this understanding, it can be concluded that fiscal policy is a policy for the management of the country's economy through adjustments in the field of income and expenditure. fiscal policy from a conventional point of view and from an islamic point of view has similarities but also differences because in islam all actions must be in accordance with islamic values and principles. in the conventional system the objective of fiscal policy is to achieve prosperity in the form of maximum benefits regardless of human spiritual needs, while in the islamic system fiscal policy aims to improve the economy for the creation of universal welfare covering life in the world and in the hereafter. in addition, islamic fiscal policy aims to develop a society based on a balanced distribution of wealth (aini, 2019: 43). islamic fiscal policy has certain characteristics including value orientation, ethical and social dimensions in carrying out its allocation, distribution and stabilization functions. for example, in the taxation system, islam must ensure that only the rich and affluent who have the advantage bear the main burden of taxes with a proportional and fair system. according to rozalinda (2014: 211), some of the characteristics of fiscal policy in the islamic economy include state expenditure based on income so that the budget deficit can be minimized, a taxation system that is proportional to the level of productivity, and the calculation of zakat based on the results of profits, not on the number of goods. 2.2 islamic fiscal policy instruments islamic and conventional fiscal policy instruments both consist of revenue sources and state budget allocations. from a conventional point of view according to karim (2007: 255-257) the tools or methods used by the government in collecting funds consist of taxes, loans (debt), and state business results through bumn (state-owned enterprises). from an islamic point of view, several things were done in fiscal policy at the beginning of islamic rule including increasing work participation, tax policy, effective budgeting and special fiscal policies carried out based on certain circumstances. the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 46 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) following is an explanation regarding the sources of income and the government budget policy according to islam: a. source of state income 1) ziswaf (zakat, infaq, alms and waqf) zakat, infaq, almsgiving and waqf are instruments of equal distribution of income in islam which have their own characteristics in practice. some are obligatory such as zakat and some are sunnah such as infaq, almsgiving and endowments. in addition, each object has different characteristics so that it is very relevant as a way of realizing welfare and equitable distribution of society. 2) kharaj kharaj is a tax imposed on land owned by all members of society, both muslims and non-muslims, based on the level of productivity of the land taking into account the characteristics of the soil / soil fertility, the type of crop, and the type of irrigation. 3) jizyah jizyah is a tax paid by non-muslims as compensation for the social, economic, welfare services and security guarantees they receive from the islamic state. if they have embraced islam, then the obligation to pay jizyah is invalidated and jizyah is not obliged if they do not have the ability to pay it because of poverty. in modern times, jizyah is like a tax imposed by the government on foreigners who enter and stay in the territory of a government or known as visa (rozalinda, 2014: 221). 4) khums khums are funds obtained from one fifth of the spoils of war (ghanimah). in q.s. al-anfal verse 41 explains about the arrangement of the allocation of war spoils, namely one fifth for allah and his messenger. this part is allocated for general welfare such as for relatives, orphans, poor people and travelers. this fifth is known as khums (rozalinda, 2014: 221). 5) usyur usyur is a tax imposed on goods that enters an islamic country, or comes from an islamic state itself. this tax is in the form of import duties imposed on all traders. https://creativecommons.org/licenses/by/4.0/ role and position of public debt in islamic fiscal policy in indonesia 47 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 6) loan or debt loans or debt in islam are only secondary receipts because in an islamic economy there is no interest, likewise for loans in islam it must be interest free, so that government spending will be financed from tax collection or profit sharing 7) other income this acceptance can be in the form of kafarat or fines and kalalah inheritance, namely inheritance from people who do not have heirs b. state budget policy in managing the state budget, islam has values and principles that come from the quran and the sunnah. if you look at the practice of budget policies during the time of the prophet muhammad, it will be different because the modern budget system is increasingly developing and more complicated so that adjustments are needed but still based on islamic values. for example in the preparation of the apbn, although in islam it does not recognize the making of an annual state budget, this system can be implemented by using islamic values, for example by selecting a source of funding that does not come from usury. then related to budget policy, the basis used is effective and efficient practices. some general principles in budget policy according to islamic law are as follows: (nasution, 2006: 223-224): 1) government spending must be in the corridor of maslahah 2) avoiding mashaqqah (difficulties) and harm should take precedence over making improvements 3) individual mudarat can be used as an excuse to avoid mudarat on a general scale 4) individual sacrifices can be made and individual interests can be sacrificed in order to avoid loss and sacrifice on a general scale 5) the al-ghunmu bi al-ghurni rule, which is a rule that states that those who get benefits must be ready to bear the burden (those who want to be lucky must be prepared to bear losses) 6) the rule of "ma la yatimnu al-wajibu illa bihi fahuwa wajib". namely the rule which states that "something that must be upheld, and without being supported by other supporting factors cannot be developed, it is obligatory to enforce these supporting factors." https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 48 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 3. research methodology this study uses a qualitative approach, namely research that is general in nature, changes and develops according to conditions in the field. qualitative research is global, not detailed, uncertain and very flexible so that it is very open in nature (putra and lisnawati, 2012: 28). the method in this research is descriptive method with literature study research techniques and type of library research (library research). descriptive research method is a method or tool used by researchers to answer a series of research questions by collecting as much data as possible regarding the topic of public debt in islamic fiscal policy. furthermore, literature study research techniques are used by researching and understanding books, documents or other written sources relevant to the topic of public debt in islamic fiscal policy. this research is included in the type of library research (library research) according to the explanation subagyo (1999: 99), namely research that uses literature data as a theory to be studied and analyzed in order to obtain a hypothesis or conception to obtain objective results. with this type of information can be taken completely to determine scientific action in research as a research instrument that meets research support standards. based on descriptive methods and literature study techniques, this study tries to provide answers to the problems of public debt in islamic fiscal policy. the role and position of public debt is explained through data and information sourced from books, journals, articles and financial reports from the indonesian state budget (apbn/ anggaran pendapatan belanja negara). 4. result and discussion 4.1 debt in an islamic perspective debt or loans are liabilities of existing corporate entities due to past transaction events that must be paid off in the future (susilowati, 2016). according to sutrisno (2003) debt is capital that comes from loans through financial institutions or debt securities with compensation returns for perceived benefits. debt in an islamic perspective is called alqard which means cutting. by definition, qard is a loan and loan agreement with the condition that the party receiving the loan is required to return the funds received without any additional (widiastuti, 2020: 163). in islam qard is a contract based on the purpose of helping to help so that there is no additional return. the debt and credit agreement is https://creativecommons.org/licenses/by/4.0/ role and position of public debt in islamic fiscal policy in indonesia 49 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) intended to love fellow humans and help (ta'awun) in various matters. this is in accordance with the word of allah swt in qs. al-hadid (57): 11 َ قَْرًضا َحَسنًا فَيُٰضِعفَٗه لَٗه َولَٗهٓٗ اَْجٌر َكِرْيمٌ َمْن ذَا الَِّذْي يُْقِرُض ّٰللاه meaning: whoever lends to allah with a good loan, then allah will return it multiplied for him, and for him a noble reward, the debt related to the legal individual is permissible in islam as revealed by the following hadith: from rafi 'said, the prophet saw borrowed a young ox, then the prophet saw received a good camel, then he told me to pay off his young ox debt to that person. i said, "i did not find in that camel other than a camel with four fine legs. he said just give it to him, because the best people are those who are the best when paying off their debts. in islam the concept of debt consists of two, debt through loans and debt through financing. loan debt is debt that arises because of a loan, either in the form of goods or money. this loan will be paid back in the same type at the agreed period with the same amount. in islamic law, loan debt in zahir is not included in capital development efforts, because debt through borrowing is one form of assistance that is helping to help. meanwhile, debt through financing or buying and selling is debt arising from trade transactions. the form of debt through financing is different from loan debt, because debt in this form indicates a transfer of ownership rights to another person. then the principal payment of debt is made back on a delayed basis at the agreed period (yusuf qardhawi, 1997: 111 in kirom 2018). 4.2 role and position of public debt in islamic fiscal policy debt in the context of a country is called public debt, which is a loan made by the central government and local governments in a country. this loan is used to cover budget deficits that occur in countries that adhere to a deficit budget system, such as in indonesia. based on this system, the expenditure budget will be greater than the revenue because it aims to increase economic growth. this is different from budgeting practices in islamic governments which use a balanced budget system. the principle of leaders in islamic times was that expenditure should only be made when there is acceptance. the practice of deficit budgeting is only carried out during certain circumstances, for example during https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 50 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the time of the prophet muhammad, which was before the hunain war and before fathu makkah because many people converted to islam so that the expenditure of zakat was greater than their income (huda, 2016). from a conventional point of view, there are two theories that explain the importance of debt, in this case foreign debt, for financing the development of a country. the first theory says that foreign debt is needed to close the saving gap that occurs in the country (domestic saving). external debt is an alternative in closing the saving gap in addition to investment and equity participation, such as foreign direct investment (fdi), short term capital and long term capital. the second theory looks at foreign debt from the balance of payments side, where foreign debt functions to accommodate current account interests which are autonomous and function as gap filling, namely filling gaps due to current account deficits. (hamid, 2000: 112) from an islamic point of view, there are two opinions regarding public debt according to huda (2016). the first party is the one who is pro to debt (external financing). according to this opinion, debt is allowed as long as in practice it is in accordance with the shari'a. this opinion argues that cooperation with other parties in a business is permissible, even recommended, such as murabaha, mudaraba, musharaka. the second opinion is against debt (external financing) on the grounds that it is a preventive measure for the involvement of islamic countries in foreign debt because it will come into contact with usury. according to beik (2009) in huda (2016) in debt, there are certain principles that must be done, namely: a. debt is the last alternative when all efforts to obtain funds legally and in cash are not possible so that debt is not a habit. b. if you are forced to go into debt, you cannot go into debt beyond your ability. in sharia terms, it is called ghalabatid dayn or being in debt because it will have a negative effect, causing a large effect, namely qahrir rijal or easily controlled by other parties. rasulullah prayed that he would always be protected from ghalabatid dayn diseases which would cause self-respect to be lost. c. if the debt has been incurred there must be an intention to pay because the debt is a liability. islam is against people who are negligent of their debts. in a hadith it is even said that all the sins of a martyr will be forgiven except for debts "(hr muslim no. 1886). https://creativecommons.org/licenses/by/4.0/ role and position of public debt in islamic fiscal policy in indonesia 51 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4.3 alternative public debt instruments in islam islamic economics is based on the qur'an & hadith which aims to achieve happiness in the world and the hereafter (al-falah), as well as public debt in fiscal policy. some concepts in islam that can be a solution in avoiding the negative impact of foreign debt that contain elements of usury are as follows: a. the concept of musharaka (syirkah), namely business cooperation with a mix of funds for the purpose of sharing profits. the government can also cooperate with islamic banking through this concept in a real asset and the profits that will be generated will be shared b. the concept of profit sharing (mudharabah) is a cooperation project that can be carried out between the government and islamic banks with management carried out by the government. profits can be shared according to a profit sharing scheme. c. the concepts of buying and selling trade carried out in islamic economics can be used to gain profit without causing tyranny and exploitation of the parties involved. this solution can be done so that the government can collaborate with other countries by using the musharaka, mudaraba and buying and selling systems in creating economic development in indonesia. the indonesian government does not have to cooperate in debt to other countries, because the three solutions above are an effective way to increase development without the existence of usury. the forms of cooperation that are permitted in shari'ah, such as mudharabah, musyarakah, murabahah can be developed as a form of external financing in the state budget. in principle, these forms are more of a flow creating equity flow creating debt, which international financial institutions have begun to implement. islamic development bank through project financing in islamic countries. compared to debt, equity participation is seen as more constructive, proportional and fair in financing, because there is a distribution of returns and risks. according to (al-zoubi et al., 2008) zakat is also an important alternative in achieving a pareto optimal state of fiscal policy in a country. zakat is also proven as an instrument of equalization of wealth and optimization of fiscal policy so that optimization does not have to be achieved with debt instruments but also with zakat and taxes which are managed properly, effectively, and efficiently. zakat has an economic role in its https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 52 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) capacity to generate public revenue by determining expenditure and also providing budget stability. zakat is considered a central and main fiscal policy instrument because it has potential and advantages over other forms of fiscal instruments in terms of creating job opportunities, increasing investment, providing a fair redistribution of income and wealth, having a positive impact on poverty alleviation, and functioning as an automatic stabilization tool when there was an economic recession (daud & audu, 2011). based on this, zakat is a very appropriate instrument to exploit its potential in overcoming economic problems during a recession due to the corona virus pandemic which is still ongoing until 2021. besides that, the solution to this foreign debt according to andi hasdi hakim is as follows; (afriyenis, 2016) a. increasing people's purchasing power, namely through empowering the rural economy and providing small business capital as large as possible. b. progressively increase taxes on luxury goods and imports. the reality is that the government currently takes a luxury tax c. the concept of development that continues and leads to a single point of maximizing the strength of the national economy, gradually releases dependence on foreign debt. d. promote pride in domestic production, increase the willingness and ability to export superior products and foster the entrepreneurial spirit of the community. e. the country of indonesia is actually rich in superior natural resources so that if we use them to the maximum, it will provide foreign exchange f. developing quality human resources and placing welfare that is just and equitable. 4.4 public debt in fiscal policy in indonesia currently, indonesia is a country that adheres to a deficit budget system, namely a budget system where in practice the amount of expenditure is greater than revenue. this system was chosen because indonesia is a country at the development stage, so it requires large funds to build infrastructure and programs that support the country's economic growth. indonesia began to adopt a deficit budget system in 2000 after adopting a balanced budget system in previous years. for the value of indonesia's public debt itself, it experienced a very drastic increase in 1998 due to the financial crisis that occurred and then decreased until finally in 2021 the issue of public debt was again hotly discussed https://creativecommons.org/licenses/by/4.0/ role and position of public debt in islamic fiscal policy in indonesia 53 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) because the government chose a debt instrument to provide a source of funding to overcome the resulting budget deficit. by the covid 19 pandemic crisis. the table below shows the value of indonesia's public debt from year to year and its ratio to the value of gdp (gross domestic product) for the last ten years or so. table 4.1 amount of indonesian public debt and its comparison with the value of gdp (gross domestic product) in 2010-2021 year amount of public debt (triliun) ratio to gdp year amount of public debt (triliun) ratio to gdp 2010 1.681,7 24,5% 2016 3.515,5 28,3% 2011 1.809 23,1% 2017 3.938,7 29,4% 2012 1.977,7 23% 2018 4.418,3 29,8% 2013 2.375,5 24,9% 2019 4.786 30,2% 2014 2.608,8 24,7% 2020 6.074.56 38,68% 2015 3.165,2 27,4% 2021 6.445,07* 41,64%* source: ministry of finance report * data up to the 1st quarter (march) from table 4.1 it can be seen that the value of indonesian government debt from year to year. from 2010 to 2018 the ratio of debt to gdp ratio was still below 30%. the value of 30% is a target that the government is trying to maintain until 2018, but in 2019 the government debt ratio is more than 30%. if you look at the rules that have been passed, namely the state finance law number 17 of 2003, the maximum limit for the ratio of government debt is 60% to gdp (gross domestic product), then the value of 41.64% in 2021 is still below the threshold. even though indonesia's debt ratio is still below the threshold, the government still has to be vigilant because if you look at the data on bumn debt in 2021 it has reached 12,269.63 trillion, which is 79.5 percent of gdp when combined with government debt (pikiran rakyat.com). in addition, if you look at table 4.1, it can be seen that during the period 2010 to 2021 the amount of indonesian government debt continued to increase with the ratio of the ratio to gdp which also https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 54 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) continued to increase in 2015 to 2021, but in the period 2010 to 2014 the debt to gdp ratio was still experience ups and downs. when viewed from the perspective of public debt from an islamic perspective, the amount of indonesia's debt can be seen from two sides. on the one hand, the increase in debt by the government has a good purpose because it is aimed at the problems and welfare of the community through economic improvement. in addition, if you see a significant increase in debt in 2020, it is not without reason, but because of the emergency due to the covid 19 pandemic. on the other hand, debt in islam is only used as a last resort and not a habit. based on this, even though the decision to increase debt by the government has been based on good intentions, the government must still try to find alternative sources of state revenue that are more effective and safer so that the sustainability of the state's financial condition is maintained. with a large amount of debt, the indonesian government must also be careful so that the use of debt instruments can have a positive impact in accordance with the objective, namely to achieve economic growth. even though the purpose of public debt is good, if it is not managed properly then this will not have a good impact. research conducted by (ali et al., 2019) shows that poor governance can lead to a higher ratio of public debt to gdp. several other variables that must be considered by the government regarding debt management include per capita income which has a negative relationship with public debt so that the higher the per capita income in a country, the lower the public debt ratio. the government expenditure variable also has a positive relationship which shows that the higher the government expenditure, the higher the public debt ratio. based on this, the government must not only focus on good public debt management, but must also focus on increasing the per capita income of the community so that the increase in the amount of debt that occurs is not greater than the increase in per capita income. government expenditure items must also be considered so that expenditure budgets are right on target and are actually allocated to important sectors. the hope is that in the future the indonesian economy will continue to experience growth without relying on risky public debt instruments. from the research conducted by (ali et al., 2019) it can be seen that the role of government is very vital for the success of public debt management, so the government must pay attention to good management, be full of caution, maintain the stability of the country's political condition and eradicate all harmful acts of corruption. https://creativecommons.org/licenses/by/4.0/ role and position of public debt in islamic fiscal policy in indonesia 55 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 5. conclusion fiscal policy in islam has its own characteristics because it is rooted in the rules of allah swt in the quran and sunnah. if you look at various instruments, both revenue and budget allocation in islam, several things become important points, including the instrument of acceptance in islam that must be free from usury and in its regulation it must be fair and proportional, for example in the tax system. in addition, the budget allocation must prioritize benefit, avoid harm, and prioritize common interests. the government must be able to manage the state budget effectively and efficiently so that welfare goals can be achieved and there is no budget deficit. regarding the use of public debt, there are still differences of opinion. on the one hand, public debt is considered an instrument that can quickly solve economic problems, especially during a recession, but on the other hand, if public debt is not managed properly, this will cause a decline in the economic situation. some things that must be considered in managing public debt include good accountability, stability in political conditions, and the absence of corruption. based on this, the debt instrument should only be used in circumstances that are forced, not a habit and always prioritize principles in accordance with islamic teachings. reference aini, ihda. 2019. kebijakan fiskal dalam ekonomi islam. al-qisthu: jurnal kajian ilmuilmu hukum vol.17, no.2, december 2019, pp. 43-50 p-issn: 1858-1099 | e-issn: 2654-3559 http://jurnal.fs.iainkerinci.ac.id/index.php/alqisthu doi: https://doi.org/10.32694/010760 al-zoubi, h. a., maghyereh, a., & bhatti, m. i. (n.d.). does issuing government debt needed as a ponzi scheme in islamic finance a general equilibrium model. https://doi.org/10.1108/03074350810891038 ali, t. ben, ben, b., aziz, a., & yahya, a. (2019). the effect of governance on public debt : an empirical investigation for the arabian gulf countries. 46(4), 812–841. https://doi.org/10.1108/jes-07-2017-0168 afriyenis, winda. 2016. perspektif ekonomi islam terhadap utang luar negeri pemerintah dalam pembangunan ekonomi indonesia. maqdis (jurnal kajian ekonomi islam)-volume 1, no.1, januari-juni 2016 ani sri rahayu, pengantar kebijakan fiskal, (jakarta: bumi aksara, 2014), ed. 1, cet. 2, hal. 1 atmadja, atwin surya. 2000. “hutang luar negeri pemerintah indonesia : perkembangan dan dampaknya”. jurnal akuntansi & keuangan vol. 2, no. 1, mei 2000: 83 94. diakses tanggal 20 januari 2018. https://creativecommons.org/licenses/by/4.0/ https://doi.org/10.1108/jes-07-2017-0168 afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 56 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) daud, m., & audu, m. a. (2011). the economic significance of the zakah system : an exploratory analysis of its fiscal characteristics. 36, 3085–3090. hamid, edy suandi, (2000) perekonomian indonesia masalah dan kebijakan kontemporer, yogyakarta:uii press. huda, nurul. 2016. keuangan publik islami, pendekatan teoritis dan sejarah. jakarta: kencana. karim, adiwarman a. (2007). ekonomi makro islam. jakarta: pt. raja grafindo persada kirom, cihwanul. 2018. hutang luar negeri dalam perspektif ekonomi syariah. tawazun: journal of sharia economic law p-issn: 2655-9021, e-issn: 2655-9579 volume 1, nomor 2, september 2018 http://journal.stainkudus.ac.id/index.php/tawazun/index nasution, mustafa edwin, dkk. (2006). pengenalan eksklusif ekonomi islam. jakarta: kencana. putra, n., dan lisnawati, s. (2012). penelitian kualitatif pendidikan agama islam. bandung: remaja rosdakarya. rozalinda. (2014). ekonomi islam: teori dan aplikasinya pada aktivitas ekonomi. jakarta: pt raja grafindo persada. subagyo, joko. 1999. metode penelitian dalam teori dan praktek . jakarta:rineka cipta supangat. 2013. kebijakan fiskal negara indonesia dalam perspektif ekonomi islam: jurnal economica volume iv/edisi 2/november 2013 widiastuti. 2020. keuangan publik syariah: teori dan praktik. surabaya: cv naraya berita cnn. 2020. tumpukan utang negara buat lawan corona. https://www.cnnindonesia.com/ekonomi/20201209103046-532-579810/tumpukanutang-negara-buat-lawan-corona. diakses tanggal 19 april 2021 pikiran rakyat. 2021. khawatir jumlah utang indonesia yang capai triliunan, komisi xi: bisa buat ekonomi negara kolaps. https://www.pikiranrakyat.com/ekonomi/pr-011840586/khawatir-jumlah-utang-indonesia-yang-capaitriliunan-komisi-xi-bisa-buat-ekonomi-negara-kolaps. diakses tanggal 29 april 2021 https://creativecommons.org/licenses/by/4.0/ the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees 43 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees hizriah islami1)*, fuad mas’ud2) 1, 2islamic economics, faculty economics and business, dipoengoro university, indonesia abstract knowledge sharing behavior and organizational citizenship behavior (ocb) plays a major role in organizational development. this study aims to determine empirically the influence of islamic work ethics on knowledge sharing with ocbip (organizational citizenship behavior from islamic perspective) as a moderation variable. the population in this study were all muslim employees in indonesia who were drawn randomly. the samples collected were 100 respondents using purposive sampling technique. the questionnaire was tested first by using the feasibility test of the instrument in the form of validity and reliability tests. the analytical method of this study uses moderated regression analysis (mra) with the spss 24 program which previously passed the classical assumption test. the results of the regression moderation analysis in this study indicate that islamic work ethics has a positive and significant effect on knowledge sharing of muslim employees in indonesia. this study also concludes that ocbip can moderate the relationship between islamic work ethics and knowledge sharing among muslim employees in indonesia, where the ocbip variable is called a quasi variable which can also be used as an independent variable. keywords: ocbip, islamic work ethics, knowledge sharing 1. introduction knowledge (knowledge) has a very important role in the progress of an organization. many companies are increasingly aware of the importance of knowledge as an asset to achieve competitive advantage. on the basis of this conception, there is an effort to manage knowledge in organizations called knowledge management. from this point of view, an organization is seen as a body of knowledge composed of individual knowledge. according to nonaka and takeuchi in (ferdinandus et al., 2015) states that so that knowledge in an organization can be transformed from the individual dimension to the collective dimension or from the tacit form to an explicit form, the organization can provide opportunities for people to interact directly (face to face). tacit knowledge is something that a person knows and experiences, but is difficult to clearly and completely express. *corresponding author. email address: hzrh.islami@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:hzrh.islami@gmail.com afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 44 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) tacit knowledge is very difficult to transfer to others because this knowledge is stored in the minds of each individual in the organization. therefore, knowledge management exists to answer this problem, namely the process of converting tacit knowledge into knowledge that is easily communicated and easily documented, the results of this knowledge are called explicit knowledge. the basis for this conception is that governance appears an effort to manage knowledge in organizations called knowledge management, namely the dissemination and reuse of knowledge by other people in one organization. (razaghi et al., 2013). more and more companies put forward science in order to compete to be a superior company. this is where knowledge sharing comes into play, knowledge sharing is a part of knowledge management which has an important role in managing human resources in the organization. this process will encourage employees in the office to jointly start connecting, communicating, sharing and transferring their knowledge. sharing this information is expected to improve the quality of knowledge possessed by each individual in the organization, which in turn will improve the quality of knowledge in work units and organizations where the individual works.(nurhidayah, 2018).. the implementation of knowledge sharing in an organization can be influenced by many factors. one of them is the attitude of organizational citizenship behavior (ocb) or the extra role of human resources in managing the organization, which is considered an important factor for every employee in sharing their knowledge with many people. according to organs (in badar & seniati, 2017) organizational citizenship behavior (ocb) and knowledge sharing behavior play an important role in the success of any company. this research is supported by research by murtaza (2016) that knowledge sharing and organizational citizenship behavior plays a major role in organizational development, especially educational institutions. islam encourages collaboration in the workplace and activities that support social welfare which is equated with ocb (organizational citizenship behavior) attitudes in an organizational context (rice, 1999). ocb in an islamic perspective (ocbip) is an individual voluntary action that is in accordance with islamic law and only hopes for falah or the pleasure of allah. this concept leads to the concept of brotherhood (ukhuwah) in islam which consists of: ta'aruf, tafaham, ta'awun and takaful (kamil et al., 2014). in research conducted bykumar & rose (2012)found that islamic work ethics as a variable relevant to knowledge sharing and organizational citizenship behavior. kumar and raduan che rose also explained that there is a positive relationship between the ability to share knowledge and innovation abilities of employees in public sector organizations found to be dependent on iwe (islamic work ethics). however, with the fact that has been mentioned, there is very little research that builds theoretically and empirically regarding islamic work ethics and islamic ocb perspectives on knowledge sharing. based on the facts that have been mentioned, for that research conducted on the influence of islamic work ethics and organizational https://creativecommons.org/licenses/by/4.0/ the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees 45 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) citizenship behavior from an islamic perspective (ocbip) on knowledge sharing among muslim employees in indonesia, with the following research questions: 1. does islamic work ethics affect knowledge sharing among muslim employees? 2. can ocbip moderate the relationship between islamic work ethics and knowledge sharing among muslim employees? 3. is there a simultaneous influence between islamic work ethics and ocbip on knowledge sharing among muslim employees? 2. literature study 2.1 islamic work ethics according to simorangkir (in nur'aini, 2017) ethics can be defined as a rule using individual and social moral ratios, so that the rules are used as values in daily behavior. meanwhile, work in islam according to abi ummu salmiyah (in nurohman, 2011) that is, all forms of human effort, whether in material or non-material, intellectual or physical matters, as well as matters relating to mundane or the hereafter . thus, islamic work ethics based on sharia is an orientation that shapes and influences muslim involvement and participation. at workplace. according to ibrahim & kamri, (2013)work in islam is an activity of obligation, virtue in fulfilling the needs and obligations to create a balance in one's individual and social life. the absorption of islamic work ethics in general can be divided into 8 dimensions 2.2 organizational citizenship behavior (ocb) according to organs (in podsakoff et al., 2009) citizenship behavior in organizations or organizational citizenship behavior (ocb) is ocb behavior carried out by an individual with full freedom (at will) in determining something and mutual understanding without any formal reward or reward for the organization, so this behavior is very helpful and beneficial to the organization. there are five dimensions that contribute to organizational citizenship behavior (ocb), namely conscientiousness, altruism, civic virtue, sportsmanship, and courtesy. 2.3 organizational citizenship behavior from islamic perspective (ocbip) according to kamil et al. (2014)ocb in an islamic perspective (ocbip) is an individual voluntary action that is in accordance with islamic law and only hopes for something or pleasure from allah. ocb in the perspective of islamic law is sunnah, meaning that if it is not done it will not get punishment or sin and will get a reward if it is done. employees will be rewarded for caring and empathy with others. the concept of ocb in an islamic perspective leads to the concept of brotherhood (ukhuwah) in islam which consists of: ta'aruf, tafaham, ta'awun and takaful.(dwi et al., 2016). likewise with opinions (diana, 2012), that ocb in the islamic perspective https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 46 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) adheres to behavior in accordance with islamic values, namely, the values of sincerity, ta'awun, ukhuwah, and mujahadah. kamil et al. (2014) in his research revealed the four dimensions of ocbip. two dimensions of (organ, 1997) which has been described previously relates to an islamic perspective and is in line with kamil, et al (2014), namely: 1. altruism (taawun), namely the behavior of helping other members of the organization in carrying out their duties. this behavior is the willingness of employees to help their colleagues who have difficulties in the situation they are facing regarding their duties in the organization. 2. civic virtuethat is, behavior that refers to constructive involvement in the process of organizational policy and the contribution of this behavior can be done freely for the survival and progress of the organization. civic virtue behavior in employees is always looking for the latest information that supports the progress of the organization. 3. advocating high moral standards (da'wah) is a basic principle of islam that is captured as organizational citizenship behavior, in which the employees involved seek to develop employee moral and ethical behavior, which in turn improves organizational performance. 4. removal of harm (raf'al haraj), namely avoiding evil behavior, its characteristic in islamic law is that it is open to interaction and at the same time moderate. being between a difficult attitude and an easy attitude, this trait refers to the meaning of straight, fair, and middle. in islamic law it is not limited to various laws of worship alone, more than that the removal of harm (raf'al haraj) covers all areas of islamic law such as social institutions, criminal law, civil law, personal attitudes, and so on . all of this will be clearly seen when researching the shari'ah texts and their principles and their interrelation with principles that are based on principles, produce benefits and negate the damage. based on the explanation of the theory above, it can be concluded that ocb research is mostly carried out with reference to the value system from the west, very little ocb research relies on its particular religion from an islamic perspective. the western research system brings ocb to a person's hard work relationship to work better and more efficiently towards the organization that looks only at worldly elements. in contrast to ocbip, which does not only lead to organizational or individual results as found in west ocb, but also strengthens muslim brotherhood ties with allah, because work itself is seen as an act of worship. likewise, what muslim employees must do in having islamic ethics in their place of work. https://creativecommons.org/licenses/by/4.0/ the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees 47 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2.4 knowledge sharing knowledge is a process that explains past relationships with something meaningful, which can be understood and can be applied by each individual. according to debowski (2006) knowledge is divided into two parts, including: 1. explicit knowledge namely knowledge that has been collected in the form of documentation so that it can be easily disseminated to others as information. 2. tacit knowled genamely knowledge that an individual has and is difficult to communicate. in this case it is due to knowledge. this is a combination of experience and research that has been stored for so long that it is difficult to share with others. according to van den hooff & ridder (2004)knowledge sharing is a reciprocal process in which individuals exchange knowledge and jointly create new knowledge (solutions). one of the purposes of this definition consists of providing and gathering knowledge, which provides knowledge by communicating what knowledge to others is owned by someone's intellectual personal and gathering knowledge referring to consulting with colleagues by sharing the information they have. according to calantone et, al (inafqarina & dihan, 2019) a number of studies have demonstrated that knowledge sharing is essential because it enables organizations to improve innovation performance and reduce redundant learning efforts. based on the description above, it can be concluded that knowledge sharing is a process where individuals mutually exchange knowledge or information through social interaction based on their experiences and skills to share and receive knowledge within the entire organization to create new knowledge. the aspects of knowledge sharing according to van den hooff & ridder (2004): 1. providing knowledge (knowledge donating) is channeling / spread knowledge or intellectual capital to others which involves communication between individuals. 2. collecting knowledge (knowledge collecting) is seeking / gathering knowledge or intellectual capital by consulting with others. the influence of islamic work ethics to knowledge sharing research conducted by ghulam murtaza, muhammad abbas, usman raja, olievier reques, afsheen khalid and rizwan mushtaq (2014) on the impact of islamic work ethics on organizational citizenship behaviors and knowledge sharing behavior. in his research, he explained that there is a positive relationship between islamic work ethics and knowledge sharing, in other words, people who have a high spirit of islamic work ethics will tend to do better knowledge sharing than people who have a low spirit of islamic ethics. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 48 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) h1 : islamic work ethics have a positive effect on knowledge sharing among muslim employees the iinfluence of islamic work ethics to knowledge sharing with ocbip as a moderation variable research is directly proportional to that conducted by syahri nehru husain and yasir syam husain (2016) found that work attitude has a significant relationship with knowledge sharing and is significant towards ocb (organizational citizenship behavior). the results of this study also found that ocb was a significant mediator in the correlation between work attitudes and knowledge sharing. h2: islamic work ethic has an effect on knowledge sharing behavior with ocbip as a moderating variable the influence of islamic work ethics and organizational citizenship behavior from islamic perspective (ocbip) to simultaneous knowledge sharing research conducted by mogotsi, ic, boon, ja, & fletcher, l. (2011) also explains that there is a positive influence between ocb and knowledge sharing. in addition, naresh kumar and raduan che rose, (2011) also explains that there is a positive relationship between the ability to share knowledge and the innovation ability of employees in public sector organizations found to be dependent on iwe (islamic work ethics). h3.: islamic work ethics and organizational citizenship behavior from islamic perspective (ocbip) have a simultaneous effect on knowledge sharing 3. research methodology the dependent variable or dependent variable used in this study is knowledge sharing. the independent variable or independent variable used in this study is islamic work ethics. also, the moderating variable used in this study is ocb islamic perspective (ocbip).the population in this study were muslim employees throughout indonesia. the sampling technique used in this study is a non-probability sampling technique with a purposive sampling approach, which is an approach that determines samples based on certain criteria or characteristics.the number of samples used in this study was 100 respondents with certain criteria. the criteria referred to in this study are muslim employees who have worked for at least 1 year, and have taken at least a bachelor's degree.collecting data in this study by distributing questionnaires and literature studies from journals, the internet, and books. the analysis used in this research is moderation regression analysis (mra) with a regression analysis tool, namely spss 24. the data analysis used is validity and reliability test, classic assumption test, regression test, interaction test, t test, f test, and the coefficient of determination (r2). https://creativecommons.org/licenses/by/4.0/ the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees 49 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4. result and discussion 4.1 overview of respondents this research was conducted through a survey method by distributing questionnaires through the google form link with three criteria, namely the respondent is a muslim employee, has worked for a minimum of 1 year and has a minimum final education of s1 (strata 1). the questionnaire was distributed for one week and as many as 100 respondents were collected from various companies throughout indonesia. 4.2 respondent description table 2 respondents by age no. type of work number of people) percentage (%) 1 18-24 years 42 42 2 25-30 years 33 33 3 > 30 years 25 25 amount 100 100 source: primary data, processed in 2020. based on the table above, it can be seen that the majority of respondents are aged 1824 years of 42 people or 42% of the total respondents are 100 people. table 1 respondents based on education no. late education number of people) percentage (%) 1 s1 88 88 2 s2 11 11 3 s3 1 1 amount 100 100 source: primary data, processed in 2020. based on the table above, it can be seen that the majority of respondents come from s1 with a number of 88 people or 88% of the total 100 respondents. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 50 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 4 respondents based on location of institution / company no. work place number of people) percentage (%) 1 dki jakarta 47 47 2 bekasi 1 1 3 tangerang 3 3 4 semarang 27 27 5 cirebon 1 1 6 bandar lampung 7 7 7 cibinong 1 1 8 jepara 2 2 9 palembang 1 1 10 kediri 1 1 11 trunk 1 1 12 bandung 1 1 13 solo 1 1 14 ngawi 1 1 15 sibolga 1 1 16 padang 1 1 17 jambi 1 1 18 majalengka 1 1 19 aceh 1 1 amount 100 100 source: primary data, processed in 2020 most respondents came from the dki jakarta area as many as 47 respondents or 47% of the total 100 respondents. table 5 length of work no. type of work number of people percentage (%) 1 15 years 67 67 https://creativecommons.org/licenses/by/4.0/ the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees 51 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2 > 5 years 33 33 amount 100 100 source: primary data, processed in 2020 based on table 5 above, it can be seen that the majority of respondents have worked for 1-5 years as many as 67 respondents or 67% of the total 100 respondents. table 6 type of work no. type of work number of people) percentage (%) 1 private employees 67 67 2 employees of bumn / government agencies 25 25 3 academics (teachers, tutors, teaching assistants, researchers, etc.) 6 6 4 journalist 2 2 amount 100 100 source: primary data, processed in 2020. based on table 6 above, it can be seen that the majority of respondents with the status of having a job as private employees are 67 respondents or 67% of the total 100 respondents. 4.3 answer index analysis table 7 answer index analysis variable index average category islamic work ethics 90.63 high ocb islamic perspective 82.33 high knowledge sharing 81.68 high source: primary data processed, 2020 analysis of the answer index per variable aims to find a descriptive picture of the respondents in this study. this study uses an index analysis technique that describes the respondent's question items, the scoring technique used in this study is a maximum score of 5 and a minimum of 1. table 7 shows that the average index value of all variables is included in the high category. or good. this reflects that respondents gave a good assessment. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 52 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4.4 instrument test results validity test all results from testing the validity of all indicators used have a calculated r value greater than r table, namely 0.194 (r table value for n = 100), so all indicators are declared valid. reliability test the reliability test results explain that the cronbach's alpha value of all variables is greater than 0.60. based on this, it can be concluded that all variables are declared reliable. classic assumption test normality test table 8 kolmogorov-smirnov normality test unstandardized residual n 100 statistical test .061 asymp.sig (2-tailed) .200c, d source: primary data, processed in 2020 based on the results of the normality test in table 8, it is known that the asump.sig value is 0.200> 0.05, so it can be concluded that the residual value is normally distributed. multicoleniarity test table 9 multicollinearity test variable tolerance vif islamic work ethics .623 1,606 ocb islamic perspective .623 1,606 source: primary data processed, 2020 based on the multicollinearity test results above, it can be concluded that the independent variables used in this study are not correlated. it is known from a tolerance value greater than 0.1 and a vif value smaller than 10. https://creativecommons.org/licenses/by/4.0/ the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees 53 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) heteroscedasticity test table 10 heteroscedasticity test results with white's test model r r square adjusted r square std. error of the estimate 1 .605a .366 .333 25.46905 source: primary data 2020, processed figure 2. scatterplot heteroscedasticity test source: primary data, processed in 2020 based on the graph test on the scatterplot, it can be seen that the distribution of points is above and below 0 on the y axis, does not converge only above or below, is not patterned, does not form a wave pattern, is straight or curved so that it can be interpreted that the data collected does not have heteroscedasticity symptoms.. these results are similar to heteroscedasticity testing throughstatistical test using the white method, where the calculated chi-square obtained is 36.6 (100 x 0.366) smaller than the chi-square table of 120,9896 (df = nk = 97 with α = 0.05, then 97; 0 , 05). so it can be concluded that the statistical test proves the data collected does not show heteroscedasticity symptoms. hypothesis testing statistical t test (partial) table 11 statistical t-test results (model 1) model unstandardized coefficients standardized coefficients t sig. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 54 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) b std. error beta 1 (constant) 15,278 6,014 2,540 .013 x1 .292 .102 .278 2,867 .005 a. dependent variable: y source: primary data, processed in 2020 table 12 interaction test modereted regression analysis (model 2) model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 110,617 34,120 3,242 .002 x1 -1,670 .585 -1,592 -2,855 .005 z1 -1,229 .543 -2,084 -2,264 .026 x1z1 .026 .009 3,767 2,842 .005 a. dependent variable: y source: primary data, processed in 2020 based on the t statistical model 1 test in table 11, islamic work ethics has a significance value of 0.005 and a t value of 2.867. the significance value of 0.005 is less than 0.05 and the t value of 2.867 is greater than the t table of 1.9834 so that it can be concluded that the islamic work ethic variable has a significant positive effect on the knowledge sharing variable. based on these results, the hypothesis of islamic work ethics has a significant partial effect on knowledge sharing among muslim employees, so (h1) is accepted. these results are directly proportional to the results of previous studies (ghulam murtaza, 2016;tufail et al., 2017; kumar & rose, 2012) which explains that there is a positive relationship between islamic work ethics and knowledge sharing. the results of the model 2 interaction test in table 12 show that ocbip as a moderating variable weakens the relationship between islamic work ethics and knowledge sharing among muslim employees, this is because the regression coefficient value that leads to significant negative (0.005 <0.05), with a t value of 2.842> the t table value is 1.98472 which concluded that the ocbip moderating variable can weaken the independent variable. this is because there is a dimension of advocating high moral (dakwah value) which is not visible in the character of muslim employees in indonesia. this research is similar to the research conducted by farida elmi (2019)that in general it can be understood that the dimensions of altruism, civic virtue, advocating high moral https://creativecommons.org/licenses/by/4.0/ the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees 55 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) standards and removal of harm, almost all of which are demonstrated by employees, while what is not seen is the dimension of advocating high moral standards because employees do not have (weak) this character in their behavior. this does not mean that they are tolerant of phenomena that are contrary to islamic teachings, but do not voice it or inform other parties. meanwhile, all significance values on islamic work ethics, ocbip, and islamic work ethics * ocbip (x1x2) are less than 0.05 so that the moderating variable (ocbip) is called a quasi moderator variable, where the moderating variable can also be used as a independent variable. this research is directly proportional to previous research by (syahri nehru husain & yasir syam husain,2016) which explains that ocb can be used as a significant mediating variable on the correlation between work ethics and knowledge sharing. based on these results, the ocb islamic perspective (ocbip) hypothesis as a moderating variable between the relationship between islamic work ethics and knowledge sharing can be (h2) accepted. the equation model based on table 12 is as follows: y = 1,592x1 2,084x2 + 3,767x1x2 + e information: y = knowledge sharing x1 = islamic work ethic x2 = ocbip x1x2 = interaction between islamic work ethics and ocbip α = constant β1-β3 = regression coefficient e = standard error a. the regression coefficient of the islamic work ethics variable (x1) of -1.592 indicates that the moderating variable (x1x2) causes that every increase of one unit of the islamic work ethics variable will reduce knowledge sharing, assuming other variables are considered constant. b. the ocbip variable regression coefficient (x2) of -2.084 indicates that the moderating variable (x1x2) causes each increase of one unit of the ocbip variable to reduce knowledge sharing, assuming other variables are considered constant. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 56 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) statistical f test (simultaneous) table 13 f test results statistics (model 1) model sum of squares df mean square f sig. 1 regression 173,417 1 173,417 8,220 .005b residual 2067,493 98 21,097 total 2240,910 99 a. dependent variable: knowledge sharing b. predictors: (constant), islamic work ethics source: primary data, processed in 2020 table 14 interaction test results modereted regression analysis (model 2) model sum of squares df mean square f sig. 1 regression 673,740 3 224,580 13,757 .000b residual 1567,170 96 16,325 total 2240,910 99 a. dependent variable: knowledge sharing b. predictors: (constant), islamic work ethic, ocbip, islamic work ethic * ocbip source: primary data, processed in 2020 the results on the f test (see table 13) in model 1, it is obtained a significance value of 0.005 which is smaller than 0.05 and the value of f count 8.220 which is greater than the value of f table 3.94 so that it can be concluded that the independent variable, namely islamic work ethics simultaneously has a significant effect on knowledge sharing. similar results are found in model 2 (see table 14) f count obtained 13.75 with a significance value of 0.000. while the value of f table for a sample of 100 and a variable of 2, namely 3.94 and the significance is below 0.05, the result is 13.75> 3.94 (f count> f table) it can be concluded that there is a simultaneous influence on the independent variable, namely ethics. islamic work (x1), ocbip (z1) and islamic work ethic * ocbip (x1 * z1) on the dependent variable, namely knowledge sharing. based on these results, the hypothesis of the effect of islamic work ethics and ocbip simultaneously on the knowledge sharing of muslim employees can be accepted (h3). this result is directly proportional to the results of previous research (mogotsi, i. c, 2011) which explains that there is a positive, simultaneous and partial relationship between ocb and knowledge sharing, and also research made by naresh kumar (2011) which explains that there is a positive relationship. between the knowledge sharing skills and innovation capabilities of employees in public sector organizations were found to be dependent on iwe (islamic work ethics). https://creativecommons.org/licenses/by/4.0/ the influence of islamic work ethics and ocbip on knowledge sharing among muslim employees 57 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) coefficient of determination (r2) table 15 result of determination coefficient test (r2) (model 1) model r r square adjusted r square std. error of the estimate 1 .278a .077 .068 4,593 a. dependent variable: knowledge sharing b. predictors: (constant), islamic work ethics table 16 result of determination coefficient test (r2) (model 2) model r r square adjusted r square std. error of the estimate 1 .548a .301 .279 4,040 a. dependent variable: knowledge sharing b. predictors: (constant), islamic work ethic, ocbip, islamic work ethic * ocbip the results of the spss model summary analysis show that the amount of adjust r square in model 1 (see table 15) is 0.068 or 6.8%. the knowledge sharing variable can be explained by islamic work ethics of 6.8% and the remaining 93.2% is explained by other variables outside the model that do not exist in this study. then the addition of ocbip as a moderating variable in model 2 (see table 16) adds to the strength of the influence of the relationship between islamic work ethics and knowledge sharing with adjust r square of 0.279 or 27.9%, where the ocbip moderating variable can explain the knowledge sharing variable of 27.9. % and the remaining 72.1% is explained by other variables outside the model that are not in this study. 5. conclusion based on the results of the discussion of this study, the conclusions of the study are as follows: a. islamic work ethics have a positive effect on knowledge sharing b. ocbip can moderate the relationship between islamic work ethics and knowledge sharing, where ocbip is called a quasi moderator variable which can also be used as an independent variable. c. islamic work ethics and ocbip have a simultaneous effect on knowledge sharing. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) 58 published by afebi islamic finance and economic 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zulfikri charis darmawan1)*, sri herianingrum2) 1master of science in islamic economics, 2department of sharia economics, faculty of economics and business, airlangga university abstract this study aims to examine the concept and implementation of good corporate governance in islamic banking in indonesia. this research is a research field which is sharpened by the literature. this research is descriptive in nature, seeks to examine gcg policies and find ideas to strengthen regulations in compliance with sharia aspects and describes the implementation of gcg in islamic banking in indonesia. the method used in data analysis is a qualitative method, namely by presenting it in the form of descriptions and concepts. the performance of islamic bank management, namely the implementation of gcg consisting of transparency (openness), accountability, responsibility, professionalism, independence, and fairness, as well as being committed to sharia compliance, however, the author only focuses on sharia compliance. then the assessment is carried out periodically and continuously and efforts are made so that it can be carried out properly in accordance with applicable regulations. this research focuses more on the concept and implementation of gcg in islamic banking. keywords: good corporate governance (gcg), sharia bank management performance, sharia compliance. 1. introduction islamic economy is built on the basis of sharia, therefore it is an integral part of islam. as a derivation from islam, islamic economics will follow islam in various aspects. islam is a system of life (way of life), where islam has provided a complete set of rules for human life, including in the field of economics. every human being aims to achieve prosperity in his life, but humans have different understandings about welfare. in various conventional economics literature it can be concluded that the goal of humans to meet their needs for goods and services is to achieve welfare (wellbeing). man wants happiness and well-being in his life, and for this he strives at all costs to achieve it. human welfare as stated in the qur'an relates to human enjoyment and misery in the hereafter, and objective criteria according to economic needs such as food, education, other goods and services and non-material commodities such as immortality, love and affection between husband and wife. this concept prioritizes the gratification of "useful desires", rejects "useless desires, and encourages people to mobilize their human and material *corresponding author. email address: zulfikri.charis.darmawan-2020@feb.unai.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:zulfikri.charis.darmawan-2020@feb.unai.ac.id afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 95 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) resources to fulfill the" desires of society ". banking corporate governance has become an important area that needs further attention at the global level, especially after the financial institution crisis in 2008 which affected banking stability around the world (haan, 2016), financial institutions are closely related due to globalization and technological developments as well as financial liberalization policies that undoubtedly trigger higher risks for the banking sector, effective corporate governance is essential to achieve and maintain public trust and confidence in the banking system, which is essential for the functioning of the banking sector and the economy as a whole. corporate governance in islamic banks is different from conventional banks, is unique and offers a specific structure that is guided by a sharia supervisory board. corporate governance is not only one of the main principles in running a company successfully, but also ensures confidence in security by monitoring and controlling company operations. in today's business environment with diverse cultural backgrounds, the principles of corporate governance cannot be applied to all propositions. therefore, it is necessary to strictly adopt and implement new, stronger company rules and regulations in the face of rapid financial innovation. this implies that good corporate governance not only complies with hard and fast rules but is also seen as a guideline for different environmental structure oversight frameworks. corporate governance must be based on principles, not based on rules and regulations (oecd, 2004). based on the above background, the formulation of the problem can be formulated, namely: how is the governance model for sharia banking companies in indonesia in accordance with the principles of islamic economics. 2. literature review 2.1 good corporate governance a. definition of good corporate governance good corporate governance (gcg) is a system used to manage a company with the aim of increasing shareholder value and allocating various parties with an interest in the company (stakeholders), such as creditors, suppliers, business associations, consumers, workers, government, and the wider community (sula, 2004). cadbury committee defines (gcg) as a system that directs and controls a company (muhammad, 2005). b. good corporate governance principles basically, the main principles and best practices of good corporate governance developed in conventional banks and islamic banks are almost the same. this is because in general, the function of islamic banks is the same as conventional banking (endri, 2019). what distinguishes it is that islamic banks have an obligation to comply with a set of sharia rules and principles. these sharia principles are part of the sharia system (rukmana, 2010). gcg principles in the world of islamic banking, including: https://creativecommons.org/licenses/by/4.0/ good corporate governance model in indonesian islamic banking 96 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1) transparency is openness in conveying material and relevant information, as well as openness in carrying out the decision-making process. 2) accountability is clarity of functions and implementation of accountability of bank organs so that management runs effectively. 3) responsibility is the conformity of bank management with the prevailing laws and regulations, the principles of sound bank management. 4) independency is the professional management of a bank without any influence or pressure from any party. 5) fairness is fairness and equality in fulfilling stakeholder rights that arise based on agreements and laws in force. (abdullah, 2010). 6) compliance, which means measuring the company's ability to comply with islamic law and the principles of banking and islamic economics (othman, 2001). c. benefits of good corporate governance the benefits of implementing good corporate governance (gcg) that will be obtained are as follows: 1) improve company performance through the creation of a better decision-making process, increase the company's operational efficiency and further improve service to stakeholders. 2) make it easier to obtain cheaper financing funds which in turn will increase corporate value. 3) restoring investor confidence to invest in indonesia. 4) shareholders will be satisfied with the company's performance and will increase shareholders value and dividends (zarkashi, 2008). 2.2 previous research previous research on good corporate governance or gcg in islamic banking that is relevant to this research is as follows: karim ginena researched sharıah risk and corporate governance of islamic banks in qatar, concluding that sharia risk, operational risk poses a credible danger to islamic banks and stakeholders. possible impacts of non-compliance with sharia include higher costs, financial losses, liquidity problems, bank failures, industrial pollution and financial instability. the implementation of gcg and the application of sharia principles or in terms of sharia governance are imperative for islamic banking in improving reputation and trust, as well as protecting the interests of stakeholders which aim to image a healthy banking system (ginena, 2014). imran khan and syeda nitasha zahid examined the impact of shari'ah and corporate governance on islamic banks performance: evidence from asia. revealed that the sharia variables related to corporate governance are more influential in determining the financial performance of islamic banks. as well as banks that have high total assets show the characteristics of good governance (zahid, 2020). https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 97 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) aishath muneeza researched the shari'ah governance applicable to islamic banks in malaysia: effect of islamic financial services act 2013. concluding that sharia governance is a concept that has been developed and implemented gradually in malaysia and the new 2013 islamic financial services law has made one level better than before. however, this does not mean that it has resolved the problems in sharia governance that existed before the enactment of the law. this study shows that a regulation is needed to support the improvement of gcg in a country, which will make a company, especially islamic banking, get the full trust of the public and have a positive impact on the company's development (muneeza, 2013). khuram shahzad bukhari, hayat m. awan and faareha ahmed examined an evaluation of corporate governance practices of islamic banks versus islamic bank windows of conventional banks a case of pakistan. this study reveals that the most significant dimensions affecting corporate governance in islamic banking are the sharia supervisory board (ssb) and the board of directors (bod). whereas the significant factors for the islamic banking window are almost all dimensions of corporate governance. this shows that good corporate governance greatly affects the improvement of a company, especially islamic banking (khuram shahzad bukhari, 2013). rohaida basiruddin and habib ahmed researched corporate governance and shariah non-compliant risk in islamic banks: evidence from southeast asia. this study reveals that banks with smaller board sizes and a higher proportion of independent board members tend to have lower sncrs. the findings also show that financial expertise and a higher frequency of sharia committee meetings reduce sncr. collectively, the analysis shows that banks with strong corporate governance environments reduce sncr (ahmed, 2019). mohd shukor harun, khaled hussainey, khairul ayuni mohd kharuddin and omar al farooque researched csr disclosure, corporate governance and firm value: a study on gcc islamic bank. this study states that the level of corporate social responsibility disclosure (csrd) is very low among the sample of islamic banks in the gulf cooperation council (gcc) countries. when using corporate governance characteristics to examine the determinants of csrd, this study provides evidence of a significant positive relationship between board size and csrd practice in islamic banks and a significant negative relationship between the duality of chief executive officer (ceo) and csrd, as expected. for the economic consequences of csrd, the research documents the different performance effects of csrd, chalkboard size, board composition. 3. research methodology the method used in data analysis is a qualitative method, namely by presenting it in the form of descriptions and concepts https://creativecommons.org/licenses/by/4.0/ good corporate governance model in indonesian islamic banking 98 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4. result and discussion 4.1 review of corporate governance policies in indonesia corporate governance islamic economists are recognized as important by islamic economists for all companies, but this is more important for islamic financial institutions (zahid, 2020). islamic perspective gcg has a special meaning because islamic financial institutions must be part of the paradigmatic development of an islamic financial system that emphasizes moral content in all business behavior and transactions (hayes, 2007). in this regard, the implementation of gcg has become the obligation of all banks operating in indonesia. all of this is marked by the existence of bank indonesia (pbi) no. 8/14/2006 concerning the implementation of gcg for commercial banks, as well as the implementing regulations that must be improved. the next development is pbi no. 11/33 / pbi / 2009 dated 7 december 2009 and bi circular letter (se) no. 12/13 / dpbs dated 30 april 2010 concerning the implementation of good corporate governance for sharia commercial banks (bus) and sharia business units (uus), as well as the issuance of financial services authority regulation (pojk) no. 18 / pojk.03 / 2014 dated 18 november 2014 concerning the implementation of integrated governance for financial conglomerates in indonesia. what becomes is how a bank, especially a sharia bank in indonesia, can develop gcg that is truly in accordance with the needs and specific identities initiated by islamic economic thinkers. this is very important to emphasize considering that islamic banks have certain characteristics that require corporate governance in accordance with these characteristics (bank indonesia regulation, 2009). the rapid development of islamic banking in indonesia today demands good and effective governance. islamic finance development report, icd tomson reuters reported that indonesia was ranked 11th out of 15 countries that entered the top performance islamic finance development indicators criteria in 2017. the assessment of indicators is calculated through an index approach by considering several assessment categories, namely, quantitive development, knowledge, governance, corporate social responsibility (csr) and awareness. the development of islamic banking and financial institutions in indonesia is no less rapid than that of other muslim countries, including malaysia, pakistan, iran and sudan. islamic finance development report, icd tomson reuters reported that indonesia was ranked 11th out of 15 countries that entered the top performance islamic finance development indicators criteria in 2017. the assessment of indicators is calculated through an index approach by considering several assessment categories, namely, quantitive development, knowledge, governance, corporate social responsibility (csr) and awareness. the development of islamic banking and financial institutions in indonesia is no less rapid than that of other muslim countries, including malaysia, pakistan, iran and sudan. islamic finance development report, icd tomson https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 99 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) reuters reported that indonesia was ranked 11th out of 15 countries that entered the top performance islamic finance development indicators criteria in 2017. the assessment of indicators is calculated through an index approach by considering several assessment categories, namely, quantitive development, knowledge, governance, corporate social responsibility (csr) and awareness. the development of islamic banking and financial institutions in indonesia is no less rapid than that of other muslim countries, including malaysia, pakistan, iran and sudan. indicator assessment is calculated through an index approach by considering several assessment categories, namely, quantitive development, knowledge, governance, corporate social responsibility (csr) and awareness. the development of islamic banking and financial institutions in indonesia is no less rapid than that of other muslim countries, including malaysia, pakistan, iran and sudan. indicator assessment is calculated through an index approach by considering several assessment categories, namely, quantitive development, knowledge, governance, corporate social responsibility (csr) and awareness. the development of islamic banking and financial institutions in indonesia is no less rapid than that of other muslim countries, including malaysia, pakistan, iran and sudan. at the time of the financial crisis that hit asian countries in 1997-1998, at that time the indonesian state felt the impact and was very burdensome for all of its people. this tragedy is not only felt by the little people, but business people also feel it. not to mention the impact of the political crisis in the form of the resignation of the soeharto government in 1998 which worsened the indonesian economy. at that time, the indonesian state was not only experiencing a financial crisis but it was expanding into an economic crisis. all of this was marked by the shrinking gross domestic product (gdp) in 1998 to minus 13.68 percent compared to 4.65 percent in 1997, and followed by the inflation rate that swelled to 77.63 percent that year compared to only 11. 05 percent in the previous year (siamat, 2004). thus, the devastation of the indonesian state ahead of the reform era which is full of various social, economic, political and legal problems necessitates the urgency of fundamental changes in many fields of state administration. according to dorojatun kuntjoro djakti, no country is strong without a strong business world, at least as evidenced by the economic crisis mentioned above. as stated, one root cause of the economic crisis in indonesia and also in various other asian countries was the poor implementation of corporate governance in almost all existing companies, both government-owned (bumn) and private companies (baird). , 2000). logically, with poor cg implementation, the level of confidence of the owners of capital will decrease because the investment they make is insecure. of course, this will be followed by withdrawal of the investment that has been invested, while new investors are also not interested in investing. reluctance to implement gcg will certainly cause financial difficulties for the company, so that its activities decrease and in the next stage result in a slow turnaround of the economy as a whole. one of the important steps that must be taken is to improve the https://creativecommons.org/licenses/by/4.0/ good corporate governance model in indonesian islamic banking 100 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) implementation of cg, this is in line with research conducted by (khuram shahzad bukhari, 2013) which shows that good corporate governance greatly affects the improvement of a company, especially islamic banking. in short, cg can be defined as a system that regulates and controls a company to create value added for all stakeholders (wibisono, 2003). 4.2 corporate governance in islamic perspective good corporate governance (gcg) according to islam, there are several studies that have been carried out especially on islamic financial institutions and found alternative models of corporate governance. one of the studies in this study confirms that all stakeholders have the same goal, namely monotheism. chaudhury and hoque discussed the epistomological basis of tawhid as a reference for islamic corporate governance models. the principle of tawhid derives the concept of caliphate and justice or balance. the stakeholders as the khalifah of allah have the duty to uphold the principle of distributive justice through a deliberation process. the deliberation element provides the widest possible participation of stakeholders in state affairs, including companies either directly or through their representatives (najmudin, 2011). a. tawhid tawhid is understood as an expression of a muslim's belief (shahada) on the oneness of god. the concept of monotheism contains human submission to god, in a broader perspective, the concept reflects the existence of unity, namely the unity of human life demands (unity of guidance) and the unity of life goals (unit of purpose of life) (muhammad, 2007). this devotion in particular shows the vertical dimension of islam which connects limited and imperfect social institutions with a perfect and infinite essence. this relationship is affected by man's unconditional surrender before him, by making his desires, ambitions, and actions subject to his commands. as allah says in surah az-zumar verse 38: and really, if you ask them, "who created the heavens and the earth?" surely they answered, "allah." say, "then do you know what you worship besides allah, if allah wants to bring disaster to me, will they be able to eliminate that disaster, or if allah wants to give me mercy, can they prevent his mercy?" say, “allah is enough for me. it is to him that those who put their trusts surrender themselves. " b. takwa and ridho the principle or principle of piety and pleasure is the main principle of the establishment of an islamic institution in any form of the principle of piety to allah and his pleasure. business governance in islam must also be upheld on the foundation of piety to allah and his pleasure in qs at-taubah, verse 109, namely: https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 101 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) so are people who build buildings (mosques) on the basis of piety to allah and (his) pleasure are better, or are those who build their buildings on the edge of a cliff that collapse, then (the building) collapses together with him into hell? allah does not give guidance to wrongdoers. a business should be run on a consensual or voluntary basis. it is not justified that an act of contempt, for example trade and economic activity, is carried out by coercion or fraud. if this happens, it can cancel the act. this happy principle shows the sincerity and goodwill of the parties. c. benefit benefit, according to al-syatibi, is anything that causes human life to be upright and its perfection and causes people to be guided by their desires and thoughts so that they are fully enjoyed. the most famous concept of al-syatibi is maqasid ash-sharia which literally means the purpose of implementing law. with this purpose, humans are required to seek benefit in this world and the hereafter. in particular, among the scholars who are relatively discussed the most are imam ghazali, imam syatibi and imam izzuddin abdus-salam have classified this goal into three categories, namely primary or basic needs (dharuriyat), secondary needs (hajiyat) to make life more perfect, and the tertiary need for life to be beautiful (tahsiniyat) (chapra, 2011). according to the islamic worldview, islam teaches universal and comprehensive values. universal means that islam is a religion for all mankind regardless of position, color, ethnicity, and nation. comprehensive means that islam covers all aspects of human life (political, economic, socio-cultural, educational and so on) (badreldin, 2009). the main goal of islamic teachings is mercy for all mankind. this is the main goal of the prophet muhammad (peace be upon him) being sent to this world. described in qs al. anbiya verse: 107, namely: and we did not send you (muhammad) but to (be) a mercy for all the worlds. the important thing to realize this goal is to promote welfare (falah) for all mankind regardless of race, age, gender and nation. falah, which means victory, prosperity with worldly and ukhrawi dimensions, must be used as the goal of all human life activities both in economic, political, educational, socio-cultural, and other activities carried out under the guidance of sharia. likewise, in the practice of islamic banking, it needs to be regulated in order to fulfill the values embedded in the al-qur'an and hadith. islamic bank as a business entity, is not only required as a company that seeks profit, but also has to carry out its functions and objectives as a business entity based on the maqashid sharia concept. as an intermediary institution between parties with excess funds https://creativecommons.org/licenses/by/4.0/ good corporate governance model in indonesian islamic banking 102 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) and parties with shortages of funds, islamic banking plays a role in channeling the collected funds to the public, especially the real sector. the relationship between banks and customers of islamic banks is more about the relationship between the owner of capital and the workforce (manager) compared to the relationship between debtors and creditors that exist in the conventional banking system. islamic banking has a strategic role in improving the welfare of the people, through the intermediation process of collecting and channeling funds and providing other financial services. based on sharia principles. when the conventional banking system is weak due to the monetary crisis and requires huge costs to maintain it, islamic banking is actually required to be able to save part of the economy of the people. 4.3 the existence of the sharia supervisory board (dps) as an element of the governance structure of sharia banks in indonesia the emergence of islamic banking as a pioneer in gcg enforcement is more dominant than conventional banking, because governance issues in islamic banking are very different from conventional banks. first, islamic banks have an obligation to comply with the principles of sharia (sharia compliance) in running their business. the sharia supervisory board (dps) plays an important role in the governance structure of islamic banking. second, because the potential for asymmetry information is very high for islamic banking, the problem of agency theory is very relevant. this is related to the level of accountability and transparency in the use of customer and shareholder funds. therefore, the problem of representation of investment account holders in the gcg mechanism is a strategic problem that must also receive the attention of islamic banks. third, from the perspective of corporate culture, islamic banking should carry out a cultural transformation so that the values of islamic business ethics become an inherent character in islamic banking business practices (indonesia, 2008). the risks faced by islamic banking are credit risk (non-profit sharing assets) and asset sharing systems or variable assets, market risk (equity price risk, exchange rate risk, commodity price risk, liquidity risk, operational risk, legal risk, reputation risk. and others). islamic banking should carry out a cultural transformation so that the values of islamic business ethics become an inherent character in islamic banking business practices (indonesia, 2008). the risks faced by islamic banking are credit risk (non-profit sharing assets) and asset sharing systems or variable assets, market risk (equity price risk, exchange rate risk, commodity price risk, liquidity risk, operational risk, legal risk, reputation risk. and others). islamic banking should carry out a cultural transformation so that the values of islamic business ethics become an inherent character in islamic banking business practices (indonesia, 2008). the risks faced by islamic banking are credit risk (non-profit sharing assets) and asset sharing systems or variable assets, market risk (equity price risk, exchange rate risk, commodity price risk, liquidity risk, operational risk, legal risk, reputation risk. and others). https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 103 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) these various risks must be minimized by management in order to improve the performance of islamic banks (khan, 2008). one thing that can be done is the implementation of gcg, this is in accordance with the results of research conducted by (herianingrum, 2014) which states that good service quality or can be called gcg can increase customer satisfaction and loyalty in islamic banking and this statement is also in line with research conducted conducted by (ahmed, 2019) the results of the analysis show that banks with a strong corporate governance environment reduce sncr, this is what can minimize risk in a company, especially islamic banking. risk in islamic banking is one of the factors that can encourage the implementation of corporate governance in islamic banking. sharia banking in indonesia still adheres to bank indonesia circular letter number 12/13 / dpbs dated april 30, 2010 concerning the implementation of good corporate governance for sharia commercial banks and sharia business units. the principles of gcg in this regulation are still the same as the conventional organization for economic coorperation and development (oedc). even though islamic banks have different characteristics from conventional banks. 5. conclusion sharia banking governance implemented in indonesia consists of the general meeting of shareholders (gms), the board of commissioners, the sharia supervisory board (dps), the board of directors and committees under the board of commissioners and directors. all departments strive to apply the principles of gcg and become a role model for all company organs. because with the implementation of good gcg in a company, it can guarantee justice and the implementation of the interests of various parties (stakeholders). the implementation of gcg can also minimize the risks faced by islamic banking, such as credit risk and profit sharing system assets and market risk. references abdullah, ma (2010). sharia banking corporate governance in indonesia. yogyakarta: arruzz media. ahmed, rb (2019). corporate governance and shariah non-compliant risk in islamic banks: evidence from southeast asia. corporate governance, vol. 20 n0. 2, pp. 240262. badreldin, am (2009). measuring the performance of islamic banks by adapting conventional ratios. faculty of management technology, german university in cairo., 16. baird, m. (2000). the proper governance of companies will become as crucial to the world economy as the proper governing of countries. a paper. chapra, u. (2011). islamic vision in economic development: according to maqasid asshari'ah. solo: al hamra. https://creativecommons.org/licenses/by/4.0/ good corporate governance model in indonesian islamic banking 104 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) endri. (2019). file view islamic economics: implementation of good corporate governance in islamic banking. ginena, k. (2014). sharıah risk and corporate governance of islamic banks. corporate governance, vol 14 no. 1, pp. 86-103. haan, j. &. (2016). corporate governance of bank: a survey. journal of economic survey, 277-278. hayes, fe (2007). islamic financial law: concepts, theory and practice. bandung: nusamedia. herianingrum, rp (2014). the effect of islamic service quality on customer satisfaction and loyalty in bank bri syariah surabaya. journal of sharia economics theory & applied, vol. 1 no. 9. indonesia, b. (2008). blueprint for the development of indonesian sharia banking. jakarta: directorate of sharia banking. khan, m. u. (2008). regulation and supervision of islamic banks in indonesia. jakarta: pt bumi aksara. khuram shahzad bukhari, hm (2013). an evaluation of corporate governance practices of islamic banks versus islamic bank windows of conventional banks a case of pakistan. management research review, vol. 4, pp. 400-416. mohd shukor harun, kh (2020). csr disclosure, corporate governance and firm value: a study on gcc islamic bank. international journal of accounting & information management, vol. 28 no. 4, pp. 607-638. muhammad. (2005). sharia bank management. yogyakarta: upp amp ykpn. muhammad. (2007). in principles of islamic economics (pp. 4-5). yogyakarta: graha science. muneeza, a. (2013). shari'ah governance applicable to islamic banks in malaysia: effect of islamic financial services act. contemporary studies in economic and financial analysis, vol. 95, pp. 31-44. najmudin. (2011). financial management and modern syar'iyyah actualization. yogyakarta: andi. oecd. (2004). principle of corporate governance. organization de cooperation et de developpement. othman, a. &. (2001). adopting and measuring customer service quality (sq) in islamic banks: a case study in kuwait finance house. international journal of islamic financial services, 1-26. bank indonesia regulation (pbi), (2009). regarding the implementation of good corporate governance (gcg) for sharia commercial banks (bus) and sharia business units (uus) in the general section. bank indonesia, (p. 11/33 / pbi / 2009). rukmana, am (2010). bank syari'ah: theory, policy, and empirical studies in indonesia. jakarta: erlangga. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 105 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) siamat., d. (2004). financial institution management. jakarta: publishing institute, faculty of economics, university of indonesia. sula, ms (2004). sharia insurance (life and general) concepts and operational systems. jakarta: echo of insani. wibisono, hs (2003). good corporate governance: is it successfully implemented in indonesia? widya warta journal, no. 2, year xxvi. p. 4. zahid, ik (2020). the impact of shari'ah and corporate governance on islamic banks performance: evidence from asia. islamic banks performance, vol. 13 n0. 3, pp. 483501. zarkashi, mw (2008). good corporate governance in manufacturing, banking, and other financial services business entities. bandung: alfabeta. https://creativecommons.org/licenses/by/4.0/ analysis of corporate zakat on the capital structure of islamic banks in indonesia 89 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) analysis of corporate zakat on the capital structure of islamic banks in indonesia nanda lismatiara zubaid1), anwar m. radiamoda2) risma savhira dwi lestari3)*, tika widiastuti4), mochammad soleh5) 1,3,4faculty of economics and business, university of airlangga, indonesia 2shari’ah center, mindanao state university, philippines 5faculty of vocational studies, university of airlangga, indonesia abstract since the issuance of the law regarding tax-deductible zakat in indonesia, several islamic banks have begun to pay corporate zakat. this paper aims to analyze the effect of corporate zakat and the capital structure of islamic banks in indonesia. this study uses a quantitative approach with the panel data regression method. the variables in this study are capital structure, corporate zakat, and firm size with the research period from 2014 to 2020. the findings show that corporate zakat has a significant negative effect on the capital structure, and firm size has a significant positive effect on the capital structure of islamic banks. islamic banks are expected to be able to optimize capital structure decisions by maximizing corporate zakat. and for regulators, it is hoped that the public and firms will be literate about tax deduction zakat. as zakat operates in accordance with sharia compliance, it is hoped that the zakat policy as a tax deduction can be applied to all companies listed in sharia securities. keywords: islamic banks, corporate zakat, capital structure, firm size. 1. introduction zakat is the third pillar of islam and an obligation for muslims. a comprehensive zakat mechanism that plays a significant role in economic and socio-economic development such as productive zakat which is able to initiate small businesses, the provision of health and education facilities and so on (jermsittiparsert & sommanawat, 2019). some muslim countries, such as malaysia and indonesia, have shown remarkable progress in zakat collection which is no longer limited by individual muzakki (zakat payers), but extends to institutional payers such as companies or corporations (akhyar adnan & barizah abu bakar, 2009). zakat has similarities with taxes but also differs in several respects. zakat is an islamic commandment, while taxes are a government order; and zakat aims to meet the needs of the poor, while taxes aim to meet the overall expenditure of society (mustapha dan sapiei, dikutip dalam nomran & haron, 2021). so that zakat and taxes are collected with different economic and social perspectives and goals (jermsittiparsert & sommanawat, 2019). firms that only pay taxes and firms that pay taxes have many differences such as profitability and capital structure. karim (2007) in his book explains that the imposition of a sales tax with a fixed total income, will increase the average total cost which means it will decrease profits. meanwhile, the imposition of commercial zakat has a different impact from taxes. in the imposition of zakat, efforts are made to maximize profits by maximizing zakat, so that commercial zakat is limited to maximizing profits. *coressponding author. email address: risma.savhira@yahoo.com https://creativecommons.org/licenses/by/4.0/ mailto:risma.savhira@yahoo.com afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 90 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) research on zakat and capital structure has been studied several times in various countries that have implemented corporate zakat. research by sanusi (2014), found that zakat is able to increase equity financing and reduce the problem of asymmetric information and bankruptcy by reducing the use of leverage which includes 422 companies in malaysia. the results imply that corporate tax and zakat do not encourage firms to acquire debt due to lower firm value. equity financing can reduce bank monitoring costs, strengthen the banking system and increase returns to rab al-mal (providers of capital). another study by at-tally (2014) found that there is a relationship between capital structure and capital performance in saudi arabian companies. the average financial performance of 57 companies tends to increase due to a decrease in the level of leverage. lower levels of leverage were found to be associated with higher gross profit margins, npm, roa, and roe. the results of this study are also consistent with the conclusion that there is a relationship between capital structure and zakat. average zakat payments tend to remain relatively constant under leverage of around 0.3 (the average estimate among saudi arabian companies). average zakat then increases systematically with increasing leverage, and stabilizes above the level of around 0.6 to 0.7. the results of this study are consistent with the conceptual framework which states that capital structure predicts zakat; zakat predicts financial performance; and both leverage and zakat, controlling for firm size and age, predict financial performance. corporate zakat in indonesia is remain voluntary and is accommodated in article 1(5) law no 23 of 2011. it is hoped that applying zakat as a tax deduction is so that muslims who want to issue zakat do not get a double burden of taxes. since being accommodated by corporate zakat, several islamic banks have implemented zakat as a tax deduction. sharia compliance banking that implements corporate zakat is the fulfillment of islamic values in carrying out zakat obligations. there is a lack research on corporate zakat and its relationship to capital structure regardless the corporate zakat has been accommodated since 2011. given these research gaps, this paper aims to analyze the effect of corporate zakat and the capital structure of islamic banks in indonesia. this paper reviews the literature on the impact of zakat on companies from various perspectives. 2. literature study commercial zakat and islamic supply theory commercial zakat is imposed if the production results are sold and the sales proceeds meet the nisab (minimum limit for the results that are the object of zakat, which is equivalent to 96 grams of gold) and haul (minimum time limit for the property to be owned, which is 1 year). if the nisab and haul have been fulfilled, the zakat is 2.5%. the basic principle of corporate zakat is based on urud al-tijarah, merchandise whose purpose is to increase profits (septiawan & bahri, 2019). according to adiwarman karim (2007) this has no effect on the supply curve and unlike taxes, which cause the cost component to increase. the imposition of commercial zakat makes profit-maximizing behavior go hand in hand with zakat-maximizing behavior. the object of commercial zakat is goods that are traded. in economics, it means that the object of commercial zakat is revenue minus cost. there are several differences of opinion regarding the object of commercial zakat, namely economic rent, while the second opinion is quasi rent or producer surplus. productive zakat will open up opportunities for mustahik who become producers with productive zakat funds to be able to offer goods/services at a more competitive cost and consequently will increase supply. capital structure https://creativecommons.org/licenses/by/4.0/ analysis of corporate zakat on the capital structure of islamic banks in indonesia 91 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) capital structure is a ratio or long-term balance of the firm shown by the ratio of long-term debt to its own capital. if the company's funding originating from its own capital is still experiencing a deficit (deficit), it is necessary to take into account the company's funding from external, namely from debt financing. however, in meeting funding needs, firms must look for efficient alternatives through optimizing the capital structure. the optimal capital structure can be interpreted as a capital structure that can be obtained by using the total cost of capital or the average cost of capital (nursyamsu, 2016). theoretically, larger firms include more debt in their capital structure. the leverage ratio is measured as the ratio of debt (total liabilities to total assets), the ratio of short-term liabilities to total assets, and long-term debt to total assets. however, the greater the debt, the greater the firm's financial risk. amarudin et al. (2019) explains that the risk in question is financial risk, namely the risk that arises due to the firm's inability to pay debt installments in bad economic conditions. in such conditions, if the debt gets bigger, then the value of the firm will decrease. in the islamic concept, the use of property in a business carried out jointly, at least two people is known as syirkah. in syirkah, the parties include capital to run the business. the goal is that the treasure becomes spinning and can provide benefits. in this case, islam has the following provisions (al-mushlih, 2004): a. capital must be known. the point is that if the amount of capital is not known, then this is only speculative. this makes the transaction invalid. capital must be known, because that capital will be a reference when the business alliance is dissolved. it is not possible to do this without knowing the amount of capital included by the parties. b. capital must exist at the time the transaction occurs. c. capital is not a debt. the effect of corporate zakat on capital structure decisions on the company's capital structure are influenced by the company's borrowing capacity and internal funds (al-ajmi et al., 2009). islamic law prohibits transactions that are contrary to sharia principles in the capital market, one of which is usury (interest) on loans. based on the financial services authority regarding the list of sharia securities, public companies that meet sharia criteria are required to have no total interest-based debt compared to total assets of no more than 45%. total interest income and other non-halal income compared to total operating income and other income no more than 10%. if the company is unable to meet the predetermined criteria, it risks being excluded from the sharia securities list. this makes the company will rely on internal funds first before using debt. zakat is the third pillar of islam and is an obligation for muslims. zakat is an obligation that comes from religion and is based on the belief that by helping people in need, people purify their own property and soul (mosteanu, 2018). the obligation of zakat is an important factor in determining the loan rate. payments of zakat and corporate taxes are considered a combination of debt and company equity (azizah et al., 2018). the combination of debt and company equity will be optimal through the management of appropriate capital structure decisions. zakat will reduce the use of leverage by increasing the cost of equity and predicting financial performance, leverage, controlling firm size and age (sanusi, 2014; at-tally, 2014). based on this, hypothesis 1 is proposed. h1: corporate zakat has a significant impact on the capital structure https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 92 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the effect of firm size on capital structure firm size is a measure of the size of the assets owned by the firm so that large firms generally have large total assets. large firms are considered to have good prospects in the long term and have a better ability to manage the firm and produce quality financial reports. firm size is expressed as a determinant of financial structure for several reasons, namely, firm size can determine the level of ease of companies obtaining funds from the capital market. the size of the firm determines the strength in seeking funding from various forms of debt, including special offers that are more profitable. another possibility is that the effect of scale in costs and returns allows larger firms to earn more profits (rahmawati, 2017). an capital structure theory has been developed to determine the optimal capital structure and its relationship to firm value (dawar, 2014). research by sheikh (2017) finds that bank size is positively related to book leverage and confirms the predictions of the trade-off theory. tradeoff theory states that larger institutions tend to be more diversified and less prone to bankruptcy costs. pecking order theory emphasizes that companies prefer internal capital over external funding, but when external funding is needed, companies need to issue securities that are least risky because of information asymmetry (lee, 2015). firm size is an important determinant of a firm's ability to raise capital through debt or equity (moosa, 2012).this is supported by several studies by kurshev (2015); koralun-bereźnicka (2018), who found firm size empirically was found to be very positively related to capital structure in the study. based on this, hypothesis 1 is proposed. h2: firm size has a significant impact on the capital structure 3. research methodology this study uses a quantitative approach with the panel data regression method. the data was used in the form of secondary data from the official website of the financial services authority (ojk) and the annual report of islamic banks, during the period 2014 to 2020. by using the purposive sampling technique, a research sample of five bus in indonesia was obtained emissions, while fdi has a negative impact. mesut's research (bahbe, 2015) entitled relationships among co2 emissions, economic growth and foreign direct investment and the environmental kuznets curve hypothesis in turkey using the var research method concluded that fdi economic growth has a significant impact on increasing carbon dioxide. based on research (danar, 2017) entitled analysis of the impact of gdp and energy consumption on carbon dioxide emissions in indonesia in the 1971-2013 period, it shows that gdp has a positive and significant impact on carbon dioxide emissions. as well as energy consumption is one indicator where the level of technology can be measured, where the widespread use of environmentally friendly technology can reduce energy consumption of fossil fuels. and research (sweety & mrutyuni, 2016) with the title co2 emissions and economic growth of saarc countries; evidence from a panel var analysis shows that economic growth has a positive impact on co2 emission levels. https://creativecommons.org/licenses/by/4.0/ analysis of corporate zakat on the capital structure of islamic banks in indonesia 93 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) table 1. list of islamic banks no. islamic banks 1. bank muamalat indonesia 2. bank bri syariah 3. bank bni syariah 4. bank mandiri syariah 5. bank mega syariah table 2. operational variables variables formula dependent variable capital structure (cast) 𝐿𝑒𝑣𝑒𝑟𝑎𝑔𝑒 = 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 independent variable corporate zakat 𝐶𝑍𝐾𝑇 = 𝐿𝑜𝑔 𝐶𝑜𝑟𝑝𝑜𝑟𝑎𝑡𝑒 𝑍𝑎𝑘𝑎𝑡 control variable bank size 𝑆𝐼𝑍𝐸 = 𝐿𝑜𝑔 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠 the dependent variable in this study is the capital structure of islamic banks in indonesia. the independent variable in this study is corporate zakat. and the control variable used is firm size. the equation for the regression is as follows: 𝑌𝐶𝐴𝑆𝑇𝑖𝑡 = 𝛽𝑖 + 𝛽1𝐶𝑍𝐾𝑇𝑖𝑡 + 𝛽2𝑆𝐼𝑍𝐸𝑖𝑡 + 𝑒 where i is the symbol for cross-section, t is for time series, yit is the capital structure (cast), βi is constant-coefficient, czkt is corporate zakat, size is bank size, β1-β2 is the regression coefficient, and symbol e is for the error. 4. result and discussion table 3. descriptive statistics corporate zakat total aset leverage mean 8,852,880,200 45,405,987,428,571 0.90 median 6,934,000,000 43,123,488,000,000 0.91 standard deviation 10,936,390,578 30,782,392,828,488 0.03 minimum 408,000,000 5,559,820,000,000 0.83 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 94 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) maximum 48,999,000,000 126,907,940,000,000 0.94 table 3 above shows the sample descriptive statistics of the variables used, including the mean, median, and standard deviation (std. dev). based on the descriptive statistics, it can be seen that islamic commercial banks have varying total assets and corporate zakat. table 4. chow test result effect test statistic d.f. prob cross-section f 8.535049 (4,28) 0.0001 the results of the chow test show a probability of 0.0001 which means that the fixed effect model (fem) is chosen as the appropriate estimation model compared to the ordinary least square (ols). table 5. hausman test result effect test chi-sq. statistic chi-sq. d.f prob cross-section random 3.438189 2 0.1792 the probability value in the hausman test is 0.46 or greater than 0.05, so the random effect model (rem) model was chosen as the best estimation model. table 6. panel data regression results random effect model var coefficient std. error prob. c -0.052917 0.078851 0.5070 corporate zakat -0.004368 0.002012 0.0375 firm size 0.033715 0.002848 0.0000 r-squared 0.821805 prob(f-statistic) 0.000000 based on the regression results, it shows that the f value is smaller than α = 0.5, which is 0.0000, which means h0 is rejected. these results indicate that simultaneously corporate zakat and firm size have a significant influence on capital structure. while the r2-value shows a value of 0.8218 or 82%, this indicates that the independent variables used are able to explain their effect on the dependent variable by 82%, while the remaining 18% is explained by variables outside the model discussion corporate zakat has a significant negative effect on the capital structure of islamic banks. increased corporate zakat will reduce the capital structure. research by sanusi (2014) found the impact of wealth tax (zakat) and corporate tax (ct) on capital structure and showed that companies that pay high wealth taxes should be financed with relatively more debt. meanwhile, zakat is able to increase financing equity by reducing the use of leverage. firms that have high debt increase the firm's risk in paying off their debts (waluyo, 2018). in addition, a lower level of leverage conduces higher returns on assets and equity (azizah et al., 2018). it is expected that a firm does not have a debt ratio that exceeds that specified in its capital structure. https://creativecommons.org/licenses/by/4.0/ analysis of corporate zakat on the capital structure of islamic banks in indonesia 95 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) integrated zakat management in indonesia through credible institutions can reduce tax payments (masyita, 2018). the calculation of corporate zakat is based on its current assets (irfan & muhyarsyah, 2020). furthermore, hafidhuddin (in irfan & muhyarsyah, 2020), explained that every firm has at least three types of assets. first, property in the form of goods, either in the form of facilities and infrastructure or in the form of business commodities. second, the property is in the form of cash, which is usually deposited in a bank. third, assets in the form of debt. business assets that must be subject to tax are three forms of property, minus assets in the form of facilities and infrastructure as well as other urgent obligations, such as debts that are due or which must be paid immediately. firm size as a control variable has a significant positive effect on capital structure of islamic banks. these results indicate that every increase in the size of the firm as proxied by total assets, the firm tends to use more debt to finance their investment. research by bukair (2019) found a significant positive relationship between bank size and capital structure. bukair further explained that larger islamic banks have lower bankruptcy costs because they have a diversified portfolio and lower investment risk. large companies tend to be more diversified. this is because the larger the size of the islamic bank, the more diversified it is with a higher credit rating, which lowers funding costs and increases profitability (al-hunnayan, 2020). firm size is used to control the firm's ability to use collateral in securing loans (saif-alyousfi, 2020). in addition, larger companies tend to have higher leverage. according to khan (2021), large companies interpret diverse loan and investment potentials so that they are less vulnerable to financial difficulties. the findings of koralun-bereźnicka (2017) provide evidence that capital structure is influenced by firm size and depends on debt maturity 5. conclusion zakat is an obligation of religion and faith, and should be prioritized before tax. the obligation of corporate zakat has become one of the most important obligations in islam. since the issuance of the law regarding tax-deductible zakat in indonesia, several islamic banks have begun to pay corporate zakat. the five islamic banks that pay corporate zakat from 2014 to 2020 are bank mega syariah, bank muamalat indonesia, and the three banks that merged in 2021 (bank bri syariah, bank bni syariah, and bank syariah mandiri). the findings show that corporate zakat has a significant negative effect on the capital structure of islamic banks, which means that an increase in corporate zakat will reduce the capital structure. firm size has a significant positive effect on the capital structure of islamic banks and shows that every increase in firm size as a proxy for total assets, companies tend to use more debt to finance their investments. the empirical analysis of this study has several implications. the achievement of stable bank capital is one of the important requirements. therefore, islamic banks are expected to be able to optimize capital structure decisions by maximizing corporate zakat. for regulators, it is hoped that the public and companies will be literate about tax-deductible zakat. as zakat operates in accordance with sharia compliance, it is hoped that the zakat policy as a tax deduction can be applied to all companies listed in sharia securities. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 96 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) references akhyar adnan, m., & barizah abu bakar, n. 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(2017). determinants of capital structure of islamic and conventional commercial banks: evidence from pakistan. international journal of islamic and middle eastern finance and management, 10(1), 24–41. https://doi.org/10.1108/imefm-10-2015-0119 https://creativecommons.org/licenses/by/4.0/ the role of takmir in mosque fund management on increasing trust community for zakah, infaq, and alms (study on the great mosque of pelita samarinda) 133 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the role of takmir in mosque fund management on increasing trust community for zakah, infaq, and alms (study on the great mosque of pelita samarinda) isna yuningsih1), andi martina kamaruddin2)* , adi tri pramono3) 1associate professor at islamic economic undergraduate program, faculty of economics and bussiness, mulawarman university, islamic economics doctoral candidate at airlangga university 2, 3lecture at islamic economic undergraduate program, faculty of economics and bussiness, mulawarman university abstract this study aims to determine the role of takmir in managing mosque funds so that they can increase and maintain public trust in zakah, infaq, and alms at the great mosque of pelita samarinda. the methodology used in this study is qualitative with a descriptive approach. the informants in this study were the administrators of the great mosque of pelita samarinda which included the mosque secretary, the treasurer of the mosque, and the chair of the education section/taklim assembly of the great mosque of pelita samarinda, as well as the congregation of the great mosque of pelita samarinda. data collection techniques used are interviews, library sources, and documentation. the results of this study indicate that the role of takmir is very vital in increasing public trust in zakah, infaq, and alms at the great mosque of pelita samarinda. the contributions of this research include being able to improve the quality and responsibility of the mosque takmir in terms of being accountable for the trust of the congregation, by providing evidence of transparent income and expenditure reports. keywords: great mosque of pelita samarinda; takmir mosque; fund management 1. introduction for muslims, the existence of a mosque is generally a manifestation of the aspirations of muslims in providing social services to people with social welfare problems. therefore, mosques need to be fostered as well as possible, both in terms of physical buildings and in terms of prosperity activities, considering the very strategic function of mosques. in this case, the importance of the role of takmir in managing mosque funds effectively, efficiently and transparently to increase trust public, thereby increasing the number of zakah funds. because the mosque administrator personally is the caliph, who is responsible for the resources entrusted to him through the organization and personally. in islam, takmir have a role to be responsible vertically and horizontally. in managing the *corresponding author. email address: hamasi0910@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:hamasi0910@gmail.com afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 134 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) mosque's finances, it is necessary to foster idarah (administration). with the guidance of idarah for the takmir as the manager and person in charge of mosque funds, it can make mosque finances more organized, and well detailed, to increase mosque trust and be able to develop mosques (suherman, 2011). mosque financial management can run effectively if the takmir or mosque administrators always make and present financial reports, which include every activity of the mosque's financial income and expenditure. in mosque management two accountability matters must be accounted for, namely vertical accountability (responsibility to allah) and horizontal accountability (responsibility to the community or congregation). by conducting quality financial reporting and can be realized in both accountabilities. the management of organized mosque funds is important because poverty in indonesia is not only a problem and the responsibility of the government, but it is also a shared responsibility between the government and the community. this is because the government's role in making poverty alleviation programs such as subsidies for fuel oil, the raskin program (rice for the poor), and others, is not efficient and effective enough in poverty alleviation. therefore, effective and organized management of mosque funds is a must to foster public trust, because the role of the community is also very important in alleviating poverty, such as zakah, infaq, and alms. takmir or mosque administrators must be able to adapt to the times because the management of mosques today requires knowledge and skills so that mosque problems do not occur. the problems in question are takmir who do not care about the aspirations of the community, passive worshipers, and the activities in the mosque are less active. this can hinder the progress and prosperity of the mosque. the management of mosque funds in indonesia is still widely found which in its management has not been well structured and organized. there are still mosque takmir who serve as mosque managers who do not know the exact picture of the allocation of mosque funds. in this case, the takmir of the mosque as the manager should know exactly the picture of the allocation of income and expenditure of mosque funds. this is done so that the mosque's financial management can run effectively, thereby affecting the smooth running of the mosque's management. the mosque whose management can be said to be well-organized and whose financial reports are always published transparently to the public is the pelita grand mosque. pelita great mosque is a mosque located on jalan pelita no. 01, sungai pinang dalam, sungai pinang district, kota samarinda, east kalimantan 75117. this mosque was founded in 1985 and is the first mosque in sungai pinang dalam village. along with the times, the pelita great mosque is a mosque that is a role model for other mosques on jalan pelita, sungai pinang dalam. because in addition to the beautiful building, this mosque also has a secretariat office whose management is friendly and open. since 2007 the pelita great mosque has not only provided comfortable worship facilities and infrastructure but also, the pelita great mosque routinely holds dawn taklim activities https://creativecommons.org/licenses/by/4.0/ the role of takmir in mosque fund management on increasing trust community for zakah, infaq, and alms (study on the great mosque of pelita samarinda) 135 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) every day filled with qualified lecturers, not only from samarinda city but also from outside the region. the pelita great mosque also routinely holds activities at every religious momentum, and the pelita great mosque conducts training for quality muslim youth through the mosque youth association (irma). in addition, the pelita grand mosque also provides services for zakah receipts in the form of zakat fitrah (during ramadan), zakat fidyah, infaq, and alms. this zakah collection has been carried out since the establishment of the pelita great mosque in 1985. the following is a graph of comparative data on zakah receipts for 2016-2019: graph 1.1 comparative data on zakat receipts for 2016-2019 source: the great mosque of pelita samarinda, 2019 according to the graph of comparative data on zakah receipts at the great pelita mosque listed above, it states that zakah, infaq, and alms funds have increased every year. this proves that the role of takmir at the great pelita mosque in managing mosque funds such as zakah, infaq, and alms can be said to be effective. this will increase public trust in zakah, infaq, and alms. this will reduce the level of the poverty local community. 2. literature study the mosque is the most important part of islam, because it is the center of all muslim activities and an icon of the existence of islam. the word mosque is repeated twentyeight times in the koran. this shows that the koran's attention to mosques is so high (shihab, 1996). at the time of the prophet muhammad the mosque was the center or center of the activities of the muslims. activities in the field of governance, both include ideological, political, economic, social, judicial, and military discussed and solved at the mosque. the mosque also functions as a center for the development of islamic culture, especially when special buildings have not been built. apart from that, mosque is also a place for halaqah or discussion, a place for the koran, and to deepen religious and general knowledge. nowadays, the growth of youth in mosques also includes efforts to maximize the cultural functions that mosques carry. thus, seeing its many and varied functions, it can be concluded that mosques have a very important role in islam. to achieve and realize the activities of islam in a mosque, it requires capable people da n appropriate to revive and prosper those activities. in indonesia, people who manage a mosque are called ta'mir or ta'mir al-masjid. prospering mosques is an activity that must be carried out by muslims. this is a form of a servant's faith in allah swt. in the koran, this issue has been specifically explained in surah at-taubah verses 17-18. (syahidin, 2003). the true prosperity of a mosque is to https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 136 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) carry out various worship activities, especially cleansing the soul such as prayer, remembrance, istigfar, and reading the koran following the main function of the mosque as a place of prayer. besides, a mosque can also be used as a center for community guidance with various congregational activities that are appropriate to be carried out at a mosque, such as religious education activities, sociocultural activities, and so on. according to tafsir al-misbah m. quraish shihab essay, as well as the interpretation of al-kabir, or better known as al-ghaib mafatih written by fakhr ar-razi, besides worshiping, reciting the koran, i'tikaf, making the mosque prosperous can also be in the form of building, helping materially and mentally. can also be shaped to build, help materially and thought. as for the two interpretations, quraish shihab tends to be more moderate in assessing the form of prohibiting the polytheists to prosper the mosque. according to him, as long as they do not put forward certain conditions in helping materially or non-material and by islam, then it is permissible. likewise, when a polytheist will build a mosque, this is justified and acceptable (shihab, 2002). 3. research methodology this study used qualitative research with a descriptive approach. in qualitative research, data collection is not guided by theory but is guided by facts found during research in the field. the data criteria in qualitative research are definite data. definite data is data that occurs as it is, not just data that is seen, spoken, but data that contains meaning behind what is seen and spoken. meaning is actual data, definite data which is a value behind visible data. qualitative research methods are research methods used to examine the condition of natural objects. natural objects, or natural settings, so this research method is often referred to as the naturalistic method (sugiyono, 2013). a natural object is an object as it is, not manipulated by the researcher so that the conditions when the researcher enters the object, after being in the object, and after leaving the object are relatively unchanged. primary data is obtained directly from the field which is the object of research and compiled by the researcher as the object of writing. primary data relates to in-depth interviews or interviews, as well as documentation, which was obtained directly from the parties involved in the research at the great mosque of pelita samarinda. the results of interviews and analysis along with documents from the governing body of the great pelita mosque and other supporting data, such as documentation, are combined according to the description that occurs in the field, to then draw accurate and detailed conclusions. secondary data was obtained from documents provided directly by the pelita grand mosque as well as information related to the pelita samarinda grand mosque which had been published through social media, such as journals, previous research, and related literature. 4. result and discussion this research was conducted at the great mosque of pelita samarinda, which is located on jalan pelita rt. 041 no. 01. the history of the establishment of the great mosque of pelita samarinda, which began with the establishment of the samarinda level ii government employee housing in 1973, wherein that year there were no muslim houses of worship for residents in the area so that the implementation of worship every https://creativecommons.org/licenses/by/4.0/ the role of takmir in mosque fund management on increasing trust community for zakah, infaq, and alms (study on the great mosque of pelita samarinda) 137 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ramadan was carried out at residents' homes alternately. . due to the increasing number of settlements in the area every year, on june 18 1982, the surrounding community held a meeting in preparation for the holy month of ramadan, and in the meeting an idea arose to build a mosque. on november 30, 1985, the pelita mosque was inaugurated by mr. sudarmono, sh., as the minister of state secretariat of the republic of indonesia. furthermore, the name of the pelita samarinda mosque was changed to the great mosque of pelita samarinda. to develop the work program of the pelita great mosque broadly, in 2014 the pelita great mosque foundation of samarinda was formed, with the decree of the minister of law and human rights number: ahu-05392.50.10.2014, concerning the legalization of the establishment of a legal entity of themosque foundation pelita great of samarinda, with the management of the pelita grand mosque as stated in the notary deed as follows: a. drs. h. syamsiar syamsudin (coach) b. drs. h. syafruddin amir husin, mm (chairman) c. drs. h. muchdi hs (secretary) d. hj. noor semah, ba (treasurer) e. drs. h. fauzie achmad (supervisor) pelita grand mosque profile a. name of the mosque: pelita great mosque b. mosque address: b. road: jalan pelita no. 01 rt. 041 c. village: sungai pinang dalam d. district: sungai pinang samarinda e. district: samarinda city f. province: east kalimantan g. postal code: 75117 h. phone: (0541) 771587 i. year of establishment: 1985 ce assets of the great mosque of pelita the assets contained in the great mosque of pelita include: a. foundation assets, the initial capital of rp10,000,000 b. mosque building and its contents c. the land occupied by the mosque building with an area of 2,847 m2 is a donation from the regional government of samarinda level ii or d. samarinda city government, letter of appointment no. 5361/a-3/pem/1981 dated december 2, 1981 e. salawatan funds in the month of ramadan, eid al-fitr and eid al-adha, as well as funds every friday f. other funds which are funds from the great mosque of pelita samarinda https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 138 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) facilities and infrastructure of the pelita great mosque, the pelita great mosque of samarinda, in addition to providing a comfortable place of worship, quality and millennial congregational prayer priests, the best lecturers or clerics from within and outside the region and the country every day, and the pelita great mosque also provides facilities and infrastructure that support for the smooth running of every mosque activity and the comfort of the pelita grand mosque congregation so that it can increase community participation in distributing zakah, infaq, and alms, including the secretariat office, community reading park, worship room equipped with air conditioning (ac and fan), ablution place and clean toilets, free wifi, monitor screens for tausiyah activities, women's prayer equipment, sound system, hearse, curing facilities or funeral services, ablution slippers, refrigerator provided with free drinks for mosque worshipers. the great mosque of pelita in the management of mosque funds the role of the takmir of role of the takmir is the main factor that influences the prosperity of the mosque. the takmir has the responsibility to gain and increase public trust, which can be seen from the takmir's ability to manage funds, as well as programs and activities in the mosque. based on the results of interviews with the mosque takmir, the following is the way of the takmir of the great mosque of pelita samarinda in gaining and increasing public trust. first, according to mr. h. panut retno, se as secretary of the pelita great mosque said that: "in attracting, growing, and maintaining public trust in the pelita great mosque, that is, judging from the ability of the management who is very influential in attracting public interest and trust in the pelita grand mosque. such as the responsibility of each administrator to the congregation, where whatever has been conveyed to the congregation, it must be accounted for and must be proven to the congregation openly and transparently, the continuity/istiqomah of every activity contained in the pelita great mosque, the quality of the activities (such as congregational prayers led by qualified, qualified and millennial imams). mr. hm yusni, se as treasurer of the great mosque of pelita samarinda, said that: "the role of the takmir or mosque institutions in attracting interest and maintaining the trust of donors and the community is more about the quality and responsibility of the management in the form of evidence, such as transparency and always being open to anyone who wants to know about the funds in the pelita grand mosque, and reports are always made then announced directly every week after friday prayers and will be presented directly on the bulletin board every week so that the community will automatically give confidence to the pelita great mosque because the mosque management always provides evidence not only promises, and also always holds quality and high-quality activities. quality every day. the following data is one proof of the enthusiasm of the community based on the results of interviews with the management and congregation of the pelita great mosque, this belief by participating in every activity and program contained in the pelita great mosque of samarinda, which is as follows: https://creativecommons.org/licenses/by/4.0/ the role of takmir in mosque fund management on increasing trust community for zakah, infaq, and alms (study on the great mosque of pelita samarinda) 139 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) based on the results of research that have been carried out, on february 21 2020, where mr. hm yusni as treasurer of the pelita great mosque stated that the efforts of the pelita grand mosque takmir to increase public trust are, by always prioritize the quality and responsibility of takmir, such as being responsible for what has been conveyed to mosque congregations, by making reports related to mosque funds and activities, and always being open and transparent to anyone who wants to know about the pelita grand mosque funds. this is very influential in increasing public trust. the following are the principles applied by the takmir of the pelita grand mosque in managing funds to increase public trust, namely: a. management transparency. the transparency of the management carried out by the pelita great mosque is by always providing information or publishing openly to the public and anyone who wants to know the income, and expenditure of funds and the needs of the mosque, through print media, online media, as well as direct announcements every week after friday prayers. at. b. modernization of management, wherein its management the great mosque of pelita samarinda applies computer and internet-based information technology as well as standard sops (standard operating procedures). c. publication. the publication implemented by the pelita great mosque is by creating separate social media accounts such as facebook accounts, youtube channels and other mass media, which are used to publish every activity, program, information related to the pelita great mosque, as well as funds for both expenditure and income of the pelita great mosque. d. management of funds and quality activities. the takmir of the pelita grand mosque prioritizes the quality and responsibility of the takmir to the community in managing funds and managing an activity. the role of the takmir, as written by pratiwi (2018) in his journal, states that the takmir of the mosque is an organization that takes care of all activities related to the mosque, both in building, maintaining, and prospering it. takmir also functions as: a. parties who submit suggestions, considerations, and reports related to mosques b. parties who promote and develop the quality of mosques c. parties who plan and carry out every activity related to islamic symbols. in the financial management of mosques, it is necessary to foster iarah (administration), the aim is that mosques are better able to develop activities so that they can be more successful and efficient in carrying out congregational guidance and developing mosque finances. to carry out mosque financial management, activities such as mosque financial bookkeeping and mosque financial reports (lkm) must be carried out(suherman 2011). it is stated that mosque administrators must be able to manage and empower funds, especially funds that are passively pursued to be active and productive. there are several things that the board must do when managing and empowering mosque funds, namely: https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 140 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) a. transparent, make a report book, record money in and out every month and should be reported every friday during the friday prayer. b. the books must be ready to be checked at any time. c. funds are only used for things that are considered important and efficient. d. mosque funds are issued for the benefit of the mosque not for personal gain. e. using mosque funds for things that have been agreed upon in the management deliberations. f. producing mosque funds owned by things that are believed to be profitable and not letting the vacuum. referring to the theory above, the following is the role of the takmir of the great mosque of pelita in the distribution and management of mosque funds based on the results of direct interviews with mosque administrators, namely: a. determine and determine the tasks of the takmir contained in the fund management section and his business which is in charge of collecting and distributing mosque funds. b. provide information to mosque congregations either directly after each prayer or in writing through circulars related to the entry and expenditure of mosques as well as things needed by the mosque. c. the collected funds will then be allocated into cash funds, daily operational funds, qurban funds, and development funds. the funds will be stored in different accounts, where daily operational funds are stored in conventional bank accounts, while for qurban and development funds, they are stored in islamic bank accounts. and some funds will be managed and distributed to those in need. the last step is the takmir of the pelita grand mosque to make a report on the expenditure and income of mosque funds which is made by the mosque treasurer every week. according to mr. hm yusni as the treasurer of the mosque said that: "community trust will arise if the mosque always provides evidence not only promises, where the funds are managed transparently and by holding quality, quality, diverse, and educational activities every day". likewise, according to drs. h. zainuddin a. mansyah as the head of the education section and the taklim assembly of the great mosque of pelita samarinda, also said that: "the key to building a relationship and increasing public trust is based on the continuity, quality, and quality of mosque activities". based on the explanation above, according to ayub (2001: 1-2) in his book explains that: "the collection of funds for the cost of building a mosque is a big job and it is not easy. there are so many obstacles that usually confront the takmir or mosque administrators. starting from finding and selecting people who can be asked for help and donations, tracking their addresses, to the most appropriate way in the measurement system. https://creativecommons.org/licenses/by/4.0/ the role of takmir in mosque fund management on increasing trust community for zakah, infaq, and alms (study on the great mosque of pelita samarinda) 141 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) therefore, the takmir of the pelita grand mosque is divided into its own field and management section. the management fields and sections aim to make each board more focused on their respective duties and roles, so that there is no overlap in carrying out their duties and also aims to carry out regular checks (double checks) so that the fund management system at the pelita grand mosque is more organized in an organized manner. efficient and effective. based on the results of research and direct interviews with the management and congregation of the mosque, it is stated that the role of the community in the progress of the mosque to date has always supported every activity in the pelita great mosque, and has always given a positive response. community support for the progress of the mosque in the form of community participation in every activity and also assistance in the form of funds and goods for the pelita great mosque. the level of public trust is based on the explanation of mr. hm yusni as the treasurer of the mosque in a direct interview, namely: "alhamdulillah, for now there are no obstacles both in obtaining and managing funds, because both the community and the government always support every activity in the mosque, and always provide help when the mosque needs of something. and the mosque fund collection carried out by the takmir only takes a maximum period of two months after being informed to the public”. the form of support from the community and the east kalimantan provincial government for the pelita grand mosque is also very large. the support aims to empower the function and prosper the mosque. support from the community and the government is not only material but also non-material support. non-material support, for example, is always enthusiastic, participates, and supports every activity and program at the pelita grand mosque. meanwhile, material support can be seen from the amount of income from zakah, infaq, and alms which always increases every year. in addition, the east kalimantan provincial government always provides financial assistance for each mosque construction. mr. h. panut retno, se as the secretary of the mosque, also said that: "for now there are no obstacles in managing the mosque, due to the many supporting factors at the pelita great mosque which include the role of the community who strongly supports every activity and program of the pelita great mosque, both moral support and financial support for the pelita great mosque, as well as the extraordinary enthusiasm of the community”. trust is defined as the lubricant that makes the running of a group or organization more efficient. where trust lubricates the wheels of various social and economic transactions, without trust, things will not go according to plan and will take a lot of time. (fukuyama, 2007:22). the mosque is a non-profit organization, where the funds collected are mostly from donors. in general, the funds collected from donors are based on the donor's trust in the mosque management institution. trust is what makes resources or https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 2 (2019) 142 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) funds flow with certainty into the organization. it is this donor trust that needs to be maintained, even increased if the organization wants certainty and increased cash inflows (kurniasari, 2011) the form of trust and support that the great mosque of pelita samarinda gets from the congregation of the mosque, makes the managers and administrators able to maximize every activity for the prosperity of the mosque. so that the mosque appears to function optimally, not only as a place of worship but as a center for the development of islamic dakwah. this part should describe informative results of empirical research which are written systematically and critically. tables and figures can be presented in this part to support the discussion, for example table of statistics-test results, figures of model test results and, etc. in general, journal papers will contain three-seven figures and tables. the same data cannot be presented in the form of tables and figures. 5. conclusion it should illustrate brief and clear results of study, contributions to new theories, and new ideas for future researches. here, the theoretical and practical implications should be written in paragraphs the market supervisor in the early days of islam was known as al-hisbah. the alhisbah institution is led by an officer called muhtasib. in the early days, prophet muhammad saw himself became his muhtasib. the main task of the institution of al hisbah is to command the good (amar ma’ruf) and prohibit evil (nahi munkar). each of these tasks has three parts: the right to god almighty, the right to society, and the third are to link the two rights intermittently. furthermore, al hisbah has three main functions, namely economic, social and moral functions. the economic function is concerned with ensuring the fulfillment of basic needs, supervision of industry, supervision of services, and supervision of trade. in the supervision of trade, al hisbah has duties such as monitoring prices, measurements, measurements, and scales. the second is to supervise prohibited buying and selling, then prohibiting usury, gharar, maysir, fourth is monitoring the standards of halal health and hygiene of a commodity, then regulating the beauty and comfort of the market, overcoming disputes and injustice, and the last is intervening in market and price certain conditions. in social functions, al hisbah has to realize social justice and distributive justice in society. al hisbah, with its moral function, functions as a supervisor for the implementation of islamic morals and morals in consumer transactions and behavior. the flexibility of sharia allows the organization's evolution to suit current circumstances. although the structure might differ from the original form, the aim of enjoining the good and forbidding the bad must be preserved as its fundamental characteristic. the emergence of an institution that monitors ethics and economic justice is a consequence of the dynamics of people's increasingly fast, sophisticated, and complex lives. the presence of supervisory institutions is very significant and cannot be denied. reference abd ghafur. 