journal of islamic economic laws vol. 3, no. 2 july 2020: 159-170 159 literature review on the role of the financial services authority (ojk) in oversighting sharia investment vanesa putri wardani1 and muhammad muinudinillah basri2 1universitas muhammadiyah surakarta 2universitas muhammadiyah surakarta email: vanesaputri9811@gmail.com, mm122@ums.ac.id abstract in overseeing investment, ojk collaborates with the satgas waspada investasi (swi). to oversee investments based on sharia principles, the ojk is assisted by the dewan pengawas syariah (dps) and the majelis ulama indonesia (mui). this review aims to determine the role of the financial services authority in overseeing islamic investment and assisting the public in choosing safe and licensed islamic investments from the ojk. this type of research uses qualitative research with content analysis techniques. the results of this research show that ojk has not been optimal in preventive action because there are still many who are deceived by fraudulent investment, and the low level of financial literacy and inclusion in indonesian society, while repressive action, ojk is quite maximal because it is firm in closing down investment companies that have the potential to be fraudulent and detrimental. keywords: ojk, investment, supervision, action. introduction indonesia is the world’s largest muslim country. based on data from global religious future, indonesia’s population who is muslim in 2010 reached 209.12 million or around 87% of the total population. by 2020, indonesia’s muslim population is estimated to reach 229.62 million (databoks.katadata.co.id, 2019). the indonesian muslim community is not yet fully interested in using islamic banking services, including: the public does not mailto:vanesaputri9811@gmail.com mailto:mm122@ums.ac.id vanesa putri wardani and muhammad muinudinillah basri 160 fully believe in the suitability of sharia financial institutions, the obligation of the workplace to use conventional banks, facilities related to business interests that are not fulfilled by islamic banks where most due to restrictions on authority by laws and regulations, and there is no adequate knowledge of the importance of sharia transactions from a religious perspective (hikmah, 2017). since january 2013, ojk officially started its duties as the supervisory agency for the indonesian capital market and other non-bank financial institutions replacing bapepam and financial institutions (bapepam-lk) and since january 2014 ojk has been the sole supervisory authority for the indonesian financial sector (indah, 2017). throughout march 2020, the investment alert task force (swi) has found and stopped 15 business activities suspected of violating investment regulations in indonesia, namely investment offering activities that do not have permission from the ojk and have the potential to harm the community (financial services authority, 2020). sharia investment is currently overseen by the financial services authority, but the role of the ojk in overseeing sharia investment still requires the role of the sharia supervisory board and the indonesian ulama council to focus more on supervising investment activities based on sharia principles (financial services authority, 2014). this paper aims to discuss the ojk’s supervision of islamic investment in a comprehensive manner. so that this review can be used as teaching material for future research, as well as helping the wider community in choosing safe sharia investments according to the direction of the financial services authority. literature review sari (2018) shows that ojk in collaboration with the satgas waspada investasi (swi) has taken two actions, namely preventive action against illegal investment and repressive action against illegal investment. on the other hand, ojk’s preventive action is to call all investment organizers and conduct direction, journal of islamic economic laws-july, vol. 3, no. 2, 2020 161 education and socialization related to the implementation and related regulations applicable in investment implementation, while ojk’s repressive action is to investigate investment operators who do not register and permit (pramana and atmadja, 2019). based on ahmad (2018), the actions of the financial services authority (ojk) in dealing with illegal investments in the community are to carry out socialization and education to the public regarding the characteristics of fundraising and investment management activities, dispute resolution, issue regulations related to legal protection of illegal investment victims, and create a satgas waspada investasi (swi). ojk is also authorized to take measures to prevent losses to consumers and the public (lestari, 2012). ojk implements customer protection procedures through swi, which opens complaints to the public for consultation regarding financial investment offers that are considered suspicious to ojk consumer services and swi (novitasari, 2019; masyitoh, 2019; bakhri, 2019). ojk as an independent state institution is an institution that coordinates the swi coordination forum between ministries and institutions to work together in handling and preventing problematic investments (vurista, 2019). pakpahan et al. shows that the ojk can help the indonesian stock exchange (idx) to socialize and educate about how to invest safely in the capital market. ojk, in protecting consumers and the public, has the authority to take measures to prevent losses to consumers and the public by establishing a work unit (satker) for education and consumer protection (epk) (elfajri, 2019; stiyana, 2018). from the literature above, there are several actions in monitoring islamic investment by the financial services authority, namely preventive and repressive. preventive actions are actions taken by ojk with the aim of preventing irregularities in the financial services industry, while repressive actions are actions taken by ojk to protect consumers of financial services, especially if the violations committed by financial services vanesa putri wardani and muhammad muinudinillah basri 162 institutions harm consumers and prevent illegal investment. meanwhile, there are two forms of investment supervision by ojk, namely directly and indirectly. methods this research uses qualitative data analysis with bibliography methods from various scientific articles as literature. the library method according to (zed, 2014) is a series of activities relating to methods of collecting library data, reading, and taking notes and processing research materials. while the qualitative data method according to (anggito, 2018) is research that does not use statistics but through data collection analysis, then interpreted. data taken from electronic journals is via google scholar. the search for electronic journals is in accordance with the research theme being written and at least the publication in 2011. from many electronic journals, the contents are in accordance with the theme being researched. the results of the search for