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(2019). al-hisbah contextualization in the business competition law in indonesia. al-’adalah, 16(2), 249–262. https://creativecommons.org/licenses/by/4.0/ opportunities and threats of bank bri kcp kukar tenggarong in increasing the number of tabungan faedah bri syariah ib 120 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) opportunities and threats of bank bri kcp kukar tenggarong in increasing the number of tabungan faedah bri syariah ib syarifah1)*, sri wahyuni2) 1,2faculty of economics and business , mulawarman university abstract this study aims to provide an alternative strategy in facing opportunities to threaten the benefits of tabungan faedah bri syariah ib productat the bank bri syariah kcp kukar tenggarong.this research used study of literature and swot analysis. swot analysis is the identification of various factors systematically to formulate a company strategy. this analysis is based on the logic that can maximize strengths and opportunities), but at the same time can minimize weaknesses and threats. the results of this study indicate that the bri syariah kcp kukar tenggarong bank has strengths, weaknesses, opportunities and threats to its product benefits. this research also provides 4 alternative strategies that can be used by banks in facing opportunities and threats. the 4 alternative strategies are the so strategy, the wo strategy, the st strategy and the wt strategy keywords: strategy, strategy increase in the number of customers, swot analysis 1. introduction according to law number 21 of 2008 onsharia banking, sharia (islamic) bank is a bank conducting business based on the sharia principles consisting of sharia (islamic) commercial bank and sharia (islamic) people financing bank. the main function of sharia (islamic) bank is to collect public funds, it’s different from the conventional bank remuneration is given in the form of interest, but in islamic banks, savers will receive remuneration in the form of profit sharing. the second function of sharia (islamic) bank is to distribute the funds, funds that have been collected from customers which will then be distributed to other customers who need funds with a profit-sharing system. the third function is to provide bank services, in this case the sharia (islamic) bank functions as a provider of services such as transfer services (andespa, 2016). the development of sharia (islamic) banking in indonesia begins with the publication law number 10 of 1998 on banking, in this law, it is explicitly stated that indonesia adheres to a dual banking system in the national banking system by recognizing the presence of banks with sharia principles to operate, both as sharia commercial banks and sharia business units of conventional banks (pradja, 2017). although the law has accommodated the presence of islamic banking in the dual banking system in indonesia, for sharia (islamic) * corresponding author. email address: syarifahifha99@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:syarifahifha99@gmail.com afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 121 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) banking circles the law has not been able to accommodate all the needs of sharia (islamic) bank, therefore in the past the acceleration of sharia (islamic) banking could have a positive impact on the indonesian economy. on july 16 2008 passing law number 21 of 2008 on sharia (islamic) banking, this ratification provides a legal basis for national sharia (islamic) banking and it is expected to encourage the development of the sharia (islamic) banking industry to be better and renewed with the issuance of bank indonesia regulations. (pbi) no. 11/3/pbi/2009 contains the procedures and rules for establishing a branch office, which can make the development of the number of sharia (islamic) banking services grow rapidly. sharia (islamic) banking in indonesia is currently experiencing rapid development, this can be seen from the increase in the number of sharia (islamic) banks, this is evidenced by the number of sharia (islamic) banks registered at ojk (2020), a total of 2,958 sharia (islamic) commercial banks, sharia (islamic) business units. based on the data above, it can be concluded that the financial services industry is currently undergoing a very fast transformation. from this phenomenon, it is certain that the competition between sharia (islamic) banks is getting heavier in maintaining its existence. in this case, one thing that can determine whether the sharia (islamic) bank will survive and develop or even decline and fail to maintain competitiveness with other sharia (islamic) bank are the strategies carried out by these islamic banks in facing opportunities and threats of increasing the number of customers. considering that the development of sharia (islamic) bank in marketing sharia (islamic) banking products are getting tighter, sharia (islamic) banks are required to move quickly by establishing strategies that are in accordance with the strengths, weaknesses, opportunities, and threats in the midst of increasingly fierce competition in the banking world (al abdahd, 2019) the number of muslim communities is one of the opportunities for the development of sharia (islamic) banking, indonesia is a country where the majority of people are muslim so that the development of islamic banking in indonesia is growing rapidly. one of the districts in east kalimantan that has the largest number of muslim communities is kutai kartanegara. based on data from (central bureau of statistics east kalimantan, 2015) the number of followers of religions according to religious groups, it is reported that kutai kartanegara is in the third position with the highest number of muslims after big cities, namely samarinda and balikpapan, with 602,357 muslims. from these data, it can be concluded that kutai kartanegara has the potential for the development of sharia (islamic) banking. one of the sharia (islamic) banks participating in the development of sharia (islamic) banks in kutai kartanegara is the kcp kukar kartanegara sharia bri bank which has several funding products including the bri syariah ib faedah savings, the bri syariah ib hajj savings, the bri syariah ib dream savings, the bri syariah ib giro and deposito bri syariah ib. among these funding products, the bri syariah faedah savings product is a funding product that is the product with the most customers. data from bri syariah bank https://creativecommons.org/licenses/by/4.0/ opportunities and threats of bank bri kcp kukar tenggarong in increasing the number of tabungan faedah bri syariah ib 122 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) states that there was a significant increase, in 2017 there were 1,209 customers, in 2018 it increased to 1,397 customers and in 2019 increased to 1,697 customers. based on data on the number of faedah bri syariah kcp kukar tenggarong savings customers from 2017 to 2019 which continues to increase, so that it will be investigated regarding opportunities, threats of bank bri kcp kukar tenggarong in increasing the number of faedah bri syariah ib savings customers. 2. literature study 2.1 sharia bank according to law number 21 of 2008 on sharia (islamic) banking, sharia (islamic) bank is a bank conducting business based on the sharia principles consisting of sharia (islamic) commercial bank and sharia (islamic) people financing bank. while the sharia (islamic) business unit according to law number 21 of 2008 on sharia (islamic) banking is a working unit of the conventional commercial bank head office functioning as the head office of offices or units conducting business activities based on the sharia principle, or working unit in a branch office of a bank located overseas conducting conventional business activities functioning as a head office of subsharia (islamic) branches and/or sharia (islamic) unit. according to muhammad (2005) in ajeng & pertiwi (2016) sharia (islamic) bank is bank whose activities leave usury problems and do not rely on interest or financial or banking institutions whose operations are in accordance with sharia principles, which refers to the provisions of the al-quran and al-hadith. according to pradja (2017) sharia (islamic) bank is a financial institution that carries out an intermediary function (intermediary) in collecting public funds and distribute financing to the public in accordance with sharia principles compared to the conventional bank, sharia (islamic) bank have several essential characteristics that differentiate them from conventional banks, as well as differences between conventional and sharia (islamic) banks (ascarya & yumanita,2005) : tabel 1. difference between conventional bank and sharia (islamic) bank conventional bank sharia (islamic) bank bank functions and activities intermediation,financial services intermediation, investment manager, social, financial services mechanisms and business objects not antiriba and anti maysir antiriba and anti maysir the basic principle of operation a) free of value b) money as a commodity c) interest a) not free of value b) money as a medium of exchange and not a commodity https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 123 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) c) revenue sharing, buying and selling and renting service priority personal interests public interest orientation advantages islamic socio-economic goals, benefits shape commercial banks commercial banks, development banks, universal or multi purpose banks customer evaluation limited debtors close as a business partner sources of short term liquidity money markets, central banks sharia money market, central bank loans given commercial and noncommercial, profit-oriented. commercial and non commercial, profit oriented and non -profit. dispute resolution board court, arbitration court, the national sharia arbitration body business risk a) risk of bank is not directly related to the debtor, the debtor's risk is not directly related to the bank. b) chances are negative spread a) faced jointly between the bank and the customer with the principles of fairness and honesty b) not chances are negative spread supervisory organizational structure board of commissioners board of commissioners, sharia supervisory board, national sharia council. investasi halal or haram halal source : ascarya & yumanita (2005) 2.2 characteristics of sharia (islamic) bank andri soemitra (2009) in (pradja, 2017) sharia (islamic) banks are not only interest-free banks but have a prosperous achievement orientation. fundamentally there are several characteristics of islamic banks, namely: a. elimination of usury b. service to the public interest and realizing islamic socio-economic goals c. sharia (islamic) bank are universal which is a combination of commercial banks and investment banks https://creativecommons.org/licenses/by/4.0/ opportunities and threats of bank bri kcp kukar tenggarong in increasing the number of tabungan faedah bri syariah ib 124 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) d. sharia (islamic) bank will conduct a more careful evaluation of financing applications that are oriented to capital participation because sharia (islamic) commercial bank apply profit-loss sharing in consignment, venture, business or industry e. revenue sharing tends to strengthen the relationship between sharia (islamic) bank and entrepreneurs f. a framework built to help banks manage their liquidity by utilizing sharia interbank money market instruments and sharia-based central bank instruments 2.3 savings according to law number 21 of 2008 sharia (islamic) bank, explains that savings deposits are deposit based on the akad wadi’ah or fund investment based on the akad mudharabah or other akads which are not contradictory with the sharia principle of which the drawing may only be conducted according to certain terms and conditions, but may not be drawn by cheque, “bilyet giro”, and/or other compatible instruments. pradja (2017) savings deposits are a form of customer savings that are liquid in nature. that is, on this product when the customer needs it can be taken at any time, but for the proceeds offered to the customer a small saver. however, this type of savings fund collection is a product that has minimal cost to the bank. typically, the number of savings customers is more than the number of other gathering customers. according to fatwa of the national sharia council: about saving, savings consist of two types, namely: a. savings that are justified according to sharia principles, that is, savings that are based on the principles of mudharabah and wadi'ah. b. savings that are justified according to sharia principles, that is, savings that are based on the principles of mudharabah and wadi'ah. 1) wadi’ah savings according to pradja (2017), wadi'ah yad al-amanah, that is, in principle, the entrusted property should not be used by the party entrusted for any reason, but the person entrusted is allowed to charge an administration fee to the party entrusted as a contribution to safeguarding the goods deposited. meanwhile, wadi'ah yad dhamanah, the party entrusted (the bank) is responsible for the integrity of the deposited property so that he may take advantage of the entrusted property. parties may provide the least amount of profit they get to their customers according to the bank's policy. 2) mudharabah savings pradja (2017) mudharabah is a contract in which the depositor of funds or the depositor acts as the shahibul mal (owner of the capital) and the bank as the mudarib (manager). then the bank will channel financing to customers who need loan funds that have been obtained by the bank, either in the form of murabahah, ijarah, musyarakah, mudharabah or other forms of contracts. then, the proceeds will be shared with savings customers based on the ratio agreed at the beginning https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 125 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2.4 saving faedah bri syariah ib tabungan faedah bri syariah ib is a savings product for individual customers who need daily savings. in this savings, the contract used is wadi'ah yad dhamanah. in the wadi'ah yad dhamanah contract, the islamic bank as the recipient of the deposit can take advantage of the deposit which is considered as a deposit with the permission of the owner of the funds so that the bank must be responsible for the integrity of the assets or funds deposited. faedah savings also has advantages that customers can take advantage of. the advantages are that transactions can be carried out in all bri syariah office and electronic networks, giving bonuses according to bank policy, as well as other transaction facilities. the facilities provided are: a. initial deposit rp 100.000, b. next deposit rp. 10.000, c. free monthly administration fee d. free monthly atm card administration fee e. minimum balance of rp. 50.000, -. if the balance is below the minimum, an administration fee of rp. 12,500 per month f. 50% discount for cash withdrawals, transfers and wrong checks throughout the bri, bersama and prima atm networks. tabungan faedah bri syariah ib at bri sharia bank kcp kukar tenggarong is one of the funding products which is the product most in demand by customers. the data on the increase in the number of customers of the bri syariah ib savings at bri sharia bank kcp kukar tenggarong are as follows : tabel 2. number of customers tabungan faedah bri syariah ib years number of customers 2017 1.209 2018 1.397 2019 1.697 source: bri sharia bank kcp tenggarong. 2.5 sharia strategy management usman (2015) sharia strategic management is a series of islamic management activity processes that include the stages of formulation, implementation and evaluation of strategies to achieve organizational goals, where islamic values become the basis for a strategy to achieve organizational goals, where islamic values become a strategic foundation in all activities. organization, which is colored by the principle of tauhid, worldly-ukhrawi orientation and mardhatillah motivation. yusanto dan widjajakusuma (2003) in usman (2015) sharia strategic management perspective for an organization/company has nine distinctive characteristics that distinguish it from conventional (non-islamic) strategic management. the difference between the nine https://creativecommons.org/licenses/by/4.0/ opportunities and threats of bank bri kcp kukar tenggarong in increasing the number of tabungan faedah bri syariah ib 126 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) characters is viewed from the following aspects: 1) principles, 2) motivation, 3) orientation, 4) master strategic, 5) operational functional strategy, 6) financial functional strategy, 7) marketing functional source, 8) hr functional strategy, 9) resources. 2.6 sharia strategic management theories usman (2015) named this theory: the five powers of the sharia strategic management. in order for the company's goals to be achieved with the best performance and maximum results, all company organs (shareholders, management, and crew) must have a strong commitment to implement them seriously, while continuing to expect the guidance and pleasure of allah swt. theory 1: the principle of monotheism in organizations/companies. the application of the principle of tawhid as the basis for all organizational/company activities, with absolute belief that allah swt is the ruler and regulator of all life in this world, and by surrendering in totality only to him will increase confidence for the management and crew to succeed in achieving the vision, mission, and goals for a better company and the benefit of the hereafter. theory 2: mundane-spiritual orientation. by setting the goal of a worldly-ukhrawi oriented company, namely obtaining worldly profit or benefit as well as ukhrawi benefits/benefits, will provide calm, tranquility, and satisfaction in running the organization/company. theory 3: motivation mardhatillah. with the motivation of mardhatillah, that is, all organizational / company activities are intended solely because of allah and hope for the reward and pleasure of allah swt, will provide a stronger impetus for the management and crew to achieve the success of their business in the world to the hereafter. theory 4: ubudiyah belief in work. with the ubudiyah belief, namely believing that work is worship where all activities in the organization/company are solely intended as worship to allah swt, will give strength to management and crew to face and overcome various obstacles and obstacles and provide calm, satisfaction, and happiness. in working and doing activities for the sake of expecting the blessings and pleasure of allah swt. theory 5: ihsaniyah awareness at work. with the awareness of ihsaniyah, namely believing that all activities of an organization/company are righteous deeds that are always known and under the supervision of allah swt, it will encourage management and crew to work as well as possible, honestly, trustworthiness, and itqan (precise, perfect, complete) without having to be supervised. by superiors, thus encouraging the achievement of the best results and performance. 2.7 swot analysis swot analysis, which includes identifying the strengths, weaknesses, opportunities, and threats that determine company performance. rangkuti (2019) swot analysis is the identification of various factors systematically to formulate a company strategy. this analysis is based on the logic that can maximize strengths (strengths) and opportunities (opportunities), but at the same time can minimize weaknesses (weaknesses) and threats https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 127 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) (threats). sedamayanti (2014) swot analysis stands for strength, weaknesess, opportunity, and threats. the explanation of the four abbreviations is as follows: a. strength, part of the analysis of the company's internal environment, and strength is part of a swot analysis that helps organizations or companies find and find out what are the advantages of the business so that the company can still compete. b. weakness, weakness is part of an analysis of the company's internal environment that helps management to identify deviations that make the company's position unprofitable so that it affects the level of competitiveness. c. opportunity. opportunities are part of an analysis of the company's external environment that assists management in finding and finding out what are the opportunities and opportunities for the company is running its business so that the company can gain market share with greater profits. d. threats, threats are part of the analysis of the company's external environment that helps management to find out the challenges that the company will face and have faced that arise because of an unfavorable trend or development outside the company. after we know the strengths, weaknesses, opportunities that are open, and the threats they experience, then we can formulate a plan or strategy that includes predetermined goals. we must then translate the strategic plan into operational plans that state the targets that we must achieve. 3. research methodology in completing this research, researchers used a qualitative descriptive method. qualitative descriptive research is a type of research that aims to describe systematically, factually, and accurately the facts and characteristics of a particular population, or to try to describe phenomena in detail. (yusuf, 2017). 3.1 sources and types of data in this study, the sources and types of data consist of (1) primary data, primary data is data that can be obtained directly from the field or research site. this study uses this data to obtain direct information about how the marketing strategy is applied to the benefits of bri sharia savings products at bri sharia bank kcp tenggarong. (2) secondary data, in addition to using primary data sources, this study also uses secondary data obtained indirectly to respond and support primary data sources. secondary data from this study came from a document related to the use of the library. 3.2 data analysis technique the data analysis technique in this study used (1) data reduction, namely summarizing, selecting the main things, focusing on important things, looking for themes and patterns. (2) data presentation, is a group of structured information that provides a presentation of drawing conclusions. (3) conclusion and verification, that is, drawing conclusions is part of https://creativecommons.org/licenses/by/4.0/ opportunities and threats of bank bri kcp kukar tenggarong in increasing the number of tabungan faedah bri syariah ib 128 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) a complete configuration activity. the conclusion is to find the essence of the content and meaning contained(sugiyono, 2016). 4. result and disscussion 4.1 analisis swot the strategic management of a company can be seen relatively from an analysis called swot, namely strength (strength), weakness (weakness), opportunities (opportunity), and the threats (threats) in an organization. these things can be described as follows: 1) strengths of bri sharia bank kcp kukar 1) the existence of law and dsn-mui regarding banks and savings 2) the application of islamic values in banking activities based on the principle of tauhid, world-ukhrawi orientation, mardhatillah motivation, ubudiyah belief in work, and ihsaniyah awareness at work 3) small deposits, free monthly administration, providing subsidies for interbank transactions and products needed by the public 4) good service and giving appreciation to customers 5) good facilities and infrastructure and strategic location 2) weaknesses of bri sharia bank kcp kukar tenggarong 1) employees are not graduates of sharia economics 2) the number of service offices is not as many as conventional bri bank 3) errors in work are caused by individual errors (hr) 4) there is still a lack of atm availability 5) the availability of advertising media, both print, electronic and social media, is still minimal. 3) opportunities for bri sharia bank kcp kukar tenggarong 1) the large number of people is muslim 2) establish cooperation with both private and public agencies 3) not specifically for muslim people 4) the technology used follows the times 5) the market share of sharia(islamic) banking and financial services is still wide 4. threat of bri sharia bank kcp kukar tenggarong 1) the existence of similar products in other sharia (islamic) banks 2) lack of trust for people who have not used sharia (islamic) banks to the system at sharia (islamic) banks 3) conventional bank facilities are more adequate 4) the public is more likely to prefer products from conventional banks that have been operating for a longer period of time 5) the incessant promotion of fellow sharia (islamic) bank competitors 4.2 opportunities and threats of increasing the number of faedah savings customers a. opportunities for increasing the number of faedah savings customers https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 129 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1) the large number of people are muslim the muslim population has an effect on increasing the number of customers, thus providing opportunities for sharia (islamic) banks, namely many muslim communities who use sharia (islamic) banks. based on data on central bureau of statistics east kalimantan (2015) based on the number of followers of religions according to religious groups, it is reported that kutai kartanegara is in the third position with the highest number of muslims after big cities, namely samarinda and balikpapan, with 602,357 muslims. from these data, it can be concluded that kutai kartanegara has the potential for the development of islamic banking. 2) establish cooperation with both private and public agencies bri sharia bank kcp kukar tenggarong also collaborates with agencies. services and facilities are one of the reasons for the agencies that have collaborated to choose bri sharia bank kcp kukar tenggarong as the bank chosen to facilitate all forms of financial transactions for their parties. one of the agencies that collaborate with the bri sharia bank kcp kukar tenggarong is the al-arsyadi samboja islamic boarding school foundation, there are many facilities that make it easier for the foundation, teachers, employees, cottage businesses, students to guardians of the students. the facilities you feel start from students' cards, free monthly administration to 100% subsidies or free inter-bank transaction fees such as transfers, balance checks, cash withdrawals at other banks. 3) not specifically for muslim people bri sharia bank kcp kukar tenggarong does not specify that its customers must be muslim, customers of bri sharia bank kcp kukar tengarong are also non-muslim, one example is that non-muslim customers admit that the system in sharia (islamic) banks is a good and very profitable banking system. to invest so that many non-muslim people who understand the sharia (islamic) banking system decided to join like sharia. 4) the technology used follows the times. bri sharia bank kcp kukar tenggarong really pays attention to and keeps up with the times so that it can survive in the era of globalization. utilization of social media to applications that have features that are very helpful and make it easier for customers to make transactions. 5) the market share of sharia (islamic) banking and financial services is still wide currently, financial services and sharia (islamic) banking are experiencing a very fast development, this is evidenced by a large number of sharia (islamic) banks, from ojk data (2020) currently bus has 14 institutions and 1,942 offices, uus has 20 institutions and 390 offices and sharia people's financing banks has 162 institutions and 626 offices. so that the total number of institutions is 196 and the total office is 2,958 offices. this shows that the increase in the number of sharia https://creativecommons.org/licenses/by/4.0/ opportunities and threats of bank bri kcp kukar tenggarong in increasing the number of tabungan faedah bri syariah ib 130 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) (islamic) banks is due to the large market share opportunities that lead to the rapid development of sharia (islamic) banking. b. threats to the increase in the number of faedah savings customers 1) the existence of similar products in other sharia (islamic) banks the faedah bri sharia ib savings product is a product that uses the wadi'ah contract, where the product or product that uses the wadi'ah contract is owned by all sharia (islamic) banks because it is a product that is really needed by the community, only different product names and facilities are provided so that makes it a challenge in itself to provide the best facilities in order to be able to compete with similar products in other sharia (islamic) banks. 2) lack of trust for people who have not used sharia (islamic) banks to the system at sharia (islamic) banks. people who do not believe in the sharia (islamic) banking system are people who are not familiar with sharia (islamic) banks and their systems, so they think that sharia (islamic) banks and conventional banks are the same and are only distinguished by name. however, the times and information technology make people's insights into sharia (islamic) banking more open. 3) conventional bank facilities are more adequate in indonesia, conventional banks have been operating longer so that they have more adequate facilities than islamic banks. however, over time, sharia (islamic) banks continue to improve their facilities and services. 4) the public is more likely to prefer products from conventional banks that have been operating for a longer period of time conventional banks have been operating for a long time compared to sharia (islamic) banks, so they have more experience and people tend to trust more and still like products at conventional banks. 5) the incessant promotion of fellow sharia (islamic) bank competitors currently, the development of sharia (islamic) banking is getting faster, so that competition between sharia (islamic) banks is also getting tighter in maintaining its existence in order to survive in the midst of competition between other sharia (islamic) banks, therefore sharia (islamic) banks are required to promote themselves and the products they offer. this is also a threat to bri sharia bank kcp kukar tenggarong to promote its products. 4.3 prospect of bri syariah ib benefit savings at bri syariah bank kcp kukar tenggarong faedah bri sharia ib savings is a savings product for individual customers who need daily savings. in this savings, the contract used is wadi'ah yad dhamanah. in the wadi'ah yad dhamanah contract, the sharia (islamic) bank as the recipient of the deposit can take advantage of the deposit which is considered as a deposit with the permission of the owner of the funds so that the bank must be responsible for the integrity of the assets or funds https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 131 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) deposited. this product is a product that is very much needed by the community and the facilities provided are also very helpful for customers in making transactions, therefore the public has a lot of trust in bri sharia bank kcp kukar tenggarong in entrusting their funds, this can be proven from bank data which states that savings availah experience an increase in the number of customers continuously. the data on the increase in the number of customers in avail savings are as follows: tabel 3. number of bri sharia ib savings savings customers year number of customers 2017 1.209 2018 1.397 2019 1.697 4.4 the strategy carried out by bri sharia bank kcp kukar tenggarong the strategy that has been used in increasing the number of customers is that all employees of bri sharia bank kcp kukar tenggarong collaborate in increasing the number of customers by providing the best service to customers, open tables, in addition the facilities provided include free administration fees, 50% subsidies to 100% transfers, cash withdrawals and other transactions at other banks as well as the technology facilities provided. bri sharia bankkcp kukar tenggarong also held socialization about sharia (islamic) banking and products, which is also wrong in broadcasting the islamic economy. 4.5 alternatif alternatives that can be used by bri sharia bank in facing opportunities and threats of increasing the number of faedah savings customers a. strategy so (expanding market prey, increasing cooperation between private and public agencies, making routine programs in socializing sharia (islamic) banking and maintaining and developing existing services and facilities) b. strategy wo (improving information technology both social media and print media to make it easier for customers to find information about sharia (islamic) banks and products, improving service quality through digitalization in banking activities to make it easier for customers to transact, increasing tightening in monitoring human resources and increasing training on employee understanding of the sharia economy ) c. strategy st (conduct seminars or workshops on sharia banking directly to the community, continue to update the products and facilities needed by the community and provide regular rewards for customers, collaborate with sharia (islamic) banks that are members of bsi in promoting islamic banking.) d. strategy wt https://creativecommons.org/licenses/by/4.0/ opportunities and threats of bank bri kcp kukar tenggarong in increasing the number of tabungan faedah bri syariah ib 132 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) (increase customer confidence in using availah savings, educate customers about avail savings so that it can help disseminate information about savings benefits and improve existing facilities for customer satisfaction) 5. conclusion a. opportunities for increasing the number of faedah savings customers (a large number of the population is muslim, cooperates with both private and public institutions, not specifically for muslim people, the technology used is following the times, there is still a large share of the market for sharia (islamic) banking and financial services) b. threats to the increase in the number of faedah savings customers (the existence of similar products in other sharia (islamic) banks, the lack of trust among people who have not used sharia (islamic) banks in the sharia bank system, the facilities at conventional banks are more adequate, people are more likely to like products at conventional banks that operate longer, the more incessant promotion among competitors of sharia (islamic) banks) c. alternatives that can be used by bri sharia bank in facing opportunities and threats of increasing the number of faedah savings customers 1) strategy so (expanding market prey, increasing cooperation between private and public agencies, making routine programs in disseminating sharia (islamic) banking and maintaining and developing existing services and facilities) 2) strategy wo (improving information technology both social media and print media to make it easier for customers to find information about sharia banks and products, improving service quality through digitalization in banking activities to make it easier for customers to transact, increasing tightening in monitoring human resources and increasing training on employee understanding of the sharia economy) 3) strategy st (conduct seminars or workshops on sharia banking directly to the community, continue to update the products and facilities needed by the community and provide regular rewards to customers, cooperate with sharia (islamic) banks that are members of bsi in promoting sharia (islamic) banking) 4) strategy wt (increase customer confidence in using availah savings, educate customers about savings benefits so that they can help disseminate information about savings benefits and improve existing facilities for customer satisfaction) references ajeng, e., & pertiwi, d. p. (2016). hasanah di pt . bank negara indonesia syariah kantor cabang x. jurnal manajemen dan pemasaran jasa, 9(1), 55–78. al abdahd, m. k. (2019). analisis strategi pemasaran pada bri syariah banjarbaru. jieb : jurnal ilmiah ekonomi bisnis, 5(november), 77–87. andespa, r. (2016). strategi pelayanan bank konvensional dan syariah: prioritas pelayanan fisik dan empati. al-masraf : jurnal lembaga keuangan dan perbankan, 1(2), 143– https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 133 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 159. ascarya, & yumanita, d. (2005). gambaran umum bank syariah (issue 14). pusat pendidikan dan studi kebanksentralan. badan pusat statistik kalimantan timur. (2015). banyaknya pemeluk agama menurut golongan agama dan kabupaten/kota 2015. badan pusat statistik kalimantan timur. (pbi) no. 11/3/pbi/2009, 4 1 (2009). fatwa dewan syariah nasional : tentang tabungan, 2 (2000). ojk. (2020). statistik perbankan syariah per juni 2020. snapshot perbankan syariah. pradja, j. (2017). lembaga keuangan syariah (2nd ed.). pustaka setia. undang-undang no. 21 tahun 2008 tentang bank syariah, (2008). undang-undang nomor 21 tahun 2008 tentang bank syariah, (2008). rangkuti, f. (2019). teknik membedah kasus bisnis analisis swot (pp. 3–31). pt. gramedia pustaka utama. sedamayanti. (2014). manajemen strategi. pt. refika aditama. sugiyono. (2016). metode penlitian kualitatif, kuantitatif dan r&d. alfabeta. undang-undang republik indonesia nomor 10 tahun 1998 tentang perbankan, presiden republik indonesia 63 (1998). usman, a. h. (2015). manajemen strategi syariah. zikrul hakim. yusuf, m. (2017). metode penelitian kuantitatif, kualititaif & gabungan. pt. fajar interpratama mandiri. https://creativecommons.org/licenses/by/4.0/ muzakki’s intention in paying zakat 60 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) muzakki’s intention in paying zakat afrida yeni1), hasan mukhibad2)* 1, 2faculty economics and business, universitas negeri semarang, indonesia abstract the purpose of this study was to examine the factors that influence muzakki's intention to pay zakat using the theory of planned behavior approach. the sample used 94 muzakki which were selected by the incidental sampling technique. methods of data analysis using the structural equation model (sem). the results showed that the intention of muzakki in paying zakat was positively influenced by the factors of attitude and behavior control. the intention to pay zakat has a positive effect on the intention of the muzakki to pay zakat. the behavioral control factor has a positive and significant effect on the willingness to pay zakat, while subjective norms do not affect the intention to pay zakat. this research implies that laz can create a supportive environment for muzakki to increase the desire and intention of muzakki to pay zakat. keywords: attitude, subjective norms, behavior control, intention to pay zakat, willingness to pay zakat. 1. introduction zakat is part of the assets that must be submitted by the obligatory zakat (muzakki) to the recipient of zakat (mustahiq). initially, in indonesia, zakat management was managed by mosques and islamic boarding schools without the involvement of the state. it was only during the order era that three types of zakat management institutions emerged. first, zakat management institutions established by local governments such as the dki jakarta amil zakat agency (baz) (1968), east kalimantan (1972), west sumatera (1973), west java (1974), south sumatera (1975), lampung (1975), irian jaya (1978), north sulawesi (1985), south sulawesi (1985), and bengkulu (1989). second, zakat management institutions established by state owned enterprises (bumn) such as bamuis bni, amil zakat institution (laz) yaumil pt bontang lng (1986), baitul maal pupuk kujang (1994). third, zakat management institutions established by civil society such as the al falah social fud foundation (1987), dompet duafa republika (1993), rumah zakat indonesia (1998) and the ummat justice post (1999) (imz, 2010). in semarang, the management of zakat was initially carried out by mosques and islamic boarding schools, then for the first time in 2003 the first amil zakat management institutions were established, namely bas semarang, followed by rumah zakat in 2005. although many lazs have been officially established, it turns out they have not been able to collect zakat according to their potential (mukhibad, fachrurozie, & nurkhin, 2019) (martono et al., 2019). during the 2020 zakat national coordination meeting (rakornas), vice president ma’ruf amin regretted that the realization of zakat collection was lower than the *corresponding author. email address: hasanmukhibad@mail.unnes.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:hasanmukhibad@mail.unnes.ac.id afebi islamic finance and economic review (aifer) volume 5, no 1 2020 61 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) existing potential (rri.co.id). in 2019, the potential for zakat in indonesia according to baznas is 233 trillion rupiah. however, the zakat infaq and alms (zis) collected was only 10.2 trillion (puskas baznas 2020). the number of zis collected in 2019 increased by around 25% from the zis collection in the previous year which ampunted to 8.1 trillion (puskas baznas 2020). in term of potential, the collection of zakat is categorized as still low. the low realization of zakat collection also occurred in 2016 to 2018 as shown in the following table: table 1 : potential and collection of zis 2016-2019 year potential zis collection of zis percentage of zis collection 2016 271 trillion rupiah 5 trillion rupiah 1,8% 2017 462 trillion rupiah 6,2 trillion rupiah 1,34% 2018 216 trillion rupiah 8,1 t trillion rupiah 3,7 % 2019 233 trillion rupiah 10,2 trillion rupiah 4,4% source: processed data table 1 shows that every year, there is still a lot of potential for zakat that has not been collected to its potential. in other words, there is still an average of 96% of zakat potential that has not been collected. the same problem also occurs in central java. baznas estimated that the potential for zis in central java was 20 trillion rupiah, but the zakat collected was only 40 billion rupiah. this number also shows the very low zis collected in central java. the chairman of the semarang city baznas, arnaz agung adrarasmara, stated that the zis collected is semarang was 3.5 billion rupiah. this amount was also far below the potential of 150 billion rupiah. when compared beween relatization and potential, zis collection in semarang city was only 2.3% of the total zis collection ( https//:baznas.semarangkota.go.id). about the low zis compiled by laz has attracted experts to conduct studies with various approaches. the first approach is to emphasize laz performance as a factor that can increase the behavior of muzaki to pay zis (mukhibad et al., 2019) using the extended theory of planned behavior (etpb) found that muzakki’s desire to pay zakat was influenced by repitation, transparancey of laz, muzakki religiosity, and muzakki’s trust in laz. the result of this study were corroborated by (ahmad & rusdianto, 2018) who found that laz accountability would increase muzakki satisfaction and this muzaki sarisfaction subsequenty has a positive effect on muzaki’s trust in laz. meanwhile (nahar, 2018) found that laz managerial reform was viewed positively by stakeholders and would further increase muzaki’s trust in laz. the second approach is to look at the individual characteristics of the muzakki. (yusfiarto, setiawan, & nugraha, 2020) using muzakki on the island of java, found that the higher the level of altituted, subjective norms, and literacy about zakat owned by muzakki, the higher the intention of muzakki in paying zakat.. (andam & osman, 2019) using muzakki in marawi city, philippines as a research sample fund that attituted, descriptive norms and moral norms were positively related to the intention to ay zakat. (sedjati, basri, & hasanah, 2018) using muzakki in jakarta found that the intensity of muzakki paying zakat was positively influenced by knowledge, attitudes, religiosity, motivation, and people’s income. https://creativecommons.org/licenses/by/4.0/ muzakki’s intention in paying zakat 62 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) this study uses an individual characteristic approach and uses the tpb theory in explaining the intentions of muzaki in paying zakat. this approach is the same as that used by (yusfiarto et al., 2020) (andam & osman, 2019) (sedjati et al., 2018) (bidin, othman, & noor azman, 2013; bin-nashwan, abdul-jabbar, aziz, & haladu, 2020; haji-othman, mohamed fisol, & sheh yusuff, 2018). however, the difference between this study and previous research is that the sample of this study was lecturers and staff at universities, where lecturers and staff of universities had higher education backgrounds. this educational is a unique characteristic that will influence their attitude (tikka, kuitunen, & tynys, 2000), including attitudes inpaying zakat (abdullah & sapiei, 2018). thus, this research can add additional studies regarding the compliance of muzakki who have higher education in paying zakat. 2. literature review in tpb, the intention to influence people to behave and the intertion to perform the behavior can be predicted through attitudes, subjective norms and behavioral control. behavioral control does not only affect the intention to behave, but behavior control can also affect behavior. this study will examine the factors that influence muzakki’s willingness to pay zakat using the theory of planned behavior approach. the variables used in this study are attitude, subjective norms, behavioral control, intention to pay zakat, and willingness to pay zakat. attitude is defined as a persistent tendency to feel and act in a certain way towards some objects (luthans, 2005). behavioral beliefs are the basis for influencing attitudes (ajzen, 1991) which means a person’s belief that each behavior will lead to certain results, then it can affect attitudes. based on the theory of planned behavior issued by ajzen, it says that a person’s attitude can affect a person’s behavioral intentions, which in this case is that attitude can affect the muzakki’s intention to pay professional zakat at the amil zakat infaq sedekah (lazis) semarang state university. this is also supported by the results of research conducted by huda et al. (2012) in his research found that attitude had a significant effect on muzakki’s intention to pay zakat. saragih (2018) also found that attitude had a significant effect on muzakki’s intention in paying zakat. amilahaq and ghoniyah (2019) also found in his research that attitude had a significant effect on muzakki’s intentions in paying zakat. h1: attitude has a positive and significant effect on the intention to pay zakat subjective norms are formed from normative beliefs which refer to social pressure to perform or not to perform a behavior. according to the theory of planned behavior by ajzen, subjective norms affect a person’s behavioral intentions. several studies on subjective norms affecting muzakki intentions have been carried out by several researchers including nuryana (2016) in his research said that subjective norms have a significant influence on muzakki compliance intentions in paying professional zakat. saragih (2018) in his research found that subjective norms have a significant influence on muzakki’s intentions in paying zakat. pratiwi (2018) found in her research that subjective norms have a significant influence on the intention to pay zakat. amilahaq and ghoniyah (2019) found in their research that subjective norms have a significant influence on the intention to pay zakat. based on the theory of planned behavior and supported by several research results in this case we can conclude that the subjective norm affects the intention of muzakki to pay professional zakat at lazis unnes. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 2020 63 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) h2: subjective norms have a positive and significant effect on the intention to pay zakat behavioral control refers to a person’s perceptions of the ease or difficulty of performing a behavior. behavior control itself is formed from belief control. based on the theory of planned behavior issued by ajzen said that behavioral control affects behavioral intentions. this is confirmed by several studies that have been carried out including huda et al. (2012) in his research found that behavioral control has a significant effect on muzakki’s intentions in paying zakat. nuryana (2016) also said that behavioral control has a significant influence on muzakki compliance intnetions in paying professional zakat. pratiwi (2018) found in his research that behavioral control has a significant effect on the intention to pay zakat. cahyani, aviva, & manilet (2019) in their research found that behavioral control has a significant effect on muzakki’s intentions in paying zakat. saragih (2018) in his research found behavioral control had a significant effect on muzakki’s intentions in paying zakat. amilahaq and ghoniyah (2019) found in their research that behavioral control had a significant effect on muzakki’s intention to pay zakat. based on the theory of planned behavior and supported by several research results, in this case we can say that behavioral control affects muzakki’s intention to pay professional zakat at lazis unnes. h3: behavioral control has a positive and significant effect on the intention to pay zakat behavioral control plays an important role in predicting behavioral intention and behavioral achievement. in the theory of planned behavior, which is the development of the theory od reasoned action, a new variable has been added to predict the intention and behavior of that variable, namely behavioral control. ajzen said that behavioral control can affect a person’s behavior, in this case behavior control can affect the willingness of muzakki to pay professional zakat at lazis state university of semarang. this is also supported by research conducted by pratiwi (2018) who found in her research that behavioral control had a. significant effect on compliance behavior in paying zakat. h4: behavioral control has a positive and significant effect on willingness to pay zakat according to the theory of planned behavior intention is a direct reference of behavior, where behavior can be directly influenced by behavioral intentions, this is also supported by researcher saragih (2018) found that intention has a positive and significant effect on their compliance in paying zakat. pratiwi (2018) found in his research that intention has a significant effect on compliance behavior in paying zakat. amilahaq and ghoniyah (2019) found in his research that intention has a significant influence on the behavior of muzakki in paying zakat. based on the theory of planned behavior and supported by several researchers, in this case intention can affect the willingness of muzakki to pay zakat. h5: the intention to pay zakat has a positive and significant effect on the willingness to pay zakat 3. research methodology this research is quantitative research with a hypothesis testing design. this research was conducted at the amil zakat, infaq, and alms institute, semarang state university (lazis unnes). the population in this study was muzakki at lazis unnes which consisted of 1482 lecturers and education staff. the sampling technique used is incidental sampling. determination of the number of samples using the slovin formula with a tolerance range of 10 https://creativecommons.org/licenses/by/4.0/ muzakki’s intention in paying zakat 64 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) percent and obtained a sample of 94 people. data collection techniques using a questionnaire. method data analysis was performed using structural equation model (sem) using smartpls 3.0 software. the following presents the operational definitions of variable in table 2 below: table 2: operational definition no variable operational definition indicator scale source 1 attitude attitude can be defined as a persistent tendency to feel and act in a certain way towards some object a. willingness to pay zakat voluntarily b. feeling benefited by the presence of zakat contribution to empower the poor and needy likert scale modified from (yusfiarto et al., 2020); (bidin et al., 2013); (andam & osman, 2019) 2 subjective norm subjective norms are formed from normative beliefs which refer to social pressure to perform or not toperform a behavior a. friends influence b. family influence c. couple’s influence d. environmental influence e. the influence of ta’lim f. leadership influence likert scale modified from (yusfiarto et al., 2020); (bidin et al., 2013); (andam & osman, 2019) 3 behavior control behavior control refers to a person’s perceptions of the ease or difficulty of performing a behavior. behavior control itself is formed from belief control a. the influence of religiosity b. policy support likert scale modified from (yusfiarto et al., 2020); (bidin et al., 2013); (andam & osman, 2019) 4 intention to pay zakat intention is a direct reference of behavior where intention is influenced by attitudes, subjective norms, and behavioral control a. tendency to pay zakat decision to pay zakat likert scale modified from (yusfiarto et al., 2020); (bidin et al., 2013); 5 willingne ss to pay zakat willing to pay zakat a. paying zakat voluntarily b. paying zakat periodically and regularly likert scale modified from (yusfiarto et al., 2020); (bidin et al., 2013); (andam & osman, 2019) 4. result and discussion descriptive analysis in this study is used to provide an overview of the distribution of research results on the variables of attitude, subjective norms, behavioral control, intention to pay zakat and willingness to pay zakat. the respondens who were muzakki of the amil zakat, infaq, and alms institute of semarang state university (lazis unnes). the following is a description of each research variable. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 2020 65 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 3: description of attitude variables no statement percentage of answers sd sdts dna ts n a sa 1 i pay zakat voluntarily 1,06% 1,06% 3,19% 32,98% 61,70% 2 the zakat that i pay will benefit me 1,06% 6,38% 5,32% 35.11% 52,13% 3 paying zakat can clean my property 2,13% 1,06% 3,19% 29,79% 63,83% 4 paying zakat can help mustahik (zakat recipients) to improve their quality of life 0 2,13% 1,06% 44,68% 52,13% 5 by paying zakat i can contribute to empowering the poor and needy 1,06% 2,13% 2,13% 45,74% 48,93% total (%) 1,06 2,55 2,98 37,66 55,74 sd (strongly disagree); dna (do not agree); n (neutral); a (agree); sa (strongly agree) table 4: description of subjective norm variables no statement percentage of answer sd dna n a sa 1 my friends encourage me to pay zakat 12,76% 36,17% 21,28% 22,34% 7,45% 2 usually, i follow my friend’s advice to pay zakat 12,76% 47,87% 21,28% 17,02% 1,06% 3 my family encourages me to pay zakat 9,57% 27,66% 14,89% 24,47% 23,40% 4 usually, i follow my family’s advice to pay zakat 9,57% 31,91% 18,08% 25,53% 14,89% 5 my partner encourages me to pay zakat 9,57% 20,21% 10,64% 34,04% 25,53% 6 usually, i follow my partner’s advice to pay zakat 8,51% 31,91% 13,83% 26,60% 19,15% 7 my co-workers encourage me to pay zakat 10,64% 40,43% 22,34% 15,96% 10,64% 8 usually, i follow the advice of my coworkers to pay zakat 10,64% 42,55% 21,28% 18,08% 7,45% https://creativecommons.org/licenses/by/4.0/ muzakki’s intention in paying zakat 66 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 9 the ta’lim i follow encourages me to pay zakat 7,45% 27,66% 19,15% 26,60% 19,15% 10 i pay zakat because of the influence of the ta’lim that i follow 13,83% 36,17% 23,40% 17,02% 9,57% 11 my work leader encourages me to pay zakat 8,51% 36,17% 19,15% 23,40% 12,76% 12 usually, i follow the advice of my work leader to pay zakat 9,57% 38,30% 25,53% 15,96% 10,64% total (%) 10,28 34,75 19,24 22,25 13,47 sd (strongly disagree); dna (do not agree); n (neutral); a (agree); sa (strongly agree) table 5: description of behavioral control variables no statement percentage of answer sd sdat s dna n a sa 1 it is difficult for me not to pay zakat because it is very likely that i will get a sin 1,06% 11,70% 9,57% 43,62% 34,04% 2 i pay zakat because i understand the science of zakat 0 1,06% 10,64% 54,26% 34,04% 3 zakat deductions directly from my salary, maing it easier for me to pay zakat 1,06% 2,13% 11,70% 43,62% 41,49% 4 zakat deductions directly from my renumeration, making it easier for me to pay zakat 1,06% 1,06% 10,64% 47,87% 39,36% total 0,78 3,99 10,64 47,34 37,23 sd (strongly disagree); dna (do not agree); n (neutral); a (agree); sa (strongly agree) table 6: variable description of intention to pay zakat no statement percentage of answer sd sdt s dna n a sa 1 after i know about zakat, i tend to want to pay zakat 0 0 10,64% 46,80% 42,55% https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 2020 67 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2 after i become a muzakki (oblgatory zakat) i tend to want to pay zakat 0 2,13 % 7,45% 48,94% 41,49% 3 after i found out about zakat, i decided to pay zakat 0 0 8,51% 48,94% 42,55% 4 after i become a muzakki (obligatory zakat) i decided to pay zakat 0 0 5,32% 52,13% 42,55% 5 after i understand the benefits of zakat, i tend to want to pay zakat 0 0 6,38% 50% 43,62% 6 after i understood the benefits of zakat, i decided to pay zakat 0 0 4,25% 46,80% 48,94% total (%) 0 0,35 7,09 48,94 43,62 sd (strongly disagree); dna (do not agree); n (neutral); a (agree); sa (strongly agree) table 7: variable description of willingness to pay zakat no statement percentage of answer sd dna n a sa 1 every individual who has met the requirements as an obligatory zakat then he is obliged to pay zakat 0 0 3,19% 35,11% 61,7% 2 i went to the amil zakat, infaq, alms institute, semarang state university (lazis unnes) voluntarily 1,06% 0 23,40% 45,74% 29,79% 3 i accept my obligation as a zakat obligation to pay zakat properly with sincere and good intentions 0 0 4,25% 39,36% 56,38% 4 i am on time in paying zakat 0 1,06% 11,70% 52,13% 35,11% 5 i always pay zakat periodically and regularly 0 0 15,96% 48,94% 35,11% total (%) 0,21 0,21 11,70 44,25 43,62 source: processed primary data, 2020 sd (strongly disagree); dna (do not agree); n (neutral); a (agree); sa (strongly agree) https://creativecommons.org/licenses/by/4.0/ muzakki’s intention in paying zakat 68 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the results of the analysis of the structural model of inner model from this study are as follows: figure 1 sem boostrapping model test souce: smartpls 3.0 the structural model of inner model in pls is done by looking at the r-square value and the parameter coefficient values and the p-values. based on the results of testing the r-square value, the variable intention to pay zakat is 0,585 and muzakki’s willingness to pay zakat is 0,525, which can be interpreted that the variable intention to pay zakat can be expained by the variables in this study of 58% while the other 42% are explained by other variables outside the proposed research. furthermore, the variable of muzakki’s willingness to pay zakat can be explaied by the variables in this study of 52% while the other 48% are explained by other variables outside the proposed research. to see the significance of the infuence between variables, it can be done by looking at the value of the parameter coefficients and the pvalues. the following are the results of hypothesis testing can be seen in the table below. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 2020 69 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 8: hypothesis test results no hypothesis coefficient pvalues description 1 attitude has a significant effect on the intention to pay zakat 0,327 0,000*** hypothesis accepted 2 subjective norms have a significat effect on the intention to pay zakat 0,110 0,165 hypothesis rejected 3 behavioral control has a significant effect in the intention to pay zakat 0,545 0,000*** hypothesis accepted 4 behavioral control has a siginificant effect on willingness to pay zakat 0,208 0,075* hypthesis accepted 5 intention has a significant effect on willingness to pay zakat 0,565 0,000*** hypothesis accepted source: smartpls 3.0 where: *** significant at level 1% ** significant at level 5% * significant at level 10% discussion the result of this study indicate that the attitude variable has a positive and sigificant effect on the intention to pay zakat. this is in line with the theory of planned behavior proposed by (ajzen, 1991) which states that a person’s actions will be influenced by intentions, while the intention itself is also influenced by attitudes. attitude is a persistent tendency to feel and act in a certain way towards some objects (luthans, 2005), this attitude itself is based on behavioral beliefs. when a person has confidence in a certain behavior then he will be able to determine attitudes towards that behavior, the better a person’s belief in that behavior, the greater a person’s tendency towards that behavior. the existance of an attitude will give a person a tendency to pay zakat. the results of this study are in line with several studies that have been carried out by other researchers including by huda et al. (2012) in his research found that attitude had a significant effect on muzakki’s intention to pay zakat. saragih (2018) also found that attitude has a significant effect on muzakki’s intention inpaying zakat. amilahaq and ghoniyah (2019) (yusfiarto et al., 2020); and (bidin et al., 2013) also found in his research that attitude has a significant effect on muzakki’s intentions in paying zakat. the results of this study indicate that the subjective norm variable has no significant effect on the intention to pay zakat. as said by ajzen (1991) in the theory of planned behaviour that subjective nors are formed because of normative beliefs. we can mean that the subjective norm is a person’s perception of the perceived social pressure to do or not do something, or someone about something he or she will do related to how the people around him react. then the greater the belief that is perceived by the people around him or the better the reactions of the people aroun him, the more otivated a person will be to do something which will lead to a strong intention for that person to do something. https://creativecommons.org/licenses/by/4.0/ muzakki’s intention in paying zakat 70 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) although ajzen in his theory said that a person’s intention is influenced by subjective norms, in this case he finds differet resuts where the subjective normsit self has no effect on the intention to pay zakat. we can mean that people pay zakat without considering the reaction of the people around them when paying zakat. this is because paying zakat itself is the fourth pillar of islam where paying zakat is a relationship between humans and allah swt so that in doing so people do not need worry about the opinions or reactions of the people around them because paying zakat itself is a serious obligation that should be done. the results of this study are in line with several studies that have been carried out by other researchers including huda et al. (2012) in her research found that subjective norm did not have a significant effect on the intention to pay zakat. cahyani, aviva, & manilet (2019) in their research also found that subjective nors did not have a significant influence in influencing muzakki’s intention to pay zakat. the results show that the behavioral control variable has a positive and significant effect on the intention to pay zakat. this is in line with the theory of planned behavior proposed by ajzen (1991) stated that in acting a person will be influenced by intentions while the intention itself is also influenced by behavioral control. behavioral control is a person’s perception of the ease and difficulty of performing a behavior. this is formed because of belief control, which then gives a persons’s perceptions of the ease or difficulty in carrying out the behavior so that he can decide to do the act. in this case, behavioral control will enable someone to pay zakat. this is because the control of the belief that he gains from knowledge so that it can provide a perception for muzakki that paying zakat can be done easily so that it can provide a perception for muzakki that paying zakat can be done easily, so that it can strengthen a person’s intention to pay zakat. based on the discussion described above, it can be concluded that the better the control of a person’s behavior, the higher his intention to pay zakat. this study is in line with several studies that have been conducted by other researchers including huda et al. (2012) who in their research found that behavioral control has a significant influence on muzakki’s intentions in paying zakat. nuryana (2016) also said that behavioral control has a significant influence on muzakki compliance intentions in paying professional zakat. pratiwi (2018) found in her research that behavioral control has a significant influence on the intention to pay zakat. cahyani, aviva, & manilet (2019) in their research found that behavioral control had a significant influence on muzakki’s intentions in paying zakat. saragih (2018) in his research found behavioral control has a significant effect on muzakki’s intentions in paying zakat. amilahaq and ghoniyah (2019) found in their research that behavioral control has a significant effect on muzakki’s intention to pay zakat. the results show that the behavioral control variable has a poitive and significant effect on the willingness to pay zakat. the resuts of this study are in line with the theory of planned behavior proposed by ajzen (1991) which states that behavioral control can directly affect behavior. behavioral control is a person’s perception of the ease and difficulty of performing a behavior. this behavioral control is formed because of belief control. the existence of belief control will give a person’s perceptions of the ease or difficulty in carrying out the behavior so that he can decide to do the act. in this case, the existence of behavioral control will mae a person able to pay zakat. this is because the control of the belief that he gains from knowledge https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 2020 71 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) so that it can provide a perception for muzakki that paying zakat can be done easily so that in this way it can strengthen a person’s intention to pay zakat. this study is in line with several studies that have been conducted by pratiwi (2018) which in her research found that behavioral control has a significant influence on compliance behavior in paying zakat. the result show that the variable of intention to pay zakat has a positive and significant effect on the willingness to pay zakat. this is inline with the theory of planned behavior proposed by ajzen (1991) which states that in acting a person will be influenced by the person’s intention to act. intention is a direct reference of behavior, where the intention itself is the encouragement or motivation that a person has to perform certain behavior or actions. the stronger a person’s intentions, the better his performance will be. the existance of an intention in muzakki to pay zakat will give rise to a strong urge to pay zakat. the stronger a person’s intention to pay zakat, the greater the possibility that he is willing to pay zakat. this study is in line with research conducted by saragih (2018) which found that intention has a positive and significant influence on their compliance in paying zakat. pratiwi (2018) found in his research that intention has a siginifcant influence on compliance behavior in paying zakat. amilahaq and ghoniyah (2019) found in their research that intention has a significant influence on the behavior of muzakki in paying zakat. 5. conclusion this study was conducted to explain the willingness of muzakki to pay zakat through laz using the tpb theory approach. in this tpb, there are attitude factors, behavioral control and subjective norms and intentions as factors that influence the attitude of muzakki to pay zakat through las. the results of the study show that attitudes and behavioral control have a positive influence on the intention to pay zakat. howver, the subjective norm has no effect on the intention to pay zakat. the results also show that behavioral control and intention have a positive influence on willingness to pay zakat. based on the results of this study, researchers will provide some suggestions for laz managers to be able to create a supportive environment for muzakki at semarang state university in order to increase the desire and intentions of muzakki to pay zakat, infaq and alms. the academic environment developed by the university should be equipped with an environment that increases awareness to fulfill the obligation to pay zakat through laz. the limitation of this study lies in the low response rate of the respondents. of the 1482 population, only 94 questionnaires were returned completely, making the response rate is only 6.32%. this low response rate can be caused by the covid-19 pandemic, which makes most of the population worked from home, thereby reducing opportunities for effective communication between researchers and respodents. for further researchers wo want to examine the willingness of muzakki in paying zakat, they can expand the research area to other lazs such as rumah zakat, 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(2020). literacy and intention to pay zakat : a theory planned behavior view evidence from indonesian muzakki. international journal of zakat, 5(1), 15–27. https://creativecommons.org/licenses/by/4.0/ the influence of accounting information quality, accountability and transparency on zakat receipt 62 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the influence of accounting information quality, accountability and transparency on zakat receipt dewi purnama sari1)*, siti atikah2), nur fitriyah3 1,2,3 fakultas ekonomi dan bisnis universitas mataram abstract this study aims to analyze the effect ofquality of accounting information, accountability and transparency of financial reporting on the receipt of zakat. this research is an associative researchthe data used in the form of primary data by distributing questionnaires to amil and muzakki from the national zakat agency (baznas) in west manggarai regency. 99 questionnaires were distributed, but 90 were collected and can be studied. analysis of data to test the hypothesis used multiple linear regression with analysis the spss program.the result of the study stated that the quality of accounting information and transparency has positive affect the receipt of zakat in the baznas of west manggarai regency. on the contrary, accountability to have no effect on the receipt of zakat in the baznas of west manggarai regency. keywords: the quality of accounting information, accountability, transparency, the receipt of zakat. 1. introduction the word of zakat comes from the word zaka which is the isim mashdar, which etymologically has several meanings, namely holy, growing, blessed, commendable, and developing. meanwhile in terminology, zakat is a certain amount of property that is required by allah swt to be handed over to those who are entitled to it (qardhawi, 1999). according to law no 23 of 2011 concerning the management of zakat, the definition of zakat is assets that are obligatory and must be set aside by a muslim or an entity/business owned by a muslim to be given to those who are entitled to received zakat in accordance with religious provisions. one of the regencies in east nusa tenggara province is west manggarai regency, where the socio-cultural life has diversity because it is influenced by cultures from outside the region such as java, bugis, bima, and others. the west manggarai community is a believing society, this can be seen in history which states that the ancestors of the west manggarai people believed in the highest form (god). the highest form is often referred to in the manggarai language, namely mori keraeng. only about 20% of the people of west manggarai follow islam, or 46.787 people, while the majority are catholic christians as many as 184.882 people (kemenag west manggarai). even though they are a minority religion, religious activities are still strong in accordance with the teaching brought by the great prophet muhammad saw and carry *corresponding author. email address: akuntansi.feb@unram.ac.id out obligations such as prayer, fasting, and paying zakat. https://creativecommons.org/licenses/by/4.0/ mailto:akuntansi.feb@unram.ac.id afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 63 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the collection of zakat funds in west manggarai regency has fluctuated from year to year. these fluctuations can be seen in the following table: table 1.1 amount of zakat receipt in west manggarai year amount of zakat receipt (in the form of money) amount of zakat receipt (in the form of rice) 2015 rp 459.357.000 2016 rp 479.662.000 2017 rp 563.262.500 11.767 kg 2018 rp 424.444.000 6.166 kg 2019 rp 590.353.000 25.246 kg source: national amil zakat agency (baznas) of west manggarai based on the information from the table above, it can be seen that the realization of zakat receipts in the last 3 years had continued to increase, but there had been a decrease in zakat receipts in 2018, this proves that the realization of zakat receipts was still very far from the expected potential for zakat receipts. the actual potential in 2018 according to h. idrus achmad as chairman of the national amil zakat agency (baznas) in west manggarai regency, which reached 1 billion or equivalent to 20.000 people who paid zakat, but the amount of zakat receipts collected was only idr 424,444.00 in the form of cash and 6,166 kgs in the form of non-cash (rice) or equivalent to 14,181 muzakki. in addition, he explained that in west manggarai regency there are 8 sub-districts and as many 155 mosques, but in 2018 the zakat collected at baznas was only 51 mosques that had deposited. one of the factors that caused the decline in the number of zakat receipts can be seen from the habits of rural communities in west manggarai regency tend to pay zakat directly to mustahiq without going through the amil zakat agency, so that the realization of zakat receipts collected in 2018 has not met the expected zakat potential. 2. literature study 2.1 sharia enterprise theory (set) basically, the important axioms in sharia enterprise theory (set) are the relationship between human responsibility and allah swt and accountability relationship with stakeholders (muzakki). this theory teaches humans that in essence the main ownership is only to allah swt, and humans have rights as managers /khalifa khalifa fil ardhi (kalbarini and suprayogi, 2014: 508-509). therefore, from the previous explanation related to sharia enterprise theory, the author draws the conclusion that everything humans do on this earth is not only for worldly interests but is also done to achieve happiness in the hereafter. although given special previleges by allah swt as a caliph (leader), humans must be trustworthy in carrying out their duties and obligations and stay away from all his prohibitions. humans also have to help each other or remind each other in terms of goodness, because everything that is done there will be a reward form allah swt. https://creativecommons.org/licenses/by/4.0/ the influence of accounting information quality, accountability and transparency on zakat receipt 64 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2.2 basic concepts of zakat receipt, quality of accounting information, accountability and transparency a. zakat receipt receipt of zakat, infaq and alms (zis) funds is the receipt of zis funds in the form of money or goods received by zakat amil. there are two ways to receive zis funds paid by muzakki (zakat prayers). the first one, starting from a muzakki who pays zakat, infaq or alms by depositing cash or by paying directly to the zakat management organization (zmo). the second is paying zis by transfer through a sharia bank that has been provided by the zmo. if by bank transfer, muzakki do not need to come directly to the zmo (nikmatuniayah, marliyati dan mardiana, 2017: 64). 1) the legal basis of zakat as the third pillar of islam, zakat is also one of the banners of islam that should not be ignored by anyone. therefore, people who are reluctant to pay zakat can be fought and people who refuse zakat obligations are considered infidels. there are several verses in the qur’an that form the basis of the obligation to pay zakat, namely: • qs. al-taubah verse 103 • qs.al-baqarah verse 43 • qs.al-hajj verse 78 • qs. ali 'imran verse 180. 2) the wisdom and purpose of zakat zakat is worship that has many meanings in human life, especially muslims. zakat has a lot of wisdom, both related to the relationship between humans and their god, as well as social relations between humans, which are: • purify oneself from the dirt of sin, purify the soul, cultivate noble character to be generous, have a sense of humanity, and erode miserliness (stingy) and greedy so that they can feel inner peace, because they are free from the demands of god and the demands of society’s obligations. • eradicating the disease of envy, hatred, and envy from human beings that usually arise when seeing the adequacy or excesss of people around him with luxury, while he himself has nothing and no helping hand from them (rich people) to him. • to help foster and build the weak to meet the basic needs of life, so that they can carry out their obligations to allah swt. • to support the realization of an islamic social system that stands on the principles of ummatan wahidan (one ummah), musawah (equality, rights and obligations), ukhuwah islamiyah, and takaful ijtima’l (shared social responsibility). • to be an important element in the balance in the distribution of social property (social distruction), balance in property ownership (social ownership), and balance of individual responsibilities in society • zakat is maliyyah worship which has economic dimensions and functions or the distributions of god’s gifts and is an embodiment of social solidarity, proof of https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 65 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) islamic brotherhood, binding the brotherhood of the ummah and the nation as a liaison between the strong and the weak. • to create a prosperous society, where one’s relationship with others is harmonious, peaceful and harmonious which can create a situation that is both physically and mentally peaceful and secure (kartika sari, 2007:13). 3) types of zakat the types of zakat can be diided into two, namely zakat nafs (soul) and zakat maal (wealth) which are explained as follows: • zakat nafs (soul) zakat nafs (soul) or zakat fitrah is zakat that must be issued by a muslim who is able or has sufficient wealth and has fulfilled the requirements to fulfill his zakat obligations. zakat fitrah is issued once a year starting at the beginning of the month of ramadhan until the limit before the eid prayer is carried out. • zakat maal (wealth) zakat mal (wealth) is zakat issued to purify property, if the property has met the requirements of the obligatory zakat (kristian and umah, 2011). groups of people who are entitled to receive zakat is in accordance with the word of allah swt. assets that can be categorized as zakat mal are livestock, gold and silver, trade, agricultural products (plants and fruits), finding goods, zakat on income from professionals, company zakat, zakat on securities, zakat on currency trading money, zakat on traded livestock, zakat on honey and animal products, zakat on property investment, zakat on sharia insurance, and others (baznas.go.id) 4) muzakki and mustahik zakat muzakki or zakat payers are people whose assets are subject to zakat obligations. a zakat payer is required to be a muslim and is not required to have reached puberty or is capable of reasoning according to the opinion of jumhur scholars. (septiarini: 2011). while mustahik is: “in fact, zakat is only distributed to the fakir, the poor, zakat administrators, converts to islam, freeing slaves, people who owe, fi sabilillah and people who are on the way, as a statute that is obligated by allah, verily allah is all-knowing, all-wise“( q.s attaubah: 60). according to septiarini (2011), the groups or groups that are entitled to receive zakat are as follows: • poor, namely a group of people who can not meet their basic needs (primary). while the scholars argue that the poor are people who do not have the nisab of zakat. • the poor are groups of people who have less money needed to meet their own needs, their families and other people who are in their care. there are scholars who think that the poor are people who have no wealth at all. • amil (zakat administrator), is a party appointed by the government or the community to handle the affairs of collecting zakat from its source and distributing it to those in need. muallaf, namely the community group of people https://creativecommons.org/licenses/by/4.0/ the influence of accounting information quality, accountability and transparency on zakat receipt 66 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) who have recently embraced islam who are given zakat to persuade their hearts to remain in islam or strengthen their faith. • riqab is a muslim who is in slavery status. it means the part of zakat which is used to free young slaves and eliminate all forms of slavery system. • gharim is a muslim who must immediately pay his debts but does not have the ability to pay them. he is entitled to receive zakat if the debt is not for immorality or has proven repentance. • fi sabilillah is a person who struggles in the way of allah in the broadest sense as determined by the fiqh scholars includes every practice that propagates islam, protects and maintains religion and elevates the sentence of monotheism, such as fighting, preaching, trying to apply islamic law, rejecting slander caused by enemies of islam, stemming the flow of toughts that are contrary to islam. ibn sabil was a foreigner who had no money to return to his homeland. 5) functions and roles of amil zakat institutions functions and roles of amil zakat institutions (laz) according to sjechul hadi permono (2005,362) are: • the amil zakat institute guarantees the implementation of islamic sharia, because the implementation of the collection and distribution of zis must always be supervised. • zis collection through the amil zakat institution is expected to be evenly distributed in its distribution. • collecting zis through the amil zakat institution is more noble, because muzakki does not need to meet face-to-face with mustahik so that they can maintain the dignity of both parties. • zakat, infaq and shodaqoh are more focused on the 8 asnaf and can not only be channeled through certain individuals but also through institutions that are managed more productively. b. quality of accounting information good financial reports must provide information for users. according to iai (2016:8), there are four main qualitative characteristics related to accounting information, namely: 1) understandable an important quality of information contained in financial statements is that it is easy for users to understand immediately. 2) relevant to be useful, information must be relevant to meet user needs in the decisionmaking process. information has the quality of relevance if it can influence the economic decisions of users by helping them evaluate past, present, and future events, correcting the results of past evaluations. 3) keandalan https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 67 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) information has a reliable quality if it is free from misleading understanding, material error, and can be relied on by users as a sincere or honest representation of what its shoud be presented or which is reasonably expected to be presented. 4) comparable users should be able to compare the financial statements of islamic entities between periods to identify trends in financial position and performance and evaluate their relative financial position. c. accountabillity accountability is an accountability for the actions and decisions of a person or an institution (halim and kusufi, 2017: 424). mardiasmo (2002: 20) stated that accountability is an obligation. so it can be said that an entity is accountable if it has bee able to openly present accounting information related to the decisions that have been taken. d. transparency according to nurhayati, lestira and dan fadilah (2016: 225) that the explanation of transparency is a condition in which an institution is able to provide relevant information and materials related to institutions tht are accessed and easily understood by the general public. yuliani and bustaman (2017: 78) stated that transparency is the openness of a public organization in making financial policies, so that it can be monitored by the public and creates a clean, effective, efficient, accountable and responsive organization to the public interest. according to nurhayati, lestira, iss and oktaroza (2014: 579) state that the concept of transparency in islam must include: 1) the organization is open to the public 2) information must be disclosed honestly, relevantly, timely and comparable in relation to the information to be provided and 3) the information provided must be completely fair. 3. research methodology 3.1 research approach the type of research used in this study is an associative type with a quantitative approach. 3.2 research location and time this research was conducted at the national amil zakat agency (baznas) in west manggarai regency, east nusa tenggara province and when the research wasconducted i 2019. 3.3 population and research sample a. population the population is the entire subject to be studied or it can be said that an element or elements are the object of research (sugiyono, 2017:136). the population used in this study is the nasional amil zakat agency (baznas) of west manggarai. the population of respondents can be seen in table 3.1 as follows: https://creativecommons.org/licenses/by/4.0/ the influence of accounting information quality, accountability and transparency on zakat receipt 68 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 3.1 respondent total population amil 275 muzakki 14.181 total respondent population 14.456 b. sample the sample is part of population that has characteristics related to the population (sugiyono, 2017:137). to determine the minimum sample of the population taken, using the slovin equation. the slovin formulation was uased to determine the sample formulation with a error date (d) of 0.1, as follows 𝑛 = 𝑛𝑛.𝑛2+1 keterangan: n = jumlah sampel n = total population d = the error tolerance limit is 10% or 0.1 as the sample calculation is as follows: 𝑛=𝑛𝑛.𝑛2+1=14.45614.456.0.12+1=14.456144,56+1=14.456145,56=99,31 based on the above calculation, the number of respondents as many as 99 people who will be allocated is not in accordance with the proportions, where 25% is for amil where 75% is for muzakki. if the researcher allocates according to the proportion, then only 2% is for amil and 98% for muzakki because when viewed from the ratio of the number of amil and muzakki which is very far, so the authors allocate the sample not according to the proportion. therefore, the sample for amil is 25 people and sample for muzakki is 74 people. 3.4 research variable a. clarification of variable dependent variable in this study is zakat receipt (y). while the independent variables in this study are the quality of accounting information (x1), accountability (x2), and transparency (x3). b. conceptual and operational definitions of variables there are conceptual and operational of each variable which we can see in the table 3.2 as follows: variable definition indicator scale of data question number zakat fund receipt sources of revenue in the form of cash assets and non-cash assets (nikmatuniayah, marliyati and mardiana, 2017) a. type of zakat (baznas.go.id) b. pay directly and transfer (nikmatuniayah, marliyati and ordinal a. 1, 2 and 3 b. 4 and 5 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 69 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) mardiana, 2017: 64). quality of accounting information accounting information that has qualitative characteristics used by users (iai, 2016: 8) a. understandable b. relevant c. relliability d. comparable (ia1, 2016:8) ordinal a. 1, 2 b. 3,4 c. 5,6,7,8,9 d. 10 accountability it is an obligation to provide accountability for explaining the performance and actions of the organization related to the success / failure of its mission to the authorized party (hamidi, 2013) a. compliance with ethical and standard values b. punctuality c. clarity of policy objectives d. information dissemination e. public access to information f. presentation of financial statements g. financial control (hamidi, 2013) ordinal a. 1, 2 b. 3 c. 4 d. 5 e. 6 f. 7,8 g. 9 transparency a zakat recipient organization (opz) provides accounting information that is easily accessible to users (nurhayati, lestira and fadilah, 2016). a. open b. easy to undesrtand c. there is access to publications (nikmatuniayah, marliyati and mardiana, 2017). ordinal a. 1,2,5,6 7 b. 3 c. 4, 8 https://creativecommons.org/licenses/by/4.0/ the influence of accounting information quality, accountability and transparency on zakat receipt 70 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 3.5 procedure for data collection the data collection procedure carried out in this study is to collect financial report data or recapitulation of zakat receipts from the national amil zakat agency (baznas), where the report contains data on the number of zakat receipts, muzakki, amil, mustahiq, and the allocation of zakat funds that support this research. the data collection procedure was carried out by distributing questionnaries and documentation. documentation is intended to collect data or documents as accurate evidence in research. meanwhile, the document used in this study is a recapitulation of the receipt of zakat funds owned by the west manggarai amil zakat agency from 2015 to 2019. 3.6 data analysis procedure there are several statistical techniques that can be used to analyze the data, the purpose of this data analysis is to obtain relevant information about the research variables. the data analysis method in this study used an overview of the research object, research instrument testing, classical assumption test, multiple linear regression analysis, and hypothesis testing. 4. result and discussion 4.1 overview of research objects a. place and time research the population in this study is the people of west manggarai who have the obligation to pay zakat or commonly referred to as muzakki, and amil as officers who have the obligation to collect and manage zakat funds. this research was conducted at the national amil zakat (baznas) in west manggarai regency, located on jalan puncak waringin, kelurahan labuan bajo, kecamatan komodo. b. rate of return (response rate) the data used in this study is primary data obtained by distributing questionnaires to the management of the national amil zakat agency (baznas) and muzakki in west manggarai regency. the research was conducted for one month after the research permit was submitted to the baznas, by distributing 99 questionnaires. distribution of the quesionnaires is presented in the table 4.1 as follows: respondent distributed questionnaire returned questionnaire amil 25 25 muzakki 74 65 total 99 90 4.2 discussion a. the effect of the quality of accounting information on the acceptance of zakat the result showed that the quality of accounting information had an effect on zakat receipts, this is seen from the significance value of 0.000 which is smaller than 0.05. the resulting beta value was positive at 0.382. the positive direction on the variable https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 71 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) coeffcicient of the quality of accounting information indicated that the higher the quality of accounting information, the more the number of zakat receipts increased. knowledge of accounting oinformation must be useful for others so that it can be studied and understood, if the information is not published or the truth in the information is not conveyed, it will be accputed for on the day of judgement. this is clearly seen in the words of the great prophet muhammad saw; “a servant’s feet will not move on the day of resurrection until he is asked about four accpuntable things, namely: about his age, what he spent on it; about his youth, what was it spent on; about his property, where it was obtained and for what; and about his knowledge, what has been done with that knowledge”. (hr. tirmidzi). the results of this study supported the proposed hypothesis. where in theory, the quality of accounting information has a qualitative caharacteristic, which is understandable, relevant, reliable and can be compared. this qualitative characteristic was one of the characteristics that make financial statement information useful to users. (iai, 2007: 44). from the respondents’ answer to the questionnaires distributed, it can be seen that the quality of accounting information owned by the nasional amil zakat agency (baznas) of west manggarai barat was very good. this resulted from the questionnaire and documentation. respondents have the perception of agreeing to the report on receipt of zakat funds that were presented easily understood by the public (muzakki) and society, the information on financial statements containing the receipts of zakat funds was not convoluted and confusing, the information disclosed in the zakat report was relevant to the actual source of zakat funds, the information disclosed in the zakat report was relevant to the donations to the programs being impelemented, information related to the payment of zakat had been calculated according to the type of zakat to be paid, information related to payment of donations was in accordance with the published activity program, all information provided to the public was free of errors, provided fair or equitable information to the public regarding the receipt of zakat funds, zakat receipts reports were disclosed in a honest, neutral, complete and timely manner, zakat receipts reports had been presented systematically, periodically and could be compared with the previous period or with other baznas. from the results of the documentation, it can also be seen that the recording of the recapitulation of receipts and distribution of zakat, infaq and alms funds was quite good, where there was clarity in the allocation of these funds. so that the better the quality of accounting information, the higher the public’s desire to pay zakat so that zakat receipts would increase. the results of this study support research conducted by lestira dan fadilah (2016), and research by nikamatuniayah, marliyati and mardiana (2017). in these two studies, they were explained that the quality of accounting information had a positive effect on zakat receipts. this meant that the high quality of accounting information could increase the ampunt of zakat receipts. however, this research was inconsistent with the previous research conducted by natalia (2019) which explained that there was no significant effect between the quality of accounting information on zakat receipts. https://creativecommons.org/licenses/by/4.0/ the influence of accounting information quality, accountability and transparency on zakat receipt 72 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) b. the effect of accountability on zakat receipts the results show that accountability had no effect on zakat receipts, meaning that accountability had a weak influence that was seen from a significance value greater than 𝛼, where the hypothesis result was 0.062 t-count which menas it was smaller than t table namely 1.988 and had a significance of 0.951 more greater than 0.05. thus, it can be said that the accountability variable has no effect on zakat receipts. accountability can be analogized as a trait and attitude of the amil zakat agency, namely amanah. the nature of amanah means trustworthy, in accordance with the word of allah swt in qs an-nisa’ verse 58, “indeed, allah commands you to convey the mandate to those who are entitled to receive it.” the verse implies that the amil zakat agency must be trusted in collecting, storing and distributing zakat funds to people who have rights to these funds. good accountability from the west manggarai baznaz was certainly highly desired by the community. from the respondents’ answers to the questionnaires distributed it can be seen that the accountability of baznas of west manggarai was still lacking, it can be seen from the results of the questionnaire where many respondents’ answer especially muzakki’s answers who disagree with statements related to reports to receipts of zakat funds have been published in a timely manner, receipts of funds have been presented on bulletin boards, websites , magazines, etc., and statements related to reports on receipts of funds can increase public trust in baznas. so, it can be said that the west manggarai baznas has low accountability. this was supported by the characteristics of the respondents that is seen from the level of education, namely strata 1 (s1). due to the fact that they have a good level of education, of course they had given answers that were in accordance with the actual situation. the result of this study did not support the porposed hypothesis. the accountability factor was seen from its accountability to stakeholders, namely the community, muzakki and other interested parties. accountability was not only in the form of a printed report, but can be seen from social media such as the web, instagram which always displays the results of donations. so that this accountability still has an effect, but in this study, accountability had no effect on zakat. the results of this study were inconsistent with the result of previous studies conducted by natalia (2019), nikmatuniayah, marliyati and mardiana (2017), nurhayati, lestira and fadilah (2016), which explain that there was a significant influence between accountability on zakat receipts. differences in research results were possible due to differences in the number of respondents and research locations, where respondents in natalia’s study were 42 people while in this study there were 90 people. the research conducted by natalia was at the zakat management organization (opz) at sukoharjo regency, while this research was conducted at the national amil zakat west manggarai regency. different research areas certainly have different cultures and habits of people so that they will have different perceptions. in addition, this research was conducted in an area where the community was predominantly catholic. eventhough it was dominated by christianity, muzakki still knew the obligation to pay zakat. so, when the accountability of a baznas decreased, zakat receipts continued to increase. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 73 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) c. the effect of transparency on zakat recipients based on the results of the hypothesis test, the transparency variable (y) had a coefficient of 9.363, which means it was greater than the t-table 1.988 and had a significance of 0.00 which was smaller than 0.05. thus, it can be said that the transparency variable had a positive effect on zakat receipts at the national amil zakat agency in west manggarai regency. the amil zakat institution or agency as the manager of zakat, infaq and alms must instill the nature of tabligh which is one of the four characteristics of the prophets, in accordance with the word of allah swt in qs al-maidah verse 67 which means “o messanger, convey what has been sent down to you from your lord and if you do not do (what was ordered, it means) you do not convey his message”. in the verse it was implied that the amil zakat agency must adhere to allah’s rules, always convey everything correctly nad transparently, uphold honestly, do work with dedication and high loyalty. the west manggarai national amil zakat agency (baznas) had implemented transparency, which can be seen from the results of the questionnaire answers and documentation results in the form of recapitulation of receipts of zakat, infaq and alms funds. the results of the documentation were given directly from baznas, this proved that baznas was transparent to those who need information related to the receipt and distribution of zakat, infaq and alms funds. the transparaency of baznas was measured from the results of the questionnaire answers that many of those who answered agreed with the statement that the national amil zakat agency was open to muzakki or the public, provided all clear, accurate and adequate information, provided information regarding the receipts of zakat funds and their distribution, reports on the receipts of zakat funds were presented easily accessed by the public, had presented acceptance reports honestly and trustworthy, had provided information related to the policies implemented, either in writing or in direct communication to muzakki, had included parties who were donors or muzakki and there were no errors in recording, information reports on receiving zakat funds can be accessed on websites, magazines, newspapers or other social media such as instagram, facebook, etc. this was because baznas of west manggarai was very transparent to the public who need information. the results of this study support the proposed hypothesis. the transparency factor can be seen from the openness of the amil zakat agency of west manggarai regency. so, when people ask about receiving zakat funds or related to the programs being run, baznas provided an explanation to each community. in this way, it could increase public trust. so, the higher the transparency of baznas, the higher the level of acceptance of zakat funds. the results of this study were relevant to research by natalia (2019), nikmatuniayah, marliyati and mardiana (2017), nurhayati, lestira and fadilah (2016), that transparency had a positive effect on reporting receipts of zakat, infaq and alms funds. basically, transparency was closely related to public trust, so it was hoped that it would also increase the level of acceptance of zakat funds. https://creativecommons.org/licenses/by/4.0/ the influence of accounting information quality, accountability and transparency on zakat receipt 74 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 5. conclusion the conclusion of this research is the quality of accounting information affected the acceptance of zakat. therefore, if the quality of accounting was getting better, the better the amount of zakat fund receipts would be. accountability had no effect on zakat receipts. eventhough the accountability of the national amil zakat agency (baznas) of west manggarai regency was not optimal, the community was still willing to pay zakat. transparency had an effect on zakat receipts. the more transparent the national amil zakat agency (baznas) of west manggarai regency towards the community (muzakki), the public’s trust in baznas was also higher and of course many were willing to pay zakat so that it had an impact on the ampunt of zakat receipts. limitation the author realized that this research still had the following limitations: a. the object of this research was only one namely the baznas of west manggarai regency. b. variations in the quality of accounting information, accountability and transparency variables on zakat receipts were only able to explain 86.5%. while the remaining 13.5% was explained by other variables outside the model that can affect zakat receipts. suggestion for further research researh on zakat receipts in the future wa expected to be able to provide higher quality research results, taking into accpunt the following suggestions: a. increase the number of research objects, because there are 11 national amil zakat agency (baznas) in east nusa tenggara province, namely baznas of sikka regency, baznas of timor tengah selatan regency, baznas of belu regency, baznas of ende regency, baznas of alor regency, baznas of manggarai regency, baznas of west manggarai regency, baznas of east flores regency, baznas of ngada regency, baznas of nagekeo regency and baznas kupang regency. b. considering other variables that are thought to have an effect on the amount of zakat fund receipts. references astuti, s. p. 2016. modul praktikkum statistika. ian surakarta: tekna. efferin, sujuoko. 2015. akuntansi, spiritual, dan kearifan lokal: beberapa agenda penelitian kritis. jurnal akuntansi multipradigma. 6(3) : 341-511. ghozali, i. 2013. aplikasi analisis.multivariate dengan program ibm spss 21. semarang: badan penerbit universitas diponegoro. hakiem, al. 2012. prinsip dan tujuan dasar zakat.http://nurahalhaiem.blogspot.co.id/2012/04/prinsip-tujuan-dasarhukum zakat.html.di akses pada tanggal 26 mei 2019 13:00 pm. hamidi, n., dan suwardi, e. 2013.analisis akuntabilitas publik organisasi pengelola zakat berdasarkan aspek pengendalian intern dan budaya organisasi.survey https://creativecommons.org/licenses/by/4.0/ http://nurahalhaiem.blogspot.co.id/2012/04/prinsip-tujuan-dasar-hukum%20zakat.html http://nurahalhaiem.blogspot.co.id/2012/04/prinsip-tujuan-dasar-hukum%20zakat.html afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 75 published by afebi islamic finance and economic review this is an open access article under the cc by sa license 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persada. jakarta. uu republik indonesia no 23 tahun 2011 tentang: pengelolaan. yuliana, n. w., dan bustaman. 2017. akuntabilitas dan transparansi pengelolaan aset wakaf pada baitul mal kota banda aceh. jurnal ilmiah mahasiswa ekonomi dan akuntansi.vol 2 (4).75-8. http://www.baznas.go.id,diakses pada 20 juli 2019. https://creativecommons.org/licenses/by/4.0/ http://www.baznas.go.id/ micro business empowerment model through cash waqf 27 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) micro business empowerment model through cash waqf agus suaidi hasan1*, sri herianingrum1 1islamic economics departement, faculty of economics and business, airlangga university, indonesia abstract poverty and economic inequality have become persistent problems. it is believed that this problem can be faced with cooperation and mutual concern. through this, islam as a holistic teaching has actually provided a means of solution to dealing with this problem, namely the existence of islamic philanthropy in the form of zakat, infaq, shadaqah and waqf. especially in the field of waqf, it has now experienced a development of meaning, where currently the practice of waqf with money or cash waqf has developed. the existence of waqf money is a huge potential, especially in indonesia as the largest muslim country in the world. with this potential, it is hoped that the management of waqf money can become a new alternative in economic development, especially as an alternative financing for empowering micro businesses. this research uses a qualitative approach with literature study method, data is obtained from electronic media, books, and journals. the result of this research is to develop a sharia financing model through cash waqf instrument as an alternative source of financing and empowerment of micro businesses. keywords: cash waqf, sharia financing, empowerment, micro business 1. introduction poverty is a complex problem concerning welfare which is influenced by various interrelated factors, including the level of community income, unemployment, health, education, access to goods and services, location, geography, gender and environmental location. poverty is no longer understood only as an economic inability, but also a failure to fulfill basic rights and differences in treatment for a person or group of people in living a life with dignity. although development in the social and economic fields has become the agenda in every country in the world (fadhilah, 2015). the problems of poverty and welfare are actually problems that must be faced together and there is concern for others. responding to this, islam as teachings and guidelines covering all aspects of life have offered several solutions to overcome these problems. one solution that has been taught in islam is the application of islamic philanthropic policies, namely zakat, infaq, shadaqah and waqf. the existence of this islamic philanthropic instrument is actually a reflection of mutual care for each other, especially in overcoming social disparities and poverty. on that basis, it is important to optimize the role of islamic philanthropy. in this case, besides the zakat, infaq, and shadaqah instruments, there are philanthropic instruments in the form of waqf. *corresponding author. email address: agus.suaidi.hasan-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:agus.suaidi.hasan-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 28 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) waqf is understood as giving rights to nadzir or managers of waqf objects to be managed and used in accordance with the provisions of islamic teachings. in its development, waqf has expanded its meaning to a wider range. currently, a form of waqf activity that uses cash (cash waqf) has developed. cash waqf itself has become a hope and a solution that can be used as an instrument in building a country's economy. especially in muslim countries. indonesia, with the largest muslim population in the world, has the potential to develop this cash waqf. the indonesian waqf board (bwi) states that the potential waqf of money in indonesia can reach rp. 180 trillion annually. as for data in the ministry of religion (2018), the realization of waqf money recorded from 2011 to 2018 an average of rp. 31.9 billion annually. from this potential, it is only natural that this waqf aspect needs special purity so that its collection and distribution can be maximized for benefit according to islamic law. furthermore, the ministry of religion finally issued a circular waqf money movement in the asn environment of the agency. this movement was born with the aim of making the ministry of religion a pilot model as well as an initiator of waqf money. furthermore, it is well aware that the potential of waqf money is very large in indonesia, and it is appropriate to develop it as an alternative solution in economic development. the funds raised can be developed as a means of developing micro-businesses and creating community welfare. one of the ways this is done is by providing financing to micro businesses through cash waqf, this is as researched by asmy (2018) which reveals that cash waqf can provide financial services as a new alternative to financing sources for micro businesses. 2. literature study 2.1 empowerment empowerment is an effort to build community power both by motivating, optimizing and increasing their potential (kastasasmita, 1996). empowerment is a process of self awareness of the community to be active, participative and transformative in an effort to continuously improve the ability to solve problems at hand and improve living conditions to suit their wishes. this means that empowerment is a process and a goal, namely a series of activities to strengthen empowerment and weak power with the aim of social change (muslim. 2009). 2.2 micro business according to the law of the republic of indonesia number 20 of 2008 concerning micro, small, medium enterprises, micro enterprises are understood as productive businesses owned by individuals and / individual business entities, which meet the criteria of micro businesses as stipulated in this law. the criterion for micro-businesses is that they have a net worth of at most rp. 50,000,000.00 (fifty million rupiah) excluding land and buildings for business premises, or having annual sales proceeds of at most rp. 300,000.00 (three hundred million rupiah) https://creativecommons.org/licenses/by/4.0/ micro business empowerment model through cash waqf 29 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2.3 cash waqf waqf is a form of transferring ownership rights to nadzir (waqf manager), both institutions, or individuals with the intention that the results and benefits are used for things that are in accordance with islamic sharia rules (sabiq, 2006). as for the meaning of waqf in the meaning of positive law in indonesia as regulated in law number 21 of 24 concerning waqf article 1, it is stated that waqf is a waqif legal act to separate and / or hand over part of his property to be used forever or for a certain period of time in accordance with its interests are for the purposes of worship and / or general welfare according to sharia. in its development, waqf objects can not only be in the form of goods or objects such as land waqf which are generally known, but nowadays a new concept has developed, namely the application of cash waqf. the indonesian ulema council (mui) issued a fatwa regarding cash waqf (money) with the following conditions: a. waqf uaang (cash waqf / waqf al nuqud) is waqf that is carried out by a group or a person or a legal entity in the form of cash waqf. b. included in the definition of money are securities c. waqf whose law is jawaz (may) d. waqf which can only be distributed and used for things that are permitted in syar'i e. the main value of waqf, which must be guaranteed its sustainability, may not be sold, gifted or colored. cash waqf is the transfer of rights property in the form of cash to someone, groups of people, or nadzir institutions for managed productively by not reduce or eliminate air assets so that the results can be retrieved or the benefits by willing to achieve in accordance with waqf requests that are in line with islamic law. (soemitra, 2017). cash waqf is a deep waqf form of money which is then managed productive by nadzir, and the result used for waqf. (s. rusydiana and abrista, 2017). from the explanation of this definition, it can be understood that cash waqf in practice can be given in the form of cash or securities to be developed and its benefits used in accordance with the provisions of sharia regulations. meanwhile, the directorate of zakat and waqf development (2005) stated that it takes several things to pay attention to so that the potential of waqf funds can be maximized and be able to provide great benefits. some of the things mentioned are as follows: a. first, the method of collecting funds (fundraising), namely how cash waqf is mobilized. in this case, certification is one of the easiest ways, namely how to issue certificates with different nominal values for different target groups. this aspect is the advantage of cash waqf compared to other asset waqf, because the amount can adjust the ability of the candidate for waqf (the person who donates his assets). b. second, the orientation of the fund management that has been collected must be able to provide the maximum possible results (income generating orientation). the implication is that these funds must be invested in productive endeavors. c. third, the distribution of the results created to the beneficiaries in distributing these https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 30 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) results what needs to be considered is the purpose / orientation of the distribution, which can be in the form of charity, empowerment of human investment or human investment. infrastructure investment. 2.4 sharia financing through the mudharabah agreement mudharabah agreement the term mudaraba is also known as qiradh, which is commonly used by the hijaz, while mudaraba is commonly used by iraqis (hasan, 2018). mudaraba and qiradh are two synonymous terms. qiradh is taken from the word al qardlu which means cut (al qath'u). so called because the provider of the capital gives a piece of capital to the manager to be productive and another piece in the form of profit. qiradl is also referred to as mudaraba (al anshary, 2007). as for mudaraba when viewed in terms of terms has the following meanings: بسحب امه ن يب اكرتمش ح ب لر ا ن و كيو هيف ر جت ي ل الا م ل ماعل ا ى ل ا لكاملا فعد ي ان شرطا ما meaning: people who have assets surrender their capital to the manager to be managed (ditasharrufkan) in which later the profit from the management of the capital will be divided between the two based on agreed terms. sayyid sabiq defines mudaraba as follows: و يه ف ر جت ي ل ر خاال ىل ا قد ن ماه د ح ا ع ف د ي ان ىل ع نيفطر ن ي ب د عق :ا ن ه اهب والمقصود عليه تحيح ا م ه نيب حب الر يكونان ىل ع meaning: what is meant by mudlarabah here is an agreement between the two parties, in which one will provide capital to the other to be traded (managed) provided that the profits will be shared between the two based on a predetermined agreement. if the management experiences a loss, then the manager is not entitled to get compensation and the loss will be borne entirely by the investor, provided that the loss on the management is not caused by carelessness of the manager (syafi'i, 2001). based on the definition above, it can be seen that mudaraba is part of the tijari contract (there is profit) that occurs to two or more people, where the other party (the investor) provides or provides capital to the other party (manager) to be managed, while the profits will be shared. among the parties to the contract in accordance with the agreed terms. hasan (2018) mentions that mudaraba is generally divided into two types, as follows: a. mudaraba mutlaqah is a mudharabah contract which is carried out by both parties or more by giving absolute or free gifts, the work format in this type of contract is not limited by specifications for the type of business, time, or region or location of a particular business. b. muqayyadah mudaraba is a mudharabah contract carried out by two or more parties, in which the management authority is limited to the type of business, time or location. so that the manager's https://creativecommons.org/licenses/by/4.0/ micro business empowerment model through cash waqf 31 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) space for movement will be narrower. c. mudaraba application the implementation of the mudharabah contract in the financial services authority (ojk) book standards can be done by the following mechanism: a. customers apply for business financing to banks or financial institutions to obtain business capital or projects. b. islamic banks (financial institutions) and customers enter into a financing agreement using a mudharabah contract c. islamic banks (financial institutions) as owners of capital (shahibul maal) provide financing capital to customers according to the financing proposal after going through the verification stage in accordance with the standard operating procedures for providing financing at the bank. meanwhile, the customer as a capital manager (mudharib) manages the capital provided by the bank to run a business with the expertise or competence possessed by the customer. d. businesses run by customers benefit e. the profits earned are then divided according to the ratio agreed upon by both parties. f. if there is a loss in the business being carried out and not due to mistakes or negligence made by the customer, then the loss is borne by the bank (financial institution) as the owner of the capital. 3. research methodologhy this research uses a qualitative approach with methodslibrary research. the use of this method because in this research will only conduct a conceptual or not empirical study. the types and sources of data in this study are secondary data obtained from various research results, articles, or reference books that discuss the same topic. 4. results and discussion 4.1 micro business problems and solution efforts in carrying out an empowerment approach to micro-businesses, first understand the probelmatics and problems that are often found in micro-businesses. panggabean in dewanti (2010) formulates various reasons that exist in micro businesses, including the following: a. human resources and business management micro enterprises are mostly run by human resources (hr) who have a low level of education. so that this affects their capacity and skills, even tends to have low motivation to develop their business more productively and progressively. this limited ability ultimately results in simple management methods that are only for meeting daily needs. such as the absence of a bookkeeping system that complies with business administration and financial standards. b. capital capital is important in advancing a business, but for micro business actors, access to https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 32 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) capital is very difficult to obtain because of the lack of financial accountability and inadequate guarantees. so that this limited capital makes it difficult for micro businesses to develop. c. technology the use of technology is very important to support business productivity to become more effective and efficient. however, for micro businesses, access and information to technology is still minimal due to a lack of expertise and access to capital. d. weak associations there is no micro business association with members or an entrepreneur background. this also complicates the development of the micro business itself, because a forum is needed to build a network in developing the micro business together. the problems that exist in micro businesses can be eliminated or anticipated, one of which is by seeking empowerment. as for empowerment efforts for micro businesses according to yuli (2016) can be done by the following steps: a. conducting coaching and training as an effort to improve skills and business character such as in how to manage business, business motivation, and so on related to entrepreneurship. b. after receiving the training, it was continued with periodic consultations and business assistance to be able to improve his business capabilities in the future c. the existence of a community or business group, with the hope that business actors can run their business properly according to the rules and have a vision for the future d. introduction to the micro business market. so that business actors can understand market share, be able to sell and promote their products e. build social networks in the field of business. so that they are able to be a support in running a business, both in the aspects of supplier, production, and distribution. as for one of the concrete steps that are believed to be an effort to empower and develop micro-businesses is to take advantage of islamic mass organizations through the formation of micro finance institutions (mfis) as facilitators between surplus units and defifst units, as this is reflected in the ummat economic empowerment program carried out by cooperatives. fatayat nu ar raudhah surabaya by channeling financing so that micro businesses have a choice of access to capital that can be used for business development and empowerment. (herianingrum, 2016). currently, mfis do not only rely on third party funds, but it is possible to optimize the potential of waqf that is currently developing, especially in relation to the large potential that exists in cash waqf. 4.2 cash waqf as an effort to empower micro businesses the cash waqf instrument is a new hope to revive the ummah's economy, especially in the context of empowering micro-businesses. cash waqf currently has experienced a lot of usability development. cash waqf not only can its potential be maximized in terms of collecting or collecting funds, but cash waqf is one of the sources for funding various needs https://creativecommons.org/licenses/by/4.0/ micro business empowerment model through cash waqf 33 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) of the community without depending on the government. the use of cash waqf can be allocated to various sectors such as; build mosques, schools, arabic language learning centers, hospitals,universities, providing scholarships, funding computer training centers, providing entrepreneurship development programs, funding medical facilities, providing physical facilities, providing free medical services to the poor, helping orphans, and providing free interest loans. (mohsin, 2013). one example of developing the use of waqf is as developed by the yatim mandiri foundation, where the proceeds from waqf funds are developed for the education sector, apart from providing facilities or school buildings, yatim mandiri also creates educational programs to hone entrepreneurial skills marked by the mandiri entrepreneur center program ( herianingrum, 2016). of course this is a good signal in the development of cash waqf for the development of the community's economy, especially in the sector of access to capital for micro-businesses. the opportunity to maximize the potential of cash waqf as a means of access to capital for micro businesses was well recognized by thaker, et al. (2016), they put forward a concept proposal related to cash waqf which has the potential to be used as an alternative financing for micro businesses. this financing is carried out by utilizing cash waqf instruments with the muyasarakah mutanaqqishah contract requirement mechanism, namely the diminishing partnership between micro entrepreneurs and waqf institutions. this concept is developed through activities in which waqf institutions and micro entrepreneurs are involved in business activities or buying property. later, investor ownership is divided into several parts with the understanding that the micro entrepreneur will buy this share in stages through regular payments. furthermore, the concept for distributing cash waqf based on musharakah mutanaqqisyah is considered capable of being a potential alternative under the auspices of official state institutions or corporations so that the concept can be sustainable. (thaker, 2018). the concept can be seen more clearly in the image below: https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 34 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) figure 1: micro business financing through cash waqf with the musyarakah mutanaqisah agreement source: thaker, 2016 in short, the cash waqf distribution model with the musharaka concept will be more suitable for property financing or procurement of goods or business equipment. with the musyakah mutanaqisah scheme, both parties will divide their respective portions of ownership, then the customer or micro entrepreneur will buy their share of ownership with payments made regularly. so that the portion of the waqf institution will decrease and vice versa the portion of ownership for customers will increase until it reaches 100% at repayment. this scheme is more appropriate in the form of property because in the contract there is an element of ijarah or rent that must be paid by the customer to the capital channeling institution. the application of cash waqf as a means of financing or capital is also expressed by kachkar (2017) who proposes a management model of cash waqf that can be used as a source of financing for refugees, where they are basically very difficult to get adequate access and financial protection. this financial financing proposal utilizes fundraising through cash waqf, both temporary cash waqf and perpetual cash waqf. from the funds collected, it is then managed for financing and investment. as for the profit generated can be included in the reserve fund or operational needs, and what is interesting here is that in its implementation, the financing does not require collateral. however, go through a selective process and rely on https://creativecommons.org/licenses/by/4.0/ micro business empowerment model through cash waqf 35 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the existing community system among these pengunssi. so that if there are new members who want to apply for financial financing, they must get a recommendation from the old member. during its development, cash waqf can also be used as a mechanism for human resource development, especially for micro-business managers so that they have additional capabilities in managing their business, so that they can maximize the expected profit. thaker, et al (2018) propose a cash waqf empowerment model in the context of hr development which can be explained in the figure below: figure 2: human capital development through cash waqf institution source: thaker, et al 2018 in brief, the modeling can be understood as the following steps: 1. donors, both individuals and corporations, collect waqf funds from waqf institutions. hereinafter, the waqf institution is also referred to as a manager who can make investment decisions related to the waqf funds. 2. waqf institutions will create and promote human resource training at subsidized costs and build a training center accompanied by sophisticated mutaakkhir equipment using waqf funds 3. through this training center, the waqf institution can conduct training and mentoring for micro entrepreneurs so that they can improve their quality or abilities. in this case, micro entrepreneurs will be asked to pay at subsidized or very affordable rates 4. so after receiving training, micro entrepreneurs can use their expertise to maximize the business they are doing and increase their productivity, so that they will contribute to increasing national income. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 36 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4.3 proposed development of model for micro business empowerment through cash waqf these various finding and the development of cash waqf usability are interesting to continue to be studied so that the potential that exists in these waqf instruments can be maximized and become a new alternative in community economic development, especially in micro businesses. cannot be reached by micro businesses. in order to maximize this potential, the author tries to formulate the development of the concept of empowering micro businesses through cash waqf. the development of this concept can be seen in the image below: figure 3: development of a micro business empowerment model through cash waqf source: data processed the model explanation can be understood as in the following steps: 1. donors or wakif channel their funds to the waqf institution that has received approval from the government 2. customers or micro entrepreneurs who are members of the community or business group apply for financing to the cash waqf fund manager. however, if the micro business does not yet have a community, the institution can facilitate its formation in the future. miro business group / community 1 institution / waqf institution 2 3b 3a customers / micro entrepreneurs 4 human resources for waqf 5b 5a socio preneur komuintas 6 business assistance 8 7a result 7b business training or development mudharabah contract wakif / donors of waqf funds https://creativecommons.org/licenses/by/4.0/ micro business empowerment model through cash waqf 37 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 3a. the customer enters into the mudharabah contract with the waqf management institution, stating the sighat consent and qabul mechanism with the waqf institution 3b. the waqf institution as the manager who has been given the mandate, is given the authority to manage or invest cash waqf funds, and enter into a mudharabah agreement by stating the ijab-qabul mechanism with the customer 4. waqf institutions provide training and guidance to customers 5a. coaching or training is promoted by human resources (hr) at the waqf institution 5b. coaching also involves sociopreneur elements from both the community concerned and from entrepreneurs outside the group with more experience 6. after the training, customers will have additional insight and expertise to manage their business to be more productive 7. furthermore, the results or profits (profits) obtained by the customer will be divided in two according to the agreement in the contract. however, if there is a loss, it will be borne by the waqf institution, if the loss is not caused by customer negligence. 8. in addition to pay customers’ obligation, waqf institutions are expected to continue to provide assistance so that future business processes will be more advanced and developed, and customers will also feel motivated to become entrepreneurs. this illustrates the development of a model for empowering micro businesses through cash waqf instruments. the thing that is tried to be presented in this scheme is by forming a group or micro business either in the same field or in the same location. the management of the group's benefits will be a network to develop each other's business, and improve business productivity relationships, both for suppliers, production, as well as distribution and marketing. as stated by yuli (2016) who strongly supports efforts to form micro-business groups as an effort to empower them. furthermore, with this community, it can be functioned as an effort to mutually guarantee one another, and become social capital in developing micro-businesses. in the process of financing, they do not use collateral because it is a problem for micro businesses because they do not have sufficient assets to access capital using collateral. therefore, waqf institutions exist through the use of cash waqf to provide loans to them without any collateral. however, what is guaranteed is the social ties between members of the group. where in the submission, group members must obtain a recommendation from the longer member, and if there is bad credit that is experienced due to their own negligence, to support the efforts to empower these micro businesses, training is needed for them, so that their abilities and skills will be opened up and can be more productive and developed. the importance of adequate training and capital through cash waqf for micro businesses to increase productivity and welfare is also recognized by haneef, et al. (2015) which states that based on observations made in bangladesh, cash waqf is carried out in an integrated manner with resource development and financial institutions. micro are able to have a significant https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 38 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) impact on alleviation. so that training is one of the keys to the success of empowering micro businesses. the existence of training for micro business actors in this scheme answers problems related to aspects of human resources and business management, where most microentrepreneurs have difficulty developing their business and tend to be managed in a traditional manner. this is partly due to their low level of education, which will affect their limited capacity and skills. this limitation of ability ultimately has an impact on simple management methods and the absence of a bookkeeping system that complies with business administration and financial standards. to oversee this empowerment, waqf institutions are expected to always update data and provide assistance to micro-entrepreneurs, including when making routine payments. so that micro business actors will continue to be monitored and have multiple motivations to develop their business. the importance of this assistance was also expressed by herianingrum (2019) who revealed that mentoring those who are carried out during repayment will increase motivation, discipline to pay installments, and become serious in doing business. empowerment of micro businesses through cash waqf instruments, in addition to taking advantage of the potential and opportunities to maximize existing cash waqf, is expected to become a new alternative for empowering the community's economy, especially micro businesses with all the shortcomings and problems inherent in them. so that with this modeling their capacity and skills will develop along with the opening of access to capital. with the hope that the business that is being undertaken will be more productive and increase. so that their welfare will increase and of course it will have an impact on increasing national income. thus, this waqf instrument can be used as a very potential source of islamic social finance and can be used as a new alternative in providing financing that is not burdensome to microentrepreneurs. so that the capital problems that continue to happen to them can be resolved. this is also in accordance with the attention made by the directorate of zakat and waqf development regarding the role of cash waqf funds in society. in accordance with his direction, cash waqf is expected to be able to be managed by providing maximum benefits and results by investing in productive endeavors. so that the role of cash waqf in empowering the community through financing productive businesses will continue and can be developed even more. the hope. with this development, more and more micro business actors will turn into middle and more advanced business actors 5. conclusion micro business actors are one of the important pillars in their contribution to strengthening the country's economy. however, this role cannot be maximized due to all the limitations inherent in them. one of them is the issue of access to capital and management https://creativecommons.org/licenses/by/4.0/ micro business empowerment model through cash waqf 39 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) capacity which is still traditional, which hinders the pace of business development. on the one hand, a very potential philanthropy has been developed. this philanthropy is a waqf instrument, especially cash waqf, which has experienced rapid development. the community is increasingly motivated to donate some of their assets by way of unai. the potential for cash waqf is what will later become a tool for empowering micro businesses. through the development of a cash waqf-based micro enterprise empowerment model, the author tries to compile an alternative capital for micro-businesses that is integrated with a selfcapacity training mechanism. this financing is carried out using the mudharabah contract which later on, the results of business management will be divided according to the agreed contract. this empowerment is also community-based so that the strength of social capital will be seen among micro-entrepreneurs to develop their own businesses. in this way, the various classical problems inherent in micro-entrepreneurs are more elaborated, and become new hopes for developing their business more progressively. so that the business involved will be productive and able to have a significant impact on improving the welfare of the community and increasing national income. reference al anshary, zakariya. (2007). fathul wahhab bi syarhi minhajit thullab. juz. 1 cet. ke 5 .beirut: darul kutub al alamiyah. direktorat pengembangan zakat dan wakaf direktorat jenderal bimbingan masyarakat islam dan penyelenggaraan haji. (2005). strategi pengembangan wakaf tunai di indonesia cet. kedua. jakarta, kemenag. fadilah, nur. (2015). efektifitas kerjasama indonesia – usaid dalam penanganan kemiskinan untuk mencapai mdgs 2015. journal ilmu hubungan internasional. 3. tp: unmul, 27 haneef, mohammad aslam, dkk. (2015). integration of waqf-islamic microfinance model for poverty reduction the case of banglades. international journal of islamic and middle eastern finance and management vol. 8 no. 2 hasan, akhmad faroh. (2018). dari klasik hingga kontemporer (dari teori dan praktek). malang: uin maliki press. herianingrum, sri dan maulana, alfin. (2016). peran koperasi fatayat nu ar-roudhoh ranting babat jerawat-benowo-surabaya dalam pemberdayaan ekonomi masyarakat babat jerawat. jurnal el-qist. issn 2252-7907. vol. 06. no. 02. oktober herianingrum, sri dan widiastuti, tika. (2016). the empowerment model of cash waqf to improve education quality in zakat institutions. international jurnal of islamic business ethics (ijibe) volume 1, number 1 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 40 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) herianingrum, sri, dkk. (2019). micro entreprise empowerment model through islamic financial service cooperative (study in indonesia-malaysia). 2nd iciebp the 2nd international conference on islamic economics, business, and philanthropy (iciebp) theme: sustainability and socio economic growth. kachkar, omar ahmad. (2017). towards the establishment of cash waqf microfinance fund for refugees. isra international journal of islamic finance vol. 9 no. 1 kastasamita, ginandjar. (1996). pembangunan untuk rakyat: memadukan pertumbuhan dan pemerataan. jakarta: pt pustaka cidesindo mohsin, magda ismail abdel. (2013). financing through cash-waqf: a revitalization to finance different needs. international journal of islamic and middle eastern finance and management vol. 6 no. 4 muslim, aziz. “metodologi pengembangan masyarakat”. (yogyakarta: teras, 2009) otoritas jasa keuangan (ojk). standar produk mudharabah. . available in www.ojk.go.id. otoritas jasa keuangan (ojk). standar produk mudharabah. available in www.ojk.go.id. panggabean dalam dewanti, ida susi. (2010). pemberdayaan usaha kecil dan mikro: kendala dan alternatif solusinya. jurnal administrasi bisnis. volume 6. no. 2 januari. s. rusydiana, aam & devi, abrista. 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(2018). a qualitative inquiry into cash waqf model as asource of financing for micro enterprises", isra international journal of islamic finance, vol. 10 issue: 1, pp.19-35. https://creativecommons.org/licenses/by/4.0/ http://www.ojk.go.id/ http://www.ojk.go.id/ micro business empowerment model through cash waqf 41 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) www.bwi.go.id. yuli, sri budi cantika. (2015). optimalisasi peran wakaf dalam pemberdayaan usaha mikro kecil dan menengah (umkm). jurnal ekonomika-bisnis vol. 6 no. 1. januari https://creativecommons.org/licenses/by/4.0/ http://www.bwi.go.id/ analysis of factors affecting the decision of economics faculty students in semarang city to use islamic banks what determines student decision to select islamic bank in indonesia? 147 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) what determines student decision to select islamic bank in indonesia? bagus eka saputra*, edy yusuf agung gunanto islamic economics, faculty of economics and business, diponegoro university, semarang abstract indonesia has a very large muslim population. the large number of muslim population in indonesia will certainly affect the behavior of consumers from the public to use islamic banking services. this study aims to determine the effect of religiosity, income, service, promotion and location on the decision of students of the faculty of economics in semarang to use islamic banks. the population in this study were students of the faculty of economics in the city of semarang. this research is quantitative study conducted by distributing questionnaires to 191 respondents with purposive random sampling method. this research uses multiple linier regression analysis which is processed using spss version 23. the study found that the factors of religiosity, promotion and location partially have a significant effect on the decision of students to select islamic banks. while the income and service variables partially did not significantly influence the decision of students to use islamic banks. keywords: consumer behavior, religiosity, income, service, promotion, location 1. introduction indonesia is a country with most of the muslim population, with a total of around 207,176,162 people, which is 87.18% of the total 237,641,326 population of indonesia1. a large number of the muslim population in indonesia will certainly influence consumer behavior from the community to use islamic banking services. table 1. population by religion in 2010 no religion population percentage 1 islam 207.176.162 87,18 % 2 christian 16.528.513 6,96 % 3 catholic 6.907.873 2,91 % 4 hindu 4 012.116 1,69 % 5 buddhist 1.703.254 0,72 % 6 confucian 117.091 0,05 % 7 others 299.617 0,13 % 8 unanswered 139.582 0,06 % 9 not asked 757.118 0,32 % total 237.641.326 100 % source: sp2010.bps.go.id, processed. *corresponding author. email address: besaputra@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:besaputra@gmail.com afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 148 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) law no. 21 of 2008 states that islamic banks are banks that carry out business activities based on islamic legal principles or sharia principles. the indonesian ulema council issued a fatwa number 1 of 2004 concerning the prohibition of bank interest, making islamic banks born as an alternative to the problems of interest and usury, namely with a profit-sharing scheme. as for allah's command not to have anything to do with usury, it is said in the qur'an that surah al-baqarah verse 278 which means, "hi you who believe, fear allah and leave the rest of usury (which has not been collected) if you are people who believe”. the indonesian ulema council issued this fatwa but did not necessarily make all muslims who use conventional banks switch to using islamic banks. mars indonesia's research in maghfiroh's research explains that the percentage of customers who use islamic banks in the group (35-55 years), is 50.8%. then in the age group (25-35) that is 37.6% and in the age group (18-24) that is 11.6%. this research shows that the age group (18-24) has the smallest percentage. therefore, it is interesting to research this age group. the research objects selected were students of the faculty of economics and business, diponegoro university, and students of the faculty of economics and islamic business, walisongo state islamic university, semarang. the reason for choosing the research object is that the writer assumes that many students from both universities use islamic banking. 2. literature study 2.1 consumer behavior theory consumer behavior is the study of how individuals, groups, and organizations choose, buy, use, and how goods, services, ideas, or experiences satisfy their needs and wants. the factors that influence consumer behavior are 3: a. cultural factors cultural factors can influence the broadest and most profound, even beyond personal consumer behavior and decision-making. b. social factors social factors such as reference groups, family, and social status and roles influence buying behavior c. personal characteristics the buyer's decision is also determined by personal characteristics d. psychology individual decision decisions are very reliable by psychological factors of perception, motivation, learning, and beliefs, and attitudes. 2.2 marketing mix theory machfoedz said that the marketing mix is a series of integrated tactical marketing tools that can be controlled (price, product, promotion, place) to find out the response from the market that a company wants. marketing mix refers to a unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with the target market. distribution is sometimes in places, thus providing 4 components in the marketing mix, namely as follows 5: a. products (product) b. place (place) c. promotion (promotion) d. price (price) https://creativecommons.org/licenses/by/4.0/ what determines student decision to select islamic bank in indonesia? 149 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) service (x3) student decisions to use sharia banks (y) location (x5) promotion(x4) income (x2) religiosity (x1) 2.3 religiosity religiosity is a person's level of adherence to his religious beliefs and practices in everyday life. 2.4 income sobri said that income level is a type of income obtained by someone who is ready to be spent or consumed. 2.5 service service quality is the level of excellence expected and control over that level of excellence is to meet customer desires. 2.6 promotion promotion is a communication made by companies to consumers regarding products or services produced with the aim of building a profitable relationship. if the company does not communicate its products or services, then consumers will never buy these goods or services. 2.7 location kasmir said that the location is a place to serve consumers, it can also be interpreted as a place to display goods. 2.8 buying decision the purchase decision is real action and is not acting alone but consists of several actions which include the type of product, brand, price, quality, quantity, time of payment, and method of payment in order to collect the information obtained. framework for thinking and formulation of hypotheses figure 1 thinking framework the hypotheses in this study are as follows: h1: religiosity has a significant influence on student decisions to use islamic banks. h2: income has a significant influence on student decisions to use islamic banks. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 150 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) h3: service has a significant influence on student decisions to use islamic banks. h4: promotion has a significant influence on student decisions to use islamic banks. h4: location has a significant influence on student decisions to use islamic banks. 3. research methodology the population is a generalization area consisting of objects/subjects that have certain qualities and areas determined by the researcher to be studied and then drawn conclusions12. the population in this study were students using islamic bank at feb undip semarang and febi uin walisongo semarang. the process of selecting samples from the population with the aim of getting general conclusions about the population based on the results of research on the selected sample. so that the sample is representative of the population, the number of samples is calculated by the following formula: description: n = number of samples n = quantity α = inaccuracy tolerance: 10% based on data obtained from (www.forlap.ristekdikti.go.id), it is known that the total population of undergraduate students of feb undip is 3954 students and the total population of undergraduate students of febi uin walisongo semarang is 1355 students. the number of samples required are: n (undip) = = 97,29 rounded up to 97 n (uin) = = 93,55 rounded up to 94 the author uses the purposive sampling technique as a sampling technique. purposive sampling is a sampling technique with certain criteria. respondents determined by the researcher are as follows: a. respondents are undergraduate students from predetermined universities. b. respondents use islamic banks. this study uses descriptive analysis and quantitative analysis. descriptive analysis is used to find out a descriptive picture of the respondents' answers. calculations for descriptive analysis in this study using the three-box method. quantitative analysis using test instruments namely validity test, reliability test, and confirmatory factor analysis test. classical assumption tests include normality tests, multicollinearity tests, and heteroscedasticity tests. hypothesis testing includes multiple linear regression, ttest, f test, and coefficient of determination test. the analytical tool used in this study is spss version 23. 4. result and discussion 4.1 sharia bank used based on table 2, it can be seen that the number of bri sharia users is the highest with 92 people, followed by bank syariah mandiri 47 people, bni syariah 46 people, bank muamalat 7 people, bca syariah 7 people, btn syariah 7 people and each of bank bukopin syariah, cimb niaga syariah, and bank jateng syariah are one person. if the data from each university, on feb undip respondents, it can be seen that the most users are bank syariah mandiri with 42 people, followed by bni syariah 39 people, bank muamalat 6 people, bri syariah 6 people, bca syariah 2 people and each https://creativecommons.org/licenses/by/4.0/ what determines student decision to select islamic bank in indonesia? 151 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1 person each from btn syariah, bukopin syariah and cimb niaga syariah. while the respondents of febi uin walisongo can be seen that the most users are bri syariah with a total of 86 people, followed by bni syariah 7 people, bank syariah mandiri 5 people, bank muamalat 1 person and bank jateng syariah 1 person. table 2. used islamic banks bank name undip uin total jml % jml % jml % bni syariah 39 39,7% 7 6,6% 46 22,5% bank syariah mandiri 42 42,8% 5 4,7% 47 23% bank muamalat 6 6,1 % 1 0,9% 7 3,4% bri syariah 6 6,1% 86 81,1 % 92 45% bca syariah 2 2,04% 0 0% 2 0,9% btn syariah 1 1,02% 6 5,6% 7 3,4% bukopin syariah 1 1,02% 0 0% 1 0,5% cimb niaga syariah 1 1,02% 0 0% 1 0,5% bank jateng syariah 0 0% 1 0,9% 1 0,5% 98 100% 106 100% 204 100% source: primary data, processed in 2020. 4.2 descriptive analysis descriptive analysis in this study measured the calculation of the three-box method. the use of 3 boxes (three-box method) is divided into the following: 38.2 89.13 = low 89.14 140.07 = moderate 140.08 – 191.00 = height the results of the descriptive analysis show that each variable value, namely religiosity has an index of 164.8 in the high category, income has an index of 68.72 in the low category, service has an index of 157.02 in the high category, the promotion has an index of 126.6 in the high category. the moderate, location has an index of 148.2 in the high category, the decision to use islamic banks has an index of 140 in the medium category. 4.3 quantitative analysis https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 152 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) a. validity test the validity test in this study was to measure the validity of the statement items using the r table value 0.142. the results of the validity test that have been carried out, the statement items of each variable have a calculated r-value (pearson correlation)> r table, it can be concluded that all statement items from each variable are valid. validity test using confirmatory factor analysis test shows that all statement items are valid. this is because all variables get kmo and bartlett's values > 0.5, and all statement items from each variable have a component matix value > 0.5. b. reliability test the reliability test in this study used the cronbach alpha formula. the variable can be said to be reliable if the cronbach alpha value is> 0.6. the results of the reliability test that have been carried out, all variables have a cronbach alpha value > 0.6, it can be concluded that all the variables used are reliable. 4.4 classical assumption test a. normality test testing the normality of the data can be done using one-sample kolmogorovsmirnov. the provisions of a regression model are normally distributed if the probability of kolmogorov-smirnov is greater than (p > 0.05). the results of the normality test that have been carried out show that the kolmogorov-smirnov value is 0.200, so it can be concluded that the data is normally distributed. b. multicollinearity test table 3. multicolonierity test collineary statistic variable tolerance vif conclusion religiosity 0,699 1,431 there is no multicollinearity income 0,991 1,009 there is no multicollinearity service 0,566 1,766 there is no multicollinearity promotion 0,903 1,107 there is no multicollinearity location 0,757 1,321 there is no multicollinearity source: primary data, processed in 2020. the regression model can be said to be good if there is no multicollinearity. if the tolerance value is > 0.1 and the vif value is < 10, then there is no multicollinearity. table 3 shows that the tolerance value of the independent variables, namely religiosity 0.699, income 0.991, service 0.566, promotion 0.903, and location 0.757 is greater than 0.1. for the vif value of the independent variables, namely religiosity 1.431, income 1.009, service 1.766, promotion 1.107, and location 1.321 it is smaller than 10. based https://creativecommons.org/licenses/by/4.0/ what determines student decision to select islamic bank in indonesia? 153 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) on this description, it can be concluded that there are no symptoms of multicollinearity between independent variables in this study. c. heteroscedasticity test testing for the presence of heteroscedasticity is done by looking at the plot graph between the predicted value of the dependent variable (zpred) and the residual (spresid). if a certain pattern is found (widened, narrowed, then wavy,) then heteroscedasticity occurs. however, if there is no pattern and points that spread below and above the number 0 on the y axis, then there is no heteroscedasticity. figure 2. heteroscedasticity test figure 2 shows that there is no clear pattern and the dots spread above and below the number 0 on the y-axis. this shows that in this study there was no heteroscedasticity. 4.5 research hypothesis test a. multiple linear regression analysis table 4. multiple linear regression test unstandardized coefficient standardized coefficients variable b standard error b t sig constant -0, 342 1,404 -0,244 0,808 religiosity 0,154 0,051 0,186 3,016 0,003 income -0,185 0,131 -0,073 -1,412 0,160 service 0,45 0,39 0,80 1,171 0,243 promotion 0,182 0,24 0,418 7,724 0,000 location 0,199 0,37 0,319 5,402 0,000 source: primary data, processed in 2020. the results of multiple linear regression in this study are as follows: https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 154 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1) the regression coefficient for the religiosity variable (x1) is 0.186. this shows that the religiosity variable has a positive influence on students' decisions to use islamic banks. this shows that if the level of student religiosity has increased, the student's decision to use islamic banks has also increased, with the assumption that the other independent variables of this regression model are fixed. 2) the income variable regression coefficient (x2) is -0.073. this shows that the income variable has a relationship that is not in line with the student's decision to use islamic banks. this means that for every increase in income by one unit, the decision variable using islamic banks (y) will decrease by 0.073 with the assumption that the other independent variables from the regression model are fixed. 3) the service variable regression coefficient (x3) is 0.80. this shows that the service variable has a positive effect on student decisions to use islamic banks. this shows that if the level of service has increased, the tendency for student decisions to use islamic banks has also increased, with the assumption that the other independent variables of the regression model are fixed. 4) the regression coefficient of the promotion variable (x4) is 0.418. this shows that the promotion variable has a positive effect on students' decisions to use islamic banks. this shows that if the level of promotion has increased, the student's decision to use islamic banks has also increased, with the assumption that the other independent variables of the regression model are fixed. 5) the location variable regression coefficient (x5) is 0.319. this shows that the location variable has a positive effect on student decisions to use islamic banks. this shows that if the level of service increases, the student's decision to use islamic banks also increases, assuming that the other independent variables of the regression model are fixed. b. partial test (t) a partial test (t) is used to test how much influence the individual independent variables have in explaining the variation of the dependent variable. on the basis of decision making as follows: 1) if t table> t count, and the probability value of significance> 0.05, then ho is accepted while ha is rejected. 2) if t table <t count, and the significance probability value <0.05, then ho is rejected while ha is accepted. following are the results of the partial test (t): table 5. partial test (t) independent variable coefficient t-count sig.t description religiosity 0,186 3,016 0,003 significant (h0 accepted) income -0,073 -1,412 0,160 not significant (h0 rejected) service 0,80 1,171 0,243 not significant (h0 rejected) promotion 0,418 7,724 0,000 significant (h0 https://creativecommons.org/licenses/by/4.0/ what determines student decision to select islamic bank in indonesia? 155 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) accepted) location 0,319 5,402 0,000 significant (h0 accepted) source: primary data, processed in 2020. based on the significance value 1) hypothesis x1 affects y because the significance value is 0.003 <0.05 the hypothesis is accepted 2) hypothesis x2 has no effect on y because the significance value is 0.160 > 0.05 the hypothesis is rejected 3) hypothesis x3 has no effect on y because the significance value is 0.243 > 0.05 the hypothesis is rejected 4) hypothesis x4 affects y because the significance value is 0.000 <0.05 the hypothesis is accepted 5) hypothesis x5 affects y because the significance value is 0.000 <0.05 the hypothesis is accepted c. simultaneous test (f) table 6. simultaneous test model ftabel fhitung sig regression 2,26 38,622 0,000 source: primary data, processed in 2020. table 6 shows that the calculated f is 38,622 (sig f = 0.000). so, f-count > ftable (38.622 > 2.26) and sig f < 5% (0.000 < 0.05). this shows that the variables of religiosity (x1), income (x2), service (x3), promotion (x4), and location (x5) simultaneously have a significant influence on variables that depend on the decision to use islamic banks. d. determination coefficient test table 7. determination coefficient test model r r square adjusted r square std. error of the estimate 1 0,715 0,511 0,498 1,68762 source: primary data, processed in 2020. table 7 shows that the value of the coefficient of determination or r2 is 0.511. the r2 value of 0.511 is the result of squaring the correlation coefficient or "r" which is 0.715 x 0.715 = 0.511. the magnitude of the coefficient of determination (r square) is 0.511 or equal to 51.1%. this figure means that the variables of religiosity (x1), income (x2), service (x3), promotion (x4), and location (x5) simultaneously (together) affect the decision variable to use islamic banks (y) of 51.1 %. while the rest (100% 51.1% = 48.9%) is influenced by other variables outside this regression equation or variables not examined. 4.6 discussion https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 156 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) a. the effect of religiosity on students' decisions to use islamic banks the partial test between religiosity on the decision to use islamic banks is obtained that the t-count value is greater than the t-table and the significance value has a smaller value than the significance level. thus, it can be concluded that the religiosity variable has a significant influence on students' decisions to use islamic banks. the religiosity variable with a positive sign (+) indicates that the higher a person's religiosity, the higher a person's tendency to use islamic banks. this is in line with sulistyono's research13 that religiosity has a positive and significant impact on consumer decisions to become customers of islamic banks. research by desiana, susilowati and putri also shows that the religious quality of a person has a significant influence on the decision to use islamic banks. the highest average value of the religiosity variable is on the indicator of feeling calm using islamic banks. that's because as a devout muslim, of course, your heart will feel calm if you avoid things that are forbidden and will also be calm if you are persistent in your faith. a person's decision to use islamic banks is a form of religious practice to avoid usury and to get peace of mind. this is by following per under the word of allah in the letter ar raad 28 is meaning, "and allah guides those whose hearts are at peace with monotheism and remembering him so that they become calm with it. remember by obeying allah and remembering him and with his reward, the heart becomes calm and peaceful." the verse explains that by always remembering allah swt in everything you do, you will get peace and peace of mind. for example, in choosing financial products, you should choose products that are in accordance with religious guidance and do not take usury. the confidence indicator of using islamic banks is also a dominant indicator. this is in line with research conducted by daulay15 that belief is the dominant variable in influencing the saving decisions of islamic bank customers. this is because every individual has a desire to do something according to his beliefs in making a decision. if someone is sure of what is taught in his religion then of course he will follow his teachings. for example, in choosing islamic financial products, confidence is an important thing in consumer decision-making. islamic financial products are closely related to islamic religious beliefs. someone who is convinced of his religious beliefs will pay attention to the halalness of the products used and of course, will have a tendency to choose to use islamic banks. this is also in line with research conducted by fathurrahman & azizah16 that the religious teachings that a person believes will guide a person's behavior to conform to the religious teachings he believes in. prospective customers who know islamic law well will certainly pay attention to the halalness of the banking products used. the third dominant indicator is using islamic banks to avoid usury. this is because a muslim who runs the shari'a is very in accordance with what is taught in the guidance of the islamic religion. this is in line with what allah commanded in surah al-baqarah 279 which means, "so if you do not do (leaving the rest of usury), then know that allah and his messenger will fight you. and if you repent (from taking usury), then for you the principal of your wealth; you do not persecute and do not (also) be wronged." https://creativecommons.org/licenses/by/4.0/ what determines student decision to select islamic bank in indonesia? 157 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the verse explains that the tendency of a muslim to avoid usury is due to the guidance of religious teachings as measured by his level of religiosity. this is indicated by the respondents' decision to use islamic banks. based on the description above, it can be concluded that religiosity is an important factor in a person's decision to use islamic banks. the more religious a person is, the more likely they are to use islamic banks. on the other hand, the less religious a person is, the less likely they are to use islamic banks. if someone has switched and left usury, of course, he will feel calm and confident in banking that is in accordance with sharia and which does not take usury. b. the effect of income on students' decisions to use islamic banks the results of the tests carried out in this study, there is a negative and insignificant effect between income and the decision to use islamic banks. this can be interpreted that the level of income does not affect students' decisions to use islamic banks. this is in line with the research of desiana, susilowati and putri17 that income has no influence on customer decisions to use the services of islamic banks. islam recognizes individual ownership and everyone is free to optimize their income or property according to the limits set by allah. however, the freedom given is sometimes misused by some people, for example, to take usury. in this study, the income received by students should be used for positive things and of course in accordance with the guidance of religious teachings, for example, used for giving alms and giving infaq. in accordance with god's command in surah al-baqarah verse 215, namely, "they ask about what they spend. answer: "whatever wealth you spend, let it be given to parents, relatives, orphans, the poor, and the poor. -people who are on the way." and whatever good you do, then verily allah is knowing. the verse above explains that islam recommends for everyone to be able to give their wealth to others in need. in this study, income does not affect a person's decision to use islamic banking. this is related to the letter albaqarah 215, that if someone who is religious will have a tendency to obey the teachings that are recommended and of course practice these teachings. if in accordance with the verse, the tendency of a person will choose to distribute his wealth and give it to the needy rather than just saving his money in the bank, because of course the benefits will be felt by others directly. the tendency of students to use islamic banks in this study is not because of the pocket money or income they earn, but more towards student religiosity. this can be seen in the index of respondents' answers to the religiosity variable in the high category while the income variable is in a low category. based on the description above, it can be concluded that the level of student income does not affect the student's decision to use islamic banks. this is because the tendency of the decision to use islamic banks is more on the religiosity factor when viewed from the index of respondents' answers in the high category compared to the income in the low category. c. the effect of services on students' decisions to use islamic banks https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 158 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the partial test between services and decisions using islamic banks is obtained that the t-count value is smaller than the t-table and the significance value is greater than the significance level. thus, it can be concluded that the service variable has an insignificant effect on students' decisions to use islamic banks. this is in line with wibowo's research that service has no significant effect on the decision to become a customer. research by abhimantra, maulina, and agustianingsih also shows that service does not have a significant effect on decisions in choosing to save in islamic banks. the service variable in this study shows a positive sign (+) which means that the better the service from the banking system, the higher a person's decision to use islamic banks. this is in line with the research by wardiyanti & jayanto that service has a positive effect on customer decisions to use islamic banking products. the indicator serving according to the procedure has the highest correlation coefficient. this is because customers need guarantees that employees who perform services carry out procedures according to company rules and do not deviate from company regulations. the indicator of serving according to procedures is a very important aspect that can influence customer decisions to use islamic banks. with services that are in accordance with procedures, customers are more confident in using islamic banks. the service variable in this study has a positive effect, which means that if the service is in accordance with existing procedures, it will increase a person's tendency to use islamic banks. the friendly employee indicator is also a dominant indicator. this is because customers will be more comfortable if served by friendly employees, so there will be a two-way interaction that will facilitate communication between customers and employees. customers who are served friendly by employees will feel more cared for because of the easy interaction with employees. the service variable in this study has a positive effect, which means that the more friendly the islamic bank employees are, the more a person's tendency to use islamic banks will increase. the third dominant indicator is providing information even though it is not asked for. this is because new customers will need a detailed explanation of the products to be used even though the customer does not ask to be explained so that customers can compare which financial products will be used later. employees who actively provide information to customers even though customers do not ask will make customers more comfortable and feel served optimally. the service variable in this study has a positive effect, which means that if employees often provide information even though it is not requested, it will increase a person's tendency to use islamic banks. based on this description, it can be concluded that service is an important factor in students' decisions to use islamic banks because it has a positive effect, which means that if the service is getting better, the decision to use islamic banks will increase but not significantly. service is not the main aspect for students to decide to use islamic banks. this is because students prefer to use islamic banks because of other factors such as religiosity, promotion, and location. d. the effect of promotion on student decisions to use islamic banks https://creativecommons.org/licenses/by/4.0/ what determines student decision to select islamic bank in indonesia? 159 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the partial test between promotion and decision to use islamic bank obtained t value > from t table and the significance value is smaller than the significance level. thus, it can be concluded that the promotion variable has a significant influence on students' decisions to use islamic banks. the promotion variable shows a positive sign (+) which means that the more intensive promotion is carried out, the more a person's decision to use islamic banks will be. on the other hand, if promotion is lacking, the tendency of a person's decision to use islamic banks will decrease. this is in line with the research of indratama & artanti that sales promotion is a variable that influences the customer's decision to choose an independent sharia bank savings account. siregar's research also shows that promotion has a significant effect on someone's decision to become a customer. the indicator is interested in islamic banks from television which has a high correlation value. this is because television is indeed a medium that is witnessed by various groups ranging from small children, young people to the elderly. this indicates that promotion on television is indeed a good means to attract consumers, in line with research conducted by wibowo & karimah that television advertising has a significant effect on purchasing decisions. erdalina & evanita's research also shows that television advertising has a significant effect on purchasing decisions. the indicator of being interested in magazines/articles is also another dominant indicator. this is because magazines or articles that cover islamic economics and islamic banking are already widely spread on the feb undip and febi uin walisongo campuses. the existence of an islamic economics study group organization and islamic economics department in each of the faculties of the two universities certainly provides an opportunity for the spread of writings that can trigger a person's tendency to choose to use islamic banks. the indicator of being interested in islamic banks through brochures is also dominant because in the brochure there is information related to services, product types, product names, and descriptions of each product. in addition, brochures are also very easy to distribute in strategic locations. the existence of an islamic economics study group organization that has collaborated with islamic banks in the event also provides an opportunity for the islamic bank to be able to promote one of them through brochures during the event. based on the description above, it can be concluded that promotion is an important factor in making a person's decision to use islamic banks. the more intense and the more lines of promotion there are, the more someone's decision to use islamic banks will increase. on the other hand, if it is not intensive and there are few promotion lines, then someone's decision to use islamic banks will be lower. e. the influence of location on student decisions to use islamic banks tests that were carried out partially between locations on the decision to use islamic banks obtained the value of t count > from the t table and the significance value was smaller than the significance level. thus, it can be concluded that the location variable has a significant influence on students' decisions to use islamic banks. conversely, the less and less strategic the location of islamic banks, the decision to use islamic banks will decrease. this is in line with the research of ma'arif & trisnawati that determining the location is very important so that customers can easily reach the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 2 (2020) 160 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) bank's location in transactions. if the strategy and convenience of the bank is getting better, then the customer's decision to transact at islamic banks will be higher. tyas & setiawan's research also shows that location has a significant influence on the decision to save at bmt. the indicator of the location of islamic banks is easy to reach by public transportation which has the highest correlation coefficient. this is because the strategic location in the establishment of a banking office will facilitate access for customers or parties with an interest in banking. one of the strategic locations can be seen from the ease of using public transportation. public transportation that is easily accessible to islamic banks will certainly increase a person's tendency to determine which islamic bank will be used by customers. this is in line with murti & santika's research that the more strategic the location, the more customer transactions will be. the second dominant indicator is the location of islamic banks that are easily accessible by private vehicles. this is almost the same as the indicator that it is easy to reach by public vehicles, namely due to its strategic location, which can be seen from the ease of using transportation, but private vehicles are the second dominant indicator because there is a greater cost factor that must be incurred when compared to public transportation that can be reached by cheaper price. the location of islamic banks, which are easily accessible by private vehicles, will certainly increase a person's tendency to choose islamic banks. atm close to residence is also a dominant indicator. this is because the development of banking transactions today does not require transactions to be made at the teller or customer service at the office, but can be done at an atm. in the past, atms were only used for cash withdrawals and transfers, now you can save money by depositing cash. however, this has not been able to make the indicator of atm close to residence the most dominant indicator, because not all existing atms have complete facilities, for example for cash deposits, the distribution of atms is still small. atms that are spread on average only have cash withdrawal and transfer facilities. therefore, it is important for islamic banking to be able to increase the number of atms with complete facilities in order to encourage the decision to use islamic banks. based on the description above, it can be concluded that location is an important factor in making a person's decision to use islamic banks. the more strategic, close and the number of islamic bank offices are many, the person's decision to use islamic banks will be high, and conversely the less strategic, far, and fewer islamic bank offices, the lower one's decision to use islamic banks. 5. conclusion this study aims to determine the effect of religiosity, income, service, promotion, and location on student decisions to use islamic banking. based on the previous discussion, the following conclusions can be drawn: a. religiosity has a significant influence on students' decisions to use islamic banks. this is because students feel confident and calm when using islamic banks because of religious factors. students also use islamic banks to avoid usury. so that the more religious a student is, the more likely the decision to use islamic banks will be. https://creativecommons.org/licenses/by/4.0/ what determines student decision to select islamic bank in indonesia? 161 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) b. income has no significant effect on students' decisions to use islamic banks. based on the description above, it can be concluded that the level of student income does not affect the student's decision to use islamic banks. this is because the tendency of the decision to use islamic banks is more on the religiosity factor when viewed from the index of respondents' answers in the high category compared to the income in the low category and is also closely related to allah's command in surah al baqarah 215 which recommends distributing the assets owned rather than keeping the property. c. service is an important factor in students' decisions to use islamic banks because it has a positive effect, which means that if the service is getting better, the decision to use islamic banks will increase but not significantly, but service is not the main aspect for students to decide to use islamic banks. this is because students prefer to use islamic banks because of other factors such as religiosity, promotion, and location. d. promotion has a significant influence on students' decisions to use islamic banks. this is because students have an interest in islamic banks through brochures, television advertisements, and magazines/articles. so that the more islamic banks carry out promotions on the promotion line, the more students tend to use islamic banking. e. location has a significant influence on students' decisions to use islamic banking. the results showed that students considered that access to using public and private transportation to the location of islamic banks, then access to atms near their homes was the main reason for using islamic banks. the more strategic, close, and a large number of islamic bank offices will make it easier for someone to transact at islamic banks. reference abhimantra, a., maulina, a. r., & agustianingsih, e. 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(2013). perilaku konsumen pengaruhnya terhadap keputusan menjadi nasabah pada kopwan syariah. jurnal dinamika manajemen, 1(1),1 34-40. https:/doi.org/10.15294/jdm.vlil.2447 https://creativecommons.org/licenses/by/4.0/ http://www.jurnal.unsyiah.ac.id/jaa/article/view/4460 https://doi.org/10.1108/jima-05-2013-0036 https://doi.org/10.24952/tazkir.v4i1.1060 https://dspace.uii.ac.id/handle/123456789/2545 https://doi.org/10.18326/muqtasid.v3i2.277-297 what determines student decision to select islamic bank in indonesia? 163 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) wibowo, s. f., & karimah, m. p. (2012). pengaruh iklan televisi dan harga terhadap keputusan pembelian sabun lux. jurnal riset manajemen sains indonesia (jrmsi), 3(1), 15–15. https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 42 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) efficiency analysis of indonesian sharia banks nur khalimah1)*, edy yusuf agung gunanto2) 1,2 ekonomi islam, ekonomika dan bisnis, universitas diponegoro, semarang abstract the development of islamic banking in indonesia is still not optimal, so it requires performance improvement. it is necessary to measure efficiency and productivity to achieve predetermined targets. this study measures the level of efficiency of 12 islamic commercial banks in indonesia for the 2016-2018 period using dea (data envelopment analysis), method with the assumption of crs (constant return to scale) and maximizing output. furthermore, the malmquist index analysis is to see the productivity level of islamic commercial banks. the results show that the overall efficiency of islamic commercial banks in indonesia has decreased. in 2016, the average efficiency of islamic commercial banks was 100 percent. in 2017 the average efficiency was 99.93 percent with 3 islamic commercial banks that were not efficient. in 2018 the average efficiency was 98.4 percent with 2 islamic commercial banks that were not efficient. the results of the malmquist index analysis in 2017, there were 8 islamic commercial banks increasing returns to scale, while 4 islamic commercial banks decreasing returns to scale. in 2018, 11 islamic commercial banks increasing returns to scale and 1 islamic commercial banks decreasing returns to scale. keywords: efficiency, productivity, dea, islamic bank. 1. introduction the development of the islamic financial institutions (ifi) industry in indonesia, especially islamic banking, has progressed both in terms of institutional aspects and business performance. the development of islamic banking from the institutional aspect can be seen by the number of islamic commercial banks (icbs) and sharia business units (sbus). the otoritas jasa keuangan (ojk) or the financial services authority noted that until 2018, the number of islamic banks was 14 icbs, 20 sbus and 167 bprs. there was an increase in the number of 1 icb and a decrease in 1 sbu in 2018 compared to 2017 as shown in table 1. table 1. development of national sharia banking and banking offices 2016-2018 (unit) sharia banks 2016 2017 2018 bank office bank office bank office sharia commercial bank 13 1.869 13 1.825 14 1.875 sharia business unit 21 332 21 344 20 354 bprs 166 453 167 441 167 495 source: sharia banking statistics 2018 * corresponding author. email address: nurkhalimah@students.undip.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:nurkhalimah@students.undip.ac.id afebi islamic finance and economic review (aifer) volume 4, no 1 2019 43 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the development of islamic banking from the aspect of business performance can be seen from the development of assets, third party funds (tpf) and financing which experienced significant development as shown in table 2. table 2. development of indonesian islamic banking 2016-2018 (billion rupiah) year asset funding tpf 2016 356,503 248,007 279,335 2017 424,181 285,695 334,888 2018 477,327 320,193 371,828 source: sharia banking statistics 2018 although islamic banking has experienced quite rapid development in terms of institutional and performance aspects, the market share of islamic banking in indonesia is still relatively small. the following is a comparison of the development of islamic banking assets and market share. table 3. development of islamic banking assets and market share in indonesia indicator 2016 2017 2018 asset (trillion rupiah) rp 365,6 rp 435,02 rp 489,69 market share (percent) 5,33 % 5,55% 5,96 % source: sharia banking statistics 2018 in this case, there is a gap phenomenon due the fact that indonesia is a country with the largest muslim population in the world as shown by the indonesia central statistics board (bps) in 2010 as many as 207.17 million people or about 87.18 of the total population of indonesia adheres to islam and assessment of the global islamic financial report in 2016, where indonesia ranks sixth in the countries that have the potential and conduciveness in developing the islamic finance industry. however, in reality, the islamic banking market share is still relatively small compared to the national banking market share, which is only 5.96 percent of total banking assets nationally at the end of 2018. research conducted by (putri, 2015) on the efficiency of islamic commercial banks in indonesia in 2013-2015 using a data envelopment analysis (dea) approach concluded that overall islamic commercial banks in indonesia have not yet reached 100 percent efficiency. in 2013, the average overall efficiency level of icbs was 97.15 percent, then increased in 2014 to 97.58 percent. however, in 2015, the average icbs efficiency decreased by 2.02 percent to 95.56 percent. it was necessary to conduct further research to measure the level of efficiency of islamic banking in the following year, namely 2016-2018 and find the best solution so that islamic banking can achieve 100 percent efficiency. on the other hand, every business including banks needs to know the return-on-investment to measure efficiency in converting the money used (roa) into net profit. in the 2018, indonesian islamic financial development report (keuangan, 2018), show that during 20162018 the roa of islamic commercial banks has increased. ideally, the higher the roa number, the better the assumptions of the company’s performance in terms of equity management. https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 44 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the elaboration of the gap phenomenon and the results of previous research as well as the variables that need to be included in measuring the efficiency of islamic banking using the data envelopment analysis (dea) method was carried out for further research. this study has included 12 islamic commercial banks (icbs) in indonesia using the financial reporting period 2016-2018. the use of the dea method was because the dea method can obtain more accurate results when compared to using financial ratio analysis (hadad et al., 2003). the dea method provides information on banks that were less efficient and was able to identify which banks have achieved the highest level of efficiency so that this can be used as a reference for banks that were less efficient. the phenomenon of the rapid development of islamic banking did not necessarily indicate productivity, because productivity was not merely productive or produce, but was a combination of effectiveness and efficiency (pambuko, 2019). in this codition, productivity analysis was important because productivity was one of the performance measurements and it was possible to be a factor that was taken into account in decision making (basalamah, 2014). to measure productivity, this study uses the malmquist productivity index (mpi) analysis. the malmquist index is part of the dea method which specifically looks at the productivity level of each business unit, so that changes in the level of efficiency and technology used will be seen based on predetermined inputs and outputs. the malmquist index was also used to analyze changes in performance over time (rusydiana, 2016). 2. literature review a. production and cost concepts bank is one type of company, where as an economic actor who uses factors of production (input) to produce goods or services (output) (sadono sukirno, 1994). the production function can be shown by the following formula: q = f (k, l, r, t) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) equation 1 explains that the level of production of a good or service (q) depends on the amount of capital (k), labor (l), natural wealth (r) and the level of technology (t) used. different amount of production naturally requires different factors of production, in addition to a certain levelof production a combination of different factors of production can also be used (sadono sukirno, 1994). in the production function, there is not only the concept of production but also the concept of cost. the cost concept is closely related to the product concept introduced (r. b. lipsey, 1992). the cost curve shows the minimum product cost at various levels of output. in figure 1 in the short run either one or more factors of production are assumed to be fixed. the total fixed cost (tfc) reflects all liabilities or costs incurred per unit time for all fixed inputs. the total variable cost (tvc) is the total cost borne per unit of time for all the variable inputs used. the total cost (tc) is tfc plus tvc. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 45 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) figure 1: total cost curve source: (dominick salvatore, 1994) b. concept of efficiency and productivity productivity efficiency can be used to measure the performance of a unit of economic activity. both are concepts that show the ratio of the results of the comparison between input and output (nurfikasari & tanuatmodjo, 2019) the concept of efficiency is a fundamental concept and was born from the economic concept of using small resources and producing optimal output. the concept of efficiency begins with the concept of microeconomic theory, namely producer theory and consumer theory. the producer theory states that producers tend to maximize profits and minimize costs. meanwhile, consumer theory states that consumers tend to maximize their utility or level of satisfaction. figure 2: efficiency concept source (collie, et al., 2000) figure 2 explains the concept of efficiency where in an industry, a company only uses 1 input (x) to produce 1 output (y). companies operating at point a are considered technically inefficient compared to companies operating at point b. this is because with the same amount of input (x2), companies operating at point b can produce more output (y2) than the output produced by companies operating at point a, namely y1. from the point of view of islamic economics, the concept of efficiency is in line with sharia principles which aim to achieve and maintain the maqashid of sharia, namely the maintenance of al-maal (sari & suprayogi, 2015). the concept of efficiency is basically to avoid all forms of waste as contained in the letter al-israa’ verse 26-27: ْر تَْبِذيًر)٢٦( َوَءاِت ذَا ٱْلقُْربَٰى َحقَّهُۥ َوٱْلِمْسِكيَن َوٱْبَن ٱلسَّبِيِل َوََل تُبَذ ِ https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 46 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ُن ِلَرب ِ هِۦ َكفُوًرا)٢٧( ِطيِن ۖ َوَكاَن ٱلشَّْيَطٰ َن ٱلشَّيَٰ ِريَن َكانُٓو۟ا إِْخَوٰ إِنَّ ٱْلُمبَذ ِ meaning: give to close relatives their due, as well as the poor and needy travellers. and do not spend wastefully. surely the wasteful are “like” brothers to the devils. and devil is ever ungrateful to his lord (qs. al-israa (17):26-27). c. data envelopment analysis (dea) concept and malmquist productivity index (mpi) the purpose of dea was to focus more on evaluating the performance of an economic activity unit (eau). the evaluation was carried out on the relative efficiency of comparable eaus, then the efficient eaus will form a frontier line. if the eau is in the frontier line, then it can be said to be relatively efficient compared to other eaus in sample. dea can also show some eaus which can be references for inefficient eaus (ascarya, diana y. dan guruh s. r., 2008). malmquist index or malmquist productivity index (mpi) is part of the dea method that specifically measures productivity. there are two things that are calculated in the measurement of the malmquist index, namely catch-up effect and frontier shift effect. the catch-up effect measures the rate of change in relative efficiency from period one to period two. meanwhile, the frontier shift effect measures the rate of technological change which is a combination of inputs and outputs from period one to period two. d. sharia banking concept according to the law of the republic of indonesia number 21 of 2008 dated july 16, 2008 concerning islamic banking, it is everything related to sharia banks and sharia business units, including institutions, operational activities, as well as methods and processes in carrying out their operational activities. meanwhile, sharia commercial banks are sharia banks which in their activities provide services in payment traffic. according to (karim, 2004) in (sri et al., 2014), basically, the products offered by islamic banks can be divided into three major parts, namey: 1) fund distribution products 2) fundraising products 3) service products e. framework this study measured the efficiency level of 12 islamic commercial banks in indonesia 2016-2018 using the data envelopment analysis (dea) method with the assumption of constant return to scale (crs) and maximizaing output. the input variables included: first, the number of deposits, which means the amount of public funds both individuals and legal entities that can be collected by islamic banks. second, fixed assets were tangible assets that were not intended to be sold in the context of normal company activities and have a useful life or more than one year. third, operational costs were defined as costs used by the bank to carry out its operational activities. fourth, the cost of profit sharing was the bank’s obligation for third party funds that have been collected by islamic banks. the output variables included: first, financing, namely murabahah financing and financing other than murabahah. current assets that were used as output were cash and curret accounts with bank indonesia, which were considered as the most liquid and were not temporarily oriented to generate profits. furthermore, operating income was income resulting from operational activities of islamic banks. finally, roa (return on assets) was one of the profitability ratios that can show the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 47 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) company’s success in generating profits. roa is able to measure the company’s ability to generate profits in the past and then projected in the future. then, to measure productivity, this study uses the analysis of the malmquist productivity index (mpi). there were two things that were calculated in the malmquist index measurement, namely the catch-up effect which measures the rate of change in relative efficiency from period one to period two and the frontier shift effect which measured the rate of technological change which was a combination of input and output from period one to period two. figure 3: framework 3. research methodology this study aims to measure and analyze the efficiency and productivity of islamic banking in indonesia during 2016-2018 at 12 islamic commercial banks (icbs), using a non parametric analysis method, namely the data envelopment analysis (dea) method. the analytical tool used in this research was banxia frontier analyst (bfa). this research was using the data envelopment analysis (dea) method, had use data in the form of inputs and outputs of an economic activity unit (eau). the input variables included the number of deposits, fixed assets, operational costs, and profit-sharing costs while the output variables consist of laporan keuangan 12 bus tahun2016-2018 input 1. jumlah simpanan 2. aktiva tetap 3. biaya operasional 4. biaya bagi hasil output 1. pembiayaan murabahah 2. pembiayaan lainnya 3. aktiva lancar 4. pendapatan operasional 5. roa nilai efisiensi (metode dea dengan pendekatan crs) tingkat efisiensi bus produktivitas bus https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 48 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) murahabah financing (istishna, ijarah, qard, mudharabah, musyarakah), current assets, operating income, and roa. the following 12 islamic commercial banks (icbs) were used as research samples: table 4. list of bank samples in research no sharia commercial banks 1 bank muamalat indonesia (bmi) 2 bank syariah mandiri (bsm) 3 bank syariah mega indonesia (bsmi) 4 bank rakyat indonesia (bri) syariah 5 bank syariah bukopin 6 bank negara indonesia (bni) syariah 7 bank jawa barat dan banten (bjb) syariah 8 bank central asia (bca) syariah 9 bank victoria syariah 10 bank maybank syariah indonesia 11 bank panin syariah 12 bank tabungan pensiunan nasional syariah the approach used in measuring efficiency was to use the ratio of output to input, as shown in equation (1). efficiency = 𝑢𝑡𝑝𝑢𝑡 𝐼𝑛𝑝𝑢𝑡 ………………………………… (1) in the dea approach, linear programming was used to maximize the ratio between input and output (charnes, cooper dan rhodes, 1978), likewise for dmus in the islamic banking industry. for dmus in the banking industry (which are the object of the study), all input and output samples were denoted (marked) by “n” and “m” respectively, where n= input and m = output. then the efficiency of each bank was calculated through equation (2) ℎ𝑠 = ∑ 𝑢𝑖 𝑦𝑖𝑠 𝑚 𝑖=1 ∑ 𝑣𝑗 𝑥𝑗𝑠 𝑛 𝑗=1 .................................................. (2) for i = 1,……., m and j = 1,……n, where: ℎ𝑠 = bank s efficiency m = observed output of bank s n = observed input of bank s 𝑦𝑖𝑠 = the amount of output i produced by bank s 𝑥𝑗𝑠 = the amount of input j used by bank s 𝑢𝑖 = the weight of the output i produced by the bank s 𝑣𝑗 = the input weight j given by bank s and i is calculated from 1 to m and j is calculated from 1 to n equation 2 shows the use of one input and one output variable. then, the efficiency ratio (hs) was maximized with the following constraints: maximize ℎ𝑠 = ∑ 𝑢𝑖 𝑦𝑖𝑠 𝑚 𝑖=l ∑ 𝑣𝑗 𝑥𝑗𝑠 𝑛 𝑗=l ≤ 1 ; r = 1,..., n................ (3) where 𝑢𝑖 and 𝑣𝑗 ≥ 0 ............................................. (4) https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 49 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) this study has used the ccr model in accordance with the opinion of priyonggo suseno (2008). the assumption used in this research was output maximization. in the measurement of productivity using the malmquist index was introduced by caves et.al (1982). (rusydiana, 2016). 4. result and discussion based on the results of data processing using the dea method which assumes constant return to scale (crs), the efficiency level of islamic commercial banks in indonesia in 20162018 is shown in table 5. table 5. technical efficiency level of 1 icbs in indonesia 2016-2018 (percent) bank name 2016 2017 2018 bank muamalat indonesia (bmi) 100 100 94.9 bank syariah mandiri (bsm) 100 100 100 bank syariah mega indonesia (bsmi) 100 99.8 100 bank rakyat indonesia (bri) syariah 100 99.7 100 bank syariah bukopin 100 100 86.0 bank negara indonesia (bni) syariah 100 100 100 bank jawa barat dan banten (bjb) syariah 100 100 100 bank central asia (bca) syariah 100 99.6 100 bank victoria syariah 100 100 100 bank maybank syariah indonesia 100 100 100 bank panin syariah 100 100 100 btpn syariah 100 100 100 average efficiency 100 99.93 98.4 source: processed data table 5 shows that the 12 scbs which we were used as research objects had reached a level of technical efficiency of 100 percent in 2016, decrease in 2017 with an average efficiency of 99.93 percent and in 2018 experienced a decline again with an efficiency level of 98.4 percent. otoritas jasa keuangan (ojk) or the financial services authority also noted that the growth of total islamic bank assets experienced a slowdown from 23.39 percent in the second quarter of 2017 to 14.58 percent in the second quarter of 2018. in 2017, the average efficiency value of 12 islamic commercial banks in 2017 reached 99.93 percent with 3 percent inefficiency icbs and 9 efficiency icbs. the 3 inefficiency icbs are bank syariah mega indonesia (bsmi), bank rakyat indoneisa (bri) syariah, and bank central asia (bca) syariah. table 6. input-output value of mega indonesia sharia bank in 2017 (million rupiah) bank name efficienc y rate actual target potential improvement total deposit 1198568 1198568 00.00% https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 50 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) bank name efficienc y rate actual target potential improvement fixed asset 99.83% 318016 116098.14 -63.49% operating cost 477214 477214 00.00% profit sharing fee 271515 271515 00.00% murabahah financing 3937253 3943968.20 00.17% other financing 680912 1231752.66 80.90% current asset 812596 1388397.54 70.86% operating income 839772 1042877.87 24.19% roa (percent) 1.56 1.70 8.76% source: data processing result table 6 shows the results that bsmi in 2017 has an effciciency level of 99.83 percent, which means that it has not yet reached the level of efficiency/inefficiency. the inefficiency in bsmi due to the fact that the allocation of fixed assets input. it takes a reduction of 63.49 percent of fixed assets in order toachieve the level inefficiency. the required input target should be 116,098.14 million rupiah; however, the actual input was 318,016 million rupiah. to achieve the efficiency level of output, an increase of 0.17 percent (murabahah financing), 80.90 percent (other financing), 70.86 percent (fixed assets), 24.19 percent (operating income) and 8.76 percent (roa). table 7. development of bsmi input-output value in 2017-2018 input/output actual target potential improvement total deposit 2017 1198568 1198568 0.00% 2018 837313 837313 0.00% fixed asset -361255 -361255 development 2017 318016 116098.14 -63.49% 2018 336924 336924 0.00% operational cost 18908 220825.86 development 2017 477214 477214 0.00% 2018 529670 529670 0.00% development of 52456 52456 profit sharing fee 2017 271515 271515 0.00% 2018 257566 257566 0.00% development of -13949 -13949 murabahah financing 2017 3937253 3943968.2 0.17% 2018 3885574 3885574 0.00% development of -51679 -58394.2 other financing 2017 680912 1231752.66 80.90% 2018 1264293 1264293 0.00% development of 583381 32540.34 current asset 2017 812596 1388397.54 70.86% 2018 4549688 4549688 0.00% development of 3737092 3161290 operating income 2017 839772 1042877.87 24.19% https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 51 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) input/output actual target potential improvement 2018 837749 837749 0.00% development of -2023 -205128.87 roa 2017 1.56 1.7 8.76% 2018 0.93 0.93 0.00% development -0.63 -0.77 source: dea data processing result from table 7 it is known that there was an improvement in 2018 that was suggested in 2017, namely the actual value of other financing and current assets increased. other financing increased by 583,381 million rupiah from 2017 or 85.7 percent from the previous year. this increase exceeds the 2017 potential improvement, which is 4.8 percent. current assets increased by 3,737,092 million rupiah from 812,596 million rupiah in 2017, or an increase of 459.9 percent from the previous year. this increase exceeds the potential improvement, which is 389.04 percent greater. table 8. bri syariah input-output value in 2017 (million rupiah) bank name efficienc y level actual target potential improvement total deposits 99.74% 6533329 5293850.01 -18.97% fixed assets 177935 177935.00 00.00% operating costs 1178743 1178743.00 00.00% profit sharing fees 1193918 1159573.76 -2.88% murabahah financing 10457017 13440542.47 28.53% other financing 6817382 9038855.27 32.59% current assets 4363623 4374846.97 0.26% operating income 2965527 3142934.45 5.98% roa (percent) 0.51 2.54 397.95% source: dea result table 8 shows that in 2017, bri syariah has an efficiency level of 99.74 percent, which means that it is not yet efficienct/inefficient. the efficiency stems from the input allocation of the amount of savings and the cost of profit sharing. it takes a reduction of 18.97 percent of the total savings and 2.88 percent of the cost of profit sharing in order to achieve the level of efficiency. the input target for the required ampunt of savings shoud be 5,293,850.01 million rupiah, but the actual input is 6,533,329 million rupiah and the required profit-sharing cost input target should be 1,159,573.76 million rupiah, but the actual input is 1,193,918 million rupiah. to achieve the efficiency level of output, an increase of 28.53 percent (murabahah financing), 32.59 percent (other financing), 0.26 percent (fixed assets), 5.98 percent (operating income) and 397.95 percent (roa) is required. table 9. development of bri syariah input-output value in 2017-2018 https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 52 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) input/output actual target potential improvement total deposits 2017 6533329 5293850.01 -18.97 % 2018 8689987 8689987 0.00% development of 2156658 3396136.99 fixed assets 2017 177935 177935 0.00% 2018 221444 221444 0.00% development of 43509 43509 operating costs 2017 1178743 1178743 0.00% 2018 1200619 1200619 0.00% development of 21876 21876 profit sharing fees 2017 1193918 1159573.76 -2.88 % 2018 1317100 1317100 0.00% development of 123182 157526.24 murabahah financing 2017 10457017 13440542.47 28.53 % 2018 11370876 11370876 0.00% development of 913859 -2069666.47 other financing 2017 6817382 9038855.27 32.59 % 2018 8249827 8249827 0.00% development of 1432445 -789028.27 current assets 2017 4363623 4374846.97 0.26% 2018 17641795 17641795 0.00% development of 13278172 13266948 operating income 2017 2965527 3142934.45 5.98 % 2018 3294489 3294489 0.00% development of 328962 151554.55 roa 2017 0.51 2.54 397.95% 2018 0.43 0.43 0.00% development -0.08 -2.11 source: dea result improvement to bri syariah in 2018, which are suggested in 2017, are theactual value of murabahah financing, other financing, current asset, and increased operating income. murabahah financing increased by 913,859 million rupiah from 2017 or 8.7 percent from the previous year. however, this increase has not yet reached the 2017 potential improvement, which is 28.53 percent. other financing increased by 1,432,445 million rupiah from 2017 or 21 percent from the previous year. although it has increased, it has not yet reached the 2017 potential improvement, which is 32.59 percent. current assets increased by 13,278,172 million rupiah or increased 304 percent from the previous year. this increase exceeds the 2017 potential improvement, which is 303.7 percent higher. operating income increased by 328,962 million rupiah from 2017 or 11 percent from the previous year. this increase exceeds the 2017 potential improvement which is 5.98 percent, making it 5.02 percent bigger. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 53 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 10. bri syariah input-output value in 2017 (million rupiah) bank name efficienc y level actual target potential improvement total deposits 99.59% 660196 660196.00 00.00% fixed assets 81354 73944.22 -9.11% operating cost 179270 179270.00 00.00% profit sharing fee 247351 247351.00 00.00% murabahah financing 1557673 1564051.90 0.41% other financing 2031335 2196427.69 8.13% current asset 672935 675690.77 0.41% operating income 489254 491257.57 0.41% roa (percent) 1.20 2.00 67.03% source: dea result bca syariah in 2017 has an efficiency level of 99.59 percent, which means that it has not yet reached the level of efficiency/inefficiency. the in efficiency in bca syariah stems from the allocation of fixed assets input. it takes a reduction of 9.11 percent of fixed assets in order to achieve the level of efficiency. the required input target should be 73,944.22 million rupiah, but the actual input is 81,354 million rupiah. to achieve the efficiency level of output, an increase of 0.41 percent (murabahah financing), 8.13 percent (other financing), 0.41 percent (fixed assets), 0.41 percent (operating income) and 67.03 percent (roa). table 11. development of bca syariah input output value in 2017-2018. input/output actual target potential improvement total deposits 2017 660196 660196 0.00% 2018 669739 669739 0.00% development of 9543 9543 fixed assets 2017 81354 73944.22 -9.11 % 2018 126281 126281 0.00% development of 44927 52336.78 operating costs 2017 1178743 1178743 0.00% 2018 186331 186331 0.00% development of -992412 -992412 profit sharing fee 2017 247351 247351 0.00% 2018 274695 274695 0.00% development of 27344 27344 murabahah financing 2017 1557673 1564051.9 0.41% 2018 1679410 1679410 0.00% development of 913859 115358.1 other financing 2017 2031335 2196427.69 8.13% 2018 2627647 2627647 0.00% https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 54 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) input/output actual target potential improvement development of 596312 431219.31 current assets 2017 672935 675690.77 0.41% 2018 2776530 2776530 0.00% development of 2103595 2100839.23 operating income 2017 489254 491257.57 0.41% 2018 542199 542199 0.00% development of 52945 50941.43 roa 2017 1.20 2.00 67.03% 2018 1.20 1.20 0.00% development 0.00 -0.8 source: dea result the recommended improvements to bca syariah for 2018 in 2017 were that the actual value of operational costs decrease and murabahah financing, other financing, current assets and operating income increase. operational costs decreased by 992,412 million rupiah from 2017 or 532.6 percent. the decrease in inputs has a very good effect on efficiency, because if the inputs is reduced but the output produced is the same or greater than other scbs, the potential to achieve efficiency is high. murabahah financing increased by 913,859 million rupiah from 2017 or 58.7 percent from 2017. this increase exceeded the 2017 potential improvement, which was 58.29 percent. other financing increased by 596,312 million rupiah from 2017 or 29.3 percent. this increase exceeded the 2017 potential improvement, which was 21.2 percent. current assets increased by 2,103,595 million rupiah or 312.6 percent from 2017. this increase exceeded the 2017 potential improvement, which was 312,1 percent. operating income increased by 52,945 million rupiah or 10.8 percent from 2017. this increased exceeded the 2017 potential improvement 2017, which was 10.39 percent greater. in 2018, the efficiency level of 12 icbs decreased from the previous year with an average efficiency of 98.4 percent. there were 10 icbs that are efficient and 2 icbs that were inefficient, namely bank muamalat indonesia (bmi) and bank syariah bukopin. table 12. bank muamalat indonesia input-output value in 2018 (million rupiah) bank name efficienc y level actual target potential improvement total deposits 94.89% 6078344 6078344.00 00.00% fixed assets 3357284 1090192.65 -67.53% operating cost 1721801 1721801.00 00.00% profit sharing fee 2162970 2044812.78 -5.46% murabahah financing 15325983 16151864.08 5.39% other financing 17034840 17952807.35 5.39% current assets 22102705 24810311.49 12.25% operating income 3569342 4560144.04 27.76% roa (percent) 0.08 8.29 10260.56% https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 55 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) source: processed data table 12 shows the results that in 2018 bank muamalat indonesia (bmi) had an efficiency level of 94.89 percent, which means that it has not yet reached the level of efficiency/inefficiency. it takes a reduction of 67.53 percent of fixed assets and 5.46 percent of profit-sharing fees in order to achieve the level of efficiency. the input target for fixed assets required shoud be 1,090,192.65 million rupiah, but the actual input is 3,357,284 million rupiah. the input target for the required profit-sharing costs should be 2,044,812.78 million rupiah, however, the actual input is 2,162,970 million rupiah. to achieve the efficiency level of output, an increase of 5.39 percent (murabahah financing), 5.39 percent (other financing), 12.25 percent (fixed assets), 27.76 percent (operating income) and 10,260.56 percent (roa). to find out more about the factors that caused bank muamalat in 2018 to be inefficient, the input output value in 2018 will be compared with the input output value in 2017. table 13. development of bmi input value in 2017-2018 input/output actual target potential improvement total deposits 2017 6421635 6421635 0.00% 2018 6078344 6078344 0.00% development of -343291 -343291 fixed assets 2017 2653439 2653439 0.00% 2018 3357284 1090192.65 -67.53% development of 703,845 -1563246.35 operating costs 2017 1614484 1614484 0.00% 2018 1721801 1721801 0.00% development of 107317 107317 profit-sharing fees 2017 2541321 2541321 0.00% 2018 2162970 2044812.78 -5.46% development of -378351 -496508.22 murabahah financing. 2017 19342510 19342510 0.00% 2018 15325983 16151864.08 5.39% development of -4016527 -3190645.92 other financing 2017 20622051 20622051 0.00% 2018 17034840 17952807.35 5.39% development of -3587211 -2669243.65 current assets 2017 7793885 7793885 0.00% 2018 22102705 24810311.49 12.25 % development of 14308820 17016426.5 operating income 2017 4185954 4185954 0.00% 2018 3569342 4560144.04 27.76% development of -616312 374190.04 roa 2017 0.11 0.11 0.00% https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 56 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) input/output actual target potential improvement 2018 0.08 8.29 10260.56% development -0.03 8.18 source: dea result tabel 13 shows that bank muamalat experienced inefficiency in 2018 when compared to 2017. the reasons are, among others, first, fixed assets increased by 703,845 million rupiah or 26.5 percent so that a reduction of 67.53 percent is needed to achieve the level of efficiency. second, operational costs increased by 107,317 million rupiah or 6.6 percent from 2017 with a contribution value of 79 percent efficiency, therefore this decrease had a big impact. third, murabahah financiang decreased by 4,016,527 million rupiah or 20.8 percent from 2017. this decrease greatly affects efficiency because the contribution of murabahah financing to efficiency is 89 percent. the results of data processing recommended an increase of 5.39 percent in order to achieve the level of efficiency. fourth, other financing decreased by 3,587,211 million rupiah or 17.4 percent from 2017. the result of data processing recommended an increase of 5.39 percent in order to achieve the level of efficiency. fifth, operating income decreasd by 616,312 million rupiah or 14.7 percent from 2017. the result of data processing recommended an increase of 27.76 percent in order to achieve the level of efficiency. sixth, roa decreased by 0.03 percent. the result of data processing required an increase 10,260.56 percent in order to achieve the level of efficiency. table 14. bank syariah bukopin input output value 2018 (million rupiah) bank name efficiency level actual target potential improvement total deposits 85.98% 1112392 842598.61 -24.25% fixed assets 315739 125193.68 -60.35% operating cost 236396 236396.00 00.00% prodit-sharing fees 298526 298526.00 00.00% murabahah financing 1462523 1934349.74 32.26% other financing 2604668 3029243.40 16.30% current assets 2857874 3323723.39 16.30% operating income 537907 625588.84 16.30% roa (percent) 0.02 1.06 5192.32% source: dea result table 14 shows that in 2018 bank syariah bukopin was not yet efficient as indicated by an efficiency level of 85.98 percent. it takes a reduction of 24.25 percent of total deposits and 60.35 percent of fixed assets in order to achieve efficiency levels. the input target for the required amount of savings should be 842,598.61 million rupiah, but the actual input is 1,112,392 million rupiah. the input target for fixed assets required should be 125,193.68 million rupiah, but the actual input is 315,739 million rupiah. to achieve the efficiency level of output, an increase of 32.26 percent (murabahah financing), 16.30 percent (other financing), 16.30 percent (fixed assets), 13.60 percent (operating income) and 5,192.32 percent (roa) are required. to find out more about what factors caused bank syariah bukopin in 2018 to be inefficient, the input output value in 2018 will be compared with the input output value in 2017. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 57 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 15. development of bank syariah bukopin input output value in 2017-2018 input/output actual target potential improvement total deposits 2017 1335963 1335963 0.00% 2018 1112392 842598.61 -24.25% developmet of -223571 -493364.39 fixed assets 2017 228913 228913 0.00% 2018 315739 125193.68 -60.35% development of 86826 -103719.32 operating costs 2017 241467 241467 0.00% 2018 236396 236396 0.00% development of -5071 -5071 profit-sharing fees 2017 368685 368685 0.00% 2018 298526 298526 0.00% development of -70159 -70159 murabahah financing 2017 1629024 1629024 0.00% 2018 1462523 1934349.74 32.26% development of -166501 305325.74 other financing 2017 2694965 2694965 0.00% 2018 2604668 3029243.40 16.30% development of -90297 334278.4 current assets 2017 1386900 1386900 0.00% 2018 2857874 3323723.39 16.30% development of 1470974 1936823.39 operating income 2017 615093 615093 0.00% 2018 537907 625588.84 16.30% development of -77186 10495.84 roa 2017 0.02 0.02 0.00% 2018 0.02 1.06 5192.32% development 0.00 -1.04 source: dea result from table 15, it can be seen that when compared to 2017, bank syariah bukopin experienced inefficiency in 2018, namely, first, fixed assets increased by 86,826 million rupiah or 37.9 percent from 2017 concequently that a reduction of 60.35 percent was needed to achieve the level of efficiency. second, murabahah financing decreased by 166,501 million rupiah or 10.2 percent from 2017. the result of data processing recommended an increase of 32.26 percent in order to achieve the level of efficiency. the required input target should be 1,934,349.74 million rupiah, but the actual input is 1,462,523 million rupiah. third, other financing decreased by 3,587,211 million rupiah or 3.3 percent from 2017. the results of data processing recommended an increase of 16.3 percent in order to achieve the level of https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 58 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) efficicnecy. fourth, operating income decreased by 77,186 million rupiah or 12.5 percent from 2017. it recommended an increase of 16.30 percent in order to achieve the level of efficiency. malmquist index was used to measure the productivity level of each business unit. there are two things that are calculated in the malmquist index measurement, namely catch-up effect and frontier-shift effect. the catch-up effect measures the rate of change in relative efficiency fro period 1 to period 2. the frontier-shift effect measures the rate of technological change (input-output combination) from period 1 to period 2. following are the results of the malmquist index data processing of 12 icbs in indonesia in 2016-2018: table 16. malmquist indexes of 12 icss in indonesia in 2016-2018 period bank name malmquist index catchup frontier shift 1 bca syariah 2 bca syariah 0.8757 0.9959 0.8793 3 bca syariah 1.7042 1.0041 1.6973 1 bjb syariah 2 bjb syariah 0.8967 1 0.8967 3 bjb syariah 1.6822 1 1.6822 1 bni syariah 2 bni syariah 1.0233 1 1.0233 3 bni syariah 1.7192 1 1.7192 1 bri syariah 2 bri syariah 0.9354 0.9974 0.9378 3 bri syariah 1.8627 1.0026 1.8579 1 btpn syariah 2 btpn syariah 1.017 1 1.017 3 btpn syariah 2.138 1 2.138 1 bmi 2 bmi 1.0638 1 1.0638 3 bmi 1.3799 0.9489 1.4542 1 bank panin syariah 2 bank panin syariah 3.2669 1 3.2669 3 bank panin syariah 0.3546 1 0.3546 1 b.syariah bukopin 2 b.syariah bukopin 1.0968 1 1.0968 3 b.syariah bukopin 1.5166 0.8598 1.7638 1 b. syariah mandiri 2 b. syariah mandiri 1.0015 1 1.0015 3 b. syariah mandiri 2.3033 1 2.3033 1 bsmi 2 bsmi 0.8633 1 0.8633 3 bsmi 1.5457 1 1.5457 1 b.victoria syariah 2 b.victoria syariah 5.1183 1 5.1183 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 59 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) period bank name malmquist index catchup frontier shift 3 b. victoria syariah 1.9862 1 1.9862 1 maybank syariah 2 maybank syariah 798.6896 1 798.6896 3 maybank syariah 1.0024 1 1.0024 sourcer: dea result. from table 12, it can be seen that in 2017 there were 8 icbs experiencing increasing returns to scale, namely bni syariah, btpn syariah, bank muamalat indonesia, bank panin syariah, bank syariah bukopin, bank syariah mandiri, bank victoria syariah, and maybank syariah indonesia. meanwhile, 4 icbs experienced a decreasing return to scale, namely bca syariah, bjb syariah, bri syariah, and bsmi. in addition to ecperiencing decreasing returns to scale, bca syariah, bri syariah and bsmi were also inefficient in 2017. althogh bjb syariah experienced a decrease in productivity, in 2017 it was efficient. in 2018, there were 11 scbs experiencing increasing returns to scale and oly 1 scb decreasing return to scale. the scbs which decreases return to scale is panin syariah bank with a malmquist value of 0.3546. despite experiencing a decreasing return to scale, panin syariah bank in 2018 was efficient. muamalat indonesia bank and syariah bukopin bank were inefficiency in 2018 but their productivity has increased. sharia commercial banks (scbs) whose relative efficiency change rate from 2016 to 2017 has decreased, namely bca syariah with a catchup value of 0.9959 and bri syariah with a catchup value of 0.9974. meanwhile from 2017 to 2018, the scbs that experienced a decreased in the rate of change in relative efficiency were bank muamalat indonesia and bank syariah bukopin. meanwhile, the value of the frontier-shift effect that has decreased from 2016 to 2017 is bca syariah, bjb syariah, bri syariah and bsmi. meanwhile, from 2017 to 2018 only panin syariah bank experienced a decline. 5. conclusion based on the analysis that has been carried out in the previous discussion, it can be concluded tat the results of the calculation of the efficiency of 12 islamic commercial banks (icbs) in indonesia using dea in 2016-2018 overall decreased. sharia commercial banks achieved an efficiency level of 100 percent 2016, decreased in 2017 with an average efficiency of 99.93 percent and in 2018 experienced a decline again with an efficiency level of 98.4 percet. mengalami penurunan kembali dengan tingkat efisiensi 98.4 persen. the result obtained from the productivity analysis with the malmquist index show that in 2017, 8 out of a total of 12 icbs experienced an increase in productivity, or about 67% of all islamic commercial banks. meanwhile, in 2018, 11 of the total 12 icbs experienced an increase in productivity, or around 92% of all islamic commercial banks. it is characterized by a score of more than 1. while the rest show a relatively low level of productivity. references https://creativecommons.org/licenses/by/4.0/ efficiency analysis of indonesian sharia banks 60 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) al-qur’an terjemah. kementrian agama ri ascarya, & yumanita, d. (2006). analisis efisiensi perbankan syariah di indonesia. tazkia islamic finance and business review, 1(2). ascarya, diana y. dan guruh s. r. (2008). analisis efisiensi perbankan konvensional dan perbankan syariah di indonesia dengan data envelopment analysis (dea). paper dalam buku current issues lembaga keuangan syariah tahun 2009, tim iaei, jakarta: kencana prenada media group. badan pusat statistik. (2010). sensus penduduk 2010. http://www.bps.go.id. bank jawa barat dan banten syariah. (2019). laporan keuangan tahunan (annual report) 2016-2018. http://www.bjbsyariah.co.id. bank mega syariah indonesia. (2019). laporan keuangan tahunan (annual report) 20162018. http://www.megasyariah.co.id. bank muamalat indonesia. (2019). laporan keuangan tahunan (annual report) 2016-2018. http://www.bankmuamalat.co.id. bank negara indonesia syariah. (2019). laporan keuangan tahunan (annual report) 20162018. http://www.bnisyariah.co.id. bank panin syariah. (2019). laporan keuangan tahunan (annual report) 2016-2018. http://www.paninbanksyariah.co.id. bank rakyat indonesia syariah. (2019). laporan keuangan tahunan (annual report) 20162018. http://www.brisyariah.co.id. bank syariah bukopin. (2019). laporan keuangan tahunan (annual report) 2016-2018. http://www.syariahbukopin.co.id. bank syariah mandiri. (2019). laporan keuangan tahunan (annual report) 2016-2018. http://www.syariahmandiri.co.id. bank syariah maybank indonesia. (2019). laporan keuangan tahunan (annual report) 20162018. http://www.maybanksyariah.co.id. bank tabungan pensiunan negara syariah. (2019). laporan keuangan tahunan (annual report) 2016-2018. d http://www.btpnsyariah.com. bank victoria syariah. (2019). laporan keuangan tahunan (annual report) 2016-2018. http://www.bankvictoriasyariah.co.id. bca syariah. (2019). laporan keuangan tahunan (annual report) 2016-2018. http://www.bcasyariah.co.id. berger, a. n dan humprey d. b., (1997). efficiency of financial institution: international survey and direction for future research. european journal operational research. hadad, m. d., wimboh, s., ilyas, d., & mardanugraha, e. (2003). analisis efisiensi industri perbankan bi. journal of economics literature. https://www.bi.go.id/id/publikasi/perbankan-dan-stabilitas/riset/pages/penggunaan metode nonparametrik data envelopment analysis (dea).aspx keuangan, o. j. (2018). laporan perkembangan keuangan syariah indonesia. otoritas jasa keuangan. nurfikasari, a., & tanuatmodjo, h. (2019). iqtishaduna, vol. 10 no. 2 desember 2019. 10(2). putri, m. dan a. s. m. (2015). analisis efisiensi bank umum syariah (bus) di indonesia dengan menggunakan metode data envelopment analysis (dea) periode 2013-2015. uin syarif hidayatullah jakarta, 151, 10–17. rusydiana, a. s. (2016). indeks malmquist untuk pengukuran efisiensi dan produktivitas bank syariah di indonesia. 1, 47–58. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 2019 61 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) sari, d. f., & suprayogi, n. (2015). membandingkan efisiensi pembiayaan bank umum syariah dan bank umum konvensional di indonesia dengan metode data envelopment analysis (dea). jurnal ekonomi syariah teori dan terapan, 2(8), 673. https://doi.org/10.20473/vol2iss20158pp673-688 sri, i., ir, l., indira, m., & ms, h. (2014). efisiensi bus di indonesia menggunakan metode data envelopement analysis ( dea ). proceeding ums, 52–60. https://creativecommons.org/licenses/by/4.0/ the influence of halal destination awareness on halal destination loyalty: a study on west sumatera 32 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the influence of halal destination awareness on halal destination loyalty: a study on west sumatera anya safira, nabila salsabilia* department of management, faculty of economics and business, university of indonesia, indonesia abstract opportunities in developing muslim-friendly tourist destinations in indonesia are getting bigger along with the increasing muslim population in indonesia and in the world. since receiving the spotlight as a country with several world-class halal tourism awards, indonesia has begun to focus on developing muslim-friendly tourism comprehensively. west sumatra is one of the provinces that has become the focus of the indonesian ministry of tourism and creative economy as a muslim-friendly tourist destination in indonesia with the aim to provide muslim-friendly tourism services for the global muslim community. this study was conducted to analyze the effect of halal destination awareness on halal destination loyalty of west sumatra as a muslim-friendly tourist destination. data was collected using a selfadministered questionnaire and 386 respondents were obtained and then processed using pls structural equation modeling with smartpls 3.0 software. this study found that halal brand destination awareness has an effect on halal destination brand loyalty in the selection of west sumatra as a muslimfriendly tourist destination. these results can be used as a reference for tourism industry players to maximize the potential and advantages possessed by west sumatra as a muslim-friendly tourism destination. keywords: muslim friendly tourism, halal destination awareness, halal destination value, halal destination loyalty, west sumatera. 1. introduction the role of the tourism sector is becoming increasingly important and is an advantage for development and contribution to the welfare of the world community by contributing usd 8.9 billion to the world economy in 2019, about 10.9% of the total world gdp (world travel and tourism council, 2020). travel and tourism should be considered important economic activities worldwide as it can contribute directly and indirectly to the economy. the world travel and tourism council reported in 2020 that indonesia is an archipelagic country with a rapidly growing tourism sector and has an abundance of tourist destinations. it has become the 9th ranked country with the increase and growth of the tourism sector in the world and ranks 1st in asean. the development of the tourism sector can also be seen from the ranking of the competitiveness position of indonesian tourism destinations in the travel and tourism competitiveness index by the world economic forum which continues to increase from 78th in 2014 to 40th in 2018. to the ministry's strategic plan tourism 2020-2024 (ministry of tourism, 2019) the tourism and creative economy sectors are targeted to make an increasing contribution to the resilience of the indonesian economy. the foreign exchange value of the tourism sector is targeted to increase from us$ 3.3 – 4.8 billion in 2020 to us$ 21.5 – 22.9 billion in 2024. the growth of the tourism sector can of course also be increased by optimizing indonesia's tourism resources by developing tourism. muslim-friendly, indonesia as a country with the world's largest muslim-majority population has a great opportunity in the field of halal tourism or now called muslim-friendly tourism. in 2020, as *coressponding author. email address: nabilasalsabilia194@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:nabilasalsabilia194@gmail.com afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 33 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) many as 227 million people, or 87.22% of the people in indonesia adhere to islam (bps, 2020) based on data from global religious future, the muslim community in indonesia will increase to 256.82 million in 2050. the number of people who embrace islam in indonesia indicates that indonesia is the right market to apply the concept of halal tourism (national development planning agency, 2018). west sumatra is one of the muslim friendly tourism destinations in 10 provinces in indonesia with the 3rd highest communication value, 2nd highest environment value, and 4th highest service value, while the access value is the lowest value among other provinces ( imti, 2019). this value indicates that west sumatra has the potential to develop muslimfriendly tourism. this firmly makes it easier for west sumatra which has a bright future in the development of halal tourist destinations (nasrul abit, 2019). however, the west sumatra travel entrepreneurs association report, asita (2019) assesses that the promotions implemented by west sumatra, especially in the introduction of halal tourism, have not been maximized, as a result, some foreign tourists are new to other halal destinations such as; lombok, jakarta, and bali. in this study, researchers conducted a study that focused on analyzing the effect of halal destination brand awareness on halal destination loyalty, which has a positive and significant relationship with tourist loyalty in choosing west sumatra as a muslimfriendly tourism destination in indonesia and does not focus on muslim-friendly tourism only. according to dprd's decision with number 5/sb/2020 concerning dprd approval of the draft regional regulation on the implementation of halal tourism to be stipulated as a regional regulation. one of the supporting factors for the existence of regional regulations regarding muslim-friendly tourism is because the concept of muslim-friendly tourism is following the culture and philosophy of the community of west sumatera (west sumatra regional people's assembly council, 2020). accordingly this research will also produce indicators that need to be maximized by west sumatra in preparing itself to become a world muslim-friendly tourist destination from a branding perspective as well as data obtained from respondents who have been to west sumatra from 2017 to 2021 destination in indonesia and does not focus on muslim-friendly tourism only. this research will also produce indicators that need to be maximized by west sumatra in preparing itself to become a world muslim-friendly tourist destination from a branding perspective as well as data obtained from respondents who have been to west sumatra from 2017 to 2021. previous research by tran, nguyen and tran (2020) was conducted to see how much brand equity and customer satisfaction affect tourists to come to da nang city, vietnam. supported by research by preko, mohammed, and allaberganov (2020) by examining the antecedents of brand equity on halal tourism destinations that look from the perspective of a tourist destination with a majority muslim population in ghana, larabanga. this is almost similar to west sumatra as one of the regions with a muslim majority who wants to optimize the potential of halal tourist destinations in indonesia. in this study, it is hoped that there will be benefits from longitudinal studies and data collection throughout the year over several years to achieve broader results and further studies should consider extending halal tourism to nonmuslim tourists in the same context tran, nguyenand tran (2020) ) in the research of preko, mohammed, and allaberganov (20211), brand destination equity has the same indicators as destination loyalty. therefore, researchers are encouraged to use previous research by combining the two studies as a reference where west sumatra is the object of halal tourism destinations in their research. referring to the research of tran, nguyen and tran (2020) and preko, mohammed, and allaberganov (2021) and adapting several other studies to build research hypotheses including; baldauf, cravens and binder (2003), yunduk and kim (2019), and also manthiou, kang and schrier (2014). https://creativecommons.org/licenses/by/4.0/ the influence of halal destination awareness on halal destination loyalty: a study on west sumatera 34 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 2. literature study tourism is an economic, social and cultural phenomenon characterized by the movement of people to a place outside their daily environment or other countries with the aim of having a personal or business need where the travel activity is said to be a visitor and tourism is also related to activities that they are doing, this definition of tourism is in accordance with the united nations world tourism organization (2020) statement. meanwhile, the tourism sector is composed of various industries starting from small to large companies; retail, culture, sports, accommodation, transportation, food, beverages, and others whose purpose is to support tourists with different tourism destinations also support to create jobs, encourage export-import that results in the welfare of society as a whole according to world travel and tourism (2019). moslem’s friendly tourism the ministry of tourism of the republic of indonesia stated that muslim-friendly tourism is an activity that is supported by various facilities and services provided by the community, businessmen, government, and local governments that comply with sharia provisions (kemenpar, 2021). meanwhile, the islamic tourism center malaysia (2015) defines muslim-friendly tourism as all activities, events, and experiences carried out on a journey that is by islam. boğan and sarıışık (2019) argue that halal tourism should be evaluated with an approach that includes the idea that all types of tourism must follow islamic principles and rules that are categorized as halal. in the literature written by mohsin, ramli, and al khulaifi (2016). muslim friendly tourist destinations muslim-friendly tourist destinations are types of destinations that adhere to islamic values (hassan, 2007). a muslim-friendly tourist destination is a destination that provides activities in tourism that are permitted or permitted according to islamic teachings (battour and ismail, 2016). the provision of tourism products and services that meet the needs of muslim tourists adequately and appropriately following islamic teachings is one of the important things in halal tourism destinations or halal tourism destinations (mohsin et al. 2016). halal tourism destinations will also offer tour halal destination brand equity a brand is valuable when customers feel and appreciate the brand's value and meaning (keller, 1993). brand equity focus on the customer perspective (karate and guzman, 2020). in the tourism industry, the success of a brand is widely measured through brand equity (pike and page, 2014). with research on brand equity in a tourist destination, it will be easier for tourism managers to measure the effectiveness of tourism marketing and predict its development in the future (chekalina, fuchs, and hagen, 2016). five dimensions of customerbased brand equity consist of awareness, image, quality, value, and loyalty. these five dimensions will be explored as the basic construction of brand equity in a halal tourist destination from the perspective of muslim tourists (shafaei, 2016). halal destination brand awareness halal destination brand awareness (hda) is a tourist's ability to remember the characteristics of a destination where there is awareness of a brand and also products that have https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 35 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) an important role in comparing similar products so that it has the encouragement of consumers to choose production activities (bianchi, pike, and ling, 2007). 2014). to increase the number of potential tourist attractions, a tourist destination must first gain awareness from the public (yang, liu, and li, 2015). a place must be known by consumers in some context before they can make the place a potential destination (gartner and konecnik, 2011). in other words, tourists who have the potential to come to a place are tourists who are familiar and have an image in their minds about the destination to be addressed (chen and myagmarsuren, 2010). halal destination image the existence of a destination image that visitors have about a destination plays an important role in making travel decisions and is one of the most important factors that can influence decisions in the choice of tourist destinations and the behavioral intentions of tourists in the future (chen and tsai, 2007). to assess halal destination brand image, attributes that symbolize the image of muslim areas in halal tourist destinations can be used (shafaei and mohamed, 2015). so, halal destination brand image can be evaluated through the attributes that exist in islamic destinations such as the islamic environment in resorts and hotels as stated by al-hamarneh and steiner (in shafaei, 2016). halal destination perceived quality the assessment of destination perceived quality is based on seven criteria, namely features, performance, serviceability, reliability, durability, and conformational quality (keller, 2003). in the dimensions of halal products, performance and ease of service are used in assessing the perceived quality of a destination's brand. destination perceived quality is an instrument in the benchmark where tourist locations meet the functional needs of muslim tourists. consistency and excellence of islamic service offerings are used to assess halal destination perceived quality because it reflects the success or failure of a halal destination in meeting the needs of muslims (shafaei and mohamed, 2015). halal destination brand value halal destination value can be measured from the availability of islamic attributes as one of the factors that can attract the attention of muslim tourists where it can increase the value of the destination (shafei, 2016). in halal tourism, there is a different assessment process when compared to the requirements of sharia law because the evaluation of halal tourism destinations is based on the needs of muslims to fulfill the teachings of the islamic religion (battour, ismaeil, and battor, 2011). halal destination loyalty halal destination loyalty can be found when the islamic values or attributes (halal food, separate prayer facilities, islamic dress code and places of worship) of a destination are the most significant components that attract muslims to a tourist location and the added value to the destination is also be a criterion for their level of loyalty (battour and ismail, 2016). customer satisfcation customer satisfaction shows that the perception will be predicted by push and pull motivation (correia et al, 2007). also claim that the level of tourist satisfaction is significantly related to their travel needs (qu and ping, 1999). the development of islamic attributes from destination measures is recommended and tourism supports that destination attributes have a positive impact on overall tourist satisfaction, related to destination choice. thus, it is recommended to investigate the relationship between the islamic attributes of a destination https://creativecommons.org/licenses/by/4.0/ the influence of halal destination awareness on halal destination loyalty: a study on west sumatera 36 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) and overall tourist satisfaction (battour et al, 2013). hypotheses researchers want to test the research model according to the chart described, this study aims to understand and find out how the influence of brand equity with its 5 dimensions, namely halal brand awareness, halal brand image, halal brand perceived quality, halal brand value, halal brand loyalty and customer satisfaction towards the selection of west sumatra as a muslim-friendly tourism destination from the point of view of tourists who have been to west sumatra before. in this study, there are 19 hypotheses, namely as follows: in the halal tourism sector, muslim tourists will also use islamic laws and provisions in their assessment of tourism products (shafei and mohamed, 2015). tourism also strongly applies sharia values which can increase the value of the tourist experience with the benefits of islam that will be felt later by tourists (eid and el-gohary, 2015). in addition, with the availability of halal attributes that exist in a tourism destination such as entertainment and halal food according to sharia, it will be easy for tourists to feel the benefits of traveling activities (eid, 2013). therefore, the following hypothesis is proposed: h1. halal destination awareness has a positive influence on halal destination image h2. halal destination awareness has a positive influence on halal destination perceived quality. h3. halal destination awareness has a positive influence on halal destination value h4. halal destination awareness has a positive influence on customer satisfaction. h5. halal destination awareness has a positive influence on halal destination loyalty islamic attributes such as islamic cultural or historical attractions, friendly muslim communities and good islamic stability can be used as factors that can create a halal destination brand image (shafaei, 2016). in addition, media channels also have a significant contribution to the selection of tourist destinations by muslim tourists haq and wong (2013). on the other hand, the more muslims are attracted to travel to halal tourist destinations that they consider as central to their lifestyle and can reflect their identity, the more often they seek information regarding these halal tourist destinations (shafaei and mohamed, 2015). therefore, the following hypothesis is proposed: h6. halal destination image has a positive influence on halal destination perceived quality. h7. halal destination image has a positive influence on halal destination value h8. halal destination image has a positive influence on customer satisfaction. h9. halal destination image has a positive influence on halal destination loyalty. perceived quality measures customer satisfaction compared to expectations (fornell et al, 1996). customers evaluate and assign brand value to perceived quality (kotler et al, 1996). in tourism, when a particular product service is a mixture of different services, the assessment of service quality becomes complicated and can affect the origin of brand equity (konecnik and gartner, 2007). empirical studies confirm the effect of perceived quality on satisfaction (san martín et al., 2019). islamic perceived quality can be improved again if halal tourism destinations provide consistent and superior islamic quality offerings when compared to other tourism destinations (shafaei, 2016). perceived quality is the actual brand performance where https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 37 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the brand performance of a tourist destination is related to the fulfillment of the functional needs of tourists (saeed and shafique, 2019). thus the proposed hypothesis is as follows: h10. halal destination perceived quality has a positive influence on halal destination value h11. halal destination perceived quality has a positive influence on customer satisfaction. h12. halal destination perceived quality has a positive influence on halal destination loyalty the value of a brand has the strongest relationship with loyalty (bianchi, pike, and lings, 2014). religious attributes and islamic values lie in products that reflect the lifestyle, expectations, and culture of the islamic religion (shafaei, 2016). these attributes include prayer facilities, halal food, entertainment that does not violate sharia law, dress code according to sharia, maintaining islamic morals, openness to religious practices, and avoiding mixing between men and women (shafaei and mohamed, 2015). based on the explanation above, the researcher proposes the following hypothesis: h13. halal destination value has a positive influence on customer satisfaction. h14. halal destination value has a positive influence on halal destination loyalty a good brand image about a tourist destination can lead to favorable comments so that it can attract more tourists to visit again (liu, li, and kim, 2015). thus, the following hypothesis is proposed: h15. customer satisfaction has a positive influence on halal destination loyalty. bianchi, pike, and lings (2014) state that the value of a brand has the strongest relationship with loyalty. religious attributes and islamic values lie in products that reflect the lifestyle, expectations, and culture of the islamic religion (shafaei, 2016). these attributes include prayer facilities, halal food, entertainment that does not violate sharia law, dress code according to sharia, maintaining islamic morals, openness to religious practices, and avoiding mixing between men and women (shafaei and mohamed, 2015). based on the explanation above, the researcher proposes the following hypothesis: h16. customer satisfaction mediates the relationship between halal destination awareness and halal destination loyalty. h17. customer satisfaction mediates the relationship between halal destination image and halal destination loyalty. h18. customer satisfaction mediates the relationship between halal destination perceived quality and halal destination loyalty. h19. customer satisfaction mediates the relationship between halal destination value and halal destination loyalty. 3. research method research design is a step that needs to be done in marketing research which is divided into two types, namely; conclusive research as well as exploratory (malhotra et al, 2012). exploratory research is carried out to gain broad insight with quantitative methods which require more and more extensive information structure, while the conclusive research design aims to test hypotheses between variables. in this study, the researcher used a conclusive research design aimed at measuring a phenomenon which later would also test the proposed hypothesis and the relationship between variables in previous studies (malhotra et al, 2010). conclusive research is also divided into descriptive and causal research, (malhotra et al, 2017). this https://creativecommons.org/licenses/by/4.0/ the influence of halal destination awareness on halal destination loyalty: a study on west sumatera 38 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) research includes descriptive research by collecting primary data as a form of an answer to each problem formulation by providing various questions in research that have been previously determined according to the needs of the researcher. this descriptive study uses a single crosssectional design method because the data collected from one sample is only carried out once and is carried out within a certain time and period. (cooper and schindler, 2014). a survey with a questionnaire will be used in this study to collect primary data from respondents who meet the criteria of this study. the primary data in this study were collected using a questionnaire in google form which was distributed online and the results of the questionnaire data were processed using the structural equation modeling (sem) method with smartpls 3.0 software. figure 1. research model the study refers to previous research conducted by tran, nguyen, and tran research (2020) under the title "brand equity customer satisfaction: a comparative analysis of international and domestic tourist in vietnam" whose results show that brand equity with all its dimensions and tourist satisfaction have an influence which has a positive and direct effect on the selection of tourism destinations by domestic and international tourists in da nang city, vietnam. the five dimensions of brand equity studied, namely brand awareness, brand image, brand quality, brand loyalty, and tourist stratification, have a close relationship with each other, however, the relationship between tourist satisfaction has a stronger total effect than the other elements. to complement and show the relationship between dimensions and concepts of muslim friendliness in tourism destinations, this study also adopts the research of preko, mohammed, and allaberganov (2021) entitled "antecedents of brand equity on halal tourism destinations". this study examines halal brand equity with one of the muslim-friendly destinations in malaysia, where all variables contain a halal context that is in line with the research objectives conducted by the author regarding west sumatra as a halal tourism destination. one of the variables in preko's research (2021) and implemented in this study is halal brand destination value. this study also adopts several other studies to build research hypotheses including; artur, karen, and budrun (2003), yunduk and kim (2019), and also manthiou, kang, and schrier (2014). the researcher carried out variable operations to clarify the indicators of each variable to be used in this study by adopting the research variables of tran, nguyen, and tran (2020) and preko, mohammed, and allaberganov (2021). the scale used in this study is a likert scale of 1-7 where 1 means "strongly disagrees" and 7 means "strongly agree". this study uses two types https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 39 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) of data, namely primary data and secondary data to obtain information in meeting the answers to the problems that exist in the research objectively. primary data is a method to obtain information based on structured questions posed by researchers to respondents directly to solve research problems (malhotraa, 2010). in compiling this research, the technique used in collecting primary quantitative data is the self-administered questionnaire so that the collection is by the character and criteria of the respondents that have been set for this research independently without any direct assistance from the researcher (malhotra, 2010). in general, the sampling process of this study uses a non-probability sampling technique with a judgmentmental sampling method, namely as a sampling technique when the researcher provides space and also opportunities for each member of the population to be used as a sample based on conditions, quotas, and criteria determined by the researcher. in this study (sugiyono, 2008). non-probability sampling technique is when all members of the existing population do not have the same opportunity to be sampled and also with unknown population size. the technique used by researchers to distribute questionnaires is done online by utilizing social media such as line, twitter, instagram, telegram, and linkedin as publication media. the criteria for respondents from this study are men and women who have been to west sumatra in the last 5 years, namely in 2017-2021, and are at least 17 years old. the determination of the minimum age of the respondent is 17 years because the researcher refers to the legal standing age in indonesia when the 17-year-old respondent can already take the risk of the choices made by himself as well as the respondent's actions in making travel decisions (kuhp law, 2021). 4. result and discussion in this study, there are 34 indicators from 6 existing variables so the minimum number of respondents that must be owned is 170 respondents. after getting data from the distribution of the main test questionnaire that has exceeded the minimum number of respondents, the researcher processes and analyzes it using the sem (structural equation model) method with smartpls 3.0 software. in processing the data from the collected questionnaires, the researchers used the smart pls 3.0 application. after processing the data, the researcher will analyze the partial least square through a feasibility test of the model, namely the measurement model (outer model) and structural model (inner model). the analysis conducted in this study looked at several variables, both exogenous and endogenous variables which include brand awareness, image, perceived quality, value, customer satisfaction, and loyalty. testing the feasibility of the model on the variables using measurement model analysis and structural model analysis through the process of bootstrapping data, blindfolding data, and analysis of research hypothesis testing. measurement analysis model analysis of the measurement model is carried out to measure the accuracy of the indicators on the variables. there are 2 types of measurement, namely reliability test, and validity test. things that must be analyzed include the reliability test of each indicator (indicator reliability), the reliability test of each construct (internal consistency), the validity test of each construct (convergent validity), and the validity test of each indicator (discriminant validity). the results of the research on the variables that had has an ave of 0.71, hdi has an ave of 0.671, hdpq has an ave of 0.725, hdv has an ave of 0.589, cs has an ave of 0.839, hdl has an ave of 0.802. structural model fit and hypotheses testing predictive relevance model by using pls, as well as doing the r2 and q2 tests. measurement of the coefficient of https://creativecommons.org/licenses/by/4.0/ the influence of halal destination awareness on halal destination loyalty: a study on west sumatera 40 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) determination (r2) which aims to see how much influence all endogenous variables have. according to hair et al. (2014), there are 3 criteria for r2 values, namely 0.75 (strong), 0.50 (medium), and 0.25 (weak). based on table 4.37, there are 6 weak predictive accuracy values, including halal destination image of 0.631, halal destination perceived quality of 0.768, halal destination brand value of 0.647, customer satisfaction of 0.726, halal destination loyalty of 0.798. from the results of this calculation, it can be concluded that the variable with the largest r square is the halal destination loyalty variable which has a higher predictive value than the others. the measurement of effect size (f2) aims to see the results of the contribution of the exogenous construct to the r2 value of the endogenous variable. the results of the effect size in this study conclude that 15 variables contain all hypotheses with the explanation listed in the table above. the most influential hypothesis of all existing variables is h1: halal destination awareness -> halal destination image of 1.711 and has a large effect. the last measurement is q2 predictive relevance which aims to measure how endogenous variables can be represented. the way to find out q2 is to do blindfolding and then look at the crossvalidated redundancy. according to hair et al. (2014), if the value of q2 shows a number above 0 (q2> 0), then the variable has predictive relevance. in this study, all exogenous variables can represent endogenous variables due to the q2 results on all variables above 0. hypothesis results. table 1. hypothesis result variable t-stat result path coefficient description h1 31.868 data supports the hypothesis 0.794 significantly positive h2 3.688 data supports the hypothesis 0.200 significantly positive h3 1.993 data supports the hypothesis 0.127 significantly positive h4 0.238 data does not support the hypothesis 0.012 not significant h5 3.366 data supports the hypothesis 0.156 significantly positive h6 13.638 data supports the hypothesis 0.709 significantly positive h7 4.655 data supports the hypothesis 0.342 significantly positive https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 41 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) h8 2.570 data supports the hypothesis 0.209 significantly positive h9 0.839 data does not support the hypothesis 0.065 not significant h10 5.357 data supports the hypothesis 0.381 significantly positive h11 1.618 data does not support the hypothesis 0.120 not significant h12 3.242 data supports the hypothesis 0.226 significantly positive h13 8.101 data supports the hypothesis 0.566 significantly positive h14 1.825 data supports the hypothesis 0.123 significantly positive h15 7.234 data supports the hypothesis 0.416 significantly positive based on the results of the analysis and significance test on the 19 hypotheses that have been carried out in the previous sub-chapter, there are a number of hypotheses whose results are accepted and also rejected. this study proves that halal destination brand equity and customer satisfaction affect the selection of west sumatra as a muslimfriendly tourism destination with the relationship between indicators such as the relationship between halal brand awareness, halal brand image, halal brand perceived quality, halal brand value, and halal brand loyalty followed by the relation with custom variables and satisfaction. west sumatra needs to maximize the indicators of each existing variable as providing good islamic facilities, halal food, a safe and comfortable atmosphere, good mosques, and maximum tourism services to make west sumatra a province is known for its muslim-friendly tourism. the researcher found that of the 6 variables, halal destination loyalty was the variable that was influenced by all other variables in the selection of west sumatra as a muslim-friendly tourism destination. the halal destination loyalty variable is affected the most with the highest path coefficient values, namely by the customer satisfaction variable worth 0.422 which is to maximize the loyalty of tourists to travel to west sumatra, customer satisfaction has a big influence compared to others. to maximize customer satisfaction, it can be seen that the cs3 indicator has the largest path coefficient of 0.924 with the indicator that tourists feel happy traveling to west sumatra. the most influential variable to generate tourist satisfaction is the halal destination value variable with path coefficients of 0.542 with the largest indicators being hdv 5, hdv1, and hdv6, where hdv5 means to maximize hdv, it is necessary for west sumatran culture to adhere to good islamic dress code and hdv6 means halal. destination value will be maximized if west sumatra can maximize its muslim-friendly culture and tourism https://creativecommons.org/licenses/by/4.0/ the influence of halal destination awareness on halal destination loyalty: a study on west sumatera 42 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) environment for the convenience of its tourists and hdv1 when west sumatra has good prayer facilities such as hotels, shopping centers, and tourist attractions. halal destination value is strongly influenced by the halal perceived quality variable with path coefficients 0.388, meaning that to maximize hdv, west sumatra also needs to maximize hpq with the largest indicator in this study being hpq4 which indicates that the quality of west sumatra is the most influential when west sumatra can provide experience. muslim-friendly tourism is better than other muslim-friendly tours and the hpq2 indicator, which is about west sumatra, provides a good travel experience for tourists. halal perceived quality is most influenced by the halal destination image variable with path coefficients of 0.709 and the two indicators of the hdi variable, namely hdi2, namely west sumatra has a good shopping place for tourists, and hdi5, namely west sumatra as a good islamic province in the eyes of tourists, by, therefore, west sumatra must be able to maximize itself to become a muslim-friendly province. halal destination image is influenced by halal destination awareness with path coefficients of 0.794, with the largest indicator being hda3, which is like west sumatra can be the first destination that comes to the minds of tourists and hda4 which means west sumatra is the first choice of muslim-friendly destinations they want to visit. 5. conclusion summary halal destination awareness has a positive and significant influence on halal destination loyalty. this also resulted from the relationship between halal destination awareness and halal destination image, halal destination perceived quality, and halal destination value. however, halal destination awareness does not have a positive and significant relationship with customer satisfaction. therefore, it can be concluded that halal destination brand awareness has a positive and significant relationship to the halal destination loyalty of west sumatra as a muslim-friendly tourist destination. halal destination perceived quality, halal destination value, and customer satisfaction have a positive and significant relationship to halal destination loyalty. however, halal destination image does not have a positive and not significant relationship with halal destination loyalty. there is the mediation of several variables through customer satisfaction towards halal destination loyalty. customer satisfaction mediates the relationship between halal destination image and halal destination value on halal destination loyalty. however, customer satisfaction does not mediate the relationship between halal destination awareness and halal destination perceived quality on halal destination loyalty. managerial implications tourism is a variety of tourism activities and is supported by various facilities and services provided by the community, businessmen, government, and local governments. the managerial implications of this research can be for academics and practitioners that this research can be used as material to determine the application of the concept of halal tourism in west sumatra and can be used as a reference for conducting further research related to halal tourism. the local government of west sumatra regarding the concept of halal tourism that is applied. this research can also be used as information material for the government about the perception of tourists regarding the potential application of the concept of halal tourism. for the community, it is hoped that it can add insight and knowledge of the community about halal tourism that is being developed by west sumatra. it can be used as reference material for tourism object managers to carry out promotions and provide facilities that are following the wishes of muslim tourists. suggestions for future research https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 43 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) in this study, there are still some limitations that can be refined in future research. the following are the limitations of the study and suggestions for future research: the age distribution of the respondents in this study is uneven because the majority (68.8%) are between 17 to 25 years old. this makes the age range in this study less varied so that other age ranges are not well described. therefore, in future research, it may be possible to distribute the questionnaires evenly with a longer time span in order to obtain comprehensive and more representative information and respondent data to represent the indonesian population. the respondents of this study were domestic tourists who traveled to west sumatra in the last 5 years, and cannot be generalized to other tourist destinations. in future research, it may be possible to conduct research not only in west sumatra, but also the 9 other muslim-friendly destinations in indonesia in order to maximize indonesia's potential in the field of muslimfriendly tourism. this study only measures the state of tourism in west sumatra in general. this study also does not look specifically at the impact of the covid-19 pandemic problem that affects the state of tourism because the variables used have no direct link with the pandemic. future research may examine the context of a pandemic by using the appropriate variables. reference aaker, d.a. 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(2016). the relationship between involvement with travelling to islamic destinations and islamic brand equity: a case of muslim tourists in malaysia. asia pacific journal of tourism research, 22(3), 255-271. doi:10.1080/10941665.2016.1232741 shafei, f., mohamed, b., (2015). involvement and brand equity: a conceptual model for muslim tourist. international journal of culture, tourism and hospital research, 9(1), 1750-6182. doi 10.1108/ijcthr-06-2014-0050 tran, phoung,. tran, vien., nguyen, v., (2020). brand equity and customer satisfaction: a comparative analysis of international and domestic tourists in vietnam. journal of product dan brand management, 30(1), 180-194. doi: 10.1108/jpbm-08-2019-2540 https://creativecommons.org/licenses/by/4.0/ concept of waqf in supporting health facilities and its compliance with regulation in indonesia 11 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) concept of waqf in supporting health facilities and its compliance with regulation in indonesia muhammad sena nugraha pamungkas1)*, irham zaki2) 1, 2 department of sharia economics, faculty of economics and business, airlangga university, indonesia abstract this study aims to identify the concept and utilization of waqf in supporting and running health care facilities in islamic civilization and evaluating its compliance with statutory regulations if the same concept is applied in indonesia. by using the documentary research method this study examining and/or exploring various secondary sources related to the research topic. this research concludes that the use of waqf in supporting and maintaining the sustainability of health facilities has become a part of islamic civilization. the concept of using waqf in operating and supporting health facilities is also not against the prevailing laws and regulations. in fact, the concept is in the same line with article 170 of law no. 36 of 2009 concerning health and presidential decree no.59 of 2017 concerning sustainable development. with the harmony between the concept of waqf and the prevailing law and regulations it is expected that government could realizing provided a sustainable and inclusive waqf-based development. keywords: waqf, health facilities, sustainable development 1. introduction the right of health is a fundamental right of every human being. without a healthy body and soul, a person will not be able to carry out his activities completely. in law no.36 of 2009 on health, health is defined as a state of health, both physically, mentally, spiritually and socially which enables everyone to live productively socially and economically. these four aspects (physical, mental, spiritual and social) influence each other. when a person is mentally ill, for example he had depression, it can decreased physical health, the immune system will weaken and he will get sick easily. otherwise, when someone is physically sick, for example, he is indicated had an infectious disease, then it will have an impact on his mental health. the level of anxiety will increase and can even result in panic attacks. likewise with the social aspect, when a person's health decreases, his rights to the social aspect cannot be fulfilled. a person whose health is impaired may lose the ability to work, decreased income and quality of life. in general that person’s social aspect is disturbed. the importance of health as a human right and as a necessary condition for the fulfillment of other rights has been recognized internationally. article 25 of the universal declaration of human rights (udhr) states that everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, *corresponding author. email address:muhammad.sena.nugraha-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:muhammad.sena.nugraha-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. (ardinata, 2020) in 2015, the world bank revealed that oic countries have very poor governance performance so that it is not possible to increase spending and provide welfare support facilities (health facilities for instance) such as in america and europe (shaikh, ismail, & mohd shafiai, 2017). in other words, assistance from the private sector is needed to fill the gap in the government's role. although it can help provide health facilities, it is not a rational thought for the private sector to provide these facilities without a profit-seeking motive. according to notoatmodjo in susanti (2017) health management cannot be equated with business administration which is more oriented towards seeking financial benefits (profit oriented). according to him, health administration is more appropriately classified into public administration because health organizations are more concerned with achieving the welfare of public. someone who use health facilities mean that those person is unable to carry out their daily activities maximally , their activities at work will disturbed, so it is not appropriate for them to be charged a fee for the benefits obtained from health facilities. therefore we need a financing system and operational funding for health facilities that are not based on a motive for seeking financial gain. in the history of islamic civilization, this has been done in the middle ages by utilizing waqf funds. waqf is a form of social funds that exist in islamic teachings it’s also one of a form of state financial instrument. everyone can issue their assets to be donated without a minimum limit on the amount and time of ownership as in zakat. the difference with alms (other social fund instruments in islam), waqf assets must be maintained and managed. if the management of waqf assets generates profits, then these profits can be utilized in various social aspects to improve the welfare of the community. so both the assets and the results of the management of waqf assets can provide social benefits to the community. the concept of waqf is very suitable to be used in financing the construction and operation of health facilities because it have the same goal to improve the welfare of society and are not motivated by financial profit. indonesia as a large country with a majority muslim population certainly has a large potential for waqf funds. zaim saidi in aziz (2017) said that the potential for waqf in indonesia can reach one-third of the wealth of muslims. this potential is measured from the prophet's recommendation for waqf as much as one-third of the assets owned. in october 2020 the indonesian minister of finance, mrs. sri mulyani said that the potential for waqf in indonesia could reach idr 217 trillion or equivalent to 3.4% of indonesia's gdp (akbar, 2020). thus, the aim of this study could be divided into two. first, evaluate the concept and the utilization of waqf in supporting and running health facilities in islamic civilization. second, examine whether the concept of utilizing waqf in supporting and operating health facilities can be applied in indonesia according to the prevailing laws and regulations. 2. literature study 2.1 indonesia’s health facilities the importance of health as a human right and as a necessary condition for the fulfillment of other rights has been recognized internationally (ardinata, 2020). concept of waqf in supporting health facilities and its compliance with regulation in indonesia 13 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) therefore, people's access to various things that support the fulfillment of these human rights needs to be improved. health facilities themselves are defined as facilities that provide health services that are used to carry out individual health service efforts, both promotive, preventive, curative and rehabilitative carried out by the government, local government and the community (rabbaniyah & nadjib, 2019). indonesia has a clear legal basis regarding that right. article 28h paragraph 1 of the 1945 constitution states that every person has the right to live in a physically and mentally well-being, to have a place to live, and to have a good and healthy living environment and the right to obtain health services. guarantee for every indonesian citizen to obtain optimal health status is also stated in article 4 of law no. 36 of 2009 on health. article 14 of the law emphasizes the government's responsibility in administering health efforts that are evenly distributed and affordable by the community. the role in the health sector is not only the responsibility of the government, but the community is also required to participate in maintaining and improving the health status of individuals, families and their environment, as stated in article 12 of the law. in other words, the laws and regulations in indonesia involve all components, the community and the government, to ensure access to adequate health facilities for all indonesian citizens. although the right to access health facilities has a very clear legal basis, but according to rabbaniyah and nadjib (2019) socio-economic factors (employment status, achievement, level of education, income, poverty and wealth) is one of the predisposing factors in the use of health facilities, especially in west java. even though it was conducted in west java, the results of their research were relatively relevant to the national condition. a person's income can affect the use of health facilities because it is related to the cost of health services, such as to pay for doctors, nurse, and to redeem the medicines. someone with a low income will face those obstacles in using health facilities due to these costs. to overcome the condition, the state mandated the government through law no. 40 of 2004 to establish a national security system which was then implemented by the government by establishing a social security agency (badan penyelenggara jaminan sosial (bpjs)) which includes national health insurance (bpjs kesehatan) and workers social security (bpjs ketenagakerjaan). although the national health insurance program has been implemented since january 1, 2014, practically there are still many problems (yustina, 2015). one of the problems faced by the national health insurance is the financial deficit. national health insurance’s annual financial report show the deficit that occurs from year to year with details of respectively idr 3.8 trillion (2014), idr 5.9 trillion (2015), idr 9.7 trillion (2016), 10 trillion (2017) ), idr 9.1 trillion (2018), and reaching idr 13 trillion in 2019 (setiyono, 2018; agi, 2019; asmara, 2020). according to firdaus & wondabio (2019) the deficit experienced by bpjs kesehatan is due to the following conditions; 1) mismatch between contribution income and benefit expense, 2) membership premium is underpriced; 3) the amount of membership dues in arrears, 4) the high cost of health services is due to the large number of people suffering from chronic diseases. therefore it is necessary to implement a new financing scheme so that the national health insurance can run better both in quality and sustainability. with this, it is hoped https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) that public access to health facilities in indonesia can be more comprehensive so that all people can improve their standard of living. 2.2 the concept of waqf and its practices in indonesia waqf literally means ‘detention’, withholding’ or ‘restrain’ (wan ahmad & rahman, 2011). in islamic law, waqf refers to an act of dedicating the usufruct of any property owned for purposes recognized by islamic laws as pious or religious (uyun, 2015; wan ahmad & rahman, 2011; hanesti, kurnia, & herianingrum, 2018). according to law no. 41 of 2004 concerning waqf article 1 paragraph 1, waqf defined as a legal act of waqif (the party who donates his property) to separate and/or surrender part of his property to be used forever or for a certain period of time according to his interests for worship purposes and/or for general welfare according to sharia. the donated assets must be maintained and managed in order to produce a benefit which can then be used accordingly with sharia law that has been approved by waqif. this distinctive characteristic does not exist in other social charities in islam such as sadaqah and zakat. according to sayyid sabiq in uyun (2015) sadaqah are basically every virtue/good deed performed by a muslim. so that waqf can be included in the form of sadaqah. but waqf requires more specific conditions and has a more sustainable impact than sadaqah. the utilization of waqf is also more flexible when compared to zakat because it does not require a certain time (haul) and ownership (nisab) limits on the assets to be donated and does not limit its distribution like zakat. therefore, waqf has the potential for longer lasting benefits and a wider scope of benefits for the community. in addition to the great benefits received by the community, even for people who have waqf, allah and his messenger (pbuh) promise great rewards that can not be found in other pious practices. as is in the hadith of the prophet muhammad (pbuh) on the authority of abu hurairah (ra) that the messenger of allah (p.b.u.h) said, “when a person dies, his deeds come to an and except for three: sadaqah jariyah (a continuous charity), or knowledge from which benefit is gained, or a righteous child who prays for him” (muslim, al-tirmidhi, al-nasa'i, and abu daud) (quoted from the mui fatwa on cash waqf) also according to the al-quran surah ali-imran:92 by no means shall you attain al-birr until you spend out (for allah) of what you love; and whatever you spend (from what allah provides you, what you spend for allah), allah surely knows it (surah ali imran [3]: 92) the above verse is used as an argument regarding waqf because after the verse came down there was a friend of the prophet muhammad (pbuh) who gave him the date palm plantation he liked most. rasulullah (pbuh) then held the date palm plantation and distributed the crop to the muslims. (uyun, 2015) research on the productive use of waqf assets in various fields has been carried out. mulasaputra & hamzah (2017) conducted research on optimizing waqf in improving the indonesian economy. in their research they found that the majority of waqf in indonesia are in the form of mosques, schools and islamic boarding schools. the results from the management of the waqf assets are only sufficient to support the operational costs of the assets themselves. they suggest that the use of waqf funds can be used more optimally in concept of waqf in supporting health facilities and its compliance with regulation in indonesia 15 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) various other more productive forms, such as for the establishment of new companies or to financing strategic businesses. hanesti et al., (2018) conducted research on the potential of cash waqf as a solution to addressing the problem of food needs in indonesia. this research shows that the food problem in indonesia lies in the factor of food procurement and distribution. to overcome the food procurement factor, the study created a food procurement model by optimizing the functions of cash waqf and bmt, which bmt became an institution that functions to collect and manage waqf funds so that they can be used to support the food procurement process. on the other hand, the concept of equal distribution of wealth and the prohibition on hoarding that exists in islam needs to be implemented by the government (in its capacity as a leader) to distribute food needs from food-producing areas to areas that are in need. paul & rachmad (2020) in their research on optimizing the management of cash waqf in the form cash waqf linked sukuk (cwls) shows a vast possibilities regarding the development of the use of cash waqf funds. cwls is an innovation in the field of islamic social finance and investment in indonesia which was pioneered by bwi, where cash waqf can be invested in the form of state sukuk. cwls is considered as an innovative breakthrough in the field of waqf management where waqf funds invested in the form of sukuk can be more guaranteed for their principal value, because they are guaranteed directly by the state, and the yields are more competitive, because bwi is exempted from taxation. the results of the cwls have been used in various sectors, namely: a. purchase and renovation of health equipment and buildings for the retina center at the achmad wardi waqf hospital, located in serang, banten. b. free cataract surgery services for 2,513 poor patients at the achmad wardi hospital c. procurement of an ambulance d. implementing a 1,000 glasses program for santri (students in islamic boarding school) the nature of waqf, which can be widely used and can last for a long time, is the main characteristic that distinguishes it from infaq and sadaqah. with the limited ability of the government to provide good health facilities then the possibilities to utilizing waqf to support the existence and sustainability of health facilities in indonesia are very possible. 3. research methodology the method used in this research is a documentary/library research. according to nazir in sari & asmendri (2020) documentary research is a data collection technique by conducting a review of books, literatures, notes, and various reports related to the problem to be solved. according to zed (2014:4-5) library research has at least four main characteristics. first, the researcher is dealing directly with text or numerical data and not with direct knowledge from the field or eye-witnesses such as events, people or other objects. text has its own characteristics and requires its own approach. therefore, text reading techniques (books or articles and documents) are a fundamental part of library research. second, library data is 'ready-made'. this means that researchers do not go anywhere, except only face to face with source materials that are readily available in the library. third, literature data is generally a secondary source, in the sense that the researcher obtains second-hand data and not first-hand original data from the field. fourth, the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) library data condition is not limited by time and space. researchers are dealing with static, fixed information. this means that whenever it comes and goes, the data will never change because it is already "dead" data stored in written records (text, numbers, pictures, tape or film recordings). based on this explanation, the author will collect data by examining and/or exploring various secondary sources such as journals, books, and other documents (either in electronic or printed form) related to the research topic. 4. result and discussion 4.1 the history of health facilities in islamic civilization the essence or main purpose of the application of islamic law is to create the benefit of humans or what is known as maqashid sharia (jauhari, 2011). according to alsyatibi, there are five main elements of the maqashid of sharia, namely religion, soul, children, thinking and property (jauhari, 2011). judging from these elements, islam recognizes both body and mental health (thinking) as a basic human need. this is also confirmed by the many arguments in the al-quran and al-hadith regarding this matter. one of them is in q.s al-isra verse 82 and we send down of the qur’an that which is healing and mercy for the believers, but it does not increase the wrongdoers except in loss (surah al-isra: 82) the healing referred to in the verse means the antidote for diseases that attack the body or the soul (jauhari, 2011). human soul in quran is greatly appreciated, therefore suicidal act which results in the loss of a human soul is prohibited in islam. as in qs annisa verse 29 which allah said o believers! do not devour one another’s wealth illegally, but rather trade by mutual consent. and do not kill each other or yourselves. surely allah is ever merciful to you (qs an-nisa: 29) therefore, health in the islam’s perspective is a basic need which is even become one of the goal of implementing islamic law. starting from this value, history has records that islamic civilization has always paid attention to the provision of health support facilities for the community. the concept of a place of treatment or what is known today as a hospital has even existed since the time of the prophet muhammad (pbuh). where at that time he made a place devoted to caring for people who were injured during the trench warfare (khandak). the first recorded hospital during the islamic era was in 8th century damascus built by the umayyad caliph al-walid. al-walid arranged for guides to be supplied to the blind, servants to the crippled and monetary assisstance to lepers. in the early 9th century during the reign of caliph harun al-rashid, islamic civilization had a mental health facility and it was during this time that bimaristan (bimar: sick people, stan: place) began to be known as a term for hospital. as civilization develops, the existence of hospitals is also increasing. in 1160 ad the andalusian rabbi benjamin tudela quantified over fifty hospitals in cordoba and another sixty in baghdad. (al ansari, 2013) the efforts to improve public health through bimaristan are very innovative. to support the sustainability of the health system, bimaristan will later develop into a medical school. medical students learned basic science and anatomy from tutors and accompanied concept of waqf in supporting health facilities and its compliance with regulation in indonesia 17 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) physicians as they treated patients. bimaristans establish the first medical records program; students recorded the medical treatments and were responsible for keeping these records so physicians could review them if needed for later treatment. the bimaristan medical university hospitals were the first in the world to award medical diplomas and to require licensure. following the death of a patient due to a physician’s mistake, caliph al-muqtadir established a mandatory licensing program for physicians in approximately 931 ad. until as physician passed an examination, he was not allowed to practice medicine. (edriss, rosales, nugent, conrad, & nugent, 2017) to support the education process of prospective doctors studying in bimaristan, a large library was also built next to the bimaristan building itself. in 872 ad, the tulum hospital in cairo had 100,000 books. mustansiriyya university in baghdad had 80,000 volumes, cordoba library had 600,000 volumes, cairo had 2,000,000 volumes, and tripoli has 3,000,000 volumes. to grant some perspective, in the 14th century europe’s largest library, at the university of paris, consisted of a mere 400 volumes. the library at tripoli was 7,500 times the size of that in paris. (miller, 2006) in the early days of islamic civilization, many public baths were established because cleanliness was an important part of islamic teachings (m. t. khan, 2015). with so many public bathing places, the level of cleanliness in the community will be better and can minimize disease transmission. apart from establishing bimaristan and medical schools, the islamic government also encourages the development of health science in the field of chemistry and local medicine (m. t. khan, 2015). to get a healthy body, of course, foods that are a source of nutrition for the body need to be considered. the issue of nutrition and food has also not escaped the attention of the islamic government. according to hamouche (2007) in beirut during the ottoman caliphate there was an office located near the great mosque of beirut called a "basket of bread" which served to distribute food to poor people every friday. unlike the alumariyah madrasa, there are donations that are usually given to the surrounding community in the form of bread and cakes (frankel in m. t. khan, 2015) in other words, the attention of the islamic government in the health sector was quite comprehensive, because besides a curative health facilities, such as bimaristan, preventive facilities that support public health, such as financing for food and public baths, were also taken into account. 4.2 the role of waqf in funding health facilities the absence of special rules in sharia regarding the utilization of waqf funds makes it possible to use in various fields and in various forms. apart from being used to build mosques and educational facilities, as most are found in indonesia, waqf can also be used to finance strategic government projects such as roads, housing, and health facilities. the existence of waqf in the health sector is very important for the community. health waqf is a waqf intended for the construction of hospital buildings, the purchase of medical machines, and various other facilities that can benefit the sick and the weak (ismail, johari, baharuddin, ahmad, & alias, 2019). the utilization of waqf funds in the establishment of bimaristan in the era of the islamic caliphate is divided into two forms. the first form is given the name "primary waqf". primary waqf is a waqf fund for land and hospital buildings. the second form is https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) called "secondary waqf". secondary waqf includes various kinds of waqf after the bimaristan was established such as waqf for medical equipment, commercial buildings, additional land for hospital expansion, books (both general reading and medical-related), clothing, and for various kinds of furniture that can support the bimaristan operations. (al ansari, 2013) the beneficiaries of waqf (mawquf alaihim) are also divided into two types. the first is those that provide health services in bimaristan such as doctors, nurses, pharmacists, waiters, and readers of the al-quran. the second is anyone who use bimaristan facilities, people who seek treatment. the beneficiaries of this waqf do not recognize gender, ethnicity, or religion. although actually the beneficiaries of waqf can be determined according to the wishes of the waqif, but such things are prohibited for waqf intended for hospitals. (al ansari, 2013) the division of the form of waqf into primary and secondary used in bimaristan, shows that muslims have thought about how to manage waqf assets according to their essence. waqf is used not only to build hospital buildings but also to manage it so that the hospital can be guaranteed its operational continuity and its benefits will continue to be felt even across generations. this is what needs to be considered carefully, that waqf for the hospital does not have to be related to the hospital because there are also hospital operating costs that must be fulfilled while the hospital's operations are still running. for example, someone who donates a shop house can intend and declare to the manager of the waqf asset (nazhir) that any income that come from the utilization of the shop house that he donated as a waqf asset is for the hospital's operational costs. this can be done considering that in waqf the person who donates his property (waqif) has the right to determine the use of the benefits of the waqf property. because the operational costs of the hospital are also funded by waqf, the community can enjoy very affordable (if not completely free) health facilities. the running of this system for centuries in islamic civilization, shows that muslims at that time had excellent asset managerial abilities. to get a better understand about how waqf can finance, not only health facilities but also health insurance systems and other social fields for a whole city, we need to see how much waqf assets are managed by muslims at that time. in his research hamouche (2007) included data on waqf assets in algiers (algiers) which is currently known as the capital of algeria. according to hamouche (2007) in algiers, the foundation of mecca and madina had been the largest foundation in the city with 1,558 assets that represented over 40% of the total endowments in the city in 1837. at the end of the ottoman caliphate period and the early days of french colonialization it was estimated that the waqf assets in algiers included 840 houses, 258 shops, 33 stores, 82 rooms (in warehouses), 3 public baths, 11 bakeries, 4 cafes, 1 funduq (warehouse and hotel), 57 gardens (of fruit trees) 62 farms, 6 windmills and 201 ‘ana (when an endowment asset collapsed its land is rented for an investor who paid an annual rent in counterpart of redeveloping the plot). the benefits of waqf assets will certainly be better managed by a waqf institution established by the government. even the government can direct waqf assets to align with government development goals and plans in the social sector and public facilities, by offering waqf schemes in strategic state projects. in order for the benefits felt by the community to continue, it is important to carry out careful management and efficient development of these assets. of course, this process must be closely monitored by state concept of waqf in supporting health facilities and its compliance with regulation in indonesia 19 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) audit agencies and also ulama organizations so that they do not deviate from the laws and regulations and islamic law. 4.3 application of waqf funds in supporting health facilities in indonesia as a dynamic rule of law, indonesia has a principle of organizing the public interest which results in the state's responsibility to realize the welfare of its people, by interfering in the affairs of its citizens from birth to death. the health sector is among these matters, of course. (yustina, 2015) article 170 of law no. 36 of 2009 concerning health explains that health financing in indonesia is carried out as follows: a. health financing aims to provide sustainable health financing in sufficient quantities, is allocated fairly, and is utilized effectively and efficiently to ensure the implementation of health development in order to improve the health status of the community as high as possible b. the elements of health financing as referred to in paragraph (1) consist of sources of financing, allocation and utilization c. sources of health financing come from the government, local governments, the community, the private sector and other sources based on the provisions on health financing in article 170 above, it can be interpreted that it is impossible for the government to bear or carry out health financing on its own, which is one of the main elements for the realization of the highest degree of health for the community. therefore, the government has implemented a national health insurance system (jkn) that involves the participation of all citizens in the form of jkn contribution payments (yustina, 2015). even though it has included all indonesians, the current jkn system is still not optimal, as seen from the financial condition of the bpjs which continues to be deficit. as one of the human needs, the access to health facilities must be easily accessible to all people. not only in terms of easy access due to the even distribution of health facilities throughout the country, but also in terms of whether economic factors should not become an obstacle for someone to get the benefit from health facilities. basically, health facilities have a social orientation and should not be used for profit, sick people really need treatment so that the need for treatment can become an "economic good" with perfect inelastic properties that are easily exploited if there is a profit-seeking motive. in addition, people who are sick are certainly not as productive as usual, which means that their income may decrease, so it is unethical for such people to be charged with health costs which are could be quite expensive. this was also applied in the era of islamic civilization where people who had been discharged from the hospital would be given new clothes and a certain amount of money to compensate for the income they might lose while undergoing treatment (mahdi & fariba, 2013). in indonesia there are three types of hospitals with different functions; first is a government hospital that carries out political and social functions, second is a private hospital that functions socially and the third is a private hospital that functions with a profit orientation (adrian in rahayu & sulistiadi, 2016). although it can help the government in providing health facilities, the fact is (based on data from the indonesian ministry of health in 2019) from a total of 2,877 hospitals throughout indonesia, 1,830 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 5, no 1 (2020) (63%) of which are private hospitals (primadi, budijanto, indrayani, wardah, & khairani, 2020). private hospitals, even those with social orientation, will at least impose medical costs on patients so that health facilities become an exclusive item that can only be enjoyed by people who have the ability to pay. this is where the role of waqf is to bridge these problems. the use of waqf assets is in accordance with the concept of the heyday of islamic civilization, as described in the previous section, can help overcome the problem of health facility financing. the waqf assets of the indonesian people can be directed to support the financing of health facilities such as build the health facilities, operational financing of health facilities, provision of medical equipment, establishment of medical schools, and also to initiate research and drug production, so that health facilities can operate in a sustainable manner. waqf asset management certainly needs to be manage professionally and transparently in order to run effectively. shaikh et al. (2017) argue that a company-like structure is suitable to be applied to a waqf management institution so that its management runs professionally and sustainably. management in the form of a company can also encourage management to run efficiently and effectively like a company with a profitseeking motive. diversification of institutional income sources also needs to be implemented so that waqf management institutions have sources of funds for the short, medium to long term. even though it comes from islamic teachings, but in a pluralistic society with various ethnic backgrounds, religions and beliefs such as in indonesia, the concept of optimizing the function of waqf as a source of sustainable development (especially in the health sector) can still be applied. abdullah (2018) states that most of the 17 development goals of sustainable development goals (sdgs) are in accordance with the long-term goals of maqasid syariah so that waqf managers can develop waqf-based development plans that are in line with the sdgs framework. sdgs is a global action plan agreed upon by world leaders, including indonesia, to end poverty, reducing gaps and protecting the environment the main similarity between the concept of maqashid sharia and the sdgs is realizing sustainable and inclusive development. thus, the concept of waqf-based sustainable development does not conflict with the concept of sustainable development as outlined in presidential decree no.59 of 2017 concerning the implementation of achieving the goals of sustainable development. this alignment has the potential to accelerate the actualization of the concept of using waqf as a driving force for health facilities in indonesia. 5. conclusion in the history of islamic civilization, waqf has been used as a source of financing for sustainable health facilities. bimaristan (hospital) at the time of islamic civilization was in its heyday, financed from the income of the waqf assets from the muslims. not only for curative health facilities but also for preventive health facilities, and not only for establishing but also for maintaining the operational continuity of these health facilities. as one of the human rights, the fulfillment of health rights, including the right to enjoy health facilities, is the obligation of a state. this also applies in indonesia. however, the limited resources available have made this ideal condition yet to be realized. given these conditions and by looking at the large potential of waqf in indonesia, the concept of waqf concept of waqf in supporting health facilities and its compliance with regulation in indonesia 21 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) to fund health facilities as applied in the heyday of islamic civilization can also be applied in indonesia. alignment between statutory regulations in indonesia with the greatest goal of islamic sharia (maqashid syariah) further strengthens the possibility of implementing this policy. one of the important things that need to be considered in implementing this policy is the capability of the waqf management institution in managing the assets of waqf assets so that the benefits can be felt sustainably even across generations. a professional, accountable and efficient waqf management institution is an important element in realizing sustainable and inclusive waqf-based development. reference abdullah, m. 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(2014). metode penelitian kepustakaan. jakarta: yayasan pustaka obor indonesia. https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 75 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 riska delta rahayu1)*, riski delta ningtyas2), muhammad rofiq fatakhudin3), bakhrul huda4) 1,2,3,4sharia economics, faculty of islamic economics and business, sunan ampel state islamic university, surabaya, indonesia abstract tangguh smes is an empowerment program for the community by daarut tauhid peduli east java in entrepreneurship field which was founded in 2020 which coincides with the covid-19 pandemic. it has an impact on delays in the production and sales process. the purpose of this study is to analyze the internal and external conditions of the business and formulate a business strategy that is suitable for tangguh smes. the research method used is a qualitative-descriptive. data collection techniques using observation, interviews, and documentation. the data that has been collected is then analyzed using the ife and efe matrices, swot matrix, ie matrix, and qspm. the result of the ife matrix is 3.05 and efe matrix is 3.00. then the results of swot matrix and ie matrix show that the position is in a growth and development strategy so that strategic choices that can be applied are market penetration, product development, market development, and horizontal integration. the final result of this research can be concluded that the recommendation of the right strategy for tangguh smes from qspm is a market development strategy then followed by a product development strategy. keywords: tangguh smes; covid-19; business strategy; strategy choice. 1. introduction the covid-19 pandemic has an impact on various sectors, including the economic sector. in the economic sector, it can be seen in the economic growth which has decreased significantly throughout 2020. based on data from the badan pusat statistik, the indonesian economy in 2020 experienced a contraction of 2.07% compared to the previous year. this is due to the decreasing level of public consumption. in addition, several companies have had to take time off, cut wages and lay off their employees. these are some of the impacts of the existence of government policies to suppress the chain of spread of covid-19, such as social distancing, psbb, etc. this is shown based on the big data employment analysis that unemployment in indonesia reached 9.77 million people, which increased by 2.67 million people in august 2020 (badan pusat stastik, 2020). in addition, the number of job vacancies advertised tended to decrease to 3,541 in the july 2020 period, which indicates that all sectors are not looking for new workers. thus, this resulted in an increase in the poverty rate of 10.19% compared to the same period the previous year. indef predicts that in 2021 there will be an additional 1.1 million * corresponding author. email address: riskadelta.r@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:riskadelta.r@gmail.com afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 76 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) unemployed people as a result of covid-19 and as many as 2.5 million people will be a new unused workforce which will further add to the new poor (handayani, 2021). on the other hand, micro, small and medium enterprises (msmes) are a support in expanding the market economy which can reduce poverty problems and contribute greatly to improving the regional economy and the national economy (setyanto, 2015). msmes as one of the pillars of the indonesian economy, it is shown that msmes have the ability to absorb the largest workforce, which is 97% also affected. the contribution of msmes to gdp was 60.3% in 2019, but decreased significantly by 38.14% in 2020, namely 37.3%. this of course requires collaboration and synergy of all parties, from the government, business actors, to the community to be able to restore the indonesian economy. in developing and maintaining a business so that it can survive in any condition, strategic planning is needed. this planning requires stages in order to make decisions for the long and short term. strategic planning or what is called strategic management is a field that studies in which it discusses the formulation, execution, and assessment of actions taken to achieve the goals of a particular company or organization (fred, 2004). according to lawrence r. jauch and wiliam f. gluench (1998) that strategic management contains a number of decisions and actions that are used in developing an effective strategy in order to achieve company goals (taufiqurokhman, 2016). this is done by designing strategic designs and implementing programs through existing resources to achieve goals and make optimal use of resources. in strategic management, there are several stages that must be carried out, namely strategy formulation, strategy implementation, and strategy evaluation. in the strategy formulation stage, it includes developing a business mission, identifying an external opportunity and threat, measuring and determining the internal weaknesses and strengths of the company and choosing a strategy that will be applied to certain situations and conditions. therefore, in implementing strategic management, an important first step to take is to formulate problems and select strategies for businesses that will be implemented in a sustainable manner. analysis and strategy selection are used in determining the best alternative action in building the company in order to achieve its mission and objectives. analysis and choice of strategies are based on objective information that has been obtained and involve subjective decision making (fred, 2016). in formulating a strategy there are several crucial things that need to be considered, including: a) the external environment that is used to control and evaluate factors outside the organization or company that have an impact on managerial and operational processes, b) the internal environment used to identify , review, and evaluate the factors that come from the company. these factors are used to determine the superiority of the company's strategy so that it can anticipate the opportunities and threats of the company effectively and efficiently (lawrence & wiliam, 2001). this is because a business cannot be separated from various kinds of changes that originate from these two environmental factors (putriani, 2017). https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 77 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) laz daarut tauhid peduli east java also provides guidance to msmes in order to empower people to be productive in producing products or services through borrowing capital along with management training, character change, and b'usiness development. the development program is called tangguh smes with the “kelompok usaha bersama (kube)” mechanism which is carried out in the handicraft and culinary business sector. the program has been running since 2020 until now. although the program has not reached the public yet, it can help increase family income in the area. the existence of the covid-19 pandemic has also had an impact on tangguh smes, such as stopping production and lack of capital for operations. therefore, it is necessary to have strategic management which requires an initial step, namely conducting an analysis of internal and external aspects which then determines the right strategic choice to run. in line with the background explanation above, the formulation of the problem can be drawn, namely how to identify the conditions of internal strategic factors and external strategic factors in tangguh smes assisted by daarut tauhid peduli east java?; how to formulate and formulate a business strategy for the smes assisted by daarut tauhid peduli east java in the middle of the covid-19 pandemic? while the purpose of this research is to identify internal and external factors of smes, as well as to formulate business strategies and provide recommendations for business strategies that are suitable to be applied to smes assisted by daarut tauhid peduli east java as an effort to develop business in the middle of the covid-19 pandemic. the results of this study are expected to be a benchmark in planning and analyzing effective strategies for the development of the tangguh smes under the guidance of daarut tauhid peduli east java. 2. literature study 2.1 strategy strategy is a way of achieving long-term goals for a business. business strategies can be in the form of geographic expansion, diversification, acquisition, product development, market development, divestment, market penetration, liquidation, and joint ventures (fred, 2012). strategy as a theory related to how companies achieve their competitive advantages (barney & hesterly, 2008). strategy has an important role for an organization so it is necessary to formulate a strategy. strategy formulation requires consideration of alternative strategies so that the right strategy can be determined. in the formulation of a strategy, analysis and choice of strategy are needed which consists of 3 stages, namely the input stage, the matching stage, and the decision stage which can be shown in figure 1.where in the analysis and choice of strategies is carried out by involving subjective decisions based on objective information (fred, 2016). https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 78 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) figure 1. comprehensive strategy formulation framework source: fred, 2016 2.2 input stage the input stage is the stage in formulating a strategy from the basic information that is summarized. in the input stage, three tools can be used, including the ife (internal factor evaluation) matrix, cpm (competitive profile matrix), and efe (external factor evaluation) to obtain basic input information, which will be used for the next stage, namely the matching stage and the decision stage. during the early stages of the strategy formulation process these input tools were used by strategy managers to measure subjectively. effective strategy creation and evaluation is carried out by making various simple decisions in the input matrix concerning strategic factors (fred, 2016). 2.3 matching stage the matching stage aims to get the result of a suitable alternative strategy, but it is not the best strategy. the matching stage relies on the derivative of information from the input stage which is used to match external factors (opportunities and threats) with internal factors (strengths and weaknesses). in this stage, it is a framework in formulating a strategy that can be used in five techniques including the swot matrix, space matrix, bcg matrix, ie matrix, and big strategy matrix that depend on information from the input stage (fred, 2016). 2.4 decision stage the qspm (quantitative strategic planning matrix) matrix is an analytical tool in which strategists assess or evaluate various alternative strategies based on internal and external success that they have identified objectively. qspm is based on internal and external success factors as a step to determine the attractive score (relative attractiveness) of a number of alternative strategies. at the decision stage, analysis and intuition are carried out which are the basis for strategic formulation decisions. the right strategy that can be applied to the company can be determined from the results of the analysis in the second stage or the matching stage which is summarized and re-analyzed to define and formulate an appropriate and appropriate strategy. generally at the decision stage, strategists use a quantitative strategic planning matrix (qspm) which can objectively stage 1: input stage external factor evaluation – efe matrix competitive profile matrix – cpm internal factor evaluation – ife matrix stage 2: matching stage strenghtweaknessopportunitythreat – swot matrix strategic position and action evaluation – space matrix boston consulting group – bcg matrix internal-external –ie matrix grand strategy matrix stage 3: decision stage quantitative strategic planning matrix – qspm https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 79 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) show the most appropriate strategy. the qspm is carried out using analysis from stage 1 (input stage) and results from stage 2 (matching stage) (fred, 2016). 2.5 micro, small and medium enterprises micro, small and medium enterprises (msmes) play an important role in the development of the economy in indonesia. in indonesia, msmes have proven their existence where when the crisis occurred in 1998, small and medium scale businesses were relatively able to survive compared to large companies. micro, small and medium enterprises (msmes) play an important role in economic growth in indonesia. msmes provide a sizeable contribution to the absorption of labor and national income (gdp). in addition, the umkm network is spread to various corners of the region so that it can develop the potential of the wider community (bappenas, 2018). in general, the development of msmes in indonesia has a role in the country's economy, including: a. msmes as actors in economic business activities b. msmes have a fairly large role in the development of the local economy and empowerment of society c. msmes contribute significantly to the expansion of employment opportunities d. msmes create new innovation markets e. msmes make a direct contribution to the balance of payments. 2.6 previous research based on the research of irma wardani and umi nur solikah (2019) entilted “formulation of the strategy for the development of small micro business in the efforts to increase the competitiveness of local agriculture products (case study in sukoharjo district)” which aims to formulate alternative strategies that are applied to develop micro and small businesses in increasing the competitiveness of local products. the results indicate that the right choice strategy is a product development strategy. other research by hany setyorini, mas'ud effendi, and imam santoso (2016) entilted “marketing strategy analysis using swot matrix and qspm (case study: ws restaurant soekarno hatta malang)” shows priority strategies that can be applied to business development, especially in the marketing sector. is to maintain the company's image. based on amiruddin's research (2017) entitled "rategy formulation using swot and qspm analysis in determining the direction of business development (case study: pt consolidated electric power asia)" shows the results of strategies that can be applied by companies are product or service development strategies, strategies o&m, then backward integration strategy. 3. research methodology the research method is to use a qualitative approach with descriptive research type. a qualitative approach is to describe certain social situations or circumstances in detail with relevant collection and analysis techniques (lexy & moleong, 2008). descriptive research is research that puts forward a review of various references that have little in common with the theoretical study approach. however, this descriptive approach describes the facts and characteristics of objects and subjects systematically to solve https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 80 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) current and actual problems (sugiyono, 2005). researchers collect data and information through observation, interviews, and library research. in this study, there are two sources of data used. the primary data source was obtained from the head of the east java daarut tauhid peduli program as an informant who provided data and information through interviews. meanwhile, secondary data sources were obtained from books, journals, articles, and references related to the research topic. in this study, researchers collected data using three methods, including: 1) observations were made by direct observation and then recorded the observations in the field; 2) interviews conducted by a series of question-and-answer activities by researchers with related parties as informants in this study. interview activities were carried out with the head of the daarut tauhid peduli program section for east java; 3) documentation, namely the collection, selection, processing and storage of data and information obtained in the field. the data collection technique used is in accordance with the documented background of the research object and uses other documents to support research data related to the research topic. the process of data analysis and strategy selection in this study was carried out in three stages, namely: 1) the input stage using the external factor evaluation (efe) matrix and the internal factor evaluation (ife) matrix to identify internal strategic factors and external strategic factors in micro and small businesses; 2) matching phase using the swot matrix and internal-external matrix (ie) to determine the various alternatives used to determine the strategy of micro and small enterprises; and 3) the decision stage using the quantitative strategic planning matrix (qspm) is used to formulate a strategy for developing an alternative strategy matrix. 4. result and discussion 4.1 overview of tangguh smes under the guidance of daarut tauhid peduli east java daarut tauhid peduli is a national amil zakat institution located in various regions in indonesia, one of which is located in east java. daarut tauhid peduli east java was founded on march 24, 2019, located in surabaya. there are several programs that are implemented, namely in the fields of social, da'wah, and productive waqf, education, entrepreneurship, and islamic culture. one of the programs implemented by dt peduli jatim in the field of entrepreneurship is the establishment of an empowerment program called smes tangguh. tangguh smes is an empowerment program for the community consisting of kube (kelompok usaha bersama), dtcc (daarut tauhid creative center), and tangguh gerobak. kube (kelompok usaha bersama) is a program to empower the community to produce food and beverage products, such as honey pia dates, coffee and chocolate bread, sponge cake, sweet corn milk drink, and so on. this program has been running since april 2020 which coincides with the covid-19 pandemic. in addition to providing capital to facilitate production operations, daarut tauhid peduli east java also provides assistance and guidance to produce and market products, as well as character building through the concept of qolbu management for the assistants. https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 81 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4.2 identification of internal and external factors tangguh smes under daarut tauhid peduli east java is currently required to identify the internal and external factors that affect the tangguh smes guided by daarut tauhid peduli in order to develop the condition of smes. internal factors consist of strengths and weaknesses, while external factors consist of opportunities and threats for smes under the guidance of daarut tauhid peduli. internal factors include marketing, products and operations, finance, human resources (hr), internal management, and research and development. the following are internal factors in tangguh smes under daarut tauhid peduli east java: a. strength strength is the ability that can provide a comparative advantage for the company among its competitors in the market. strength is a factor that can be controlled by the company. the results of the identification of the strength factors in the tangguh smea assisted by daarut tauhid peduli east java are as follows: 1) tangguh smes produces unique product innovations. 2) tangguh smes produces products that have long durability. 3) tangguh smes are able to produce low production prices but still have quality products. 4) adequate location of tangguh smes to produce and market the product. 5) smes tangguh has high morale human resources (hr). 6) tangguh smes has been able to generate short-term capital independently. 7) the working principles of tangguh smes are in accordance with islamic business. b. weakness weakness is a limitation that comes from resources, skills, and abilities as factors that hinder the performance of a company or organization. the results of the identification of the weakness factors in the tangguh smes under daarut tauhid peduli east java are as follows: 1) tangguh smes has not been able to return its long-term capital independently. 2) tangguh smes have not maximized digital sales. 3) tangguh smes does not yet have a structured management. 4) tangguh smes still produces manual production. 5) tangguh smes has not conducted market research. 6) tangguh smes does not have standardization of employee work, so the quality of its human resources is still low. 7) tangguh smes still lacks sales force and direct promotion media to customers. then, identifying external factors such as opportunities and threats can assist tangguh smes in developing a clear mission, planning strategies to achieve their longterm and short-term goals, and developing various policies. external factors include economic, social and cultural conditions, politics, demographics, strength of negotiations with suppliers, threats of new competitors and threats of substituted products. the https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 82 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) following are external factors for tangguh smes assisted by daarut tauhid peduli east java: a. opportunity opportunity is an important situation that can provide benefits for a company or organization. the results of the identification of opportunity factors for tangguh smes assisted by daarut tauhid peduli east java are as follows: 1) the culinary business has a potential market. 2) consumer loyalty to the product. 3) there are still few competitors for similar products. 4) quality raw materials from good suppliers. 5) products can be sold at any time so that business is ensured that it is not seasonal. 6) increase in product sales under certain conditions, such as a celebration. 7) support from local government in smes development. b. threat threat is an important situation that does not provide benefits for the company or organization. the results of the identification of threat factors in tangguh smes assisted by daarut tauhid peduli east java are as follows: 1) every year there is an increase in the price of raw materials. 2) public perception of the product. 3) the emergence of new competitors in the same field. 4) price-sensitive customers choose products that have lower prices. 5) the level of public consumption that has decreased in certain situations and conditions. 6) types of food and drinks that are increasingly varied. 7) community lifestyle. 4.3 input stage: determine the ife (internal factor evaluation) matrix and efe (external factor evaluation) matrix ife and efe matrices are tools in strategic management which are generally used to assess current business conditions (amirudin, 2017). the ife matrix is a tool used to evaluate the company's internal environment and to represent its strengths and weaknesses quantitatively. the efe matrix is a tool used to examine the company's external environment and to quantitatively identify existing opportunities and threats. in determining the weight of each key factor is given a weight ranging from 0.0 which gives a weak effect to 1.0 which means that it has a strong influence, where the total weight of each key factor must add up to 1.0. meanwhile, in determining the internal matrix rating, it refers to how strong or weak each of the factors affecting tangguh smes, which ranges from 1-4. then, the rating on the external matrix refers to how effective the current strategy of tangguh msmes is in responding to opportunities and threats ranging from 1-4, where scale 4 means the response of smes is very strong, scale 3 means that the response of smes is strong against these factors. 2 means the response of smes is weak, and scale 1 means that the response of smes is very weak against these factors. https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 83 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 1. ife score calculation results internal factors strength weight rating weight x rating 1. tangguh smes produces unique product innovations 0,11 4 0,42 2. tangguh smes produces products that have long durability 0,08 3 0,24 3. tangguh smes are able to produce low production prices but still have quality products 0,08 3 0,24 4. adequate location of tangguh smes to produce and market the product 0,08 3 0,24 5. tangguh smes has high morale human resources (hr) 0,08 3 0,24 6. tangguh smes has been able to generate short-term capital independently 0,05 2 0,11 7. the working principles of smes are in accordance with islamic business 0,11 4 0,42 sub-total 0,58 1,89 weakness weight rating weight x rating 1. tangguh smes has not been able to return its longterm capital independently 0,03 1 0,03 2. tangguh smes has not maximized digital sales 0,03 1 0,03 3. tangguh smes does not yet have a structured management 0,05 2 0,11 4. tangguh smes still produces manual production 0,08 3 0,24 5. tangguh smes has not conducted market research 0,05 2 0,11 6. tangguh smes does not have standardized work for employees, so the quality of its human resources is still low 0,08 3 0,24 7. tangguh smes still lacks sales force and direct promotion media to customers 0,11 4 0,42 sub-total 0,42 1,16 total 1,00 3,05 table 2. efe score calculation results external factors opportunity weight rating weight https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 84 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) x rating 1. the culinary business has a potential market 0,08 3 0,23 2. consumer loyalty to the product 0,05 2 0,10 3. there are still few competitors for similar products 0,08 3 0,23 4. quality raw materials from good suppliers 0,08 3 0,23 5. products can be sold at any time so that business is ensured that it is not seasonal 0,10 4 0,41 6. increase in product sales under certain conditions, such as a celebration 0,10 4 0,41 7. support from local governments in the development of smes 0,03 1 0,03 sub-total 0,51 1,64 threat weight rating weight x rating 1. every year there is an increase in the price of raw materials 0,08 3 0,23 2. public perception of the product 0,08 3 0,23 3. the emergence of new competitors in the same field 0,05 2 0,10 4. price-sensitive customers choose products that have lower prices 0,08 3 0,23 5. the level of public consumption that has decreased in certain situations and conditions 0,08 3 0,23 6. types of food and drinks are increasingly varied 0,08 3 0,23 7. community lifestyle 0,05 2 0,10 sub-total 0,49 1,36 total 1,00 3,00 from table 1 it can be seen that the strength factor has a weighted average score of 1.89; while the weakness factor has a weighted average score of 1.16 meaning that in determining the marketing strategy to increase competitiveness, when compared to the weakness factors of the tangguh smes, it has a greater strength. furthermore, in table 2 the opportunity shows a weighted average score of 1.64 and the threat factor has a weighted average score of 1.36 so that when compared with the threat that will arise it can be seen that the opportunity factor is quite large in determining the competition strategy. therefore, tangguh smes has the ability to exploit its potential into advantages and better performance. 4.4 matching stage: swot matrix (strength-weakness-opportunity-threat) and ie matrix (internal-external) https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 85 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) swot analysis is a method for planning a business strategy that is carried out by monitoring the conditions of the business environment (internal-external environment) so that it is expected to determine the strategic decisions that will be chosen to be implemented. swot analysis is an instrument that has benefits in conducting strategic analysis (basya & silfia, 2020). in a swot analysis, basically, it focuses more on the strengths and weaknesses of the company in taking advantage of opportunities and finding solutions to existing threats. according to robinson, the swot framework provides in-depth basic information to improve company quality and policies (robinson & richard, 2007). meanwhile, according to (rangkuti, 2005), a swot analysis is carried out by identifying various factors that are used as a systematic formulation of a strategy for an organization or company. through this method, the process for making decisions through this method is linked to the development of the mission, objectives, strategies and business policies. in formulating a swot analysis, it is carried out by taking advantage of opportunities and strengths and minimizing weaknesses and threats. in creating a swot analysis matrix, it begins with collecting data and the process of classifying the pre-analysis based on internal data and external data. then make a work sheet by drawing a cross line so that it forms four quadrants consisting of strengths, weaknesses, opportunities, and threats. diagram 1. swot analysis of tangguh smes figure 1 shows that the tangguh smes assisted by daarut tauhid peduli east java is located in quadrant i. quadrant i shows that it is currently in the most profitable condition, where tangguh smes has the opportunity and strength to develop a business. in this condition, the strategy that can be taken is to support an aggressive growth policy (growth oriented strategy) that takes advantage of the opportunities and internal strengths of the company. this also shows that it is possible to continue to carry out activities to enhance growth and development. this means that in the future development of smes tangguh can use a growth strategy that is carried out gradually and according to the priority scale. this strategy is supported by the existence of alternative opportunities to https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 86 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) attract wider consumers by producing quality and attractive products to meet customer satisfaction. the strength-weakness-opportunity-threat (strength-weakness-opportunitythreat) matrix is a matching tool used to assist managers in developing four types of strategies, namely so strategy (strength-opportunity), wo strategy (weaknessopportunity), strategy st (strength-threat), and wt strategy (weakness-threat). so strategy is aimed at taking advantage of external events by using internal forces. the wo strategy is aimed at taking advantage of external events by increasing internal weaknesses. st strategy is aimed at avoiding the impact of external threats by utilizing internal strengths. the wt strategy is aimed at reducing internal weaknesses and avoiding external threats that will arise (fred, 2016). table 3. swot matrix strength 1. tangguh smes produces unique product innovations 2. tangguh smes produces products that have long durability 3. tangguh smes are able to produce low production prices but still have quality products 4. adequate location of tangguh smes to produce and market the product 5. tangguh smes has high morale human resources (hr) 6. tangguh smes has been able to generate short-term capital independently 7. the working principles of smes are in accordance with islamic business weakness 1. tangguh smes has not been able to return its long-term capital independently 2. tangguh smes has not maximized digital sales 3. tangguh smes does not yet have a structured management 4. tangguh smes still produces manual production 5. tangguh smes has not conducted market research 6. tangguh smes does not have standardized work for employees, so the quality of its human resources is still low 7. tangguh smes still lacks sales force and direct promotion media to customers opportunity 1. the culinary business has a potential market 2. consumer loyalty to the product so strategy 1. increase production capacity by utilizing teamwork capabilities and improving hr skills in order to be able wo strategy 1. improve hr skills to make digital sales (w2, w6-o3) 2. conduct market research to determine efe ife https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 87 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 3. there are still few competitors for similar products 4. quality raw materials from good suppliers 5. products can be sold at any time so that business is ensured that it is not seasonal 6. increase in product sales under certain conditions, such as a celebration 7. support from local governments in the development of smes to maintain product quality (s5, s7-o1,o6) 2. marketing actively, both online and offline, with the principle of quality products at affordable prices to maintain consumer loyalty and expand market reach (s4-o1, o2, o4) 3. creating a variety of products to meet diverse consumer tastes (s1, s2-o3, o5) 4. build a network with souvenir shop partners to support product development to a wider market (s5-o7) the various desires of consumers (w5-o1, o3) 3. adding human resources to market products directly to customers (w7-o1, o3, o6) 4. determine positioning to form positive perceptions in the minds of the public (w3, w5-o2) threat 1. every year there is an increase in the price of raw materials 2. public perception of the product 3. the emergence of new competitors in the same field 4. price-sensitive customers choose products that have lower prices 5. the level of public consumption that has decreased in certain situations and conditions 6. types of food and drinks are increasingly varied 7. community lifestyle st strategy 1. expanding the promotion strategy in several areas by utilizing digital technology (s4-t2) 2. maintaining product quality by checking every raw material used, production process, to consumers (s3 -o4) 3. increase innovation, both in products and packaging so that it can attract consumers because the products produced are products that can be consumed directly (s1, s2-t7) wt strategy 1. provide more intensive and consistent hr training and coaching to maximize sales (w6-t3) 2. implement standardization of work and structured operations management so that production is carried out effectively and efficiently (w3, w6-t4) the second matching tool uses an internal-external (ei) matrix including indicators used to formulate a strategy based on internal and external factors. ie matrix is based on two weighted average scores (weight x rating), namely based on the results of ife and https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 88 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) efe calculations. the ie matrix consists of 9 cells, of which cells i, ii, and iv show as growth and construction. cells iii, v, and vii show a defensible strategy is also maintained. cells vi, viii, and ix show as reaping and reducing assets (divestment) (fred, 2016). table 4. internal-external matrix (ie) strong 4,00 – 3,00 medium 2,99 – 2,00 weak 1,99 – 1,00 strong 4,00 – 3,00 i ife = 3,05 efe = 3,00 ii iii medium 2,99 – 2,00 iv v vi weak 1,99 – 1,00 vii viii ix table 4. is the result of the ife and efe matrix grouping. the value score is used as a determinant of the value of the ie matrix based on this position. it can be formulated that the position of the tangguh smes assisted by daarut tauhid peduli east java is in cell i where this position indicates that tangguh smes is in a position of growth and development strategy thus the strategies that can be applied are horizontal integration, market penetration, market development, and product development. 4.5 decision stage: qspm (quantitative strategic planning matrix) the qspm calculation is based on the multiplication of weights obtained from the ife and efe matrices. the qspm also determines the relative attractiveness of each of these strategies, so the next step is to determine the attractiveness score (attractiveness score / as) on key factors in tangguh smes which is determined by observing each internal factor and the main external factor at a certain time. by considering whether this factor affects the choice of strategy made, so that in determining the range of attractiveness scores that can be used are 1 = no attractiveness, 2 = low attractiveness, 3 = moderate attractiveness, and 4 = high attractiveness. is calculating the total attractiveness score (tas) by multiplying the weight by the score of attractiveness (as) in each row. the higher the total attractiveness score, the more attractive the alternative strategy will be. the final step is to calculate the total attractiveness score (tas). by adding up the total attractiveness scores in each strategy column d from qspm (fred, 2016). higher scores indicate a more attractive strategy bearing in mind that all relevant external and internal factors can influence tangguh smes to make strategic decisions. table 5. total attractive score (tas) internal factors internal factors alternative strategies s1 s2 s3 s4 weight as tas as tas as tas as tas strength efe ife https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 89 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 1. tangguh smes produces unique product innovations 0,11 3 0,33 4 0,44 2 0,22 1 0,11 2. tangguh smes produces products that have long durability 0,08 2 0,16 4 0,32 3 0,24 1 0,08 3. tangguh smes are able to produce low production prices but still have quality products 0,08 1 0,08 3 0,24 2 0,16 4 0,32 4. adequate location of tangguh smes to produce and market the product 0,08 3 0,24 2 0,16 4 0,32 1 0,08 5. tangguh smes has high morale human resources (hr) 0,08 2 0,16 3 0,24 1 0,08 4 0,32 6. tangguh smes has been able to generate short-term capital independently 0,05 4 0,2 2 0,1 3 0,15 1 0,05 7. the working principles of smes are in accordance with islamic business 0,11 weakness 1. tangguh smes has not been able to return its long-term capital independently 0,03 3 0,09 4 0,12 2 0,06 1 0,03 2. tangguh smes has not maximized digital sales 0,03 2 0,06 3 0,09 4 0,12 1 0,03 3. tangguh smes does not yet have a structured management 0,05 3 0,15 2 0,1 1 0,05 4 0,2 4. tangguh smes still produces manual production 0,08 3 0,24 2 0,16 1 0,08 4 0,32 5. tangguh smes has not conducted market research 0,05 3 0,15 2 0,1 4 0,2 1 0,05 6. tangguh smes does not have standardized work for employees, so the quality of its human resources is still low 0,08 1 0,08 3 0,24 2 0,16 4 0,32 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 90 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 7. tangguh smes still lacks sales force and direct promotion media to customers 0,11 2 0,22 3 0,33 4 0,44 1 0,11 total 1,00 32 2,16 37 2,64 33 2,28 28 2,02 table 6. total attractive score (tas) external factors external factors alternative strategies s1 s2 s3 s4 bobot as tas as tas as tas as tas opportunity 1. the culinary business has a potential market 0,08 3 0,24 2 0,16 4 0,32 1 0,08 2. consumer loyalty to the product 0,05 4 3 2 1 3. there are still few competitors for similar products 0,08 2 0,16 4 0,32 1 0,8 3 0,24 4. quality raw materials from good suppliers 0,08 2 0,16 3 0,24 1 0,08 4 0,32 5. products can be sold at any time so that business is ensured that it is not seasonal 0,10 4 0,4 2 0,2 3 0,3 1 0,1 6. increase in product sales under certain conditions, such as a celebration 0,10 4 0,4 2 0,2 3 0,3 1 0,1 7. support from local governments in the development of smes 0,03 1 0,03 2 0,06 4 0,12 3 0,09 threat 1. every year there is an increase in the price of raw materials 0,08 4 0,32 3 0,24 1 0,08 2 0,16 2. public perception of the product 0,08 1 0,08 2 0,16 4 0,32 3 0,24 3. the emergence of new competitors in the same field 0,05 1 0,05 3 0,15 4 0,2 2 0,1 4. price-sensitive customers choose products that have lower prices 0,08 2 0,16 3 0,24 1 0,08 4 0,32 5. the level of public consumption that has decreased in certain 0,08 2 0,16 3 0,24 4 0,32 1 0,08 https://creativecommons.org/licenses/by/4.0/ analysis of strategy for tangguh smes assisted by dt peduli east java in the pandemic covid-19 91 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) situations and conditions 6. types of food and drinks are increasingly varied 0,08 3 0,24 4 0,32 1 0,08 2 0,16 7. community lifestyle 0,05 3 0,15 4 0,2 2 0,1 1 0,05 total 1,00 36 2,55 40 2,73 35 3,1 29 2,04 table 7. qspm results for total internal and external factors alternative strategies market penetration (s1) product development (s2) market development (s3) horizontal integration (s4) qspm internal factors 2,16 2,64 2,28 2,02 qspm external factors 2,55 2,73 3,1 2,04 total 4,71 5,37 5,38 4,06 the qspm produces a number of strategies obtained from the results of the ife and efe matrix analysis inputs as well as the matching of the swot and ie analyzes. based on table 7, it shows that of the four alternative strategies from the largest, namely the market development strategy with an attraction value of 5.38, which means that tangguh smes need to expand the market by introducing and marketing products, both offline and digital to new customers geographically, including another market. then the product development strategy with a tas value of 5.37 means that tangguh smes need to make improvements, such as increasing human resource skills and improving production operations with technology in order to produce an efficient and effective process. furthermore, a market penetration strategy of 4.71 means that tangguh smes need to determine market position and conduct market research in order to create diverse products to meet consumer tastes. the horizontal integration strategy is 4.06, which means that tangguh smes can take advantage of partners to support increased sales. therefore, the qspm results show that the largest total attractiveness (tas) and approaching the same value are the market development strategy and product development strategy. tangguh smes should use both of these strategies and can also combine them with a market penetration strategy. a market development strategy is a growth strategy aimed at selling products that have been created in new markets (wardani & solikhah, 2010). the strategy that tangguh smes needs to do to develop the market is by actively marketing and promoting, both online and offline with the principle of quality products at affordable prices to maintain consumer loyalty and expand market reach, improve hr skills to make digital sales, and build network with gift shop partners to support product development to a wider market. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 92 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) meanwhile, the product development strategy is a strategy carried out with the aim of introducing products that have been created in an established market (wardani & solikhah, 2019). in developing strategic products that need to be implemented by tangguh smes, namely by conducting market research to determine the desires of various consumers, markets, and competitors so that they can produce new products that have advantages that can be done through surveys. in addition, tangguh smes need to increase innovation both in products and in packaging so that they can attract consumers because the products produced are products that can be directly consumed through exchange of ideas among members in the kelompok usaha bersama (kube). this is because product development aims to serve existing markets by increasing sales and finding better new products. 5. conclusion the results of the analysis and discussion of research that has been carried out on the tangguh smes assisted by daarut tauhid peduli east java can be seen that the main strength lies in the unique product innovation and is located in a strategic location for production and marketing. based on the results of the ife matrix, it shows that the strength-weighted average score is 1.89, while the weakness factors have a weighted average score of 1.16 which means that tangguh smes has higher strengths than weaknesses in increasing competitiveness. against the market. then, the results of the efe matrix show that the opportunity-weighted average score is 1.64 and the threat factors have a weighted average score of 1.36 which indicates that tangguh smes have a great opportunity in determining market competition strategies compared to threats. that will be faced. furthermore, the results obtained from the matching stage through the swot matrix and ie matrix indicate that tangguh smes are in a growth strategy position and are building with applicable strategies, namely horizontal integration, market penetration, market development, and product development. the results of the decision from the qspm analysis show that the right strategy to be implemented is to carry out a market development strategy which is then followed by a product development strategy. the researchers suggest that strategic steps should be taken by tangguh smes, namely by expanding the market by introducing and marketing products, both offline and online to new geographic consumers including other markets and can use partners as support to increase sales. then, it is necessary to make improvements that can be carried out by holding activities to improve hr skills and improve production operations to produce various product ideas and take advantage of the role of technology in order to produce an effective and efficient process. reference amirudin. 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(2017). analisis swot sebagai dasar perumusan strategi bersaing pada produk asuransi jiwa perorangan ajb bumiputera 1912 kpr pekanbaru. jom fisip, 4(1). rangkuti, freddy. (2005). analisis swot: teknik membedah kasus bisnis-orientasi konsep perencanaan strategis untuk menghadapi abad 21. jakarta: pt gramedia pustaka. setyanto, alief rakhman, bhimo rizky samodra, yogi pasca. (2015). kajian strategi pemberdayaan umkm dalam menghadapi perdagangan bebas kawasan asean. etikonom, 14(2). setyorini, hani mas'ud effendi, and imam santoso. (2016). marketing strategy analysis using swot matrix and qspm (case study: ws restaurant soekarno hatta malang). jurnal teknologi dan manajemen agro industri, 5(1): 46-53. sugiyono. (2005). memahami penelitian kualitatif. bandung: cv. alfabeta. taufiqurokhman. (2016). manajemen strategik. jakarta: fakultas ilmu sosial dan ilmu politik universitas prof. dr. moestopo beragama. wardani, irma & umi nur solikhah. (2019). perumusan strategi pengembangan usaha mikro kecil dalam upaya peningkatan daya saing produk pertanian lokal (studi kasus di kabupaten sukoharjo). jurnal agric, 31(2). https://creativecommons.org/licenses/by/4.0/ istibdal waqf relevance on development of waqf in indonesia 1 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) istibdal waqf relevance on development of waqf in indonesia hariyanto1)*, irham zaki2) 1,2sharia department, faculty of economic and business, airlangga university, indonesia abstract this study aims to describe madzhab hambali’s perspective on waqf istibdal, in which there are many opinions among the scholars regarding the ability to implement istibdal on waqf goods. the differences of opinion among fiqh scholars in responding to the dynamics of waqf, the laws related to waqf and their management procedures are important to discuss, because they will have an impact on the formulation of policies that will be taken in the future. and discuss about waqf istibdal relevance on development of waqf in indonesia by madzhab hambali’s perspective. this research uses descriptive qualitative research with the library research method. the results of this study indicate that waqf istibdal is allowed in the perspective of madzhab hambali and it is very relevant to the development of waqf in indonesia. keywords: waqf, istibdāl, the development, madzhab syafi’i. 1. introduction there are two kinds of worship in islam, namely mahdah and ghairu mahdah. mahdah worship is pure worship which is only a direct relationship between the servant and allah, such as ablution, tayamum, prayer, fasting, and so on. meanwhile, ghairu mahdah is worship that is not only a relationship between the servant and allah, but also with other servants, such as waqf, sacrifice, almsgiving, aqiqah, and so on. it was narrated from abi hurairah radiyallahu 'anhu, that rasulullah saw said: "from abu hurairah radliyallahu' anhu that rasulullah saw. said: "when a person dies, his deeds will be cut off except from three things: almsgiving, a useful knowledge, or a pious child who prays for him." (hr. muslim). some of the scholars translate almsgiving jariyah as waqf, because none of the other alms continue to flow but directly possess the substance and its benefits, even though it is included in the hadith, it is very rare. thus translating alms in the hadith with the main meaning of waqf. (abdul aziz, 2010) waqf is an islamic philanthropy that needs to be empowered for the benefit of the ummah. in the history of islamic development, waqf has played an important role in *corresponding author. email address: hariyantodkk@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:hariyantodkk@gmail.com afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 2 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) supporting the establishment of mosques, islamic boarding schools, majelis taklim schools, hospitals, orphanages and educational institutions and other islamic social institutions. the donated property can be in the form of land or other property. juhaya s. praja explained that objects that can be donated are not only property, but also other property, fixed objects called al-'aqr or moving objects called al-masya '. ibn hajar al asqalani called fixed or immovable objects with the term ghayr al-manqulat and moving objects as al-manqulat. (m. athoillah, 2014) waqf is one of the demands of islamic teachings concerning social life in the context of ijtimā'iyah worship (social worship), because waqf is a form of social worship that can be used for the benefit of other people or humans in general, then the object of waqf must be permanent in nature, such as land, buildings and so on. the principle of immortality that exists in waqf so that many scholars view that waqf is an act of sadaqah jāriyah whose rewards continue to flow even though waqif has died, while the property is still useful. waqf is also a very important part of islamic law. it has a relationship between spiritual life and the socio-economic sector of the muslim community. waqf besides having 'ubudiyah divine in dimension, it also functions as a social community. waqf is a manifestation of a person's strong sense of faith and a high sense of solidarity with fellow human beings. waqf is the glue of the "hablumminallah wa hablum minannas" relationship, a vertical relationship to god and a horizontal relationship to fellow human beings. the practice of waqf, both immovable objects and moving object waqf has been widely practiced by the companions of the prophet, even according to mundzir qohaf, waqf in the islamic era began at the same time as muhammad saw's prophetic period began in medina. the prophet built the quba mosque as the first waqf, then he built the prophet's mosque on the land that the prophet bought from the orphan bani najjar for eight hundred dirhams. (athoillah, 2014) waqf has a very strategic role for the development of the muslim community at all times, both regarding health, education and welfare issues. because, the essence of human life at all times involves these three aspects. it is a pillar of human development because it contains an important element that cannot be left behind, the element of funding (finance), an important factor in today's life. (uu. 41: 2004, 2). as a financial source that is not risky for the recipient. the existence of waqf is increasingly needed both now and in the future, such as the need for building mosques, prayer rooms, madrasas, majlis taklim, organizational buildings, islamic financial institutions, schools, campuses, hospitals, and other facilities. in short, everything will be successful if it is supported by funding through waqf. considering that the nature of waqf is very heavy, the reward of waqf is very large, as a good deed whose rewards will not stop all the time, even though the waqif has died. the heavier the deeds performed, the greater the reward that will be received. likewise, the lighter the worship is done, the smaller the reward will be. however, it is unfortunate that the developments that have been achieved so far are still focused on the fields of worship, education and health alone, while the economic fields https://creativecommons.org/licenses/by/4.0/ istibdal waqf relevance on development of waqf in indonesia 3 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) which are the pillars of modern life have not been widely touched. this fact is unfortunate that the impact was very large, including the effect on the beliefs of the people. (nuruddin. 2015) the current practice of waqf in society is not yet fully orderly and efficient. one proof of this is that among the assets of waqf are not well maintained, abandoned, and even turned into the hands of third parties by means of unlawful means. abandonment and transfer of waqf objects to third parties occurs due to negligence or inability of nazīr to manage and develop waqf property, the attitude of the public who does not care about or do not understand the status of waqf assets which should be protected as a medium to achieve general welfare in accordance with the objectives, functions, and the allocation of waqf. (mubarok, 2008) as time goes by, along with the development and spread of islam to various regions and communities, as well as the birth of a cosmopolitan islamic society, waqf has also undergone dynamic developments, inviting understanding and opinions about waqf and its dynamic management as well. so among the fiqh scholars there were differences of opinion in responding to the dynamics of waqf and the laws related to waqf and the procedures for its management. some of these differences are substantial and some are practical. (tholhah, 2009) can waqf goods in the form of plantations that are no longer productive can be exchanged with other more productive plantation lands, or can they be sold and bought other waqf goods that can benefit mauquf 'alaih? can the damaged and unused land and mosque buildings be exchanged with other land in other places in the midst of the muslim community who use it for congregations or for friday prayers? in an academic context, the discussion of jurists about waqf is very deep and detailed and the principles of fiqh that are used are also various which are based on various hadiths about waqf. in the hambali school of thought, this discussion focuses on the issue of utilization and methods of developing waqf assets in accordance with the legal principles adhered to. what is dominant in the hambali school of thought is that it opens up a lot of space to see more creative mechanisms in the development of waqf assets but it must be carried out very strictly and carefully. therefore, to understand the perspective of the hambali school of thought about istibdal, it is necessary to first explore the main principles contained in the law of waqf law in this school. 2. literature study 2.1 definition of istibdal the problem of exchanging waqf objects in wakaf fiqh is called "al-istibdāl", or "al-ibdal". al-istibdāl, is defined as the sale of waqf objects to buy other objects as a substitute for waqf. there are also those who mean that al-istibdāl is removing the waqf status from an object and replacing it with another object. al-ibdal, is defined as the replacement of waqf objects with other waqf objects, whether they are of the same use or not, such as exchanging waqf in the form of agricultural land with other objects in the form of land for buildings. there are also opinions that interpret al-istibdāl and al-ibdal (tholhah, 2009) https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 4 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the word istibdal is derived from the word badal which means to change or change. while ibdal and istibdal intend to change something by taking something else (al shuwayri, 1995). in short, waqf istibdal means to change property waqf and replace it with other properties such as selling the original one and buying new property (abu zahrah, 1971). the study of scientific views on istibdal found that there were many differences of opinion among the scholars. istibdal (change request). the jurisprudence scholars use the word istibdal, while what is desired is to sell waqf goods both yards or movable goods for money, or to buy goods with money to be donated in exchange for goods sold or bartering waqf goods for other goods. however, another tradition emerged from writers since the past that used istibdal to mean the purchase of goods with money to be donated, ibdal for the meaning of selling waqf goods for money, tabadul or badal for the meaning of bartering (wahbah, az-zuhaili). 4.1 maslahah in istibdal waqf the maslahah performance is an important indicator of islamic law. this is supported by the majority of the ulama mazhab consisting of malikiyyah, syafi'iyah and hanabilah (asni, 2016). based on al-ghazali (1997), maslahah is defined as obtaining, maintaining, developing and maintaining benefits and rejecting harm, damage and vanity. maslahah aims to maintain sharia, which includes five things, namely preserving religion, life, intellectuality, descent and wealth. therefore, all available means to preserve the benefits of the five things are considered maslahah, while any means that function otherwise are considered mafsadah. recognition of maslahah and mafsadah must be in line with sharia authorities (asni and sulong, 2017). according to al-shatibi (1997), there are three levels of maslahah in order of priority, namely daruriyyat something that is really needed or basic needs, hajiyyat complementary needs, and tahsiniyat secondary needs. according to shulthoni and saad (2018), it is proven that waqf is a form of religious use for muslims to accommodate current needs. however, in certain circumstances, the benefits cannot be sustained except through istibdal methods. therefore, the application of istibdal is a mechanism or method to obtain or maintain benefits, as well as to expand benefits according to the times. otherwise, the property will be abandoned and uneconomical (hisham et al., 2013). furthermore, istibdal authorization is a way of maintaining and prioritizing public benefits over individual benefits (sirat et al., 2016). therefore, every property waqf manager must be aware of the sustainability of the benefits rather than the corporal (mawquf) aspect as a corporal element of waqf that has no value if the benefits are destroyed. 4.2 the principles of waqf object apart from the main principles, there are also several other principles related to the object of waqf. the hadith about umar who asked the prophet for advice when he got land in khaibar refers to waqf goods in the form of land (immovable property). therefore, scholars agree on the permissibility of waqf in the form of land or other https://creativecommons.org/licenses/by/4.0/ istibdal waqf relevance on development of waqf in indonesia 5 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) immovable property, on the basis of this very clear hadith (abdullah, 2010). furthermore, regarding movable waqf items, according to imam syafi'i, it is permissible to donate movable goods, on the basis of the hadith which states that rasulullah saw once donated weapons of war and armor to khalid bin walid. according to the syafi'iyah scholars, although the hadith only mentions weapons of war and armor, it is permissible to donate other movable objects, such as books, clothes, the koran, and so on, by accusing weapons of war and the armor. with the use of qiyas by syafi'iyah scholars in this case, making the types of assets that can be donated become wider and more numerous, provided that the movable property that is waited is permanent, not damaged or used up. that is, it is not permissible to donate movable items such as food, drinks, candles, fragrances and so on, which take advantage of them by using them which depletes their substances (abdullah, 2010). the majority of scholars other than hanafiyyah agree on the permissibility of waqf for items that can be moved absolutely, such as mosque tools. for example lamps and mats, various kinds of weapons, clothes, furniture, both items that are donated independently, are referred to by the texts, or are applied in tradition, or follow others such as yards. this is because the majority of scholars do not require a perpetual time for the validity of waqf. therefore, waqf is valid, either permanently or temporarily, for charities or families. hanafiyyah circles do not allow waqf items that can be moved. according to them, items that can be moved are buildings, plants, unless they follow the yard, or in texts such as weapons and horses, or apply in traditions, such as book waqf, mushaf, axes, pickaxes, pots, corpses and clothes. corpses, dinars, dirhams, items that can be weighed, goods that can be weighed, boats with merchandise. these items can be donated because the community has practiced them (wahbah, azzuhaili) the syafi'iyah scholars require that the objects that are donated must be clear and concrete, not covered by debt collateral, become full wakif property that can be transacted in buying and selling and the like, have benefits, and provide long-term benefits. thus, it is illegal to use waqf for the benefits of goods without the object, such as the benefits of the goods being leased or the benefits of the goods that are inherited or the waqf that is still being covered. waqf is not valid for goods that have no benefits and benefits, such as waqf aniing, pigs, wild animals, wild birds that are not suitable for hunting. it is illegal to donate goods that cannot always be used, such as food, beverages (in the form of drinks, not water in general), candles, perfume, because the benefit of food is in its consumption (wahbah, az-zuhaili). 4.3 aspects of status change imam ahmad bin hanbal in the book al-musnad narrated a hadith about waqf, namely: "has told us yahya from ubaidullah has reported to me nafi 'from ibn umar, that umar radliyallahu ta'ala' anhu brought a war horse, then umar gave it to rasulullah sallallahu 'alaihi wasallam was used by someone. then umar got the news that what he had been waiting for was being sold. so he asked the prophet sallallaahu' alaihi wasallam if he could buy it back. he then replied: "don't buy it and take back your alms. "having told us yahya bin ghoilan told us risydin had told me 'amru ibnul harith https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 6 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) that taubah bin namr had told him, that abu' ufair bin sari 'had told him, that a man asked ibn' amru bin al ' ash said: "an orphan is in my care and i donate to him a slave girl, then the orphan dies and i am his heir." so abdullah bin 'amru said: "i will report to you something that i have heard from rasulullah sallallahu' aliahi wasallam, umar bin khaththab once gave a horse in the way of allah then he found the friend who was represented by the horse to sell the horse, then umar wanted to buy it back. he asked rasulullah sallallahu 'aliahi wasallam, and the prophet forbade him saying: "if you have given alms, let him pass”. the first hadith above tells about the sale of waqf goods in the form of horses, where when umar got the news that the horse that had been donated was being sold, he then asked the prophet, is it okay if the horse he had donated was bought back, the prophet replied: "don't you buy it. and take back your alms ", which means that umar is not allowed to pull back the horse that he has donated even by buying it. however, in this hadith what was forbidden by the prophet was umar's intention to withdraw the waqf property that had been donated, while for the waqf horse that was sold by someone who used the horse did not get a prohibition from the prophet. while the second hadith tells of a man asking ibn 'amru bin al-'ash, about an orphan who was donated (donated) to him a slave girl, where the orphan was in the man's care, then the orphan died. and the man became the heir, abdullah bin amru told the man about the first hadith, that it is forbidden to withdraw the waqf property that has been donated, even though in this hadith the waqf giver becomes the inheritor of the waqf property that he previously endowed. . ibn qudamah, one of the hanabilah scholars in the book al-muqni 'conveyed the following: "we took the argument from one of the narrations, that umar bin khattab wrote a letter to sa'ad bin abi waqqash when the baitul mall in kufa was stolen, "move the mosque which is located in the area of tamarin (where the owner of dates). then, make the baitul mall in the position of the qibla direction. thus, the mosque will continue to have people praying”. the incident was known by the other friends, and they did not disagree at all so it was the ijma’ (consensus) of the friends. according to almaimuni, it is obligatory to sell or move waqf property because the guardian has to do something for the benefit. according to shaykh taqiyuddin, waqf property can be bought and sold or transferred if there is a need and replaced with the same property, if there is no need it is also permissible, but replaced with better assets”. from the events in the hadith narrated by imam ahmad bin hanbal in the book al musnad and ijam 'friend conveyed by ibn qudamah in the book al-muqni' above, imam ahmad bin hanbal and the ulama hanabilah allow changes in waqf property, either with how to be transferred, exchanged, or sold. because in the hadith, the prophet only forbade umar to take back the horse he had donated and did not prohibit someone who had sold his wakanan horse. and in the ijma 'friend, from what umar bin khattab did to the mosque was an incident whose purpose was for the benefit of the ummah, namely maintaining the security of the baitul mall in kufa, moving the mosque for the benefit https://creativecommons.org/licenses/by/4.0/ istibdal waqf relevance on development of waqf in indonesia 7 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) of goods other than the mosque (baitul mal). , let alone moving the mosque or changing its status for the benefit of the mosque itself. this incident was witnessed by the friends, so that it became an indication that the friends agreed with what umar was doing, and it was concluded by imam ahmad bin hanbal that this was an ijma 'or consensus from the friends. 3. research methodology this research is a qualitative descriptive study. descriptive research according to whitney (in nazir, 1988: 63) is research to find facts with the right interpretation. studying problems in society, the manner of society and certain situations, including the relationship between activities, attitudes, views and ongoing processes and the effects of a phenomenon. the purpose of this research is to create descriptions, descriptions or paintings in a systematic, factual and accurate manner regarding the facts, characteristics and relationships between the phenomena being investigated. the technique of obtaining information through purposive sampling technique (information retrieval based on objectives). while the data collection technique is done by documentation and literature study. the data in this study will be analyzed qualitatively. qualitative research is a procedure that produces descriptive data in the form of written or spoken words or observed behavior. qualitative data analysis requires researchers to carry out activities simultaneously by collecting data, interpreting data and writing research reports. (creswell, 2009). thus data analysis is not carried out separately from data collection, but is an activity carried out jointly. during data collection, researchers move interactively in 3 components of analysis, namely data reduction, data presentation and final conclusions / verification (sutopo, 2002) 4. result and discussion 4.1 change in the status of waqf assets uu no. 41 of 2004 in uu no. 41 of 2004 waqf assets that have been donated are prohibited from being used as collateral, confiscated, granted, sold, inherited, exchanged or transferred in other forms of transfer of rights. however, the provisions referred to are exempted if the waqf assets that have been donated are used for the public interest in accordance with the general spatial planning (rutr) based on the provisions of the prevailing laws and regulations and do not conflict with sharia, the implementation can only be done after obtaining written permission from the minister. with the approval of the indonesian waqf board. waqf assets whose status has been changed must be exchanged for assets whose benefits and exchange rate are at least the same as the original waqf assets, provisions regarding changes in the status of assets shall be further regulated by government regulation 4.2 waqf regulations in indonesia waqf is sadaqah jariah (sustainable charity) that provides sustainable rewards to givers and long-lasting benefits for the public (mahamood, 2007). a waqf is not merely a form of worship but the distribution of wealth which has an important role in increasing https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 8 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the economic development and social equality of a country. expanding the meaning of waqf in the current situation has received attention in several muslim countries. waqf is one of the islamic financial institutions which historically has contributed greatly to the development of a country, especially infrastructure development. professional management of waqf and awareness of the muslim community to distribute waqf are two important factors that support the success of waqf in supporting various sectors of the economy. however, in the economies of contemporary islamic countries, the significant role of waqf in state development is still not maximized. from the institutional side, based on the results of the fgd, up to 2018 there were 192 recorded institutions that obtained bwi permits to manage cash waqf funds, including 15 islamic financial institutions managing cash waqf (lks-pwu). in addition to institutional nazir, 66% of nazir in indonesia are individual nazir, while the other 16% are organizational nazir and the remaining 18% are legally incorporated nazir. of these, only 16% worked full time. more than that, from an institutional point of view, bwi as a regulator also plays a dual role, namely being an organization / institution that manages waqf funds. although indonesia is listed as the country with the largest muslim population in the world, the realization of its waqf funds is still low. based on the records of the indonesian waqf board (bwi), the realization of the collection of waqf funds up to 2017 is still at rp. 199 billion. this amount consists of contributions from the central bwi, regional bwis and collections from other waqf fund management institutions. the largest collection is obtained from institutions / institutions in the form of foundations. most of these foundations also manage other islamic social funds such as zakat, donations and alms. meanwhile, the accumulation of waqf for immovable objects is currently quite high. as of 2016, donated land in indonesia reached 435,768 plots of land with an area of 4.2 million hectares, of which about 66% already have a waqf certificate. however, bwi stated that the potential for indonesian waqf actually reached idr 180 trillion. meanwhile, according to some experts, the potential for cash waqf in indonesia can also reach idr 3 trillion per year nasution (2005). many countries in the world have made reforms in legislation related to the welfare of the wider community, including in several countries where the majority of the population is muslim, one of which is indonesia. in this case the indonesian government has enacted law no. 41 of 2004 concerning waqf. meanwhile, the definition of waqf according to the waqf law no. 41 of 2004 wakaf is a waqif legal act to separate and / or give up part of his property to be used forever or for a certain period of time in accordance with his interests for the purposes of worship and or general welfare according to syari'ah. 4.3 law istinbath of hambali school the scholars of the hambali school of thought include fuqaha who allow istibdal waqf on the basis of fairly rational considerations. madzhab hambali can be classified into fuqaha which agrees with the statement that waqf does not include an order that is ta'abbudiy (which cannot be rationalized), but is more ta'aqquliy (which can be https://creativecommons.org/licenses/by/4.0/ istibdal waqf relevance on development of waqf in indonesia 9 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) rationalized) and whose ultimate goal is to benefit the people. the previous description has shown that the law of istibdal origin of waqf assets is not permitted except for an emergency condition and for a benefit in the context of maintaining the sustainability of the benefits of the waqf assets continuously as this is the essence of waqf so that it is referred to as shadaqah jariah. the basis for the consideration of istibdal by the hambali school of thought is the existence of an emergency condition and for the benefit of the benefit, because the law of origin of istibdal is haram unless there are emergency reasons and reasons for maintaining the purpose of the waqf itself. therefore, islamic jurists set various legal requirements so that this practice is not abused in its implementation. it is clear that the method of legal istinbat used by the scholars of the hambali school of permitting the sale or replacement of waqf property (istibdal) is due to considerations of benefit to provide benefits of wakaf assets which are no longer useful. however, although the hambali school of thought allows istibdal waqf, they still limit the istibdal mechanism of the waqf property. the limitations imposed by hambaliyah scholars are: a. that the sale of waqf assets in the form of the hambali madzhab mosque allows it based on ijma 'which was carried out by a friend of umar bin khatab who had moved the mosque, as previously explained. however, the hambali madzhab allows the istibdal waqf of the mosque when it is in an emergency or the mosque has been abandoned by the community. b. for waqf assets other than mosques, madzhab hambali is of the opinion that it is permissible to do wakaf assets as long as the benefits of the waqf assets cannot be used and if the assets can still be utilized, then according to the hambali school of religion it cannot be donated. c. if the assets of waqf have been sold, the proceeds from the sale may be bought for anything (other waqf goods, of a kind or not), as long as the purchased assets are beneficial for the public interest, because the basic principle in waqf is the optimal use of the assets for the public interest. d. if the property of waqf is in the form of an animal, but can no longer be used and then sold and the proceeds from the sale are not sufficient to buy another animal of the same type and quality, then it is permissible to buy another animal that is not of the same type and not of the same quality as the available money, so that it can still be waqf recipients use. in addition, madzhab hambali also limits the subject or perpetrator who commits the donation of waqf property, in other words it does not allow the istibdal of waqf property to be carried out by just anyone. here the hambali school only allows the sale of waqf to be carried out by the judge if it is for the benefit or benefit of the public. meanwhile, the waqf that is allocated by individuals of the hambali school of thought is that only nadzires are allowed to sell their waqf assets, which of course must first obtain permission from the judge. from this analysis, the aspect of benefit that is prioritized by the hambali school of law in taking the law is permissible istibdal of waqf assets rather than having to maintain the permanence of waqf assets, especially waqf assets which are no longer useful. in https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 10 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) ushul fiqh, consideration of the aspect of benefit is commonly known as maslahah mursalah and some scholars agree that it is used as a legal basis in determining islamic law. mashlahah is a beneficial action that has been directed by shari '(allah) to his servants for the sake of maintaining and safeguarding his religion, soul, mind, offspring and property. maslahah is also defined as getting benefits and rejecting harm. the consideration of the hambali school of thought regarding the ability of istibdal of waqf objects is based on the purpose of the existence of waqf to get benefits from the assets donated and not from the waqf objects. so when the wakaf property cannot be used for some reason, it will remove the essence of the waqf itself. actions of this kind are the same as giving rise to harm and redundancy of assets or objects that can actually be used. with the existence of istibdal waqf it will provide more benefit and benefit to the community. istibdal does not necessarily eliminate the physical property of waqf, but only changes the type and appearance of the waqf property which is more useful. as the opinion of the hambali school of thought allows the sale of waqf assets, but the proceeds from the sale must be bought back more useful waqf assets. as with the concept of maslahah, according to al-ghazali, it aims to protect five things including religion, soul, descent, property and reason. of the five aspects, one of the objectives of the maslahah is to protect property. when it is related to the opinion of the hambali school of thought regarding the ability of wakaf property, it is very relevant where the purpose of istibdal is to protect property so that it is not damaged and can still be used. because if waqf assets that are no longer productive are just left alone, it will also damage waqf assets. in addition to considerations of benefit, the hambali school of thought has other considerations in allowing istibdal waqf, which must be in an emergency. this means that in fact the hambali school of thought is still guided by fiqh that basically waqf cannot be replaced or traded because by the hambali school this can be done in an emergency, when it is not in an emergency, istibdal waqf is not allowed. the basic concept of emergency in the legal istinbat carried out by madzhab hambali is quite reasonable as in the rule of fiqh that in an emergency a person is allowed to do something that was originally not allowed. as in the principle of fiqh: "kemudharatankemudharatan allows things that are prohibited”. these principles are the basis for scholars in conducting ijtihad on islamic law. so that what is done by the hanbali madzhab regarding the ability of istibdal waqf is quite rational and has a basis. in addition, the opinion of the hambali school of religion regarding the ability of istibdal waqf if we draw its relevance to the contemporary era, it will be very suitable. we can illustrate this if the waqf assets which then cannot be used for various reasons including disasters or others can no longer be used so that they are only left alone, while on the one hand, waqf assets such as land are increasingly expensive and limited. then it will be redundant and waste the wealth of waqf and it will cause harm to society. 4.4 the relevance to the growth of waqf in indonesia based on the analysis of the opinion of the hambali school of thought, it can be https://creativecommons.org/licenses/by/4.0/ istibdal waqf relevance on development of waqf in indonesia 11 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) understood that the hambali school of thought allows istibdal waqf with the consideration of taking advantage of it. in indonesia, the implementation and management of waqf has actually been regulated in such a way as is stipulated in law of the republic of indonesia number 41 of 2004 concerning waqf. islamic fiqh does not discuss the procedures and mechanisms for implementing waqf in complete and detail. however, pp no. 28 of 1977 and regulation of the minister of religion no. 1 of 1978 regulates more complete instructions as well as in the law of the republic of indonesia number 41 of 2004 concerning waqf. according to law of the republic of indonesia number 41 of 2004 concerning waqf, parties wishing to donate their land must come before ppaiw to make a pledge of waqf. nadzir is obliged to manage and develop waqf property in accordance with its purpose, function and allotment. the management and development of waqf assets by nadzir as referred to in article 42 is carried out in accordance with sharia principles. the scholars also agree that nadzir is trusted for the waqf property he holds. as a person who has been trusted, he is not responsible for replacing the lost waqf property, if the loss of the item is not due to accidental or negligent factors. first, the management and development of waqf assets as referred to in paragraph (1) shall be carried out productively. second, in terms of the management and development of waqf assets as referred to in paragraph (1), a guarantor is required, then a sharia guarantor institution is used. third, in managing and developing waqf assets, nadzirs are prohibited from making changes to the allocation of waqf assets except on the basis of a written permission from the indonesian waqf board. fourth, the permit as referred to in paragraph (1) can only be granted if the waqf property cannot be used in accordance with the allotment stated in the waqf pledge. in accordance with article 45 of law of the republic of indonesia number 41 of 2004 concerning waqf, a nadzir can regenerate or be replaced with provisions, including: 1. in managing and developing waqf property, nadzir is dismissed and replaced with another nadzir if the nadzir concerned: a. died for an individual nadzir; dissolved or dissolved in accordance with the provisions of laws and regulations applicable to organizational nadzir or legal entity nadzir; b. at his own request; c. not carrying out their duties as nadzir and / or violating the prohibited provisions in the management and development of waqf assets in accordance with the provisions of the prevailing laws and regulations; d. sentenced to a criminal sentence by a court that has permanent legal force. 2. termination and replacement of nadzir as referred to in paragraph (1) shall be carried out by the indonesian waqf board. 3. the management and development of waqf property by other nadzir due to dismissal and replacement of nadzir shall be carried out with due observance of the designated waqf property allocation and the purpose and function of the waqf. in the law of the republic of indonesia number 41 of 2004 concerning waqf, the issue of istibdal is included in the law of exemption (al-hukmu al-istitsna'i). as mentioned in chapter iv article 40 and 41 paragraph (1). although basically in law https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 12 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) no. 41 of 2004 concerning waqf prohibits waqf assets for: 1. made a guarantee; 2. confiscated; 3. be granted; 4. sold; 5. be inherited; 6. exchanged; or 7. transferred in the form of other transfer of rights. however, there are exceptions related to the sale of waqf assets as referred to in article 41 paragraph: 1. the provision as referred to in article 40 letter f is exempted if the waqf assets that have been donated are used for public interest in accordance with the general spatial planning (rutr) based on the provisions of the prevailing laws and regulations and do not conflict with sharia. 2. the implementation of the provisions as referred to in paragraph (1) can only be carried out after obtaining written permission from the minister with the approval of the indonesian waqf board. 3. waqf assets whose status has been changed due to the exemption provisions as referred to in paragraph (1) must be exchanged for assets whose benefits and exchange rates are at least the same as the original waqf assets. 4. provisions regarding changes in the status of waqf assets as referred to in paragraph (1), paragraph (2), and paragraph (3) shall be further regulated by a government regulation. from the provisions listed starting from articles 40 and 41 above, it can be seen that there is a principle of permissibility to sell or replace (istibdal) waqf assets. however, it must be accompanied by caution in exchanging waqf goods, and still emphasizing efforts to maintain the immortality of waqf items as long as their conditions are still normal. but on the other hand, it has also opened the emergency door even though it is not genuine (making problems easier). taking into account the contents of the laws and regulations (law of the republic of indonesia number 41 of 2004 concerning waqf), it can be concluded that the law also allows for the sale or replacement (istibdal) of waqf assets. however, in the law of the republic of indonesia number 41 of 2004 concerning waqf there is also a precautionary principle in the process of selling or replacing (istibdal) the assets of waqf. uu number 41 of 2004 article 42 and article 43 regulates the management of waqf that nadzir is obliged to manage and develop waqf property in accordance with the purpose, function and allocation of the waqf furthermore, the law determines the principles in the management of waqf, with one of the points being the second point that waqf must be carried out productively, besides that in the fourth point it is explained that for waqf that is neglected or originating from abroad, the management and development of assets waqf objects from individual foreign citizens, or foreign organizations and foreign legal entities on a national or international scale, as well as abandoned waqf https://creativecommons.org/licenses/by/4.0/ istibdal waqf relevance on development of waqf in indonesia 13 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) assets, can be made by indonesian waqf bodies. from the clause of law number 41, it can be explained that there is an obligation to manage waqf productively and there is no need for waqf to be neglected. one of the ways to manage waqf assets in order to remain productive is by means of waqf assets that have been neglected or that are no longer productive and replaced with more productive waqf assets so that the waqf can still provide benefits to the community. after the explanation regarding the management of waqf, especially in indonesia, which is stated in the law of the republic of indonesia number 41 of 2004 concerning waqf, it is substantially the same as what was conveyed by the hambali school of thought. broadly speaking, both of them have the same perception of the management of waqf assets, especially the problem of istibdal waqf, namely: first, both in the hambali school of thought and in the law of the republic of indonesia number 41 of 2004 concerning waqf in indonesia it allows the sale or istibdal replacement of waqf assets. second, although istibdal waqf is allowed, in practice it must be based on the principle of benefit and accompanied by an element of caution. third, the subjects who are only allowed to do istibdal on waqf property are judges or nadzir and should not be done by just anyone to avoid mudharat. 5. conclusion hambali school allows istibdal waqf based on emergency conditions and the principle of benefit such as loss of function and benefits of the waqf property. according to the hambali school, the ability of istibdal waqf has a consequence that if the waqf property has been sold, the proceeds from the sale must be bought back the waqf property which of course has a beneficial value for the public interest considering the basic principle in waqf is the use of assets for the public interest. the hambali school only allows the sale of waqf to be carried out by the judge if it is for the benefit or benefit of the public. while waqf that is intended by individuals is only the nadzir party who is allowed to sell the waqf property which of course must obtain permission from the judge first. the ability of istibdal waqf according to the hambali school is quite relevant to the existing conditions in indonesia, where this opinion is in accordance with several waqf regulations in indonesia as stipulated in law number 41 of 2014 concerning waqf which is permitted under the terms of the law. certain that has been set. the ability of istibdal waqf by madzhab hambali with law number 41 of 2014 concerning waqf basically has the same goal, namely to optimize the benefits and empowerment of waqf assets. reference abdullah al-kabisi, muhammad abid. 2003. ahkam al-waqf fi al-syari’ah alislamiyah, terj. ahrul sani fathurrahman, jakarta: iiman. abdullah, luqman haji. 2010. istibdal harta wakaf dari perspektif mazhab syafi’i, journal of fiqh. no. 07, 71-82. abdullah, mohammad. 2017. waqf, sustainable development goals (sdgs) and https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 4, no 1 (2019) 14 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) maqasid al-shariah. international journal of social economics. doi 10.1108/ijse 10-2016-0295. abu abdillah ahmad bin muhammad bin hanbal bin hilal bin asad al-syaibani, musnad al-imam ahmad bin hanbal. beirut: muassasah al-risalah, juz ix.. 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(2018). cooperative-waqf model: a proposal to develop idle waqf lands in malaysia. isra international journal of islamic finance, 10(2), 225–236. https://doi.org/10.1108/ijif-07-2017-0012 al-syarbini, syamsuddin muhammad bin al-khatib, mughni al-muhtaj ila ma’rifati ma’ani al-fadhi al-minhaj, beirut: dar al-ma’rifah. athoillah, m. 2014. hukum wakaf benda bergerak dan tidak bergerak dalam fikih dan peraturan perundang-undangan di indonesia, bandung: yrama widya. deks bank indonesia – des-feb unair. 2016. wakaf: pengaturan dan tata kelola edisi pertama. jakarta: deks bank indonesia. firmansyah, hamdan. 2019. penafsiran ayat-ayat ahkam tentang wakaf, al-awqaf: jurnal wkaf dan ekonomi islam. vol. 12, hal. 1-9 ibn al-hajjaj, al-imam muslim. 2015. shahih muslim, beirut: dar al-kotob al-ilmiyah. ibnu qudamah al-maqdisi, imam muwaffaq ad-din abi muhammad abdullah bin ahmad bin muhammad bin. 2005. al-muqni’ fi fiqhi al-imam ahmad bin hanbal, beirut: dar al-kotob al-ilmiyah. kementerian perencanaan pembangunan nasional/ badan perencanaan pembangunan nasional. 2019. masterplan ekonomi syariah indonesia 2019-2024 hasil kajian analisis ekonomi syariah di indonesia. mahasna, ali salama dan almuin, nani. analisis. 2019. hukum tukar guling tanah wakaf (studi kasus tanah wakaf di indonesia). al-awqaf: jurnal wkaf dan ekonomi islam. vol. 12, hal. 86-104. mauluddin, m. i., & rahman, a. a. (2018). cash waqf from the perspective of majelis ulama indonesia (mui) and the scholars of aceh: an analysis . new developments in islamic economics, 49–66. https://doi.org/10.1108/978-1-78756-283-720181004 mubarok, jaih. 2008. wakaf produktif, cet. ke-1, bandung: refika offset. muhammad azzam, abdul aziz. 2010. fiqh muamalat: sistem transaksi dalam islam edisi pertama, terj. nadirsyah hawari, jakarta: amzah. nuruddin, muhammad. 2015. memahami hadis wakaf dalam konstalasi masyarakat global, ziswaf: jurnal zakat dan wakaf, vol. 2, no. 1, hlm. 134. suhaimi, f. m., rahman, a. a., & marican, s. (2014). the role of share waqf in the socio-economic development of the muslim community: the malaysian experience"corporate social responsibility, waqf system and zakat system as faith based model for poverty reduction". humanomics international journal of social https://creativecommons.org/licenses/by/4.0/ https://doi.org/10.1108/ijif-07-2017-0012 https://doi.org/10.1108/978-1-78756-283-720181004 istibdal waqf relevance on development of waqf in indonesia 15 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) economics world journal of entrepreneurship management and sustainable development, 30(3), 227–254. http://dx.doi.org/10.1108/wjemsd-09-2013-0052 tholhah, hasan. 2009. istibdal harta benda wakaf, jurnal wakaf dan ekonomi islam, vol. 2, no. 03. uu nomer 41 tahun 2004 tentang wakaf https://creativecommons.org/licenses/by/4.0/ http://dx.doi.org/10.1108/wjemsd-09-2013-0052 the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange 147 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange kiran salsabilah1)*, abdul hamid habbe2), nirwana3) 1,2,3departement of accounting, faculty of economy and business, hasanuddin university, indonesia abstract this research aims to analyze the effect of sukuk structure and sukuk guarantee status on sukuk rating. the research was conducted based on companies in the financial sector and non-financial sector listed on the indonesia stock exchange and included in the rating conducted by pt pefindo for the period 2015-2019. a total of 65 samples were selected using purposive sampling method. the data source in this study is secondary data in the form of the company's annual financial statements. the data analysis methods used are ordinal logistic regression analysis the results showed that the sukuk structure has an opportunity to lower the sukuk rating, while the sukuk guarantee status has the opportunity to increase the sukuk rating. then for simultaneous test results, sukuk structure and sukuk guarantee status have an effect on sukuk rating. key words: sukuk structure, sukuk guarantee status, sukuk rating 1. introduction in islam, the property owned by every human being is only a deposition from allah swt as the sole absolute owner of all his creations. human beings are only limited to carrying out the mandate of allah swt to manage and utilize property in accordance with his provisions. one form of management and utilization of property in islam is investment. investment according to islam is the investment of funds or investment of capital for a particular field whose activities are not contrary to sharia principles either, the object or the process. generally, the purpose of investment is to make the property owned more productive. the development of investment forms today is not only limited to investment in the real sector, but also developing into the non-real sector that is investment in financial assets or commonly referred to as indirect investment with various forms of instruments. the capital market becomes a forum for investing in financial assets. in indonesia, the term for the capital market is the indonesia stock exchange or commonly abbreviated to idx. a wide range of financial instruments are traded without the exception of products in accordance with sharia principles. sukuk is one form of islamic financial instruments in the capital market that is growing very rapidly and promising opportunities. sukuk according to the fatwa of the national sharia council (dsn) no.32/dsnmui/ix/2002 is a long-term securities based on sharia principles issued by the company (issuer) to sukuk holders provided that they will get a revenue share and pay back sharia bond funds at maturity. sukuk becomes a financial instrument where the market is very responsive. responsive stock market reaction is projected one of them by looking at abnormal return as a measurement indicator. rizaldi (2020) in his research shows that there is a significant abnormal return around the date of issuance of sukuk in the period 2014-2019 which means that investors respond to sukuk issuance. sukuk has a privilege *corresponding author. email address: kiransalsabilahhh08@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:kiransalsabilahhh08@gmail.com afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 148 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in the eyes of investors compared to other islamic financial instruments. sukuk provides a more competitive income or profit sharing ratio and is paid monthly in rewards and face value up to sukuk maturity. in addition, investors can earn additional income in the form of margin (capital gain), and can avoid elements that are prohibited in peace such as riba, gharar and maysir. table 1. corporate sukuk development data in indonesia sukuk issuance is distinguished into two namely, corporate sukuk and state sukuk. the rapid and consistent development of corporate sukuk in indonesia rose from 2015 to october 2020 as presented in table 1 reaching 271 sukuk issuances with an accumulated issuance value of 54.54 trillion and an outstanding sukuk of 163 with a value of 31.89 trillion. this increased from year to year with an accumulation of sukuk issuance by 211% (ojk, 2020). the increase of an average of 30% annually for the issuance of state sukuk also shows that sukuk is very promising especially in its contribution in financing the state budget (apbn). the total accumulation of state sukuk issuance until october 2018 has reached more than 950 trillion with outstanding as of october 25, 2018 of 657 trillion (ministry of finance, 2018). investors' interest in sukuk makes investors seek a lot of information about the risks and profits that will be obtained. based on the theory of signals according to bringham and houston (2016:488), the information obtained by investors is a signal that will influence investment decisions in the future. in the application of signal theory, the informant can choose what and how the information will be displayed and the recipient can choose how to interpret the information received, but according to raharja and sari (2008) the information obtained is still unbalanced or asymmetric information. based on the problem according to sudaryanti (2011) the assessment indicator of sukuk can be seen from the rating or rating of sukuk. event of default of sukuk investment has occurred in indonesia at pt. x. pt. x is a company engaged in sea transportation and liquid cargo. the company issued sukuk ijarah in 2007 and 2009. the failure occurred because the company still has not implemented the mechanism of implementation of sukuk ijarah as stipulated and determined so that it fails to meet the agreed obligations. two main issues in the mechanism of implementation of sukuk ijarah pt x are related to sukuk structure and collateral status of underlying assets. the failure of company x resulted in pt. pefindo in 2012 stated the default condition on the issuance of sukuk ijarah pt x and lowered the sukuk rating to non-investment grade (idd) category (pranata, 2014). the failure of pt x is certainly become a concern for the company and especially as an investor, so it is important for them to always pay attention and monitor sukuk performance through sukuk ratings. according to borhan and ahmad (2018), the rating year accumulated number of sukuk issuances accumulation percentage increase accumulated value of sukuk issuance (trillions) total of sukuk outstanding outstanding value (trillions) 2015 87 17% 16,66 47 9,9 2016 102 20,43 53 11,9 2017 137 57% 26,39 79 15,7 2018 175 101% 36,12 99 21,3 2019 232 167% 48,24 143 29,83 october 2020 271 211% 54,54 163 31,89 source: otoritas jasa keuangan (2020) https://creativecommons.org/licenses/by/4.0/ the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange 149 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) can be a signal that indicates a category worthy or unfit to invest sukuk, in addition the rating can also reduce the potential for asymmetric information from sukuk issuer and investors. sukuk rating describes the probability of debt failure and risk of the company becoming an issuer. the better the rating of the sukuk, the lower the probability of debt default and the risk it will get. furthermore, hadinata (2020) concluded that in anticipation of the default risks that will occur in making sukuk investments, it is important to conduct an initial analysis of sukuk ratings issued by rating agencies. in increasing secondary market activities to assist the public in determining the right investment options, the financial services authority (ojk) recognizes the existence of rating agencies that aim to rank bonds and sukuk. in indonesia, the rating agencies are pt pefindo (indonesian securities rating) and pt. kasnic rating agency, but most companies that issue sukuk on the indonesia stock exchange get a rating through pt pefindo. the rating conducted by pt pefindo is by dividing sukuk rank into two categories, namely investment grade and non-investment grade. sukuk rating methodology conducted by pt. pefindo adopts from the rating process on conventional bonds by looking at the business and financial aspects of the company, while also looking at risks that can affect the ability of the company to pay off its obligations, namely industrial risk assessment, financial risk and business risk. this is in line with the theory presented by bringham and houston (2016:488) that there are two factors that can affect a bond's rating. first, quantitative factors in the form of financial ratios and second, qualitative factors in the form of structure, age, guarantee provisions, stability, regulation, environment and so on. in detail the approach will be varied based on the characteristics of the business / industry run by the company (pefindo, 2019), but there is no more detailed explanation of what variables are used in assessing sukuk rating. the assessment of pt. pefindo in the process of rating bonds and sukuk is essentially based on risk assessment of the company's ability to perform its obligations as promised at the beginning of the investment process to investors. according to innasativa research (2018) which examines the comparison of sukuk and bond risk using value at risk (var) measuring instruments states that sukuk has a lower risk than bonds. the factors that cause the difference in risk is the first, sukuk structure in the form of return that uses the concept of fee / revenue sharing is not an uncertain interest rate and secondly, the existence of underlying assets as the basis of sukuk issuance. the difference in nature that makes the risks posed in terms of sukuk investments and bonds is different. furthermore, in innasativa research (2018) stated that both factors that make investors feel safer and feel advantaged in making sukuk investments. based on the risk assessment, researchers are interested to see the influence of two variables, namely sukuk structure and sukuk guarantee status on sukuk rating that will be given by pt. pefindo. inconsistent results of the study related to the influence of sukuk structure and sukuk guarantee status on sukuk ratings encouraged researchers to re-examine both variables by developing from previous studies. this research is important to see how consistent the results of previous research. although there has been a lot of research on variables that affect sukuk rating, the results of the study are diverse. this is due to differences in the properties of independent variables (x), measuring instruments of dependent variables (y), research populations and data analysis methods. the motivation of this study is also to provide beneficial information on sukuk rating and concrete evidence regarding its determinants to all parties that are interested in issuing sukuk and investing in sukuk. this research hopes to shed light on the determinants of sukuk rating and thus may become a beneficial point of reference to all sukuk rating users and to the islamic capital market in general. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 150 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2. literature study 2.1 signalling theory signalling theory is information in the form of instructions or signals needed by investors to make decisions. the information will help investors to see the company's future prospects. this is supported by signal theory according to brigham and houston (2016:488), which is a management behavior within the company in providing guidance to investors related to management's view of the company's future prospects. signals in the form of financial and non-financial information can become a signal to external parties that the company has a good or bad prospect in the future. this is the basis of the importance of a company choosing strong information so that the signal provided can change the assessment of external parties to the company and can reduce the risk of information assimilation in an entity. asymmetrical information occurs because of one party that has better information than other interested parties (raharja and sari, 2008). the form of signal given to external parties can be in the form of bond rating information published. for example, bond issued by the companies. the company signals about a particular financial ratio can predict bond ratings. information in the form of published bond rating is expected to be a signal of the company's condition. 2.2 sukuk structure according to accounting and auditing organization for islamic financial institutions (aaoifi) sharia standards no.17 (2017), there are 14 types of sukuk with 7 types of sukuk commonly used in sukuk market namely sukuk murabahah, sukuk salam, sukuk istishna, sukuk ijarah, sukuk musyarakah, sukuk mudharabah and sukuk hybrid. according to fitrianingsih (2017) sukuk structure will be formed based on the contract used in sukuk issuance. in indonesia, the use of sukuk that is growing and widely used until now is sukuk ijarah and sukuk mudharabah (ojk, 2020). consideration of sukuk selection is influenced by the financing needs of the company as well as the sukuk structure, namely the yield offered. sukuk structure will affect the risk that will be obtained by investors and companies because the selection of contracts used is also different and the yield offered is also certainly different. this is supported by research conducted by muliana (2018) that investors prefer sukuk ijarah because the yield offered in the form of fees is more certain than sukuk mudharabah. further research examining whether sukuk structures affect sukuk ranks has also been conducted in the malaysian capital market namely by abulgasem et al. (2015) and borhan and ahmad (2018). the results stated that the structure of sukuk has a significant effect on sukuk rank. similar results were also obtained by puspita sari (2020) which researched in the scope of capital market in indonesia. in his research also stated that sukuk structure significantly affects sukuk rating. 2.3 sukuk guarantee status underlying assets become a mandatory requirement in issuing sukuk. this makes sukuk not including debt securities but called investment securities (direktorat pembiayaan syariah, 2015). the existence of underlying assets can be guaranteed or not guaranteed. the situation requires sukuk publishers to provide additional information about the bail status of sukuk. the regulation is contained in the financial services authority regulation no. 18/pojk.04/2015. according to borhan and ahmad's research (2018), sukuk given guarantee will have a higher rating than unsecured sukuk. furthermore, aulya (2019) in his research stated that the guaranteed sukuk will attract more investors because the risks that investors will receive are less likely. although the company is well known and earns trust and goodwill, it is not enough if the company does not provide guarantees to investors. this is because investors do not want any risk of https://creativecommons.org/licenses/by/4.0/ the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange 151 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) default in the future, so guarantees are important in issuing sukuk. the same result was also obtained by puspita sari research (2020) which stated that the status of the guarantee had a significant effect on sukuk rating. 2.4 sukuk rating sukuk rating is a standardization given by a well-known and trusted securities rating agency, pt pefindo (indonesian securities rating) that has cooperated with idx (indonesia stock exchange) to sukuk issuers and which can provide a level of trust for investors in interest payments and principal in accordance with their agreed schedule. pt. pefindo provides sukuk rating on risk analysis conducted objectively, independently and accountably. the categories used in determining ratings are: a. investment grade, which is a category of sukuk rating that the company or country is considered to have the ability to fulfill its obligations as an issuer. b. non-investment grade, which is a rating category that states that the company or state is considered doubtful in fulfilling its obligations as an issuer. 2.5 research hyphotesis based on the background of the problems that have been presented, the basis of the theory, and the results of previous research, the following hypotheses are produced: h1: sukuk structure positively affects sukuk rating h2: sukuk guarantee status positively affects sukuk rating h3: sukuk structure and sukuk guarantee status simultaneously affect sukuk rating 3. research methodology research on the influence of sukuk structure and sukuk guarantee status on the company's sukuk rating is a type of quantitative research with a form of causal relationship. the data taken in this research test is secondary data. the population in this study is financial and non-financial companies listed on the indonesia stock exchange (idx) in 2015-2019. the research samples were selected using purposive sampling techniques, with the following criteria: table 2. sampling selection no. criteria number of companies number of sukuk 1. companies (financial and non-financial sectors) that issue sukuk on the indonesia stock exchange (idx) and sukuk are still outstanding for the period 2015-2019 8 15 2. companies not registered with pt. pefindo in the period 2015-2019 (1) (2) 3. companies that do not post annual reports for the period 2015-2019 in a row 0 4. companies that do not publish full annual financial statements and have been audited for the period 2015-2019 ended december 31, respectively. 0 5. have data related to complete research variables 0 total companies and sukuk sampled 7 13 total research sample (13 sukuk x 5 years) 65 source: processed data (2021) dependent variable in this study is sukuk rating issued by pt. pefindo while the independent variables in this study is the structure of sukuk that is projected with the contract used and the status of sukuk guarantee is projected with additional information related to the underlying asset used. the following is the operational definition of each research variable: https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 152 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 3.1 sukuk rating the measurement of sukuk rating in this study is based on the rating standard issued by pt pefindo and its grouping refers to pt pefindo's partner standard &poor which is the rating symbol divided into three more specific categories which are very worthy of investment (aa+ to aaa), investment worthy (bbbto aa-) and less investment worthy (ccc to bb+) (azis, 2015:107-108). the grouping is then converted into the following form of value: very worthy of investment (aa+ to aaa) worth 3, worth investment (bbbto aa-) worth 2, and less worthy of investment (ccc to bb+) worth 1. the scale used in this measurement is the ordinal scale. according to junaidi (2015), ordinal scale is a measurement scale that states a category that is tiered. 3.2 sukuk structure sukuk structure is an agreement used in the issuance of sukuk grouped based on the payment scheme or return offered. in indonesia the majority of sukuk issuance uses mudharabah and ijarah agreements. sukuk structure used for mudharabah contract is a revenue share with floating return because it is adjusted to the profit obtained and for the ijarah contract is a margin / fee with a fixed income or fixed return. the scale used to measure sukuk structure in this study is nominal scale using dummy variables and grouping data in two different categories namely, 1 for sukuk mudharabah category sukuk and 2 for sukuk ijarah category sukuk (abulgasem et al., 2015) 3.3 sukuk guarantee status sukuk guarantee status is additional information or information from the existence of objects that are used as underlying assets in sukuk issuance by seeing if the object is guaranteed or not. disclosure of additional information such as warranty information covering at least the type, value, and status of ownership (if any) as well as the acquisition of assets that are the basis of sukuk consists of at least the type or form of assets, the location of the asset, the status of ownership of the asset, the status of the asset (as collateral or not) and the accompanying legal and economic implications (if any), and also the value of the asset based on the assessment results of the assessor will clarify the risk of the existence of sukuk underlying assets that are the basis of sukuk issuance. this is stated in the financial services authority regulation no. 18/pojk.04/2015. sukuk guarantees can also be provided by insurers, banks, funds, or government authorities (borhan and ahmad, 2018). measurement of this variable uses a nominal scale using dummy variables with criteria 2 if the sukuk uses a guarantee and is worth 1 if there is no guarantee (rahayuningsih, 2016). the method of data analysis used in testing hypotheses in this study is ordinal logistics regression analysis, which is done using spss software. the models of logistics ordinal regression equations in this study are: (logit (p1+p2+…p5) = α +β1x1+ β2 x1 + e………………………………..…………(1) description: (logit (p1+p2+... p5) = probability of sukuk rating (y) issued by pefindo α = constant β1-2 = regression coefficient x1 = sukuk structure x2 = sukuk guarantee status e = coefficient of error https://creativecommons.org/licenses/by/4.0/ the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange 153 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4. result and discussion 4.1 descriptive statistical analysis descriptive statistical analysis in this study aims to describe the variables used with the analysis tools used are average (mean), standard deviation, maximum value and minimum value. the variables used in this study are the sukuk structure as the first independent variable, the guarantee status of sukuk as the second independent variable and the sukuk rating as a dependent variable. the results of the analysis of descriptive statitic data are presented in the following table: tabel 3. descriptive statistical data analysis results variabel n min max mean std. deviation sukuk_structure 65 1 2 1,77 ,425 sukuk_guarantee status 65 1 2 1,15 ,364 sukuk_rating 65 1 3 2,45 ,662 valid n (listwise) 65 source: processed data (2021) based on the results obtained in table 3, it can be known that the number of data (valid n) amounted to 65 samples from 7 companies with a total of sukuk is 13 sukuk that have passed the criteria of previous sample selection. in addition, it can be known that for variable sukuk structure and sukuk guarantee status is measured on a nominal scale while for sukuk rating variables are measured on an ordinal scale. the results of the analysis of the first independent variable descriptive statistical data, namely the sukuk structure, showed a minimum value of 1 and a maximum of 2 with an average value of 1.77 and a standard deviation of 0.425. for the second independent variable, the status of sukuk guarantee shows the minimum value is 1 and the maximum is 2 with an average value of 1.15 and the standard deviation of 0.364 and for dependent variables that is sukuk rating shows the minimum value of 1 and the maximum value is 3 with an average value of 2.45 and standard deviation of 0.662. from the results of descriptive statistical description all variables can be known that the value of the average is greater than the standard deviation. this indicates that the quality of the data obtained is quite good because the average value is greater than the standard deviation on each variable identifying that the standard error of the variable is low. 4.2 ordinal logistics regression analysis the analysis used in this study is an ordinal logistics regression analysis conducted using the spss program. ordinal logistics regression model is used because dependent variables namely sukuk rating have several categories that are multilevel. the following are the results of the estimation of the ordinal logistics regression model of the influence of sukuk structure and sukuk guarantee status on sukuk rating: table 4. results of estimated parameters of ordinal logistics regression model parameter estimates estimate std. error wald df sig. 95% confidence interval lower bound upper bound threshold [sukuk_rating = 1] -,694 ,651 1,139 1 ,286 -1,969 ,581 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 154 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) [sukuk_rating = 2] 3,003 ,941 10,192 1 ,001 1,160 4,847 location [sukuk_structure=1] -3,710 ,833 19,837 1 ,000 -5,342 -2,077 [sukuk_structure =2] 0a . . 0 . . . [sukuk_status=1] 4,864 1,046 21,612 1 ,000 2,813 6,915 [sukuk_status=2] 0a . . 0 . . . source: processed data (2021) based on the results obtained in table 4, the logistics regression equation is generated as follows: logit [p(y≤1|x)]=-0,6943,710x1+4,864x2……………………………………….…..(2) logit [p(y≤2|x)]=3,0033,710x1+4,864x2………………………………...…………(3) description: logit [p(y≤1|x)] = probability rating sukuk (y) published by pefindo -0,694 = sukuk structure probability constant 3,003 = sukuk guarantee status probability constant -3,710 x1 = regression coefficient of sukuk structure 4,8464 x2 = regression coefficient of sukuk guarantee status 4.3 hypothesis test a. goodness of fit test the goodness of fit test is conducted to find out the ordinal logistic regression model obtained is worth using deviance method test. the criteria of the model is said to be feasible if the value of significance obtained is greater than the value of the level of research significance of 0.05. deviance shows a measure of how much variety the logistics regression model cannot explain. here are the results: table 5. model goodness of fit test results goodness-of-fit chi-square df sig. pearson 1,964 2 ,072 deviance 5,364 2 ,233 source: processed data (2021) based on the results in table 5 obtained chi-square value in deviance method test of 5,364 and significance value of 0.233. because the significance value obtained is greater than the value of the level of research significance of 0.05, it can be said that the data generated from the observation of the research in accordance with the prediction of the ordinal logistics regression model to be used and means that the model used in this study is a good model or logit model obtained is worth using. b. model fitting information test the model of fitting information or simultaneous parameter test aims to determine whether or not there is a significant influence of all free variables (independent) on dependent variables. in simultaneous tests used the results of the statistical test g. variables used in this study are sukuk structure (x1) and sukuk guarantee status (x2) as independent variables and sukuk rating (y) as dependent variables. here are the results: https://creativecommons.org/licenses/by/4.0/ the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange 155 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 6. g statistical test results model fitting information model -2 log likelihood chi-square df sig. intercept only 78,774 final 33,478 45,296 2 ,000 source: processed data (2021) based on the results in table 6 obtained statistical value g of 45,296 and value of -2 log likelihood model intercept only (without predictor variable) of 78,774 and value of 2 log likelihood of final model (with predictor variable) of 33,478. since the statistical value g = 45,296 > x2((0,05,2))= 5,991 and the significance value obtained is 0.000 smaller than 0.05 so it can be said that the coefficient of β significant value affects the ordinal logistics regression model. this indicates that there is at least one variable that has a significant effect on its bound variable or that there is one β≠0. in other words, in this study, it means that sukuk structure variables (x1) and sukuk guarantee status variables (x2) as independent variables or free variables affect simultaneously or together against sukuk rating variables as dependent variables or bound variables. c. wald test partial tests are used to determine whether or not there is a significant influence on each free (independent) variable on a dependent variable. in the partial test stage, wald statistical test was used with a level of research significance of 0.05. table 7. wald statistical test results parameter estimate estimate std. error wald d f sig. 95% confidence interval lower bound upper bound threshold [sukuk_rating = 1] -,694 ,651 1,139 1 ,286 -1,969 ,581 [sukuk_rating = 2] 3,003 ,941 10,192 1 ,001 1,160 4,847 location [sukuk_structure=1] -3,710 ,833 19,837 1 ,000 -5,342 -2,077 [sukuk_structure =2] 0a . . 0 . . . [sukuk_status=1] 4,864 1,046 21,612 1 ,000 2,813 6,915 [sukuk_status=2] 0a . . 0 . . . source: processed data (2021) based on the results in table 7 obtained the following results: for the variable sukuk structure (x1) obtained a statistical value of wald test of 19,837 and a significance value of 0.000. because the statistical value of the wald test is greater than the chi squared table value (z2>x2((0,05,1)) = 19,837 > 3.84) and the significance value obtained is 0.000 smaller than 0.05 so it can be said that the sukuk structure variable (x1) has a significant effect on the sukuk rating (y). for the variable sukuk guarantee status (x2) obtained a statistical value of wald test of 21,612 and a significance value of 0.000. because the statistical value of the wald test is greater than the chi squared table value (z2>x2((0,05,1)) = 21,612 > 3.84) and the significance obtained is 0.000 less than 0.05 so it can be said that the sukuk guarantee status variable (x2) has a significant effect on the sukuk rating (y). based on statistical tests wald obtained the results that the structure of sukuk (x1) and the guarantee status of sukuk (x2) had a significant effect on sukuk rating. this results in the calculation of odds ratio values that are only used for significant free (independent) variables on the model. here are the results obtained: https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 156 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 8. result of odd ratio value variable odds ratio value sukuk structure (x1) 0,0245 sukuk guarantee status (x2) 129,541 source: processed data (2021) based on the results in table 8 obtained odds ratio value for each variable as follows: the odds ratio for sukuk structure variable (x1) is exp (-3,710) = 0.0245, meaning that the chances of sukuk mudharabah structure fall into the category of less investmentworthy, investment-worthy, and very viable investment is 0.0245 times lower than sukuk structure by considering other variables constant. because the value of the coefficient of negative value means that the higher the percentage of sukuk structure whether it is sukuk mudharabah or sukuk ijarah, the lower the chances of the sukuk being included in the category of less viable investment, worthy of investment, and very worthy of investment. the odds ratio for sukuk guarantee status variable (x2) of exp (4,864) = 129,541 means that sukuk guaranteed guarantee status opportunities fall into the category of less investment, investment-worthy, and very viable investment lower 129,541 times that of sukuk guarantee status is not guaranteed by considering other variables constant. because the value of the coefficient of positive value means that the higher the percentage of sukuk guarantee status whether it is unsecured status or guaranteed status, the higher the chances of sukuk guarantee status fall into the category of less viable investment, worth investing, and very worthy of investment. d. pseudo r-square test an r-square pseudo-test is a test that indicates a free (independent) variable capable of describing variations of dependent variables. the magnitude of the coefficient of determination in the logistic regression model is indicated by the values of mc fadden, cox and snell, and nagelkerke. here are the results: table 9. pseudo r-square test result pseudo r-square cox and snell ,502 nagelkerke ,596 mcfadden ,378 source: processed data (2021) based on the results in table 9 obtained the value of mc fadden coefficient of determination of 0.378, cox and snell of 0.502 and nagelkerke of 0.596. of the three values of the coefficient of determination, nagelkerke has the largest coefficient of determination of 0.596 which means free variable (independent) namely sukuk structure (x1) and sukuk guarantee status (x2) is able to explain the variation of sukuk rating by 59.6% while the remaining 40.4% is influenced by other factors that are not included in the scope of this study. e. parallel lines test in this test it is used to test the assumption that each category has the same parameters or the relationship between logit free variables is the same for all logit equations (slope values). here are the results: https://creativecommons.org/licenses/by/4.0/ the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange 157 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 10. paralell lines test result test of parallel linesa model -2 log likelihood chi-square df sig. null hypothesis 2,548 general ,000b 3,478 2 ,089 source: processed data (2021) based on the results in table 10 shows that the value of chi-square is 3,478 and the sig value is 0.089. because the sig value obtained is greater than 0.05 which means that the slope coefficient is the same for all response variables. 4.4 effect of sukuk structure on sukuk rating based on the results of the data on the partial test using statistical tests wald obtained statistical value wald test greater than the value of the chi-square table and the value of significance is smaller than the value of the level of significance of the study. the results showed that variable sukuk structures had a significant influence on sukuk ratings. this means that both mudharabah and ijarah structures can provide information to predict sukuk ratings as well as be able to explain variations in influencing sukuk rating variables. however, for the calculation of odds ratio value, sukuk structure variable has a negatively marked coefficient value which means that sukuk structure negatively affects sukuk rank. thus the first hypothesis (h1) is rejected or in other words the sukuk structure has no positive influence on the sukuk rating. when associated with signal theory according to bringham and houston (2016:488), sukuk structures that have a significant negative effect on sukuk ratings that are the result of this study, can be a signal or information for information users in this case investors and companies to make decisions in the future. sukuk rating influenced by sukuk structure can also reduce assymetric information that can occur between the company and investors and can help anticipate default risk in sukuk investment. the results of this study further confirm that sukuk structure has a negative relationship to sukuk rating which means that if sukuk ijarah structure or mudharabah sukuk structure has a higher percentage, it makes sukuk ijarah or sukuk mudharabah rank have a greater chance of decreasing or lower. in this study, sukuk ijarah had a higher percentage, so sukuk ijarah rank had a greater chance of decreasing or lower. when associated with previous theories and studies in the decline of hypotheses, the results of this study are not in line. the different sukuk structures used in sukuk publishing offer different advantages and risks. sukuk ijarah structure has more fans because the margin / fee offered is certain by providing fixed return while for sukuk mudharabah structure fewer fans because of the profit sharing that gives expected return that is floating (scientific, 2017). the results of abulgasem et.al (2015), borhan and ahmad (2018), puspita sari (2020) further revealed that the structure of sukuk ijarah has a positive influence on sukuk ratings. sukuk ijarah has a positive influence on the issuance of sukuk by the company and reflects positive signals regarding the company's financial position for investors. this makes the chances of sukuk ijarah get a bigger sukuk rating increase compared to sukuk mudharabah. the cause is not in line with the results of research and theories that apply because the motivational factors of each company that publishes sukuk vary. according to rachmawati (2017), the selection of sukuk structure depends on the condition of the company as well as the purpose of using sukuk funds. sukuk ijarah structure that promises a fixed fee / margin or sukuk mudharabah structure that promises floating profit sharing can not be said directly can guarantee the timeliness of payment of corporate obligations https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 158 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) as sukuk issuer to investors. this provides an opportunity to decrease the rating given by pt pefindo (pefindo, 2019). the results of this study are in line with the results of research by fitrianingsih (2017), lestari (2018), and tyas (2019) which stated that sukuk structure does not have a positive influence on sukuk rating. however, the results of this study are not in line with research conducted by puspita sari (2020), abulgasem et al. (2015), borhan and ahmad (2018), and muliana (2018) which states that sukuk structure variables have a positive influence on sukuk ratings. 4.5 effect of sukuk guarantee status on sukuk rating based on the results of the data on the partial test using statistical tests wald obtained statistical value wald test greater than the value of the chi-square table and the value of significance is smaller than the value of the level of significance of the study. the results show that variable sukuk guarantee status has a significant influence on sukuk rating. this means that both sukuk guarantee status is not guaranteed and guaranteed to provide information used to predict sukuk ratings as well as being able to explain variations in influencing sukuk rating variables. furthermore, the variable odds ratio value of sukuk guarantee status has a positively marked coefficient value. thus the second hypothesis (h2) is accepted or in other words the status of sukuk guarantee has a positive influence on sukuk rating. when associated with signal theory according to bringham and houston (2016:488), sukuk guarantee status that has a significant positive effect on sukuk rating which is the result of this study, can be a signal or information for information users in this case investors and companies to make decisions in the future. sukuk rating influenced by sukuk guarantee status can also reduce assymetric information that can occur between the company and investors and can help anticipate the risk of default in sukuk investment. the results of this study confirm that sukuk guarantee status has a positive relationship to sukuk rating which means that if sukuk guarantee status is not guaranteed or guaranteed to have a higher percentage, it makes sukuk rating with sukuk guarantee status is not guaranteed or guaranteed to have a greater chance to increase or have a high rating. in this study, the percentage of sukuk guarantee status is not guaranteed higher, so sukuk rank with sukuk guarantee status is not guaranteed to have a greater chance of increasing or higher. when associated with previous theories and studies in the decline of hypotheses, the results of this study are in line. sukuk guarantee status is additional information from the existence of guaranteed or unsecured underlying assets can give signals to companies and investors in looking at sukuk ratings given by rating agencies. financial services authority regulation no. 18/pojk.04/2015 concerning issuance and sukuk requirements in article 12 (3) letter b explains that issuers are obliged to disclose additional information about the status of assets that are used as the basis for sukuk issuance. however, it can be known that from the results of the research conducted, sukuk ratings with guaranteed status are not guaranteed to have a greater chance of increasing. this can be attributed to the application of signal theory according to khairudin and windita (2017) that the given signal can have a different interpretation of the receiving party information. according to werastuti (2015) in sukuk transactions, investors prefer sukuk given guarantees because they feel safer if the investment is guaranteed. this signals to investors that the risk will be lower if there is a guarantee status of the existence of underlying assets. however, in its application according to pranata (2014), in indonesia the majority of sukuk are issued using the type of sukuk-based assets i.e. assets are only https://creativecommons.org/licenses/by/4.0/ the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange 159 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) used as underlying assets but not guaranteed. this can be the reason for the opportunity to increase sukuk rating with sukuk guarantee status is not guaranteed. another reason is that many companies do not guarantee their underlying assets because they rely on good reputation and goodwill, so that investors can get a positive signal about it and trust that sukuk investments are safe and the company can meet its obligations. this makes the sukuk rating issued by pt pefindo for sukuk with guaranteed status is not guaranteed to have a great opportunity to increase or high. the results of this study are in line with the results of research by puspita sari (2020), aulya (2019), and borhan and ahmad (2018) which stated that sukuk guarantee status has a positive influence on sukuk rating. however, this study is not in line with purwaningsih (2013) and rahayuningsih (2016) research which states that sukuk guarantee status does not have a positive influence on sukuk rating. 4.6 effect of sukuk structure and sukuk guarantee status on sukuk rating based on the results of the data on simultaneous tests using statistical tests g obtained a statistical value of test g greater than the value of the chi-square table and a significance value smaller than the value of the level of significance of the study. the results show that sukuk structure variables (x1) and sukuk guarantee status variables (x2) as independent variables or free variables affect simultaneously or together sukuk rating variables as dependent variables or bound variables. thus the third hypothesis (h3) is accepted or in other words the sukuk structure and sukuk guarantee status have an influence on sukuk rating. when associated with signal theory according to bringham and houston (2016:488), sukuk structure and sukuk guarantee status can be a signal or information for information users in this case investors and companies to make future decisions regarding sukuk investments. sukuk rating influenced by sukuk structure (x1) which is projected with the type of contract that will affect the form of sukuk return where sukuk ijarah promises fixed fee /margin and sukuk mudharabah promises floating profit sharing and sukuk guarantee status (x2) which is projected with additional information related to underlying assets guaranteed or not guaranteed can reduce assymetric information that can occur between the company and investors and can help anticipate the default risk in sukuk investment. in this study, sukuk ijarah structure with sukuk guarantee status is guaranteed to have a greater chance of getting a lower sukuk rating than sukuk mudharabah structure with sukuk guarantee status not guaranteed by pt pefindo. 5. conclusion the results of this study show that partially, sukuk structure has the opportunity to lower sukuk rating, while sukuk guarantee status has an opportunity to increase sukuk rating. it was then simultaneously proven that sukuk structure and sukuk guarantee status had an effect on sukuk rating. future research could include other variables that are expected to affect sukuk ratings. this is based on pseudo r-square test results which stated that there were still 40.4% of other factors or variables not included in the study. further research can also add other rating agencies in assessing sukuk ratings and add the observation time period. references abulgasem, m. a. e., nurul a. m, dan nathasa m. r. (2015). the influence of corporate governance, financial ratios, and sukuk structure on sukuk ratings. procedia economics and finance. 31: 62-74 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 160 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) accounting and auditing organization for islamic financial institutions (aaoifi). (2017). shari’ah standards & shari’ah governance (ss & sg) first edition. kingdom of bahrain: aaoifi. al haraqi dan endang s.n. (2017). pengaruh return on asset, secure dan maturity terhadap ratingsukuk. jurnal ilmiah. 2 (4): 116 124 aulya, meyta siti. 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(2018). pengaruh struktur dan maturity terhadap peringkat sukuk pada perusahaan penerbit sukuk yang terdaftar di daftar efek syariah. skripsi mahasiswa fakultas ekonomi dan bisnis islam universitas islam negeri ar raniry. banda aceh otoritas jasa keuangan. 2020. laporan penerbitan sukuk. jakarta pusat: ojk. https://creativecommons.org/licenses/by/4.0/ the effect of sukuk structure and sukuk guarantee status on sukuk rating in indonesia stock exchange 161 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) pemeringkat efek indonosia (pefindo). (2019). sukuk rating methodology. (online),(https://www. pefindo.com/fileman/file?file=833, diakses 7 januari 2021) pemeringkat efek indonosia (pefindo). (2019). rating methodology. (online), (https://www. pefindo.com/pageman/rating-methodology, diakses 12 maret 2021) peraturan otoritas jasa keuangan no. 18/pojk.04/2015 tentang penerbitan dan persyaratan sukuk. pranata, ahmad adi. (2014). analisis kesesuaian syariah dalam penerbitan, pelaksanaan, dan events of default dalam investasi sukuk korporasi ijarah( studi kasus pada pt x). jurnal mahasiswa universitas indonesia. 7-15. purwaningsih, septi. (2013). faktor yang mempengaruhi rating sukuk yang ditinjau dari faktor akuntansi dan non-akuntansi. accounting analysis journal. 2 (3): 1-9. puspita sari, afifuddin dan mawadri. (2020). pengaruh struktur sukuk, umur sukuk, dan status jaminan sukuk terhadap peringkat sukuk pada perusahaan yang terdaftar di daftar efek syariah tahun 2016-2018. e-jra. 9 (5): 2-17. rachmawati, eka n. (2017). akad penerbitan sukuk di pasar modal indonesia dalam perspektif fikih. al-a’dalah. 14 (1): 257-258. raharja dan m. p sari. (2008). kemampuan rasio keuangan dalam memprediksi peringkat obligasi (pt kasnic credit rating). jurnal maksi. 8(2). rahayuningsih, dwi. (2016). pengaruh secure, maturity, kualitas auditor, komite audit, dan sinking fund terhadap rating sukuk. artikel ilmiah mahasiswa 2016. rizaldi, sandi. (2020). pengaruh penerbitan sukuk terhadap reaksi pasar saham (event study pada perusahaan-perusahaan yang menerbitkan sukuk di bursa efek indonesia tahun 2014-2019. skripsi mahasiswa fakultas ekonomi dan bisnis universitas hasanuddin. makassar. sudaryanti. (2013). analisis determinan peringkat sukuk dan peringkat obligasi. tazki. .6 (3): 105-106. tyas, luluk ayuning. (2019). rasio keuangan, corporate governance, struktur sukuk dan peringkat sukuk (studi pada perusahaan penerbit sukuk yang terdaftar di bei periode 2014-2017). skripsi mahasiswa fakultas ekonomi dan bisnis islam institut agama islam negeri surakarta. surakarta. werastuti, desak nyoman sri. (2015). analisis prediksi peringkat obligasi perusahaan dengan pendekatan faktor keuangan dan non keuangan. jurnal dinamika akuntansi. 7(1): 63-74. widowati, d., nugrahanti, y., dan kristanto, a.b. (2013). analisis faktor keuangan dan non keuangan yang berpengaruh pada prediksi peringkat oblogasi di indonesia (studi pada perusahaan non keuangan yang terdaftar di bei dan di daftar peringkat pt pefindo 2009-2011). jurnal manajemen. 13(1): 35-54. https://creativecommons.org/licenses/by/4.0/ poverty treatment effectiveness in the era of pandemic covid-19 with the role of the baitul maal wat tamwil 106 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) poverty treatment effectiveness in the era of pandemic covid-19 with the role of the baitul maal wat tamwil vabila ananta setya1)*, tika widiastuti2 1,2faculty of economics and business, airlangga university, indonesia abstract islam teaches to minimize the gap between the rich and the poor through the teachings of zakat, infaq and sedakah (zis). indonesia is one that is included in the red zone of a poor country with various potentials and problems. the problem that will be examined in this research in general is how to strengthen economic institutions run by bmt in poverty reduction efforts. the purpose of this study is to reveal that bmt financing is effective in reducing poverty, where most respondents can increase their income after receiving bmt financing as an effort to reduce poverty and find out what efforts / policies have been established by the government to overcome poverty during the covid-19 pandemic. 19. keywords: baitul maal wat tamwil (bmt), poverty, covid-19 pandemic 1. introduction as is well known, the economy has an important role in maintaining the stability of the life of the nation and state. the level of growth and development of a country can be seen from economic indicators (suryati, 2012). the growth and development of the economy can come from business actors, both from large companies, multinational companies, as well as small and medium enterprises. although there are many business actors in indonesia, not all businesses can survive during the global crisis. in general, the condition of poverty in indonesia is a crucial social phenomenon and is multidimensional because it almost colors all aspects of people's life, where the existence of the poor is not only determined by the size of income alone, but is also influenced by the fulfillment of political, social, cultural and economic rights. overall. all of which have the impact of weakening economic activity, less than optimal health and education services, inadequate public infrastructure and facilities, decreased public order and public order and lack of public trust in the bureaucracy in providing services, which at the same time have implications for the high number of poor people. according to the central statistics agency (2010), indonesia's population living with per capita income below the poverty line is still very high, namely around 9.1% / year during the 2011-2017 period. this percentage is quite small compared to the justification of the world bank report which states that almost half of indonesia's population lives on per capita income below usd 2 per day. with regard to the causes of poverty, the core problem of poverty lies in what is called deprivation or shortage traps caused by several disadvantage factors, and vulnerability and powerlessness are factors that often cause poor families to become poorer. in addition, the decline in economic growth and the application of social and mobility restrictions in various regions as a result of the covid-19 pandemic, not only has the potential to result in large job losses, but also to increase poverty massively. * corresponding author. email address: vabila.ananta.setya-2020@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:vabila.ananta.setya-2020@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 107 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the core indonesia research institute (center of reform on economics) said in a press release tuesday (5/5/2020), these vulnerable and near-poor people generally work in the informal sector and many are highly dependent on government assistance. core executive director mohammad faisal said that the spread of covid-19, which is currently concentrated in urban areas, has resulted in a greater potential for increasing poverty to occur in urban areas. what needs to be watched out for next is that the potential for the spread of the outbreak from urban to rural areas cannot be prevented, including through limiting the mobility of people from cities to villages, the increase in the number of covid-19 cases in rural areas cannot be avoided. "the impact is that the potential for increasing the number of poor people in rural areas will be greater than the prediction above. this means that the government's burden to overcome poverty problems, either through subsidies, social assistance and others, is getting bigger. " to overcome these weaknesses, other parties who can help are needed. islamic microfinance institutions are considered to be able to help overcome one of these problems, namely financial problems. one of the institutions that is trying to solve this problem is baitul maal wat tamwil (bmt). bmt is one of the sharia financial institutions in indonesia that operates based on sharia principles with two main functions, namely baitul maal and baitul tamwil (soemitra, 2009). bmt is one of the sharia financial institutions that protects the middle and lower class people from the interest system applied by conventional institutions as well as from moneylenders who set high interest rates on their customers. bmt is different from other financial institutions that provide consumptive financing so that the people's economy tends to be consumptive. bmt tends to provide financing in the form of working capital to people who have micro businesses so that people are encouraged to be more creative and productive. based on this matter, the writer focuses this study on "the effectiveness of the role of baitul maal wat tamwil (bmt) in poverty reduction in the middle of the covid-19 pandemic" the problem that will be studied in general is how to strengthen local economic institutions carried out by bmt in empowerment. community economy which leads to poverty alleviation efforts, therefore the purpose of this research / study is to describe: 1. the role of bmt in empowering community economic enterprises which leads to poverty alleviation efforts during the covid-19 pandemic. 2. the role / government policy in efforts to reduce poverty due to the covid-19 pandemic. 2. literature study 2.1 the baitul maal wat tamwil (bmt) practice of islamic finance in indonesia began in 1993 with the establishment of bank muamalat indonesia (saefullah, 2010). when islamic finance became known, islamic microfinance also developed in the 1990s through formal institutions such as islamic banks and islamic rural banks (islamic rural banks), and non-bank institutions such as islamic cooperatives, namely the pesantren cooperative and baitul mal wa tamwil (bmt). ) (kassim, 2016). baitul maal wat tamwil (bmt) consists of two terms, namely baitul almaal and baitul tamwil. baitul maal is more on non-profit fundraising efforts such as zakat, infaq and sodaqoh. meanwhile, baitul tamwil is an effort to collect and distribute commercial funds. this business cannot be separated from bmt as a supporting effort in the economic https://creativecommons.org/licenses/by/4.0/ poverty treatment effectiveness in the era of pandemic covid-19 with the role of the baitul maal wat tamwil 108 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) activities of the community (sudarsono, 2003). in addition, bmt is a variant of islamic mfi and is defined as a communitybased mfi that operates under a cooperative system and the domain of non-governmental organizations (nazirwan, 2010). in fact, mu'alim and abidin (2005) also stated that bmt is an economic organization that focuses on developing cooperation and investment to develop mw and alleviate poverty through a profit sharing system. it is driven by various organizations including islamic banks, islamic people's credit banks (bprs) and, sometimes supported by islamic organizations such as nahdatul ulama and muhammadiyah which currently have more than one hundred million members (obaidullah, 2008). based on solehudin (2010), because there are no specific legal rules governing bmts, bmts can follow the provisions of cooperatives or self-help groups (shg) (community self-help groups / ksm). if the bmt is in the form of a cooperative, it is regulated in the cooperative law, namely the cooperative law no.25 / 1992 (fadilla, 2007). meanwhile, if a bmt is formed as a ksm, it will only be a group of people and there is no legal rule that regulates it. ideally, the establishment of bmts should be legalized by a notary (widiyanto and abdul ghafar, 2006). if they have not been registered as a legal entity, they will receive a business certificate from the regional small business incubation center (pinbuk). this is because bmt's articles of association are standardized and cover subjects such as identification of areas, objectives and business activities based on sharia principles. for example, sources of funds are determined as a share of founding members, compulsory and voluntary savings, donations, loans and retained earnings. voluntary savings mobilization, loans from other sources of funds and loans must be based on sharia principles. in addition, 2.5 percent of the annual profit must be donated (zakat) and a minimum of 10 percent (after zakat and taxes) must be allocated in reserves and compensation funds used for management and commissioners (adnan & ajija, 2015). the functions and roles of bmt as described by buchori in rahmi (2011) are as follows: a. investment manager, what is meant is that bmt can play its role as an agent or as a liaison for the owners and distribute and that has been collected to candidates or members who have been appointed by the owner of the funds. b. investors, bmts have a role as investors if bmt receive funds from parties who entrust the management of their funds completely to the bmt concerned. c. socially, bmt is required to be able to provide social services both to members in need and to the poor. the word financing comes from the word cost which can be interpreted as an unavoidable expense or sacrifice to get an item or service with the aim of obtaining benefits, expenses for a certain activity, purpose, or time, such as shipping costs, packaging, and sales intended to obtain income in the company's income statement (prasetya & herianingrum, 2016). there are many types of financing offered by bmt. generally, they promote several financing products such as profit-loss sharing (mudarabah and musharakah), murabahah, bai'bitsamanil ajil and qard hasan. as a social intermediary, bmt handles management, namely the collection and distribution of zakat, infaq, shadaqah and waqf (ziswaf). integration between ziswaf and bmt institutions is needed so that the poor can get financial assistance (chapra, 1998). therefore, the basic objective of ziswaf to solve https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 109 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) complex social problems such as poverty, unemployment, natural disasters, debt and unfair income distribution can be achieved (al qardawi, 2002). 2.2 zakat, sadaqah and waqaf practices in baitul maal wat tamwil there are several alternative models for overcoming the problem of poverty. in many institutions, poverty alleviation efforts are based on a corporate social responsibility approach, but the practice is questionable because many companies sometimes carry out a spread mission when carrying out corporate social responsibility (raimi, l., patel & adelopo, 2014). corporate social responsibility in some companies is only needed as an image to build action. the religion-based model is a solution for muslim-majority countries. since the islamic financial system developed rapidly, islamic financial institutions have been dealing with ethical business. as a solution, institutions will pay zakat, shadakah and waqf to alleviate poverty (raimi, l., patel & adelopo, 2014). zakat is a blessing, purity, kindness and progress on assets that have a certain value and is distributed to eight people who are entitled to receive zakat funds, such as: the poor, the poor, zakat managers, those whose hearts are inclined towards islam. (including new converts who lack economic support), slaves, debtors (debt due to real needs), in the way of allah (fi sabilillah), and travelers (ibn sabil) (surat at-taubah: 60). both must be integrated in a faith-based system to alleviate poverty in muslim-majority countries (wulandari, 2019). a. zakat zakat is a mandatory payment that must be paid by muslims in the amount of r 2.5% of the taxable amount (nisab) equal to 20 dinars (gold) or 200 dirhams (silver) (raimi, l., patel & adelopo, 2014). it is a unique instrument for poverty alleviation. it can be used on eight types of receivers or asnaf. five are intended for poverty alleviation, namely people in bop, the poor, debtors, slaves (to free them from captivity), and travelers in need. another is the administrative fee for zakat, 'those whose hearts are inclined towards islam and in the way of allah (hassan, 2010). in the case of indonesia, zakat is usually integrated with islamic microfinance where zakat funds and islamic charities will be used as a source of microfinance funds. thus, zakat funds are specifically aimed at people who are bop and are carried out as a tool to alleviate poverty, especially extreme poverty. usually given a qardhul hasan financing scheme (interest-free loans) (yumna and clarcke, 2009). zakat is mandatory while waqf is voluntary. usually the rate is fixed and is only spent once a year and only applies to muslims (hassan, 2010). islamic mfis use zakat, infaq and sadakah as their csr to alleviate poverty and meet the needs of the poor. this concept is applied using theconcept qardhul hasan (nor & hashim, 2014). the implementation of csr in islamic mfis will create a microfinance structure platform that is embedded with values and religiosity. islamic mfis must set aside their profits to provide qardhul hasan financing for the community at the bop. in indonesia, islamic mfis such as the sharia rural bank (bprs) indicate that customers will usually choose to pay zakat, infaq and sadakah at the bprs, and furthermore certain bprs divisions will manage zakat, infaq and sadakah and distribute funds to the poor. in addition, the bprs also uses the halal income derived from its operations to be distributed to poor people. although this practice is controversial, many bprs have received approval from the scholars to do so. https://creativecommons.org/licenses/by/4.0/ poverty treatment effectiveness in the era of pandemic covid-19 with the role of the baitul maal wat tamwil 110 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) b. infaq infaq is not a mandatory donation but is highly recommended in both the koran and the sunnah (junaidi & rizkiyah, 2013). muslims believe that giving infaq not only pleases allah, but also helps improve society (kamla & rammal, 2013). islamic mfis, in particular, must invest part of their social funds (zakat, infaq, and shadaqah) in environmentally friendly business practices (effendi, 2013). infaq will provide extraordinary incentives to share one's wealth with less fortunate residents of society (sadeq, 1997). c. waqaf waqaf is a tool developed to meet crucial needs such as education, transportation and health (mohsin, 2013). it also refers to valuable property or tangible assets as gifts to god. in practice, it can be monetized as a leasing facility but cannot be sold (raimi, l., patel & adelopo, 2014). in fact, waqf is a charity to hold special properties for sustainability (hassan, 2010). there are two classifications of awqaf: awqaf al-ahli and awqaf al-khayri. the requirement for "awqaf alahli " is an endowment fund set aside for the family of the person making donations (wakif) ". while awqaf al-khayri on the other hand refers to an endowment fund set aside for the general welfare of people in bop, widows, orphans and people who are economically disadvantaged (raimi, l., patel & adelopo, 2014). furthermore, there are three kinds of awqaf: religious waqf (focusing on building and maintaining religious institutions), waqf philanthropy (providing support to the community at bop such as health services) and family waqf (given to families first) (hassan, 2010). currently, cash waqf is very popular where a certain amount of money is given as waqf to build property in order to create community welfare (mohsin, 2013). in this case, waqf can be integrated with microfinance. a waqfislamic-based mfi will facilitate wealth building for the poor. this can reduce the cost of financing which can create wider access to the community in bop (ahmed, 2007). islamic mfis allow charity funds such as zakat, infaq and sadakah as sources of funding (samad, 2014). these tools will help the poorest of the poor have access to islamic mfis. in addition, using lkm charity funds can increase the level of community creditworthiness at the bop and minimize uneven distribution (effendi, 2013). islamic mfis can reach a higher number of poor individuals than conventional ones because the zakat funds are distributed by the qard al hasan scheme (effendi, 2013). on the other hand, semi-formal islamic mfi practices such as bmt carry out two functions: baitul maal (managing zakat, infaq and sadakah) and baitul tamwil (managing savings and funding). bmt can manage charity funds by collecting zakat, infaq and donations. the main objective of bmt is not only to provide funding but also to involve borrowers in community development programs by cutting the role of money sharks in the community (kamla & rammal, 2013). 2.3 poverty there is still no universally accepted definition of poverty (tambunan, 2003). because poverty is multidimensional, as it has income and non-income dimensions that are usually interrelated, there are always difficulties in deciding where to draw the line between the poor and the "nonpoor". despite this, many experts have tried to define poverty. bps tries to explain poverty as the inability to meet basic needs, as measured by expenditure. this https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 111 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) means that people whose expenditures are below the average poverty line are included in the poor. according to unitednations (2001) as quoted by barber (2008) defines poverty as: microfinance in indonesian islamic institutions 163 [...] a human condition characterized by continuous or chronic deprivation of resources, abilities, choices, security and power necessary to enjoy adequate standards of life and civil, cultural, economic, political and other social rights. in indonesia, poverty is measured by comparing per capita household consumption with the poverty line set by the central bureau of statistics (alisjahbana and yusuf, 2003). if per capita household consumption expenditure falls below the poverty line, then the household is considered poor. sumner et al. (2020) however, it is asserted that a slight decrease in per capita household consumption will mean an increase in income-based poverty in the region. this situation is likely to push more families down the poverty line (mahler et al., 2020). during the outbreak of the covid-19 virus, indonesia witnessed tremendous economic losses as the government faced losses in public income, besides that the government is also struggling to provide the support needed for its citizens. this forces people from low-income families to bear the long-term effects of this pandemic, especially those without economic, social, health and education support services (buheji et al., 2020) despite the fear of catching the virus and the covid-19 pandemic mortality rate. -19 is currently unpredictable and containment of its spread is very difficult due to the transmissibility of this pathogen. fiscal recession and social impacts are unavoidable and unpredictable in the current pandemic (abideen, mohamad, & hassan, 2020). many people are unable to stay at home because the longer they do so, the lower their income and chances of survival. the increase in essential commodity prices has exacerbated the situation for many people, especially informal sector workers, most of whom earn less than the national average (owusu & frimpong-manso, 2020) 2.4 the government's strategy in reducing poverty during the covid-19 pandemic the five steps topoverty that can be taken include (safitri, 2020): a. population data update target recipient of the family hope program (pkh) that the government has budgeted for during the pandemic is 10 million families with a budget allocation of idr 37.4 trillion or idr 3.7 million per year. meanwhile, the basic food cards are targeted at 20 million families with a budget of rp. 43.6 trillion, consisting of rp. 200,000 per month for nine months, including rp. 600,000 for 1,776 million families in jabodetabek for three months. in addition, there is a cash transfer from the pre-employment card program for 5.6 million participants worth idr 600,000 for four months. in addition, there is a cash transfer from the pre-employment card program for 5.6 million participants worth idr 600,000 for four months. "in addition to continuing to update data on the poor and vulnerable to poor who deserve social assistance, the government needs to increase the social assistance budget and expand the number of aid recipients to people who have fallen into poverty due to covid-19," (faisal, 2020). b. the integrity of the distribution of social assistance https://creativecommons.org/licenses/by/4.0/ poverty treatment effectiveness in the era of pandemic covid-19 with the role of the baitul maal wat tamwil 112 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) in many places, various forms of social assistance of different types and numbers have created social tensions in a number of areas. this is exacerbated by the social assistance database, in particular the integrated social welfare data (dtks), which is used by local governments that do not yet include people who were previously unregistered but whose economic conditions deteriorated during the pandemic. one alternative that can be taken by the government is to partner with state banks to transfer social assistance directly through a special account for each beneficiary. "apart from more efficient distribution, recipients of aid do not overlap. in addition, the potential to reduce the amount of aid can be avoided, ”. c. administrative prices subsidies reduce the burden on public expenditures, especially for the poor and near-poor, especially by reducing administered prices. among them: 1) reducing the price of fuel, which is one of the largest components of expenditure for the poor (5 percent for the urban poor and 4 percent for the rural poor). although the current decrease in mobility of people has an impact on reducing the use of bbm, bbm still plays a major role in the mobility of goods (logistics) which remains very crucial during the outbreak. moreover, the price of crude oil has continued to decline to below 25 dollars per barrel. the base price of fuel under ron 95 should drop to at least rp. 4,500 to rp. 5,000 per liter. "the price is potentially lower if the ministry of energy and mineral resources reduces constant costs (alpha procurement, storage, and distribution) and the margins of fuel distribution companies," increase the number of households receiving electricity tariff cuts so that they cover a minimum of all 900 va customers. currently, apart from the r1 / 450va group (24 million subscribers) who get free electricity for three months, the r1 / 900va household group that gets 50 percent deduction is only 7.2 million subscribers out of a total of 22.1 million. 2) lowering the price of three kilograms of lpg, which is mostly consumed by the lower middle class. this is also in line with the price of propane and butane, which are the main raw materials for lpg, which fell sharply. the price of aramco propane, which is the reference for calculating the price of lpg subsidies, fell from us $ 430 per tonne in march to us $ 230 per tonne in april 2020. meanwhile, the butane price fell from us $ 480 per tonne to us $ 240 per tonne. in the same period. therefore, in line with the potential decline in the realization of the three kilograms (rp. 50.6 trillion) lpg subsidy budget this year, the government has enough room to lower the fuel price by around rp. 1,000 to rp. 2,000 per kg. "this reduction will have a large enough effect to reduce the cost of living for people, especially those affected by covid-19," (faisal, 2020). 3) providing discounts or eliminating water rates for households, especially in areas that have implemented the psbb. many developing countries have adopted this policy, such as malaysia and thailand. because the management of clean water is under the control of the regional government, faisal appealed to them for the time to share part of the burden on the community by providing discounts or eliminating clean water tariffs in their areas. 4) incentives in agriculture, animal husbandry and fisheries increasing incentives for farmers, ranchers and fishermen through government product purchase schemes and improving logistics lines for agricultural, livestock and fishery products are necessary considering these sectors continue to produce and face https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 113 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) minimal market absorption. if incentives in this sector are not immediately and specifically provided, then they have the potential to increase the number of people in poverty. the agricultural sector currently absorbs the largest number of workers up to 34.58 million people or 27.3 percent of the national workforce as of august 2019. "this policy will also help the government secure the availability of national food stocks, especially during the pandemic period," (faisal, 2020). d. careful apbn management increased government intervention to cope with the pandemic will certainly have an impact on increasing the government budget. although there is room to widen the deficit, the government can optimize the reallocation of the budget that has been prepared and implement several alternative policies, including: 1) reallocating part of the capital expenditure budget and apbn goods expenditures, and carrying out burden sharing between the central government and regional governments by diverting part of the transfer to regions and village fund budgets, to be allocated into the social assistance budget. the government also needs to renegotiate foreign debt payments to foreign creditors, both institutions and countries. 2) reallocating the budget for handling covid-19 worth idr 150 trillion (out of a total funding of idr 405 trillion) which was originally intended to support the national economic recovery program, which details have not been explained, for social safety-net budget activities and an increase in the budget for covid-19 countermeasures. 3) reallocating the pre-work card program budget, which is used to pay for training programs worth rp. 5.63 trillion, which is irrelevant to the current needs of society, especially the workforce who are unemployed due to layoffs. after all, most of the material on offer can be found free of charge on the internet. "thus, these funds can be allocated to provide social assistance that is more needed by the poor and near-poor, especially in the form of providing basic necessities," 2.5 bmt and poverty alleviation widiyanto and abdul ghafar (2010) measure the effectiveness of bmt in reducing poverty by evaluating the effectiveness of bmt financing to develop mw. mw development has the potential for poverty reduction in several ways: a. providing credit (financing) and / or providing classes to the poor to help them start or strengthen their businesses (schreiner and woller, 2003) b. providing assistance / compensation to groups of 8 asnaf who need to lighten their burdens c. builds self-esteem and independence d. creating autonomy e. creating a community atmosphere (geroy et al., 1997). goldmark (2001), reveals that: "the future of microenterprise development (me) considers a wider range of services, both financial and non-financial, in which small business owners can build relationships with larger businesses and more profitable markets." https://creativecommons.org/licenses/by/4.0/ poverty treatment effectiveness in the era of pandemic covid-19 with the role of the baitul maal wat tamwil 114 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) this means, to use mw development as a means of poverty alleviation, a wider availability of non-financial services is needed to increase the effectiveness of financing. increasing the effectiveness of financing is not only beneficial for the development of mus and poverty alleviation but also provides benefits for islamic microfinance institutions by reducing business risks and increasing program sustainability (widiyanto and abdul ghafar, 2010). in addition, the effectiveness of other bmts in reducing poverty is by distributing direct assistance from zakat, donations and alms. this is to help directly those who are experiencing difficulties and motivate them to immediately rise from adversity (iskandar, possumah, & aqba, 2020). 3. research methodology design of this study was a literature review or literature review. literature research or literature review (literature review) is research that critically reviews or reviews the knowledge, ideas, or findings contained in the academic-oriented literature, and formulates theoretical and methodological contributions to certain topics. , cooper (2010). the nature of this research is descriptive analysis, namely the regular breakdown of the data that has been obtained, then given an understanding and explanation so that it can be properly understood by the reader. in addition, data collection used is in the form of keywords related to this research topic. where the use of this method is related to the covid-19 pandemic situation which limits researchers in direct data collection. in this study data were taken from previous studies and journals related to the covid-19 pandemic. 4. result and discussion among the solutions that can be offered within the framework of the concept and economic system as well as islamic financial solutions which are the effectiveness of the role of bmt in poverty reduction efforts during the covid-19 pandemic, namely: first, the distribution of direct cash assistance from zakat, infaq and alms, both from zakat collection units and from the community. facing the current situation, it is not only the government that is moving, the community is also expected to contribute according to their respective abilities and conditions. in this context, it takes sacrifice from the rich and patience from the poor who are affected by the plague, on the basis of love which is manifested in the form of solidarity among humans, where the more fortunate people help those who are less fortunate (linge, 2015). one form, in the midst of the covid-19 pandemic, is to pay zakat, donations and alms. especially for zakat that is paid, the distribution can be focused on the poor who are directly affected by covid19, as the one who has the right to receive it (mustahik). second, strengthening cash waqf with cash waqf schemes, productive waqf and waqf linked sukuk needs to be improved. as is well known, waqf has a very big role in infrastructure development in various kinds of public facilities and the economic empowerment of the people (asri, a., aqbar & iskandar, 2020), where cash waqf is an alternative that is expected to overcome the problem of poverty in society. (especially for those affected by covid-19), with the active participation of non-government parties (the community), especially the rich and have the ability to help alleviate the suffering of the poor. one example in bangladesh is that non-government efforts to address the problem of https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 115 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) poverty have been tried to be answered through the existence of an institution called social investment bank limited (sibl). this institution operates by raising public funds (rich), especially through cash waqf funds, to be managed and the results of their management distributed to the poor. in the case of indonesia, efforts such as those made by sibl are an attractive alternative and should be accommodated. with the majority of the muslim population, efforts to raise and manage waqf funds (cash) as in bangladesh are expected to be more appreciated by the community (muslims), at least culturally, especially during this pandemic. and one of the institutions in indonesia, for example, can go through bmt, which is expected that this bmt can later manage and distribute it to the poor. third, superior business capital assistance during a crisis. in the midst of a crisis, many business sectors or micro, small and medium enterprises (msmes) are struggling to survive. this business is often difficult to survive due to limited capital. the existence of msmes as a nonmuzakki group is a group that is very vulnerable to falling into the abyss of poverty and bankruptcy due to shocks or economic shocks. so that the number of mustahik can increase very sharply, while the number of muzakki can continue to decrease significantly (ascarya, nd). this is where bmt plays one of the roles of bmt, during the covid-19 pandemic condition, it is hoped that bmt will be able to provide capital to the business sector or msmes in order to continue to struggle and stabilize businesses that are in crisis. the existence of micro, small and medium enterprises, especially traders in traditional markets is a form of economic life for most indonesians. this position has placed traditional market traders as the main thing that needs attention, especially in terms of capital. the process of developing traditional market traders is a manifestation of economic development which has become very important. efforts to develop and strengthen the potential of traditional market traders as a strategic economic group must be oriented towards empowerment, so that independent and strong local economic actors are formed through micro financial institutions (lkm), especially islamic microfinance institutions (lkms) (sabirin & sukimin, 2017). therefore, the provision of capital by bmts to businesses is used as a means of reducing the impact of the crisis. this provision of capital can be done with several policy alternatives, such as providing additional stimulation of sharia banking relaxation and restructuring or deferral of sharia credit / financing payments for the next few months. in order to be stronger, this provision of capital from islamic banking / financial institutions needs to be supported and strengthened with assistance so that it can be accounted for. fourth, the above business capital can also be followed by aloan qardhul hasan. in sharia economic / financial terminology, qardhul hasan is a loan that does not take any benefits (profits) but is still emphasized to be repaid (sari, 2015). this product / scheme is one of the products / schemes of the islamic financial system which is very important in supporting the recovery or sustaining the economy. one of them is: baitul mal wa tamwil (bmt), through baitul malitsto be one institution that can participate in providing a solution to this problem, namely by way of implementing development programs through product qardhul hasan (mubarok, 2019) .implementasi qardhulhasan thisnot only serves as a financing platform, but this form of financing is also equipped with a mentoring model, so that with this assistance, the implementation of the financing model can run well and in the end this noble goal will also be realized. https://creativecommons.org/licenses/by/4.0/ poverty treatment effectiveness in the era of pandemic covid-19 with the role of the baitul maal wat tamwil 116 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) fifth, the islamic economic and financial system as a system that is full of values as well as an indication of the creator is believed to be capable of realizing productive economic activities within the framework of justice. for this reason, the public needs to be given a correct understanding of sharia economics and finance in order to increase islamic economic and financial literacy, including through the provision of islamic economic education assistance for students affected by covid-19; granting permits and facilities for state and private universities to run the distance program (pjj) which offers sharia economics programs with an emphasis on moral development; and expansion of internet connection infrastructure to support pjj that is evenly distributed throughout indonesia for free. in addition, the existence of the sharia economic community organization as a forum that aims to be a reference and to be followed as an example for efforts to accelerate the development and application of the economic system and islamic business ethics in indonesia can be involved in this effort (lubis, 2019). islamic financial literacy in indonesia is still in the low category (hayati, 2019), only occupying the ninth position in the share of the islamic financial market in the world. due to the lack of knowledge and technological knowledge of the indonesian people, many people do not know about the existence of islamic financial products that are very useful for life. from the many efforts made above, it can be said that bmt is effective in reducing poverty during the covid-19 pandemic. where the various kinds of efforts carried out by bmt in indonesia can reduce the poverty gap that occurs, besides that the difference in income differences earned by the poor can also be reduced through the assistance and financing provided by bmt. the condition of the poor can be said to be more prosperous when they get financing or assistance from bmt. even the distance that separates the poor from the inequality between the poor and the poverty line is reduced after they receive financing and assistance from bmt. prosperous society conditions mentioned in the quran letter quraysh: 3-4 following: 4 ف و خ من مهنموءا وع ج من مهمعطأ ذيلٱ 3 تيب لٱ هذا ب ر واد بعيلف meaning: "so let them worship the lord of this house (ka'bah). who has given them food to get rid of hunger and save them from fear "qs. quraish / 106: 3-4, ministry of religion of the republic of indonesia). in this verse, it can be seen that there are three indicators of welfare, namely worshiping allah, eliminating hunger, and eliminating fear. the indicator of eliminating hunger shows the fulfillment of basic human needs (adhilla & herianingrum, 2020). 5. conclusion as a country with the largest muslim population in the world, muslims can give their best role through various forms or models of philanthropy in islamic economics and finance, especially during the covid-19 pandemic. this role is expected to be able to overcome economic shocks that occur, one of which is poverty and the entire community, especially muslims, can participate in contributing to recovering these shocks. among the solutions offered by bmt in the effectiveness of poverty reduction during the covid-19 pandemic, namely: (1) by distributing direct cash assistance from zakat, donations and alms; (2) by strengthening waqf in the form of cash waqf, productive waqf, waqf linked sukuk and waqf https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 117 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) for infrastructure; (3) through superior business capital assistance for the business sector or micro, small and medium enterprises (umkm); (4) through the qardhul hasan scheme; and (5) increasing islamic economic and financial literacy. with these efforts, it can be concluded that bmt is effective in reducing poverty. where these efforts lead to increased income after receiving bmt financing. empowerment of the poor in various productive efforts has been able to reduce the extent and severity of poverty. therefore, an integrated program for the poor designed by bmt, namely the provision of financial and nonfinancial services including spiritual development through the internalization of islamic moral values is an important tool in poverty alleviation. bmt not only has an important role in reducing poverty and promoting local economic development, but also in reducing the scope and prevalence of illegal moneylenders that trap the poor. using the qard hasan scheme, bmt has succeeded in eliminating the number of moneylenders as well as educating the public about the dangers of usury. poverty alleviation will be successful if islamic financing institutions such as bmt are carried out massively in many areas (widiyanto and abdul ghafar, 2010). so, given the important role of bmts in poverty reduction, it is hoped that the government of indonesia, both local and international islamic organizations will increase their support for bmts. the government can channel a portion of the public budget through the bmt which will then organize and manage funds for the clients accordingly. the two largest islamic communities in indonesia such as nahdhatul ulama and muhammadiah can also maximize the role of bmt to help society. ummah,because the majority are still poor. the role of bmt can be maximized if the government and the muslim community work well together. of course all the efforts made are inseparable from noble efforts and intentions, and of course all these efforts must be really encouraged, so that in the future it is hoped that it can help the economic surplus re-form so that the acceleration of economic recovery can be realized and ultimately can reduce the poverty level occurred during the covid-19 pandemic onwards. references abideen, az, mohamad, fb, & hassan, mr (2020). mitigation strategies to fight the covid19 pandemic — present, future and beyond. journal of health research, 34(6), 547–562. https://doi.org/doi 10.1108 / jhr-04-2020-0109 adhilla, an, & herianingrum, s. 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(2020, april). 5 steps to reduce the spike in poverty as a result of the covid19 pandemic. kompas.com. retrieved from https://money.kompas.com/read/2020/05/06/110100926/5-langkah-untuk-kurangilonjakanangka-kemoverty-akibat-pandemi-covid-19?page=all sari, sp (2015). the influence offinancing on the qardhul hasan increase in business income of mustahik zakat (case study of dompet peduli umat daarut tauhiid bogor branch. (alinfaq, 4(1), 57–93. wulandari, p. (2019). enhancing the role of baitul maal in giving qardhul hassan financing to the poor at the bottom of the economic pyramid: case study of baitul maal wa tamwil in indonesia. journal of islamic accounting and business research. https://creativecommons.org/licenses/by/4.0/ does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? 57 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? abdurrahman1)*, amilin2), indo yama nasaruddin3) 1 student of doctoral program in islamic banking, uin syarif hidayatullah, indonesia 2,3 economic and bisnis faculty, uin syarif hidayatullah, indonesia abstract this study aims to analyze the relationship between intellectual capital and islamic corporate governance on financial performance and its impact on earning management behavior. this study uses the analysis method generalize least square and path analysis in islamic banking. the sampling technique used purposive sampling. the data obtained is secondary data based on financial reports for a period of 9 years in the period 20112019. the results showed that the role of intellectual capital and islamic corporate governance can directly affect financial performance, and the role of intellectual capital and islamic corporate governance cannot directly affect earnings management however must go through financial performance. keywords: earning management, financial performance, islamic corporate governance, intellectual capital. 1. introduction banking is a business of trust, where banks have a large number of human resources, who have a role as intermediaries between those who have excess funds and those who are short of funds and institutions that function to facilitate the flow of payment traffic, such as islamic banking must be able to gain public trust in carrying out its activities. islamic banking stands as part of the development of the concept of sharia economics, especially in the financial sector which was developed in response to muslim economists and banking practitioners who try to accommodate the pressure of various parties who want the existence of financial transaction services to be carried out in accordance with the moral values and principles of islamic sharia. according to maghrebi & abbas (2015), rules the principles of sharia are determined in the koran and are operationally described in the hadith, these rules consist of various kinds of institutions in running the economy, including the rules that regulate the behavior of market participants. whereas in market capitalism, the market is considered a system, in islamic economics it is only one mechanism, the most important thing in islamic economics is to achieve the economic goals of society or to achieve the benefit of the ummah. *corresponding author. email address: abdurrahman@esaunggul.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:abdurrahman@esaunggul.ac.id afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 58 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) regarding the conditions of islamic banking above, there needs to be a strategy handling in an effort to increase both volume and financial transactions through islamic banking, the strategy in question is a strategy in using policies to run a company that needs to be carried out in an effort to improve financial performance and is expected to increase company value (morrow, et al, 2007; murtini, 2008) companies need to choose a policy strategy in the form of appropriate management and accounting policies to achieve the company's goals, namely increasing company value. the role of the financial manager must have a strategy in managing financial activities, there are three strategies that a manager must carry out in the company, namely: 1). planning strategy, guided by the linkage between internal pressures and external needs that come from outside, depends on the elements of needs analysis, projection, forecasting, economics and finance. 2). management strategy, an effort to manage the change process, such as: strategic planning, organizational structure, strategic control and primary needs. 3). thinking strategy, as a basic framework for formulating goals and results on an ongoing basis (mustari, 2014; sujianto, et al, 2020). there are three main weaknesses of the islamic banking industry, namely: a). competitiveness; b). position and c). synergy with other islamic financial institutions. in particular, there are problems related to the lack of comprehensive and appropriate frameworks and instruments, limited market coverage, lack of public knowledge and understanding, lack of efficient organizational structures to support banking operations, operational inefficiencies, domination of basic debt financing, and inability to support banking operations. comply with international islamic finance standards (ismal, 2011). the use of management and accounting strategies is a key that cannot be underestimated in creating the sustainability of a sharia banking business (going concern). business competition between islamic banks is clearly a risk factor for an islamic bank to survive, not to mention the added competition with conventional banks that have sharia units and conventional banks in general. the ability to determine strategies in determining management and accounting policies is a determining factor in winning a competition in the financial market, especially banking. one of the success of a bank is by looking at the bank's ability to create corporate profits. the use of these strategies is of course in the hope of being able to meet the expectations of the company owner, namely business continuity and increase in company value, however, every business activity does not escape fraud / fraund, both individuals and company management, including in this case islamic banking, a real case example is a mega syariah was dragged into the money game case packaged in gold investment products gtis (golden traders indonesia syariah) and gbi (gold bullion indonesia) (sadikin, 2014). furthermore, a fictitious credit scandal committed by bank officials at bank syariah mandiri (bsm) (agustiyanti, 2018). the fictitious credit case at bank bjb syariah in 2019 (al-ayyubi, 2019), the fraud cases that appeared in the media at this islamic bank are proof that the element of sharia does not guarantee that islamic banking is free from the threat of fraud. and these cases indicate weak corporate governance practices, weak internal controls, and bank performance that causes fraud and losses for owners and the government. the performance of islamic banks must always be considered, especially in terms of various aspects, namely financial and non-financial, especially the quality of human https://creativecommons.org/licenses/by/4.0/ does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? 59 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) resources related to their skills and knowledge of sharia. with the hope that if the quality of human resources is good, a variety of sharia products will emerge that can be chosen by the community. however, the problem is not only the internal factor of islamic banking but external factors including market players and the public who need to be educated about the islamic products offered by islamic banking. the development of islamic banks which is towards improvement needs to be further guarded to prevent the emergence of various kinds of risks, both financial loss and reputation risk. islamic bank observers must be extra hard to protect islamic banks from bad possibilities in the future. if the islamic bank makes a mistake, it can cause a bad image of the islamic bank. to restore public trust, it will take a lot of money and time. the existence of islamic banks is not free from external problems such as economic and monetary conditions in indonesia. in line with these conditions, one thing that needs to be observed is the aspect of good corporate governance (gcg) because it is related to various kinds of risks which if not considered will damage the image of islamic banks in the future. corporate governance for islamic banking, emphasizing the importance of implementing effective gcg in islamic financial institutions. gcg is an important pillar that must be created to create a superior and resilient islamic bank. the application of cg is very important, because the concept of islamic banking uses risk sharing. chapra further explained that among the most important ways to support corporate governance are internal control, risk management, transparency, accounting and financing disclosures, sharia refining and auditing, prudent regulation and supervision. compliance with sharia regulations is a key player in the implementation of cg in the islamic banking industry( chapra & ahmed , 2002). 2. literature study this research involves several basic theories including: positive accounting theory (pat), agency theory, signaling theory,). resource based theory (rbt) resourcesbased view of the firm, pecking order theory (pot), and shariah enterprice theory. positive accounting theory (pat) deals with the prediction of actions such as the choice of accounting policies by companies and how the company will respond to new accounting standards that are being proposed. pat emphasizes whether the accounting theory put forward in the accounting literature can explain accounting practices and predict the causes of current phenomena and their effects in the future. (scott, 2015). agency theory is a relationship or contract between the principal and the agent, in which the principal is the party who employs the agent to perform tasks for the interests of the principal, while the agent is the party that carries out the interests of the principal (scott, 2015). signaling theory is an action taken by company management that provides instructions to investors about how management views the company's prospects. signal theory explains that signaling is done by managers to reduce information asymmetry. managers provide information through financial reports that they are implementing conservatism accounting policies that generate higher quality earnings because this principle prevents companies from exaggerating profits and helps users of financial statements by presenting income and assets that are not excessive (brigham & houstan https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 60 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2006). resource based theory (rbt) the resources-based view of the firm states that companies achieve sustainable comparative advantage and gain more benefits by owning or controlling strategic tangible and intangible assets. the rbt perspective includes all assets, capabilities, organizational processes, company attributes, information, knowledge, etc. controlled by the company which allows the company to understand and implement strategies to increase the efficiency and effectiveness of the company (ulum, 2013). pecking order theory (pot) states that companies like internal financing (funding from the company's operations in the form of retained earnings), if external funding is required, the company will issue the safest securities first, starting with the issuance of bonds, then followed by securities. with the characteristic option, only when in the end not enough new shares are issued, this theory was introduced by (donaldson, 1961) and developed by (myers, 1984). internal funds are preferred over external funds because internal funds allow companies to no longer need to seek loans from outside parties. external funds are preferred in the form of debt to equity capital for two reasons. first, considering the issuance cost, the cost of issuing bonds is cheaper than the cost of issuing new shares (husnan, 2000). shariah enterprice theory, a theory that explains the values of justice, truth and honesty as well as accountability that has been done to allah swt. according to triyuwono (2000), it explains that islamic accounting does not necessarily take the form of management accountability to company owners (stakeholders), but also as accountability to stakeholders and god. shariah enterprice theory where the highest stakeholder is allah swt, humans as caliphs or as representatives of allah swt on this earth have a mandate to share welfare with all stakeholders, humans are prohibited from hoarding assets for themselves, because in essence part of the property is owned by humans belong to another human being in need. based on the basic theory above, the variables used in this study are formed, including earning management, financial performance, islamic corporate governance, and intellectual capital. earning management is as "the choice by a manager of accounting policies so as to achieve some specific objectives" or the choice made by managers in determining accounting policies to achieve certain objectives. the practice of earnings management in the company is very logical. if accounting flexibility allows managers to influence a decision, and it is legally (to some extent) a legal practice, surely managers will. the amount of opportunities and incentives for managers to carry out earnings management encourages researchers to evaluate earnings management practices. what is difficult for researchers to explore earnings management practices is the limitation of the methodology to prove earnings management practices, because basically earnings management is difficult to detect (scott, 2003). meanwhile, if you look at the islamic perspective framework related to earning management, it begins that islam is present to bring peace by always obeying the will of allah swt, by holding two principles, namely the qur'an as the holy book sent down by allah and hadiths which contain actions inspired by allah: the words of the prophet muhammad saw and description of his behavior. these two principles build the source of islamic law (abdul rahman, 2003). there is no separation between the worldly and the spiritual dimensions in islam, and https://creativecommons.org/licenses/by/4.0/ does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? 61 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) islam views ethics as part of faith that emerges from aqidah (ahmad, 1997). by having a good aqidah, a muslim will obey the rules that have been determined. compliance with the rules determines the level of a person's faith so that he will refrain from things that are prohibited by allah swt (abdul rahman, 2003). financial performance is a function of the worker's ability to accept job goals, the level of achievement of goals and the interaction between the goals and abilities of workers. financial performance is a complete display of the state of a company for a certain period of time, which is the result or achievement that is influenced by the company's operational activities in utilizing its resources. performance is used for part or all of the actions or activities of an organization in a period with reference to standard amounts such as past or projected costs, on the basis of efficiency, accountability or management accountability and the like (srimindarti , 2004). intellectual capital is defined as a set of intangible resources and capabilities owned or controlled by a company such as knowledge, culture, brand, reputation, relational networks, processes that create value in the form of competitive advantage. it is an important part of the resources base theory (rbt) and contributes to the performance from this theoretical perspective (barney, 1991); (bollen,et,al 2005). the value of intellectual capital also lies in its intangibility, which makes it rare and difficult to imitate, in contrast to tangible assets that are easier to buy or copy (martín-de-castro et al., 2011; ray et, al, 2004). islamic corporate governance, islam as a way of life which always voices the importance of business ethics, values of integrity and true honesty. islamic entities have their own perspective on corporate governance which is a reflection of an islamic perspective, which has a different point of view from conventional corporate governance, especially the placement of the ideology of monotheism in the perspective of sharia, while the ideology of rationalism in the conventional perspective that distinguishes the other is that its business objectives in conventional perspectives will generally maximize profit, while in the perspective of sharia it focuses more on the welfare of the ummah. the principles of islamic corporate govenance refer to the al quran and al hadists. the principles of corporate governance in islam to convey the revelations of allah swt to the people, where the messengers are equipped with four mandatory characteristics, namely shiddiq, amanah, tabligh and fathanah, these four characteristics are translated into the islamic corporate governance application which is based on the law of the qur'an and hadith. (nugroho, 2015). 3. research methodology the design of this research is quantitative research with the type of causality research, which means that this research tries to find or find the cause of one or more problems (sekaran & bouqie, 2017). the scope of this research is limited to the study of firm value. the population in this study is limited to islamic banking, especially islamic commercial banks (bus), which are registered with the financial services authority (ojk). the period is limited to 9 years starting from 2011 to 2019. the selection of a sharia commercial bank (bus) is based on the independence of policies in carrying out its business activities. the population consists of 14 islamic commercial banks registered https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 62 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) with the financial services authority (ojk) and as samples there are 12 islamic commercial banks with the criteria of having complete financial and non-financial reports from 2011-2019. the data analysis method used is by using descriptive statistics, namely describing the data by looking at the mean (mean), highest (maximum) value, lowest (minimum) value, and standard deviation of a variable in the form of an explanation regarding each variable in the study either. on average, the islamic banking industry and each individual islamic banking are the object of research and the panel data estimation model where this model combines time series with cross-sector observations so that the number of observations made will increase. panel data estimation will increase the degrees of freedom and also reduce the collinearity between the explanatory variables and increase the estimation efficiency. in estimating the panel data regression model, there are three categories of models that can be used, namely the common effect, fixed effect, and random effect. after obtaining an effective model, it is continued with the panel data regression assumption test, if it passes, it will use ols (ordinary least square) if it does not pass it will use gls (genaral least square) then proceed using path analysis. earning management is an accountant's action by increasing or decreasing earnings on financial statements based on certain motivations. the measurement of earning management is proxied by using discretionary accruals. discretionary accruals use the accrual component in managing earnings because the accrual component does not require physical evidence of cash so that playing with the accrual component is not accompanied by cash received / disbursed. the value of discretionary accruals can be zero, positive, or negative. the zero value indicates that earnings management is carried out using an income smoothing pattern. meanwhile, positive values indicate earnings management with an income increasing pattern and negative values indicate earnings management with income decreasing patterns (sulistyanto, 2008). financial performance in this study is measured using the return on asset proxy, calculated by using the profit value before tax divided by total assets multiplied by 100%. which means the company's ability to obtain profits (profits) and overall efficiency. the greater the value of the return on assets (roa) ratio illustrates the high level of profit the company gets based on the use of assets owned and the more productive the company maximizes the use of assets to be converted into profit. intellectual capital is an intangible asset but can provide added value in a company. where it is divided into 3 parts, the first is vaca is the company's capital ability to create added value for the company; the second is vahu, which is the ability of human capital to create added value for the company and the third is stva, which is the ability of structural capital to create added value for the company. the three components add up to produce ib-vaic. islamic corporate governance in this study is proxied by using 11 gcg assessment factors to become a total composite value with the criteria 1 = very good; 2 = good; 3 = good enough; 4 = not good and 5 = not good. the details of the assessment factors are as follows: 1). implementation of duties and responsibilities of the board of commissioners with a weight of 12.5%; 2). implementation of duties and responsibilities of the board of directors with a weight of 17.5%; 3). completeness and implementation of committee duties with a weight of 10%; 4). implementation of duties and https://creativecommons.org/licenses/by/4.0/ does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? 63 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) responsibilities of the sharia supervisory board with a weight of 10%; 5). implementation of sharia principles in the activities of raising funds and channeling funds as well as services with a weight of 5%; 6). handling of conflicts of interest with a weight of 10%; 7). implementation of the bank's compliance function with a weight of 5%; 8). implementation of the internal audit function with a weight of 5%; 9). implementation of external audit function with a weight of 5%; 10). maximum fund distribution limit with a weight of 5%; 11). transparency of financial and non-financial conditions, gcg implementation reports and internal reporting with a weight of 15%. 4. result and discussion 4.1 descriptive analysis results descriptive analysis is used to analyze data by describing and describing the data used to describe the data used in this study with the aim of making a conclusion. this study aims to examine intellectual capital and islamic corporate governance on islamic banking financial performance and its impact on earning management actions. this description of each research variable is obtained as follows: table 1 descriptive statistics em roa icg ibvaic mean -0.000350 0.004963 1.827037 0.634431 median -0.000015 0.008255 1.715000 2.027445 max 0.937406 0.107523 2.830000 6.309517 min -1.723771 -0.235935 1.150000 -134.1635 std dev 0.200668 0.035153 0.450674 13.24238 source: output from eview 11 (student version) based on table 1 above, it can be seen that from 108 observations of earning management data, it has an average value of -0.000350 with a deviation (standard deviation) of 0.200668. earning management with the lowest score of -1.723771 owned by bank bukopin syariah in 2012 and the highest value of 0.937406 owned by bank panin dubai syariah in 2011. it can be concluded that the trend of earning management in islamic banking in indonesia tends to be by "reducing profits". based on table 1 above, it can be seen that from 108 data observations, the level of profitability as measured by using return on assets (roa) has an average value of 0.004963 or 0.4963% with a deviation (standard deviation) of 0.035153. return on asset with the lowest value of -0.235935 or -23.5935% owned by bank net indonesia syariah (bank maybank indonesia syariah) in 2015 and the highest value of 0.107523 or 10.7523% owned by bank net indonesia syariah (bank maybank indonesia syariah) in the year 2019. this can explain that on average islamic banking has a level of profitability that is "less healthy". based on table 1 above, it can be seen that from 108 observations of ib-vaic data, it has an average value of 0.634431 with a deviation (standard deviation) of 13.24238. ib-vaic with the lowest score of -134.1635 owned by bank victoria syariah in 2016 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 64 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) and the highest score of 6.309517 owned by bank net indonesia syariah (bank maybank indonesia syariah) in 2019. it can be concluded that on average the condition of intellectual capital islamic banking is still relatively “not good”. based on table 1 above, it can be seen that from 108 observations of icg data, it has an average value of 1.827037 with a deviation (standard deviation) of 0.450674. icg with the lowest score of 1.150000 owned by bank muamalat indonesia in 2012-2013 and bank bca syariah in 2014 and the highest score of 2.830000 owned by bank muamalat indonesia in 2015. this can explain that on average the conditions for the application of icg in banking sharia is in the "good" category. before going to the hypothesis testing stage, the panel data is first tested using a model that is in accordance with the characteristics of the data using the common effect, fixed effect and random effect models. table 2 summary results of the output chow test, hausman test and lagrange multiplier test source: output from eview 11 (student version) from the test results in table 2, it was found that the most appropriate model for equations with the dependent variable roa is "common effect" and for equations with dependent variables em is "common effect", after getting the right model then the test is continued using the classical assumption test, as follows: table 3 results summary multicollinearity test output source: output from eview 11 (student version) at the results of the summary of the output of the multicollinearity test in table 3 the dependent part of the roa variable has no correlation value that exceeds the value of 0.8 so it is said that the regression equation with the dependent variable roa is multicollinearity free, then for the dependent variable em there is no correlation value that exceeds the value of 0.8 so it is said that the regression equation with the dependent em variable is multicollinear free, then the next test is the autocorrelation test: https://creativecommons.org/licenses/by/4.0/ does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? 65 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 4 results summary of autocorrelation test output source: output from eview 11 (student version) at the results of the autocorrelation test output in table 4 the dependent part of the roa variable, the breusch-godfrey serial correlation lm test on prob.chi-square (2) is 0.7899> from α (0.05) means that the regression equation with the dependent variable roa does not exist autocorrelation. then the dependent part of the em variable the value of the breusch-godfrey serial correlation lm test on prob.chi-square (2) worth 0.0983> from α (0.05) means that the regression equation with the em dependent variable does not exist autocorrelation, then the next test is the heteroscedasticity test: table 5 results of the summary of the heteroscedasticity test output source: output from eview 11 (student version) when viewed from the summary results of the heteroscedasticity test output in table 4:16 using the white heterokedasticity test of the chi-square prob value in the dependent part of the roa variable worth 0.0000 <from α (0.05) it means that the regression equation with the dependent variable roa has heterocedasticity, then the value the chisquare probability in the dependent part of the em variable is 0.0043 <from α (0.05), which means that the regression equation with the em dependent variable has heteroscedasticity. 4.2 panel data regression analysis based on the results of the postestimation test, the panel data estimation model selected both equations 1 and 2 is common effect, but all models 1 and 2 have not passed the postetimation test so they must be treated using the robust standard error or generalized least squate. such regression eliminates problems of multicollinearity, heteroscedasticity or autocorrelation. in this study, the treatment model used is generalize least square, here are the results of the summary of the output from the generalize least square: https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 66 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 6 results summary of gls treatment model outputs source: output from eview 11 (student version) at the results of the gls treatment model output in table 6, it can be seen that the test results with the gls treatment method on the dependent part of the roa variable show that the icg variable has a significant effect on roa because it has a prob <0.05 and the ibvaic variable has a significant effect. roa because it has a prob <0.05 value, then the test results with the gls treatment method on the dependent part of the em variable, the test results with the gls treatment method show that the roa variable affects earning management (em) because it has a prob = 0.0013 <0 value. 05, while ibvaic and icg have no effect on em because they have a prob value> 0.05. 4.3 path analysis results a. first sub structure this stage explains the role of intellectual capital (ibvaic) and islamic corporate governance (icg) on return on assets (roa), where the results can be seen in figure 1 below: figure 1 first model results the results in figure 1 show that intellectual capital (ibvaic) has a positive effect on return on assets (roa) and islamic corporate governance (icg) has a negative effect on return on assets (roa). b. second sub structure this stage explains the role of intellectual capital (ibvaic), islamic corporate governance (icg) and return on asset (roa) on earning management (em), where the results can be seen in figure 2 below: 0.000278 intellectual capital (ibvaic) (x1) financial performance (roa) (z) islamic corporate governance (icg) (x2) -0.005813 https://creativecommons.org/licenses/by/4.0/ does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? 67 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) figure 2 second model results the results in figure 2 show that only return on asset (roa) has a positive effect on earning management (em), while intellectual capital (ibvaic) and islamic corporate governance (icg) have no effect on earning management (em). so as to form a combined model model below, here are the results of the combined model in this study: figure 3 combined model results the results in figure 3 shows that intellectual capital (ibvaic) has a direct effect on return on asset (roa) and islamic corporate governance (icg) has a direct effect on return on asset (roa), return on asset (roa) has a direct effect on earning management (em), intellectual capital (ibvaic) has a direct effect on tax aggressiveness (ap), return on assets (roa) has a direct effect on firm value (bv) while the indirect effect is on intellectual capital (ibvaic) has an indirect effect on earning management (em) through return on assets. (roa), islamic corporate governance (icg) has an indirect effect on earning management (em) through return on assets (roa). intellectual capital (ibvaic) (x1) financial performance (roa) (z) islamic corporate governance (icg) (x2) earning management (em) (y) 0.247980 -0.005813 0.000278 earning management (em) (y) intellectual capital (ibvaic) (x1) financial performance (roa) (z) islamic corporate governance (icg) (x2) 0.24798 0 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 68 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) table 9 value of direct effect, indirect effect and total effect correlation direct effect indirect effect total effect x1 → z 0.000278 x2 → z -0.005813 z → y 0.247980 x1 → z → y 0.00006893844 0.248258 x2 → z → y -0.0014457234 0.242167 source: output from eview 11 (student version) 4.4 discussion a. intellectual capital (ibvaic) on financial performance (roa) the results of this study indicate that intellectual capital (ibvaic) has a positive effect on financial performance (roa). this means that intellectual material in the form of knowledge, information, intellectual property and experience from halal sources and in accordance with islamic law in an effort to create prosperity for islamic commercial banks can improve the financial performance of islamic commercial banks, the better the intellectual capital value (ibvaic) the better the financial performance. sharia commercial bank. this means that islamic commercial banks (bus) need to consider strengthening intellectual capital (ibvaic) in each islamic commercial bank in order to improve better financial performance. strengthening intellectual capital (ibvaic) by paying more attention to improving the quality of employees by increasing training costs, r&d costs, employee costs, productive asset expenditures, and capital expenditures at low capital costs in order to increase the company's rate of return even better. the results of this study support several theories, namely stakeholder theory, legitimacy theory, resource based view theory and signaling theory and are strengthened by the results of research conducted by chen, et al. (2005); hamdan (2018); naushad (2019); alabass (2019); doumpos et al. (2017) and alazzawi et al. (2018) which state that intellectual capital has an effect on financial performance. b. islamic corporate governance (icg) on financial performance (roa) the results of this study indicate that islamic corporate governance (icg) has a negative effect on financial performance (roa). this means that the implementation of the duties and responsibilities of the board of commissioners, board of directors and sharia supervisory board is good, the completeness and implementation of committee duties is adequate, implementation of sharia principles in fundraising and fund distribution activities as well as good services, good handling of conflicts of interest, the implementation of good bank compliance, internal audit and external audit functions, compliance with the maximum limit of fund distribution and transparency of financial and non-financial conditions, gcg implementation reports and internal reporting, which is represented by a composite value can affect financial performance (roa) for the better. this means that the more islamic commercial banks have a commitment and obedience to bank management in accordance with sharia rules and regulator rules, resulting in a https://creativecommons.org/licenses/by/4.0/ does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? 69 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) small composite value, it will improve the financial performance of islamic commercial banks. if you look at the direction of the influence, it can be explained that the smaller the icg composite value (meaning the better the management of the islamic commercial bank), the better the resulting financial performance will be, and vice versa if the greater the icg composite value (meaning that the better management of islamic commercial banks) it will reduce its financial performance. a more specific meaning is that the compliance and commitment to the disclosure of islamic corporate governance (icg) by islamic commercial banks consists of 11 assessment factors, namely the implementation of duties and responsibilities of the board of commissioners, directors, committees and sharia supervisory board, implementation of sharia principles in gathering activities. funds and distribution of funds as well as services, handling conflicts of interest, implementing the bank compliance function, implementing the internal audit function, implementing the external audit function, the maximum limit for fund distribution, as well as transparency of financial and non-financial conditions, gcg implementation reports and internal reporting are able to influence financial performance sharia commercial bank in general. the results of this study support several theories, namely agency theory, shariah enterprice theory and and signaling theory which are strengthened by the results of research conducted by riana & stanly (2014); mujiati, et al (2016); and mardiani et al., (2019) which states that islamic / corporate governance affects profitability. c. intellectual capital (ibvaic) on earning management (em) the results of this study indicate that intellectual capital (ibvaic) has no effect on earning management (em). this means that intellectual material in the form of knowledge, information, intellectual property and experience from halal sources and in accordance with islamic law in an effort to create prosperity for islamic commercial banks is not able to directly influence the behavior or actions of islamic commercial bank earning management. this means that no matter how good the implementation of intellectual capital (ibvaic), islamic commercial banks will not affect the behavior or actions of earning management (em) at islamic commercial banks. the results of this study do not support the theory of stakeholder theory, legitimacy theory, resource based view theory, positive accounting theory and agency theory and are not in line with the research of nuryaman (2019); wato (2017); galdipour, et al (2014); mojtahedi (2013); darabi, et al (2012) which states that intellectual capital has an effect on earning management d. islamic corporate governance (icg) on earning management (em) the results of this study indicate that islamic corporate governance (icg) has no effect on earning management (em). this means that the implementation of the duties and responsibilities of the board of commissioners, board of directors and sharia supervisory board is good, the completeness and implementation of committee duties is adequate, implementation of sharia principles in fundraising and fund distribution activities as well as good services, good handling of conflicts of interest, the implementation of good bank compliance, internal audit and external audit functions, https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 1 (2021) 70 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) compliance with the maximum limit of fund distribution and transparency of financial and non-financial conditions, gcg implementation reports and internal reporting that are carried out represented by a composite value have not been able to directly influence the behavior of islamic commercial bank earning management . this is sufficient to explain that in islamic commercial banks the application of islamic corporate governance will not affect islamic commercial banks in implementing their earning management policies. the results of this study do not support the theory of agency theory, shariah enterprice theory, positive accounting theory and agency theory and are not in line with the research of fadhilah (2019); man & wong (2013); amertha (2013); karuniasih (2013); murhadi (2010) states that islamic corporate governance (icg) has a negative effect on earning management (em). e. financial performance (roa) onearning management (em) the results of this study indicate that financial performance (roa) has a positive effect on earning management (em). this means that when the bank earns a profit and is able to make efficient use of assets as a whole, it can increase the behavior or actions of earning management (em) at the bank. it cannot be denied that financial performance (roa) has a role in the actions of earning management (em) in islamic commercial banks, the higher the financial performance (roa) will also increase the earning management (em) actions in islamic commercial banks and vice versa. roa) will also reduce earning management (em) actions in islamic commercial banks. the better the financial performance, the more islamic commercial banks will carry out earning management behavior or actions by increasing their profits and vice versa.if financial performance conditions are decreasing, islamic commercial banks will carry out earning management behavior or actions by reducing their profits. this condition confirms that in general, it is clear that bonus motivation is a realistic reason if it is linked to the relationship between financial performance (roa) and earning management (em). the results of this study support the theory of signaling theory, agency theory and positive accounting theory which are strengthened by the results of research conducted by sudarmadji, et al, 2007; widyastuti, 2009; wijaya & budiasih, 2018; dewi, 2012; dan satya & amertha, 2013 which explained that financial performance (roa) has an effect on earning management (em). f. intellectual capital (ibvaic) on earning management (em) through financial performance (roa) the results of this study indicate that intellectual capital (ibvaic) has an indirect effect on earning management (em) through financial performance (roa), which means that the higher the financial performance (roa) of islamic commercial banks is caused by the increasing role of intellectual capital (ibvaic). increasing earning management (em) actions in islamic commercial banks. a more detailed explanation that the role of intellectual capital (ibvaic) is able to increase financial performance (roa), so that if the financial performance (roa) is adequate or high, it will increase earning management (em) actions that will be carried out by islamic commercial banks, as well as conversely, if the role of intellectual capital (ibvaic) reduces financial performance (roa), so that if the financial performance (roa) decreases, it will reduce https://creativecommons.org/licenses/by/4.0/ does intellectual capital and islamic corporate governance affect financial performance and earning management on sharia banking in indonesia? 71 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the behavior or actions of earning management (em) that will be carried out by islamic commercial banks. the results of this study strengthen the theory of stakeholder theory, legitimacy theory, resource based view theory, positive accounting theory, agency theory and signaling theory. g. islamic corporate governance (icg) on earning management (em) through financial performance (roa) the results of this study indicate that islamic corporate governance (icg) has an indirect effect on earning management (em) through financial performance (roa). this means that the higher the financial performance (roa) of sharia commercial banks which is caused by the better management / governance of islamic commercial banks (marked by a decrease in the composite value), it can increase earning management (em) actions in islamic commercial banks. this means that better management / corporate governance (meaning that the composite value decreases) is able to increase financial performance (roa), so that if the financial performance (roa) is adequate or high, it will increase earning management (em) actions that will be carried out by commercial banks. sharia, and vice versa, if the role of islamic corporate governance (icg) decreases (marked by increasing its composite value) financial performance (roa), so that if the financial performance (roa) decreases, it will reduce earning management (em) actions that will be carried out by the bank. sharia general. the results of this study strengthen the theory of agency theory, shariah enterprice theory, positive accounting theory, agency theory and signaling theory. 5. conclusion this study aims to determine the role of intellectual capital and islamic corporate governance on financial performance, as well as its impact on earnings management actions, in islamic banking, especially islamic commercial banks for the period 20112019. based on the results of the discussion, the following conclusions can be drawn: a. there is a direct effect of intellectual capital (ib-vaictm) and islamic corporate governance (icg) partially on financial performance (roa). b. there is a direct effect of financial performance (roa) on earning management (em), but intellectual capital (ib-vaictm) and islamic corporate governance (icg) do not directly affect earning management (em). c. there is an indirect effect of intellectual capital (ib-vaictm) and islamic corporate governance (icg) on earning management (em) through financial performance (roa). reference abdul rahman, a. . 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(2007). bisnis dalam perpsektif islam (telaah aspek keagamaan dalam kehidupan ekonomi). mazahib, 4(2), 172–184. https://journal.iainsamarinda.ac.id/index.php/mazahib/article/view/507 https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 162 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) mursyidi abror1)1 1master of science in islamic economics, faculty of economics and business (feb) universityairlangga abstract islamic economics is an economic system that is built on the basics and arrangements of the qur'an and al-sunnah with the aim of maslahah. production does not only create something that does not exist, but also makes goods resulting from several productive activities that have usability. a producer must contain islamic values in their production activities. this value is reflected in the objectives in the production cycle must containgood luckand uphold the ethics and norms of both parties, namely consumers and producers whose ultimate goal is to achieve happiness in the world and the hereafter (falah). this article discusses ethical issues related to tempe producers and their relation to religion. the literaturereview used includes the concept of ethics, production theory, islamic production ethics and production in islam. at the end of the discussion, namely how a tempe producer creates a mashlahah in their production activities by implementing the maqashid sharia concept and theconcept of social responsibility in islam (icsr) from the tempe production activities so that their activities achieve islamic values: barokah, maslahah, falah, responsibility. social responsibility that synergizes with production theory. keywords: production ethics, maqasih syariah, islamic csr 1. introduction production is an activity carried out by humans in producing a product, both goods and services which are then used by consumers. when human needs are still few and simple, production and consumption activities are often carried out alone, namely someone produces to meet their own needs. however, along with the increasing diversity of needs and limited resources, a person can no longer produce the goods and services he needs himself, so he needs another party to produce whathe needs. this production activity is also a chain of consumption, without a production activity that produces goods and services, there will be nothing that can be consumedand life activities will stop, causing economic activity to slow down. humans need to eat, drink to be able to move, and need clothes to cover their genitals and worship, and need a place to live to protect themselves as well as various other needs. 1corresponding author. email address: mursyidiabror96@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:mursyidiabror96@gmail.com afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 163 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) meanwhile, in islamic production, it departs from human status as a'abd and caliph fi alard. with this status, production activities become a manifestation of human submission to allah swt. production activities are not just an effort to meet the needsof life as agay economics but also a means to seek social justice and maintain the dignity of human beings and provide maslahah. so producers have the same goal in economic activity, namely achieving good luck the optimum. in managing resources, the process of production activities must of course be based on islamic values, which will later lead to the benefit of the people. do not let production activities only based on the lust of greed in an effort to get the maximumprofit with the smallest sacrifice which will bring harm to humans. al-qur'an and assunnah become a frame of reference to return production activities to their original goal of increasing total human welfare (in terms ofas-syaibani called 'imaratul kaun).all production processes and activities lead to the glorification of human status, improvement of living welfare, eliminating socioeconomic inequalities, and having apositive impact on economic growth and independence as well as being able to provide welfare to the surrounding environment. as an activity that produces goods and services, production emphasizes the relationship between input used and output resulting from. the position of producers is to meet the needsof the community. this goal has far-reaching implications. in addition to meeting the scale of needs based on consumer demand and increasing producer welfare, production activities also have a social function, namely distributing community welfare as a producer's social responsibility. in other words, increasing the welfare of producers is accompanied by the obligation to distribute their wealth in the form of zakat, alms, infaq or csr funds.corporate social responsibility). the objectives of meeting community needs and increasing producer welfare are carried out within the sharia corridor. islam actually accepts the production motive as the motive in the conventional economic system, only further that islam also adds moral values in addition to economic utility. and humans are required to meet their needs and must be able to survive for their survival (rianto, 2004). one way that can be taken by humans is by producing tempeh, which is a type of traditional food that is widely produced by indonesian people. the tempeh home industry production itself does not operate in the (clothing) and board (residential) sectors only, but also in the food (food) sector. the term home industry is a food sector where tempe production is a rapidly growingsector and has many choices for consumers.therefore, the author wants to study further through this study entitled "implementation of maqashid shariada and islamic corporate social responbility in production ethics (case study of tempe industry home in kamal madura)". https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 164 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 2. literature review 2.1 definition of ethics ethics comes from the word ethos. ethosin greek has the meaning of morals or beliefs that guide a person or group. ethics is defined as a systematic study of the nature of the concept of values, morals, good/bad, right, wrong and so on, and the general principles that justify us to implicate them in whatever we do. according to isarafiq, ethics is a set of moral principles that distinguish good and bad. ethics is a normative field of science because it plays a role in determining what an individual should or should not do (muhammad, 2004). the meaning of ethics in the islamic economic paradigm will affect the mindset and community life in carrying out a production, ethics has a role, namely: a. with ethics, a person or group can judge about human behavior b. ethics becomes a means of control or signs for a person or group to carry out anaction or community activity c. ethics can provide prospects for overcoming the moral difficulties we face today d. ethics can be a fundamental principle for society in carrying out its activities ethical issues have been discussed a lot in the qur'an and al-hadith. ethics is a moral system based on belief in god, and of course based on religion, with that thequr'an and alhadith are the main sources that determine the boundaries in daily actions for humans, so ethics in production is part of human actions in carrying outthe corridors that have been determined in islam. the qur'an has also explained about ethics that there are three basic keys that form the basis for ethics, namely faith, islam and taqwa. if you think about it, it will have a very identicalmeaning. faith means freedom from danger, peace and islam means safe and integral, protected from disintegration and destruction, while taqwa is something that is fundamental to the qur'an from these two terms and taqwa has the meaning of guarding against destruction, futility and disintegration. so that the discussion of ethics contained in the qur'ancontains a broad horizon because it involves the values contained in human life both individually, in society and in the state in general in order to achieve happiness both in the world and in the hereafter (saiffudin, 2019). so simply ethics is a set of moral principles that distinguish between good and bad. ethics is very important to be applied in the production process to minimize wrong production activities that cause losses, so that the rules of values and norms have a very important position in controlling actions so as not to cause harm to otherhumans (tamamudin, 2016). 2.2 production theory production theory is an activity to create and add usefulness (utilities) somethinggood or service. factors of production in economics, such as land, labor, and skills (assruri, 1986). the definition of production is not limited to the act of goods, but involves all activities that can add or create the use of an item, so activities that produce services include production (tamamudin, 2016). https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 165 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the theory of production is divided into two parts, namely the theory of short-run production and the theory of long-run production. the theory of short-term production isthat if a producer uses factors of production, there are variable and fixed ones. the longterm production theory is that if all the inputs used are variable inputs and there are no fixed inputs, so it can be assumed that there are two types of production factors, namely labor (tk) and capital (m) (aziz, 2003). in economics, this theory of production always raises a question about: a. what will be produced and in what quantity b. how to produce/produce these goods and or services. c. for whom (for whom) the goods and or services are produced/produced. in answering this, the company that will produce a product faces limited resources (factors of production), so the company chooses the best alternative that will be used to produce the desired product. furthermore, the way the company produces the desired product is illustrated in the production process. every production process has the main elements of the production system, namelyinput, process and outputt. input are the resources used in the production process, the process is the method used to produce theproduct and the output is the desired product. then this can be described by using the scheme (soeratno, 2000): figure 1. production system schematic how? what? production is also an activity that converts inputs into outputs. many types of activities that occur in the production process, such as changes in form, place and time of use of the products.output company on the type of enterprise goods production depends on the number of inputs used in production. production is also ajob that creates or adds value and use of goods or services. in order for the production run to create results, several factors of production (inputs) are needed. and to produce output, the production factors which are inputs need to be processedtogether in a production process (production method). to produce a number of inputs are needed, namely the presence of capital, labor and technology. thus there is a relationship between production and input in the form of maximum output produced with certain inputsor called the production function (sugianto, 2002). production activities, both individuals and companies will always encounter three factors of production. capital (k) or called input fixed, for example, such as land, machinery, buildings. then labor (l) are people who have skills or do not have skills and the last is raw materials (m) such as fuel (perloff, 2012). companies to combine these factors of production input process output https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 166 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) will take into account the production costs that can produce goods and services. then the production function model appears to see the difference between output and input, namely q = f (l, k). where q is the unit of goods and services produced using l (labor) and the amount of k (capital) issued. then the company will consider the amount of labor and capital used to produceoutput in the context of efficiency even though profit maximization is not included in the productionprocess, in other words in the amount of output certain companies will not want to use two workers if it can be done by one worker (spell, 2020). the production activity in the economy is usually expressed in terms of the production function. the production function is a mathematical relationship that describes a way in which the amount of a given product depends on the number of certain inputs used. 2.3 islamic production ethics ethics if associated with the production process must be oriented towards achievingharmony or balance for all or the various parties with an interest in production activities by understanding the good and bad of all actions taken. ethics is also a reference (framesof reference) to produce goods and services, streamline performance and productivity, increase profits, and develop them widely. the urgency of ethics in production means glorifying humans as creatures of god, because humans are caliphs, and carry out social functions for society. this argument also refutes the existence of humans as merehomo economicus. in perspective homo economicus, ethics is separate from economics. whereas in islam, production behavior is a manifestation of worship, morality, and humansubmission to god. producers in islam implement ethical values in the qur'an and as sunnah in terms of meeting consumer demand, production processes, obtaining capital, business growth, and product diversification for business continuity. because it cannot be separated from ethical values, production has a direct effect in social life (fahrudin, 2010). this production process is the most important thing in the activities to create products, because if the production process is hampered then the circulation of economic activity will not be perfect, so islam views that ethics is the most important part of the production process so that these production activities run smoothly.in doing business it is also productionoriented in islam which includes (djakfar, 2007): a. oneness related to the concept of monotheism, including the economic aspect is also regulated in it. this isthe vertical dimension of islam. b. balance balance is shown to create the best rules, including balance in the economic fieldwhich is shown in awareness. c. free will islam teaches life without pressure in all things including in the economic sphere,humans have the ability to think and make decisions, to choose whatever way of life he wants, and most importantly, to act on what he chooses. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 167 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) d. responsible muslims are stressed to take into account everything that will be done. in the field ofeconomics and business this principle is translated into a certain pattern of behavior.it has a multi-layered nature and focuses on both the micro (individual) and macro (organizational and social) levels, both of which must be carried out together. e. virtue ihsan or actions that benefit others without any particular obligation. ihsan is thewillingness of business people to give kindness to others, for example giving timeslack to the debtor and if necessary, reducing the debt burden, accepting the return of goods that have been purchased and paying debts before the time of collection arrives. these five ethical philosophies are oriented towards islamic production activities due to the interconnectedness of the responsibilities possessed by a production actor accompanied byan ethical philosophy in attitude, namely oneness, balance, free will, responsibility, and virtue (tamamudin, 2016). the production process to marketing and service to consumers all must follow islamic ethics. metwally said that the difference in production that uses islamic ethical values with non-islamic ethics lies not only in its objectives, but also in its economic policies and market strategies. there are several things that must also be considered in this production ethic (faizal, 2016): a. types of products products to be produced must comply with sharia principles regarding goods and production. in islam, the main principle in production ishalal toyyibah and beneficial as stated clearly in the verses of the koran (al-nahl, 16: 114). halal toyyibah means that it can be consumed in relation to islamic teachings as long as it is safe and not harmful. muslims should avoid any food or drink that lies syubhah. b. maintaining production in an ethical way muslim entrepreneurs must be able to produce products that are halal toyibah continuously, thus that the muslim entrepreneur is able to demonstrate his ability to comply with all the principles and rules of production in islam. if the production of halal toyyibah placed as a priority, it must be supported through the use of halal resources and legal work procedures. if muslim entrepreneurs can avoid elements of haram elements such as fraud and usury continuously, then the application of ibe in production will be maintained. to maintain ethical production, entrepreneurs need tobelieve and be prepared to make small profits. their willingness to accept these conditions will help them to remain ethical in producing their products. c. relationship of islamic business ethics with halal certification halal certification is issued by the authority as confirmation that a product mustmeet the procedures and standards set in accordance with islamic principles. technically, verification and halal status will allow users to make choices about products on the market. from this explanation, we can conclude using the table: https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 168 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) figure 2. the parameters of islamic business ethics in production 2.4 production in islam production activities in the perspective of islamic economics are related to humans andtheir existence in economic activities, production is an activity to create wealth by utilizing natural resources by humans. production is commonly defined as creating value for goods or adding value to a product, goods and services produced must only be permitted and profitable (halal and good) according to islam (mohamed aslam haneef, 2010). production does not mean only physically creating something that does not exist,but what humans can do is make useful goods resulting from several production activities, because no one can create completely new objects. making an item useful means producing an item that suits the needs of the community and has a high sellingpower (ika yunia fauzia and abdul kadir riyadi, 2014): figure 2. the concept of production in islam the production objectives in the perspective of the economic fiqh of the caliph umar bin khatab are as follows: a. realizing the maximum possible profit realizing profit as optimally as possible means that when producing is not just routine production or the origin of production but must really pay attention to the realization of profits, however, this goal is different from capitalist understanding which seeks to https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 169 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) achieveas much profit as possible. b. realizing individual and family sufficiency a muslim is obliged to carry out activities that can realize his sufficiency and theadequacy of people who are his livelihood obligations. c. don't rely on other people umar ra as taught in islam does not justify / allow someone who is able to work to raise his hand to others by begging and calling on muslims to rely on themselves, not expecting what is in the hands of others. d. protect property and develop it wealth has a big role in islam. because with wealth, the world and religion can beupheld. without wealth, a person may not be istiqamah in his religion and not calm in his life. in umar's economic fiqh there are many narrations that explain the urgency of wealth, and that wealth is very much needed for the enforcement of various world and religious problems. because, in the world of wealth is as glory andhonor, as well as to protect one's religion more. in it there is goodness for someone, and connects the relationship with others. therefore, umar ra called on humans to maintain wealth and develop it by exploring it in production activities. e. explore economic resources and prepare them for use the sustenance created by allah swt. not only property that is in the hands of a person, but includes everything that is entrusted by allah swt. on this earth so that itcan be used as a tool to meet their needs and pleasures. allah swt. has prepared for humans in this world many economic resources, but in general to be able to be utilized, exploration must be carried out in the form of production activities so that it can meet human needs. f. liberation from the shackles of economic dependence production is the most important means in realizing economic independence. a nation that produces its needs is a nation that is independent and free from shackles economic dependence on other nations. meanwhile, a nation that only relies on consumption willalways be a prisoner of the economic shackles of other nations. g. taqarrub to allah swt a muslim producer will get a reward from allah swt. this is due to its production activities, both for the purpose of gaining profit, realizing stability, protecting property and developing it or other purposes as long as he makes these activities asan aid in obeying allah swt (lukman hakim, 2012). all production goals in islam are basically to create maslahah that optimum for humans as a whole so that falah will be achieved which is the ultimate goal of economic activity as well as the goal of human life. falāh itself is the glory of life in this worldand the hereafter that will give true happiness to humans. thus, production activities are very concerned about the glory and dignity of humans, namely by raising the quality and degree of human life. the dignity of human dignity must receive great and primary attentionin https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 170 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) all production activities, because all activities that are contrary to the honor of human dignity are contrary to the teachings of islam (p3ei) uii). therefore, production activities in the perspective of islamic economics are related to humans and their existence in economic activities (m. nur rianto al-arif, 2011). in economic terms, production is a cycle of economic activities to produce certaingoods or services by utilizing production factors within a certain period of time (said sa'ad marthon, 2004). there are several factors as a means of production, namely: a. natural/soil factors natural factors are basic factors in production. the nature referred to here is the earth, and all its contents, both on the surface of the earth, and those contained within the earth itself. in production, all of these are categorized as natural resources that canbe utilized for the welfare and prosperity of mankind (said sa'ad marthon, 2004). rasulullah saw. very concerned about the use of dead land (ihya al-mawat) as aresource for the prosperity of the people. islam recognizes ownership of existing natural resources, by always striving for good use and maintenance of natural resources as a factor of production. it is intended to give encouragement to someone in developing (managing) the land. islam also allows land owners to use other natural resources as production materials (muhammad, 2004). b. labor factor labor is an efficient factor from the previous production factors, namely the natural. manpower is also an asset for the success of a company, because the success of a production lies in the performance of the human resources in it. workers who have good skills and integrity are the main capital for a company. laboris the basis of productivity of all production factors that will not be able to produce any goods/services without the presence of labor (ika yunia fauzia and abdul kadir riyadi, 2014). thus, labor is needed to carry out the transformation process from materials to finished goods as desired by the company. labor / labor is not only a number of businesses or services offered for sale to thecompany, so that those who employ workers / employees / labor have moral and social responsibilities, so that the basis for determining the amount of wages paid must be able to improve the welfare of the workforce concerned. without neglecting the level of work efficiency so as to reduce production costs (indriyo gitosudarmo, 2002). the right of work that must be fulfilled by the perpetrator is the fulfillment of the terms ofthe work contract (contract) that has been approved. one that must be fulfilled is the rights of workers. the rights that must be accepted by workers are (djazuli, a., yadi janwari, 2002): get wages/salaries from their work, get job security from the employer, get health services and other social goals, get education so that the quality of work ofthe workers increases. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 171 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) c. capital factor (capital) capital is a very important factor in a production, therefore without capital producers cannot produce goods/services. capital is the amount of purchasing power or that can create power that is used for a production process, without capital it cannot produce and build (mochtar effendi). in islam, capital must be sourced from something that is free from usury sothat goodness can be achieved in production activities and the achievement of maslahah (ika yunia fauzia and abdul kadir riyadi). mochtar effendi distinguishes capital based on the source of capital, namely (mochtar effendi): 1. capital from nature all contents of natural resources that have not been declared to be owned by a personor legal entity can be used as production capital. 2. own capital anything that belongs to a person can be used as capital for his business as long as theproperty or item is not prohibited or declared haram. 3. loan capital loans obtained from other people or institutions and used as capital can overcomethe shortage of production capital with a note that the loan system used must not contain elements of usury or violate sharia rules, even the more advanced the economy, the more transactions will be carried out by credit. getting money (purchasing power) that comes from loans is called loan capital. d. management factor management is the science and art of managing the process of utilizing human resources and other resources effectively and efficiently to achieve a certain goal (malayusp hasibuan, 2004). based on the management functions in the form of planning, organizing, directing and supervising, management means the process of planning, organizing, directing and supervising the financial, human and information resources of a company to achieve its goals. without good management, all production factors will not produce maximum profit because all these production factors require regulation through a good managerial process (ika yunia fauzia and abdul kadir riyadi, 2014). the managerial process requires expertise, namely managerial skills whichconsist of two aspects, namely: 1. skills to organize the skill to regulate is a skill where a manager must be able to make arrangements or create rules or concepts for the development and developmentof the company he leads. 2. skills to lead the skill to lead is the ability to move so that the plans that have been made can run and be controlled so that the goals stated in the plan can actually be realized.leadership activities have five main elements, namely exploring concepts, conveying concepts, https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 172 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) motivating, directing or ordering and supervising or controlling. figure 3. managerial skills scheme (indriyo gitosudarmo) in carrying out the management function, the managerial will perform the followingstages: 1. planning function planning is the determination of goals about the desired future state by selecting and determining the way to be taken from all possible alternatives to achieve these goals. the steps needed in planning are setting business goals andtargets, formulating strategies to achieve business goals and targets, determining the necessary resources and setting standards of success in achieving business goals and targets (ernie trisnawati sule, 2008). the planning carried out can function to set company goals and formulate them in a production program so that they can clearly distinguish the direction of each production activity, provide a formulation of the goals to be achieved, identify obstacles/risks that may arise in the company's operations and avoid uncontrolled growth. the product planning process that will be produced cannot be separated from analyzing internal factors that can produce strengths and be able to find out their weaknesses. companies also need to analyze external factors in the form of opportunities (opportunities) that are open and pressures (treatments) experienced by the organization/company. analysis of internal and external factors is often knownas swot analysis. figure 4. planning process involving swot analysis https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 173 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) figure 5: planning steps (indriyo gitosudarmo) b. organizing function 1. allocating resources, formulating and assigning tasks and establishing thenecessary procedures. 2. establish an organizational structure that shows the lines of authority andresponsibility. 3. carry out recruitment, selection, training and human resource developmentactivities. 4. placing human resources in the most appropriate position c. directing function 1. implement the process of leadership, mentoring and providing motivation tothe workforce so that they can work effectively and efficiently in achieving goals. 2. provide routine tasks and explanations regarding work and established policies. d. controlling function 1. evaluate success in achieving goals and targets in accordance withpredetermined indicators 2. take steps to clarify and correct any deviations that may be found 3. carry out various alternative solutions to various problems related to achievement (ernie trisnawati sule, 2008). e. technology in the current era of production progress, technology has a very large role in the production sector, because of this, many producers cannot survive because theycannot https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 174 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) compete with other competitors who are able to produce goods/services better than what they produce. because it is supported by good technology equipment. f. raw material a producer must first study the channels of raw material providers so that productionactivities run well (ernie trisnawati sule, 2008) so that they do not hinder the production process. production raw materials are sometimes something that can only be obtained or produced by nature without any substitute and there are also other materials that can be found to replace existing materials. 3. research methods this study uses a descriptive qualitative method, which is a study that uses qualitative data and then describes it descriptively. this type of research is used to analyze social conditions, events, or a phenomenon. the research focus in this article is how to analyze how to implement maqashid sharia and islamic corporate social responsibility towards islamic production ethics. in this study using primary data and secondary data. primary data, namely data collection can be done by direct interviews, communication by telephone or indirect communication such as letters, emails and others. secondary data is collecting data through indirect methods or having to do an in-depth search first, such as through the internet, literature, statistics, books and others. used in this study using the company's internal data that has been in advance (prasanti,2018). the data analysis technique used in this study is qualitative data analysis, this analysis has 4 stages, namely collection, reduction, presentation and conclusion. collecting data in this study using primary data, interviews with sources related to the company. next is the data reduction stage, the data that has been obtained is analyzed, simplified, and discarded the part of the data that is not needed in order to produce relevant information. then the data presentation stage, after the data is analyzed, the data set is arranged systematically. presentation of qualitative data in the form of graphs, charts, networks, matrices or narrative texts. through this stage, the data will be arranged ina pattern of relationships, and make it easier to draw conclusions. the final stage in this data analysisis drawing conclusions and verification. the data that has been collected, then researchers look for relationships, similarities, and differences and valid evidence in order to get answers to existing problems, so that they become a conclusion. the existence of data verification is intended so that thesuitability of the data with the objectives in the analysis is more precise and rational (rezkia, 2020). this research method describes the analysis of data obtained from the results of research on the implementation of maqashid sharia and islamic corporate social responsibility in production ethics. because production is very much needed which has potential during a pandemic like today, so that optimal management can help the government and the communityto deal with pandemic conditions like today. in conditions of uncertainty and difficulty like today,production is a concern during this pandemic (kadir et al., 2020). https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 175 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 4. discussion maqashid sharia in tempe production term of maqashid derived from the arabic language which means the principle, intent, purpose, intent, or purpose. when combined with the termshari'ah then it has a meaning asthe intent and purpose of islamic law or just the purpose of islamic law. maqashid shari'ah indicators are developed to achieve individual and public interests. this will be the basis for designing regulations in an islamic economic system that understands values, measures and standards. this must be maintained in daily activities in halal business and trade (kurnia, 2017). in islamic economics, the purpose of production activity is to provide good luck for humans, where good luck this is the main basis for humans to fulfill needs, and these basics must be maintained, including: hifdzu ad-dien, hifdzu an-nafs,hifdzu al-'aql, hifdzu an-nasl, hifdzu al-maal. the explanation of the five basic human needs is as follows (rafsanjani, 2016): a. hifdzu ad-dien maintaining or maintaining religion is maintaining religion (pillars of faith and pillars of islam). islam teaches humans to live their lives properly, as has been arranged by allah swt. in fact, it is the effort to live rightly and live life rightly that makes one's life of great value. the measure of the good and bad of a person's lifeis not measured by other indicators but by the extent to which a human being clings to the truth. for this reason, humans need a guide about the truth in life, namely religion.dien) (herianingrum, 2014). implementation hifdzu ad-dien in the production of tempeh in kamal, mr. munir always pays attention to the raw materials that have been produced according to islamic recommendations, namely that there are no elements of raw materials that are prohibited in the qur'an and hadith, for example choosing raw materials of good quality and avoiding raw materials. rotten stuff. meanwhile, in running the organization, you can use islamic concepts such as buying and selling that does not contain an element of disappointment (mutual pleasure). in addition,islam also orders to issue zakat, infaq, and shadaqah. so the company realizes this and is distributed to the authorities in managing zakat, infaq and shadaqah such asmosques, laz or baz. these efforts were made to fulfill the five pillars of islam that have been taught in islam. b. hifdzu an-nafs nurturing the soul is meant here, namely maintaining the physical so that it remains healthy and can still be active. body and soul life (an-nafs) in this world is very important, because it is a field for crops to be harvested in the afterlife. what will be obtained in the hereafter depends on what has been done in this world. life is highly respected by the teachings of islam, because it is a gift given by allah to his servants tobe used as well as possible. everything that can help the existence of life is automatically a necessity, and on https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 176 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) the other hand, everything that threatens life (cause death) should basically be avoided. implementation hifdzu an-nafs in production activities in the tempe kamal homeindustry, namely producing healthy goods/products, such as raw materials used not using hazardous chemicals and not using formalin which can damage humanhealth. c. hifdzu al-'aql maintaining the mind is to keep the mind from being damaged, both physically and nonphysically, physically means that the mind is not damaged by anything that is physically damaging,whether it is damaged by drugs or other things, while non-physically means that the mind is not brainwashed with things negative things (herianingrum, 2014). implementation hifdzu al-'aql in production activities in the tempe home industry,namely by not producing goods/products that can threaten brain damage such as formalin, a mixture of other raw materials (which can damage the tempe itself) or illegal drugs. in addition, it also provides training for employees in order to develop their insights and ideas in order to be able to create good quality and be able to compete at a higher scale such as the level of international trade. d. hifzu an-nasl to maintain the continuity of life, humans must take care of their descendants andfamilies.nasl). although a believer believes that the time horizon of life includes not only the life of this world but to the hereafter, the continuity of the life of this world is very important. humans will maintain the balance of life in this world and in the hereafter. therefore, the continuity of heredity and sustainability from generation to generation must be considered. this is a very important need for human existence. the implementation of hifdzu an-nasl in production activities at the tempe kamal home industry, namely in the management of raw materials must be used as well as possible, not over-exploiting, especially during the pandemic season it is very difficult to find the raw materials, therefore the community can enjoy tempeh continuously. e. hifdzu al-maal maintaining property is maintaining property so that the property is not damaged / still exists and even develops. material property (sorry) needed, both forworldly life and worship. humans need property to meet the needs of food, drink, clothing, houses, vehicles, jewelry and various other needs to maintain their survival. implementation hifdzu al-maal in production activities, namely by always turningthe money earned to continue to be invested and developed. don't let the money the profits from their production activities are stored/hoarded, because hoarding money willdamage the wheels of the economy. therefore, islam prohibits the production and sale of dangerous goods except under certain conditions and under very strict conditions. based on the concept of maqashid shari'ah above, the model of economic development based on maqashid shari'ah production can be described using a scheme. the development process aims to achieve better worldly and hereafter welfare that is able to maintain social https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 177 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) welfare in producing: figure 3. maqashid al sharia as a model of economic development production welfare is measured by using the maqashid shari'ah indicator, namely the maintenance of religion (ad-din), soul (an-nafs), sense (al-aql), descendants (an-nasl) and wealth (almaal) (herianingrum, 2014), the production of tempe which is contrary to the maqashid sharia, such as drugs, tempe mixed with formalin or tempeh mixed with other raw materials that change the image of tempe itself (such as tempe mixed with grain and others) isstill prohibited by allah although these products are in high demand. meanwhile, suhaidi explained that cleanliness is very important in business and has a significant relationship with the concept ofhalal toyiban. muslims should not carelessly practice what is prescribed in the theory of production. on the contrary, they must ensure that every product produced must comply with the principles of islamic teachings islam has determined that every production activity should be based on priorities ( alawlawiyyat) and according to maqashid shari'ah. principle of al-awlawiyyat specifies thata product should be based on three priority levels. it starts withdaruriyyat goods (needs), followed by hajiyyat (needs) and finally tahsiniyyat shari'a welfare of worldly and hereafter https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 178 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) (perfection). so, islam has determined thatdaruriyyat goods must be prioritized in the production process. faizal also stated that following the principles of al-awlawiyyat and maqashid shari'ah in production is important in islamic teachings. therefore, must prioritize more production daruriyyat product, not hajiyyat and tahsiniyyat product. for example, if there is a muslim whostarts production or does business with a sense of responsibility towards other muslims, then the muslim entrepreneur must start his business by incorporating the values of halalan toyyibat and useful. because islam teaches that every product must have the value of worship.islam stipulates that every product must allow its users to benefit (faizal, 2016). the philosophical goal is more directed at the vertical type relationships found in the representation of wordsal-falah. al-falahhas become the general goal of islamic economics. it covers the area of human activity for the sake of allah and is also achieved through the fulfillment of operational-based goals. therefore, this goal requires a real assessment process to ensure its effectiveness and achievement in production activities (omar, 2013). islamic corporate social responsibility in tempe production corporate social responsibility (csr) is the commitment of producers to contribute to developing a sustainable economy (sustainable economy) by paying attention to corporate social responsibility and focusing on the balance of life in thesocial, economic, and environmental fields (budi, 2008). in other words, the csr implementedin the tempe home industry is a symbiotic strategy between the company and the communityin seeking mutual prosperity through dedication and the company's social role so as to createmutually beneficial harmonization. various social and environmental problems that accompany economic developments have forced producers to redesign their production concepts so that they run synergistically with the conditions of society. on that basis, community involvement in implementing csr programs in the tempe home industry is very much needed. this can be done by inviting them to becomevolunteers, as an object of empowerment, and a source of information so that the csr program is able to accommodate the aspirations and interests of the community concerned. in the implementation of tempe production, producers are required to develop programs for csr on an ongoing basis. this program is carried out in various activities that are prioritizedfor community needs and stakeholders. csr programs can be referred to as producers' obligations because they must care and be involved in improving the welfare of the surrounding community. one of them is zakat, alms, and infaq. the producer's obligation topay for this instrument is an early form of csr program (usman, 2016). in addition, tempe production always practices csr in that the company's operations must be free from various modes of corrupt practices and guarantee maximum service throughout its operations, including trusted services for each of its products. provision anddevelopment of safe and reliable products). in addition, islam also provides signs and norms that can and should not be done in business. islam allows its adherents to earn profits https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 179 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) through the mechanism of trade (ba'i) and prohibits usury, maisir, gharar and gambling. this trading practice has also been exemplified by the prophet muhammad saw and his companions in which an example of how to build islamic business ethics is illustrated. islam does not teach the practice of profit-taking which is accompanied by the emergence of adverse effects, oppressing and causing damage. so, in terms of regulation (shari'ah law), islam clearly distinguishes between what is haram and what is lawful, both in terms of consumption, distribution, and production. all of these aspects in islam must be passed in ways that are justified and do not violate islamic shari'ah rules (muhammad a., 2014). this is explicitly stated in the qur'an (surat al-a'raf verse 85). allah swt says: "so complete the measure and the scales and do not reduce for humanstheir measures and scales,” with this, then the practice of csr if the intention is sincere to help people in need, itcan certainly be categorized into ghairu mahdhoh. that is, even though the program was originally not included in worship, but because it is solely to help others and hope for the pleasure of allah swt, the subject of the perpetrator will get a reward as well as doing worship. this means that if the intention is planned like that, then the benefits of doing csr arenot only the company will be closer to the community. but what is more meaningful, the managers will be closer and get a reward from allah swt. if the csr program is only economically motivated, then surely it will not get the reward of worship, because since initially, the theological values have been realized which can actually be set since planning theprogram. that's why it's a loss for companies that carry out csr programs only to achieve temporary worldly profits, completely separated from the transcendent theological values of ukhrowiyah. in islam, there are general principles that companies must adhere to to help maintain economic balance, safeguard human rights, and ensure justice. these principles are in line with the four principles of islamic business ethics, namely benevolence, relationships with others, equity, and accountability (maurice, 2020). figure 4. islamic corporate social responsibility model https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 180 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) 5. conclusion the tempe production process is an activity carried out by producers (mr. munir)to produce goods to meet the needs of life, with different motives, such as economic motives, which are profitoriented.profit), social-humanitarian motives, namely production activities are carried out because of positive benefitsand do not cause moral (ethical) damage to the community and political motives, namely production activities are carried out in connection with the state's need for a production item as a supporter of government resilience and stability. in addition, the production process also pays attention to the values of justice and virtue (maslahah). production is also a human effort to improve not only the physical condition of the material, but also morality as a means to achieve success fallah. in carrying out tempe production activities, the company always tries to implement the principle of balance in all aspects. because balance is the key to the survival of the company. without maintaining a balance, the company will experience problems in the social environment which can have an impact on financial problems, the condition of thesefinancial problems is not only bad for the company, but also for all parties related to the company such as workers and their families, the surrounding community and suppliers. inaddition, the purpose of tempe production activities must providegood luck for humans, wheregood luck there are five basic needs for humans that must be maintained, including: hifdzu addien, hifdzu an-nafs, hifdzu al-'aql, hifdzu an-nasl, hifdzu al-maal. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 6, no 2 (2021) 181 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) references al-arif, m. nur rianto. 2011. dasar-dasar ekonomi islam. solo: pt era adicitra intermedia. assruri, s. 1986. manajemen produksi. jakarta: penerbit fe-ui. aziz. 2003. pengantar mikro ekonomi, aplikasi dan manajemen. malang: banyumediapublishing. budi, h. 2008. corporate social responbility. jakarta: sinar grafika. djakfar, m. 2007. etika bisnis dalam perspektif islam. malang: uin malang press. djazuli, a., yadi janwari. 2002. lembaga-lembaga perekonomian umat (sebuah pengenalan). jakarta: pt.raja grafindo persada eja, a. 2020. etika produksi islami: maslahah dan maksimalisasi keuntungan. ekonomi islam. fahrudin, s. 2010. etika produksi perspektif ekonomi islam. ekonomi islam al-infaq. faizal, m. 2016. parameters of islamic business ethics in productions. global business and social entrepreneurship. fauzia, ika yunia dan abdul kadir riyadi. 2014. prinsip dasar ekonomi islam: perspektif maqashid al-syari’ah. jakarta: prenadamedia group. gitosudarmo, h. indriyo. 2002. manajemen operasi, edisi kedua, yogyakarta: bpfe yogyakarta. hakim, lukman. 2012. prinsip-prinsip ekonomi islam. jakarta: erlangga. haneef, mohamed aslam. 2010. pemikiran ekonomi islam kontemporer. terj. suherman rosyidi. jakarta: rajawali herianingrum, s. 2014. implementation of maqashid al sharia as a model of economicdevelopment agriculture in east java. business and economics. kadir, a., hakim, m. r., syam, f., & karim, m. s. 2020. penggunaan dana zakat pada korban covid perspektif maqashid syariah. al-tafaqquh: islamic law kurnia, f. 2017. maqasid al-shari'ah based performance measurement for halal industry. humanomics. maurice. 2020. religion and csr: an islamic "political" model of corporate governance. business and society. marthon, said sa‟ad. 2004. ekonomi islam di tengah krisis ekonomi global. jakarta: zikrul hakim muhammad. 2004. ekonomi mikro dalam perspektif islam. yogyakarta: bpfe-yogyakarta. muhammad. 2004. etika bisnis. yogyakarta: upp amp ykpn. muhammad, a. 2014. developing an islamic corporate social responbility model (icsr). competitiveness review. omar, m. 2013. the objective of islamic economic and islamic banking in light of maqasid alshariah: a critical review. scientific research. perloff, j. 2012. microeconomics. boston: addison-wesley. prasanti, d. 2018. penggunaan media komunikasi informasi kesehatan. lontar: ilmu komunikasi rafsanjani, h. 2016. etika produksi dalam kerangka maqasid syariah. https://creativecommons.org/licenses/by/4.0/ implementation of maqashid sharia and islamic corporate social reponbility in production ethics (case study of tempe home industry in kamal madura) 182 published by afebi islamic finance and economic review this is an open access article under the cc by sa license (https://creativecommons.org/licenses/by/4.0/) perbankan syariah. rezkia, s. m. 2020. langkah-langkah menggunakan teknik data kualitatif rianto, a. 2004. metodologi penelitian sosial dan hukum. jakarta: granit. saiffudin, a. 2019. bisnis. retrieved from kompasiana: https://www.kompasiana.com/saiffudinachmad/5d2e8d72097f362ecc473494/etikaproduksidalam isam?page=all#:~:text=pengusaha%20muslim%20harus%20memperhatikan%20kem asla hatan,produksi%2c%20karena%20keharaman%20babi%20tersebut. soeratno. 2000. ekonomi mikro pengantar. yogyakarta: stie ykpn. sugianto. 2002. ekonomi mikro sebuah kajian komprehensif. jakarta: pt gramedia pustakautama. sule, ernie trisnawati. 2008. pengantar manajemen. jakarta: kencana. tamamudin. 2016. prilaku produksi industri batik kota pekalongan menurut etika produksiislam. hukum islam. usman, r. 2016. islamic perspective of corporate. islamic perspective corporate. https://creativecommons.org/licenses/by/4.0/ http://www.kompasiana.com/saiffudinachmad/5d2e8d72097f362ecc473494/etikahttp://www.kompasiana.com/saiffudinachmad/5d2e8d72097f362ecc473494/etikahttp://www.kompasiana.com/saiffudinachmad/5d2e8d72097f362ecc473494/etikafinancial exclusion in northern nigeria: a lesson from the developed countries 45 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) financial exclusion in northern nigeria: a lesson from the developed countries tijjani muhammad1)*, besar bin ngah2), al-shaghdari fahd mohammed obad3) 1department of islamic studies (islamic banking and finance), faculty of arts management and social sciences and federal university, gashua, yobe state, nigeria 2,3adepartment of islamic banking, faculty of finance and administrative science, almadinah international university, shah alam selangor, malaysia abstract the objective of this paper is to assess the causes of financial exclusion in northern nigeria, including the reason and causes behind the accessibility to banking services at a competitive and affordable prices. the study adopted confirmatory factor analysis under structural equation modeling using vulnerable group theory (religiosity and poverty) and financial literacy theory (awareness). in this study, the survey method was used, additionally, the stratified sampling technique is applied as it provides richness and accuracy of information from respondents from various stratums. the participants comprised senior, middle and lower classes for the study justification. the finding indicates the positive relationship between vulnerable group theory and financial exclusion while financial literacy theory has no relationship as indicated. therefore, the vulnerability which is consists of religiosity and poverty drive as the major causes of financial exclusion in nigeria. the research provided insights and developed a model that indicates the causes of financial exclusion and apparent barriers to better financial services and inclusion in the community and society. this study's originality shows that have not used such vulnerable group theory and financial literacy theory for justification. keywords: financial literacy theory; vulnerable group theory; causes; financial exclusion 1. introduction after nigeria obtains its independence, the financial system adopted by the government was found to be unsuitable to the muslim community in northern nigeria. not only the conventional financial system has been inconsistent with their shariah requirements, also the products and services offered failed to meet the needs of muslim majority in the northern region. as a result majority of muslims in the region has excluded themselves from the mainstream financial system in the country. however, to some benefits and government resources, the advocates and awareness started by the majority of northerners who feel cheated and single way to be in the financial sector (kumar and pathak, 2022). the practice draws much attention of northerners to cooperate with the system and financial activities to fight exclusion (mani, 2022). however, the vast number of financial exclusion remains significant while the other regions, including southern and western nigeria, have almost 85 per cent inclusion. financial inclusion is an essential program of the government of nigeria. the goal is to include those left behind informal financial services. the central bank of nigeria has launched various financial inclusion initiatives (kumar and pathak, 2022). after investigatory efforts by the government of nigeria in collaboration with the central bank of nigeria, it is indicated that 36.8% of adults are financially excluded from formal and informal sources of funding, and 66.6% of adult’s households in northern nigeria are suffering financial exclusion in the country (muhammad and ngah, 2021). not accessible (akpene, et al., 2022). less access to *coressponding author. email address: hajiteee@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:hajiteee@gmail.com afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 46 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) formal financial services for small and marginalized northerners has been seen as a serious threat to the economic development of developing countries such as nigeria, as defined by mohan (2009) for a country cannot determine its economic capacity and potentiality while the majority of the people were financially excluded. a financial exclusion means a lack of basic banking services at affordable prices to vulnerable parts of society (du et al., 2022). addressing financial exclusion barriers is responsible for providing financial inclusion with timely access to financial services and, if necessary, ensuring adequate credit to vulnerable groups, such as vulnerable groups and low-income groups, at an affordable cost. the banking sector of mohammed, ibrahim, and muritala (2022) consists of the central bank of nigeria, commercial banks, and credit unions. financial services covers the entire range of savings, loans, insurance, credits, payments and more. these services for small homegrown farmers and vulnerable parts of society are to provide help and solutions to them through poverty mitigation. furthermore, households need access to credit facilities for livelihoods which people feel comfortable and inclusive that will bring potential growth economically, and wise financial housing, consumption, and emergencies will be an advantage. therefore, adults and households need financial services to access a wide range of savings and investment products to build wealth, all of which depend on financial literacy and identifying the major cause of financial exclusion (muhammad dauda and mamman, 2019). many researchers who investigated financial exclusion indicated previous studies, such as (muhammad dauda and mamman, 2019), emphasized the awareness factor despite other evidence that justified financial exclusion. therefore, there was no research on the causes of the financial exclusion that tested financial literacy and vulnerable group theories as the reason behind financial exclusion in northern nigeria. 2. literature review in essence, microscale globalization leads to the financial inclusion of the privileged and the financial exclusion of the poor or the working group. however, the separation of businesses in terms of efficiency/inefficiency exists in terms of microscale globalization and wealth opportunities. poor customers are costly and have limited services, as financial institutions focus on attracting the desired high-end customers by offering low or free services. in addition, cross-subsidization between elite customers and other customers. banks that are small but allowed to provide similar financial services will be deprecated. banks are now competing globally for elite customers and are no longer subsidizing unbalanced or high-risk customers. the result of all these transitions is an increase in the number of households that do not have a bank account (bhatia, and singh, 2019) and households that are financially included and excluded. njambi, and kariuki (2018) concludes his insightful analysis by observing that if a financial institution moves "blindly" towards efficiency, it may move further from the point of wealth fairness. therefore, for those concerned about the working class of today's globalized financial markets and the plight of the poor, it is imperative to "identify and uphold the standards of fairness and fair treatment in financial practices." the question is, who are these people, and how do they uphold the standards of justice and impartiality. after all, we need more than pay attention to the problem, and to developed a solution (bhatia, and singh, 2019). de la cuesta-gonzález, et. al. (2021) also provided a comprehensive overview of the issue of financial inclusion but focused on europe. this study investigated financial inclusion's nature, causes, and scope and discussed policy and industry responses. it may have attributed the widespread liberalization of the financial industry in europe and the resulting "intensifying banking competition" to "very prominent" financial inclusion over the last decade. the authors argue that the roots of regulation and institutions are facing today's financial inclusion, as the problem has been caused or exacerbated by deregulation. the regulatory aspect of the problem https://creativecommons.org/licenses/by/4.0/ financial exclusion in northern nigeria: a lesson from the developed countries 47 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) arose from competitive activity in the industry following the liberalization of financial institutions. through these efforts, financial intermediaries have not only subdivided the population and targeted the wealthy but also encouraged the development of loan application screening devices (balasubramanian, kuppusamy, and natarajan, (2018). like developing countries, anarfo and abor (2020) financial inclusion is "always experienced by the poor of society," despite being in developed countries. for example, the proportion of adults who do not have a bank account in europe is staggering. it is 22.4 per cent in italy, 17.9 per cent in greece, 16.8 per cent in ireland, 16.7 per cent in portugal, 13.5 per cent in ireland, austria and 10.5 per cent in the united kingdom. regarding the consequences of financial inclusion, researchers have found that the problem of financial inclusion is not new, but its implications are becoming more and more serious. for instance, lack of access and bank accounts makes it difficult for poor people to generate, pay, and earn credits desperately to navigate the valleys and mountains of their households. as a result, poor people rely on alternatives to traditional financial institutions such as money lenders, payday loans, and pawn shops that impose very high-interest rates. another problem faced by the poor due to the exclusion is the inability to obtain insurance coverage. because they live around society, which they are also affected by social exclusion. the united kingdom and the united states have the most deregulated financial markets globally. deregulation seems to have exacerbated the problem of financial inclusion by encouraging financial institutions to maximize shareholder returns. the product of this climate can be claimed to be the "redlining" of some us markets. however, us politicians are trying to combat financial inclusion in programs such as the 1977 community reinvestment act, which does not exist in europe. the community reinvestment act was passed to encourage custodians to meet the borrowing needs of the communities in which they operate (anarfo and abor (2020). carbo et al. (2005) concluded that there was a disappointing lack of policy response from the european commission (ec) on the issue of financial inclusion. the ec response was ad hoc, rather than enacting the us community reinvestment act, and was largely left to individual countries. while various countries such as the united kingdom are tackling the issue of exclusion by promoting regions including post offices and other entities and social banking, european policymakers say that banks are basic to everyone. you need to consider a law that requires you to open a bank account service. those who prefer a marketoriented solution may doubt the cautiousness of this proposal, as banks can cost some money, but encourage the public to "bail out" banks due to financial difficulties. after some time, we think there was a door, and it was also open to the public to seek help from banks to involve people who have traditionally been excluded from the mainstream financial markets. drakeford and sachdev (2001) tested the reasons for financial exclusion within the uk and the authorities' efforts to address the trouble by reviewing the present-day literature and publicly to be had to file authorities’ reports. gardner (1999) who discovered that "the primary concerted strive of any european government to address the difficulty of monetary exclusion with the aid of using imparting actual selections to excluded people", the authors stated that authorities become sufficiently involved in approximately the trouble and have been visibly taking steps to fight it. however, all of the steps taken to address the trouble to date have been supply-facet answers oriented; that is, in preference to compelling the banks thru regulatory means, the authorities appeal to the good-will of the monetary establishments to take steps to boom access to the excluded. drakeford and sachdev (2001) quoted a report from the university of bristol that found that people classified as pakistanis were four times less likely to have a bank account than their white peers. indians can be twice as likely and bangladeshis three times less (guardian, 1999). these facts/statistics show that the issue of financial inclusion continues despite government efforts. the authors recommended a two-sided solution in which the government used both demand-side and supply-side approaches to https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 48 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) alleviate the problem of financial inclusion. however, what exactly these different approaches mean can confuse anyone looking for "difficult" recommendations. beckmann, deluca, devlin, and smith, (2005); drakeford and sachdev (2001), investigated the issue of exclusion in the united kingdom and noted the growing interest in the discussion of financial exclusion in the united kingdom. he also pointed out that previous studies of financial inclusion in the uk generally focused on a single service, such as a bank account, and excluded all other services. he further noted that while previous studies used different methodologies and models when considering specific problems, different approaches created unique problems. deluca, devlin, and smith, (2005) sought to overcome this methodology problem by using a general model to test and compare the impact of a wide range of financial exclusions. a collaborative model of researchers based on literature reviews includes variables such as social class, gender, age, household status, household income, ethnicity, region, educational background and employment status, number of households, and housing placement. the data from the survey was collected using a representative sampling frame created by a commercial market research firm. a face-to-face interview method was used, with participants answering questions in a questionnaire. the first sample of 210 parliamentary members was selected as the primary sampling point. "two areas of 5,000 households were selected to ensure the representativeness of the population composition of this member." households were also selected to ensure the representativeness of the variable of interest. use the quota system randomly. binary logistic and logit model used for testing any financial service. the results of this study are informative and show that employment status, household income and homeownership are more important determinants of financial inclusion. marriage history, age and level of education also affect financial inclusion. in a service-by-service analysis, the results show that people in lower social classes are more likely to be excluded from account checks. in terms of age, people over the age of 66 are unlikely to have a checking account, but ethnicity does not seem to be an important factor in having a checking account. this survey found that gender and social class are important factors for savings accounts. we found that women are more likely to use savings accounts than men and that age has a greater impact on exclusion from savings accounts than current accounts. interestingly, however, ethnicity does not seem to affect the ownership of savings accounts. gender, marital status, and social class do not affect the exclusion of home insurance, but age and ethnicity play a role. in life insurance, gender, ethnicity, and social class do not affect ownership but age. single adults are less likely to have life insurance, and those married or living together are more likely to have life insurance. concerning pension, gender is a significant factor in exclusion, with males less likely to be excluded than females. devlin (2005) is, no doubt, comprehensive in examining the factors that correlate significantly with a financial exclusion. affleck and mellor (2006) found that financial inclusion is now globally recognized as an important aspect of socio-economic inequality, with poor and poor mainstream, especially in affordable and readily available credit, claimed to be isolated from financial services. the authors said that different approaches to tackling the problem of financial inclusion had been adopted around the world, but these approaches have produced different results. these approaches are pervasive under various names, including social investment programs, microfinance programs, community finance, and community development. the uk government's current policy initiative is to inspire local businesses and reduce their reliance on government support through financial exclusion. affleck and mellor (2006) investigated the former and evaluated its proposed role in community renewal. the authors like pillai and williams (2004) and hutchinson et al. (2002) reviewed studies published by taylor (2003) expressed scepticism about the success of cdfi in promoting financial inclusion. they also expressed scepticism about the success of cdfi, adding that the government seems to be https://creativecommons.org/licenses/by/4.0/ financial exclusion in northern nigeria: a lesson from the developed countries 49 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) "confident in the potential economic vitality of the community" and closed the review. the conclusions may be justified, but it is not surprising as the studies mainly reviewed previously conducted studies, most of which were already sceptical of government efforts. mckillop et, al. (2007) also considered financial inclusion in the united kingdom. mckillop et al. (2007) used publicly available data on british credit unions at the end of 2001 to determine the effectiveness of government efforts that began in july 1998. they discovered in 2001 that there were 837 credit unions in the united kingdom. the number has dropped to 779 due to the tendency to transfer exposure from small, weak credit unions to slightly larger credit unions. in addition, the number of credit unions appeared to have declined during the enforcement of the government's financial services and markets act of 2000. according to the author, the law includes reforms such as the classification of straight corporate bonds and the removal of the 5,000 membership limit, the extension of the permissible loan period, the permission to borrow from other credit unions and licensed banking institutions, and the permission to claim auxiliary services. we will compare the activities of credit unions with community-level deprivation policies that acted on behalf of financial inclusion and assess the effectiveness of the new guidelines in reaching financial inclusion. according to the survey, government subsidies are designed to promote the development of credit unions "by increasing costs, peer monitoring, voluntary peer monitoring, board self-determination, and self-help. the authors also provide a viable long-term model for credit union development, rather than targeted subsidies, for government and trade association policies that encourage credit union development based on the cross-section of the wealthy population. mckillop et al. (2007) shows that there are some inappropriate peculiarities in the recommendations as a guide for policymakers. economic exclusion is a social issue, regardless of where it occurs. unlike previous studies on financial inclusion that attributed the problem to deregulation in the financial industry (carbo et al. 2007; devlin and wright, 1995). dymski and li (2003) analyzed financial inclusion problems in the united states by examining the history of urban space, focusing on the more profitable segments (sahay, et. al, 2020). the logic of the development of the financial sector, especially the commercial banking sector, and the development of urban areas. the authors argue a spatial dimension to financial exclusion since it flowed from banking strategies triggered by global deregulation of financial markets. by analyzing the historical financial evidence on exclusion and relating financial exclusion to strategic shifts in the banking industry, dymski and li (2003) used ideas on the intraregional flow of goods and services, which are rooted in the sraffian production model. through this linkage, the authors argued that “spatial conception of financial fragility which shows that urban subareas` wealth accumulation prospects are linked to the locus of financial and goods and services flows within the city.” furthermore, based on insights and analyses gained from this linkage, the authors show that micro and macrostructural causes were also behind the problem of financial exclusion in the usa. in the main, the withdrawal of mainstream banks from unprofitable locations left their former customers unserved and available for fringe banks that charge high fees. furthermore, the withdrawal of mainstream banks has a spatial dimension clustered and disproportionately in urban subareas, which often have substantial macrostructural problems. using the two-sector model, the authors showed that the inner core areas from which banks withdrew could sustain their cross-border financial balances only if the residents earned enough income from somewhere else to pay for “imported” goods and services (dymski and li, 2003). the authors find that financial exclusion is a problem primarily for low-income households and the minority who do not have access to banks. it states. loans, opening bank accounts, accumulating capital. in addition, the issue of exclusion is an effort from two sides, both in terms of the macrostructure of economically isolated urban areas and the reexamination of strategic interactions and competitive microeconomic logic within the financial industry. similar to the study by mckillop et al. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 50 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) (2007), dymski and li (2003) also proposed specific means by which policymakers can tackle the long-standing problem of financial inclusion. joassart-marcelli and stephens (2010) also focused on the united states, previous studies of financial exclusion in the united states examined the relationship between exclusion and individual characteristics such as culture, religion, education, and ability to speak english. (orozco, 2004), income, law, and status (marcelli and lowell, 2005) investigated with little attention to the geographical aspects of banks. therefore, the author sought to build on the ecology of financial inclusion literature and used it to study the spatial relationships between immigrant settlement patterns. the survey focused on the boston area in 2000. the data used in the survey on immigrant groups included poverty rate, income, unemployment, english speaking ability, homeownership, family type, race, religion and ethnicity. these variables have been identified in the literature as being related to the use of financial services by migrants (moser and park, 2004). by studying immigrant agreement styles in a census tract data, the authors confirmed that substantial geographic variations in awareness and clustering exist in step with the united states of america as starting place of the immigrant. further evaluation of the usage of multivariate regression and using controlling for socio-financial elements along with ethno-racial and land use traits indicates a greater complex photograph of the trouble of financial exclusion as seen below: • accessibility to monetary establishment’s in particular financial institution branches consisting of atms correlates with the percentage of immigrants and minorities within the community. • as the share of minorities in tracts in which foreign-born families stay increases, they get the right of entry to the conventional monetary establishment decreases. • particular immigrant businesses often reveal extra limitations due to which they stay. for example, immigrants from the dominican republic, san salvador, and haitians revel in better limitations relative to vietnamese; immigrants within side the greater boston region live in census tracts which have constrained get right of entry to formal financial establishments, however with disproportionately excessive publicity to much less formal financial establishments. solo (2008) directed her interest to the trouble of financial exclusion in latin america. it asserted that despite numerous research on the subject, only some tested how monetary exclusion impacts financial improvement, particularly the improvement of city groups in which it's far felt maximum severely. to fill this gap, the researcher investigates the catch 22 situations of the unbanked in predominant towns in latin america – bogota, colombia, mexico city, mexico, and lots of towns in brazil. this survey collected data from a representative sample of 1,500 households in the census group. the survey was the primary means of collecting data but was supplemented by a focus group survey conducted in mexico city. the survey indicates about 80% of households did not have access to formal financial institutions. these excluded households generally have lower incomes and educational backgrounds than the average population. in addition, the excluded households consisted primarily of minorities and immigrants who were dependent on the informal sector and often lived in informal settlements. another salient feature of those who do not have a bank account in the area is that they are primarily self-employed. overall, 65% of respondents who do not have a bank account in colombia and 70% in mexico use a formal banking system for fees, high minimum balance requirements, and/or high initial deposits. interestingly, unlike in the united states and the united kingdom, most people without a bank account owned their own home (66% in colombia, 63% in mexico). solo (2008) shows the homeownership may indicate that the lack of access to formal financial institutions is due to costs, not poverty itself. therefore, the authors say that financial inclusion in these parts of the world may be primarily https://creativecommons.org/licenses/by/4.0/ financial exclusion in northern nigeria: a lesson from the developed countries 51 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) due to psychological barriers and the general sentiment among the poor that mainstream financial institutions do not welcome them. further analysis of the data collected by solo (2008) sheds light on the macroeconomic aspects of the issue of financial inclusion. it has been found that the underdeveloped financial sector can impede access to financial services at the household level, which can limit economic growth and poverty reduction. according to data analysis, the costs of paying, saving and borrowing for the poor are higher than for fellow citizens tied up in banks. for example, in mexico, cash transactions can be up to 5 times more expensive than paying by check and 15 times more expensive than electronic payments. the situation in colombia is not always good. commercial banks accept payments for public services such as water and electricity from non-account holders. still, this responsibility is delegated to only one cashier and takes only a few hours a day. other findings from solo (2008) on the macroeconomic impact of financial inclusion are consistent with those from dymski and li (2003) argued that restricting access to financial institutions could reduce overall savings and cause a continued decline in domestic credit to gdp. she also says that public funds are being used to bail out financial institutions in the face of financial difficulties is a disproportionate burden on poor people who do not enjoy the benefits of those institutions, pointed out that it suggests. regarding the steps taken by mexico, colombo, and brazil governments to improve financial inclusion, solo (2008) found that they were moving in the right direction. for example, government-funded insurance programs with limited savings can help reduce the resistance and fear of using a bank that people without banks experience. this is the main cause of self-exclusion. like the us federal government, all civilians must pay by electronic remittance, and the bolivian government has begun paying checks to employees. this payment method achieves two goals. one is to protect the nation. second, it offers the opportunity to run a bank without a bank. the government is addressing the issue of financial inclusion by creating 30,000 "service points" for debit, credit and store cards. this project aims to promote and encourage debit cards and more savings accounts. while the use of microfinance by ngos continues to help nonbankers access credit and capital, some latin american commercial banks now offer secured loans and "joint guarantees". in addition, the colombian government has opened branches and atms for banks, similar to the "bank development district" created in the united states from a partnership between the us government and banks to serve "poorly serviced areas main courses of financial exclusion distance barriers distance is a major obstacle for rural people due to the long distance to the nearest bank branch. rural people cannot afford to travel long distances due to the expenses involved in financial spending when travelling long distances, which is one of the reasons for withdrawing interest from informal financial services. it was one of the significant barriers scientifically justified by some literature and also supports this idea, and its removal may prevent individuals from using it. global findex survey irfan et al. (2022) described that 20% of adults in developing countries cite distance as a reason for not having a bank account. saha and dutta (2022) stated that financial inclusion is a lack of outreach and coverage. language barrier: one significant barrier for rural areas is language barriers (karliner et al., 2011). rural people use their language to communicate with each other, and they do not know other languages, which prevents them from using formal financial services. dinçer, eichengreen, & geraats (2019) described the central bank of nigeria's guidance for banks to provide all materials related to account opening, disclosure, etc., in local languages to improve financial inclusion. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 52 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) timing and working hours barrier the timing of bank deposits is also a reason for financial exclusion (wilson, 2012). during the day time, the workers are at their working duties on their daily earners; after the working hours, no financial institution provides services to such individuals use banking facilities during non-business hours, and no public or private financial institution provides facilities during non-business hours, which is an obstacle for rural people. damodaran (2013) has defined one of the supply-side reasons for the financial exclusion of business hours. literacy barriers literacy barriers are considered a significant constraint that refers to ignorance of financial activities and formal financial services (yoong, 2011). people are less aware of the financial services that governments provide for rural development, and because of this barrier, as malnight, buche, and dhanaraj (2019) found in their study, the main reason for finance in rural areas. people couldn't benefit from financial services. the exclusion is a lack of knowledge about the financial system. schuetz and venkatesh (2020 also supported this barrier, stating that many people are unaware of the banking situation. documentation barrier banks require many identities, and the rural communities do have not any records or some identities that become issues and difficult to get if they want people to appear with it for justification rural adults will prefer staying without having an account in the financial institution to people living in rural areas. schuetz and venkatesh (2020) define many challenges; one of the challenges is to access formal financial services needs different documents, but vulnerable people lack these documents and avoid these services during their increase. shih, chen, syu, & deng, (2019). the main opening of the bank account is the certification of identity and witness. in many cases, people in rural areas gave their dominant card and voters' card information, which is considered illegible for proof justification. earning barrier revenue is a major threat to financial inclusion. however, the financial income sometimes becomes an issue less income. allen and farber (2019) said that income levels determine economic access and low-income people generally think that they are only rich through bank savings. religious barrier religious barriers decrease inclusion level and become a strong barrier to household income. it has been explained that it will establish a rural household saving habit. it was a big problem in front of the nigerian government when citizens decided to keep their money in the house. most people are willing to hide money indoors due to the interest-bearing system going in the financial institution (nessen, 2018). muhammad and khalil (2021) pointed out the religious barriers in their study, and older people experienced difficulties using an interestbased system, as most convention banking service operates. muhammad and ngah (2020) also described religiously motivated financial exclusion. they said people are withdrawing even though they have access to the service and can afford it. mair, marti, and ventresca (2012) also found that people's traditions and social practices discourage access to formal financial services. https://creativecommons.org/licenses/by/4.0/ financial exclusion in northern nigeria: a lesson from the developed countries 53 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 3. research methodology this study uses sem (structural equation model) as a hypothesis testing tool to investigate the impact of regulations based on two respective theories (vulnerable group theory and financial theory cognitive roles on implementing northern nigeria's financial exclusion program. in this study, the survey method was used as it is designed to deal more directly with participants’ thoughts, feelings, and opinions, especially when collecting data about attitudes and beliefs (neuman and dickinson, 2003). additionally, the stratified sampling technique was applied as it provides richness and accuracy of information from respondents from various stratums. the study area includes several states such as north-east, north-west and northcentral. the study used a sample of 300 respondents. each region has an equal representation in the three regions of northern nigeria. this study examines age, gender, employment, education level, region type, and wage or income level categories, which are considered part of some of the criteria used to determine poverty. the study distributed the 380 questionnaires to three regions in northern nigeria which consist of north-east, north-west and northcentral. however, 300 respondents received and analysed based on the structure equation modeling for justification. management researchers widely use dummy variables to understand the effects of categorical variables. in particular, strategic researchers often use dummy variables to study strategic reactions and directions. for example, basheer et. al. (2019) discuss how an organization changes in the face of change pressure. they argue that it is worth considering whether the response is route-independent or route-dependent rather than considering how companies respond to constraints. a dummy variable can represent each of these two types of responses. another example is the typology of devlin (2005) this approach was successfully applied with positive feedback from practitioners regarding the ability to identify good performers while being insensitive to extreme values. adeyemi, pramanik and meera (2012) used structural equation modelling to build financial exclusion models and some multiple variables (indicators) associated with them. given the mathematical equivalence of the approach, hypothesis testing is based on similar test statistics in each case, however, the different functional forms of the model look different between the two tests. the corresponding hypothesis tests between the two approaches are also different and easy to implement. see the credibility of theories tested based on regression in appendix 1. 4. result and discussion demographic information the sample’s characteristics supply information about gender, age, work status, educational and monthly income. results were obtained by analyzing respondents’ demographic variables. table 1 below details the respondents’ profiles. table 1 demographic information variable description frequencies percentage % gender male 190 63.2 female 110 36.8 age(s) 18-30 90 30 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 54 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) variable description frequencies percentage % 31-50 150 50 51-above 60 20 education primary 30 10 secondary 75 25 degree 120 40 postgraduate 75 25 work status employed 96 32 self-employed 135 45 unemployed 69 23 monthly income range 50,000 -100,000 60 10 101,000-500,000 105 35 501,000-1,000,000 135 45 1,000,000 – above 60 10 source: authors the demographic analysis results indicate that out of 300 samples, 63.2% were men, and 36.8% were women; which dominant of the respondent were male gender compared to the female gender. in terms of education, it is dominated by degree level is 40% and the education. the employment status of self-employed got 45%, while employed by government has only 32% and 23% for unemployed representation. the average population of three regions in rural areas where they make a living is based on geographically stand. result details of the above table 1 indicate the descriptive statistics of the respondents. the validity and reliability test were conducted through cronbach's alpha, composite reliability and average variance extracted. as shown in table 2. table 2: validity and reliability constructs factor loadings cronbach’s alpha composite reliability ave decision lit 0.845 0.890 0.732 reliable lit1 0.695 lit2 0.808 lit3 0.741 lit4 0.750 lit5 0.728 https://creativecommons.org/licenses/by/4.0/ financial exclusion in northern nigeria: a lesson from the developed countries 55 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) lit6 0.707 lit7 0.699 vgt 0.897 0.845 0.714 reliable vgt1 0.889 vgt2 0.900 vgt3 0.572 vgt4 0.585 vgt5 0.627 fe 0.863 0.849 0.726 reliable fe1 0.640 fe2 0.834 fe3 0.716 fe5 0.704 fe6 0.738 source: authors the standard factor loadings met the minimum loading of above 0.5, indicating positive loadings. the low loading indicates were removed and enhanced the other loading defined by bryne (2010). the validity and reliability were above the threshold of 0.7 as composite reliability (cr) and cronbach’s alpha and average variance extracted (ave) were considered significant and good loadings and are above the cut-off point. therefore, all the constructs have met the required loading with the same reliability and validity assessment. figure 1. variable correlation table 3: correlation of the variables variables (1) (2) lit 1 vgt 0.568 1 fe 0.379 0.502 source: authors the statistical relationship between the three variables, which two are considered independent variable (iv), consists of financial literacy theory and vulnerable group https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 56 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) theory and financial exclusion. previous results indicate that financial literacy theory and financial exclusion are not correlated with 0.379, while vulnerable group theory (vgt) and financial exclusion are significantly correlated with 0.502. figure 2. fit model table 4: measurement model fit model indications model result recomd. theories model fitness cmin 240.42 4 df 111 p-value 0.000 cmin/df 2.166 <5.0 marsh & hocevar (1985) acceptable gfi 0.928 >0.9 chau (1997) acceptable agfi 0.901 >0.9 byrne (2010) acceptable ifi 0.962 >0.9 hatcher (1994) acceptable tli 0.953 >0.9 byrne (2010) acceptable cfi 0.962 >0.9 byrne (2010) acceptable rmsea 0.057 <0.085 byrne (2010) acceptable source: authors a goodness-of-fit test is then performed to determine how well the model fits the series. from observation. this test is with observations expected value of the model. based on table 3 above, the absolute measure of conformance is: this can be seen from the chi-square because the main conditions for the chi-square value are met. the model has a value of 240.424 and a p-value of 0.000 (less than 0.05). the goodness of fit. however, as is known, sem is very sensitive to the number of samples used. according to the survey, the number of respondents is increasing, but it is improving. on the other hand, the model is considered valuable because cmin (χ²) value can be high. therefore, sem provides another alternative test for https://creativecommons.org/licenses/by/4.0/ financial exclusion in northern nigeria: a lesson from the developed countries 57 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) conformance according to the following criteria: absolute goodness of fit is measured by examining and working with an rmsea value of 0.057 (less than 0.085) as indicated by (byrne, 2010). we conclude that this model "fits". gfi of the model has the aboverecommended level at > 0.928, agfi >0.901, ifi scored 0.962 with standards are saturated model. criteria are based on the parsimonious fit measure by looking at the normalized chisquare value (χ² / df) of 2.166 (lower limit 1). and the upper limit 5). overall, this model has been declared a limit. it can be used to confirm theories built on existing observations that the data or this model can be said to be "properly fit. table 5. hypotheses hypothesis estimate se cr p-value decision lit -> fe 0.164 0.084 1.947 0.052 rejected vgt -> fe 0.416 0.74 5.640 0.000 accepted financial literacy theory (lit) significantly affects financial exclusion (fe). the pvalue of financial literacy theory (lit) in predicting the financial exclusion (fe), the probability of getting a critical ratio as large as 1.947, while the areas related in absolute value is above 0.052. in other words, the regression weight for financial literacy theory in the prediction of financial exclusion is rejected as therefore shows that financial literacy theory indicates no issue to financial exclusion. vulnerable group theory (vgt) significantly affects financial exclusion (fe). the probability of getting a critical ratio as large as 5.640 in absolute value is 0.000. in other words, the regression weight for vgt in the prediction of financial exclusion is supported by hypothesis 2 (h2) and indicates a positive relationship between vulnerable group theory and financial exclusion. the magnitude of each standardization effect (normalization effect) or indirect (normalization) effect (indirect effects) is shown in above table 4. it is well known that financial literacy theory has a negative impact, while vulnerable group theory has a positive impact. consistent with previous research (muhammad and ngah, 2021; bongomin et al., 2018). norms arise from individual problem-solving activities in which standards play a major role. the rules of expected behaviour. religion, and poverty, are considered vulnerable groups to financial exclusion. this is the primary foundation for financial institutions to be more responsive and flexible in responding to their needs. community / community. therefore, norms shape the choices of people who use personal financial services. the institution is considered better, and there is trust between the two. discussion financial literacy theory play an important role in making financial decisions while this study rejected the theory based on the causes of financial exclusion. therefore, decisions are made by groups according to individual behavior. those who are exposed to deviant behavior and expect to do the same in social groups for sanctions. while for the vulnerable group theory (vgt) accepted as the significant impact on financial exclusion and has the positive impact. therefore, the economic decisions of poor households are shaped by social policy. it is found in existing norms and adapts to those determined by the community. test results from previous studies are different (bongominetal. 2016; koseu gunes, 2018), showing that adverse effects on financial inclusion are caused by procedures as indicates (h2). in this case, the established rules can be too difficult followed by vulnerable groups. in reality, each financial services institution has its own rules. however, the problem is that the procedure used is very cumbersome and a bit complicated. the inclusion program can be successful using the vgt https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 58 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) theory. the system needs to be more accessible and economically improved an inclusion program that benefits the community. this is the implementation of the directive given by some procedural points, it makes it easier management procedures. the two tested hypothesis have shown a negative and positive effect on declarative cognitive towards financial exclusion. while the second group vgt indicates the religious and poorest group who depend on the ability to use memory dimensions and cognitive ability to filter financial services and business decision. this is consistent with previous studies (muhammad and zanna, 2021). financial inclusion information not covered by their schematic templates the mind is ignored based on the need to tackle the financial exclusion. 5. conclusions the result identifies equal opportunities in using banking services within the society regardless of status and vulnerability. on the other hand, access and promotion of financial services. access to comprehensive financial services in urban areas is very beneficial to urban communities, but such access is minimal in rural areas. this indicates that the financial literacy theory and vulnerable group theory have pointed out the clear status of financial exclusion theories that can be used for addressing exclusion and inclusion. the institution must decide to apply a proper and appropriate system for the vulnerable community as the institution promotes the correct behaviour. in this case, the negative effect means that you can protect the accessible financial inclusion process. group, but conversely, if the process is more complex, this is almost the goal of financial inclusion achievement, while the hypothesis (h1) does not work considered significant towards financial exclusion as indicated in (muhammad, dauda and mamman, 2019) under the groups' financial literacy. in the second variable, evidence has found that hypothesis h2 has a positive effect and relationship with financial exclusion. therefore, the vulnerable group, which consists of poverty and religiosity, are considered the main predictors of the research and rules applied by financial services are conceptualized based on that direction. regulatory authorities should actively affect financial integration according to the theories described. in other words, the community chooses financial inclusion programs based on their needs. the problem of limiting financial inclusion is both poor households and vulnerable groups. in rural or remote areas, it is clearly indicated that there is a lack of financial awareness, and we fully understand the information awareness from financial exclusion. financial services to promote financial inclusion. the government also has different regions, especially vulnerable groups. the legal system needs to be easily accessible in rural areas for economic reasons and compensation. financial inclusion is the procedure or process of ensuring access to the financial services that society needs in an affordable, fair and transparent manner, including vulnerable groups such as financial literacy and vulnerable groups and low-income groups. to achieve the national goal of financial inclusion, the government of nigeria and policymakers need to take steps to remove the above barriers to financial inclusion. https://creativecommons.org/licenses/by/4.0/ financial exclusion in northern nigeria: a lesson from the developed countries 59 published by afebi islamic finance and economic review this is an open access article under the cc by license 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(2003), public policy in the community, palgrave macmillan, basingstoke. wilson, t. a. (2012). supporting social enterprises to support vulnerable consumers: the example of community development finance institutions and financial exclusion. journal of consumer policy, 35(2), 197-213. yoong, j. (2011). financial illiteracy and stock market participation: evidence from the rand american life panel. financial literacy: implications for retirement security and the financial marketplace, 76. https://creativecommons.org/licenses/by/4.0/ https://www.emerald.com/insight/search?q=mallika%20saha https://www.emerald.com/insight/search?q=kumar%20debasis%20dutta https://doi.org/10.1108/jfep-06-2021-0162 afebi islamic finance and economic review (aifer) volume 7, no 1 (2022) 62 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) appendix appendix 1 model credibility based on r-squared regression statistics multiple r 0.896608261 r square 0.87942855 adjusted r square 0.805999975 standard error 2.627324621 observations 300 causality relationship among the variables intercept coefficients standard error t-stat p-value lower 95% upper 95% intercept 7.747 2.020 3.835 0.002 3.300 12.193 financial literacy theory (lit) 0.673 0.133 5.058 0.000 0.3806 3.967 vulnerable group theory (vgt) 2.067 0.689 2.997 0.012 0.549 3..585 https://creativecommons.org/licenses/by/4.0/ the opportunities to have own home in banda aceh city 49 8 the opportunities to have own home in banda aceh city yasrizal 1* 1 teuku umar university, meulaboh, indonesia abstract as we know that the development of infrastructure, especially housing problems is really needed by everyone and had so much built by developers both inside the city and outside the city. this rmesidential development ranging from the type, design and technical specifications are varied, it is intended to be accessible by consumers. although developers already provide some conveniences such as the ability to repay in accordance with the selected type, there are still plenty of civil servant (pns) as well as those working in the private sector has not been able to buy/own their own home on the grounds of various considerations interests respectively. explanatory variables used in this model consists of a variable income, number of household members, gender, education level, employment sector, age and marital status will affect the probability of households to own their own home. the data used is the national socio-economic survey 2011, which contains the results of a survey conducted by bps. this thesis focuses on the area of banda aceh as well as using the logit model estimation. the result of calculations show that the proportion of households in the city of banda aceh who own their own home around 53.83%, with the proportion who are not self owned approximately 46.17%. the analysis showed that the variables household size and age significantly affect the chances of having their own home with a significance level of 5%. keywords: home ownership, logit model 1. introduction background the need for a home is one of the basic needs (home needs) to humans after food and clothing. house or dwelling is to need humans not only as a residence, but also a place to shelter from external factors (especially natural factors such as wind, rain, sunlight, temperature). in addition to functioning as a protection against natural disasters or weather, the house also has a social role of culture as a family education center, nursery culture, the value of life, preparing the young generation, and as a manifestation of identity. each individual human being will give priority to the basic needs rather than the needs of the secondary. similarly, the need for the house, everyone will try to meet the housing needs in every level of public life by observing the tastes and skills. according to wie (1978:19-20), the general concept of basic needs standard are common to all states as follows: * corresponding author. email address: yasrizal@utu.ac.id mailto:yasrizal@utu.ac.id afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 50 1. the personal consumption such as food, clothing and shelter (housing). 2. general services: health, education, water supply, transportation and cultural facilities. 3. importance of good production, a decent wage for any job so as to meet the needs. 4. importance of infrastructure that could bring the production and utilization of services (service) in order to meet basic needs. 5. importance of the participation of all residents over the decisions that have been taken or help provide support for projects relating to the business of equipping staples. according to article 5 paragraph (1) of law no. 4 of 1992 on housing and settlement every citizen has the right to occupy and or enjoy and or have a decent home in a safe environment, safe, harmonious and orderly. society currently has several options in having a home. the option is to build it yourself or by way of lease, purchase for cash or installment, grants or by other means in accordance with the legislation in force. firdaus (1997) explains that the demand is influenced by factors including the location or population growth, income, ease of funding, facilities, and public facilities according to the department of housing and spatial planning (kimtaru, 2004) that housing needs can be basically divided into two main points, namely: 1. needs home by the trend (tendency) natural population growth. 2. needs and the provision of home based on the number of appropriate housing. from the first point above the base line with the needs of the many trends based residential property developer offering a variety of housing types, design and technical specifications who varied, it is intended to be accessible to consumers. although the developers already provide some conveniences such as the ability to repay in accordance with the selected type, there are still plenty of civil servants (pns) as well as those working in the private sector has not been able to buy/own their own home on the grounds of various considerations interests respectively. indonesia's future needs about 13 million new homes for the community. the data is obtained based on the population census conducted by the central statistics agency (bps) in the year 2010. so far, the number of housing needs in indonesia is calculated based on the numbers that have been built by the community and the developers reduced the home uninhabitable and community needs increase every year. in 2004, the estimated number of housing needs in indonesia reached 7.4 million units. while in 2009 the numbers continue to grow given the housing needs of the community will also continue to increase. government regulation no. 38 of 2007 states that housing is a provincial local government issues and regency/city. this means that the local government district/municipality became the spearhead of duty to ensure the realization of the house for people, especially the lower middle. as mandated by the constitution (constitution) amendment 1945 and section 28h of the 1945 constitution, that the house is one of the basic rights of the people and therefore every citizen has the right to reside and get a good environment and healthy. but unfortunately the people's civil rights nowadays are still not fully met. one reason is the fulfillment of the housing gap is still relatively the opportunities to have own home in banda aceh city 51 large. this happens partly because they lack the purchasing power of low-income people, especially in meeting their housing needs. tsunami events that occurred in 2004 in aceh province had brought a lot of change. one impact of the tsunami is the number of residents who lost their homes/dwelling. banda aceh city is one of the centers of economic growth is one of the areas affected by the tsunami. population growth that occurred in banda aceh city either naturally or through the process of urbanization led to a growth in demand for housing. it encourages the growth of residential development in banda aceh city good simple house, house type of medium to luxury housing. based on bps data in 2010 the percentage of households living in the house contracts /leases increased to 7.34 percent. this is in line with the decline in household occupying their own house and belongs to the parents/families respectively to 76.59 percent and 10.07 percent. this relates to the appeal of the urban, the many residents who moved to work in urban areas as well as home prices are much more expensive than in rural areas so that they prefer to occupy the house rent/contract due to not being able to buy or build their own homes. on the basis of the above description it is necessary to conduct a study on how much the probability of a citizen of banda aceh to have their own home either because of the influence of income, employment, number of household members, age, marital status, education, and gender. the purpose of research 1. analyzing the characteristics of the household that is income, level of education, status/position in the main job, age, gender, number of household members and marital status that affect the chances of having their own house in banda aceh city. 2. estimating the magnitude of the probability of significant explanatory variables affect the chances of having their own house in banda aceh city. the benefit of research 1. as conceptual contribution for those who want to know the factors that affect the chances of having their own house in banda aceh city. 2. as input for the government of aceh province in their policy, and for those who care to improve the welfare of the people so that they can have their own home. 2. literature review the understanding of house the house is a typical goods with unique characteristics among all the other items that are used in general. levy (1995) mentions that the house has the following characteristics: 1. fixity, which is found in a particular place during the life of the building. 2. orability, which is generally more durable. 3. slow rate of technological change, which houses tend to age slower than other goods. 4. proness to neighborhood effects, the value is affected by the location. 5. sensitivity to credit, because the house needs a huge expense and often financed with long-term credit. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 52 6. speculative motive in ownership, which has the advantage of speculation. 7. merrid good, the house is seen as something that is selecting beneficial effect that exceeds the user satisfaction. 8. small scale of production units, when compared with other products. 9. fragmented ownership, namely ownership separate. the chance chance is known also as probability is a way of expressing knowledge or belief that an event has occurred or will apply. this concept has been formulated with more stringent in math, and then used more widely, not only in mathematics and statistics, but also finance, science and philosophy (ross, 2009). descriptive statistics descriptive statistical is analysis relating to the collection and presentation of data so as to provide useful information. this analysis aims to describe the properties or characteristics of a situation and to make the description or picture of systematic and accurate information on the facts, the properties of the phenomenon under investigation (walpole, 1993). logistic regression logistic regression is used when the response variable is categorical (nominal or ordinal) with continuous predictor variables and categorical (agresti, 1990). study literatur huang and clark (2002) in their study of housing onwership choices in chinese cities transitional using the variables of age and size of households in the form of a continuous variable. the findings of huang and clark to the case where the size of china's household as one socio-economic indicators have a positive influence in affecting home ownership. hsueh (2000) looked at the relationship between home ownership options with the saving behavior in taiwan. by using the probit model, hsueh test the probability determinant community to have a home that is influenced by a number of variables (independent variables). variable-explanatory variables include: the level of income, age of household head, family size, gender, educational level of the family, marital status of the head of the family, job status of head of the family, as well as the location of the city where the house is located. painter (2000) in his study revealed large differences in the level of importance of age, immigrant status, and duration of stay of immigrants as an explanatory variable of home ownership by using a different sample. 3. the research methods the source of data the data used in this study is a secondary data obtained from the national socioeconomic survey (susenas) banda aceh in 2011. the samples taken as much as 418 households. model selection is the type of home ownership is generally characterized by the form of the dependent variable (the dependent variable) which consists of two categories: one's own and do not belong to themselves. therefore this model is a model we can conclude that the probability of the household see to have their own home by giving it a value of one to have and to give value to zero are not belong to themselves. in the collection of the national socioeconomic survey (susenas), there are seven different types of home ownership, which own the opportunities to have own home in banda aceh city 53 property, contracts, leases, home office, rent-free, the home belonged to the parents/relatives/siblings. therefore, the modeling will be used in the aggregation type susenas into two with the details as follows: category one has its own house consists of the type of ownership of the property itself, as well as others; zero does not belong to the category itself consists of free rent, home office, home belonging to the parents/relatives/siblings. explanatory variables who used in the model consists of several variables. the first explanatory variable is the age of the household head (usi). in this study, the authors will use the variable age in the form of a continuous variable. explanatory variables who used in the model consists of several variables. the first explanatory variable is the age to the next explanatory variables are variables diploma/highest sttb owned household head (pdd). there are 15 categories in susenas diploma/sttb supreme head of the family owned, which do not have a diploma sd, sd / sdlb, m. elementary, package a, smp/smplb, m. tsanawiyah, package b, sma/smlb, m. aliyah, smk, package c, d1/d2, d3/bachelor, d4/s1, and s2/s3.pala households (usi). in this study, the authors will use the variable age in the form of a continuous variable. another variable used is the number of household members (art) in one household. in addition, the marital status of the household head was put into this model. the categories of marital status (sta) in susenas consists of 4 categories: not married, married, divorced and divorced to die. variable employment status of household head was included in the model to describe the condition of the welfare of the household head. employment status of workers (pek) is organized into discrete variables by category on their own, trying assisted by temporary workers/laborers are not paid, trying to help keep workers/laborers are paid, and free workers or unpaid family workers. other continuous variables were income level families (pdp). the author uses a variable expenditure per capita. in general, home ownership model itself that will be tested are as follows: prob (y=own=1) = α0 + α1 *art + α2 *kel + α3 *sta + α4 *pdd + α5 *usi + α6 *pek + α7 *pdp (1) 4. results and discussion 4.1 characteristics of households every household has different traits and characteristics of both the general characteristics of the household and individual characteristics of the household head. some of these characteristics may provide different implications for home ownership. 4.1.1. number of household members the first variable that affects the chances of having their own house in banda aceh city is the number of household members has a positive effect on the chances of their own homes that the larger the household size will increase the probability of households to occupy his own house. it is not separated from the need to accommodate the size of the household members. on average, members of urban households in indonesia amounted to 4.06 household members for each household. by region, the households urban in sumatra has an average number of household members most. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 54 each increase of one member of the household will increase the probability of households in banda aceh city to have their own home at 3.49%. the findings of this positive relationship was also found by huang and clark (2002) for the case where the size of china's household as one of the socioeconomic indicators have a positive influence in affecting home ownership. of samples used in this study, it appears that the average number of household members to the status of one's own home instead of having a smaller number (the average number of art = 3) compared with households that have their own home (average number of art average = 4). based on this it can be concluded that the number of households that have household members who have fewer greater tendency to occupy the house does not belong to its own compared to the number of household members of a larger household (see table 1). table 1 ownership home based number of household members home ownership number of household members (mean) 1. owned itself 4 2.'s not one's own 3 4.1.2 education the next is the interesting findings of the study variables. the estimation results indicate that the estimated coefficients have a negative sign, so that the face would be interpreted that any increase in education head of the family, will lead to the probability of the household to occupy the house itself is reduced. a fact which tends to the opposite of the hypothesis that education will be built directly proportional to the probability of households to have their own home can be described below. from the calculation of the sample used descriptive statistics, households that have seen the highest high school diploma with home ownership status is equal to zero (not the property itself) was 53.1%, while households with home ownership status is equal to one (self) of 46.9%. seen that the head of household with a high school education who have their own home and the head of household and have a high school education is not one's own home is not too much different, so that it does not cause is too the influence of the educational level (see table 2). table 2 ownership top home based diploma owned top diploma owned home ownership own alone (%) not own alone (%) 1. no have a diploma of sd 2. sd/sdlb 3. m. ibtidaiyah 4. packet a 5. smp/smplb 6. m. tsanawiyah 7. packet b 8. sma/smlb 9. m. aliyah 10. smk 77,3 65,4 100 0 64,4 50,0 0 46,9 33,3 65,6 22,7 34,6 0 0 35,6 50,0 0 53,1 66,7 34,4 the opportunities to have own home in banda aceh city 55 top diploma owned home ownership own alone (%) not own alone (%) 11. packet c 12. d1/d2 13. d3/ baccalaureate 14. d4/s1 15. s2/s3 0 33,3 45,5 45,7 84,6 100 66,7 54,5 54,3 15,4 source: bps, susenas 2011 (processed) 4.1.3 marital status the next variables that also affect the household to determine the probability of having their own home is the marital status of household head. from the estimation results indicate that marital status does not affect the opportunity to have their own home. judging from the data sample of respondents that i use, the sample of respondents on average are in the coastal areas, where most of the respondents were victims of the tsunami that gets home help. 4.1.4 employment status employment status did not significantly affect the probability of households to occupy his own house. this leads to the status of workers who work in the informal sector has a relatively low level of income. the income level of patriarch working to the status of self-employed workers have a relatively low income levels. with these low revenue resulting huge obstacle for households to have their own home. 4.1.5. gender the estimation results of gender variables significantly affect the chances of having their own home, based on descriptive statistics of household heads of men who own their own home by 53.1% while the female head of household was 59.6%. the difference is not too much different that the gender variable does not affect the chance to own their own home (see table 3). table 3 home ownership by gender gender kepemilikan rumah own alone (%) not own alone (%) 1. man 2. woman 53,1 46,9 59,6 40,4 source: bps, susenas 2011 (processed) 4.1.6. age of household patriarch the estimation results of the variable age of household head affects the chances of having their own home, based on descriptive statistics the average age of household heads who have their own home is 45 years (see table 4). each additional 1 year of age of household head, then the probability to have their own home will also increase by 1.16%. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 56 table 4 home ownership by age no home ownership age (mean) 1 not own alone 37 2 own alone 45 source: bps, susenas 2011 (processed) 4.1.7 the. income the final variable that affects the probability of households to have their own home is the household income. in this study, the authors use a month per capita expenditure. from the estimation of these variables did not significantly affect the chance of having their own home. based on the descriptive statistics of household head men spending an average of rp.1.521.851 while female-headed households spending an average of rp. 1,423,116. table 5 expenditure per capita month by gender gender expenditure per capita month man 1.521.851 woman 1.423.116 source: bps, susenas 2011 (processed) 4.2. the estimation results based on estimates by the software "r" is obtained that the explanatory variables that significantly affect the chances of having your own home is the household size and age of the household head. the probability of both variables are: table 6 probability of number of household members the number of household members probability 1 2 3 4 5 6 7 8 9 10 0,45 0,48 0,52 0,55 0,59 0,62 0,65 0,68 0,71 0,74 source: bps, susenas 2011 (processed) the estimation results of the variable number of household members showed that every increase of one (1) member of the household then the probability of having their own home was also up by 0.03. the opportunities to have own home in banda aceh city 57 an overview of the number of household members on the probability to have their own home is shown in figure 1. figure 1 plot of number of household members to probability table 7 probability of age of household patriarch age probability age probability age probability 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 0,18 0,19 0.21 0,22 0,23 0,25 0,26 0,27 0,29 0,31 0.32 0.34 0,36 0,37 0,39 0,41 0,43 0,45 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 0,46 0,48 0,50 0,52 0,54 0,56 0,58 0,59 0,61 0,63 0,65 0,66 0,68 0,69 0,71 0,73 0,74 0,75 55 56 57 58 59 60 61 62 63 64 65 66 67 69 70 72 73 75 0,77 0,78 0,79 0,80 0,82 0,83 0,84 0,85 0,86 0,86 0,87 0,88 0,89 0,90 0,91 0,92 0,92 0,93 the results of the estimation of age of household head shows that each increase of 1 (one) year of age of household head, then the probability to have their own home also rose by 0.01. an overview of the age of the head of household on the probability of having their own home is shown in figure 2. figure 2 plot of the household head age probability for figure 3 through figure 5 is a free variable that does not significantly affect the chances of having their own home, although it appears that the afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 58 relationship between the dependent variable with the independent variable is a linear positive and linear negative (can be represented by a straight line). insignificant variables gender, marital status, education, employment status of the opportunity to have their own home due to the sample of respondents is tsunami victims who live in coastal areas, which according to the author of the respondents had to get home help. figure 3 plot gender of household patriarch of the probability figure 4 plot marital status of household patriarch of the probability figure 5 plot of education of household patriarch to probability figure 6 plot employment status of household patriarch of the probability 5. conclusions and suggestion based on the findings that have been presented, there are a number of conclusions that can be drawn from the explanations that have been submitted. systematically, some conclusions from this study include: a. the estimation results indicate that the number of household members in a positive effect on the probability of households to have their own home. each the opportunities to have own home in banda aceh city 59 member of an increase in one person households will increase the probability of households to have their own home at 3.49% with the other variables held constant. b. age of the household head has a significant effect on probability in own home. from the results of the estimation indicate each by an additional 1 year of age will increase the probability of households to have their own home by 1.16% with the other variables held constant. gender of household head based on the estimation does not significantly affect the chances of having their own home. descriptive statistics show the head of the household men who have their own home by 53.1% and female heads of households who have their own home by 46.9%. this illustrates that gender does not indicate the magnitude of the opportunity to have their own home, because of the difference in ownership of 6.2%. c. descriptive statistics heads of household marital status married/have ever been married have their own home by 94.7% while the unmarried have their own homes by 5.3%. judging from the difference in home ownership there is great variation marital status should not significantly affect the ownership of the house itself. however, based on the estimates can be things that do not fit. this is according to the author because the sample of respondents living in coastal areas are victims tsunami that have received housing aid. d. the variable education of household head, household head employment status and employment status of household head also does not significantly affect the chances of having their own home, it is also due to the sample of respondents residing in coastal areas is tsunami victims who received home help. suggestion data household sample used is a cross section so that the observations were made over a period of time. this weakness gives suggestion to the government, especially the bps in order to provide a more survey panel data so that each household behavior over time can be analyzed. further research on the opportunity to have their own home can use other variables that have not been covered in this study. references firdaus, a. 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(1978). from growth to basic needs. jakarta: leknas lipi. shari’ah compliances stock market integration: evidence from indonesia and malaysia 1 shari’ah compliances stock market integration: evidence from indonesia and malaysia helma malini 1* 1 tanjungpura university, pontianak, indonesia abstract the nature of stock market integration has been an issue for almost a decade; this issue is more complicated toward shari’ah compliance between countries since there are differences of companies screening process that can be classified as shari’ah compliances. the differences make the integration of shari’ah compliances stock market become a major issue in trying to answer the question whether one country can be the placed for shari’ah portfolio diversification. this study aims to measure shari’ah compliances integration and portfolio diversification in indonesia and malaysia shari’ah compliances toward other shari’ah compliances in the world. six shari’ah compliances are selected based on countries level of development and geographical factor. this studies relies on two major time series investigation techniques, namely the auto-regressive distributed lag (ardl) approach and multi-variate vector error correction mechanism (vecm), based on the generalized methods of moments (gmm). the ardl approach is used to determine the existence of long run integration among shari’ah compliances, while the multi-variate vecm based on the gmm is adopted to provide a robust analysis of short and long-run dynamic causal linkages among the stock markets. keywords: efficient market hypothesis, portfolio diversification, shari’ah compliances integration 1. introduction rapid growth of indonesia and malaysia shari’ah compliances proves that shari’ah compliances in both countries are not only potential for international hub of shari'ah compliances but also a place for investor to diversified their portfolio rather than investing in domestic conventional stock market. the certainties of stability from listed companies that ensure by screening process make shari’ah compliances establish in several countries in the world. however, the chances of diversifying portfolio from and to other shari’ah compliances in the world is less due to the question whether shari’ah compliances among countries are integrated to each other, in this case (indonesia, malaysia, india, qatar, bahrain and japan). the capability of islamic financial industry to survive during crisis has make shari’ah compliance becomes preferable choice for investor to diversify their investment portfolio. malaysia, egypt, pakistan, saudi arabia and sudan are pioneering countries for the development of shari’ah compliances, while indonesia, middle east, canada and us provide the platform and contribute to the * corresponding author. email address: helma.malini@ekonomi.untan.ac.id mailto:helma.malini@ekonomi.untan.ac.id afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 2 diversification of islamic capital market product. despite, fundamental differences between shari’ah and conventional capital markets, particularly in term of screening process, in the implementation, shari’ah compliance can replicate useful and non contradictory functions of the conventional capital market as well. however, with the rapid development of islamic financial industry in the world particularly the islamic capital market thus not attracts attention to research about shari’ah compliances integration and portfolio diversification, while integration in shari’ah compliances is essential to indicate the level efficiency and stock return behaviour of shari’ah compliance. therefore, the integration and portfolio diversification in shari’ah compliance also as reflection of all available information and as such, are consistent with the economic fundamentals (beechey et al., 2000). in the context of stock market integration, stock price in integrated markets have similar expected return due to the same risk exposure. integrated shari’ah compliance suggesting that these markets offer no diversification benefits as the market performance tend to be similar. in a risk-return framework, investor can increase return or reduce risk or both, by having investment mix in shari’ah compliance which return are uncorrelated. thus, the degree of stock market integration suggests the potential portfolio diversification benefits that can be gained by investor. 2. literature review integration is one the objective in forming shari’ah compliance that described in the solidarity and brotherhood in islam. chapra (2001) asserted that the apparent disparities in terms of nationality, race, creed and color are artificial and have no place in islam. the holy quran dearly points that human beings were created as one nation (ummah) but become divided because of their differences (alquran 10; 19), although the integration of economy is the foundation of shari’ah economic system, but in the implementation the integration among shari’ah compliance is in question due to several differences of islamic economic system that implemented in several countries. furthermore, one country that has open foreign investment policy will benefit from the integration of stock market, since the level of stock market integration will influence the level of benefits or profit of international investment, moreover stock market integration between countries has important consequences in terms of stock return predictability, portfolio diversification, asset allocation, economics of scale and scope and long term gain (kim and singal, 2000; goetzman et al 2005; mc andrews and stefanadis, 2002; artige and nicolini, 2006; syllignakis and kouretas, 2011). the benefit of stock market integration between countries is the capability to decrease the cost of capital, increased the investment opportunity set for local and foreign investor but also lead to significant welfare gains from higher saving and international risk sharing or diversification through the possibility of integration. in minimizing risk and increasing profit opportunities, more investor seeks to diversify their portfolio to international territory. international portfolio makes it possible to expand the efficient frontier and reducing the systematic risk below domestic securities. ming yuan (2007) have studied the benefits of international diversification and one of the benefits is to expand the efficient frontier and reduce the systematic risk level below that of domestic securities alone. the reason is that shari’ah compliances stock market integration: evidence from indonesia and malaysia 3 structural and cyclical differences across economies makes the risk-reduction benefit possible. if one market is doing worse than expected it is likely that another market will do better than the expectations, hence the risk is reduced and losses are offsets. hussin et al. (2013) empirically investigates co-integration between islamic stock market in malaysia, indonesia and the world by applying the vector auto regression (var) method. the research used monthly data from january 2007 to may 2012 taken from authorized sources. the finding shows that there is no longrun or equilibrium relationship exists between ftse bursa malaysia emas shari’ah (fbmes), jakarta islamic index (jakisl), and dow jones islamic market index (djim). conclusion can be made that the islamic stock markets of malaysia does not integrate with indonesia’s, as well as with the world markets in the long run, the result also showed that malaysia is a favorable country for investor to diversify their investment. despite there have been numerous studies examining market integration among developed and emerging markets, but there have been relatively few studies explore the issue of stock market integration and portfolio diversification in islamic stock market particularly in shari’ah compliance. for example, kassim (2010) confirmed that even though the growth of indonesia and malaysia shari’ah compliances has been increasing in term of size, number of listed companies and number of investor. however no empirical studies on whether shari’ah compliances in indonesia and malaysia integrated with shari’ah compliances in the selected shari’ah compliances. 3. research methodology data in analyzing the nature of integration among the shari’ah compliances, six shari’ah compliances are chosen to be included in the analysis. data on daily closing stock indices of the six shari’ah compliances are gathered from thomson data stream database covering the period since january 2000 to december 2010. the shari’ah compliances and their respective indices being selected are as follows: table 1 selected country for shari’ah compliances integration country indices number of listed companies indonesia (id) indonesia shari’ah compliance (isc) 234 malaysia (my) kuala lumpur shari’ah compliance (klsi) 854 bahrain (bh) qatar (qr) bahrain stock exchange dubai stock exchange 50 55 japan (jap) india (ind) japan ftse shari’ah compliance india shari’ah compliance 100 50 the selection of this stock market is based on the reason that six shari’ah compliances cover a wide geographical which contributes to the objectives of this study. in particular, the selected shari’ah compliances represent six major shari’ah afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 4 compliances across the globe, not only in term of market capitalization but also with number of listed companies. methodology ardl bound testing approach to examine the long run relationship among the shari’ah compliances, this research employs the ardl bound testing approach to co integration which involves estimating the conditional error correction version of the ardl model (pesaran et al. 2006). the choice of ardl approach in this research is based on the consideration of co integration analysis are unbiased and efficient given the fact that, firstly, it can be applied to a small sample size study and therefore conducting bound testing will be appropriate for the present study, secondly it estimates the short and long run components of the model simultaneously, removing problems associated with omitted variables and autocorrelation. finally, it can distinguish between dependent and independent variable. in this study, the estimation following baseline model: inat = α0 + α1myt + α2indt + α3qrt + α4japt + α5 bht + €t (1) myt = α0 + α1inat + α2indt + α3qrt + α4japt + α5bht + €t (2) where ina, my, ind, qr, jap, bh refer to the shari’ah compliances of indonesia, malaysia, india, qatar, japan, and bahrain, respectively, and €t is the error term for the model. the error correction version of the ardl framework pertaining to equation can be reproduced as follows; δinat = δ0 +   p i 1 ε iδinat-1+   p i 1 ɸiδmyt-i +   p i 1 ϕiδindt-i+   p i 1 ϒiδqrkt-i+   p i 1 µiδjapt-i+   p i 1 viδbht-i+ λ1inat-1 + λ2myt-1 + λ3indt-1 + λ4qrt-1 + λ5japt-1+ λ6bht-1+u1t (3) δmyt = δ0 +   p i 1 ε iδmyt-1+   p i 1 ɸiδinat-i +   p i 1 ϕiδindt-i+   p i 1 ϒiqrkt-i+   p i 1 µiδjapt-i+   p i 1 viδbht-i+ λ1myt-1 + λ2inat-1 + λ3indt-1 + λ4qrt-1 + λ5japt-1+ λ6bht-1+u1t (4) shari’ah compliances stock market integration: evidence from indonesia and malaysia 5 in the above equation, the terms with the summation signs represent the error correction dynamic while the second part (term with λs) correspond to the long run relationship. the null of no co integration in the long run relationship is defined by h0:λ1 =λ2 =λ3 = λ4 = λ5 = 0 is tested against the alternative of h1:λ1 ≠ λ2 ≠ λ3 ≠ λ4 ≠ λ5 ≠ 0, by the means of familiar f-test. however, the asymptotic distribution of this f-statistic is non-standard irrespective of whether the variables are i (0) or i (1). pesaran et al (2006) have tabulated two sets of appropriate critical values. one set assumes all variables are i(1) and another assumes that they are all i(0). this provides a bound covering all possible classifications of the variables into i(1) and (i)0 or even fractionally integrated. if the f-statistic lies above the upper bound level, then the null are rejected, this indicates the existence of co integration. while if the f-statistic falls below the bound level, the null cannot be rejected, which supporting no co integration exist. if, however, it falls within the band, the result is inconclusive. finally, in order to determine the optimal lag-length incorporated into the model and to select the ardl model to be estimated, the study employs the akaike (1974) information criterion (aic) with the maximum lag-length to be considered as 8. generalized method of moments this research investigates the short and long run relationshiop among six selected shari’ah compliances worldwide. the research estimates them by gmm estimation, where the error correction terms are incorporated in the models. the gmm can be used to estimate the model parameters and test the set of moment conditions that arise during period of research. based on hung and cheung’s (1995) study on five variables johansen-juselius cointegration test, the vecm representation can then be reformulated in a simple matrix form as follows :                           jap qr ind bh my in =                     5 4 3 2 1 0       +   k i ri 1                           jap qr ind bh my in t-k +∏                     jap qr ind bh my in t-1 +                     5 4 3 2 1 0       in this research, the akaike (1974) information criterion (aic) is used to determine the lag length incorporation in the entire tests of this research. it is important to note that for gmm estimator to be identified; there must be at least as many instrumental variables z as there are parameters ɵ. following lee et al (1997), this study used lags of explanatory variables as the instrumental variables. this variables were opted for use because of the difficulty in finding other instrument variables, as the research utilizes daily data and for an extended period. these variables are, however, obvious instrument and in most cases, should be included in the instrumental list. another important aspects of specifying gmm is the choice of the weighting matrix to yield a consistent and robust estimate. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 6 4. finding and discussion the descriptive analysis provides preliminary description of the nature and volatility of selected shari’ah compliances. at the same time, it enables comparison of the basic performance indicators of the stock indices allowing an observation of how they fare against each other. table 2 descriptive statistics of selected shari’ah compliances statistics id my ind qr bh jap mean 0.1411 0.3872 0.0004 0.0003 0.0007 0.0001 median 0.4500 0.3700 0.0089 0.0033 0.0002 0.0064 maximum 0.4900 0.4800 0.0617 0.0833 0.0485 0.0835 minimum 0.0956 0.3300 0.6176 -0.0061 -0.0158 -0.0109 std deviation 0.0426 0.9224 0.0403 0.0226 0.0111 0.0300 skewness 0.0206 0.8608 -0.6438 -0.6711 -0.4949 -0.9972 kurtosis 2.3836 3.0325 0.2373 3.1044 2.07115 3.8300 table 2 provides a summary statistic of the stock return for the selected shari’ah compliances in this study. in term of highest average daily return, malaysia is showing the highest average daily return 0.38 percent, followed by indonesia at 0.14 percent, bahrain 0.07 percent, india and qatar at 0.04 and 0.03 percent and japan at 0.01 percent. in terms of volatility of return as reflected by the standard deviation, malaysia is the highest shari’ah compliance risk at 0.92, followed by indonesia shari’ah compliance at 0.04. india and bahrain compliance offer the lowest risk at 0.01 percent.2regarding the measurement of skewness1, india, qatar, bahrain and japan shari’ah compliances exhibit negative skewness. in conclusion, shari’ah compliances that have the highest volatility are shari’ah compliance in emerging and developing markets; malaysia and indonesia. the volatility of malaysia shari’ah compliance can be explained as the result of diversified companies background and enormous product diversification in kuala lumpur shari’ah compliance, resulting to the chance of gaining benefit from portfolio diversification toward implementing buying and selling different company’s strategy (pandian and jayanthi, 2009). while, the volatility of indonesia shari’ah compliance can be explained as investor response due to lack of information about shari’ah compliance in indonesia. lack of information can be in term of screening process information, company’s background and types of product from companies that listed as shari’ah compliances. table 3 correlations among shari’ah compliances stock returns id my bh ind qr jap id 1.000 my 0.430 1.000 bh 0.312 0.341 1.000 ind 0.241 0.453 0.031 1.000 qr -0.222 -0.456 0.674 -0.765 1.000 jap 0.431 0.789 0.563 0.876 0.765 1.000 1 skewness is a measurement of asymmetry shape in a time series data distribution shari’ah compliances stock market integration: evidence from indonesia and malaysia 7 table 3 report that during period of observation, the selected shari’ah compliances showed strong correlation to each other as reflected by strong correlation of coefficients among the shari’ah compliances. strong correlation or highest value of correlation is recorded between india and japan (0.876), followed by malaysia and japan (0.789) and qatar and japan (0.765). strong correlation between these shari’ah compliances suggest that the major factor contributing to the strong correlation which is economic grouping and geographical closeness do not apply in this research, since the countries that correlated to each other are came from different region, between asian and middle east or between developed and developing countries. furthermore, this part of research does not find any correlation or weak correlation between asian to asian shari’ah compliances, which also similar to the previous study about asian stock market integration (gupta and guidi, 2012). japan shari’ah compliance showed strong correlation with other selected shari’ah compliances in this research, although japan shari’ah compliance considered as relatively new, but the country has strong bilateral trades among selected countries and resulting to the interdependence between shari’ah compliances very strong. the rest of the shari’ah compliances also showed strong correlation, except for bahrain and indonesia with value lesser than 0.1. while indonesia and qatar, malaysia and qatar showed weakest correlation with negative2 value of correlation. diversification benefits in several shari’ah compliances countries imply that the countries are very liquid, investor are easily moving their funds to shari’ah compliances in the country, and resulting to the chances of making speculative action very high. specifically the country that having the weakest correlation is: bahrain-qatar33(0.031), indonesia-qatar (-0.222), malaysia and qatar (-0.456). bahrain and qatar shari’ah compliances are among the country that has the weakest correlation to other shari’ah compliances. weak economic interdependence can be the reason for the low correlation of indonesia and malaysia shari’ah compliances to other shari’ah compliances in middle east. furthermore, due to the policy of closed stock market for foreign investor to invest in most of the stock market in middle east, making the correlation between bahrain and qatar as one of the country in middle east remained weak. as for indonesia and malaysia shari’ah compliances, both countries showed high correlation to each other with value of (0.430) although not as strong as india and japan. the correlation between indonesia and malaysia due to close proximity, makes investor in both countries have the flexibility in term of liquidity, they tend to move and switch their investment between shari’ah compliances or to conventional stock market. 2 a negative correlation which is displaying the correlation coefficient between 0 and -1 indicates that there are two securities move in the opposite direction. 3 the weak correlation between bahrain and qatar also can be explained by relating to closed stock market policy that implemented in several countries in middle east, although bahrain and qatar are geographically closed to each other, the impact of the policy remain to the integration of stock market among countries in middle east. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 8 table 4 ardlf statistic for testing existence of co-integration order of lag model 1 (ina, mal) model 2 (ind, qr, bh, jap) model 3 (ina, ind, qr, bh, jap) model 4 (mal, ind, qr, bh, jap) model 5 (ina, mal, ind, qr, bh, jap) 1 1.217 2.117 1.9832 2.7652 0.2728 2 1.224 2.445 1.6322 2.7699 0.9823 3 1.321 2.1150 2.321 1.6543 1.9202 0.7288 4 3.431 2.6548 3.92829 0.6754 5 4.321 3.011 2.8903 1.90231 0.5632 6 1.321 3.221 2.9783 1.08299 0.7654 notes: the relevant critical value bounds are taken from pesaran (2001): (i). case iii: unrestricted intercept and no trend (number of regressors = 7), they are 2.96 – 4.26 at the 99%; 2.32-3.50 at the 95%; and 2.03 – 3.13 at the 90% significance levels respectively; and (ii) case v: unrestricted intercept and unrestricted trend (number of regressors = 7), they are 3.34 – 4.63 at the 99%; 2.69383 at the 95%; and 2.38 – 3.45 at the 90% significance levels respectively. * denotes that f-statistics falls above the 90% upper bound. the ardl analysis determines the existence of long run equilibrium relationship among shari’ah compliances. statistically, two market or more are integrated to each other if the markets share a long run equilibrium relation between two variables (yusof and majid, 2006). for shari’ah compliances, the concept of shari’ah stock price that moves together in long run is a result of arbitrage activity. arbitrage in shari’ah principle is prohibited, since this action is a form of taking advantages from other party weaknesses and in shari’ah it is considered as ihtikar. the existence of common long term trend in shari’ah compliances can be empirically proven by the significant joint f statistics produced by the estimated equation. table 4 showed the result of ardl test for the existence of long run cointegration among selected shari’ah compliances. indonesia and malaysia showed weak co-integration (90 percent significant level) at lag length 1, suggesting that there is a long run equilibrium relationship between the two shari’ah compliances. shari’ah compliances in model 2 (india, qatar, bahrain, and japan) also showed long run equilibrium. when indonesia and malaysia shari’ah compliances are concluded in the model (model 3 and 4) there are also significant evidences of long run relationship among the shari’ah compliances. however, when both indonesia and malaysia are included and link to the whole selected shari’ah compliances (model 5) this market found to be not significant and not co-integrated to each other. long run equilibrium among selected shari’ah compliances exist if the selected country remove institutional shari’ah constraint that consist of taxation, foreign exchange controls, capital market regulations, transaction costs and socializing foreign markets to investor (bartram & dufey, 2001). institutional constraint for indonesia shari’ah compliance is in form of lowering tax44 for foreign 4 indonesia in general is not applying foreign exchange control. accordingly, indonesia becomes more favorable to be an investment destination in the perspective of less exchange control barriers. shari’ah compliances stock market integration: evidence from indonesia and malaysia 9 investor, transparent shari’ah compliance regulations, lowering transaction cost such as brokerage fee and increasing liquidity. while, the institutional constraint for malaysia shari’ah compliance is lowering taxes for foreign investor and open market policy to attract more foreign investor. table 5 result of multivariate vecm analysis (model: id, my, ind, bh, qr, jp) notes: ***, ** and * represent significance at the 1%, 5% and 10% level, respectively. ect t-¹ is derived by normalizing the co integrating vectors on the dependent variable, producing residual r. by imposing restrictions on the coefficients of each variable and conducting wald test, we obtain f-statistics for each coefficients in all equations. figures in the (.) and [.] represents t-statistics and probabilities for f-statistics, respectively. the optimal lag-length included in the models is based on the akaike information criteria (aic). dw is durbin watson d test for autocorrelation and j-stats is the hansen’s j-statistics test for correct specification (over identifying restrictions) of the model. lag length is set at 3. the vector error correction model (vecm) based on the gmm estimation for the selected shariah compliances is appropriate technique because this model distinguishes between short and long run dynamics linkages among shari’ah compliances. both short and long run linkages are important to see the impact of regulation and shari’ah compliance stock price toward each other in selected shari’ah compliances. the existence of the short run multivariate granger causalities among shari’ah compliances indicated by significance of the fstatistics through joint test of lagged differences, while the long-run is shown by the significance of the t-statistics test ect. the vecm analysis is conducted on the baseline model containing all six shari’ah compliances. dpdt variablet independent variables (t-stats) [f-stats] ectt-1 diagnostic test ∆id ∆my ∆ind ∆bh ∆qr ∆jp ∆id 6.202*** 0.543 4.432*** 4.985*** 5.981*** -0.948*** r²adj=0.24 [0.000] [0.169] [0.007] [0.001] [0.001] (-4.386) dw=1.43 j-stats=0.03 ∆my 11.342*** [0.000] 1.645** [0.021] 1.984** [0.064] 0.542 [0.0876] 1.986 [0.032] -0.643*** (-3.002) r²adj=0.24 dw=1.22 j-stats=0.02 ∆ind 0.643 [0.218] 3.654* [0.032] 2.532** [0.010] 1.512 [0.414] 1.567* [0.023] -0.598*** (0.203) r²adj=0.03 dw=1.77 j-stats=0.32 ∆bh 0.543 [0.142] 1.543 [-0.232] 2.121** [0.023] 0.765 [0.454] 0.432 [0.126] -0.988*** (1.113) r²adj=0.03 dw=0.67 j-stats=0.21 ∆qr 2.432 [0.333] 3.432* [0.001] 2.5346* * [0.001] 3.754** [0.000] 1.332** [0.001] 0.7543*** (-6.675) r²adj=0.043 dw=1.23 j-stats=0.34 ∆jp 3.432*** [0.001] 2.642** [0.001] 2.732 [0.006] 2.785 [0.312] 0.564 [0.000] 1.765 [0.001] 0.8743*** r²adj=0.043 dw=0.32 (-3.253) j-stats=0.23 afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 10 the result showed that all the error correction terms (ects) are significant for the shari’ah compliances being reviewed. the ects coefficients ranging from 0.59 to 0.98 suggest that on average, the selected shari’ah compliances takes nearly about one and half week to clear any disequilibrium. disequilibrium in shari’ah compliances also considered as distraction for the stability of shari’ah compliances stock price, since it can trigger volatility from in balancing situation. indonesia shari’ah compliance, in term of short run causalities is significantly influenced by malaysia, qatar and japan shari’ah compliances, while the influence of india and bahrain is weak. malaysia shari’ah compliance, in term of short run causalities is significantly influenced by india and qatar shari’ah compliances, while other shari’ah compliances in the study showed weak influences to malaysia shari’ah compliance. while, indonesia shari’ah compliance gives a strong influence to the malaysia and japan shari’ah compliance and malaysia shari’ah compliance gives a strong influence to the indonesia shari’ah compliance, while to others shari’ah compliances, the influence somewhat very weak. 5. conclusion the nature of integration55 among stock markets conveys important information for effective market diversification. first integration of the stock market essentially indicates the efficiency of the financial markets. according to the efficient market hypothesis (emh), integrated stock market is characterized by its ability to adjust rapidly to new information (fama et al, 1969). therefore, price of assets in efficient financial markets as fully reflective of all the available information and as such, are consistent with the economic fundamental (beechey, et al, 2000). in efficient stock market, generally, stock market integration would increase, since the movement of information between countries is higher due to the elimination of barrier such as prohibition of investing for foreign investor or improvement of trading facility. in the implementation, fully integrated shari’ah compliances is not prohibit investor for having their fund place in a securities in shari’ah compliances around the world, since investor always seeking for portfolio that gives higher return and lower risk, while the chance for having the exposure are quite minimal in their own countries, thus placing fund in other foreign countries are best preferences. in addition, the gains from international portfolio diversification appear to be largest for countries with high country risk, since indonesia is a country with high profile risk, thus making other differences across countries, such as size of the stock market, size of the banking sector, and trade openness do not support to explain differences in the gains from international portfolio. for indonesia that considered as a country with a high risk profile makes the growth of shari’ah compliance becomes dependable to the volatility of risk. risk in shari’ah or generally stated with gharar which can be interpreted as doubtful toward certain things. relates with risk term in stock market that covered with uncertainty, volatility or loss that 5 it is worth noting that greater market integration does not necessarily go hand in hand with higher market efficiency. lence and falk (2005) illustrate within the setting of a standard dynamic general equilibrium asset-pricing model that these two important concepts are independent of one another. shari’ah compliances stock market integration: evidence from indonesia and malaysia 11 accepted by investor makes shari’ah principle becoming less integrated with the conventional system, thus eventually influence the integration of shari’ah compliances among countries. the implication of this research for investor to invest in selected shariah compliance is that there are still huge potential benefits of international portfolio diversification across these countries. in term of their correlation coefficient, indonesia and malaysia is emerge and become a considerable portfolio diversification for them, but india, japan, bahrain and qatar also attract foreign investor to diversified their portfolio, although selected countries provide huge risk but also provide huge return. references akaike, h. (1974). a new look at the statistics model identification. ieee transaction on automatic control ac, 19: 716-723. al-quran surah yunus, ayah, 10-19. artige, l., & nicolini, r. (2006). evidence on the determinants of foreign direct investment. the case of three european regions, crepp working paper. 2006/07. bartram, m.s., & dufey, g. (2001). international portfolio investment: theory, evidence and institutional framework. thunderbird international business review, 39 (5), 535-579. beechey, m., gruen, d., & vickery, j. (2000). the efficient market hypothesis: a survey. research discussion paper. chapra, m.u. (2001). islamic economic thought and the new global economy. islamic economic studies, 9(1). gupta, r., & guidi, f. (2012). co integration relationship and time varying comovements among indian and asian developed stock markets. international review of financial analysis, 21, 10-22. goetzmann, w. n., & valaitis, e. (2006). simulating real estate in the investment portfolio: model uncertainty and inflation hedging. yale icf working paper, 6-4, march. hussin, y., yusof, y., fidlizan, m., azila, a., emilda, h., & nur, f. m. (2013). the integration of islamic stock market: does a problem for investor?. labuan e-journal of muamalat and society, 7, 2013, 17-27. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 12 kassim. s. h. (2010). global financial crisis and integration of islamic stock markets in developed and developing countries. institute of developing economies, japan external trade organization, 461. kim, e. h., & singal, v. (2000). stock market openings: experience of emerging economies. journal of business, 73, 25-66. mcandrews, j., & stefanadis, c. (2002). the consolidation of european stock exchanges. social science research network current issues in economics and finance, (8,62). ming-yuan leon, l., (2007), “volatility states and international diversification of international stock markets”, applied economics, vol. 39, issue 14, pp. 1867-1876. pandian, p., & jayanthi, q. (2009). stock market volatility in indian stock exchange. socio economic voices, may-june 2009. pesaran, m. h. (2006). estimation and inference in large heterogeneous panels with a multifactor error structure. econometrica, 74(4), 967–1012. syllignakis, m.n.& kouretas, g.p. (2011). dynamic correlation analysis of financial contagion: evidence from the central and eastern european markets. international review of economics & finance, 20(4), 717–732. yusof, r. m., & majid, m. s. a. (2006). who moves the malaysian stock market – the us or japan? empirical evidence from the pre-, during, and post-1997 asian financial crisis. gadjah mada international journal of business, 8, 367–406. http://papers.ssrn.com/sol3/cf_dev/absbyauth.cfm?per_id=44684 http://papers.ssrn.com/sol3/cf_dev/absbyauth.cfm?per_id=44684 http://papers.ssrn.com/sol3/cf_dev/absbyauth.cfm?per_id=44684 http://papers.ssrn.com/sol3/cf_dev/absbyauth.cfm?per_id=44684 http://papers.ssrn.com/sol3/cf_dev/absbyauth.cfm?per_id=44684 causal relationship between islamic stocks and staple food commodities of largest muslim on south east asian countries 75 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) causal relationship between islamic stocks and staple food commodities of largest muslim on south east asian countries dini lestari*, sudarso kaderi wiryono department of science management, school of business and management, institut teknologi bandung, indonesia abstract with many adherents of islam, it is appropriate for the muslim-dominant countries such as indonesian and malaysia capital markets to accommodate the investment needs of the community in line with sharia principles. staple food commodity is one of the crucial commodities which can affect the mobility of stock prices. the correlation between islamic financial instruments and specific commodities, such as staple foods, has only been partially studied in the past. the lack of contextual relationships between country-specific on dominant-muslim countries of islamic stocks is attributed for the study. this paper examines the relationship between staple food commodities and islamic capital markets. using mgarch and robustness var technique analysis and monthly data from 2017-2021, the empirical evidence suggests that getting information about the dynamic correlation between them is vital. the main findings from this study are that there are relationships among them in the long run and they have positive and negative correlations. investors who place a high value on sharia compliance should be mindful that the price of rice, a staple food, is more unpredictable than other staple food commodities (cooking oil), which will have an impact on islamic stocks instrument. the main limitation was the short sample time employed for study, which prevented in-depth consideration of issues such various national and cultural contexts or other exogenous factors that might have varied the linkage between the countries. keywords: shariah instruments, islamic stock indices, staple food commodities, mgarch, south east asian. 1. introduction the public's view of sharia-based investment instruments is proliferating in line with investor demand for the need for financial instruments that are safe, flexible and not less competitive with other conventional financial products. islamic investment abilities hope to maintain the fund in a stable frame as the business nowadays becomes uncertain and very volatile, and loss of confidence leads to uneven wealth and immoral practices. islamic financial products, on the other hand, cannot be carelessly developed by a business in any industry. no ethically dubious enterprises allowed (e.g., arms manufacturing or alcohol production). all shariah-compliant tools must be supported by the three tenets of justice, fairness, and morality, which forbid riba (usury), gharar (deception), and allow risk sharing. shari'ahcompliant investments must relate returns to risks and are based on the exchange of ownership in tangible goods or services, with money operating as the payment instrument to effect the transfer of ownership. *coressponding author. email address: dini_lestari@sbm-itb.ac.id https://creativecommons.org/licenses/by/4.0/ mailto:dini_lestari@sbm-itb.ac.id afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 76 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) although islamic finance became a global system because of its resilience to crises such as at global financial crises in 2008, two main factors are hindering the ability of the islamic capital market to deliver such products. the first was that the conventional financial markets were developing with tremendous speed and in many different directions. the second factor slowing the pace of islamic capital market development was the conflict surrounding the interpretation of what constitutes shari'ah compliance (iqbal & tsubota, 2006). challenged to match investors' preferred investment products, islamic financial instruments, including islamic financial markets, are struggling to maintain a competitive pace. investors who choose the principle of compliance with sharia law also want to choose financial instruments that reduce losses due to adverse market conditions. therefore, it is necessary to know the factors affecting the movement relationship between certain commodities and islamic stock markets. have equity and commodities reached a "financialized market of one"? is this connection resilient? do the benefits of diversifying still apply? the fundamental driver for this study is the evidence that these inquiries have produced, which provides crucial insights for decision-makers including governments, traders, and investors. this study present evidence on how returns in the commodity and islamic equities markets move in lockstep in the time and frequency domains in order to evaluate the potential of commodities as an alternative asset class for investors in islamic equity. in recent years, much literature and research bestow insight and argument into connectedness among islamic financial markets and asset classes such as stocks, bonds and commodities. nevertheless, most of it focused on studying islamic bonds (sukuk) rather than islamic stocks. furthermore, macroeconomic conditions such as commodities often discussed are oil, gas, and mining (gold and silver). for instance, in the period between 2003 and 2021, inconsistent findings still emerge referring to commodities and financial instruments. they might link stock and commodity markets through their economic activity, then initiate the linkage, which directly shows which commodity group is the most influential and can affect the stability of stock price and returns. two southeast asian nations, indonesia and malaysia, are ranked top and second, respectively, in the islamic finance country index for 2021. this demonstrated that, when compared to other nations, indonesia and malaysia continue to lead the world in the development of the islamic financial sector. although they compete, malaysia and indonesia have different traits and development trends in the islamic financial markets. for instance, indonesia adopted a bottom-up approach while malaysia adopted a top-down approach to the emerging sharia economy. indonesia does not immediately rise to the top. due to indonesia being one of the few nations to change its financial industry in order to position it as a worldwide islamic finance powerhouse, they require time in the previous five years (juhro et al., 2020). this possibility will result in any changes in how the islamic finance industry is developed and how it is connected to other products like commodities. under such background circumstances above, this paper is meant to narrow the literature gap in the seeking of relation that determines the significance between shariah compliance financial instrument to macro-economic variables, including commodities. i intend to focus on staple food commodities that have not been extensively explored and in limited literature. using emerging markets in southeast asia, this research takes the case study at one of the largest muslimdominant countries such as indonesia and malaysia. this choice is related to the fact that almost the past research took dominantly muslim countries such as gulf cooperation council (gcg) https://creativecommons.org/licenses/by/4.0/ causal relationship between islamic stocks and staple food commodities of largest muslim on south east asian countries 77 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) mea regions and even non-muslim countries such as asian pacific. with the paper's primary objective to examine the causal relationship between staple food commodities and islamic stock, i would also like to find the lead-lag relationship between them, enhancing the existing literature. the paper's original contribution is to incorporate staple food commodities that none of the research has been found besides comparing big emerging markets like indonesia and malaysia. the findings reveal that the stock prices and commodity prices have a long-run relationship and there is a theoretical relationship between them. malaysian islamic stock markets have a tendency to stabilize when it comes to commodities compared to indonesia islamic stock markets. hence, the following sections of the paper are organized: section 2 reviews the relevant literature related to staple food commodities price and stock market index in time-varying and scale dependence and briefly reviews the theoretical foundations of this paper. section 3 details the methodologies to be employed. section 5 contains the data analysis and empirical results and discusses the results obtained from the previous section using probable explanations and past findings in the literature. section 6 will summarize the paper regarding literature until the conclusion, thus implications for academics and practitioners. references are attached at the end of this paper. 2. literature study islamic financial instruments and commodities in emerging markets carried out research about studying price movements in financial instruments continues to expand more until reaching a specific area such as islamic finance. the dynamic causal linkage between the stock market and macroeconomic variables has been conducted deeply in the past literature. however, when we compare the link, the nature of commodity prices such as oil, gold, and staple food is not attained deep analysis, which do not reveal the objective very much, although those factors are pretty impactful for islamic equity. research options related to a particular market area, such as emerging markets as the majority of the research used. among the earliest study on dynamic return and volatility, research done by bahloul and khemakhem (2021) aimed to examine the connectedness between commodities and islamic stock market indices that introduced techniques using a connected index stated in s&p gsci commodities and their sub-indices based on the forecast error variance decomposition from the var framework. they found that the commodity market exhibited the highest source of shocks to the islamic stock market; whatever the period, the degree of connectedness among them varies over time. especially after the covid-19 pandemic, the commodity market is the net transmitter of return and volatility shocks to the islamic stock market. however, they stated that the islamic stock market is a net recipient of return and volatility spill overs rather than a transmitter. more focused on regional areas in emerging markets such as southeast asian countries conducted by abdullah et al. (2015) aims to test the time-varying, time scale-dependent volatilities correlation between islamic stock indices and crude oil price as commodities. exciting findings from their research identify that malaysia and thailand islamic stock indices, crude oil, corn and gold prices would respond to the singapore, philippine and indonesia islamic stock indices. unlike previous research, they acquired some contemporary techniques, such as maximum overlap discrete wavelet transformation (modwt), continuous wavelet transformation (cwt) and multivariate garch, for finding the dynamic conditional correlation. from that, we can see that time-series data requires recent techniques for econometric research, which can help them identify the research objectives more clearly. additionally, we https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 78 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) might claim that emerging market nations are linked to other emerging nations in a consent. correlation of shariah instruments and commodities from a traditional economic perspective, commodities are considered good portfolio diversified and coherent inversely with stock markets. islamic stocks are proven strongly exposed to commodity price evolutions and suggest that such correlations reduce the potential substitutability of such investments in portfolios (chebbi & derbali, 2015). widad and hadjer (2018) attempt to find the correlation between commodities such as oil and precious metals in the islamic bond market. they conclude that only precious metal has insignificant responses towards islamic bonds (sukuk), although they have substantial negative relation. on another islamic instrument and selected commodities such as stock and selected commodities (crude oil, gold and corn) as employed by rithuan et al. (2014), in the long run, these variables tend to move together and minimize the diversification benefits. different from others, yahya et al. (2013) conclude that among oil and gold prices, only oil's price will affect the islamic stock return in the time-varying short-run in malaysia. interesting study conducted by aït-youcef (2019) by including agricultural commodities contains grains sector (corn, oat, soybean and wheat prices) and soft sector (cocoa, coffee and sugar prices). he found that trading by holders of commodity indexes may serve as a conduit for the integration of the equities and agricultural commodities markets, leading to the financialization of the agricultural markets. on the other hand, considering in food commodities is a field that hasn't gotten enough consideration from modern muslim academics and shariah standard-setting organizations. despite the fact that it includes essential foods for any community and muslim countries in particular, the entire food commodities market received little attention in comparison to the banking and insurance sectors (kalimullina and orlov, 2020). contrarily, the tuna and tuna study (2019) asserts that islamic stock markets are safe havens for all commodity classes, including industrial metals, energy, precious metals, agriculture, and soft commodities. so it's fascinating to investigate whether or if commodities like basic foods also exhibit safe haven and even risk aversion qualities. 3. research methodology to answer the research question regarding what is the impact of oil and other staple food commodities on shariah-compliant instruments' prices and returns, the data methodology that is being used is panel data because it consists of monthly data on the prices of two commodities (oil and rice) and islamic stock indices of indonesia (jakarta islamic index) and malaysia (ftse sharia bursa malaysia hijrah shariah) as the representative of biggest muslim dominant countries on southeast asian from 1 january 2017 until 31 december 2021. all the data was obtained from yahoo finance and investing.com public resources for the stock price indices, the ministry of trade's website for commodity price, and bank indonesia for currency rate ringgit (myr) to rupiah (idr). i choose rice as another staple food commodity because both countries have rice as their primary staple food. this study employs time series techniques namely the multivariate garch model. the multivariate garch-dcc model was first introduced by engle (2002). the dcc approach allows time series to have periods of positive, negative, or zero correlation, and the strength of the correlation can also be observed in the directions. this approach has been used to assess the volatility and correlation between commodities and islamic equities in some studies (abdullah et al.,2016; chebbi & derbali, 2015; rithuan et al., 2014; nagayev et al., 2016). multivariate generalized autoregressive conditional heteroscedastic (mgarch) has been used in this study because variations in correlations and volatilities in higher frequency levels are richer https://creativecommons.org/licenses/by/4.0/ causal relationship between islamic stocks and staple food commodities of largest muslim on south east asian countries 79 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) and sequentially calculated for large time-varying covariance matrices (filis et al., 2011). mgarch model can be conducted following the first steps to test for both normal and t distributions to determine which model is more appropriate in our case. results of unconditional correlation coefficients could suffice to provide empirical evidence. however, i require the computation of conditional cross-asset correlations to address the fourth objective more fully by using dcc-mgarch computation as: �̅�𝑖𝑗,𝑡−1 (𝜙) = 𝑞𝑖𝑗,𝑡−1 √𝑞𝑖𝑖,𝑡−1 𝑞𝑗𝑗,𝑡−1 where qij,t-1 are given by: 𝑞𝑖𝑗,𝑡−1 = �̅�𝑖𝑗 (1 − 𝜙1− 𝜙2) + 𝜙1𝑞𝑖𝑗,𝑡−2 + 𝜙2�̃�𝑖,𝑡−1�̃�𝑗,𝑡−1 in the above, ρij is the (i,j )th unconditional correlation, ∅1 and ∅2 are parameters such that ∅1 + ∅2 < 1, and ri,r-1 are the standardized asset returns. we also test whether the computed volatility is mean-reverting by estimating (1+λi1λi2). some diagnostic tests are conducted to substantiate the validity of our models. for more detail regarding this model, it can be found in pesaran and pesaran (2010). for robustness test, i will use var model because it is one of the most flexible and easy to use models for the analysis of multivariate time series beside mgarch model. the var model has proven to be especially useful for describing the dynamic behavior of economic and financial time series and for forecasting (metadjer & boulila, 2018). following, metadjer & boulila (2018), i will examine the stationary of variables using adf and pp unit root test to know if we have a unit root or any seasonal movements. then, we will use johanson co-integration test to figure out if we have long run relationship or not. after that, we must define lag for var by using akaike and schwarz information criteria (aic and sc) to estimate var model. finally, we will investigate on impulse responses of each variable to another, and study the causal relationship between our variables. 4. result and discussion descriptive statistics i outline the key statistical characteristics for the conditional correlation series across the given time. table 1 shows that there are significant differences between the mean correlation values for different commodity categories, stock prices, and stock return rates. in sum, these figures show that the islamic stock market in malaysia is significantly more associated with oil than it is with rice, but that relationship is reversed in indonesia. table 1. descriptive statistics obs mean min max std.dev skewness kurtosis jarqueberra oilina 60 4.117 4.156 4.296 0.023 3.254 15.202 478.1661 https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 80 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) oilmly 60 4.054 3,881 4.410 0.144 0.938 2.826 8.885 riceina 60 4.023 4.011 4.041 0.006 0.400 3.695 2.814 ricemly 60 3,802 3.712 4.059 0.061 1.572 6.382 53.322 returnina 60 -0,002 -0.156 0.138 0.047 -0.310 5.062 11.59 returnmly 60 0.002 -0.085 0.129 0.041 1.096 4.835 20.449 stckina 60 2.808 2.677 2.896 0.053 -0.449 2.056 4.240 stckmly 60 7.670 7.610 7.736 0.036 0.493 2.717 2.63 source: eviews output results when utilizing the m-garch model and using var as the robustness, i apply the johanson-cointegration test to determine whether or not there is a long-term relationship between the variables. the findings shown in table shows that there are some co-integrations at the 0.05 levels, indicating that the oil price and stock prices have a long-term link but not the price of rice. additionally, it shows that because the variables under consideration have a tendency to move in the same direction, the long-term benefits of diversity are diminished. table 2. results of johanson co-integration test statistics hypothesized no. of ce(s) eigenvalue trace statistics 0.05 critical value prob none 0.760499 217.3241 159.5297 0.0000 at most 1 0.542238 134.4305 125.6154 0.0130 at most 2 0.427612 89.10903 95.73566 0.1313 at most 3 0.371171 56.74859 69.81889 0.3485 at most 4 0.212301 29.84266 47.85613 0.7269 at most 5 0.172427 16.00158 29.79707 0.7122 at most 6 0.078292 5.0204603 15.49471 0.8062 at most 7 0.005091 0.296059 3.841466 0.5864 source: eviews output results the unit root test of all variables in the heteroskedasticity test found that the probability of chi-square is below the significance level at 95%, which means we can apply the dcc guards to the model and move to the next steps. besides, it is concluded that a long run relationship exists among the variables. https://creativecommons.org/licenses/by/4.0/ causal relationship between islamic stocks and staple food commodities of largest muslim on south east asian countries 81 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) table 3. heteroskedasticity test heteroskedasticity test: arch f-statistic 82.54220 prob. f 0.0000 obs* r-squared 34.89976 prob. chi-square 0.0000 source: eviews output results according to figures 1 and 2, we can observe that primary food staples like rice have positive correlations that are highlighted and are extremely volatile in islamic stocks in indonesia but not in islamic stocks in malaysia. this comparison suggests that the market fundamentals are not the primary factor in explaining commodity price behavior. as previously noted, the price of a particular commodity is determined by taking into account a variety of financial considerations as well as investor activity in derivative markets, such as stock markets. these numbers also show the disparities between indonesia and malaysia in the strong association between rice and stock price and return. as a result, it is verified that the islamic stock indices impact rice prices in indonesia. the outcome had substantial implications for the relationship, specifically the effect of staple food commodities prices on returns on islamic stocks, which showed that the islamic stock market was exposed to external macroeconomic variables in both nations, particularly indonesia. furthermore, indonesian islamic stocks' stock returns are significantly impacted by malaysia's commodities rice production. it's interesting to note that, unlike indonesia, malaysia's returns on islamic stocks are harmed by the price of rice. additionally, concur with bahloul (2021) that commodities consistently rank as the primary source of shocks for the islamic stock market. we can observe that indonesia's stock indices and rice prices are more volatile in the first quarter of 2018; this suggests that rice prices are rising due to inflation, while the stock indices continue to decline with poor performance throughout the year. additionally, malaysia had consistency throughout the sample period and only displayed one instance of significant volatility in the middle of 2017. through these outcomes, commodity volatility has proven to be crucial for both countries, despite differences in how repercussions on stock indices are handled figure 1. dynamic conditional correlation between rice and jakarta islamic index (jii) https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 82 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) table 4. estimation result of dynamic conditional correlation garch of rice price in indonesia variable coefficient c 3.703847 stckina 0.002774 stckmly 0.040471 returnina 0.009290 return mly 0.006641 variance equation c 3.73e-06 resid (-1)^2 1.298481 garch (-1) -0.138154 figure 2. dynamic conditional correlation between rice and ftse sharia bursa malaysia hijrah shariah indices table 5. estimation result of dynamic conditional correlation garch of rice price in malaysia variable coefficient c 1.864054 stckina -0.464557 https://creativecommons.org/licenses/by/4.0/ causal relationship between islamic stocks and staple food commodities of largest muslim on south east asian countries 83 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) stckmly 0.420633 returnina 0.114877 return mly -0.094486 variance equation c 0.000125 resid (-1)^2 1.526108 garch (-1) 0.027962 source: eviews output results figures 3 and 4, which discuss the price of oil and stock shariah instruments, show that oil is less volatile than rice even though it is a primary element in staple foods. however, they frequently exhibit volatility near the beginning or conclusion of the data observations. unlike rice, oil prices made clear negative associations. assert the findings of tuna et al. (2019) that combining particular commodity groupings, such as staple foods, will aid in removing the unanticipated financial stress scenarios they encountered. according to the findings, there is a significant negative association between the stock values in both countries and oil prices. in indonesia and malaysia, the oil prices of their countries have a negative relationship with both of their stocks. meanwhile, the oil prices in malaysia did not have a relationship, nor did not affect changes in the islamic stock return of indonesia and malaysia. the findings do not align with yahya et al. (2013) stated that oil price is the most significant variable contributing to the islamic stock return volatility. the findings have a significant consequence: investors should diversify their portfolios and use islamic stock instruments instead of focusing on commodities like oil for hedging. however, compared to the most recent period of 2021, both countries are experiencing high oil prices because of the russia-ukraine war, which is causing the oil supply in the global market to decline significantly. as a result, investors prefer to invest in indonesia because malaysia's oil price volatility is not as fluctuating. figure 3. dynamic conditional correlation between oil and jakarta islamic index (jii) https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 84 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) table 6. estimation result of dynamic conditional correlation garch of oil price in indonesia variable coefficient c 5.726023 stckina -0.144215 stckmly -0.149148 returnina 0.035042 return mly 0.028675 variance equation c 3.73e-06 resid (-1)^2 1.389408 garch (-1) -0.222173 source: eviews output results figure 4. dynamic conditional correlation between oil and ftse sharia bursa malaysia hijrah shariah indices table 7. estimation result of dynamic conditional correlation garch of oil price in malaysia variable coefficient c 10.79261 stckina -1.258974 https://creativecommons.org/licenses/by/4.0/ causal relationship between islamic stocks and staple food commodities of largest muslim on south east asian countries 85 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) stckmly -0.422187 returnina 0.578132 return mly 0.098928 variance equation c 0.001784 resid (-1)^2 1.048509 garch (-1) -0.149536 source: eviews output results robustness test the authors measure the reliability of the findings using the histogram results, stationery test, and competition for the impact of a certain time period in both countries. figure 5 below illustrates the price changes from january 1, 2017, to december 31, 2021. as we can see, there have been some rapid changes on the histogram chart, and the price and return of both stocks have varied quite a little. the pandemic covid-19 condition follows the irregular movements in 2020. figure 5. dynamic conditional correlation between oil and ftse sharia bursa malaysia hijrah shariah indices table 8. stationary test https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 86 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) variables adf stationarity test results oilina 0.0000 stationary at second difference oilmly 0.0000 stationary at first difference riceina 0.0000 stationary at first difference ricemly 0.0000 stationary at first difference returnina 0.0000 stationary at first difference returnmly 0.0000 stationary at first difference stckina 0.0000 stationary at first difference stckmly 0.0000 stationary at first difference source: eviews output results since all variables' probabilities are larger than the critical value, table 8 above shows that none of them are stationary and all have unit roots, however after the first difference, all variables became stationary. according to earlier discoveries that the data are not stationary and have a longterm relationship. 5. conclusion this study offers empirical evidence linking staple food commodities with stock markets in countries with a muslim majority, including indonesia and malaysia. the variables are theoretically related to one another and have a long-term relationship with one another, as was previously demonstrated. in conclusion, compared to indonesia's islamic stock markets, malaysia's islamic stock markets tend to stabilize when it comes to commodities. the return and stock price among these countries on each other's commodities will be impacted by their dependence and interconnection. the paper discusses the implications of how investors and investment managers could incorporate time-varying dimensions into their rebalancing activities in both passive and active investment approaches, allowing risk and return to be managed appropriately by following investors' specific goals. our findings provide information about combining passive and active investment strategies in a multi-asset portfolio of commodities and islamic stocks. long-term high correlations between some commodity-equity series may not always indicate the existence of perfect financialized markets. the study's primary flaw was the short sample time, which prohibited a thorough analysis of topics like different national and cultural contexts or other exogenous influences that would have altered the relationship between the nations. with the help of the analytical data, i advise investors to consider hedging against the risk of staple foods and combining it with commodities that have minimal volatility, like metals (gold). given that the supply of commodities is generally rigid over the near term, it is likely that correlations with equity are frequently transient. future studies should link islamic equities return stocks and bonds' co-movements with agricultural and staple food commodities. https://creativecommons.org/licenses/by/4.0/ causal relationship between islamic stocks and staple food commodities of largest muslim on south east asian countries 87 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) references abdullah, a. m., saiti, b., & masih, m. (2016). the impact of crude oil price on islamic stock indices of south east asian countries: evidence from mgarch-dcc and wavelet approaches. borsa istanbul review, 16(4), 219–232. https://doi.org/10.1016/j.bir.2015.12.002 aït-youcef, c. (2019). how index investment impacts commodities: a story about the financialization of agricultural commodities. economic modelling, 80(june 2017), 23–33. https://doi.org/10.1016/j.econmod.2018.04.007 awwal, m. a. f., & afandi, m. y. (2021). the effect of corona pandemic, mine commodity prices and rupiah exchange rate on indonesian sharia share prices in the mining sector 2020. jurnal ekonomi dan bisnis islam (journal of islamic economics and business), 7(2), 350. https://doi.org/10.20473/jebis.v7i2.29838 bahloul, s., & khemakhem, i. (2021). dynamic return and volatility connectedness between commodities and islamic stock market indices. resources policy, 71(june 2020), 101993. https://doi.org/10.1016/j.resourpol.2021.101993 chebbi, t., & derbali, a. (2015). the dynamic correlation between energy commodities and islamic stock market: analysis and forecasting. international journal of trade and global markets, 8(2), 112–126. https://doi.org/10.1504/ijtgm.2015.069425 engle, r., 2002. dynamic conditional correlation: a simple class of multivariate generalized autoregressive conditional heteroskedasticity models. j. bus. econ. stat. 20 (3), 339–350. filis, g., degiannakis, s., & floros, c. (2011). dynamic correlation between stock market and oil prices: the case of oil-importing and oil-exporting countries. international review of financial analysis, 20(3), 152–164. https://doi.org/10.1016/j.irfa.2011.02.014 hamimi, s., & ginting, y. r. f. (2019). the development of islamic capital markets in indonesia. proceeding international seminar on islamic studies, 1(1), 275–276. iqbal, z., & tsubota, h. (2006). emerging islamic capital markets. islamic finance review, 5– 11. juhro, s. m., narayan, p. k., iyke, b. n., & trisnanto, b. (2020). is there a role for islamic finance and r&d in endogenous growth models in the case of indonesia? pacific basin finance journal, 62(december 2019), 101297. https://doi.org/10.1016/j.pacfin.2020.101297 kalimullina, m., & orlov, m. (shamil). (2020). islamic finance and food commodity trading: is there a chance to hedge against price volatility and enhance food security? heliyon, 6(11), e05355. https://doi.org/10.1016/j.heliyon.2020.e05355 nagayev, r., disli, m., inghelbrecht, k., & ng, a. (2016). on the dynamic links between commodities and islamic equity. energy economics, 58, 125–140. https://doi.org/10.1016/j.eneco.2016.06.011 pesaran, b., & pesaran, m. h. (2010). time series econometrics using microfit 5.0: a user's manual. oxford university press, inc rithuan, h., meor, a., monir, a., masih, a., mansur, m., hanis, s., rithuan, m., abdullah, a. m., mansur, a., & masih, m. (2014). the impact of crude oil price on islamic stock indices of gulf cooperation council (gcc) countries: a comparative analysis. munich personal repec archive, 56989. tuna, g., & tuna, v. e. (2019). which commodity group is the safe haven for islamic stock markets? international journal of economics, 27(2), 253–267. https://creativecommons.org/licenses/by/4.0/ https://doi.org/10.1016/j.resourpol.2021.101993 https://doi.org/10.1504/ijtgm.2015.069425 https://doi.org/10.1016/j.eneco.2016.06.011 afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 88 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) widad, m., & hadjer, b. (2018). causal relationship between islamic bonds, oil price and precious metals: evidence from asia pacific. al-iqtishad: jurnal ilmu ekonomi syariah, 10(2), 285–298. https://doi.org/10.15408/aiq.v10i2.7171 yahya, m., hussin, m., muhammad, f., razak, a. a., tha, g. p., marwan, n., pendidikan, u., idris, s., mara, u. t., pendidikan, u., & idris, s. (2013). the link between gold price, oil price and islamic stock market: experience from malaysia. journal of studies in social sciences, 4(2), 161–182 https://creativecommons.org/licenses/by/4.0/ risk management, corporate governance and financial performance of sharia commercial banks 127 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) risk management, corporate governance and financial performance of sharia commercial banks ratna sari, aji binawan putra* faculty of islamic economic and business, universitas islam negeri sunan kalijaga, indonesia abstract financial performance is an organization that can be used to describe the success of an organization, both in good and bad times. due to the high complexity and risks associated with banking institutions, a bank's financial performance can be improved by developing an effective risk management strategy through good corporate governance. this study uses quantitative. this study aims to determine the effect of risk management on financial performance by using npf and fdr to measure financing risk, bopo to measure operational risk, nom to measure capital adequacy, and the impact of gcg by using the size of the board of independent commissioners, directors. data analysis uses partial least square software, namely the smartpls version 3 program to measure risk management of a company's financial performance. the study results show that risk management, as measured by npf, bopo, and car ratios, significantly positively affects financial performance in islamic commercial banks. gcg has not been able to moderate management risk on financial performance. the risk management variable significantly impacts financial performance, so it is essential for sustainable financial performance improvement. the gcg variable has a negligible but not significant effect on financial results. it indicates that the gcg effort variable to convey the relationship between risk management and financial performance is unsuccessful. keywords: risk management, financial performance, corporate governance 1. introduction banks are intermediary institutions in their business activities, depending on funds and public trust at the national and world levels. banks are exposed to various risks when engaging in business activities, including credit, market, operational, and reputation risks (otero gonzález et al., 2020). the development of sharia banks in indonesia shows exemplary achievements. it becomes a challenge to maintain the image and good name of the community so that they can maintain trust and loyalty to sharia banks (erviana, 2021). a good and bad description of a company's success in its operations can be seen from its financial performance. an organization's financial performance can provide a favorable and unfavorable evaluation of its business success. the current state of the business indicates good financial performance (sudrajat & ubaidillah, 2022). the financial ratios used to measure financial performance in producing good profitability in this study are the return on assets (roa) and net profit margin (npm) ratios. the ability of bank management to obtain profit before tax which is determined by the average value of company assets, can be assessed using roa. npm is also the ratio of the results of operations to the bank's net profit after tax (sinurat & siregar, 2019). *coressponding author. email address: binawanbp@gmail.com https://creativecommons.org/licenses/by/4.0 mailto:binawanbp@gmail.com afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 128 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) table 1. roa and npm ratio of sharia commercial banks in indonesia ratio (%) 2015 2016 2017 2018 2019 2020 2021 roa 0,77 0,95 0,51 1,28 1,73 1,4 1,55 npm 0,77 0,71 0,72 1,42 0,62 1,46 1,66 source: ojk, december 2021 based on the table above, the financial performance of islamic commercial banks between 2015 and 2021 varied in terms of roa and npm ratios. business operations must be carried out honestly to achieve good financial performance. in addition, it is essential to maintain the level of compliance with established and implemented rules and to develop several risk management strategies (suci izdihar, 2017). risk management identifies, measures, monitors, and controls risks arising from all aspects of a bank's business. reducing risk and improving bank financial performance by implementing an effective risk management strategy can improve performance (moezaque & daito, 2020). there are several types of risk management in this study: financing risk (npf), operational risk (fdr), market risk (nom), and liquidity risk (bopo). bad risk management reduces a company's profit margin. good business monitoring and management are essential to reduce risk (simanjutak, 2022). good corporate governance is characterized by integrity, accountability, responsibility, professionalism, and fairness. the reputational risk of the global banking industry is included in the risks associated with the inability of banks to implement responsible corporate governance. good governance can reduce high risks, prevent losses, and improve the organization's financial performance. it can strengthen oversight of several decisions that have responsibility and authority over risk management (krisnando & sakti, 2019). previous studies (sudrajat & ubaidillah, 2022) empirically show that risk management can affect financial performance by showing that npf and bopo significantly impact roa. according to research (suci izdihar, 2017) ldr results have a positive impact on roa financial performance, but the implementation of bopo operational risk management has a negative and significant impact. another research (sinurat & siregar, 2019) shows that the variable capital adequacy ratio (car) or non-performing loan (npl) and (roa) has a significant negative effect on capital yield (roa) and operational efficiency (bopo). there are differences with previous research, so sharia commercial banks must improve their financial performance. it is indicated by (gustifera, 2021) which shows that institutional commissions have a negative and limited impact on the financial performance of the banking industry. significantly and profitably, the independent board of commissioners impacts the banking industry's financial performance. the board of directors has a small and detrimental effect on the financial performance of the banking industry. the examination committee has a moderate impact on the bank's financial performance, although not too strong. furthermore, research (suci izdihar, 2017) shows the number of the board of commissioners, its composition, frequency of meetings, size of the risk management and examiner committees, as well as bpd financial performance, in this case, are all evaluated using profitability (roa). measure means that the size, composition, and frequency of the board of commissioners' meetings are evaluated. https://creativecommons.org/licenses/by/4.0 risk management, corporate governance and financial performance of sharia commercial banks 129 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) based on this, this study aims to determine the effect of risk management with gcg as a moderating variable on the financial performance of sharia commercial banks (2015-2021). the results of this research are expected to be a reference for banking companies as well as the financial services authority and bank indonesia in implementing risk management and corporate governance. 2. literature review signal theory according to signaling theory, corporate financial users must exhibit certain behaviors. business leaders use financial reports to communicate information about using conservative accounting principles that results in qualitatively superior profits. signal theory serves as the basis for the relationship between the effect of financial performance on firm value. this information is visible when a company reports increasing profits because it shows that the business is doing well. on the other hand, if a company's exit profit is decreasing, it is considered bad and, therefore, a bad indicator (mariani et al., 2018). risk management identification, measurement, supervision, and control of bank operations with reasonable and sustainable risks are steps in the risk management process (sudrajat & ubaidillah, 2022). all are expected to be able to manage these risks according to their respective responsibilities and authorities. therefore, management must realize that risks are associated with every action. any relationship between assumed risk and outcome must be plausible. the risk increases with the expected result (citra & handayani, 2014) good corporate governance gcg implementation is critical to increase company value and maintain competitiveness (krisnando & sakti, 2019). strong corporate governance must be implemented to foster local and international trust so that the banking industry can grow effectively and healthily. as a result, banks, bodies that routinely check the supervisory requirements that banks must meet, also issue guidelines on the introduction of gcg to the world banking industry (visiana & tidore, 2022). good corporate governance requires several laws, rules, and regulations to be complied with to support effective corporate performance, leading to a long-term sustainable economy for investors and local communities (gustifera, 2021). financial performance financial performance in a company describes the status and progress of the company's finances. organizations will need indications to assess the performance efficacy of their management processes (gayatri & sunarsih, 2020). sucipto explained that the management of the company's financial performance determines the company's success in generating profits (angelia et al., 2020). financial performance is also used to measure current organizational development activities and future growth potential. it is done because of changes in financial performance due to new trends in each period, such as changes in statements of financial position, profit or loss, or cash flow. all financial performance that defines the company's financial condition must be consistent with the company's objectives, standards, and qualifications (devi et al., 2020). financial performance evaluation is a significant consideration for the banking industry because it can be used to determine how good or bad a bank's performance is and to estimate https://creativecommons.org/licenses/by/4.0 afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 130 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the amount of profitability or profit generated (paulina et al., 2016). (sudrajat & ubaidillah, 2022) emphasized that a bank's financial performance during a specific period will reflect its financial condition in obtaining and distributing funds. usually, to measure a bank's financial performance, indicators of capital adequacy, liquidity, and profitability are used. previous study and hypothesis risk is the potential for financial loss resulting from the occurrence of a specific event. risk management implements several procedures to identify, measure, monitor, and manage potential risks. the relationship between risk and financial performance is that risk management is used to improve financial performance because minimizing risk means preventing losses and maximizing financial performance. financing risk is measured by non-performing financing (npf). the lower the npf ratio, the lower the financing risk faced by the bank. research (nazariyah, 2019) shows that financing risk or npf has a significant effect on roa, but contrary to research (yara nurintan, 2016) shows that npf has no significant effect on roa. liquidity risk is measured by the financing to deposit ratio (fdr). a higher fdr ratio means the bank is illiquid, so the company's performance decreases. in research (nazariyah, 2019) shows that liquidity risk only affects financial performance by proxy tobin's q, whereas (yara nurintan, 2016) , in his research results, liquidity risk has a significant effect on roa. the nom (net operating margin) ratio can be used to measure market risk in islamic banking by determining the capacity of productive assets to generate profits. banks that can control their assets and liabilities and prevent losses from fluctuations in market prices can reduce market risk, control assets, and improve business performance. according to research (nazariyah, 2019), market risk has a sizeable impact on roa. however, research (yara nurintan, 2016) states that market risk does not partially affect financial performance. the small ratio of operating expenses to operating income (bopo) indicates the bank's effectiveness in spending expenses used to quantify operational risk. yara nurintan (2016), showed the same result that partially or simultaneously, bopo significantly affects roa. in contrast to research (nazariyah, 2019) which shows bopo has no effect on roa but has an effect on tobin's q. based on the explanation above, the hypothesis submission is: h1: risk management has a positive effect on financial performance. the implementation of risk management is significantly influenced by how well the structure of company organs, such as the board of directors, audit committee, and directors, are in running the business. applying risk management techniques in this way cannot be separated from the roles and responsibilities of the corporate structure in implementing good corporate governance to achieve alignment of performance and reduce bank risk, which seeks to achieve the highest financial performance and is open to investors or the general public (citra & handayani, 2014). according to several previous studies, gcg factors can mediate between risk management and financial performance based on how it relates to risk management and financial results. first, it is proven by research putu yutika ariestya (2016), based on the description above and the results of previous research, researchers will moderate the gcg variable on the relationship between risk management and financial performance. the higher the risk management and the higher the gcg value, the higher the financial performance. but https://creativecommons.org/licenses/by/4.0 risk management, corporate governance and financial performance of sharia commercial banks 131 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) conversely, the higher the risk management and low gcg, the lower the financial performance of sharia commercial banks. h2: the good corporate governance variable can moderate the relationship between risk management and financial performance. 3. research methods this type of research is descriptive research using quantitative techniques. the independent variables in this study are risk management which is proxied by non-performing financing (npf), financing to deposit ratio (fdr), operating costs to operating income (bopo), and net operating margin (nom). the dependent variable in this study is financial performance proxied by return on assets (roa) and net profit margin (npm). in contrast, the moderating variable is proxied by the board of directors, board of examiners, audit committee, and independent board of commissioners. the analytical method uses secondary data collected from ojk and examined using the partial linear regression analysis method of the smartpls version 4 (partial least square) program. pls is an alternative approach that shifts from the covariance basis of the previous structural equation model (sem) to the variance basis. this study used a purposive sampling technique to determine the research sample. there are several criteria for obtaining the research sample, namely companies that present complete financial statements and have been published at the time of the study, companies that were registered with the ojk during the study period, sharia commercial banks that were registered with bank indonesia and continued to operate during the study period. one of the quantitative research methods used in this study is the publication of the gcg annual report and the financial reports of indonesian sharia commercial bank subsidiaries from 2015 to 2021. 4. result and analysis measurement model analysis (outer model) tests carried out on the outer model with reflective indicators as follows: the importance of factor loading, which is referred to as an indicator in each concept, and convergent validity. the item-score-to-construction-score correlation shows that the reflective model can converge. values on separate reflective measures must have a construct measurement correlation coefficient greater than 0.5. npf (x1) fdr (x2) bopo (x3) nom (x4) kinerja keuangan (y) gcg (z) https://creativecommons.org/licenses/by/4.0 afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 132 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) figure 1. loading factor value source: data processing with smartpls version 4 the results graph above illustrates the lag between indicators with various watt builds. gcg board construct indicators for directors, dki, and audit committee are examples of indicators of financial and performance constructs with a negative added value or a value below 0. when the indicator value is invalid, it is not considered or deleted. the modified model is depicted in the following figure: figure 2. loading factors value source: data processing with smartpls version 4 https://creativecommons.org/licenses/by/4.0 risk management, corporate governance and financial performance of sharia commercial banks 133 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the second step is composite reliability and cronbach alpha. the following calculation results: table 2. composite reliability result composite reliability gcg 0,371 financial performance 0,662 risk management 0,819 source: data processing with smartpls version 4 only the risk management variable shows a high level of validity and reliability because it shows a reliability value above 0.70, which has a combined reliability value. in addition, cronbach's alpha results are as follows: table 3. cronbach alpha result cronbach alpha gcg 0,421 financial performance 0,112 risk management 0,67 source: data processing with smartpls version 4 no results have a reliability value of more than 0.70 and show good validity and reliability according to cronbach's alpha value. the calculation algorithm is used to determine the convergent validity moderation value. the following results are: figure 3. output model moderating smartpls source: data processing with smartpls version 4 https://creativecommons.org/licenses/by/4.0 afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 134 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) this value is still acceptable for ratios above 0.50 to 0.60 in the model development stage. according to convergent validity, the value of the loading factor determines the value of the outer model. however, a reading above 0.70 is also recommended. only risk management key figures, gcg proxies in the board of commissioners, and financial performance key figures for npms with a value above 0.50 are represented in the output as reliable key figures. the second level consists of cronbach's alpha and combined reliability. using the results of the calculations, we can say the following: table 4. composite reliability composite reliability moderation effect 1 1 gcg 0,163 financial performance 0,661 risk management 0,819 source: data processing with smartpls version 4 table 5. cronbachs alpha value cronbach alpha moderation effect 1 1 gcg 0,426 financial performance 0,112 risk management 0,67 source: data processing with smartpls version 4 only the risk management construction has a value greater than 0.80 for the combined reliability value determined by the pls algorithm calculation, as shown in table 5. moreover, only risk management has a value of 0.5 for the cronbach alpha weight in table 6, which yielded a yield of 0.670. after convergence validity is met, discrimination validity is evaluated. the results of the calculations are, as follows: tabel 6. discriminant validty moderation effect 1 gcg (z) financial performance risk management moderation effect 1 1.000 gcg (z) 0,132 0,648 financial performance 0,264 0,175 0,723 risk management 0,183 0,288 0,677 0,775 source: data processing with smartpls version 4 https://creativecommons.org/licenses/by/4.0 risk management, corporate governance and financial performance of sharia commercial banks 135 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) evaluation of the structural model (inner model) the outer model test has been fulfilled to continue with the value test of the structural model or inner model. here are the results of bootstrapping: figure 4. output model moderating smartpls source: data processing with smartpls version 4 the inner model aims to determine each construct's correlation and significance value and the r-square. the following is the calculation of the r-square results: table 7. r square r square financial performance 0,48 source: data processing with smartpls version 4 the variance in the financial performance construct explained by the risk management and gcg constructs has a reversal effect of 48% based on the r-squared equation of 0.480. it shows that the dependent variable in the internal model can identify a weak model. the next step is to test the hypothesis or the significance by comparing the calculated t value higher than the estimate with the t-table. the path coefficient results are as follows: tabel 8. path coefficients original sample (o) mean sampel (m) standard deviation t statistik p values moderation effect 1-> financial performance (y) 0,154 0,038 0,194 0,792 0,428 https://creativecommons.org/licenses/by/4.0 afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 136 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) gcg (z) -> fianncial performance (y) -0,034 -0,045 0,169 0,202 0,84 risk management (x) -> gcg (z) 0,288 -0,014 0,344 0,838 0,402 risk management (x) -> financial performance (y) 0,66 0,664 0,102 6,5 0.000 source: data processing with smartpls version 4 the correlation between constructs shows that risk management positively impacts financial success, with an initial sample value of 0.66 and a significance level of 5% with a t value of 6.55 > 1.96. the fact that gcg has a negligible effect at 5% and produces a negative result with an initial sample value of -0.034 on performance indicates that gcg has no discernible adverse effect on financial performance. in addition, with an initial sample value of 0.154 and a t-count of 5% (t-count 0.792 1.96), the moderating effect of the relationship between risk management and financial performance yields unavoidable results, concluding that no moderation has any effect. risk management has a positive impact on the financial performance of sharia commercial banks smartpls analysis reveals the relationship between risk management as measured by bopo, npf, fdr, and nom, and financial performance with an initial sample value of 0.66; a positive value indicates a favorable relationship between risk management and the company's financial performance. the first hypothesis, which states that risk management has a beneficial impact, is refuted by the t-value of 6.5, which is higher than the t-table > 1.96. in contrast, the analysis findings show that risk management significantly improves financial performance. according to the metric data used to assess risk management, islamic banks meet the value standards set by bank indonesia for the metrics nom (capital adequacy), bopo (business risk), npf, and fdr (funding risk). in other words, the worse the financial performance, the higher the npf value, and the worse it is to improve financial performance, the higher the bopo ratio. lastly, the nom ratio shows that profitability gets more negligible because it shows the inability of a bank to cover the risks associated with its banking operations. the position of the financial kennels that reflects risk management must be maintained in all conditions so that the business operations of islamic commercial banks can continue without interruption and the bank's financial performance remains stable. the nom ratio for sharia commercial banks shows that sharia commercial banks have extraordinary capital to support risk-adjusted asset values. the npf level at sharia commercial bank does not accurately reflect the extent of the bank's financing challenges. https://creativecommons.org/licenses/by/4.0 risk management, corporate governance and financial performance of sharia commercial banks 137 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) variabel good corporate governance can moderate the relationship between risk management and financial performance in sharia commercial banks research using smartpls produces the following results: gcg has a negative correlation with the company's financial performance and has a value of -0.034 for the value of the initial sample to proxy for the percentage of members of the independent commission, prerogative, and audit committee. because t arithmetic and t table are equal to 0.202 and 1.96, respectively, the gcg variable does not significantly affect financial performance. it indicates that the corporate structure has not carried out its duties and responsibilities to implement corporate governance effectively, which has resulted in a decline in the performance of the risk monitoring committee at sharia commercial banks. as a result, the second hypothesis is rejected, which indicates that gcg cannot mitigate the impact of risk management on financial performance. the results of data analysis in the second discussion show and prove that the implementation of gcg for many administrative bodies will produce some deficiencies or problems, including an increase in internal activities, which will cause problems of less effective communication and coordination for organizations like all. the same is true when the boards of sharia commercial banks recognize the oversight role of organizations, which, despite having the maximum number of board members available, they cannot perform their duties to the highest standards due to a lack of members and few meetings.. 5. conclusion based on the results of research on the effect of risk management on financial performance with corporate governance as a moderating variable in sharia commercial banks in indonesia for the 2015-2021 period, it can be concluded: the risk management variable significantly impacts financial performance, so it is essential for sustainable financial performance improvement. it shows the financial metrics used to measure risk management. if the value of this metric differs from that required by bank indonesia, it has a negative impact on the level of bank profitability. the gcg variable has a negligible but not significant effect on financial results. it indicates that the gcg effort variable to convey the relationship between risk management and financial performance is unsuccessful. references angelia, d. a. s., sugiharto, d., lissetiawan, d. n., cahyani, e. r., novita, k. e., nurfadilah, f., … joharudin, a. 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(2022). the effect of the implementation of risk management and corporate governance with stock performance as a variable intervening on the financial performance of banking (analytic study on commercial banking listed on the indonesia stock exchange). budapest international research and critics institute (bircijournal) : humanities, 16580–16594. https://creativecommons.org/licenses/by/4.0 nazhir image and wakif trust, which influences the wakif’s intention to give waqf? 115 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) nazhir image and wakif trust, which influences the wakif’s intention to give waqf? shinta lintang nurillah1)*, yan putra timur2), achmad yasin3 1 department of islamic economics, faculty of economics and business, airlangga university, indonesia. 2waqf center for indonesian development & studies, depok, indonesia 3 department of islamic economics, faculty of economics and business, surabaya state of university, indonesia abstract this study aims to analyses the influence of nazhir image and wakif trust on waqf intentions and decisions. this study uses a quantitative method using the pls-sem approach. the primary data is obtained through a questionnaire given to respondents online. the number of sample data used is 100 people. indicator measurement for each variable uses 5 likert scales. the study results show that nazhir image and wakif trust have a positive and significant effect on waqf intention. likewise, with nazhir image also has a positive and considerable influence on waqf decisions. the results of this study provide practical implications, especially for nazhirs to always be able to maintain their trust and image through transparency in the management of waqf funds and the implementation of innovations in the direction of waqf funds so that wakifs can endow waqf through nazhir in the long term. keywords: nazir image, wakif trust, waqf intention, waqf decision, pls-sem 1. introduction waqf is one of the islamic social, and financial instruments that can support the creation of the benefit of the people. waqf generally manages immovable assets such as land, cemeteries, schools, mosques or islamic boarding schools (antonio et al., 2021; md zabri & mohammed, 2018). however, waqf is also developing a lot in the form of productive asset management to benefit from socio-economic aspects (ascarya, hosen, et al., 2022; listiana et al., 2020; mikail et al., 2017). for example, the construction of housing for poor people whose financing comes from the benefits of waqf funds (m. k. khan et al., 2022). in addition, waqf in cash can be managed in synergy with baitul maal wat tamwil to increase commercial and social activities (ascarya et al., 2022). only 0.45% of indonesia's entire potential cash waqf has been realized as of yet (819.36 billion rupiahs)(bwi, 2021). only 161,579 hectares of registered waqf land are scattered throughout 366,595 localities. the low public understanding of waqf in indonesia (mutmainah et al., 2021) as well as the low level of accountability and transparency regarding waqf institutions contribute to the low public trust in the institution waqf (kasri & chaerunnisa, 2022). one form of optimizing the collection and management of waqf funds is waqf innovation. one example of waqf innovation, for example, waqf in agriculture, is the *coressponding author. email address: shinta.lintang.nurillah-2021@feb.unair.ac.id https://creativecommons.org/licenses/by/4.0 mailto:shinta.lintang.nurillah-2021@feb.unair.ac.id afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 116 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) waqf paddy field program which has been initiated by many social institutions in indonesia (ali azizan et al., 2022; azganin et al., 2021). waqf funds managed by nazhir (waqf management institutions) through productive waqf rice fields programs are distributed to rice farmers for farming capital needs (procurement of production facilities, work alms, and assistance (afroz et al., 2019). in indonesia, the rice waqf program is carried out by various waqf management institutions such as baitul maal hidayatullah, global waqf – act, ipb waqf, etc. another example of waqf innovation is the establishment of the achmad wardi eye hospital in serang, banten, a waqf-based health service where one of its programs provides free eye care and surgery services for people experiencing poverty. in the establishment of the achmad wardi hospital, the national waqf agency or bwi collaborated with dompet dhuafa with a cash-waqf linked sukuk scheme (armen & kuswendah, 2019). on the other hand, the world of philanthropy in indonesia in 2022 is experiencing an uproar where one of the social institutions, aksi cepat tanggap or act, is alleged to have misappropriated the social funds they collected, which were used for personal gain. through global wakaf, act is one of the registered nazhir institutions in indonesia that has permission to collect, manage and distribute the benefits of funds to mauquf alaih. the case with the aksi cepat tanggap (act) agency caused the government to revoke the permit from global wakaf act. likewise, in other cases in malaysia where 32,934 waqifs stopped donating their money due to trust issues in a waqf institution (faza et al., 2022; zakariyah, 2023). this states the importance of trust to maintain donor trust in the long term (ratnasari et al., 2023). the functional component measures institutional image, while the emotional part is associated with psychological aspects (amin et al., 2013). meanwhile, trust is obtained from an organization/sector and its fair, reliable and competent people. the two definitions reflect public trust in waqf institutions and the belief that organizational actions are in the best interest (abdullah, 2019). corporate image influences one's perception of service providers (leong et al., 2022). in previous research, researchers have yet to find research that raises the topic of an image of waqf institutions. so this research associates institutional image variables with corporate image variables. in this case, the waqf institution is non-profitable, meaning it does not aim to gain its profit, but the profits will be distributed again to the people. therefore this study explores the community's perspective regarding nazhir's image and trusts in the intentions and decisions of waqf. the results of this study can have implications for nazhir institutions as a reference in developing strategies that can improve the image of nazhir as waqf management institutions in increasing waqif trust so that, in the end, they can increase waqif intentions in donating funds through waqf. 2. literature study waqf one of the good deeds that allah promises to get a big reward for a muslim is waqf. waqf is a form of islamic philanthropy in which donors or wakif donate part of the assets in the form of movable or immovable assets where the assets will be managed by the nazhir so that the benefits can be given to the mauquf alaih or beneficiaries of waqf (sano & kassim, 2021). waqf is not limited to property owners in the form of land or buildings https://creativecommons.org/licenses/by/4.0/ nazhir image and wakif trust, which influences the wakif’s intention to give waqf? 117 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) that are given for benefits (abdul shukor et al., 2019). according to the prophet muhammad saw, when someone dies, three deeds will last: useful knowledge, a pious child who prays for both parents and alms in the form of waqf. the principle of waqf is an element of policy (birr), goodness (ihsan) and brotherhood (ukhuwah) because apart from being a means of worship, waqf in the social dimension has a noble purpose in helping relatives or other people in need (yulma & herianingrum, 2017). nazhir as a waqf management institution waqf in indonesia is managed by a waqf management/management institution which is also called nazhir. according to law number 41 of 2004 article 1 paragraph (4) concerning waqf, nazhir is defined as a private party or organization that receives waqf property from the waqif to be managed and developed according to its designation. however, in any case, in modern practice, waqf management by institutions will be better than private (abu talib et al., 2020). an organization has better internal controls and controls making it more transparent. in addition, organizational nazhirs have greater ability to manage waqf funds (m. t. khan, 2014). therefore, nazhir's ability and professionalism in managing waqf funds in a transparent and efficient manner greatly influences nazhir's intention to donate back his wealth in the form of waqf in the future (zakariyah, 2023). the effect of nazhir image and wakif trust on waqf intentions in managing waqf assets or assets, trust is the principal capital of waqf nadzirs or waqf institutions (ab rahman et al., 2023; ab shatar et al., 2021). trust is the belief of individuals or groups to entrust or give away their wealth to be used by the people (sano & kassim, 2021). nadzir or waqf institutions are not allowed to take personal advantage of waqf assets. therefore nazhir institutions must be fair, reliable, competent, and transparent in all transactions (abdul shukor et al., 2019). some things underlie a person's trust in individuals and institutions, namely through self-image or institutional image. amin et al., (2013) stated that there is a significant relationship between the image variable of an islamic institution or organization and the variable trust. in this study, the reputation of the institution's management or employees emerged as the most significant indicator in influencing customers. when a wakif trusts a waqf institution, he will tend to entrust his wealth to a waqf nadzir or waqf institution for a long time. from a socio-economic perspective, abdullah, (2018) research shows that one of the socioeconomic goals of waqf can be achieved with trust. trust will lead someone to take further action even though it is still only the intention (timur & herianingrum, 2022). confidence built in zakat institutions can increase waqif intentions in channelling their waqf (abdul shukor et al., 2019; timur, 2022; timur et al., 2022). according lin & chen, (2009) in the context of buying and selling, intention will positively affect decision-making. acceptance of crowdfunding represents that a waqif intending to give waqf will tend to provide waqf. according leong et al., (2022) corporate image or, in the context of this study, the image of waqf institutions can positively affect customer support and lead to customer satisfaction and loyalty. so far, many people know about waqf, but only some have made it. the image of the institution is not good, so it https://creativecommons.org/licenses/by/4.0 afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 118 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) affects a person's intention to make waqf and the decision to make waqf. based on this explanation, the hypothesis that is built is: h1: nazhir's image has a significant positive effect on the trust level of the wakif h2: level of waqif trust has a significant positive effect on intentions to waqf decision h3: the level of trust of the waqif has a significant positive effect on the waqf decision h4: the intention to make waqf has a significant positive effect on the waqf decision h5: nazhir image has a significant positive effect on intentions to waqf decision h6: nazhir's image has a significant positive effect on waqf decisions figure 1. hypotesis model 3. research methodology his research uses quantitative methods. in this study, researchers used primary data. primary data was taken in the form of data obtained from distributing questionnaires. 100 respondents data was collected through a online questionnaire using a google form consisting of the respondent's name, gender, age, education level, monthly income, occupation, and research-supporting questions such as having or never waqf and knowledge of waqf. the population used in this study were men and women aged 17 years and over who were muslim, domiciled in indonesia, and had not or had donated waqf. according to cepeda-carrion et al., (2019) , pls-sem is used to estimate complex causal models with latent variables as a research method in various disciplines. meanwhile, the tool is used to analyze smartpls 3.0 data.a 5-point likert scale is used in this study to calculate each variable's score. measurement of each variable uses indicators that researchers get from previous research. the nazhir image variable indicator uses indicators developed from research by amin et al., (2013), tankovic et al., (2022), and leong et al., (2022). untuk indikator dari variabel wakif trust, diadopsi dari penelitian laeequddin et al., (2010), and kasri & chaerunnisa, (2022). for indicators of the wakif trust variable. regarding the waqf intention variable indicator, this study uses the development of indicators derived from research by yusfiarto et al., (2021) dan nazhir image wakif trust waqf intention waqf decision https://creativecommons.org/licenses/by/4.0/ nazhir image and wakif trust, which influences the wakif’s intention to give waqf? 119 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) hasan, (2022). while the latter, on the waqf decision variable, researchers used variable indicators from rizal & amin, (2015). 4. result and discussion demographic data obtained by respondents was dominated by women, with 54 people or around 54%. for the age range of respondents ranging from 17-25 years, several 46 people or 46% of the total research respondents. respondents with a diploma/bachelor's final education dominated this study, with 72 people or 72%. at the income level of the respondents, the researchers found that out of 100 respondents, 57 had an idr 1,000,000 – 5,000,000. for the demographics of respondents in more detail in the table below: table 1. characteristics of respondents profil frequency percentage (%) gender male 46 46% female 54 54% age 17-25 years old 43 43% 26-40 years old 48 48% 40-50 years old 6 6% > 50 years old 3 3% education senior high school 6 6% diploma/bachelor 72 72% master 21 21% doctoral 1 1% income per month idr 0 – 500.000 11 11% idr 501.000 – 1.000.000 18 18% idr 1.000.001 – 5.000.000 57 57% idr 5.000.001 – 10.000.000 13 13% https://creativecommons.org/licenses/by/4.0 afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 120 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) source: data analysis by author from the test results, it was found that the cronbach's alpha value for each variable was above 0.70 with details of nazhir image (0.816), waqif trust (0.817), waqf intention (0.845), and waqf decision (0.806). according to hair et al., (2013), this value is excellent because it is above 0.70. so from the results obtained in the test, the data used is reliable. to test the validity of the data, the average variance extracted (ave) test was carried out with a value of more than 0.5 and more significant than the cross-loading value. this test was carried out because it can reflect the average similarity of each latent factor in the reflective model (hair et al., 2013). the results show that the ave value in this study is above 0.50 with details on each variable nazhir image (0.717), wakif trust (0.642), waqf intention (0.667), and waqf decision (0.685). from the results obtained in the test, it is reliable and valid for further processing in the next test table 2. realibility and validity test source: data analysis with smartpls 3.0 furthermore, after the data is valid and reliable, a relationship test between variables (model hypothesis test) is performed using the bootstrapping test. the hypothesis test aims to determine the relationship or whether there is influence between variables with an estimated value of each test variable below 0.05 or less than 0.05. so it can be seen from the table 3. using a bootstrap test on sem-pls, one may determine how closely two variables are related. the t and p values show the interaction between the factors. in contrast, if p values > 0.05, this variable has no effect on the dependent variable. p values with values > 0.05 might imply that the factors positively impact the independent variables. for example, in the first hypothesis, the bootstrapping results show a p-value of 0.124 or > 0.05, meaning that the nazhir image variable has a positive but insignificant effect. conversely, in the third hypothesis, the results of the bootstrapping test get a value of 0.007 or <0.05. these results indicate that the waqf trust variable positively and significantly influences the waqf decision variable. table 3. path coefficient and hypotheses testing >idr 10.000.001 1 1% variable cronbach’s alpha rho_a composite reliability average variance extracted (ave) nazhir image 0,816 0,894 0,883 0,717 wakif trust 0,817 0,829 0,878 0,642 waqf intention 0,845 0,851 0,799 0,667 waqf decision 0,806 0,825 0,896 0,685 https://creativecommons.org/licenses/by/4.0/ nazhir image and wakif trust, which influences the wakif’s intention to give waqf? 121 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) source: data analysis with smartpls 3.0 figure 1. bootstrapping test visualisation hypothesis path original sample sample mean standard deviation t-statistics p-values nazhir image -> wakif trust (h1) 0,147 0,155 0,096 1,541 0,124 wakif trust -> waqf intention (h2) 0,059 0,060 0,129 0,453 0,650 wakif trust -> waqf decision (h3) 0,276 0,279 0,102 2,692 0,007 waqf intention > waqf decision (h4) 0,135 0,142 0,091 1,488 0,137 nazhir image -> waqf intention (h5) 0,314 0,327 0,072 4,374 0,000 nazhir image -> waqf decision (h6) 0,465 0,466 0,110 4,235 0,000 https://creativecommons.org/licenses/by/4.0 afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 122 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) based on the hypothesis test on the variables of the six hypotheses, 3 of them can be accepted, and 3 can be rejected. the variables taken include the wakif's trust variable,, which positively affects the wakif's decisions (h3). according to abdullah, (2019) , from a socioeconomic perspective, one of the social-economic goals can be achieved with trust. confidence will suggest someone act further even though it is still an intention. research by abdul shukor et al., (2019) states that trust built in waqf/nazhir institutions can increase waqif choices in channelling their waqf. trust can also be interpreted as perception, so if the wakif's perception of nazhir is positive, this will affect a person's level of trust (ab hamid et al., 2022). the following variable accepted is the image of nazhir, which positively affects waqf intentions and decisions (h5 and h6). according to leong et al., (2022) corporate image, or in the context of this study, nazhir image, can positively affect customer support and lead to customer satisfaction and loyalty. so far, many people know about waqf, but only some have made it. the image of the institution is not good enough that it affects a person's intention to donate. however, this cannot be generalized because each individual has their perception and needs to conduct in-depth interviews related to that context. in other studies that support ur rehman et al., (2021) corporate image is a predictor of customer loyalty. the existence of customer loyalty in this study is represented as an intention to donate or return a very large waqf. nazhir's image can be seen from the quality of service, the relationship between the waqf institution and the prospective waqif, and aspects that need special attention. according to lin & chen, (2009) in the context of buying and selling, intention will positively affect decision-making. when someone intends to waqf, he will tend to make waqf. however, not all hypotheses in this study were accepted. several other ideas were rejected, namely the first (h1), second (h2), and fourth (h4) hypotheses. these findings indicate that the wrong image of the institution for some wakifs does not affect the level of trust for waqf. there are waqifs who, regardless of company status, want or intend to sell their waqf. however, this matter certainly needs further attention by the wakif because when the nominal assets given to the nadzir are significant, and the nadzir needs to be more trustworthy, the purpose of the waqf cannot be adequately achieved. conclusion based on the analysis and discussion, it can be concluded that the quick response to institutional image affects the waqif's intention to make endowments. the level of wakif trust in waqf institutions significantly affects wakif intentions in waqf. the intention of waqf significantly affects the decision of the waqif in waqf. several important implications can be obtained from this research. for some wakif, the wrong image of the institution does not affect the level of trust for waqf. there are wakifs who, regardless of company status, have the desire or intention to distribute their waqf. however, this matter certainly needs further attention by the wakif because when the nominal property given to the nadzir is large and the nazir needs to be more trustworthy, the purpose of the waqf cannot be adequately achieved. this study contributes to society by providing a new perspective regarding the image of waqf institutions and the level of trust in waqif intentions and decisions in waqf. https://creativecommons.org/licenses/by/4.0/ nazhir image and wakif trust, which influences the wakif’s intention to give waqf? 123 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) this study has limitations regarding the number of respondents and only uses two variables in measuring a person's intention and behaviour in waqf. therefore, in future research, researchers can add other variables, such as the satisfaction variable as a moderating variable which 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(2021). understanding muslim’s switching from cash to m-payments: based on push-pull-mooring framework. journal of islamic marketing. https://doi.org/10.1108/jima-05-2021-0135 zakariyah, h. (2023). the determinants of financial technology adoption amongst malaysian waqf institutions. https://doi.org/10.1108/ijse-04-2022-0264 https://creativecommons.org/licenses/by/4.0/ demand elasticity analysis of islamic banking financing in indonesia 61 9 demand elasticity analysis of islamic banking financing in indonesia eka fitriyanti1* 1 university of bangka belitung, bangka belitung, indonesia abstract this research aims to analyze the elasticity of demand for islamic bank's financing in indonesia. the variables observed in this study is inflation and income per capita. this research uses time series of data for the period 2004-2015, which is a secondary data. the data is sourced from the central bank of indonesia and indonesian central bureau of statistics, the models used in this study is a model of multiple regression equations and analyzed using ordinary least squares (ols). based on the estimates, the research found that the inflation and income per capita significantly influence elasticity of demand for islamic bank's financing in indonesia. the elasticity of demand for islamic bank's financing is inelastic to changes in price. this means that the demand islamic bank's financing in indonesia are not sensitive to changes in price. so, islamic banks must be-able using other factors for growth reviews their financing. keywords: elasticity of demand, income per capita, inflation, islamic bank’s financing 1. introduction the price elasticity of demand for loans or financing has major implications for the macro economy, finance, and development. the continuity of the elasticity of demand affects the amount of substitution between inter-temporal in response to changes in the real interest rate, so the impact on a number of macroeconomic problems, including the composition and level of aggregate demand, the amount of interest tax, the burden of the national debt or social security funded and consumption cycle (hall, 1988). on the financial side, the elasticity of consumer prices affect pricing decisions of companies where it is the market forces (ausubel, 1991). in economic development, the demand elasticity explains that the importance of interest rate subsidies and strategies need to be designed to improve access to credit (morduch, 2000). research conducted by karlan & zinman (2005) who observed the elasticity of demand for consumer credit by presenting the parameter estimates are derived from a randomized trial. the experiment was conducted by microfinance lenders consumption in south africa and identifies the demand curve, sloping downward in relation to the price. show requests be very sensitive to price higher than normal interest rates. as well as finding the loan amount is more responsive to changes in the maturity of the loan from interest rate changes. attanasio, goldberg, and kyriazidou (2004), (hereinafter referred to as "agk"), indicating that the elasticity of demand for credit in connection with the maturity of * corresponding author. email address: ekafy1104@gmail.com mailto:ekafy1104@gmail.com afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 62 the loan is an important parameter as well. these non-zero elasticity binding only in the presence of liquidity constraints; namely, liquidity constrained consumers must show sensitivity to the size of the loan payments and loan rates. agk find widespread non elasticity of zero maturity in the market for car loans in the united states using survey data and a combination of structural exclusion restrictions and quasiexperimental bank gains mainly on providing loans (credit). about 66 percent of total bank assets in the form of loans, and credit generally produce more than half the bank's revenue. credit is the obligation of individuals or companies who receive it, but it is an asset of the bank, because the credit can provide a profit for the bank (mishkin, 2008). if banks wanted to increase public saving, ceteris paribus, the interest rate will be raised so that the interest savings would be greater. meanwhile, the fund distribution side, these interactions will affect the development of the banking credit to the public. if banks want to improve their credit expansion, ceteris paribus, lending rates will fall so that the interest for borrowing by the public increased (pohan, 2008). the interest rate on a conventional banking credit is opportunities costs in the formation of investment by the business sector, thus increasing the level of bank lending will reduce investment levels and then reduce economic growth. a decrease in the intensity of competition between banks will increase credit supply of banks or positively associated with the structure of bank credit. the increase in bank credit structure due to a decrease in the intensity of competition between banks will increase investment in real sector and then drive economic growth (bank indonesia medan, 2007). the economic crisis that hit indonesia in 1997-1998, causing interest-based conventional banking crash. many conventional banks to be liquidated because it is not able to cope with the economic crisis. however, islamic banking remains strong stand and remain able to perform its intermediary function properly. in the period of bank restructuring, many conventional banks get help from the government, while the islamic banking does not require government assistance (noor, 2006). since the enactment of law no. 21 of 2008 concerning islamic banking, it provides greater opportunities for the development of islamic banking in indonesia because it has no clear legal basis will existence of islamic banking in indonesia. islamic banking provides a wide range of banking products and services are diverse with more varied financial scheme, islamic banking become a credible alternative banking system and can be enjoyed by all segments of society in indonesia. operational’s islamic banks offer various types of products according to the needs of the people, the products of islamic banks consist of al-wadiah, financing with profit sharing, buying and selling, al-wakalah, al-kafalah, alhawalah, and ar-rhan. of all the products are the most widely used is financing with profit sharing and selling. in the islamic banking system for the results on the use of funds by the borrower (either by the customer or the bank). the principle of profit sharing (profit sharing) which is a common characteristic and the basis for the overall operations of islamic banks. determining the amount of profit sharing portion between the two sides are determined according to mutual agreement, and should happen with their willingness (antarodhin) on each side without any element of coercion (antonio, 2001). demand elasticity analysis of islamic banking financing in indonesia 63 figure 1 source: bank indonesia, 2016 in the graph above shows that each year the demand for islamic banking financing in indonesia continues to increase. financing request made customers in islamic banks influenced the macro conditions of a country, one of which is the risk of decline in purchasing power due to inflation and a decline in average income communities. based on the above problems, the formulation of the problem in this research is: 1. what form of financing on the elasticity of demand for islamic banking in indonesia? 2. how is the effect of inflation on the elasticity of demand for financing in islamic banking in indonesia? 3. how does the influence of the per capita income elasticity of demand for financing in islamic banking in indonesia? 2. literature study 2.1 demand elasticity price elasticity of demand (sometimes just called the price elasticity) measures how much the quantity demanded of a good changes when price changes. the exact definition of price elasticity is the percentage change in quantity demanded divided by the percentage change in price (samuelson & nordhaus, 2003). the goods will be very different from its price elasticity, or sensitivity to price changes. if the price elasticity of a high stuff, we say that the item has a request "elastic", which means that the quantity demanded are very sensitive to price changes. if the price elasticity of a product is low, then it is called as "inelastic" means that the quantity demanded is less sensitive to price changes. the time required for the person in response to price changes also play a role. in the short term demand for goods may be very inelastic. but in the long run you can adjust the behavior of the higher prices. the ability to adjust consumption patterns show that the elasticity of demand is generally higher in the long run than in the short term. calculate the coefficient of price elasticity numerically according to the following formula (samuelson and nordhaus, 2003): 𝐷𝑒𝑚𝑎𝑛𝑑 𝐸𝑙𝑎𝑠𝑡𝑖𝑐𝑖𝑡𝑦 = %∆q %∆p (1) where: %δq: percentage change in quantity afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 64 %δp: percentage change in price as for the measurement of the elasticity of demand is expressed as follows (samuelson & nordhaus, 2003): 1. e = 0, demand is perfectly inelastic, or demand with zero elasticity, is a condition in which the quantity demanded at all responsive to price changes. 2. e <1, where the percent change in price produces less than one percent change in the quantity demanded, then the goods that have inelastic price elasticity (demand is inelastic). 3. e = 1, demand is elastic unit (unitary), which occurs when one percent change in price produces one percent change in the quantity demanded. 4. e> 1, if the price changes one percent raises more than one percent change in quantity demanded, then stuff it has a price elasticity elastic (elastic demand). 5. e = ∞, demand is perfectly elastic, a small change in prices will lead to a huge change in the quantity demanded. 2.2 islamic banking financing basically the main function islamic bank is not much different from a conventional bank that is collecting funds from the public and then channel them back, or better known as the intermediary function. in practice, islamic banks to channel funds it received in the form of financing, both venture capital financing as well as for consumption. the notion of financing according to the various literature are as follows, according to law no.10 of 1998 financing is the provision of cash or the equivalent, based on agreements between the bank and other parties who require the parties financed to reimburse or the bill after a certain period of time in exchange or for the results. according to antonio (2001) financing is providing facilities for provision of funds to meet the needs of the parties which are deficit units. according to muhammad (2002), financing is widely interpreted as funding is issued to support the planned investment by themselves or run by someone else. based on the understanding of the above, it can be concluded that the financing is providing facilities for provision of funds to support the planned investment is based on an agreement between the bank and other parties who require the financed party to return the money or the bill after a certain period of time in exchange or for the results. according to muhammad (2002), received the funds to the customer, the general islamic financing products are divided into four categories, differentiated by the purpose of its use are: 1. financing with the principles of the sale and purchase (ba'i) the principles of buying and selling conducted in connection with the transfer of ownership of goods or objects (transfer of property) the rate of profit is determined front and become part of the price of goods sold. buying and selling can be distinguished based on the form of payment and delivery time which is as follows: a. murabahah b. financing salam c. financing istisnah 2. financing with lease principle (ijarah) ijarah transactions based on the movements of the benefits. so basically the same principle with the principle of ijarah transactions, but the difference lies in the transaction object. when the object of the transaction is the sale and purchase of goods, the ijarah transaction object is services. at the end of the lease, the bank can only sell demand elasticity analysis of islamic banking financing in indonesia 65 goods that are leased to customers. 3. the principle of sharing islamic finance products based on the principle of sharing is as follows: a. musharakah financing b. mudarabah 2.3 inflation generally understanding rising inflation is a general prices continuously. the price increase took place in a long time that happened in almost all goods and services, this is called inflation. if the price increases of one or two days only to one type of goods it can’t be said to inflation. the opposite of inflation is deflation, deflation is a continuous decline in prices. according to k. rimsky judisseno said that inflation is one of the monetary events which showed a tendency to raise the price of goods in general that causes a decrease in the price of goods. definition of inflation according to rahardja and manurung, said that the definition of inflation is the increase in the prices of goods that are common and occur continuously. definition of inflation according to eachern, said that the definition of inflation is a constant rise in the average level of prices, if the price level fluctuation, this month and next month's ride down, each of the increase in employment is not as inflation. understanding inflation and sopeland according weston, who said that the definition of inflation is an economic circumstances increased the price level high and can not be prevented or controlled anymore. definition of inflation according to sadano sukirno, said in his macroeconomics that the definition of inflation is a process of increase of prices prevailing in an economy. formula: (2) description: pit = price of item i in period t qit = weight of item i in period t pio = the price of item i in the base period o qio = weight of item i in the base period o 2.4 per capita income per capita income of a country can be a benchmark to see levels of prosperity and progress of development of a country. where the greater per capita income means more prosperous countries. formula: income per capita = national income in year of x inhabitant population in year of x (3) 2.5 research accomplished karlan & zinman (2005) examines the consumer credit demand elasticity. this study presents estimates of the parameters of a randomized trial. the experiment was conducted by microfinance lenders consumption in south africa and identifies the demand curve, sloping downward in relation to the price. requests be very sensitive to interest rates higher than the normal level. as well as finding the loan amount is much more responsive to changes in the maturity of the loan from interest rate changes. research conducted insani way, 2012 with the title of credit demand analysis consumer for civil servants on banking in makassar using analysis, multiple linear regression the result that the demand and use of consumer credit and the cost of afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 66 obtaining revenue is affected credit. loan interest and level of education does not significantly affect the credit demand. daughter of research hutagalung & nasution, 2013, entitled analysis of consumer credit demand elasticity in north sumatra by using multiple linear regression analysis, the result that the level of consumption sbk has a negative effect on the demand for consumer credit. the gdp per capita has a positive impact on demand for loans to consumer credit demand. 2.6 theoretical framework 2.7 hypothesis 1. negative effects of inflation on the elasticity of demand for islamic banking financing 2. negative effect of income per capita to the elasticity of the islamic banking financing 3. research methodology 3.1 scope of the study the scope of this study was to determine how the elasticity of demand that is formed at the request of the financing of islamic banking in indonesia, as well as how to influence variable inflation as macroeconomic variables and the national income per capita as a variable of economic development of the elasticity of demand for financing of islamic banking in indonesia. the object of research is a kind of islamic banking islamic banks and islamic business units. 3.2 data types in conducting the study, the data used is secondary data with the data types used in the form of time series (time series) in the past 10 years (2004-2014), the quantitative is shaped figures. 3.3 data collection methods this study used data collection methods, namely the collection of secondary data from statistics islamic banking issued by bank indonesia and indonesian economic report published by the central bureau of statistics indonesia as well as using the techniques of literature by collecting data from books, journals and research results, as well as the source of reading or writing material that is relevant to this study. 3.4 analysis model analysis model used in this research is multiple regression analysis as follows: y = f (x1, x2) (4) systematically of these functions can be derived model of the following equation: y = α + β1 x1 + β2 x2 + єt (5) where in: y = request financing the sharia banking x1 = inflation x2 = growth national income per capita inflation income per capita elasticity of demand for islamic banking financing demand elasticity analysis of islamic banking financing in indonesia 67 β1, β2 = coefficient of regression єt = error term α = intercept 3.5 test assumptions classical classic assumption test is the test data in thesis research to determine the condition of the data that is used in a research. a regression model was said to be exposed multicollinearity case of a perfect linear relationship between some or all of the independent variables of a regression model. to detect multicollinearity problems can be done in two ways, namely correlations between variables (correlation matrix) and using partial correlation. to test whether normal or not confounding factors, it necessary is to test for normality using the jarque-bera test (jb test). another way to see if data has normal distribution using this test jb is by looking at the probability. autocorrelation is a disruption in the form of correlation between the regression function disturbance factor (error term). there are several ways that can be used to detect the presence of autocorrelation, the graphical method, method h-statistics, test durbin watson (dw test) and test lagrange multiplier (lm test) in this study will test the lagrange multiplier (lm test) as the test autocorrelation. 3.6 compliance test (test goodness of fit) conformance test (goodness of fit test) carried out by calculating the coefficient of determination (r²), test f-statistics and t-test statistics. 1. assessment of r² aims to look at the strength variation in the independent variables affect the dependent variable variation. r² value is used between 0 and 1 (0 <² <1). the closer to 1 means that the more precise the regression line to predict the value of the dependent variable. 2. f-statistic test aims to determine the statistical significance of the regression coefficients simultaneously or together. 3. t-statistics test aims to determine the statistical significance of the partial regression coefficients. 3.7 operational definition to facilitate understanding of the terms and variables used in this study, it should be given operational definition as follows: 1. islamic banking financing demand elasticity is the percentage change in the number of islamic banking financing demand due to the percentage change in the price of the financing of islamic banking. 2. the growth of per capita income is a picture of the average income received by each resident in indonesia expressed as a percentage. 3. inflation is the increase in the prices of goods that are common and occurs continuously in indonesia. 4. results and discussion 4.1 descriptive analysis 1. financing development of islamic banking in indonesia demand for islamic banking financing in indonesia in general continues to increase every year. it can be seen from the number of total finance portfolio of islamic banking in indonesia continues to increase as described in the following table: afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 68 table 1 development of islamic banking financing year equivalent rate (%) total financing (billions rupiah) demand elasticity 2003 14,28 5.530 2004 11,06 11.490 -0,20922 2005 12,46 15.232 0,388677 2006 11,42 20.445 -0,24388 2007 14,42 27.944 0,716208 2008 15,02 38.195 0,113425 2009 10,99 46.886 -1,17916 2010 10,82 68.181 -0,03406 2011 10,52 102.655 -0,05484 2012 18,34 147.505 1,701409 2013 10,26 184.122 -1,77475 2014 12,67 199.330 2,843828 2015 12,69 212.996 0,023024 source: bank indonesia, 2016 from the table above shows that the development of islamic banking financing from year to year increase was accompanied by a percentage equivalent rate fluctuation. the increase in islamic banking financing continually show that islamic banking is resistant to the crisis, it is evident from the above table of data showing that in 2008 the islamic banking financing remains elevated even though at the time it is occurring shock the world financial system. changes percentage equivalent rate divided by the percentage change in the total financing may be formed elasticity of demand for islamic banking financing. from the analysis of the elasticity of demand for islamic banking financing in indonesia, resulting that the financing of islamic banking in indonesia is included in the category of inelastic for most of the value of elasticity is less than 1. the conditions under which a request is in the category inelastic means that when the price changes of 1% will give the effect of a change the amount of demand is less than 1% or less of the price change. 2. inflation in indonesia inflationist related to indonesia's economy, because if the high inflation rate, it is certain that will affect economic growth, which the indonesian economy will run very slowly. inflation in indonesia are like a chronic disease and it is rooted in history. the inflation rate in some of our neighboring countries like malaysia and cambodia are much lower. while the inflation rate in indonesia is quite high. entering in 2000 fairly restrained monetary stability with an inflation rate of 9.35% with a growth of 4.8%. inflation surged in 2005 approximately 17.11%, the pressure will be adjusted price of fuel oil (bbm) is estimated to be the main factor of high inflation. high oil prices in international markets led the government to remove fuel subsidy. however, since 2005-2009, inflation was reduced to the single digits. from 17.11% in 2005 to 6.96% in 2009. inflation tends to redistribute income upward so as to make jumbling balance toward economic justice. moreover, inflation also raises price controls and subsidies on food staples for consumption. so, basically rising inflation makes people poorer and poorer, it is because when compared with the increase in a person's income per demand elasticity analysis of islamic banking financing in indonesia 69 year, inflation is still higher. 3. developments of income percapita in indonesia speaking of income, then we can’t be separated from the figure, the nominal money earned by a person/family in a certain period of time, could in a matter of a month, or per year. the per capita income can be defined as the amount of the average income of the population in a country. the per capita income for the results obtained from the national income of a country with a total population (population) of the country. the per capita income also reflects the amount of gross domestic product (or commonly in short gdp) per capita. the per capita income is usually used as a measure of the level of prosperity and the progress of development of a country, where the formula used is greater per capita income, it is considered that the more prosperous a country. data declared by the central bureau of statistics show that the per capita income growth tends to fluctuate. in times of crisis growth in per capita income has increased sharply in line with inflation that is very high. 4.2 classical assumption test tests on the classical assumption will include multicollinearity, autocorrelation, normality test, linearity and heteroscedasticity. 1. multicolinearity test multicollinearity using vif (variance inflation factors). table 2 test multicolinearity variance inflation factors date: 04/29/17 time: 22:17 sample: 2004 2015 included observations: 12 coefficient uncentered centered variable variance vif vif inflasi 0.000566 8.528840 1.005060 perkapita 0.001864 89.16829 1.005060 c 0.358944 93.03198 na source: output of eviews 9, 2017 multicollinearity test results, can be seen in the above table vif centered column. vif value for the variable inflation and per capita income are equally 1.005060. because the vif value of the two variables is no greater than 10 or 5 (a lot of books that requires no more than 10, but there is also that requires no more than 5) it can be said does not happen multicollinearity on both independent variables. under the terms of classical assumptions of linear regression with ols, it is a good linear regression model is free from any multicollinearity. thus, the above model has been freed of their multicollinearity. 2. autocorrelation data used to estimate a linear regression model time series data it is necessary to free the assumption of autocorrelation. in order to as certain whether the linear regression model free of autocorrelation, can use methods brusch-godfrey or lm (lagrange multiplier) test. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 70 table 3 autocorrelation test breusch-godfrey serial correlation lm test: f-statistic 0.535989 prob. f(2,7) 0.6073 obs*r-squared 1.593628 prob. chi-square(2) 0.4508 source: output of eviews 9, 2017 value prob. f (2,7) amounted to 0.6073 can also be referred to as a probability value of f count. value prob. f count larger than the alpha level of 0.05 (5%) so that, by testing hypotheses, h0 is accepted which means no autocorrelation. 3. normality test test normality is the classical assumptions ols approach is (data) residuals formed normally distributed linear regression model, not the independent variable or the dependent variable. tests on the residuals are normally distributed or can’t use the jarque-bera test. 0 1 2 3 4 5 6 7 8 -0.3 -0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 series: residuals sample 2004 2015 observations 12 mean -1.48e-16 median 0.028197 maximum 0.465470 minimum -0.279788 std. dev. 0.194631 skewness 0.762204 kurtosis 4.014258 jarque-bera 1.676270 probability 0.432516 figure 2 jarque-bera test source: output of eviews 9, 2017 decision residuals are normally distributed or not simply by comparing the value of probability jb (jarque-bera) is calculated with an alpha level of 0.05 (5%). if prob. jb count is greater than 0.05, it can be concluded that the residuals are normally distributed and conversely, if the value is less then not enough evidence to suggest that the residuals are normally distributed. value prob. jb calculate equal to 1.676 > 0.05 so that it can be concluded that the residuals are normally distributed, which means the classical assumption of normality has been met. 4. linearity in multiple linear regressions, testing of linearity can use the ramsey reset test. table 4 test linearity ramsey reset test equation: untitled specification: ep inflasi perkapita c omitted variables: squares of fitted values value df probability t-statistic 0.366613 8 0.7234 f-statistic 0.134405 (1, 8) 0.7234 likelihood ratio 0.199932 1 0.6548 source: output of eviews 9, 2017 demand elasticity analysis of islamic banking financing in indonesia 71 if the value of probability, f count larger than the alpha level of 0.05 (5%) then the regression model to meet the assumptions of linearity and conversely, if the value of prob. f count is less than 0.05 then the model can’t meet the assumption of linearity. value prob. f count can be viewed on line f-statistic probability column. in this study, the value 0.7234 is greater than 0.05 so that it can be concluded that the regression model has met the assumption of linearity. 5. heterocedastisity heterocedastisity occur when residuals and predicted values have a correlation or relationship patterns. the pattern of this relationship is not only a linear relationship, but in a different pattern is also possible. there are several test methods of heterocedastisity that are owned by eviews, such as: breusch-pagan-godfrey, harvey, glejser, arch, white and others. this research will use breusch-pagan-godfrey. table 5 test heterocedastisity heteroskedasticity test: breusch-pagan-godfrey f-statistic 0.437006 prob. f(2,9) 0.6590 obs*r-squared 1.062197 prob. chi-square(2) 0.5880 scaled explained ss 0.900488 prob. chi-square(2) 0.6375 source: output of eviews 9, 2017 decision heterocedastisity occurs whether or not the linear regression model is to look at value prob. f-statistic (f count). if the value of prob. f count larger than the alpha level of 0.05 (5%) means not happen heterocedastisity, whereas if the value of prob. f count is smaller than the alpha level of 0.05 (5%) means going heterocedastisity. value prob. f calculated in this study amounted to 0.6590 is greater than the alpha level of 0.05 (5%) means not happen heterocedastisity. a. results and data analysis in analyzing the factors affecting the banking sharia financing in indonesia to determine whether the financing request elasticity of islamic banking in indonesia is influenced by inflation and per capita income used multiple linear analysis, using ordinary least squares (ols). the data were processed with the help of eviews program 9. the results of the regression equation can be seen in the following table: table 6 estimate equation variable coefficient std. error t-statistic prob. inflasi -0.016958 0.023788 -0.712903 0.0000 perkapita -0.002858 0.043177 -0.066187 0.0000 c 0.870899 0.599119 1.453633 0.1800 r-squared 0.688414 mean dependent var 0.710833 adjusted r-squared -0.550227 s.d. dependent var 0.200195 s.e. of regression 0.215173 akaike info criterion -0.022432 sum squared resid 0.416694 schwarz criterion 0.098795 log likelihood 3.134590 hannan-quinn criter. -0.067314 afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 72 f-statistic 0.620968 durbin-watson stat 1.215647 prob(f-statistic) 0.000009 source: output of eviews 9, 2017 based on the results of the estimation, the coefficient of determination (r²) is 0.688414. this means that the variable rate of inflation and income per capita together can explain the elasticity of demand for sharia banking financing in indonesia equal to 68.84% while the rest of 31.16% can be explained by other variables not used in this research. f-statistic test aims to determine the statistical significance of regression coefficients simultaneously or collectively. based on the results of f-statistic test in the above table, it means that all variables of inflation rate and income per capita together have a significant effect on the variable elasticity of demand for sharia banking financing in indonesia at the level of confidence 62 percent. the t-statistic test aims to determine the statistical significance of the partial regression coefficients. based on the result of t-stat test of variable of inflation rate give statistically significant influence to elasticity variable of demand of financing of sharia banking at level of trust 71,3%. the per capita income variable gives statistically significant influence to consumption demand credit variable in north sumatra at 6.62 percent confidence level. from table 4.6 it can be produced the following formula: y = 0,870899 – 0,016958 x1 – 0,002858 x2 (6) b. interpretasi model from the results of the above estimation can be analyzed as follows: 1. inflation has a negative effect on the elasticity of demand for islamic banking financing and has a coefficient of -0.016958. this means that if inflation rises by one percent then the elasticity of islamic banking financing will decrease by 0.016958 percent. 2. per capita income has a negative effect on demand for islamic banking financing and has a coefficient of 0.002858. this means that if per capita income increased by one percent then demand for consumer credit will increase by 1.8813 percent. 5. conclusions and recommendations 5.1 conclusions 1. price elasticity of demand for sharia banking financing in indonesia fall into the category of inelastic, where if the price changed by 1% will give effect to change the amount of demand for islamic banking financing is less than 1%. 2. together the inflation rate and income per capita significantly influence the elasticity of demand for sharia banking financing in indonesia. 3. based on the regression results obtained coefficient of determination (r2) of 0.688414 variable inflation rate and income per capita together to explain the variable elasticity of demand for islamic banking financing in indonesia amounted to 68.84% while the rest of 31.16% can be explained by variable others not used in this study. 4. inflation has a negative effect on the elasticity of demand for islamic banking financing and has a coefficient of -0.016958. this means that if inflation rises by demand elasticity analysis of islamic banking financing in indonesia 73 one percent, the elasticity of islamic banking financing will decrease by 0.016958 percent. 5. per capita income has a negative effect on demand for islamic banking financing and has a coefficient of 0.002858. this means that if per capita income rises by one percent then demand for consumer credit will increase by 1.8813 percent. 6. variable inflation rate and income per capita together have a significant effect on the variable elasticity of demand for sharia banking financing in indonesia at the level of confidence 62 percent. 7. inflation variable variables partially give statistically significant effect to the elasticity of demand for financing of sharia banking at the level of trust 71.3%. the per capita income variable partially gives statistically significant effect to consumer demand credit variable in north sumatera at a confidence level of 6.62 percent. 5.2 recommendations 1. for sharia banking parties should be more promoted in other ways than by raising or lowering the price of financing when there is inflation, this is because the elasticity of islamic banking financing prices are inelastic categories. 2. for academics there is expected to be further research to discuss the elasticity of demand for islamic banking financing in indonesia with different variables that have not been studied in this study. references antonio, m. s. (2001). bank syariah dari teori ke praktek. jakarta: gema insani press. arifin, z. (2002). dasar-dasar manajemen bank syariah. jakarta: alvabet. attanasio, goldberg, o. p., p. k and e. kryiazidou, e. (2004). credit constraints in the market for consumer durables: evidence from micro data on car loans. working paper. ausubel, l. m. (1991). the failure of competition in the credit card market. american economic review, 81 (1), 50-81 bank indonesia. (2009). laporan kebijakan moneter triwulan i-2009. direktorat riset ekonomi dan kebijakan moneter, http//:www.bi.go.id. bank indonesia dan puslitbank fakultas ekonomi usu (2007). intermediasi perbankan di propinsi sumatera utara: kendala dan solusi penyelesaiannya. medan. barro, r.j., & x sala-i-martin. (1995). economic growth. singapore: mcgrawhill international editions. gujarati, d. n. (2007). dasar-dasar ekonometrika (edisi 3). jakarta: erlangga. hadad, m. d., santoso, w., & alisjahbana, a. (2004). model dan estimasi afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 74 permintaan dan penawaran kredit konsumsi rumah tangga di indonesia. hall, r. e. (1988). intertemporal substitution in consumption. journal of political economy, 96 (1), 339-57. hutagalung, p. a. & nasution, i.g. s. (2013). analisis elastisitas permintaan terhadap kredit konsumsi di sumatera utara. jurnal ekonomi dan keuangan, 1 (2), 91-104 karlan, d., & zinman, j. (2005). elastisitas permintaan kredit konsumsi. universitas yale. kasmir. (2005). bank dan lembaga keuangan lain (edisi 6). jakarta: pt raja grafindo perkasa. kasmir. (2005). pemasaran bank (edisi 1). jakarta: prenada media. mankiw, n.g. (2004). teori makro ekonomi. jakarta: erlangga. miraza, b. h. (2006). perjalanan moneter dan perbankan, perkembangan moneter indonesia 2000-2005. medan: usu press. mishkin, f.s. (2008). ekonomi uang, perbankan, dan pasar keuangan (edisi 8). jakarta: salemba empat. morduch, j. (2000). the microfinance schism. world development, 28 (4): 617-629. muhammad. (2000). manajemen bank syariah. yogyakarta: upp amp ykpn. muhammad. (2002). bank syariah analisis kekuatan, kelemahan, peluang dan ancaman. yogyakarta: ekonesia. nachrowi, d. n., & usman, h. (2006). pendekatan populer dan praktis ekonometrika untuk analisis ekonomi dan keuangan. jakarta: lp-feui. nasution, m. (1998). ekonomi moneter, uang, dan bank. jakarta: djambatan. nopirin. (2007). ekonomi moneter (edisi 4). yogyakarta: bpfe. noor, zainulbahar. (2006). fenomena kebangkitan ekonomi islam. jakarta: bening publishing pohan, a. (2008). potret kebijakan moneter indonesia. jakarta: pt raja grafindo persada. pratomo, w. a., & hidayat, p. (2007). pedoman praktis penggunaan eviews dalam ekonometrika. medan: usu press. samuelson, p. a., & nordhaus, w. d. (2003). ilmu ekonomi mikro (edisi 17). jakarta: pt media global edukasi. the application of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) as a financing solution in the sharia non-bank finance industry 13 6 the application of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) as a financing solution in the sharia non-bank finance industry bustami 1* 1 tanjungpura university, pontianak, indonesia abstract to avoid buying and selling through installment (credit) that does not fall in buying and selling that contains the element of riba (that is not allowed by sharia), buying and selling through credit or bai’ al taqsit} is able to be implemented by using a pact of selling and leasing through the financing principle of al-ijarah muntahiya bi al tamlik (financial lease with purchase option). the application of the alijarah muntahiya bi al tamlik is more advantageous than the al-murabahah pact and the interest system. other than that it reflects the presence of the principles of justice and togetherness between the capital owner party (shahib al mal) with those that need financing. keywords: al-ijarah muntahiya bi al tamlik, bai’ al taqsîth, justice, togetherness 1. introduction with the development of civilization in a nation, the people’s demand of goods and services in the relevant nation in the frame of fulfilling needs and desires, experience continuous development beginning from the type, quality up to trendy fashion. in the beginning, the people’s demand of goods and services are still limited to fulfilling primary needs (food, clothing, and a home). the development of demands of the goods and services will appear clearer when an income increase occurs and the presence of expectations (lures), an increase in income will occur in the future. other than that, an increase in the demand of goods and services that are not primary needs is also accommodated by the condition of the people’s environment. in fulfilling desires for obtaining goods and services that are not primary needs that are more diverse, those that do not have cash, implement purchasing by paying in installments (which is known as buying and selling with credit) the word kredit in the indonesian language is taken from the latin language “credo” which means i believe, in other words i believe in the ability of someone to pay. this trust is based on an agreement. so there are times when credit is only used as: “an agreement to pay money or as permission for using another person’s capital. it is said that in the modern economy, the problem of credit does not only occur in the transactions of borrowing money in banks, but has already spread to the transaction of buying and selling goods (which is known as buying and selling with credit), starting from simple goods up to luxury goods (houses, clothes, * corresponding author. email address: bustami_ptk@yahoo.com mailto:bustami_ptk@yahoo.com afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 14 washing machines, car cooking equipment, motorcycles and others) credit buying and selling of this type is already common, done by those that do not have cash money nor those that have cash money (these are actually able to buy in cash, but because of certain reasons, they buy in installments. in the conventional economic concept, buying and selling with installments is named credit buying and selling or leasing (financial lease). in practice, this credit buying and selling has widely developed, implemented institutionally (financing institutions) or individually (an individual does the selling from house to house). institutionally, financial lease are usually transactions of credit buying and selling implemented for goods that have relatively expensive prices (such as houses, cars, motorcycles, television, refrigerators, washing machines and others). the amount of installments are determined based on accumulated interest rates. while the practice of individual credit buying and selling are usually credit buying and selling transactions implemented for simple goods and a relatively cheap price, such as kitchen equipment and clothes. for this last type of transaction, the amount of installments are determined based on the length of the grace period and the payment frequency, for example a good that is priced at rp.100,000 in cash, if it uses installments for six months (six times payment), the price is rp.200,000, and if it uses installments for one year (twelve times payment), the price is rp.300,000. in the islamic economy perspective, both forms of credit buying and selling like this (based on interest or the price based on the payment time period) is able to be categorized as transactions that contains riba. islamic scholars often use several hadith that are considered to be connected with this problem. one of them is the legacy hadith of imam tirmizi that reads (ar-rahim, 1410 h/1990 m:357): نهى :ثنا عبد ة بن سليمان عن محمد بن عمروعن أبى سلمة عن أبى هريرة قالحد ثنا هناد حد رسول هللا صلى هللا عليه وسلم عن بيعتين فى بيعة meaning: hannad tells us telling about abdah bin sulaiman to us from muhammad bin amr from salamah from the eyes of abi hurairah;”rasulullah saw forbids two sales or two transactions for one product”. in modern life most people are unable to be free from the practice of credit buying and selling, whether they are economically able or not, especially for fulfilling desires of secondary goods (not goods of primary needs, such as credit of permanent house ownership, cars, motorcycles in the islamic economy literature, credit buying and selling is known with the term bai’ al-taqsith. according to zuhaily (2002:311), bai’al-taqsit is the opposite word of cash buying and selling bai al-najaz, which is a model of buying and selling with the payment behind it, at once or using installments. according to al-mishry (1998/1418 h:11) bai’ al taqsit} is a contemporary example of the classic mu’amalah practice. therefore it is able to be said that bai’ al taqsit} is buying by using installments in a timeframe that is determined/agreed together between the buyer and seller. from both types of buying and selling transactions (credit buying and selling or bai’ al taqsit}, there are elements of price adding between cash and non-cash (credit). because of that for helping consumers to be able to own something and for avoiding so that buying and selling through installments (credit) does not fall as buying and selling that contains the element of riba (which is not allowed by sharia), credit buying and selling or bai’ al taqsit}, is able to be implemented by using the pact of buying and leasing through the financing principle of al-ijarah muntahiya bi al tamlik (financial lease with purchase option). the application of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) as a financing solution in the sharia non-bank finance industry 15 2. methodology this writing is a representation of one of the chapters (chapter 5) of the writer’s thesis (bustami, 2015:142-153), which is titled “the empowerment of micro, small, and middle class businesses in west kalimantan (an islamic economy perspective)” that the writer has already maintained in the open senate session doctoral promotion test in the field of islamic religion science in the concentration of islamic economy, graduate school syarif hidatullah jakarta, dated september 8, 2015. 2.1 testing results this research uses an experiment approach. therefore data that is presented in this writing are results of tests (experiments) of the writer from 2008 – 2013. before implementing tests, the writer with some colleagues established a koperasi, which is koperasi serba usaha syariah ridha madani, legal entity no. 52/xvii.10/2008 with members as many as 36 persons. the tests are implemented by providing financing in the form of productive financing (business capital aid) and consumptive financing (for giving goods, such as computers, laptops, motorcycles and others). in the test the financing is given tob 40 customers that are given financing. from the amount there are 24 persons that are given financing that is said to be procurement of goods (consumptive) by using the leasing and buying pact through the financing principle of al-ijarah muntahiya bi al tamlik (financial lease with purchase option). from the 24 persons, there are 3 persons (as many as 7.5%) that fail to pay. this failure is caused by technical problems when billing (the debt party changed the address without knowing). 2.2 literature research then for enriching data or information that the writer obtained through the research activity of the experiment results, so that this writing is worth consuming by several circles, the writer also gathered information through several references (secondary data, literature, magazines, journals, and e-journals) that is written by academics and experts through national and international journals in several printed and electronic media (through browsing activity on the internet). 3. results and discussion this form of buying and selling is none other than only a form of nasi’ah buying and selling, which is buying and selling by handing over goods up front, while the payment is not in cash or behind, it is done at once or with installments with details that are already agreed (al-mishry, 1998/1418 h:11) the terminology of al-ijarah muntahiya bi al tamlik (imtb) is a term that is commonly used in indonesia, while in malaysia the term al-ijarah thumma albay’ (aitab) is used, which is a pact of leasing a certain good that is ended with a diversion of ownership to the lessor (hakim, 2011:233-256; djamil, 2012:150-164; dusuki, tt; jusoh, 2013:47-55) in relation with the application of imbt, the writer implemented experiments in consumptive financing (computers, televisions, cell phones, two wheeled motor vehicles) for ± five years (2008-2013) by using a pact of buying and leasing through the financing principle of al-ijarah muntahiya bi al tamlik (financial lease with purchase option). in malaysia the implementation of al-ijarah thumma al-bay’ (aitab) has a very large prospect (abdullah & dusuki, tt:10-11) the aitab prospect size is illustrated from four aspects, which are the strength of afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 16 people support, the competitiveness of the aitab implementation, legal protection, and corresponding with sharia demands. then the research of jusoh (2013:47-55), shows that al-ijarah thumma albay’ (aitab) in malaysia provides a contribution of 31.2 percent in 2009 and 27.8 percent in 2010 from the whole financing of islamic banking in malaysia. 3.1 financing count with al-ijarah muntahiya bi al tamlik in the implementation of this pact, when the candidate customer proposes a number of funds to the fund provider (shahib al mal) for purchasing goods (almabi’) that he/she wants, hence the fund provider (shahib al mal), the candidate customer is welcomed to choose goods in the seller’s store that is corresponding with his/her desires (from the type and quality, or from the prices) after the person determines the type of good that he/she wants in one of the chosen stores, the fund providing party with the candidate customer visits the store to pay for the good in corresponding with the desire of the candidate customer (corresponding with type, quality, or the price that is chosen). this action is implemented for ensuring that the candidate customer really uses the loaned fund for buying the good that is corresponding with the proposed loaned fund (and does not mark up the price). because the good that is agreed in the pact is the choice of the candidate customer, there is no reason from the candidate customer to cancel the pact or return the good to the fund provider because the type, quality, and price is not corresponding with his/her desire. other than that, it is also for keeping transparence from the shahib al mal to the candidate customer. schematically, the flow of imbt funding is able to be seen in the figure below. figure 1 operational flow of imbt funding as for the operationalization from the al-ijarah muntahiya bi al tamlik (financial lease with purchase option) is able to be explained with the case study as the following: a customer (fulan for example) is meant to buy a honda motorcycle (used motorcycle) in an agent of sales (dealer) for rp.7, 300,000. fulan only has cash as the application of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) as a financing solution in the sharia non-bank finance industry 17 many as rp. 1,500,000. because fulan really needs the motorcycle, he visits the financing institute (ksus-rm for example) and proposes a loan for enclosing the fund deficit in paying the vehicle to the selling party (dealer), which is as many as rp. 5,800,000. by the ksus-rm party explained that the financing is implemented with two choices which is the al-murabahah pact (which is the pact of buying and selling goods with the primary buying price (price of the selling store) added with profit (price mark up) that the fund providing party wants) or al-ijarah muntahiya bi al tamlik (financial lease with purchase option). fulan asks for an explanation of the pacts that are meant, then fulan chooses the pact of al-ijarah muntahiya bi al tamlik (financial lease with purchase option). because the vehicle that will be funded is a used vehicle, the ksus-rm party inspects the vehicle’s condition first, to determine its economic age. what is meant by economic age in here is the length of use that the vehicle is able to be operated normally without the costs of changing primary components (internal engine components) except for changing tires and the spark plug. which means the vehicle that is funded will effectively provide a clean benefit that is positive and is able to be operated until some or all of the primary components have to be changed. after being observed the vehicle is estimated to have an economic age of 48 months (4 years), fulan agrees with the results of the research, then fulan and ksus-rm agrees to determine the lease of the vehicle per month, and a nominal lease value of the vehicle as many as rp. 152,083.33 per month is obtained. if fulan asks ksus-rm about payment of installments and ijarah with the same amount every month in corresponding with his financial condition, in the installment time period as long as 21 months, the counting illustration is as in the following table 1. table 1 illustration of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) with the same installments per month. month primary funding (rupiah) primary installment (rupiah) accumulated installment payment (rupiah) nisbah ownership*) amount of ujrah that fulan pays (rupiah) payment amount per month (rupiah) fulan (%) ksusrm (%) ( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( 7 ) ( 8 ) 1 5.800.000,00 224.166,67 1.724.166,67 0,21 0,79 120.833,33 345.000,00 2 5.575.833,33 228.836,81 1.953.003,47 0,24 0,76 116.163,19 345.000,00 3 5.346.996,53 233.604,24 2.186.607,71 0,27 0,73 111.395,76 345.000,00 4 5.113.392,29 238.470,99 2.425.078,71 0,30 0,70 106.529,01 345.000,00 5 4.874.921,29 243.439,14 2.668.517,84 0,33 0,67 101.560,86 345.000,00 6 4.631.482,16 248.510,79 2.917.028,63 0,37 0,63 96.489,21 345.000,00 7 4.382.971,37 253.688,10 3.170.716,73 0,40 0,60 91.311,90 345.000,00 8 4.129.283,27 258.973,27 3.429.690,00 0,43 0,57 86.026,73 345.000,00 9 3.870.310,00 264.368,54 3.694.058,54 0,47 0,53 80.631,46 345.000,00 10 3.605.941,46 269.876,22 3.963.934,76 0,51 0,49 75.123,78 345.000,00 11 3.336.065,24 275.498,64 4.239.433,40 0,54 0,46 69.501,36 345.000,00 12 3.060.566,60 281.238,20 4.520.671,59 0,58 0,42 63.761,80 345.000,00 13 2.779.328,41 287.097,32 4.807.768,92 0,62 0,38 57.902,68 345.000,00 14 2.492.231,08 293.078,52 5.100.847,44 0,66 0,34 51.921,48 345.000,00 15 2.199.152,56 299.184,32 5.400.031,76 0,70 0,30 45.815,68 345.000,00 16 1.899.968,24 305.417,33 5.705.449,09 0,74 0,26 39.582,67 345.000,00 17 1.594.550,91 311.780,19 6.017.229,28 0,78 0,22 33.219,81 345.000,00 afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 18 month primary funding (rupiah) primary installment (rupiah) accumulated installment payment (rupiah) nisbah ownership*) amount of ujrah that fulan pays (rupiah) payment amount per month (rupiah) fulan (%) ksusrm (%) 18 1.282.770,72 318.275,61 6.335.504,89 0,82 0,18 26.724,39 345.000,00 19 964.495,11 324.906,35 6.660.411,24 0,87 0,13 20.093,65 345.000,00 20 639.588,76 331.675,23 6.992.086,47 0,91 0,09 13.324,77 345.000,00 21 307.913,53 307.913,53 7.300.000,00 0,96 0,04 6.414,87 314.328,39 total payment 5.800.000,00 1,00 0,00 1.414.328,39 7.214.328,39 source: experiment results. *) nisbah ownership in column (5) and (6), is meant for determining the amount of ujrah that fulan pays every month, and is also used as a guide in determining the amount of each party’s return rights if until a period fulan is not able to continue the contract of the pact. if fulan asks ksus-rm for the primary payment of installments to be paid with the same amount every month and submitted to ksus-rm to determine the amount (primary installments added with ujrah) that he has to pay every month, the counting illustration is as in the following table 2. table 2 illustration of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) with the same primary installments per month. month primary funding (rupiah) primary installment (rupiah) accumulated installment payment (rupiah) nisbah ownership amount of ujrah that fulan pays (rupiah) payment amount per month (rupiah) fulan (%) ksusrm (%) ( 1 ) ( 2 ) ( 3 ) ( 4 ) ( 5 ) ( 6 ) ( 7 ) ( 8 ) 1 5.800.000,00 276.190,48 1.776.190,48 0,21 0,79 120.833,33 397.023,81 2 5.523.809,52 276.190,48 2.052.380,95 0,24 0,76 115.079,37 391.269,84 3 5.247.619,05 276.190,48 2.328.571,43 0,28 0,72 109.325,40 385.515,87 4 4.971.428,57 276.190,48 2.604.761,90 0,32 0,68 103.571,43 379.761,90 5 4.695.238,10 276.190,48 2.880.952,38 0,36 0,64 97.817,46 374.007,94 6 4.419.047,62 276.190,48 3.157.142,86 0,39 0,61 92.063,49 368.253,97 7 4.142.857,14 276.190,48 3.433.333,33 0,43 0,57 86.309,52 362.500,00 8 3.866.666,67 276.190,48 3.709.523,81 0,47 0,53 80.555,56 356.746,03 9 3.590.476,19 276.190,48 3.985.714,29 0,51 0,49 74.801,59 350.992,06 10 3.314.285,71 276.190,48 4.261.904,76 0,55 0,45 69.047,62 345.238,10 11 3.038.095,24 276.190,48 4.538.095,24 0,58 0,42 63.293,65 339.484,13 12 2.761.904,76 276.190,48 4.814.285,71 0,62 0,38 57.539,68 333.730,16 13 2.485.714,29 276.190,48 5.090.476,19 0,66 0,34 51.785,71 327.976,19 14 2.209.523,81 276.190,48 5.366.666,67 0,70 0,30 46.031,75 322.222,22 15 1.933.333,33 276.190,48 5.642.857,14 0,74 0,26 40.277,78 316.468,25 16 1.657.142,86 276.190,48 5.919.047,62 0,77 0,23 34.523,81 310.714,29 17 1.380.952,38 276.190,48 6.195.238,10 0,81 0,19 28.769,84 304.960,32 18 1.104.761,90 276.190,48 6.471.428,57 0,85 0,15 23.015,87 299.206,35 19 828.571,43 276.190,48 6.747.619,05 0,89 0,11 17.261,90 293.452,38 20 552.380,95 276.190,48 7.023.809,52 0,92 0,08 11.507,94 287.698,41 21 276.190,48 276.190,48 7.300.000,00 0,96 0,04 5.753,97 281.944,44 total payment 5.800.000,00 1.329.166,67 7.129.166,67 from the two illustrations above it is up to fulan to choose which one he likes. from the experience of experimenting it turns out that customers prefer to choose the first scenario as in table 1 compared with the second scenario as in the application of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) as a financing solution in the sharia non-bank finance industry 19 table 2, with the reason that the amount of payment that is the same (primary installments + ujrah ) will ease fulan to prepare money every month in his payment. although the total payment in the first scenario is slightly more expensive than the second scenario (there is a total payment difference as large as rp. 85,161.73 for 21 months or an average amount of rp. 4,055.32 per month). what is interesting from table 1 and table 2 is that the ijarah per month that fulan has to pay always decreases. the reason for this decrease is that when fulan pays the primary installments, this means fulan already has the vehicle that he buys as large as the ownership nisbah in column 5. if the total ujrah in table 1 and table 2 is converted in percentage, table 1 is as large as 1.16 percent per month and in table 2 as large as 1.09 percent per month. to ease the understanding of the payment illustration in table 1 and table 2, next the writer will make some equations for producing numbers in each column. this equation the writer will name imbt tami equation (an equation of the writer’s creation). such as: th is the buying price of a good in the store (thaman); k is the payment amount; an is the amount of n installments; pa is the primary installment; sp is the primary payment residual; nk is the amount of nisbah ownership of a good; uj is the amount of lease of a good (ujrah); ue is the estimated economic age of a good; aa is the installment accumulation and; lk is the contract length in a pact, so mathematically the illustration of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) in table 1 and table 2 is able to be illustrated as the following: 𝑃a = k ᾱ , is the primary installment (column 3) aa = ∑ 𝑃a𝑛𝑘=1 , installment accumulation (column 4) nk = ∑ aa 𝑛 𝑘=1 𝐾 , ownership nisbah (column 5) 𝑈j = 𝑡ℎ ue , is the amount of lease of a good/ ujrah (column 7) an = { th ue (nk) + th lk } , amount of n installments (column 8) sp = k − pa, residual primary payment (column 2) 3.2 comparison of al-ijarah muntahiya bi al tamlik, al murabahah and the interest system such as explained by the writer in part b above, that for consumptive financing it is better to apply the imbt pact. for observing the surplus financing model with the imbt al-ijarah muntahiya bi al tamlik (financial lease with purchase option). for observing the advantage of the imbt, it needs to be compared with the financing model with the al-murabahah pact and the financing of leasing with the interest model. before the writer presents the counting comparison between imbt, almurabahah and the interest system in consumptive financing, firstly there is a need to explain shortly the definitions of both types of the last pacts, which are the almurabahah pact and the interest system. 1) al-murabahah buying and selling al-murabahah is a financing product that is based on the buying and selling pact between the capital provider (finance institution) and the capital user (customer). in practice, al-murabahah is a buying and selling pact with a primary buying price (selling store price) added with profit (price markup) that the fund afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 20 providing party wants. (jusoh, 2013:47-55; djamil, 2012:108-123; hakim, 2011:225-228). generally the equation in counting the bank selling price in the al-murabahah pact is (perwataatmadja & tanjung, 2011:123): hjb = hbb + pbu tjp + cw + tk (1) where: hjb is the bank selling price; hbb is the bank buying price; pbu is the business cost portion; tjp is the financing amount target; cw is the reserve fund and tk is the profit target. while in the consumptive financing practice in non-bank finance institutions (sharia leasing companies) is (hakim, 2011:228) formulated as the following: selling price = store price + desired profit (2) 2) buying and selling goods with the interest system buying and selling with credit based on a pact with the interest system is buying and selling with the primary price (store price) added with the interest amount per month times the length of contract. this is able to be formulated as the following (dumairy, 2010:35-40): hj = ht (1 + in) atau hj = ht(1+i)n (3) where: hj is the selling price, ht is the store buying price, i is the interest rate per month, and n is the length of contract. for observing a comparison of the three types of financing pacts, in table 3 a financing model with the al-murabahah pact is presented and in table 4 the leasing financing with an interest system is presented. for the imbt type pact, it is already illustrated before (observe table 1 and table 2 above). if the margin total and the interest total in the mentioned table 3 and table 4 is converted in percentage, in table 3 it is as large as 1.23 percent per month and in table 4 as large as 1.20 percent per month. from the financing illustration with the imbt pact, the al-murabahah pact and the interest system it is seen that financing with the interest system has the smallest margin rate per month, which is as large as 1.20 percent per month. financing with the al-murabahah pact is as large as 1.23 percent. meanwhile the imbt pact financing with per month primary installments paid the same is as large as 1.09 percent per month. this means that financing with the imbt pact is more advantageous than the al-murabahah pact and the interest system. other than that, if in a certain month the buyer does not have money to pay the primary installment in the imbt pact, the buyer is able to just pay the lease (ujrah). therefore there is a remission (does not burden) for the buyer party. it is different if the credit buying and selling is determined based on a certain interest rate, the debtor has the burden of primary debt added with interest, when the debtor postpones the payment because of any reason. table 3 payment installments of a two wheeled motor vehicle with the al-murabahah pact month primary residual primary installment margin total installment 1 rp 16.161.200 rp 302.824 rp 345.176 rp 648.000 2 rp 15.858.376 rp 309.292 rp 338.708 rp 648.000 3 rp 15.549.084 rp 315.898 rp 332.102 rp 648.000 4 rp 15.233.186 rp 322.645 rp 325.355 rp 648.000 the application of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) as a financing solution in the sharia non-bank finance industry 21 month primary residual primary installment margin total installment 5 rp 14.910.542 rp 329.536 rp 318.464 rp 648.000 6 rp 14.581.006 rp 336.574 rp 311.426 rp 648.000 7 rp 14.244.431 rp 343.763 rp 304.237 rp 648.000 8 rp 13.900.668 rp 351.105 rp 296.895 rp 648.000 9 rp 13.549.563 rp 358.604 rp 289.396 rp 648.000 10 rp 13.190.959 rp 366.263 rp 281.737 rp 648.000 11 rp 12.824.696 rp 374.086 rp 273.914 rp 648.000 12 rp 12.450.610 rp 382.076 rp 265.924 rp 648.000 13 rp 12.068.534 rp 390.236 rp 257.764 rp 648.000 14 rp 11.678.297 rp 398.571 rp 249.429 rp 648.000 15 rp 11.279.726 rp 407.084 rp 240.916 rp 648.000 16 rp 10.872.642 rp 415.779 rp 232.221 rp 648.000 17 rp 10.456.863 rp 424.659 rp 223.341 rp 648.000 18 rp 10.032.204 rp 433.729 rp 214.271 rp 648.000 19 r p 9.598.475 rp 442.993 rp 205.007 rp 648.000 20 rp 9.155.482 rp 452.454 rp 195.546 rp 648.000 21 rp 8.703.028 rp 462.118 rp 185.882 rp 648.000 22 rp 8.240.910 rp 471.988 rp 176.012 rp 648.000 23 rp 7.768.922 rp 482.069 rp 165.931 rp 648.000 24 rp 7.286.853 rp 492.365 rp 155.635 rp 648.000 25 rp 6.794.488 rp 502.881 rp 145.119 rp 648.000 26 rp 6.291.607 rp 513.622 rp 134.378 rp 648.000 27 rp 5.777.985 rp 524.592 rp 123.408 rp 648.000 28 rp 5.253.393 rp 535.796 rp 112.204 rp 648.000 29 rp 4.717.597 rp 547.240 rp 100.760 rp 648.000 30 rp 4.170.357 rp 558.928 rp 89.072 rp 648.000 31 rp 3.611.428 rp 570.866 rp 77.134 rp 648.000 32 rp 3.040.562 rp 583.059 rp 64.941 rp 648.000 33 rp 2.457.504 rp 595.512 rp 52.488 rp 648.000 34 rp 1.861.992 rp 608.231 rp 39.769 rp 648.000 35 rp 1.253.761 rp 621.222 rp 26.778 rp 648.000 36 rp 632.542 rp 634.490 rp 13.510 rp 648.000 total payment rp 16.163.151 rp 7.164.849 rp 23.328.000 source: pt. federal international finance pontianak branch table 4 interest system payment installments of a two wheeled motor vehicle month primary residual primary installment margin total installment 1 rp 12.138.541 rp 239.013 rp 252.987 rp 492.000 2 rp 11.899.528 rp 243.994 rp 248.006 rp 492.000 3 rp 11.655.534 rp 249.079 rp 242.921 rp 492.000 4 rp 11.406.455 rp 254.270 rp 237.730 rp 492.000 5 rp 11.152.185 rp 259.570 rp 232.430 rp 492.000 afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 22 month primary residual primary installment margin total installment 6 rp 10.892.615 rp 264.980 rp 227.020 rp 492.000 7 rp 10.627.635 rp 270.502 rp 221.498 rp 492.000 8 rp 10.357.133 rp 276.140 rp 215.860 rp 492.000 9 rp 10.080.993 rp 281.895 rp 210.105 rp 492.000 10 rp 9.799.098 rp 287.770 rp 204.230 rp 492.000 11 rp 9.511.328 rp 293.768 rp 198.232 rp 492.000 12 rp 9.217.560 rp 299.891 rp 192.109 rp 492.000 13 rp 8.917.669 rp 306.141 rp 185.859 rp 492.000 14 rp 8.611.528 rp 312.521 rp 179.479 rp 492.000 15 rp 8.299.007 rp 319.035 rp 172.965 rp 492.000 16 rp 7.979.972 rp 325.684 rp 166.316 rp 492.000 17 rp 7.654.288 rp 332.472 rp 159.528 rp 492.000 18 rp 7.321.816 rp 339.401 rp 152.599 rp 492.000 19 rp 6.982.415 rp 346.475 rp 145.525 rp 492.000 20 rp 6.635.940 rp 353.696 rp 138.304 rp 492.000 21 rp 6.282.244 rp 361.068 rp 130.932 rp 492.000 22 rp 5.921.176 rp 368.593 rp 123.407 rp 492.000 23 rp 5.552.583 rp 376.275 rp 115.725 rp 492.000 24 rp 5.176.308 rp 384.117 rp 107.883 rp 492.000 25 rp 4.792.191 rp 392.123 rp 99.877 rp 492.000 26 rp 4.400.068 rp 400.295 rp 91.705 rp 492.000 27 rp 3.999.773 rp 408.638 rp 83.362 rp 492.000 28 rp 3.591.135 rp 417.155 rp 74.845 rp 492.000 29 rp 3.173.980 rp 425.849 rp 66.151 rp 492.000 30 rp 2.748.131 rp 434.724 rp 57.276 rp 492.000 31 rp 2.313.407 rp 443.785 rp 48.215 rp 492.000 32 rp 1.869.622 rp 453.034 rp 38.966 rp 492.000 33 rp 1.416.588 rp 462.476 rp 29.524 rp 492.000 34 rp 954.112 rp 472.115 rp 19.885 rp 492.000 35 rp 481.997 rp 481.997 rp 10.003 rp 492.000 total pembayaran rp 12.138.541 rp 5.081.459 rp 17.220.000 source: pt. federal international finance pontianak branch the application of the imbt pact is not only applied to the consumptive customers, but it is also able to be applied for financing of productive business asset ownership, such as for the procurement of transportation fleets such as taxis, motorcycle taxis and other types of transport. just as an illustration, in the following the writer submits the interview results of the writer with several express taxi drivers and lpg auto rickshaw drivers that operate in the jakarta area. for the express taxi drivers (white color), every day they have to fulfill a deposit as large as rp. 300,000, in details as many as rp. 270,000 for the company and rp. 30,000 for reserves of the vehicle maintenance fund (this fund is also deposited to the company). after the taxi operates for 6 years, the mentioned ex taxi becomes owned by the driver. after reaching the age of 6, the application of al-ijarah muntahiya bi al tamlik (financial lease with purchase option) as a financing solution in the sharia non-bank finance industry 23 the taxi car has to be rehabilitated with a new car, so the driver only has a car that is not able to be functioned as a taxi again. from the obtained income, the drivers sometimes only bring home money as many as rp. 50,000 per day. if compared with the income that the company receives, which is rp. 270,000 x 365 days x 6 = rp. 591,300,000 – rp. 50,000,000 (vehicle down payment) the average is as many as rp. 540,000,000 per vehicle as long as 6 years or the average is as many as rp. 90,166,667 per year per vehicle. while the driver, because of the deposit amount and fuel usage, say that the average net income is rp. 75,000 x 365 = rp. 27,375,000 per year or an average of rp. 2,281,250 per month. it is able to be summarized that the income that the company receives is as many as 3.3 times of the driver’s income. while lpg auto rickshaws (blue color), every day the driver has to fulfill the deposit of about rp. 135,000 – rp.175,000 per day (depending on company policy). it is different with express taxi drivers, the lpg auto rickshaw drivers do not have a chance to own the auto rickshaw that they use, no matter how long they operate it, the auto rickshaw is still owned by the company. the net income that they receive every day is not much different with the income of express taxi drivers. the two case examples above show the inequality of income that workers receive. workers that are the backbone of the company for their operations, only get a small part compared with the owner. it is common if we see that this reality causes a very large gap between the capital owners and the workers. even though according to ibn khaldun, the workers have a strategic position in production operations and the lifeline of a business. this condition of the people will not experience meaningful change, when there is no effort from the related party for improving it. in the quran verse piece of al-isra [17] allah says, which means: “if you do good deeds (means) you do good deeds for yourself and if you do bad deeds, the (evil) is for yourself” in the case of the taxi driver and auto rickshaw driver such as explained above, if the imbt financing model is applied, the taxi driver and the auto rickshaw driver are able to have their own business and vehicle, without having to depend on the company they work in. in here, the role of sharia banking/finance institution becomes important, not only as a distributor of loan funds (business credit) to businesspeople with the motive to obtain profit for themselves, but they have to raise business motivation for the lower class people (grass root) so they are able to rise from being backwards and poor, towards the reach of an economic growth with equity, according to the principles of islamic economy. 4. summary this writing proves, that the application of the imbt (al-ijarah muntahiya bi al tamlik) pact is more profitable than the al-murabahah pact and the interest system. other than that, it reflects the presence of the justice principle and togetherness between the capital owner party (shahib al mal) with those that need financing. in building the economy, welfare has to be prioritized equally and evenly for the people, not just chasing a high economic growth rate. the lower class people (grassroots) have to be given serious attention so they are able to be the backbone of the economy. the trickle-down effect paradigm is not relevant anymore, because afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 24 it is proven to not form, and because of that it has to be changed with a new paradigm through the inter linkage (interdependence) principle and the bottom up effect for spurring growth and developing awareness and motivation from the lower class people in increasing their economy for catching up, through a justice economy where moral and ethical values have to be the pillar in the economy. references abdullah, n. i., & dusuki, a. w. (tt). a critical appraisal of al-ijarah thumma al-bay’ (aitab): operation:’ issues and prospects. 4th international islamic banking and finance conference, 10-11. malaysia: monash university of malaysia. accessed on april 22, 2015. al-mishry, r. y. (1998/1418 h). bai’ al-taqsith tahlîl fiqhy wa iqtishâdy. jedah: jami’ah al-malik ‘abdul aziz. ar-rahim, m. a.-r. (1410 h/ 1990 m). tuhfatu al-ahwazi bi syarhi jami' attirmizi, juz iv (vol. print i). beirut: dar al-kutub al-islami. bustami. (2015). pemberdayaan usaha mikro, kecil dan menengah di kalimantan barat (perspektif ekonomi islam). jakarta: graduate school of syarif hidayatullah islamic public university. djamil, f. (2012). penerapan hukum perjanjian dalam transaksi di lembaga keuangan syariah . jakarta: sinar grafika. dumairy. (2010). matematika terapan untuk bisnis & ekonomi. yogyakarta: bpfe. hakim, a. a. (2011). fiqih perbankan syariah: transformasi fiqih muamalah ke dalam peraturan perundang-undangan. bandung: pt. refika aditama. ibn khaldun, a. (2001 m/ 1421 h). muqaddimah ibn khaldun. beirut: daar al fikr. jusoh, m. d. (2013). al-murabaha:’ implications on financial stability and islamic finance model. islamiyyat, 35 no. 2, 47 55. kasmir. (2000). bank dan lembaga keuangan lainnya (vol. print iv). jakarta: pt. rajagrafindo persada. perwataatmadja, k. a., & tanjung, h. (2011). bank syariah: teori, praktik, dan peranannya. jakarta: celestial publishing. zuhaily, wahbah. (2002). al-mu’âmalat al-mâliyah al-ma’âshirah. damaskus: darul fikr. the effect of development and financial performance of sharia bank on service quality and customer satisfaction 1 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the effect of development and financial performance of sharia bank on service quality and customer satisfaction agustian zen1), nawfa ayu nazira2), michael aris willson3), salsabila aninda putri4)*, saron okavia pangeswati5) 1,2,3,4,5 faculty of economics and business, bhayangkara jakarta raya university, indonesia abstract this study aims to determine the effect of development and financial performance of islamic banks on service quality and customer satisfaction in indonesia. the method used is inductive qualitative. this approach uses a qualitative approach that focuses on library research. sources of data come from references from books, journ als, and related research. data collection techniques use literature studies, expert books, and relevant scientific journals. data analysis was carried out by searching, collecting and qualitatively comparing the various insights obtained. the research findings are carried out comprehensively and are related to various concepts and relevant literature studies. the results showed that the development of islamic banks has a positive effect on service quality, financial performance has a positive effect on service quality, development of islamic banks has a positive effect on customer satisfaction, financial performance has a positive effect on customer satisfaction, and service quality has a positive effect on customer satisfaction. the conclusion obtained is that the development of islamic banks has a positive effect on service quality and customer satisfaction, financial performance has a positive effect on service quality and customer satisfaction, and service quality has a positive effect on customer satisfaction. keywords: development, financial performance, bank sharia, service quality, customer satisfaction 1. introduction indonesia is the country with the largest muslim population in the world, with around 204 million muslims. this large muslim population has great potential for the development of islamic banking. this development of sharia began to receive the government's attention when laws were passed that supported sharia banking. islamic banking is one of the banking products based on the islamic economic system, the islamic economic system, or sharia, is now widely discussed in indonesia. many people are urging the government of indonesia to immediately implement an islamic economic system in the indonesian economic system in line with the destruction of the capitalist economic system. (wilardjo, 2019) states that there is a islamic banking was initially developed in response to financial groups and islamic banking practitioners who wanted to respond to pressure from various parties who wanted financial services to be available according to moral values and the principles of islamic sharia. muslims are expected to be able to understand the development of islamic banks and develop them if they are in a position as managers of islamic banks who need to carefully identify and identify all existing and potential partners for the development of islamic banks. the development of islamic banking in indonesia has not been matched by optimal banking *coressponding author. email address ptrslsaninda123@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:ptrslsaninda123@gmail.com afebi islamic finance and economic review (aifer) volume 8, no 1 (2023) 2 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) performance, especially for calculating islamic financial ratios (hafiez, 2012). financial institutions that are developing really need proper and good control, so that the desired goals are achieved and in the future they can carry out evaluations. competition between banks in asean is getting tougher and has an impact on their performance, including islamic banks. limitations and problems of islamic banks in indonesia include limited capital, financial resources, insufficient skills of human resources and low use of information technology. therefore, islamic banks must prioritize several challenges and strategies, such as financial product innovation, employee skill improvement, and updating the use of information technology. as observed, the innovation of financial products of islamic banks is important for the gradual development of society based on the strategy. based on islamic bank economic and financial report data 2021, over the last ten years sharia banking in indonesia has grown quite well, but this has not been accompanied by market share, which as of june 2020 still represents 6.18% of the total banking market as a whole. (wahyuningsih, 2019) explained that basically, the bank's profit comes from customers, which shows that banks are focusing on how to get more customers to increase their market share. since a bank is a company that provides services to consumers, one way to increase the number of consumers or customers is to provide better service quality so that customers are satisfied so that they are ultimately loyal to the bank. as islamic bank branches have been established in large numbers, the public is exposed to a wide range of products offered by islamic banks. quality service is very important to customers. the main component is the quality of the service, because the main products of the bank, ie. credit, is an offer that does not differ, and also the bank's services are easy to imitate. thus, competition is largely influenced by the bank's ability to provide the highest quality service compared to its competitors. othman & owen (2021) mention several reasons why islamic banks need to pay attention to the importance of service quality. first, bank products and services are perceived by customers as having good quality religious values because they are based on islamic principles. second, the importance of implementing service quality in islamic banks because it will relate to costs, profits, customer satisfaction, customer retention, positive word of mouth, as well as marketing the company and improving the bank's financial performance. service quality was considered a key factor in the success and sustainability of banking, especially when the pressure of other institutions operating in the same industry is constantly increasing and the needs of customers are demanding. islamic banking is considered to be the fastest growing business in the world in the last decade. this was acknowledged not only by muslims but also by non-muslims. the mission of islamic financial institutions is usually the same as other traditional banks in the industry, but the difference lies in the rules and regulations. islamic banks manage their affairs according to the principles laid down in the islamic religion. with the rapid development of islamic banks, service quality is a key factor that becomes a competitive advantage. this is because it is easy for the bank, as a service company, to imitate the product being marketed. therefore, it is natural that islamic banks can provide excellent service quality to gain a competitive advantage over other banks. the establishment of more and more islamic banks has intensified the competition among islamic banks, which raises fundamental questions about islamic bank customer satisfaction, which factors can affect customer satisfaction the most, and how customers perceive satisfaction. among islamic banks currently developing. customers perceive a significant difference such that they mentally prefer the islamic banking brand or do customers perceive that there is no difference in the islamic banking service. https://creativecommons.org/licenses/by/4.0/ the effect of development and financial performance of sharia bank on service quality and customer satisfaction 3 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) customer satisfaction is the most important thing for a banking company that should not be ignored. because customer satisfaction is an important part of a company's reputation in the wider community, customer service is important in increasing customer satisfaction. this is very important because the role of the customer is very important to increase the income directly or indirectly to support the existence of the company. this study aims to determine the effect of development and financial performance of islamic banks on service quality and customer satisfaction in indonesia. 2. literature study islamic banks are banks that run their business according to sharia principles. islamic banks are financial service providers that operate based on islamic ethics and value systems, especially interest-free (riba), free from unproductive speculations such as gambling (maysir), free from unclear and questionable issues (gharar), make sense. of justice and finance onlyhalal businesses (munawir, 2005). islamic banking shares the common characteristics of the banking industry, namely a highly regulated and trust-based industry. the indonesian islamic banking system is implemented with a system of profitsharing principles that prioritizes cohesion, the value of ukhuwah and avoids speculative elements in every transaction (alamsyah, 2010). development of islamic banks in indonesia islamic banking developed quite rapidly and spread to many countries, even western countries. danish islamic bank international was registered as the first islamic bank in europe, namely in 1983 in denmark. now, major western banks such as citibank, anz bank, chase manhattan bank and jardien fleming have also opened the islamic window to provide islamic sharia banking services. one example is a brief map of the development of banking in muslim communities throughout history. so judging by the development process, the germ of banking in islamic society is made by an individual for the purpose of banking. the existence of islamic banks in indonesia began in 1997 when bank muamalat was established as the first islamic bank, thanks to the support of islamic intellectuals and the islamic community who are trying to build a riba-free banking system. in addition, many islamic banks have sprung up in indonesia because of government support issued in the form of law no. 21 of 2008 as a strong legal basis. therefore, there are strong legal considerations in the application of islamic banks, other islamic financial institutions and non-banking islamic financial institutions. at least four supporting factors drive the development of islamic finance in indonesia. the first is, of course, indonesia's large muslim population. according to the 2010 national population survey, there are at least 208 million muslims among the population of 237 million. second, the support of banking regulators, parliament, government and important sharia organizations also contribute to the development of sharia banking. third, the strong performance of islamic banks over the past two decades has attracted public attention to depositors and become business partners. unlike conventional banks, islamic banking has shown an optimal role as a banking intermediary as shown by several banking indicators. fourth, indonesia's economic performance supports the business operations of pt. islamic bank. the islamic banking system was introduced to provide halal financial services to the muslim community. in addition, for this purpose, this institution is expected to contribute to the socio-economic goals of islam. the main objectives of the development of islamic banks are not only to increase economic prosperity, but also to increase https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 8, no 1 (2023) 4 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) employment opportunities, high economic growth, socio-economic justice and rational distribution of income and wealth, stability of the value of money, and savings and savings. investments in economic development. islamic banking has different characteristics for service providers than conventional banking. the biggest difference between islamic banks and conventional banks lies in the practice of doing business, where the activities are based on the principles of shariah, and this principle is the main attraction for customers to use the services of islamic banks. islamic bank financial performance financial performance is an explanation of the economic consequences that can be obtained by a company or bank during a certain period of time through its business activities to generate profits efficiently and effectively, and its evolution is in the financial statements (putri & dharma, 2016). bank performance in general is an illustration of the achievements that have been achieved by a bank in its operations, and the financial performance of a bank is a picture of a bank's financial position over a certain period of time, both in terms of funding and financing (munir, 2017). financial results are an analysis that evaluates the extent to which the company has implemented good and correct financial management rules (fahmi, 2012). rudianto (2013) also states that financial performance is the result or achievement achieved by the company's management in fulfilling its task of effectively managing the company's assets over a period of time. financial indicators are used to measure financial performance. according to fahm (2020), financial ratios are a corporate performance analysis tool that explains various relationships and financial indicators that aim to show changes in financial position or past performance and help illustrate the role of these changing patterns. service quality the definition of quality according to kotler is all the characteristics and characteristics of a product or service that affect the ability to satisfy needs, either clearly stated or implied. services are defined as activities carried out by producers in order to meet the needs and desires of consumers so that consumer satisfaction is achieved (satriyanti, 2012). service quality is a form of assessment of the level of service provided by the bank to customers in accordance with what is expected (harahap & amanah, 2019). quality of service as a form of evaluation of the plans, activities, efforts and efforts made by the company to fulfill the desires, expectations and needs of consumers and to achieve a sense of pleasure and satisfaction from consumers so that consumers can use the company's products and services. service quality is one of the most important success factors for banks, but service quality is often very difficult to measure due to its unique characteristics (hoffman and bateson, 2002). service quality refers to the nature of the service received as evaluated by the customer. today, people need more excellent service, not only the quality of the products, but prefer to enjoy the convenience of the service. othman & owen (2001) developed the carter model to define and measure service quality in islamic banking. this is because the servqual model is considered inappropriate in islamic banking because it has a compliance dimension that islamic banking must maintain because its financial operations are based on shariah principles. thus, while the servqual model has only five dimensions, the carter model developed by othman and owen adds one dimension, namely islamic affiliation. thus, carter's model for measuring service quality consists of six dimensions. the six dimensions are as follows: https://creativecommons.org/licenses/by/4.0/ the effect of development and financial performance of sharia bank on service quality and customer satisfaction 5 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) 1. compliance is the ability to observe shariah principles as applied in shariah bankin (othman and owen, 2011). this means that any product or service developed and offered by islamic banks must comply with islamic law. 2. assurance is the knowledge and courtesy of islamic banking staff and their communication skills to provide customers with confidence (othman and owen, 2001). therefore, good service quality requires islamic bank employees who are polite, professional and competent to work and provide solutions to customers’ financial problems (janahi and almubarak 2015). 3. reliability is the ability to provide services that are promised, reliable, accurate and that customers can trust (othman and owen, 2001). credibility can make islamic banks more efficient and improve customer satisfaction (janahi and almubarak, 2015). 4. perceptible is physical evidence related to the presence or appearance of physical facilities, equipment, personnel and communication materials (othman and own, 2001). qureshi et al. (2012), service quality can perform well in islamic banking if it is supported by tangible elements. 5. empathy is concern, the individual concern of islamic banks for their customers (othman and owen, 2011). empathy has been shown to be a very important dimension of service quality in islamic banking, which can ultimately lead to customer satisfaction (qureshi et al., 2012; othman and owen, 2001; osman et al., 2009). 6. responsiveness is the ability to help customers and provide services quickly and provide clear information (lupiyoadi, 2001). responsiveness leads to a willingness to help customers and provide prompt service (othman and owen, 2001). the six dimensions of carter’s model are an extension of parasuraman’s servqual model (parasuraman et al., 1988). however, since the model does not have a dimension measuring compliance with islamic principles, othman and owen (2001) developed the carter model to measure service level. quality of islamic banking. customer satisfaction according to kotler and keller (2009), satisfaction is the pleasure or disappointment that results from comparing product performance with desired expectations. if the performance of the product does not meet the expectations, the customer is disappointed, if the performance of the product exceeds the expectations, satisfaction occurs. to maintain the company's position in the market, it is necessary to achieve customer satisfaction with the company's services (wahab, 2017). fast and high-quality services of islamic banks ensure customer satisfaction. satisfied customers share their positive experiences with others and become a source of word-of -mouth advertising. on the other hand, dissatisfied customers spread negative word of mouth and are more likely to switch to another product or service. the bank should be aware of the expected satisfaction of the customers by increasing the ability to use the customers (hamzah et.al, 2015). customer satisfaction is a modern approach to quality in organizations that serves the development of customer-oriented management and culture (mihelis et.al, 2001 and hamzah, et.al, 2015). customer satisfaction indicates that satisfaction and dissatisfaction are the reactions of customers to the perceived fit evaluation (disconfirmation) between previous expectations (other performance standards) and the actual performance experienced using the product. satisfaction can be interpreted as a feeling of satisfaction, pleasure and relief that a person has when he has consumed a product or service from another person or https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 8, no 1 (2023) 6 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) institution concerned. there are 5 (five) main factors that a company should consider when determining the level of customer satisfaction, namely: 1. product quality. customers are satisfied with the results of their evaluations, which show that the products they use are of high quality. 2. quality of service. especially in the manufacturing industry, customers are satisfied when they receive good or expected service. 3. emotional. customers feel proud and sure that other people will be surprised by them when they use a product of a certain brand, are usually very satisfied. the satisfaction achieved is not the quality of the product, but the social value that makes customers feel satisfied. 4. price. products of the same quality set a relatively low price, offer greater value to customers. 5. payments. customers who do not incur additional costs or who do not need to waste time to buy the product. 3. research methodology the method used in this research is an inductive qualitative method. this approach uses qualitative methods that focus on library research. the purpose of this article is to examine data through reference books and research journals as well as conduct analysis. sources of data come from references from books, journals, and related research. the data collection techniques used were literature studies, expert book studies, and relevant scientific journals. data analysis was carried out by searching, collecting and qualitatively comparing the various insights obtained. the findings of this research are carried out comprehensively and are related to various concepts and relevant literature studies. 4. result and discussion effect of development of islamic banks on service quality the development of islamic banking in indonesia has become a measure of the success of the islamic economy. the financial crisis that started in 1998 overwhelmed the traditional banks and many of them had to go into liquidation due to the failure of the interest system. however, banks implementing the shariah system can still exist and survive (fitria, 2015). this is evidenced by the existence of indonesia's first islamic bank, bank muamalat indonesia (bmi), which was established on november 1, 1991 and began operations on may 1, 1992. in its development until march 2013, bmi became a pioneer to other islamic banks and adopted this system during the proliferation of conventional banks (choiriyah et al., 2021). this is consistent with research (marlina et al., 2015) which shows that the development of islamic banking in indonesia is increasing every year, and the number of islamic financial institutions, islamic insurance, islamic investment funds and other islamic financial institutions is increasing. . the development of islamic banking in indonesia is supported by law no. 21/2008 on islamic banking, which creates a strong foundation for the development of the islamic banking sector in indonesia and promotes its growth and competition. the entry into force of the asean economic community (aec) in 2016 for the banking sector will further strengthen the competition of sharia banking in indonesia. islamic banking in indonesia has developed significantly and is promising. operations so far have been very strong to contribute to economic performance. connection with money markets and islamic capital, takaful and non-bank islamic financial institutions linked industrial activities with other institutions to finance a common https://creativecommons.org/licenses/by/4.0/ the effect of development and financial performance of sharia bank on service quality and customer satisfaction 7 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) real sector. however, in order to maintain and develop this promising industry, at least three challenges must be addressed through some proposed measures (ismal, 2011). the growth and development of islamic banking in indonesia, including the increase in the number of islamic banks, growth in assets, dpk, and financing, as well as the challenges faced by the industry (nofinawati, 2015). the results of the study (sari et al., 2013) explain that several factors, including lack of consumer trust and understanding of islamic banking, lack of government support, and banking regulations that have not fully accommodated islamic bank operations. the results of the study show the importance of a specific dimension of mcsq in improving the service quality of islamic commercial banks from the perspective of indonesian muslim consumer behavior. a specific dimension consisting of islamic values such as shariah compliance, honesty, decency, humanity and trustworthiness was found as an important dimension of service quality in islamic commercial banks according to indonesian muslim consumers (asnawi et al., 2020). the importance of service quality to business success and customer satisfaction, especially in islamic banking based on islamic principles in service quality, especially in the context of the banking sector (yusuf et al., 2021). the development of islamic banks is supported by the implementation of the merger program of three islamic banks to form bank syariah indonesia, the results of which significantly affect customer satisfaction and service quality. bank syariah indonesia improves services such as advising on financial products, responding to customer complaints and providing adequate parking spaces (meilani & sugiarti, 2022). however, this is not consistent with research (aisyah, 2018), which shows that islamic banks have not been able to build strong relationships with customers, so it is still possible to switch to other banks that offer better products and services. the service quality of islamic banks still does not support their strategy. effect of financial performance on service quality islamic banks in indonesia have had a fairly good financial performance during the 2011-2013 period. the financial ratios used in this study indicate that islamic banks in indonesia have a good level of profitability, sufficient liquidity, adequate capital solvency, good income diversification, and relatively good asset quality. (setyawati et al., 2015). in addition, it is supported by research (fatmasari & kholmi, 2018) showing that the ratio of islamic income versus non-islamic income all has high results or can be said to be very good. the average score is above 35%, which indicates that all banks receive a very good rating. this indicates that the bank pays attention to every incoming income. the research results of this paper show that good corporate governance (gcg), shariah boards (dps), financing to deposit (fdr), profit sharing financial ratio (pls), profit and financial level ratio and interim syirkahratio significantly affected the. financial performance of islamic banks in indonesia. in addition, this study also shows that noncurrent financing (npf) has a negative impact on return on assets (roa). the results of this study can provide insight into the factors that affect the financial performance of islamic banks in indonesia and can be used as a benchmark for bank management to improve their financial performance (mukhibad & khafid, 2018). this research is in line with the signal theory that if the total non-performing financing ratio in islamic banks increases, it will give a signal that the profitability or financial performance of islamic banks will also be affected (pramono & widiarto, 2019). https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 8, no 1 (2023) 8 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) effect of development of islamic banks on customer satisfaction indonesian people respond positively to adopting technological developments and changes. the financial business sector must be able to adopt technology to strengthen customer loyalty and commercial success. islamic bank customer retention in indonesia is influenced by customer satisfaction in utilizing digital services, especially after the covid-19 pandemic as an era of digital transformation (alfarizi, 2023). the relationship between the service quality of sharia mobile banking represented by five dimensions, namely convenience, security, ease of use, application and application system design, and customer satisfaction in indonesia shows that sharia mobile banking application system plays an important role in customer formation satisfaction (putri & sari, 2021). in addition, the development of market orientation has a positive and significant effect on customer satisfaction (saraswati, 2022). islamic marketing has a significant impact on customer satisfaction. this means that the shariah marketing practiced by bank muamalat can affect customer satisfaction. company image has a significant impact on customer satisfaction. this means that the corporate image owned by bank muamalat can affect customer satisfaction (setyono et al., 2015). however, the results of the study (rusmahafi & wulandari, 2020) show that brand image does not have a significant impact on customer satisfaction. this was followed by the statement (tamaruddin et al., 2020) that self-service technology has no direct impact on customer satisfaction in the development of online banking services. (febriansyah et al., 2022) refers to the importance of customer satisfaction so that satisfied customers remain loyal to the bank and conveys positive word of mouth about the use of shariah products. therefore, banks must upgrade their skills and improve information technology to increase customer satisfaction and loyalty. islamic banks must develop appropriate feasibility studies to determine strategic locations of branches and upgrade their infrastructure in the form of modern buildings and equipment, including teller machines with digital information systems, comfortable waiting rooms with comfortable seats, advanced software and hardware, etc. maintain and improve the efficiency of operations and management of sharia banks. banks must respond positively to this technological change, being complacent and not simply waiting for change because of regulators. rather, they need to work on core strategies that can redefine banking in this new digital and competitive era. the success or failure of islamic banking in indonesia today largely depends on its ability and policies to anticipate and quickly respond to market changes (aisyah, 2018). the results of the study (candera & indah, 2021) show that there are significant differences in the financial performance of islamic commercial banks and islamic commercial entities before and during the indonesian covid-19 pandemic using different financial ratio indicators such as non-performance. financing, solvency ratio and return on assets. however, it shows that there were no significant differences in npf, car or roa between islamic commercial banks and islamic business units before and during the covid19 pandemic. internal factors such as financial ratios are used as a benchmark to focus on the performance of islamic banks before and during the covid-19 pandemic. effect of financial performance on customer satisfaction providing convenience in financial consultations and interest-free products in accordance with sharia are priority aspects of forming customer satisfaction in conducting transactions at islamic banks (cahyani, 2016). according to (siswanti & sukoharsono, 2019) that the results of research from this journal show that islamic financial performance https://creativecommons.org/licenses/by/4.0/ the effect of development and financial performance of sharia bank on service quality and customer satisfaction 9 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) mediated by islamic intellectual capital has a significant positive influence on the business continuity of islamic banks in indonesia. the results of the study show that service quality and customer value significantly affect customer/customer satisfaction. with the service quality indicator, fast service has the highest correlation in creating customer satisfaction, especially satisfaction with receiving fast service. from the point of view of customer value, the expected result to influence customer satisfaction is service speed (rusmahafi and wulandari, 2020). this shows that financial performance has a positive effect on customer satisfaction, which affects customer loyalty. customer loyalty and financial performance together positively influence the willingness to buy. if the performance is lower than expected, the consumer is not satisfied. when performance exceeds expectations, consumers are very satisfied or happy. high satisfaction from consumers creates emotional attachment to certain brands, not just rational likes/preferences. high satisfaction will encourage high loyalty so that many organizations aim to achieve total customer satisfaction. satisfying consumer desires can be done by identifying customer needs and expectations/perceptions of customer expectations. effect of service quality on customer satisfaction the results of the conducted study (rusmahafi & wulandari, 2020) show that the service quality and customer value of bank muamalat significantly affect customer/customer satisfaction. with the service quality indicator, fast service has the highest correlation in creating customer satisfaction, especially satisfaction with receiving fast service. it is an interesting observation that the need of consumers for fast service as it occurs in conventional banks is also present in islamic banks such as pakurar et al. (2019), according to which service quality, including on-time service, affects customer satisfaction. the results of the study of yulfis et al. (2020) also show that the quality of the products of islamic banks has a positive and significant effect on the awareness of the customers. this effect reflects that the greater the benefits of being a customer of an islamic bank, the greater the awareness. also, if the products of islamic banks are more attractive, the awareness is also higher. companies must improve service quality to develop customer loyalty because currently the growth of the banking world in indonesia is increasing and has a broad impact on society. so, every bank is trying to attract as many customers as possible. by increasing customer satisfaction. islamic banking assumes that customer satisfaction is determined by the quality of products and services desired by customers, so that quality assurance is the most important thing in islamic banking. service quality and customer satisfaction are two main issues that are closely related, namely customer expectations of service quality and customer perceptions of service quality. 5. conclusion from the research it was concluded that: 1). the development of islamic banks has a positive effect on service quality. islamic banking in indonesia has developed significantly and is promising. the development of islamic banks is supported by the implementation of the merger program of three islamic banks to become bank syariah indonesia with the results having a significant influence on customer satisfaction and service quality. 2). financial performance has a positive effect on service quality. islamic banks in indonesia have had a fairly good financial performance during the 2011-2013 period. financial ratios show that islamic banks in indonesia have a relatively good level of quality. 3). the development of islamic banks has a positive effect on customer https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 8, no 1 (2023) 10 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) satisfaction. indonesian people respond positively to adopting technological developments and changes. the importance of customer satisfaction is so that satisfied customers will remain loyal to the bank and convey positive word of mouth to use sharia products. 4). financial performance has a positive effect on customer satisfaction. providing convenience in financial consultations and interest-free products in accordance with sharia are priority aspects in forming customer satisfaction in conducting transactions at sharia banks. 5). services quality has a positive effect on customer satisfaction. service quality fast service which is an indicator of service quality has the highest correlation in creating customer satisfaction, especially in the satisfaction of receiving fast service. the results of the study show that the development and financial performance of islamic banks has a significant effect on customer satisfaction in islamic banking. therefore, islamic banking must improve the performance and quality of its services to attract as many customers as possible and increase customer satisfaction. from the description above, we can see that research on development and finance effects islamic bank performance on service quality and customer satisfaction is a very interesting topic to be explored further, because there is still little literature that discusses it. in addition, islamic banks have just been established in 2020, so they still need a lot of input so that they can continue to develop and change for the better. therefore, the authors hope that this research can be used as a reference for similar studies in the future, especially in the field of financial performance or strategies to be used by islamic banks to face global competition. reference aisyah, m. 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(2022). indonesian islamic bank credibility and customer loyalty: does customer satisfaction really serve as a mediator variable? international journal of business and society, 23(3), 1692–1704. https://doi.org/10.33736/ijbs.5196.2022 https://creativecommons.org/licenses/by/4.0/ the effect of development and financial performance of sharia bank on service quality and customer satisfaction 11 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) fitria, t. n. (2015). perkembangan bank syariah di indonesia. ilmiah ekonomi islam, 1(2), 75–87. https://jurnal.stieaas.ac.id/index.php/jei/article/view/30 harahap, d. a., & amanah, d. (2019). kajian kualitas pelayanan dan loyalitas nasabah perbankan di indonesia. jurnal bisnis dan ekonomi, 26(1), 27–40. ismal, r. 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(2012). pengaruh kualitas layanan, kepuasan nasabah dan citra bank terhadap loyalitas nasabah bank muamalat di surabaya. journal of business and banking, 2(2), 171–184. https://doi.org/10.14414/jbb.v2i2.172 setyawati, i., kartini, d., rachman, s., & febrian, e. (2015). assessing the islamic banking financial performance in indonesia. international journal of education and research, 3(10), 233–248. http://www.ijern.com/journal/2015/october2015/19.pdf setyono, l., kusumawati, a., mawardi, m. k., kunci, k., marketing, i., perusahaan, c., nasabah, k., & nasabah, l. (2015). the effect of islamic marketing and corporate image on customer satisfaction and customer loyalty (study on customers of pt bank muamalat indonesia malang branch office). jurnal administrasi bisnis, 27(1), 1–10. siswanti, i., & sukoharsono, e. g. (2019). intellectual capital and financial performance of islamic banks in indonesia. institutions and economies, 11(4), 31–49. surya, y. a., & asiyah, b. n. (2020). analisis perbandingan kinerja keuangan bank bni https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 8, no 1 (2023) 12 published by afebi islamic finance and economic review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) syariah dan bank syariah mandiri di masa pandemi covid-19. iqtishadia jurnal ekonomi & perbankan syariah, 7(2), 170–187. https://doi.org/10.19105/iqtishadia.v7i2.3672 tamaruddin, firdaus, a., & endri. (2020). customer satisfaction mediates the effect of self service technology on customer loyalty in of islamic bank e-banking services in indonesia. iltizam journal of shariah economic researcheconomic research, 5(2), 1–15. wahyuningsih, t. (2019). pengaruh pembiayaan paket masa depan (pmd) terhadap perkembangan usaha dan peningkatan laba nasabah dalam perspektif ekonomi islam (studi pada btpn syariah mms tanjung karang barat). in skripsi. universitas islam negeri raden intan lampung. yusuf, m., ichsan, r. n., & saparuddin. (2021). determinasi investasi dan pasar modal syariah. jurnal kajian ekonomi dan kebijakan publik, 6(1), 397–401. http://jurnal.pancabudi.ac.id/index.php/jepa/article/view/1121/1001 https://creativecommons.org/licenses/by/4.0/ the economics perspective of the practice of mmm-indonesia 75 10 the economics perspective of the practice of mmmindonesia daris purba 1* 1 batam putera university, batam, indonesia abstract the mmm presence in indonesia is becoming very popular because it promises a fantastic profit. although covered by mutual-aid mode, not a few who perceive it as an investment business. having observed the rapid development of the mmm as a new investment scheme, the researcher is driven to conduct a study on the economics perspective on the mmm. the objective of this research is to describe the practice of mmm-indonesia and to review it from economics perspective. this study belongs to qualitative study with the descriptive-empirical approach. the informants were 4 mmm national top-leaders, a manager, a victim, and a new member. the methods of data collection used were preliminary survey, literature studies, interviews and observation. the data were analyzed using the descriptive analysis technique. the result of the study shows that mmm-indonesia practice pyramid scheme, ponzi scheme, and money game in its system. the research concludes that indonesian government is unaware of the existence of this scheme threat and does no action against it. the study also concludes that the practice of mmm-indonesia is incompatible with economics theories. the author suggests that the indonesian government must ban the practice of the mmm as it is a threat to national economic growth and stability. the author suggests other researchers to do further research on the server, moderator, administrator, and company management of the mmm. keywords: economics, mmm, ponzi scheme, pyramid scheme 1. introduction this study takes a case from the investment firm named mmm. the mmm is an investment company established by sergei mavrodi. mavrodi admitted that the company is operating in the base of pyramid scheme, a scheme which is illegal in many countries. mmm require partisipants to provide help (ph) before they can get help (gh). ph is transferring some money to certain bank account specified by mmm. gh is asking mmm to order other participant to transfer some greater amount of money, usually with a gain of 30%. mmm presence in indonesia is becoming very popular because it promises fantastic profit. by depositing a certain value, the members entitled to await the return of 30 percent higher in the next month. although covered by mutual aid mode, not a few who perceive mmm as an investment. whereas the mmm did not * corresponding author. email address: darispurba26@gmail.com mailto:darispurba26@gmail.com afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 76 run a business or a real investment, but only play money coming from the prior members to paying members who joined later. mmm managers claimed that mmm is neither a investment nor a bussiness institution. they claimed that this scheme is no more than giving each other money to each other people. they stated that there is no central account where the partisipants’ money can be easily retrieved by the mmm. if so, how they can promise a gain of 30%. where do the profits come from if there is no real business being run? many contemporary theories try to uncover mmm. pyramid and ponzi schemes are something that has always been associated by scholars with mmm activity. some tried to see it from legal perspective and find a conclusion that the mmm is difficult to be regarded as a legal entity since there is no compatibility with existing business classifications. with mmm only operate on the internet makes it more difficult to assess. in indonesia it came with new name “manusia membantu manusia”. like in many other countries, enthusiasm for mmm in indonesia is also quite large. people are tempted by the high promised percentage of returns. many investors are unaware of how mmm operates. many who realized but they wanted to take advantage of gaining benefit from mmm in its early stage before it falls. pyramid and ponzi schemes have caused economic crisis in many countries such as england, russia, and albania. this leads to the curiosity why are mmm running well and even legally in russia and many other countries including indonesia. what is actually run by the mmm? is it true that the concept would be able to fight the global financial system as claimed by its founder sergey mavrodi. 2. literature review studies of previous research include reading, observing, identifying, and absorbing reading material (literatures). the purpose of literature review is an attempt to examine, identify and discuss the research plan theoretically, conceptually and find a variety of variables related research, as well as the results of previous research (supardi, 2005). researcher search for relevant literature find a wide range of research include: 1. research by rajko (2007) entitled crisis management: the case of the mmm financial pyramid (rajko, 2007). the paper considers mmm, one of the world’s most famous financial pyramids that worked during the last decade of the 20th century. the author shows that financial pyramids were not the result of the transition process. they have been a regular phenomenon in the most developed economies (the netherlands, france, england etc) during the earlier periods. the short history of the pyramid mmm is given, and then in the key part of the article the functioning of the crisis management group that help mmm to survive the crisis period in the middle of the year 1994. at this manner, mmm became perhaps the only pyramid in history that continues to work successfully after the financial collapse. 2. the research by christopher jarvis a senior economist in the imf's policy development and review department –entitled: the rise and fall of albania's pyramid schemes (jarvis, 2016). this study uses a qualitative method that emphasizes the crisis prevention by the government due to ponzi the economics perspective of the practice of mmm-indonesia 77 finance. research explains how ponzi finance can lead to a crisis in the country. ponzi finance may cause the bubble due to rising unnatural purchasing power. the study concludes that the state investment business operations that are not controlled can lead to a crisis in the country. this study suggests that the government must investigate every type of investment to prevent the crisis. 3. research by nesvetailova (2008) a professor at the school of arts and social sciences, city university of london –entitled: ponzi finance and global liquidity meltdown: lessons from minsky (nesvetailova, 2008). this study uses a qualitative method emphasizes that the economy of a country is not determined by the government but on the investment activities that occur therein. this study looked at the ponzi finance from the standpoint of political science. this research concluded countries tend to do the omission of investment activity due to two factors; difficulty of detecting fraudulent investments; and avoiding the risk. this study suggested that the government must be completely aware of all the investment activities in the country. 4. research by елькина, а. в. (elkina av), 2008 entitled: financial pyramid scheme: is it a lie or revenue (elkina, 2014). this study emphasizes that pyramid schemes works at the expense of investors only. these investors are people, who do not deal with the economy and do not know nuances of the financial sphere. and after termination one of the financial pyramid defrauded investors gives their money for the same activity. why? first, people believe that not all pyramid schemes were founded for cheating. second, here there is a psychological factor. it is a passion. investors think that they have time and they come out from this system before its destruction. and finally, people watch an advertisement and believe it. this research concluded that investors can earn money from a financial pyramid, if they are a creator of it or a part of this system, so they know economy and nuances of this scheme very well. generally, this research concludes financial pyramids are much more often risk, losses and lie than revenue and wellbeing. 5. research by puscaciu, mihalache, & puşcaciu (2014) entitled stacked affairs – versus mlm (or: guised pyramids-wolf in sheep’s fur) (puscaciu, mihalache, & puscaciu, 2014). the paper reveals the model of pyramid, invented by the ancient egyptians was used by mankind in different ways, during the time. in their research they try to underline the link between some pyramidal schemes: that means their research has to show a comparative approach of two aspects apparently without any link, but reality shows that there are both resembles, and differences between them. the common element is not only the pyramid shape, but also the financial scope which they are used for. more by token, they are using this leitmotiv of pyramid not only for earning huge sum of money, but also without paying taxes on it. besides these common features, there are also a clear difference between them, i.e. one of these action (the pyramidal games) are not giving any product for the sum of money given by the participants, as the other activity (the mlm used in cosmetics and nutritional supplements industries) uses goods given instead of paying money by the involved people. 6. research by duha entitled “kedudukan dan bentuk badan usaha mavrodi mondial moneybox (mmm) dalam praktik niaga di indonesia dan perlindungan hukum bagi anggota atas transaksi mavrodi mondial afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 78 moneybox (mmm)” (duha, 2015). the objective of this study was to determine the position and form of business entity mavrodi mondial moneybox (mmm) in a commercial practice in indonesia in order to determine the existence of legal protection for transactions detrimental to members mavrodi mondial moneybox (mmm). the conclusion from this study is the legal status of mavrodi mondial moneybox (mmm) is not clear. judging from the form of business entity cannot be categorized. judging from the trade, no goods or services offered by mavrodi mondial moneybox (mmm). this research suggests that operation mavrodi mondial moneybox (mmm) should be reexamined in a commercial practice in indonesia in order to create certainty of legal protection for its members. 3. theories there are two theories are most often referred to by academics about the mmm. jarvis (1999), rajko (2007) and elkina (2008) called it a financial pyramid scheme. anastasia (2008) called it a ponzi finance. from this, it can be concluded that the mmm is the practice of financial pyramid scheme or the financial ponzi scheme. a brief explanation of both is needed in this research to give a clear idea of the mmm. 1. pyramid scheme a pyramid scheme is an unsustainable and often illegal business model that involves promising participants’ payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public. pyramid scheme (financial scheme or investment scheme) is a way of ensuring revenue for participants of the structure at the expense of a constant entrance of money. in the most countries, such as australia, japan, usa, germany, france, uk and others, this kind of financial activity is forbidden, because it is cheating (elkina, 2014). in a pyramid scheme, an organization compels individuals to make a payment and join. in exchange, the organization promises its new members a share of the money taken from every additional member that they recruit. the directors of the organization (those at the top of the pyramid) also receive a share of these payments. for the directors, the scheme is potentially lucrative—whether or not they do any work, the organization's membership has a strong incentive to continue recruiting and funneling money to the top of the pyramid. such organizations seldom involve sales of products or services with real value. without creating any goods or services, the only ways for a pyramid scheme to generate revenue are to recruit more members or solicit more money from current members. eventually, recruiting is no longer possible and the plurality of members is unable to profit from the scheme.111 head of the national consumer protection agency (bpkn) ardiansyah parman said that mmm is extremely dangerous because it uses a pyramid system which is prohibited under the law of commerce. in fact, such a system is a money game that has eluded many victims in russia. he then explained, in the pyramid 1 wikipedia, “pyramid scheme”, retrieved from https://en.wikipedia.org /wiki/ pyramid_scheme on thursday 17 september 2015 at 3:45. https://en.wikipedia.org/wiki/business_model https://en.wikipedia.org/wiki/product_(business) https://en.wikipedia.org/wiki/service_(economics) the economics perspective of the practice of mmm-indonesia 79 system, employers earn revenue not of his own business but from of recruiting others. such this system, according to him, has a very high risk that the funds collected could be at any time corrupted by managers.212 aidil akbar said on its website that the mmm is a fraud because running a pyramid scheme. this conclusion he took from the statement of sergei mavrodi which states: "it is a naked scheme, nothing more. people interact with each other and give each other money. for no reason"313 aidil further stated that mmm similar social gathering chain which was once widespread in the late 90s and early 2000s. this scheme is just about each other money transfers whom require a high level of trust and confidence of the participants so that would put money into the scheme. this scheme will usually run smoothly at the beginning and will collapse when participants put large amounts of money because of greed by investing all the capital and profits that have been obtained even plus of sources of funds from selling assets or from lending sources. 2. ponzi finance a ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. in many ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors to create the false appearance that investors are profiting from a legitimate business.414 with little or no legitimate earnings, ponzi schemes require a consistent flow of money from new investors to continue. ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out. the schemes are named after charles ponzi, who duped thousands of new england residents into investing in a postage stamp speculation scheme back in the 1920s. at a time when the annual interest rate for bank accounts was five percent, ponzi promised investors that he could provide a 50% return in just 90 days. ponzi initially bought a small number of international mail coupons in support of his scheme, but quickly switched to using incoming funds from new investors to pay purported returns to earlier investors. 3. money game the terminology of money game has broader meaning than the terminology of ponzi scheme. money game is all forms of investments without underlying business. a schematic money game could be mlm, gathering chain, or ponzi schemes. money game is the major model of the most investment fraud. when a scheme contains elements of money games it certainly has the potential fraud schemes. 2yoga sukmana, “bkpn: mmm itu money game”, retrieved from http://bisniskeuangan.kompas.com/read/2014/08/07/152222626/bpkn.mmm.itu.money.g ame on wednesday, 9 december 2015 at 10.18. 3danang sugianto, “mui sebut money game mmm haram”, http://economy.okezone.com/read/2015/04/09/457/1131586/mui-sebut-money-gamemmm-haram at 4 november 2015 at 13:04 4 retrieved from https://www.sec.gov/answers/ponzi.htm on friday, january 15, 2016, at 8:04 afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 80 money game is similar to ponzi scheme in some cases. this system collects the money from the new members to be paid to the old members. new members can benefit when recruiting new members. this system is definitely in favor of those who are in the top line. money games sometimes have a product that is not realistic because the product is sold at a very high price than the price of similar products in the market. such products are just really a symbol to get a bonus in the amount of sales exceeds the actual price of the product.515 according setyawibawa of ec consulting (pesona.co.id, 2015), since the beginning of the business founders of money game were aware that the system would not last long. as the more members, the more difficult they are to recruit new members and eventually fall off by itself. unfortunately, there is a clause in the agreement containing benefit can only be granted if there are new members – the chapter that was usually approved by the members. so when this falls, the money game makers could not face justice. business money games are usually packed with interesting and different names like gathering and mode of helping others; people help people. if recently many cases and victims of money game in indonesia, it is more because of the financial regulation is unclear. according to eka, the case of money game continues to occur because many people are not aware of and understand about the economy. in fact, economic literacy is one of the strategies to avoid such frauds investment money game. moreover, eka added, the victims are usually the type of person who is easily tempted by the lure of high profits, and those who have spare funds but do not know how to invest it, and the person who is economically driven.6 money games businesses usually do not have a real product to sell to consumers. in fact, this is the main difference from a proper mlm business. therefore, in order to be seen as a proper mlm, some money game companies made products. however, the products have very poor quality.7 4. research method to make research into a systematic, a method needs to be defined. therefore in this study researcher will use a methodology for describing, assessing and analyzing the data. the basic function of methodology is to help in reaching the truth. despite so many approaches debated among the researchers, there are those who classify those approaches in two major types: quantitative research and qualitative research (holmes et al, 1991:172). the former is also frequently named as mainstream or positivistic approach, while the latter has several different names, such as critical, interpretive, phenomenology, and so on, for each term implies different characteristics of its 5 femina pesona, “apa itu money game”, retrieved from http://www.pesona.co.id/article/apa-itu-money-game, on wednesday, 9 december 2015 at 9.29. 6 sukses bisnis usaha, “mewaspadai money game”, retrieved from http://suksesbisnisusaha.com/bisnis-investasi/mewaspadai-money-game on wednesday, 9 december 2015 at 9.34. 7 sigit setiawan, “mengenal bisnis money game”, retrieved from https://sigitstw.wordpress.com/mengola-keuangan-pribadi/penghasilan-dan-faktorpendukungnya/mengenal-bisnis-money-game/ on wednesday, 9 december 2015 at 10:24 http://www.pesona.co.id/article/apa-itu-money-gamethe economics perspective of the practice of mmm-indonesia 81 research approach or method. although the difference among naturalistic approaches mostly lie in the technical levels of research, this is not so if mainstream and naturalistic researches are compared. the differences between the two emanate further from ontological assumption, and consequently from epistemological approaches. these are followed obviously by methodology and research methods. the critical approach is a relatively new approach. it is strongly related to the frankfurt school, more particularly jurgen habermas (aitken & gaffikin, 1987). in recent development, it is now growing into diverse types. in this respect, laughlin and lowe (laughlin & lowe, 1990) say: “it would be wrong to see the alternative approaches which they advance as some homogenous set. despite the diversity in critical approaches, this study adopts the critical theory in the sense of its essential features. effective critical analysis is dependent on one’s understanding of the terms topic, thesis, purpose, and point of view.8 16these terms overlap in meaning and are sometimes used interchangeably. the real aim of critical theory is not to predict but to provide the knowledge that social agents need to know in order to realize their own best interest in a rational manner (gaffikin, 1989). it seems that this approach is quite in keeping with the objectives of this study. 1. type of and research approach this study is a qualitative research. qualitative research is an approach which is also called investigative approach because researcher collected data by directly engaging and interacting with people in the study (bungin, 2001). according to the data source, this study is categorized into field research. field research is empirical research which data and information derived from the activities in the field of research (supardi, 2005, p. 10). this type of research has been due to the type of data collected is the data obtained from the respondents. thus, to obtain the desired data researchers need to plunge directly into the field. with field research method, researchers work directly in the field to collect data by observation of active participation, in addition to using interviews. its main purpose is to describe the conditions in the field, so it can be studied the problems and systems that have been implemented by the mmm. a “modified” descriptive-empirical approach is going to be applied in this study. this implies that the study will not purely adopt the descriptive theory as it is, for there is a necessity to adjust it to empirical facts in some extent. therefore some of the empirical method will be included to get closer to the more precise conclusion. basically, there are three major components of qualitative research. first, there are the data, which can come from various sources such as interviews, observations, documents, records, and films. second, there are the procedures that researchers can use to interpret and organize the data. these usually consist of conceptualizing and reducing data, elaborating categories in terms of their properties and dimensions, and relating through a series of prepositional statements. conceptualizing, reducing, elaborating, and relating often are referred to as coding. other procedures are part of the analytic process. these include non statistical sampling, the writing of memos, and diagramming. written and verbal 8 maple woods community college writing center staff, 1999 http://www.sce. carleton.ca/faculty/chinneck/thesis.htm afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 82 reports make up the third component. these may be presented as articles in scientific journals, in talks, or in books (strauss, 1998, p. 12). 2. research location research location has been conducted in yogyakarta, since the mmm operates in a number of other places in the world, information from other places will also be included for comparison. yogyakarta is one of the basis participants of the mmm in indonesia. a server of website seminar between managers of the mmm-indonesia is in yogyakarta. 3. research informants informants will be taken from participants of the mmm-indonesia, academics, and others. other parties that can be taken as informants of research are: the investors, sources of data media, victims, and managers of the mmm. there are various managerial levels in the mmm participant. the informants will be taken in each of them. insider informants are the most important. researcher attempts to learn the insider’s view to seek the help of knowledgeable individuals from within the mmm. obviously, researcher wants someone who has been involved in the mmm long enough. other qualities to look for are that they should be observant, reflective and articulate. however, researcher has no access to the administrator of the mmm despite its important role to give technical information. the administrator existence is a secret in the mmm. nobody knows their existence except sergey mavrodi himself. once rumor said that there was once when the identity of administrator is leaked and soon after it mavrodi changed the administrator board. mavrodi wants to keep their identity hidden.917 4. informants selection technique informers will be selected through theoretical sampling. the researcher makes an initial selection of informants; collects and analyses the information and produces a preliminary explanation. after that and based on this explanation the researcher will decide what further information to collect and from whom. once these new data are analyzed the theory is refined, and which in turn guides the next round of information collection. 5. data collection technique data (single datum) is a material that contains information about an object of research acquired in the study site. actual data definition similar to the definition of information, it is just information more highlighted in terms of services, while data further highlight the material aspects (bungin, 2001:119). data collection techniques are part of the research plan associated with the process of determining ways to obtain or collect data research.(supardi, 2005:117). the technique for collecting data in this thesis is done by several methods. the data in this study are divided into two types, primary data and secondary data. interviews and observations are the primary data in this descriptive research. however, secondary data will be used to provide broader overview. 1. primary data, primary data is data obtained or collected directly in the field by the researcher. the primary data are: 9 an interview with arif hidayat a 1 thousand manager of the mmm on saturday, 12 desember 2015 at pakualaman square yogyakarta. the economics perspective of the practice of mmm-indonesia 83 a. preliminary survey, a preliminary survey was conducted to determine the characteristics, the general picture and the overall activities of the company and matters related to the discussion. this technique is a preliminary study to find out about the company's operational systems and internal aspects of the organization of the company. b. literature studies, this study was conducted by collecting a wide range of literature relevant to the discussion of research in the form of books, magazines, newspapers and other scientific papers related to the study. c. field studies, namely studies carried out directly to the object of research with the aim of describing all the facts that occurred on the object of study, so that the problems can be solved. the technique used to obtain the data by carrying out field studies are as follows: d. interviews, interviews were conducted by way of question and answer orally and meet directly (muhamad, 2008:151) to the managers of mmm. e. observation, by observing either directly or indirectly to the object under study. 2. secondary data, they are: a. documentation, documentation techniques used to collect data in the form of written data containing information and explanations as well as thinking about the phenomenon that is still actual and are associated with the research problem. documentation technique begins by compiling the document, choose the document in accordance with the purpose of research, record and explain, interpret and connect with other phenomena. b. researcher obtains primary data from inscriptions, manuscripts and archival (either in the form of printed goods or recording), the image data, photos and so forth. with these data the researcher can complete the study (supardi, 2005:117). c. records, including; data of history, concept of forming, vision and mission of founding the company, data of organizational structures, table of bonuses and other supporting data about company, data of the operational management, rules, etc., and data of practice applied through field observations, by perceiving directly to find the actual facts in the field. 6. validity of data validity of the data will be examined through data cross-check against other data from other sources. data will be selected and chosen the most valid for subsequent use in the analysis. one classification of the validity that is generally accepted is that consists of three main forms: content, criterion-related, and construct. content validity of an instrument measuring the extent to which these instruments include a research topic. if the instrument contains a representative sample population of subjects studied, the validity of the content is good (muhamad, 2008:130). 7. data analysis technique in the qualitative research, data analysis technique that is often used is descriptive analysis technique. descriptive study concerned by the current situation, attitudes and views in society, conflict two states or more, the relationship between variables and so forth (moleong, 1994: 288). this kind of research is done afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 84 at the level of study to reveal a phenomenon or sign and circumstances as they are. this study outlines the research activities to make a systematic description of a fact (supardi, 2005:28). the data analysis will use interpretative techniques. the facts from mmm will be confronted with the basic principles of finance. what is not in accordance with finance will be discarded. number of findings will be collected to be taken into consideration in making conclusions. 5. finding and analysis mmm refer to four different companies that are all founded by sergey mavrodi. first, mmm that was electronics company established in 1989 and has already collapsed. second, mmm-1994, which run ponzi finance in 1994 and also has collapsed. third, mmm-2011, like the current system but still collected participants fund directly. fourth, mmm-2012, is not collected public funds but only providing the system to transferring the fund from one another participant. table 1 the mmm transformation company year characteristics mmm 1989 electronics importing company, collapsed. mmm-1994 1994 pure ponzi scheme, collapsed. mmm-2011 2011 pyramid scheme with official accouts to collect participants fund and run its own campaign. mmm-2012 2012 pyramid scheme with no official account and the participants to make their own campaign. source: interviews with taufik – a national top leader, on january 8, 2016. discussed in this study is the mmm-2012, which is the latter and actual mmm. the term that will be used to refer mmm-2012 is hereinafter referred to mmm alone. a brief history of two previous mmm’s will be mentioned to provide a broader view of the latter the mmm. analysis begins by explaining the mmm internally; mmm identity, the system, and the participants' views of the system. practically the sytem of the mmm only exists on the internet. no one knows where their office to operate the system. informations about their existence can only be found in some journalist report or from their own website. a. the practice of mmm-indonesia 1. the participants’ behaviour and view on the mmm it is not easy to find participants mmm. most of them hide themselves when questioned. this is a common sign of an illicit activity. psychologically, people who make mistakes tend to shut down to admit the mistakes. this is contrary to their repeated claim that they are just the charity community, as why they would hide themselves from the public if their actions do noble work. however, there are still some participants who show their action publicly. they believe that there is no need to hide as they do nothing wrong. they also believe that mmm is the right system and people should join it for the good of themselves. the economics perspective of the practice of mmm-indonesia 85 this group of people in yogyakarta is led by krisnawan heru suryanto, a mmm one thousand manager. he is the most active manager who regularly runs a campaign about how to follow the system correctly and safely. he insists that most people even amongst participants misunderstand the mmm. he says that his commitment is to correct all wrong perceptions about the mmm.1018 he says that there are two keys to follow the system correctly; 1) self positioning, and 2) using free money. he says that all participants should consider themselves as a donor when they put the money into the mmm system so they never expect to lose the money in the future, this is what he means by self positioning. the other key is to use the free money. free money is a term created by the mmm to describe spare money or unliability money. krisnawan believes when both keys are followed participants would have nothing to lose. jeffry, a top leader in manado, a friend of krisnawan, says that the only thing that participats enjoying from the mmm is the spare money. he himself have enjoying this spare money almost in entirely of his life. although there are still much of his ‘old mavro’ yet be able to be liquidated, the total amount of what he has received is much higher than those locked old mavro so he has no problem with that.1119 taufik another mmm leader from madiun sees the mmm with another perspective. he does not agree to call the mmm is a mutual-aid scheme as the official claims. he rather uses different thought that he see it just the new financial system. he compares the mmm to the banks. he believes that the mmm is far better than bank due to some following factors; 1) mmm does not collect participants money, 2) participants only need to buy a mavro when there is another participants who need to sell the mavro at the same time. he rather sees the mmm as a community organization with same interesting and interest such as bmw community or ninja community. he believes that this thought is more acceptable to the public rather than the familiar thought.1220 the story of participants is not always good. rais, a student of magister of islamic studies in uii, feels that he was a victim of the mmm. an interview with him suggests that he was doing a wrong manner in following the system according to krisnawan belief. he seen the mmm as an investment business and he used unsafe money. he lost all the money and also he lost the contact to the manager who was introduced him the mmm. however, he believes that he is still the member of the mmm, at least as long as he is not receiving his money back.1321 knowing the intention of the founders and participants is a key in solving this problem. they claimed that their intention was to help people sincerily. it is need 10 first interview western indonesia timeh krisnawan heru suryanto on sunday, 13 december 2015 at bamboo restourant, 10am to 4pm western indonesia time. 11 interview western indonesia timeh jeffry at 27 desember 2015 via video conference at 21:00 pm western indonesia time. 12 interview western indonesia timeh taufik on friday, 8 january 2016 at 10:00 pm western indonesia time. 13 interview western indonesia timeh rais at 2 january in yogyakarta at 1:30 pm western indonesia time. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 86 to be clarified whether their intention was consistent to the practice of mmm. if their intention was contrary to the practice then mmm is haram. it is clear that the intention of the participants is trying to make money by joining mmm. it is obvious that this fact is contrary to the intention expressed. therefore, hence there is no consistency between intention and reality then the claimed intention is rejected by itself. regarding the intention of the founders, these are difficult to trace, because it is difficult to track where funds are flowing. the funds could flow into administrator accounts. lack of clarity about the board, making clarification of the intention becomes impossible to acquire the real intention. most participants have agreed at some point when they see the mmm, the following table shows their thoughts: table 2 participants view of the mmm activity participant level view arif hidayat manager 1k social krisnawan manager 10k social andreas wijaya top leader social taufik top leader business jeffry top leader social rais victim business hartadi beginner business source: interviews and discussions with all participants even when the ojk called a number of mmm participants for questioning, all of them were absent from the call. rusli nasution, the ojk head of investigations for the financial services sector, said the regulator had found several names on the mmm website and facebook page and invited them for questioning on april 7 at the financial regulator's headquarters regarding to review their business. however, as of now, the invited people have still failed to show up. rusli said that their domiciles are in bekasi and bogor, west java, as well as tangerang, banten. some gave clarification for their absent saying that they were busy.1422 table 3 participants profession after joining the mmm participant profession after joining the mmm arif hidayat tourism agent active krisnawan politician non-active andreas wijaya trader non-active taufik farmer less-active jeffry christian priest less-active rais student active hartadi milk producer active source: interviews and discussions with all participants the participants are required to trust the fellow members. it is somewhat difficult to be realized as members may not know each other very well. they are 14 grace d. amianti, “ojk warns of fraud risk in mmm scheme”, retrieved from http://www.thejakartapost.com/news/2015/04/10/ojk-warns-fraud-risk-mmm-scheme.html on wednesday, 9 december 2015 at 6:27 pm western indonesia time. the economics perspective of the practice of mmm-indonesia 87 also required to believe in the management of mmm which is unclear controlled by whom and where. server mmm seems to be abroad. mmm participant’s confidence seems just based on the cradle lure of big profits. mmm participant's trust completely unfounded. many participants finally lose their trust in mmm and resigned. most of those who resigned even do not want to admit that they've once joined mmm. when the system restart in late august and early september 2014 many less loyal participants resigned from mmm and never join again, who remain are only loyal participants plus some new participats recreuited by the loyalists. mmm system was successfully restored some old fund. the restart caused reduces of participants in a significant number.1523the restart was probably the only way mmm can do to reduce the number of participants. by restarting the system they can reduce a significant number of participants and be able to avoid the exced of their capacity. an old participant with the initials am who has currently resigned believed that the restart is only a trick to recruit new participants and to reduce old participants in a same time. new participants will bring fresh money and will support the new round of the system to continue.1624 a dialog with mmm manager revealed that the most manager believes that the mmm is no more than just to provide a system to facilitate mutual aid between the participants. further they believe that those who reject the mmm are the ones who do not recognize mmm as a whole. they said that mmm only facilitates the system and can not be blamed. who should be blamed are the users of the system, its participants. the system could be fall if many people are abusing the system. one example of abusing the system is to create multiple accounts, which is prohibited. another form is to do ph with bonus money that should have been used for real business. 1. economics analysis perspective many academics have concluded that the mmm running a ponzi scheme. others put it into the pyramid scheme. this difference occurs because of differences in viewpoint. scientists argue ponzi scheme look of the mmm financial side. while the opinion of the pyramid scheme see mmm structural side. thus, this difference is not the difference in the opposite but is complementary differences. the research by elkina says that investors can earn money from financial pyramid, if they are a creator or a part of this system, so they know economy and nuances of this scheme very well. however, the research concludes that financial pyramids are much more often risk, losses and lie than revenue and wellbeing (elkina, 2014). pyramid scheme is also used not only for earning a huge sum of money, but also without paying taxes on it (puscaciu et al., 2014). the mmm perhaps is the only pyramid in history that continues to work successfully after the financial 15 an interview western indonesia timeh arief hidayat at 12 december 2015 at pakualaman square at 10 am western indonesia time. 16 angga aliya, “sistem mmm restart, bagaimana nasib para partisipan?”, retrieved from http://finance.detik.com/read/2014/09/12/071022/2688241/5/sistem-mmm-restartbagaimana-nasib-dana-partisipan on wednesday, 9 december 2015 at 6:46 pm western indonesia time. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 88 collapse in the netherlands, france and england during the earlier period (rajko, 2007). ponzi scheme is prohibited in finance because it contains gambling, moreover because ponzi scheme practices money game which is also prohibited in many countries. research by christopher jarvis shows ponzi finance can lead to a crisis in a country (jarvis, 2016). 2. potential areas for fraud regardless of unilateral mmm claims about their activities, there are still the potential areas for fraud in it: a. the claim that there is no central account managed by the admin, this can not be proved at all. it could be one of the accounts, from the thousands of accounts that exist in the system, is an account of mmm. it could be also mmm has thousands of accounts, which look like participants account. b. the claim that all members help each other willingly and voluntarily is doubtful. initial motives of the participants allegedly is earning money from the mmm. when the motive is truly for earning money then the mmm belongs to the category of investment activity. c. claim that their activity is to destroy the current global financial system which is not fair does not have the correct logic. if they want to fight the banking system why they still use bank accounts in the transaction. if the banking system blamed for applying the system of interest, their activities are also promising even greater interest. d. claims that to earn money one does not have to work but can expect help from others is also unacceptable. the mmm will only provide aids if someone has been helping others first. what if there are people who can not help at all, then he will never be helped. safir senduk said in a television show apa kabar indonesia1725that the risk in the mmm can occur when: 1. when no one is willing to provide help, as long as there are still new people coming most likely provide help will continue to exist. 2. when the website is in maintenance or blocked. table 4 potential areas for fraud suspected areas potential fraud no central account it could possibly be that the mmm founder has his own participant account in the system where he can ask for as much money as he wants. sincere help it is contrary to the true intention of the participants which is to earn money from the mmm. destroying the current financial system contrary to the fact that all participants uses bank accounts for transaction. one does not need to work to earn money but all he a participant never gets help if he never provides help for others before. one has to have initial 17 retrieved from https://www.youtube.com/watch?v=p1ttnudbtam on thursday, january 14, 2016, at 9:04 am western indonesia time. the economics perspective of the practice of mmm-indonesia 89 needs to do is asking for help from others. money to help others. the problem is not everyone has the initial money. source: the mmm websites and interviews with the participants 6. conclusions mmm-indonesia practices pyramid scheme, ponzi scheme, and money game in its system. despite the public concern about it, the practice of mmm-indonesia is running rampant without any barrier in indonesia. there is no legal entity for the practice. the mmm do not hold a business license from the ojk since the ojk view it outside the financial industry. the ojk do not regulate and supervise the mmm-indonesia. the practice of mmm-indonesia has been became a public concern in indonesia that leads the kominfo do the blockings to some of the mmm websites but the blockings are ineffective as the mmm launches the websites in other addresses. to date, the government actions do not stop the activity of mmm-indonesia. 7. suggestions the indonesian government must ban the practice of mmm-indonesia because it could lead to the crisis in the country. the mmm practice is a threat to national economic growth and stability. since the mmm participants never pay tax for their earnings from the mmm, that fact can be used by the government for the reason of the ban. since there is the limitation of the access, the author cannot do the research to the server, moderator, administrator, and company management of the mmm. the research about how sergey mavrodi operates the system also remains unknown. there is no research about whether sergey mavrodi himself take a huge amount of money from the mmm or how he funds the system. the author suggests researching these areas for further 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(n.d.). apa kabar indonesia. retrieved january 14, 2016, from https://www.youtube.com/watch?v=p1ttnudbtam indonesia’s prospect of the halal food industry after covid-19 pandemic 98 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) indonesia’s prospect of the halal food industry after covid-19 pandemic eka fitriyanti*, vebtasvili faculty of economics, university of bangka belitung abstract this article discusses the prospects of the halal food industry in indonesia after the covid-19 pandemic. how with the real condition happened in society during this pandemic, especially for the halal food industry? and what are the opportunities and challenges of the halal food industry? this study observes that indonesia has various opportunities to be maximized in developing the halal food industry after the covid-19 pandemic. these opportunities can be an exploration of natural resources into halal food products, such as increasing export of indonesia's halal food, developing e-commerce for halal food products, and globalizing the halal food events. meanwhile, this study explains more about several challenges that need to be considered such as aspects of human resources, infrastructure, a production that has not created a model for the integrity to the halal industry from upstream to downstream, technology and information, and also the role of islamic financial institutions as a distributor of capital. keywords: halal food, covid-19 pandemic, indonesia’s prospect, halal certification. 1. introduction covid-19 was first detected in wuhan, china, on december 31, 2019, and designated a pandemic by the world health organization (who) on march 11, 2020 (who.int, 2021). as of november 14, 2020, more than 53,281,350 cases had been reported in over 219 countries and regions worldwide. this resulted in more than 1,301,021 deaths, while more than 34,394,214 people recovered (who.int, 2021). mobility restrictions, social distancing, lockdown, quarantine, and isolation were implemented to prevent the spread of the disease (rais, 2021). the pandemic is caused by food problems not considered for health, making the rules applied by islam in recommending food options fundamental (farnoosh et al., 2020). epidemiological studies on primary cases of covid-19 showed that the cases occurred at the food market in wuhan. this market provides food from animals considered haram for consumption. furthermore, another study stated that the sustainable consumption of halal food would reduce the risk of pandemics such as covid-19 in the future (amalia et al., 2020). this shows that eating halal food is a solution to prevent infectious diseases and maintain health. the covid-19 pandemic also affects education, social life, and economic conditions. the impact changes economic activity, stops some production, and significantly alters consumer purchasing habits, changing business operations (hidayat et al., 2021). although all business sectors were affected, the halal food industry experienced a positive impact. the performance of the indonesian halal food sector, one of the muslim-majority countries, recorded positive growth during the covid-19 pandemic, though with a slowdown compared to the previous year. this development causes the share of the islamic economy to increase in the national economy. the growth of the halal food sector and agriculture as the main supporter of *coressponding author. email address: ekafy1104@gmail.com https://creativecommons.org/licenses/by/4.0/ mailto:ekafy1104@gmail.com afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 99 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the halal value chain (hvc) in indonesia exceeds the national gross domestic product (gdp). additionally, the export value of halal food ingredients increased from around usd 30 billion in 2019 to usd 34 billion in 2020 (bank indonesia, 2021). this industry has also experienced an increase globally during the covid-19 pandemic. until 2019, indonesia has not entered the top ten best halal food countries worldwide. however, it experienced a significant increase in 2020, ranking the 4th world's best halal food country (bank indonesia, 2021). there are several studies regarding covid-19 and the halal food industry. as research conducted by yudha, candra, and kafabih (2021). in their writings, they found that the msmebased halal industry would be able to be a solution for poverty alleviation, distribution of consumption, public service media and other relevant instruments after the covid-19 pandemic (yudha et al., 2021). then the research conducted by hidayat, rafiki, and nasution (2021) which found that the covid-19 pandemic might change consumer behavior, not only in the short term but maybe in the long term. this will open up great opportunities for the halal food industry (hidayat et al., 2021). the potential of the world's halal food industry is suspected to be growing after the covid-19 outbreak. subsequently, this study aimed to analyze the prospects of the indonesian halal food industry after the covid-19 pandemic. the study question was about the opportunities and challenges of the halal food industry. indonesia has various opportunities that could be maximized in developing the halal food industry after the covid-19 pandemic. however, it should pay attention to various challenges ahead to enable the halal food industry to compete globally. 2. literature study the development of the halal food industry in indonesia the development of the halal food industry in indonesia began with cases of haram food that shocked the community, specifically muslims. it started in 1988 when tri soesanto, a lecturer at the university of brawijaya, examined products in supermarkets that allegedly contained pork elements. the findings caused panic among the wider community, including food product producers (chao, 2021). these issues led to a decrease in sales turnover of several food companies. the producer of instant noodles, indomie, admitted that its sales decreased by 20-30 percent from its turnover of 40 million packs per month. similarly, the sales of abc soy sauce fell by 20 percent, and the campina ice cream product linked to the study decreased by 40 percent (yunita, 2018). consequently, the government began establishing a halal assurance institution known as the institute for the study of food, drugs, and cosmetics-indonesian ulema council usually called by lppom mui. lppom mui has become the first and most trusted halal certification agency in indonesia. it is increasingly showing its existence as a credible national and international halal certification agency. the formation of lppom mui was based on a government mandate. mui played an active role in alleviating cases of lard in 1988. majelis ulama indonesia (mui) or indonesian council of ulama plays an important role in realizing the need of religious direction for muslim community in indonesia. it provides interpretation of religion through fatwa. fatwa is considered as an alternative to solve contemporary issues from religious perspective. in facing serious and pressing issue, fatwa is arguably the only solution of the society, even though fatwa has no place whatsoever in the formal legal establishment in indonesia (syafei, 2017). lppom mui was established on january 6, 1989, to carry out halal inspection and certification. in 1996, https://creativecommons.org/licenses/by/4.0/ indonesia’s prospect of the halal food industry after covid-19 pandemic 100 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) mui signed a memorandum of understanding with the ministries of religion and health to strengthen its position. the memorandum of understanding was followed by issuing the minister of religion decrees (kma) no. 518 of 2001 and kma no. 519 of 2001. this strengthened mui as a halal certification agency to inspect or audit and issue fatwas and halal certificates. in implementing halal certification, lppom mui collaborates with the food and drug monitoring agency (bpom) and the ministries of religion, agriculture, and cooperatives, and smes. it also collaborates with the ministries of trade, industry, maritime affairs, and fisheries, tourism, and creative economy. moreover, lppom mui collaborates with other higher education institutions in indonesia, including ipb university, muhammadiyah university, dr. hamka, djuanda university, uin, wahid hasyim university semarang, and the indonesian muslim university makassar (salman et al., 2018). cooperation with institutions has been established with the national standardization agency (bsn), the indonesian chamber of commerce and industry (kadin), the middle east committee, gs1 indonesia, and research in motion (blackberry). the mui halal certificate is required to include a halal label on the packaging for products circulating in indonesia, especially with the bpom. in 2017 and 2018, lppom mui obtained the sni iso/iec 17025: 2008 accreditation certificate for halal laboratories and sni iso/iec 17065: 2012 and dpls 21 for halal certification agency from the national accreditation committee (kan). this standard is recognized in indonesia and the united arab emirates accreditation board or esma (rangkuty, 2019). furthermore, the halal certification and assurance system designed and implemented by lppom mui has been recognized and adopted by foreign agencies, reaching 45 institutions from 26 countries. figure 1. data on indonesia’s halal certification source: according to data based on the institute for the study of food, drugs and cosmetics indonesian ulema council, 2022 the government has also issued regulations on halal food. the government has also established special authorities, such as the halal product assurance agency. the agency aims to accommodate the large potential of the domestic halal product market to help strengthen the religious tendencies of the indonesian population. the sharia economic development potential is mainly supported by the awareness of the muslim community towards the consumption of halal goods and services. the 2018 halal economy and strategy roadmap stated that indonesia's 39002 32890 64121 68576 77256 114264127286 204222274796 1292392 4869 6157 7014 10322 8676 7392 8157 17398 15495 44737 4325 5829 6666 10180 7940 6564 7198 11249 13951 19517 0 200000 400000 600000 800000 1000000 1200000 1400000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 halal product companies halal certificates https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 101 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) consumption of halal goods and services in 2017 was around 218.8 billion dollars. this number is estimated to grow by an average of 5.3 percent and reach 330.5 billion dollars in 2025. in 2017, indonesia was ranked first in muslim food expenditure, with 170 billion dollars (nirwandar, 2020). sharia economics observer from the institute for development of economics and finance (indef) abra talattov regrets that indonesia's position as a producer of halal goods is still below the non-muslim australia and singapore nations (asa, 2019). this means that indonesia has not caught the domestic market potential of the halal industry. indonesian halal food industry during the covid-19 pandemic the covid-19 pandemic has entered the new normal period, reducing health quality and economic stability. the economic decline in the new normal era shocks real economic fundamentals and damages the smooth market mechanism between supply and demand. the disruption of the vital economic, supply, demand, and the supply chain means the impact of the crisis would be felt evenly across all social levels. furthermore, the difference in the resilience of each level, specifically the decreased production, suggests the impact on the real sector would spread to the financial sector. the sector is depressed because many capital owners would lose their market share. therefore, as a country with the largest muslim population worldwide, muslims could provide their best role through various models of the halal industry. indonesia ranks first in halal food consumption worldwide, reaching 144 billion dollars (muryanto et al, 2021). although it has the largest number of muslims worldwide, this country cannot dominate the market share of world halal food products as a producer. indonesia has been dominant as a consumer of halal products. therefore, the government issued law number 33/2014 concerning halal product assurance as a reference for business actors to increase halal food production. the food and beverage industry has also been affected by the spread of covid-19. according to adhi s. lukman, the indonesia association of food and beverage entrepreneurs, the growth of the food and beverage industry before the pandemic grew by more than 7 percent on average (detik.com, 2022). this growth was only around 4-5 percent in 2020 due to declined household consumption. the covid-19 pandemic does not completely negatively impact the halal industry, specifically the food sector. the level of public awareness of healthy, clean, and hygienic products is increasing. this understanding would become increasingly popular because consumers equate halal food with healthy and hygienic food (ambali and bakar, 2014). in line with this, business actors turned to the online system to distribute clean and hygienic halal food during the pandemic. people are competing to provide halal food because the covid-19 pandemic is spread due to the absence of a healthy and clean lifestyle, making the virus multiply (hidayat et al, 2021). in this new normal era, the opportunity for the halal industry is large because people demand hygienic and halal products. lppom mui is collaborating with mui halal-certified companies. it invites around 260 companies to meet and synergize with the theme of gathering and synergy of lppom mui and halal certified companies in the success of the indonesian halal industry in the new normal era (muslih et al., 2021). lppom mui expects to become a liaison medium for accelerating the industrialization of halal products in indonesia. subsequently, mui's biggest achievement is the lppom mui halal certification standard recognized worldwide. lppom mui has achieved sni iso/iec 17065 from the national accreditation committee (kan). in 2019, it was accredited for adding the abattoir (rph) and the united arab emirates https://creativecommons.org/licenses/by/4.0/ indonesia’s prospect of the halal food industry after covid-19 pandemic 102 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) (uae) s.2055-2.2016 scheme. the mui halal laboratory has also won the sni iso iec 17025:2017 accreditation. consequently, 45 world halal certification agencies have adopted and followed the mui halal standard. during the pandemic, lppom mui also made efforts to maintain the quality of halal certification registration services. it registered through cerol-ss23000, which has been using this method for the last 8 years. another step is the modified on-site audit (mosa) protocol to ensure halal certification services run smoothly online. mosa compares audit evidence with the 11 has criteria required by lppom mui. the protocol stipulated by the mosa does not contradict the reference to sni iso/iec 17065 set by the national accreditation committee (latif et al., 2021). this means that it could be a reference in determining halalness by the mui fatwa commission. the development of the halal certification process in indonesia with registrations increasing from february to june 2020 could be due to increased efficiency in response to the covid-19 pandemic. as a result, halal food and beverage product transactions in e-commerce keep growing. this indicates that the prospects for the halal food industry are optimistic amid covid-19 with the use of digital technology. figure 3. halal product transactions in e-commerce during the covid-19 pandemic source: islamic economic and financial report issued by bank indonesia in 2020 figure 3 shows that halal food and beverages during the covid-19 pandemic reached the third-largest market share after fashion and personal care and cosmetics (bank indonesia, 2020). the products also experienced a high growth of 126 percent per year and 43 percent year to date. this shows that the halal food industry is increasingly in demand during the pandemic. 3. research methodology this research is a descriptive research qualitative with a phenomenological approach. this research is a library research which using secondary data obtained through scientific articles and other relevant documents. the data obtained is then analyzed by producing a descriptive explanation in the form of words, pictures or symbols that are linked with the object of this research. data analysis in this study was carried out in three stages, namely data reduction, categorization data, and data verification. data reduction in this research was conducted by selecting all data through truncation and simplification of data available according to the research topic. next categorization of the data that has been reduced according to the research topic, namely -050% 000% 050% 100% 150% 200% 250% 300% share growth (yoy) growth (ytd) https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 103 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) the role of halal food industry in the indonesian economy. stages the last is data verification to draw conclusions which is the researcher's interpretation of the data. verification is done by triangulation technique, namely compare one data source with another other data sources. 4. result and discussion indonesia is the largest halal food producer and market share for consumption with its abundant natural resources, though this opportunity has not been fully utilized. the muslim population in indonesia and the world continues to increase over time. the 2019 global state of islamic report explained that indonesia is one of the countries with a large potential for the halal industry, with 3000 trillion rupiahs per year. among the sub-sectors with the greatest potential is the halal food industry, with the potential to reach 2,422 trillion rupiahs. according to the master plan for islamic economics, the growth of the middle class increased by 7-8 percent per year, increasing the purchasing power (chang et al., 2019). this represents a large target market, specifically for indonesia, which population is mostly muslim. moreover, public awareness to consume halal food has increased, while the access of business actors, specifically micro, small and medium enterprises (msmes), to the international market is limited. lppom mui has achieved the uae 2055:2-2016 standard from the emirates authority for standardization and metrology (esma) to open the international halal market. the mui halal certificate has also been accepted by the global market, particularly the united arab emirates. halal food industry opportunities after the covid-19 pandemic a. exploration of natural resources into halal food products indonesia has great potential to develop its abundant natural products into halal food products. in 2016, the country was the largest producer of coconut, cinnamon, and cloves worldwide. it was also the second-largest vanilla and nutmeg plant producer worldwide. in contrast, banana and coffee yields rank third (calicioglu et al., 2019). the agricultural sector supports the national economic competitiveness, specifically in developing the halal food industry after the covid-19 pandemic. indonesia is also rich in marine and fishery resources. the development of the halal food industry in marine and fishery products has become a food item demanded by consumers during the covid-19 pandemic because the nutritional content increases immunity. the sea is one of the natural features of waters in indonesia, including lakes, swamps, and straits. it covers about 5.8 million km2, with a coastline of 81.00 km, the second-longest productive coastline worldwide (bps, 2019). according to the indonesian ministry of fisheries and maritime affairs (kkp), the sustainable potential of marine fish resources is estimated at 12.54 million tons per year (kkp, 2022). it is spread over territorial waters and the exclusive economic zone (eez). the area of the mapped coral reefs reaches 25,000 square kilometers. about 5.3 percent of the coral reefs are in very good condition, 27.18 percent are in good condition, 37.25 percent are quite good, and 30.45 percent are not good. the indonesian sea has around 8,500 species of fish, 555 species of seaweed, and 950 species of coral reef biota. fish resources cover 37 percent of the world's fish species. several fish species in indonesia have high economic value, such as tuna, shrimp, lobster, https://creativecommons.org/licenses/by/4.0/ indonesia’s prospect of the halal food industry after covid-19 pandemic 104 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) reef fish, various types of ornamental fish, shellfish, and seaweed (oktavilia et al, 2019). furthermore, the sea stores the potential of abundant non-biological resources. these marine resources are a huge opportunity to develop the halal food industry after the covid-19 pandemic. b. the increase in indonesia's halal food exports the export value of indonesian halal food materials has increased due to the demand from the global market that keeps growing amid the covid-19 pandemic. the country’s halal food exports reached 34 billion dollars or 483 trillion rupiahs in 2020. this amount is equivalent to 17 percent of the total global exports of 200 billion dollars (susilawati, 2020). export is one component of gross domestic product (gdp) that can encourage national economic recovery (pen). the ministry of trade has five strategies to encourage these exports. the five strategies involve; first, to maintain export markets and main products. second, to focus on export-oriented small and medium enterprises (smes). third, to penetrate non-traditional markets. fourth, to take the advantages of trade agreements. last, to create regulatory reform, in particular the derivatives of the job creation act. indonesia's main product and main export market must be maintained because it has a fairly large contribution. of the 10 main export destination countries, they contribute 70 percent of indonesia's total exports. meanwhile, indonesia's 10 main export products contributed 60 percent of indonesia's total export products (sugiharti et al., 2020). the local government has fully supported the increase in the export share of indonesian halal food products. the government has developed strategies to increase the exports, such as combining various available instruments. first, the government utilized policy instruments, such as export-import relaxation for halal products for export purposes. second, it strengthened market access for halal products in foreign markets using good facilities. third, the government initiated several programs that strengthen business actors in exporting halal products. in this situation, the ministry of trade facilitates halal certification for micro and small businesses. c. development of e-commerce for halal food products indonesia is a potential e-commerce market that has experienced a sharp increase since the covid-19 pandemic. the use of e-commerce has increased by five to ten times. in line with this, bank indonesia recorded an increase of 49.52 percent in nominal transactions for halal products through the e-commerce marketplace between may and december 2020 compared to 2019 (priambodo et al., 2021). in recent years, the ecommerce development in indonesia has increased quite rapidly. based on the current condition, there are more than 1,500 startups in indonesia (setyadi, 2019). e-commerce must follow the regulations regarding the digital commerce. the rules related to ecommerce consist of law number 7 of 2014 concerning trade. in addition, e-commerce must comply with the provisions of the ite law. in law number 7 of 2014 explained that every business actor is required to provide complete and correct data. business actors are prohibited from using systems that are not https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 105 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) in accordance with the data and information displayed on e-commerce pages. e-commerce has also received full attention from the government. in 2020, indonesia's medium-term target sets a vision as a digital economy country (margiansyah, 2020). the high potential of the indonesian and world e-commerce markets is a development opportunity for halal food business actors. the country has an opportunity to have a global halal productcommercial platform. therefore, business actors need digital innovation and cooperation with investors to expand their halal products online d. global halal food event organizing international halal food events is a branding of the indonesian food industry to the global community. the international meeting could be an arena for the government to evaluate the development of the halal food industry. this way, the government could create a roadmap for the future halal food industry more strategically. various international halal food events have been held annually, such as the malaysian international food and beverages trade fair (mifb), indonesia international halal expo (indhex), world halal forum (whf), summit world halal research (whr), international halal congress, and halal food world. at the 2022 international halal congress event, indonesia would be the host at the bangka belitung islands province (babelkemenag.go.id, 2022). this event could be an opportunity to promote the halal food industry to the world. it is a big prospect in developing the halal food industry after the covid-19 pandemic e. halal food article development scientific articles on halal food are benchmarks for developing a country's halal food industry. table 4 shows an overview of the development of international and national halal food scientific articles: figure 4. number of several halal food scientific articles source: created by authors, according to data based on google scholar, 2022 figure 5. development of several halal food scientific articles 2 4 8 0 .0 2 9 0 0 .0 3 3 0 0 .0 3 9 8 0 .0 5 2 1 0 .0 5 5 5 0 .0 6 2 9 0 .0 7 9 6 0 .0 9 6 2 0 .0 1 1 2 0 0 .0 1 0 8 0 0 .0 1 5 8 0 .0 1 7 0 0 .0 2 0 8 0 .0 2 2 6 0 .0 3 5 6 0 .0 4 9 6 0 .0 7 4 7 0 .0 9 9 3 0 .0 1 1 6 0 0 .0 1 1 8 0 0 .0 9 6 7 0 .0 .0 5000.0 10000.0 15000.0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 international national https://creativecommons.org/licenses/by/4.0/ indonesia’s prospect of the halal food industry after covid-19 pandemic 106 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) source: created by authors, according to data based on google scholar, 2022 the figure shows the yearly growth of scientific articles on halal food. in the covid-19 period from 2020 to 2021, the publication of scientific articles experienced a decline on international and national scales. therefore, studies should redevelop scientific articles on halal food after the covid-19 pandemic challenges of the halal food industry after the covid-19 pandemic a. human resource aspect the main challenge in developing the halal industry is the human resource aspect. this aspect would positively impact the rapid development of the industry because it provides a better market perception and understanding. human resources play an important role in the industry. good management of human resources and effective utilization would optimally run the industrial operating system. this industry involves human resources starting from top, personnel, and financial management, as well as halal supervisors (razalli et al., 2013). other human resources with an important role in providing halal products include auditors, slaughterers, product analysts, and tour guides. halal industry producers usually lack a good understanding of information concerning the provision of halal products. this is reflected in the financing, raw materials, production, marketing, and supply chain control. since the average production division does not come from sharia experts, the understanding of the processing of halal products on average is still limited. this causes weak production innovation, meaning innovation is still not as good as the conventional industry (grais and pellegrini, 2006). furthermore, innovation is strongly influenced by human resources' capacity to understand halal-based production. the problem of innovation also causes obstacles to the growth of the halal industry. this is due to the low intellectual property rights that limit the strengthening of innovation. the halal industry is only oriented to the fulfillment of religious principles, not to sustainable business innovation, specifically for the utilization of spatial potential b. infrastructure and production infrastructure is a challenge in developing the halal food industry because it should meet the aspects of distribution, sales, and marketing. it should also support research and development (r&d), the need for raw material sources, and production. in this case, production aspects that need consideration are from upstream to downstream, which still lacks a model for the integrity of the halal industry (zailani et al, 2010). furthermore, there are no protective and preventive efforts to ensure that halal industrial products are maintained after experiencing various processes and distribution channels with supply 0 1 7 % 0 1 4 % 0 2 1 % 0 3 1 % 0 0 7 % 0 1 3 % 2 1 % 0 2 1 % 0 1 7 % -0 0 4 % 0 0 8 % 0 2 2 % 0 0 9 % 0 5 8 % 0 3 9 % 0 5 1 % 0 3 3 % 0 1 7 % 0 0 2 % -0 1 8 % -040% -020% 000% 020% 040% 060% 080% 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 international national https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 107 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) chain handling activities (noordin et al., 2009). this issue is dominated by regulatory aspects and the industry's low knowledge of human resources regarding supply chain integrity. consequently, this problem is mainly faced by the halal food and beverage industry, which should pay attention to assurance from upstream to downstream. all parties in the supply chain from upstream to downstream should take individual and collective responsibility to protect halal industrial products from intentional or unintentional nonhalal contamination. moreover, the industrial supply chain should aim to achieve customer satisfaction and ensure that the products' halal status remains intact in the process. c. technology and information many issues should be considered in the halal industry. these issues include the lack of ingredients, addictive substances with correct halal standards, and quality products in muslim countries. other issues are the fragmented halal industry, global brands from muslim countries, and a lack of an approach to the supply and value chain (tieman, 2013). these issues could be overcome with technology and the philosophy of halal excellence and ecosystem. the importance of technology in overcoming challenges in the halal industry. an example of the application of technology in the halal industry is blockchain. islamic organizations providing halal certification could be connected through distributed ledgers to trace the supply chain using the blockchain (muwafaq, 2017). this is due to the challenge of differences in halal certification in several islamic countries. for instance, civet coffee is halal in indonesia but non-halal in malaysia. another technology supporting the halal industry is the internet of things (iot). iot could be used in the product delivery process, monitoring, accounting, inventory, asset and stakeholder management, and after-sales service (tarmizi et al, 2020). the application of iot in the halal industry supports automation, digitization, system tracking, and real-time monitoring. the halal industry also requires integration and collaboration among stakeholders by adopting technology d. the role of islamic financial institutions as a capital distributor in the indonesia’s islamic economics master plan 2019-2024, one policy in promoting the development of the halal food industry is synergy with islamic banking. this synergy would strengthen the supply value chains of the halal industry. bank indonesia, for instance, has a division in charge of islamic finance. it is also endeavouring to maximize lawful (halal) supply chain development in the financial sector, integrated agriculture, halal food and beverages, muslim fashion, renewable energy and halal tourism (fauzia et al., 2020). therefore, one major issue related to synergy is to promote the role of islamic banking, specifically concerning funding. one of the contracts useful in funding the halal food industry is mudharabah, a system, and a product. mudharabah is a system that guides islamic banks in conducting their transactions. as a product, its application in islamic banking has two forms. first, the customer is a depositor or the owner of capital, while the secon is islamic bank functions as a fund manager that runs a business (paino et https://creativecommons.org/licenses/by/4.0/ indonesia’s prospect of the halal food industry after covid-19 pandemic 108 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) al., 2011). this implies strengthening islamic bank financing to improve export performance and develop the halal food industry. data from the indonesia’s financial services authority in 2019 showed that islamic bank financing is dominant in the wholesale and retail trade, construction, and processing industries (putri et al., 2019). two sectors are related to the halal food industry, specifically in the downstream business context. however, in the upstream business context, the realization of financing for sectors that supply raw materials is still low, such as the agriculture and food sectors. therefore, islamic banking should promote upstream and downstream financing to improve overall development. 5. conclusion this study found that indonesia’s prospect of the halal food industry after covid-19 pandemic was supported by the increasing demand for these products during the pandemic. covid19 pandemic has increased people’s awareness to consume nutritious, healthy, and halal food. moreover, agricultural and marine products are the most sought-after foods by consumers during the pandemic because they are highly nutritious and increase immunity. indonesia has abundant agricultural and marine resources as good prospects in developing the halal food industry after covid-19 pandemic. cited on the indonesian ministry of fisheries and maritime affairs, the sustainable potential of marine fish resources is estimated at 12.54 million tons per year spread over indonesian territorial waters and the exclusive economic zone (eez). additionally, there was an increase in the export value and the development of e-commerce for halal food products during the pandemic. these are good prospects to continue developing the halal food industry. the ministry of trade has five strategies to encourage these exports. the five strategies involve; first, to maintain export markets and main products. second, to focus on export-oriented small and medium enterprises (smes). third, to penetrate non-traditional markets. fourth, to take the advantage of trade agreements. last, to create regulatory reform, in particular the derivatives of the job creation act. the next prospect is the e-commerce development for halal food products in indonesia during the covid-19 pandemic. in this case, indonesia is a potential e-commerce market. businesses using e-commerce have experienced a great increase since the covid-19 pandemic. the use of e-commerce in indonesia has increased in five to ten times. the biggest prospect for increasing the branding of halal food products is at the international halal congress to be held in indonesia in 2022. through this event, indonesia can use this opportunity to promote indonesian halal food industry to all over the world. this can be a very big prospect in the development of the halal food industry after the covid-19 pandemic. lastly, the scientific articles development on the halal food is one of the benchmarks for the country's halal food industry development. it can be a very good potential for the development of the halal food industry in indonesia. https://creativecommons.org/licenses/by/4.0/ afebi islamic finance and economic review (aifer) volume 7, no 2 (2022) 109 published by afebi economic and finance review this is an open access article under the cc by license (https://creativecommons.org/licenses/by/4.0/) this also found several challenges that need consideration, such as lacking human resources and infrastructure to support production, distribution, and marketing. the production lacks an integrity model for the halal industry from upstream to downstream. furthermore, technology and information in providing halal certification have not been connected through a distributed ledger to trace the halal supply chain. the role of islamic financial institutions as distributors of capital to the halal food industry is also not optimal. the main challenge in developing the halal industry is the aspect of human resources which will have a good impact on the rapid development. it is because it provides a better perception and understanding of the market. these human resources play an important role in the industry. good management and utilization of human resources will run the industrial operating system optimally. moreover, the infrastructure is a challenge in the development of the halal food industry because it deals with the aspects of distribution as well as the sales and marketing. infrastructure must also be able to support research and development (r&d), raw material sources requirements, and production. furthermore, the importance of technology in overcoming challenges in the halal industry is also justified by saaidal razali. one example of the technology application is the use of blockchain. with the blockchain, islamic organizations that provide halal certification can be connected through distributed ledgers with the aim of tracing the halal supply chain. finally, the challenge in the prospect of the halal food industry in indonesia especially in islamic bank financing is dominant in the wholesale and retail trade, construction and processing industries. both of the three sectors are related to the halal food industry, especially in the downstream/finish business context. however, in the upstream business context, the realization of financing for sectors that supply raw materials, such as the agriculture and food sectors, is still low. in order to support overall development, islamic banking needs to encourage financing from both upstream and downstream sides. references ahmad tarmizi, h., kamarulzaman, n. h., abd rahman, a., & atan, r. 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(2017). tracing maqasid al-shari’ah in the fatwas of indonesian council of ulama (mui). journal of indonesian islam. 11(1), 99-124. tieman, m. (2013). establishing the principles in halal logistics. journal of emerging economies and islamic research. 1(1), 19-31. who. (2020). getting your workplace ready for covid-19. http://www.who.int/ (december 30, 2021) yudha, ana toni roby candra, and abdullah kafabih. (2021). halal industry during the covid19 pandemic is the hidden blessing: industri halal selama pandemi covid-19 adalah berkah tersembunyi. el-qist: journal of islamic economics and business (jieb) 11(1), 17-32. doi: 10.15642/elqist.2021.11.1.17-32 yunita, hanna indi dian. (2018). studi tentang peluang dan tantangan industri pangan halal terhadap perekonomian di indonesia. diss. universitas brawijaya. zailani, s. h. m., ahmad, z. a., abd wahid, n., othman, r., and fernando, y. (2010). recommendations to strengthen halal food supply chain for food industry in malaysia. journal of agribusiness marketing. special edition, october 2010, 91-105. https://creativecommons.org/licenses/by/4.0/ https://doi.org/10.15642/elqist.2021.11.1.17-32 economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 25 7 economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) moch. khoirul anwar1* and hariyati2 1,2 surabaya state university, surabaya, indonesia abstract theoretically, revenue is one of local wisdom community empowerment models which is effective nowadays. this model is based on potential and social fabric conditions of the local community. the study aims to analyze the influence of the economic perspectives, cultural perspective and sharia perspective on revenue of society’s income in east java. this study uses a mixed methods study, with a qualitative and quantitative approach. the population and samples are the society in blitar, jombang, and madiun. the result of the qualitative analysis showed that there are three (3) models of implementasion in cow-calf lease agreement (gaduh) and share farming (paron) system. the first model implements profit sharing system by taking maintenance cost into account. the second model implements sharing system as well but it takes farming workers in the deficit of profit cost into account. the revenue that is based on profit sharing is still in 50:50. while the third model uses revenue sharing system without taking administration and workers cost as the cost component. however, the revenue proportion becomes 75:25. those models are reviewed from shariah perspective, economic perspective and cultural perspective. from quantitative analysis showed that economic perspective has bigger influence. keywords: economic perspectives, mixed method, profit sharing, revenue, shariah perspective 1. introduction gaduhan (cow-calf lease agreement) is the term for revenue in the farm field which is usually practiced on society’s farms. while parohan ( share farming ) is the term of revenue for farmers. gaduhan and parohan is one of economic systems which is commonly used in rural areas in indonesia that has existed since the ancient time. this system is based on mutual cooperation culture and trust that has been accustomed to do in the countryside . the revenue practice of the agricultural land and maintenance of cattle in indonesia has lasted a long time with tradisional system. there is no certain system that regulates it formally and writes about it, because a culture of trust , mutual help and mutual cooperation is underlying the system. there are no problems during the implementation of the system * corresponding author. email address: emkhoirul@yahoo.com mailto:emkhoirul@yahoo.com afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 26 starting from the beginning to the end of the process. if gaduhan or parohan gives satisfactory results, the results are divided according to the agreement and practice, but if there is a loss, the loss is also borne jointly and the capital owners usually give compensation to rice farmers who do this, although not many. related to the knowledge about the rules for revenue and sharia business, theoretically their knowledge is very low, but in practice they are already implementing a system for the results and the business for a long time. the rules about the revenue are based on an agreement between two parties and there is no certain workshop about the revenue so far. there are only workhop about health, farming of cattle and farming. in this system, cattle and farm are entrusted to someone to develop. cows deposited ranges from 2 to 5. the ownership of a cow or rice is arising from the purchased by the owner of the fields or cows and subsequently deposited. rice fields or cows that have been purchased are usually shared with other parties trusted by the owner. in the transaction, no written agreements related to the system because mutual trust is a culture that is becoming a habit in this case. the activity is chosen because hersnments or farmers generally have much spare time. hence they usually take advantage of free time from the system. the implementation of the system of revenue sharing among farmers in rural areas, is not only constituted to meet the needs of any material profit but also as a form of communication and kinship adhesive them. in addition, cultural factors and mutual cooperation dominates in this system. the implementation of the system has been very strong in rural community and is proved to spur economic growth. therefore, this system is to be developed in such a way that it becomes an ethical business and economic activities to empower communities based on the aspect of good cooperation. this research was specifically conducted to explore the system of revenue from the perspective of economics, culture and sharia in order to increase people's income. research question based on the background above , the questions of this study are as follows : 1. how does the cultural scene in the revenue can increase incomes viewed from the perspective of economics, culture and sharia . 2. how does the economic perspective , culture and sharia affect the increase in people's income. 2. theoretical framework economic perspective in revenue sharing one understanding of economics is the study of how human behave to organize consumption and production activities. therefore, any economic system including the islamic system which is applied in this world will always be associated with three main economic problems (the three fundamental and interdependent economic problem ). these three problems are what items and how much, and to whom they are created and distributed. conventional economic system assumes that the optimal welfare will be achieved if each factor of production has been allocated in such a way in order to reach the ideal balance in all sectors of production. in the view of the consumer, economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 27 optimal well-being can be achieved if the distribution of such goods have been allocated to each customer, in order to reach the ideal balance. islamic economic concept which is for the public welfare by the treasures of islamic literature is the ownership of property, including individual ownership, common ownership, and state ownership. the managerial should include the utilization and development of the property. islamic political economy which is implemented by the state is to ensure the achievement of all basic needs (primary) each individual community globally, warranty which allows each individual to meet the needs of complementary (secondary and tertiary) in accordance with their capabilities. syariah perspective in revenue sharing sharing agreement in shari'ah economy is part of a partnership contract or syirkah. etymologically, the word shirkah (company) means mixing (ikhtilat), mixing two or more parts so that it can no longer distinguish between the one with the other part (syafe 'i, 2001: 183). while according to the terms, syirkah is a partnership contract made by two or more parties to the agreement in terms of capital, skills, or confidence in doing business with the goal of obtaining a profit divided by revenue sharing agreements (mardani, 2012: 220). the general form of business for sharing is musharaka (syirkah or syarikah or union or partnership). the musharaka transaction is based on the desire of the parties working together to increase the value of the assets that they own collectively in groups. musharaka involves all forms of business that include two or more parties in which they jointly integrate all forms of resources both tangible and intangible. specifically the contribution of those who cooperate may include funds, goods trade (trading assets), entrepreneurship (entrepreneurship), intelligence (skills), ownership (property), equipment (equipment) or intangible assets (such as patents or goodwill), trust / reputation (credit worthiness) and other items that can be valued in money. syirkah law itself is permissible (may). the reason is that many people had been practicing syirkah when the prophet was sent, and he let such transactions continue to run. in other words, recognition (taqrir) the messenger of allah against those actions constitute arguments of personality on its mubah. prophet has allowed muslims to do trade by syirkah. this is in accordance with the hadith qudsi which was narrated by abu hurairah that the messenger of allah said, verily allah almighty has said, "i am the third party of the two parties which do syirkah during one of the two do not betray other colleagues. if one traitor, then i am out of both. "(hr. al-bayhaqi and addaruquthni). shirkah is part of muamalah (human relations) which may be performed among muslims or between muslims with non-muslim. a muslim may do syirkah with nashrani, jewish or other non-muslims. imam muslim ever narrated from 'abdullah ibn' umar as follows: from 'abd allah ibn' umar, from the prophet that the prophet had handed palm groves to the jews of khaibar to be worked with the capital of their possessions. and he gets half of his harvest. "(hr. muslim). in practice, syirkah must meet in pillars and conditions. mardani (2012: 220) explains that the majority of scholars argue that there are four pillars of syirkah, namely shighat (contract), 'aqidatain (two people who do contract), and ma'qud' alaihi ( object transacted) . shighat is a phrase that came out of each of the two parties to a transaction and shows the will to do the contract. shighat consists of ijab qabul which can be words and deeds. while aqidatain are two or more parties afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 28 that do contract. terms of people who do contract is the one that must have skill or eligibility (ahliyah al-aqad, namely puberty, intelligent, clever, and not blocked to spend possessions) do tasharruf (wealth management). the ma'qud 'alaihi (object) in the form of principal amount can be either property or employment. the conditions of work or objects that must be managed in syirkah is lawful and permissible in the religion and its management may be represented. in addition, it should not be payable in the form of property or objects that are not known because it can not be run to achieve the goal of syirkah, namely benefit. while the conditions to be met in the contract of syirkah, the scholars agreed that the conditions are as follows: 1. the two parties to a transaction have the capacity or expertise (ahliyah) to represent and accept representation. 2. shirkah capital is known. 3. syirkah capital exists at the time of the transaction. 4. the amount of profit is determined by the sum of the effect, such as a half, a quarter, and so forth. regarding the forms syirkah, basically there are only two kinds of syirkah, namely shirkah al milk (ownership) and shirkah al uqud (contract). shirkah al milk is caused not by contract, but through inheritance, wills, or other conditions that influence the ownership. as for the syirkah contract created due to an agreement between two or more people to work together in providing capital and they agreed to do for both profit and loss results. according to sayyid sabiq, syirkah is divided into several types, namely syirkah `inan, syirkah 'abdan, syirkah wujuh, and shirkah mufawadhah. shirkah 'inan is syirkah between two or more parties, each of which contributes to the work (charity) and capital (the mall). profit-sharing in this syirkah is adjusted by the amount of capital of each syirkah offender, if each capital is 50%, then each bears the loss of 50% as well. this shirkah is permissible based on the arguments of the sunnah and ijma 'friend. the second form of syirkah according to sayyid sabiq is syirkah abdan, namely syirkah between two or more parties, each of which contributes only work (charity), without any capital contribution (charity). they do the work. then operating results are divided among them under the agreement, such as a building contractor, roads, electricity and so forth. in some literatures, this syirkah also called shirkah 'charity. for example: a and b are both fishermen and agreed to sail together to catch fish. they also agreed that when obtaining the fish, it will be sold and the results will be shared with provisions: a gains of 60% and b obtains 40%. this syirkah does not require similar profession or skill. so, syirkah abdan may consist of several carpenters and plumbers. however, it is required that the work performed is a lawful occupation and can not be an unlawful employment. the next syirkah form is syirkah wujuh, namely cooperation between two or more people who do not use capital assets, but the trust and profits are shared among their peers. so this syirkah is based on the position, persona, or expertise (wujuh) of someone in the community. for example: a and b are trusted figure traders. then a and b do syirkah wujuh by buying goods from a merchant on credit. a and b agree that each has 50% of the items purchased. then both sell goods and profits are divided into two. while the basic price is returned to the seller. the profit of the syirkah wujuh is divided by agreement. economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 29 furthermore, there is a form of syirkah mufawadhah, namely cooperation between two or more persons to conduct a business with the following requirements: 1. the amount of capital must be given in the same number. if the amount of the capital of a member is more , then syirkah mufawadhoh is considered invalid. 2. it has similar authority to act in connection with the law. 3. it has a similarity in terms of religion. 4. each member has the right to act on behalf of shirkah. in addition, there are also forms of syirkah called the mudaraba, the business cooperation agreement between the two parties, in which the first party provides the entire capital (shahibul mal), while others become managers or entrepreneurs (mudharib). mudaraba business profits are divided according to the agreement in the contract, but if there is a loss, it is borned by the owners of capital loss as long as the loss is not due to the negligence of the manager. if the losses are caused by fraud or negligence of the manager, then the manager should be responsible for the losses. the contract is agreed at the beginning so that if there is a profit, then the division will follow the production sharing contract. suppose a contract for the result is 60: 40, where managers earn 60% of the profits while capital owners receives 40% of profits. in the implementation, mudaraba is divided into two, namely mudharabah muthlaqah and mudaraba muqayadah.mudharabah muthalaqah is a form of cooperation between capital owners and managers, whose scope is very broad and is not limited by the specifications of the type of business, time, and businesses area. while the mudaraba muthlaqah is the opposite of mudharabah muthlaqah, the business will be run limitedly by the type of business, time, or place of business. relating to agriculture, there are several forms syirkah, namely musaqah, muzara'ah, and mukhabarah. according to fiqh scholars, musaqah is cooperation between plantation owners and farmers in which the owner's garden hand over to farmers in order to be maintained and the harvest will be divided into two according to the percentage specified in the contract period. musaqah concept is the concept of mutually beneficial cooperation between the two sides (symbiotic mutualism). it is due to the fact that infrequently the owners of land do not have the time to take care of their farm, while on the other hand there are farmers who have a lot of free time, but do not have land that can be cultivated. with a system musaqah cooperation, each party will equally have benefit and profit. while muzara'ah and mukhabarah are equally co-operation in the execution of agricultural land, but has some differences. muzara'ah is cooperation in agriculture between the landlord and tenant farmers where the seeds come from farmers' crops. while mukhabarah is cooperation in the field of agriculture between landowners and sharecroppers in which the seeds of plants derived from the land owner. muzara'ah was often identified with mukhabarah. however, both actually have a slight difference. muzara'ah and mukhabarah is a form of processing of agricultural cooperation between landowners and tenants that have been known since the time of the prophet. in this case the landlord gives the tenants of agricultural land to be planted and maintained by the division of a certain percentage of the crop. in indonesia, particularly in rural areas, the second model of cultivating the land was equally practiced by farming communities. the syari'ah grounding is contained in the hadith and ijma’. in a hadith narrated by imam bukhari and muslim explained that the prophet never rent the land to the people of afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 30 khaibar to the agreement that half of the proceeds is to the owner of the land. this hadith has been narrated by some friends, among them are ibn `umar, ibn 'abbas and jabir bin' abdillah. this hadith is used as a foundation by scholars who allow the practice of muzara'ah and mukhabarah. according to them, muzara'ah and mukhabarah are good cases and are also done by the messenger of allah until he died. practices such cooperation is also followed by khulafa'ur rasyidin until they died and then followed by subsequent generations. cultural perspective in revenue sharing the cooperation which is carried out jointly is called as mutual help, eventually it is becoming strategies of life which alleviates mutual expenses of each label of work. such cooperation is a proof of harmony between humans for life community, especially for those who still respect and execute the values of life, which is usually done by rural communities or traditional community. but it is still possible that that urban community requires a spirit of mutual assistance. mutual assistance as a form of social solidarity is formed because there is a help from the other parties, for a review of private or group interests, so that the society has loyality as one unit. integrated life of a community can be seen from the solidarity between them through mutual help without the need for a review in return, such as helping unfortunate or distress people. but this kind of help is becoming an obligation to review especially if it deals with the work which is related to farming or celebration. similarly, if the work that the results are to review the joint interest, then it requires community service. mutual assistance activities are carried out by the community of rural or urban area who always require others. the value of mutual assistance in urban area is very different from mutual assistance in rural areas. it is because urban people have been much influenced by the material and wage system, so that trade-offs will be taken into account in conducting mutual assistance, while in rural areas mutual cooperation has not been much affected by the material and wage system so that the activities needed is as a matter of solidarity between people in a single territory or kinship. in this case koentjaraningrat (1984: 7) suggested mutual assistance activities in rural areas as follows, a. in case of death, illness, or accident, in which the families who are suffering from it, they will receive aid in the form of energy and matter from neighbors and others entire village; b. in terms of jobs around the household, for example, repairing roofs, replacing the wall of the house, cleaning the house of the rat, digging wells, etc., for which homeowners can enlist the help of neighbors by providing food assistance; c. in terms of parties, for example, at the time of marrying, help not only be requested from the relatives, but also of its neighbors, for preparing and organizing the party; d. in doing useful work for the public interest in rural communities, such as repairing roads, bridges, irrigation dams, public buildings etc., to which the villagers can be moved to devotedly on the orders of the village head. mutual assistance can be regarded as the characteristic of the indonesian people, especially those who live in rural areas who applies for generations, so as to form a real social behavior then shape the values of social life. the existence of these values lead to mutual cooperation that has always nurtured in community life economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 31 as a cultural heritage that should be preserved. relation to mutual assistance as cultural values, bintarto (1980: 24) argues that the value was in the system of the culture of indonesia that contains four concepts, namely: (1) a man is not alone in this world but surrounded by his community, society and the universe around him. within the macrocosm system he feels himself only as a small element, which is carried on by the circulation of the vast universe. (2) thus, humans are essentially dependent in all aspects of life to others. (3) therefore, it should always strive for as much as possible to maintain good relations with others motivated by the soul equally common sense, and (4) always try to the extent possible in conformity, do the same with each other in the community, driven by the spirit of equal height equally low. the existence of a value system that makes mutual assistance is always maintained and required in many aspects of life , so that mutual assistance will always be in various forms adapted to the cultural conditions of the community. mutual assistance as a form of integration , is influenced by a sense of togetherness among members of the community who do voluntarily without any collateral in the form of wages or payment in any other form , so that mutual help is not always necessary to form committees formally but notice of activities and execution time is sufficient to the community, then the work is carried out and will be dismissed by itself . the advantages for mutual assistance is that a job becomes easier and lighter than if it is done individually ; it reinforces and strengthens the relationships between members of the community where they are even with relatives who have lived elsewhere , and ; it unites all members of the community involved in it. thus , mutual assistance can be done to ease the work on agricultural land, to relief work in the events that related to the party which is held by one of the members of the community , or to work together in making and providing a common need . 3. research method research approach this study uses a mixed method, which uses a qualitative and quantitative approach. qualitative approach, is a form of research that seeks to provide a systematic and thorough overview of the subject or object of the study. while quantitative approach which is used in this study is on the level of explanatory. it aims to test the hypothesis of the influence of the economic perspective, the perspective of culture and sharia perspective on the output (output) on a culture of rowdy cattle and rice anvil. data was collected through questionnaire. the unit of media analysis of this study was rowdy cow business and rice anvil. the respondents of this research are cattleman and cattle owner in srengat district, blitar, east java. this research is a behavioral research that uses the perceptions of cattleman and cattle owners who are considered to have enough knowledge about the culture of gaduhan holistically. qualitative approaches in this qualitative approach, validity and reliability of the data are done through triangulation and using the data collaboration. the data then are analyzed qualitatively based on logical thinking analysis. the steps are: 1. data reduction (to sort the quality of data), 2. understanding and testing (synchronization attempts to findings and literature review), 3. interpretation (findings associated with the theory). afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 32 quantitative approach after a qualitative approach with a focus on the cultural variables that affect the outcome in rowdy cattle is done, the researcher then analyzes the data quantitatively to obtain justification of the significance of the influence of the variables. in the quantitative approach, there are two types of variables: three (3) independent variables which include an economic perspective, sharia perspective and the perspective of cultural and social, whereas one (1) dependent variable is the outcome of a cultural of rowdy cattle / anvil fields. this study uses partial least square (pls) data analysis. pls is a structural equation modeling (sem) based components or variant (variance). analysis of structural equation modeling (sem) with a 4:00 version pls warp program is used to test the hypothesis. the variables in this study were classified as follows: (a) outcome of the culture for the revenue of cattle (rowdy cattle) / anvil rice is dependent variables with indicator (1) increase revenues, (2) the aspect of togetherness in the community, (3) maximize the work, (4) a business that is comfortable and serene. (b) an economic perspective is independent variables with indicator (1) improve the welfare, (2) reduce unemployment, (3) increase revenues, and (4) make ends meet. (c) shariah perspective is independent variables with indicator (1) worship, (2) there is no fraud, (3) the existence of a collective agreement in the business of rowdy / anvil, (4) a fair profit, (5) there are no losers. (d) the perspective of cultural and social have indicators (1) the activities carried out for generations, (2) people's habits, (3) strengthen silahturahmih, (4) part of helping each other, (5) the sustainability, (6) the support of the penggaduh / owners of capital, (7) lack of support from the government, (8) the support of the community. economic perspective, sharia perspective and the perspective of cultural and social influence the outcome of the culture for results in srengat and ponggok district in blitar. the hypothesis in this study are: 1. economic perspectives influence the outcome of the culture of revenue / rice anvil directly. 2. sharia perspective influences the outcome of the culture of revenue or rice anvil directly. 3. social and cultural perspectives affect the outcome of the culture of revenue / rice anvil directly. the focus of the quantitative approach in this study is the economic perspective, sharia perspective and the perspective of cultural and social influence the outcome of the culture of revenue in srengat and ponggok dictrict in blitar. this study uses data analysis approach partial least square (pls). pls is a structural equation modeling (sem) based components or variant (variance). analysis of structural equation modeling (sem) with a 4:00 version pls warp program is used to test the hypothesis. economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 33 4. analysis and discussion results and discussion with qualitative approach results and discussion of this study from a qualitative approach are as follows: 1. the implementation of gaduh (cow-calf lease agreement) and paron (share farming) culture in terms of economic perspectives. in general, all of the key informants do not know about islamic business even though they actually have implemented the business. it is seen that knowledge about the key informant for the results is very low, but in practice they are already applying for the results. rules about the results in accordance with an agreement between two parties. the rule was never stated in the formal agreement or formal rules. so that all key informants did not know about this islamic business even though they actually have implemented the business. islamic business which is applied by cattle farmers (cow-calf lease agreement) and farmers (share farming) is strongly associated with the outcome. their share mutual trust and mutual respect of rights and its obligations. basically the system of profit sharing is an agreement of cooperation between shohibul malls and businesses in which venture capital is fully (100%) comes from shohibul mall. the entrepreneur as a recipient of venture capital-financed manage shohibul malls and shall provide for appropriate agreement. if there is a loss, then the risk is borned by shohibul mall since the loss is not due to the negligence of the employer or force majeur. this kind of prinsipal force is widely practiced by sharia financial institutions, both micro and macro. the model of this revenue is also practiced by the public in developing their work. for instance it is done in blitar, precisely in srengat district. some people in the area rely on rowdy cow /rice anvil culture in the search for fortune. the activity of rowdy cow and anvil rice with a profit-sharing system that has lasted for generations in rural communities, particularly in sub srengat, turned out to have a positive impact on the economy and well-being, namely the effort for this result, people get a chance to take advantage of the ability and energy to work and earn an income, the evidence is that their average income from cow-calf lease agreement / share farming is 1 million per month. this revenue sharing system has been long known by the people of our farmers. for example is gaduh system, which has been practiced since many years ago by farmers in central and east java . gaduh system is known as the livestock business cooperation of mutual benefit between capital owners with the herdsman. the owner entrusts his livestock to be maintained by the other party, and the result is divided by two. the type of the cattle is usually in the form of beef cattle, buffalo or goat. in aceh, west sumatra, south sulawesi and possibly in other areas, this system has also been put into practice, although under different names. livestock owners generally have higher level of social and economic life than the herdsman. care process begins premises qabul consent, usually unwritten, mainly on how to distribute the proceeds of rowdy. form agreement was adapted to the conditions of the parties to the agreement. there are two common types of agreements. first, the revenue is done by dividing by the children produced by the livestock. in this case livestock owners entrust an animal as a baboon (the parent). by herdsman, farm animals had been treated to breed. usually the first derivative of the rights goes to the owner of the livestock, the next birth is for herdsman rights, and so on alternately. afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 34 another model is the result of profits, based on the agreed ratio. the owner notifies the price of the cattle livestock, then by herdsman maintains it properly. several years later, after the developed cattle is sold, they sat down together to calculate the sales results. after deducting the purchase price of cattle, they divide the benefit for over a deal that has been made. other forms of agreement is usually just a variation of the two types of such agreements. both sides usually have been long known each other. a fit and proper test take place naturally, through everyday social intercourse. they already know each other the morality of its business partners. the owners know very well the people who do livestock, not just about its agreement alone but also those who believed it was known to have adequate knowledge and skills to cultivate the livestock. this rustic-style wealth distribution mechanism practice is very pretty. on the one hand, livestock owners may not have enough time and skill to cultivate livestock, on the other hand herdsmen do not have the capital but have the time and skills to manage livestock. this cultivation that are developed in accordance with islamic economics. besides, we also know that sharing system which normally applies to the cultivation of rice. this fact proves that the farmer or rancher are already familiar with the revenue. seeing the reality of the above, it is fitting for us as academicians to pack for the culture of revenue (gaduh and paron) into the culture that led to the populist sharia economy. for this there needs, it is necessary to have the preservation of the culture by modeling and applying it in a sustainable manner and giving education about intensification and diversification with regard economic growing conditions. from an economic perspective, cow-calf lease agreement and sharing system is the basis for a productive business community economic development in the region. it is of great potential for national food security, especially the needs of the flesh, given the support of the natural environment that still allows for the farm. the intensification and diversification, among others, can be done by making multifunctional cage, for the production of biogas from manure and the production of organic fertilizer from cow dung. the prolific pen systems, can be developed on any herdsmen who generally have side jobs in agriculture. thus there are multiple outcomes that can be utilized by herdsmen (beef cattle workers) turns into biogas, which can be used for cooking and lighting home everyday. furthermore, from the dregs of the cow dung, can be used for the base material of organic fertilizer which can be used for sale to consumers or for the benefit of other agricultural enterprises, so as to increase agricultural production in addition to raising cattle. based on the explanation above, there are a variety of factors from the economic perspectives that effect the society to do revenue culture. these factors include: the benefits, in the village customs, beliefs, individual income, expenses, individual entrepreneurial spirit. 2. the implementation of gaduh and paron in terms of cultural perspective the previous reseach of the implementation of revenue system in srengat district blitar result three paron system models; 1. landlord cooperates with tillers, overall cost is covered by the tenants and the results are 50%: 50%. the division of these findings are taken from the findings of net sales; 2. landlord cooperate with tillers, overall cost is covered by the owner and the results are 75%: 25% (owner: tenants/herdsmen). the division of these findings are taken from the findings of net sales. this model is called kedokan and it is now very rarely done; economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 35 3. landlord cooperates with tenants. generally, the whole cost is covered by the tenant , but if owners want to provide fertilizer, then it is considered as a help which is not accounted in the end of period. the results are 50%: 50%. the division is taken from the findings of net sales. while relating to rowdy system, there are several systems in srengat district blitar: a. for the purpose of fattening cattle (beef) cattle owners purchase cattle and aim to be traded. after the cow was purchased then the cows are handed over at the cattle-keeping. maintenance is carried out for 3-4 months. the entire feed and maintenance costs are paid by the farmer. once the cow is ready for sale, then they are sold. the results of sales are divided by the amount of the distribution of the same portion of 50%: 50% which are taken based on the selling price. b. cows for the purpose of breed the owner bought sires (male and female) to be maintained by the tenant/herdsmen. the entire feed and maintenance costs are paid by the farmer. there are two models in the revenue: 1) type 1: if the cow gives birth, the first child is for the owner of the cow, while the second child is for the tenant/herdsmen and so forth. 2) type 2: if the calves are sold, the revenue share is 50%: 50% of the selling. if the maintenance costs are paid by the owner, the proceeds is deducted in advance for the cost of consumables, and then it is divided by 50%: 50 %. the concept of culture is as a system of ideas, actions and man's work in the context of a society that is used by the human as self learning (koentjaraningrat, 1990: 180) . seeing from a cultural perspective, the sharing system of rice anvil / agricultural land and rowdy cow in srengat districts bitar has become a habit and culture of the community. some cultural perspective that can be explored, namely: first, a culture of mutual trust (honest) is very strongly reflected in the anvil system or farmland and rowdy cow. the culture of mutual trust can be seen from the pattern of the transaction / agreement / contract which is made orally (no written agreement). of key informant information, throughout the many years of experience contract is done only orally. transaction is done for generations and has become habit. the culture of mutual trust which is still held strong in communities of farmers who implement the system for the revenur of the anvil and rowdy, until now is still maintained and followed. cultural taboos denial of the appointment is still maintained within the farming community. second, a culture of mutual cooperation (mutual aid) and cooperation. as stated by key informants, most owners take the initiative to provide assistance in the form of fertilizer to the tenants outright, without taken into account in the final of revenue. so that they see it as pray. similarly, when cattle ranchers suffer losses, some small owners provide assistance in the form of rupiah, although a small amount of rupiah but can be considered a form of participation losses, although the owner also has to bear the some losses. beside that, at there are employers who sincerely provide capital to the cultivation of ducks to be managed independently. third, simple. based on culture in a culture of mutual trust (honest) and mutual cooperation, culture raises sharing system (paron) and cow-calf lease agreement system (gaduh) which is implemented by community srengat district in blitar. the system is simple and practice. data have been obtained from key afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 36 informant show in sharing/revenue , a standard measure used is not stiff . distribution of rice crops , such as rice or corn , land owners and tenants do not always use the size kilogram ( kg ) , but they can use the container ( a ) of the bag or other container that can measure and calculate the appropriate harvest sharing agreement . based on the cultural perspective of rowdy and anvil system implemented in sub srengat blitar, it has become a habit and a growing culture of mutual trust in the society. the culture of trust (strong hold honesty), a culture of mutual cooperation (mutual aid) and simple culture into a culture characterize the revenue system (cow-calf lease agreement and sharing system ). 3. implementation of gaduh and paron in terms of islamic perspective in the implementation of gaduh system and paron which is done in srengat district in blitar, the first model introduces a system of profit sharing by calculating the total cost of the maintenance. the concept is closer to justice because for all perpetrators of noise obtain benefit proportionately. the first model is presented in the following figure: figure 1 first revenue model the second model is using a system of profit sharing but taking labor cost into account in the component of profit defisit. therefore, the deduction for revenue which is based on the profit sharing is still in the proportion of 50:50. 50 % tenaga/keahlian+biaya pemeliharaan akad pemilik penggarap modal sapi/sawah usaha hasil biaya 50 % bagi hasil modal economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 37 figure 2 second revenue model while all third models uses the revenue sharing system without taking into account administrative costs and ranchers as a component of labor costs, but the proportion of profit sharing is 75: 25. the proporsion is taken on the grounds of 25% to cover the costs of maintenance and labor. this proportion is also in accordance with the decree of the minister of the interior and the minister of agriculture no. 211 of 1980 no. 714 / kpts / um / 9/1980 on guidelines for the implementation of the republic of indonesia presidential decree no. 13 of 1980. these regulations are made to protect people who do not have knowledge about profit-sharing and closer to justice. for more details, a model for all three results are presented in the following figure: biaya 50 % 50 % tenaga/keahlian+bia ya pemeliharaan modal sapi/sawah akad pemilik penggarap usaha gaduh / paron hasil biaya modal bagi hasil afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 38 figure 3 third revenue model of the three models of implementation of revenue for rowdy and anvil system in the srengat district blitar, people use more on the third model (revenue sharing system) than in the two previous models. this is due to the fact that they do not want to be complicated by the certain calculations. whereas they put forward the trust between each other. the use of the profit sharing model and revenue sharing certainly has advantages and disanvantages. the advantage is that both of them are the best tool to remove the bank interest in a wide range of transactions and business practices and business. in addition, the levels of investment is higher because it is given the adequate supply of the capital which can be borrowed / distributed, because of the high and low results obtained by tenants are depending on their business. the more the result of the profit generated, the higher the benefits tenants. thus, it is a motivation for them. this is a reflection of god's word in al-qur'an sura al-najm 39-40: 75 % 25 % tenaga/keahlian+biaya pemeliharaan modal sapi/sawah akad pemilik penggarap usaha gaduh / paron hasil modal bagi hasil economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 39 َوأَن لَّْيَس ِلْْلِنَساِن إَِّلَّ َما َسعَىَوأَنَّ َسْعَيهُ َسْوَف يَُرى and that man no gain other than what has been earned . and that the venture will eventually be seen ( to him ) . while the weakness of the profit sharing and revenue sharing model need high flair and precision, because the islamic economy is promoting honesty, while many businesses are less promoting it. similarly, in shari'a banking practice, the significance of profit and loss sharing in the operational fund of bank investment is very weak. according to some islamic banking observers, this happens for several reasons, including the reason of moral standards. there is a presumption that moral standards which are evolving in most muslim community do not give freedom of use of profit and loss sharing as an investment mechanism. it is based on the argument that encourage banks to hold more intensive monitoring of any such given investment. these things make banking operations uneconomic and inefficient. for this reason islamic banks use finance profit and loss sharing that were granted after monitoring the depth of the business to be, the funds will only be granted to partners who manage the business efficiently, to be honest in the transaction, the running business projects is profitable, as well as business financing is generally in short term and not for long-term financing and not the financial institution. besides, there is also reason for the ineffectiveness of the model of profit and loss sharing financing. financing profit and loss sharing do not serve a wide variety of financing needs of the ccontemporary economy. nevertheless, profit and loss sharing which are applied in the form of mudharabah and musyarakah is the best tool to remove bank interest in a wide range of transactions and short term financing. in addition, this probably make institutional credit become overdue. various problems related to the application of mudharabah and musyarakah at the level of institutional credit really can not be in use. the reason is that the increased demand for government debt to budgets, thus the request in the use of the loan by using a system of profit and loss sharing is not consummated. similarly, in providing funds for the system based on the results of profit and loss sharing requires higher vigilance on the part of banks in channeling their funds. islamic banks are likely to improve the quality of their personnel by employing engineers and experts to evaluate the project management of the business to which they lend to look more carefully and be more observant than conventional bank lending technical. this will increase the costs incurred by bankers in maintaining the efficiency of banking performance that will directly impact on refund loans. this will lead to a greater burden on the users of these funds. additional costs which are incurred by the bankers are used to maintain the operational effectiveness of islamic banking. they will probably result in extra costs in half by a partner when returning the borrowed funds which are based on a system of profit sharing profit and loss sharing. (http://jejakimawan.wordpress.com/2012/05/30/profit-sharing-vs-revenuesharing/ downloaded on may 16, 2015). in addition to using the model of revenue sharing system, the perpetrators of rowdy and anvil in srengat district blitar are also happy to use kedokan system, afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 40 land or cattle owners provide capital in the form of rice or a cow to the tenants, as well as the costs for the maintenance outcome. while the revenue is conducted in the end of business after deducting for the maintenance cost. due to the fact that tenants do not bear the maintenance costs, the profit sharing ratio which is received by tenants is smaller than the owner of the field / cow. more specifically, this kedokan system can be described as follows: figure 4 kedokan system in the kedokan system above, tenants are not burdened with the cost of seeds and the cost of maintenance. the one who provides seed and maintenance costs is land owners. so it could be said that the land owners employ the tenant but they are paid after finishing the work. the size of the reward depends on the yield. those kinds of efforts in islamic economics are like ujrah contract (wages hired), but because the wages given are from the things that are contracted and the vagueness of the amount of wages is given, then the system can not be categorized as ujrah contract. as described in rozalinda (2005: 107) that terms of wages in the contract ujrah are (1) wages form of objects which are known to be allowed to use it (the mall mutaqqwwim), (2) something that is valuable or can be rewarded with money in accordance with local custom, (3) wages / reward is not in the form of contracted things, for example, renting a house with a house. in general, the residents of srengat blitar use three models of forms of cooperation in the field of agriculture explained above. in shari'ah perspective, the 30 % 70 % tenaga/keahlian modal sapi/sawah + biaya pemeliharaan akad pemilik penggarap usaha gaduh / paron hasil bagi hasil -modal economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 41 models could be categorized as muzara'ah contract which is a form of cooperation between the owners of the land that gives the right to manage the land to the tiller with the results in accordance with the agreement as a condition. in muzara'ah, the landowner iss responsible for the cost of seed and maintenance. in addition, the kedokan system which is conducted by the residents of srengat, blitar can be categorized as a contract mukhabarah, namely cooperation agricultural processing between landowners who provide land to the tiller with certain benefits (percentage) of crops in accordance with the agreement, and the seed comes of tenants. while in the field of animal husbandry which is conducted by the residents of srengat, blitar in shari'ah perspective could be categorized as mudharabahc contract, the mutually beneficial cooperation between the capital owner with the manager (in this case the breeder). capital will evolve so that farmers be helped in the work (to avoid unemployment), and the profits are divided by two. at a rowdy culture specifically for the purpose of fattening cattle, one drawback is never done recording by the cattle owner. while the maintenance costs, the result is determined based on the selling price. therefore, it can be assured that the one who obtains the profit is financiers (the owner of the cow), while for farmers are not necessarily .in addition it has not fulfilled a 50:50 profit share based on profit sharing, but it is based on revenue sharing. in economics shariah, the basis of trading attitude should remain a voluntary basis. it is listed in the letter of annisa; 29: ا أَيَُّها الَِّذيَن آَمنُواْ َّلَ تَأُْكلُواْ أَْمَوالَُكْم بَْينَُكْم بِاْلبَاِطِل إَِّلَّ نُكْم َوَّلَ تَْقتُلُواْ أَنفَُسكُْم ََ أَن تَُكوَن تَِجاَرةً َعن تََراٍض م ِ َ َكاَن َن بُِكْم َرِحيماً إِنَّ اّلل " o you who believe! do not eat each other neighbor's property by way of vanity ( not true ) , except in the trade applicable to consensual among you . and do not kill yourselves ; allah is merciful to you . " thus, the main rule in trade is no coercion and on the basis of considerations which brings benefits, avoid madharat in social life, as well as maintaining the value of justice. specifically, the legal basis used in muzara'ah and mukhabarah cooperation is a hadith narrated by ibn umar "that rasullullah gave the land of khaibar to the jews on the condition that they want to do and cultivate it and take some of the results". in addition, there is also a hadith narrated by imam bukhari "from abdullah ra said: rasullah has given the land to the jews of khaibar and he managed to get a share (reward) of what is produced from it." in addition, there is also a hadith narrated by imam bukhari from jabir who said that arabs always cultivate their land by muzara’ah with the profit sharing ratio of 1/3: 2/3, 1/4: 3/4, 1/2: 1/2, then rasulullahpun said: "let the planting or submit it to work on. anyone who does not do one of them, resist the land". while the sharing of muzara'ah and mukhabarah, should be based on the overall results of paddy cultivation. it is appropriate with the hadith narrated by imam bukhari, rafi 'bin khadij said: "among the ansar who most have the land are us, then the land is rented , most of the land for us and some of the land for those who do the work , sometimes it works well and the other is not successful, then therefore the prophet muhammad prohibit paroan (sharing system )in that way. "this hadith explains that sharing paroan rice should not be based on any afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 42 particular distribution of land, but the results of the overall management of the rice fields are in accordance with the previous agreement. a leading scholar, imam ibn qayyim, explains that the story of khaibar is the dalils of muzara'ah and mukhabarah which is done by dividing the results obtained between the owner and the workers, either in the form of fruits and other plants. prophet himself was working with the people of khaibar in this regard. such cooperation may take place until late he died, and there is no proof that removing these laws. even the caliph also do cooperation. cooperation model is not included in this type of mu'ajarah (hiring people to work), but included in the musharaka (partnership / collaboration), and is the same as for the results. so also with the practice of mudaraba which is conducted by the residents of srengat district blitar is in conformity with the rules of shari'ah. the legal basis is the hadeeth narrated by ibn majah from suhaibah, he said: "there are three things that are endowed, namely the sale and purchase deferred, provide capital, and mix the wheat with dates for families, not for sale". moreover, imam malik also told of a'la bin abdur rahman bin ya'qub of his grandfather, that he had been working on / managing assets uthman ra, and the profits were divided by two. in regard to the results of the residents of srengat, blitar use maro bati culture (for profit equally). in islam, the division has been valid, because there has been a percentage value, mutually agreed and mutually benefited. although when it is viewed from a quantitative scale, land owners and cattle owner get more benefit without considering the cost of care and labor. thus, based on islamic rules, the concept for this result is valid. however, closer to the values of justice, we need a model that creates mutual benefit economically and equally. in addition, in the long term, considering the cost of maintenance and labor will determine the level of productivity of rice crops and cattle. impact of revenue sharing culture in srengat district blitar in shariah economic perspective the implementation of the results of muzara'ah system , mukhabarah and mudaraba in srengat district blitar has some impacts on the socio-economic growth sectors , such as : 1. can create the mutual help or mutual need between the parties to cooperate by avoiding the practice of usury 2. can add or increase income or economic sharecroppers and landowners to uphold justice . 3. can reduce unemployment . 4. can increase domestic agricultural production towards food self-sufficiency . 5. can encourage the development of the real sector that sustains economic growth at the macro level . 6. can optimize the unproductive land and turn them into productive and rewarding widely . results and discussion with quantitative approach. the quantitative approach this study uses pls sem analysis tool with the help of software warppls 4.0. warppls processing is the same as pls and other evaluation measurements of outer and inner measurement evaluation. inner measurement is to gauge whether or not the construct indicator is valid. while outer measurement is to measure the effect of exogenous variables on endogenous variables. based on the measurement reliability and validity indicators show that all are valid and reliable as following indicators: economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 43 table 1 model fit and quality indices average path coefficient (apc)=0.258, p<0.001 average r-squared (ars)=0.476, p=0.001 average adjusted r-squared (aars)=0.443, p=0.004 average block vif (avif)=1.695, acceptable if <= 5, ideally <= 3.3 average full collinearity vif (afvif)=1.893, acceptable if <= 5, ideally <= 3.3 tenenhaus gof (gof)=0.515, small >= 0.1, medium >= 0.25, large >= 0.36 sympson's paradox ratio (spr)=1.000, acceptable if >= 0.7, ideally = 1 r-squared contribution ratio (rscr)=1.000, acceptable if >= 0.9, ideally = 1 statistical suppression ratio (ssr)=1.000, acceptable if >= 0.7 nonlinear bivariate causality direction ratio (nlbcdr)=1.000, acceptable if >= 0.7 based on table 1 it appears that: 1. the value of p values for apc, ars, and aars <0.001 with apc = 0258, the value of ars = 0476 and the value of aars = 0443. 2. value of avif and afvif generated <= 3.3 which means that no multicoloniarity matter between indicators and between exogenous variables. 3. gof generated 0515> 0:36 which means a very good fit model. 4. spr, rscr, ssr, and nlbcdr generate value = 1 so there is no problem of causality in the model. to the effect of exogenous variables on endogenous variables which is shown in table 4.2 shows that economic perspectives affect the community empowerment. this is demonstrated by p-value <0.05. similarly cultural and social perspective also affect the community empowerment. while the sharia perspective has no effect on the community empowerment. it is due to the fact that p-value indicates > 0.05. the magnitude of effect sizes of economic perspective and the perspective of the cultural and social empowerment of the people is secondary because it shows > 0:15 while the effect sizes of sharia perspective on community empowerment figures show> 0.02 which means small influence. table 2 effect sizes path coefficients eko syr bdy pdm eko syr bdy pdm 0.469 0.018 0.288 p values eko syr bdy pdm eko syr bdy pdm 0.011 0.454 0.012 afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 44 effect sizes for path coefficients eko syr bdy pdm eko syr bdy pdm 0.303 0.008 0.165 table 3 shows whether or not the indicators forming the construct valid and reliable. it is said to be valid if the indicator has a value of loading factor < = 0.6 . this is because research is still to be explanatory. so that all the indicators that have a value < 0.6 to be at the drop of this research model . as in the picture 4.3. shows that : 1. there are four sub-indicators which are valid and reliable in indicators of forming the construct / variable economic perspective , they are ; increasing welfare ( x2 ) , reduced unemployment ( x3 ) , increased revenue ( x9 ) , as well as increased welfare ( x12 ) 2. likewise there are five indicators related to the indicator forming constructs / variables sharia perspective which are valid and reliable. the indicator is worship ( x13 ) , no deception ( x21 ) , agreement ( x22 ) , unfair advantage ( x23 ) , and no one harmed ( x24) . 3. variable cultural and social perspectives have indicators of which are valid and reliable. 4. while the indicator forming an exogenous variable that is empowering the community has four indicators that have a value higher loading factor, among others: increased income (y1), community togetherness (y2), the maximum in work (y4), and feel safe and comfortable because it was within the rules and religion (y5). table 3 combined loadings and cross-loadings eko syr bdy pdm type (a se p value x3 0.723 -0.038 0.089 0.088 reflect 0.192 <0.001 x9 0.789 0.065 0.076 0.110 reflect 0.192 <0.001 x12 0.732 -0.084 -0.021 -0.310 reflect 0.142 <0.001 x2 0.783 0.048 -0.138 0.097 reflect 0.154 <0.001 x13 -0.396 0.640 0.013 0.139 reflect 0.173 <0.001 x21 0.331 0.731 0.336 -0.581 reflect 0.235 0.002 x22 -0.099 0.765 -0.317 0.286 reflect 0.131 <0.001 x23 0.021 0.850 -0.150 0.234 reflect 0.101 <0.001 x24 0.099 0.700 0.165 -0.118 reflect 0.298 0.011 x25 -0.649 0.118 0.680 0.161 reflect 0.163 <0.001 x26 -0.090 0.222 0.664 -0.036 reflect 0.178 <0.001 x27 -0.082 0.179 0.794 -0.014 reflect 0.132 <0.001 x28 -0.369 0.040 0.623 0.504 reflect 0.178 <0.001 x29 0.559 -0.093 0.734 -0.358 reflect 0.200 <0.001 x30 0.190 -0.081 0.768 -0.150 reflect 0.123 <0.001 x31 0.046 -0.327 0.656 0.253 reflect 0.173 <0.001 x32 0.278 0.148 0.724 -0.288 reflect 0.164 <0.001 economic perspective, cultural perspectives, and sharia perspective in revenue sharing for village economic empowerment (case study on gaduh culture in east java) 45 x33 0.014 -0.231 0.681 0.047 reflect 0.244 0.004 y1 0.024 -0.024 -0.054 0.828 reflect 0.109 <0.001 y2 -0.142 0.126 0.158 0.791 reflect 0.145 <0.001 y4 0.078 -0.010 -0.220 0.788 reflect 0.145 <0.001 y5 0.043 -0.100 0.130 0.717 reflect 0.159 <0.001 notes: loadings are unrotated and cross-loadings are oblique-rotated. ses and p values are for loadings. p values < 0.05 are desirable for reflective indicators. table 4 shows that the value of r-squre model of this study was 0,476, or 47.6%, means that the empowerment of communities affected by the economic perspective, sharia perspective and the perspective of cultural and social activities. the remaining 52.4% is influenced by other variables outside the model of this study. composite reliability values of all variables showed a number> 0.7, which means very good so it fills internal consistency reliability. vifs collinearity full value indicates the number <3.3 so means there is no problem in collinearity. ave values are average figures as it is shown 0.5 corresponding to type of explanatory or confirmatory study. table 4 latent variable coefficients r-squared coefficients ekosyrbdypdm 0.476 adjusted r-squared coefficients ekosyrbdypdm 0.443 composite reliability coefficients ekosyrbdypdm 0.8430.8570.8980.863 cronbach's alpha coefficients ekosyrbdypdm 0.7510.7910.8720.787 average variances extracted ekosyrbdypdm 0.5730.5480.4970.612 full collinearity vifs ekosyrbdypdm 2.0641.6441.9561.907 q-squared coefficients ekosyrbdypdm 0.475 from figure 6 it can be seen that the economic perspective has a great influence on the cultural output of rowdy / anvil fields. economic perspective in terms of the main livelihood indicators , improve people's welfare, reduce the unemployment rate is a pleasant business, having job side, becoming financiers, improving the welfare of the family. figure 6 afebi islamic finance and economic review (aifer) vol.02 no.01, june 2017 46 5. conclusion from the qualitative analysis shows that there are some cow-calf lease agreements (gaduh) and share farming (paron) system in srengat: 1). for the purpose of fattening cattle (beef cattle). results of sales are divided by the amount of the distribution of the same portion of 50%: 50% which are taken based on the selling price; 2). cows bred for the purpose. there are two models in the distribution of the resvenue: type 1: the first calves become the property of the owner, while the second is a right of calf cattle belonging. type 2: if the feed and maintenance costs are paid by the owner, the proceeds are deducted in advance for the cost of consumables, and then divided by 50%: 50%. while the anvil fields, the revenue uses a system of profit sharing, revenue sharing and kedokan. in general, 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