electronic journals on google scholar obtained 13 scientific articles in the form of 9 scientific journals, and 4 theses with the keywords “role and authority of ojk”, “role of ojk supervision”, “protection of investors by ojk”, and “overcoming investment illegal by ojk “. the data analysis method used is content analysis or content analysis. it is a research that is in-depth discussion of the content of written or printed information in the mass media, content analysis refers to the process of categorizing verbal or behavioral data to classify, summarize and label data. results table 1. list of articles obtained no keywords type of article total 1. the role and authority of ojk journal 2 2. the role of ojk’s supervision journal 3 3. the role of ojk’s supervision skripsi (thesis) 4 4. investor protection by ojk journal 3 5. prevention of illegal investments by ojk journal 1 journal of islamic economic laws-july, vol. 3, no. 2, 2020 163 from the results of the search for references from several journals on google schoolar, there were 13 electronic journals that match the discussion criteria researched by the author, so that these electronic journals can be used as material to analyze the role of the financial services authority in overseeing investment. ojk’s preventive actions in supervising sharia investment according to ahmad (2018), ojk provides measures to prevent people from detrimental investments by taking preventive or preventive actions, namely by socializing and educating students (universities), sellers in the market, and the wider community. educate sellers in the market by directly visiting the markets, both traditional and modern markets, introducing which investments are licensed, and explaining what kinds of efforts to prevent fraudulent investments. and finally education for the wider community (vurista, 2019). according to (sari, 2018) education and outreach need to be carried out in coordination between the ojk, the investment alert task force, and local law enforcement. meanwhile, according to sari (2018), education and outreach need to be carried out in coordination between the ojk, the investment swi and local law enforcement. ojk’s repressive action in supervising sharia investment according to samosir (2018), the ojk’s repressive action in suppressing illegal investment is by filing complaints from the public who have suffered from fraudulent investment, the complaint or report will enter the information system, namely the intelligence market reporting information system (sipmi). regarding the handling of illegal investment cases, ojk and swi conduct investigations by taking into account 2 aspects, namely aspects of safeguarding aspects, and aspects of clarity of the parties responsible for illegal financial institution activities (novitasari, 2019). bakhri (2019) explained that swi issued an appeal against islamic investment companies that have not been licensed by the ojk. if the investment company is indicated to vanesa putri wardani and muhammad muinudinillah basri 164 have caused harm to the community, swi will follow up by giving a warning to the investment company that violates the rules. according to fadlia (2015), ojk regulates the obligations of financial service actors to resolve consumer complaints. if a consumer is not satisfied with the complaint handling by ojk, the consumer can continue the complaint to the court or the alternative dispute resolution agency (laps). financial services authority oversight in overseeing sharia investments according to masyithoh (2018), direct ojk supervision is a form of ojk supervision by coming directly to an investment company or place which can be called on-site supervision. ojk’s supervision of conventional financial institutions includes supervision of its islamic financial institutions, because islamic financial institutions send reports to conventional financial institutions for review as well as their operational findings. dps has the duty to report to the ojk for at least once a year regarding its sharia focus. ojk supervision indirectly or it can be called off-site supervision is by means of investment companies sending several files or reports needed by ojk through an online system in the form of monthly reports, publication reports, reports from the board of commissioners, annual work plan reports, and other reports (pratiwi, 2018). this indirect supervision is monitoring carried out by ojk from the investment company to islamic financial services institutions in seeing the health level of financial institutions. discussion based on the financial services authority (2019), the results of the 2019 national financial literacy and inclusion survey, the levels of financial literacy and inclusion in cities and in rural areas differ greatly, seen by regional strata, for urban areas the level of financial literacy and inclusion reaches 41.41% and 83.60%. meanwhile, the levels of literacy and financial inclusion in rural communities were 34.53% and 68.49%. this data shows that both journal of islamic economic laws-july, vol. 3, no. 2, 2020 165 in terms of understanding and use of financial products or services, people living in rural areas are still quite behind compared to people living in urban areas. from the data on financial literacy and inclusion, it shows that the preventive action of socialization and education regarding sharia investment by the ojk is still not optimal and uneven. ojk must be more aggressive in disseminating information about investment through technology, namely through social media, electronic news, and through television. for now, socialization through electronic media is still lacking, even though if the ojk can aggressively take preventive actions through electronic media, it can make financial literacy and inclusion more evenly distributed throughout indonesia, both urban and rural. ojk’s repressive actions are still not optimal, because there are still 99 investment offering entities without a license (otoritas jasa keuangan, 2020). this illustrates that the ojk has not maximally suppressed the number of fake investment offers. the only sanctions given to business actors are imprisonment and closure of business licenses. there are no special measures to replace money that has caused harm to society. ojk needs to increase sanctions against investment business actors, not only closing business licenses but rather requiring counterfeit investment actors to compensate for losses that have been done. there are still many people who are not aware of the importance of making complaints about fake investments, because they still think that making a complaint to the ojk will pass a series of quite difficult solutions. there is no guarantee that money that has been invested in an illegal fraudulent investment platform will return 100 percent. ojk continues to urge the public to be careful before deciding to invest in a platform, always ensure that the investment platform is legally registered with ojk or not and always pay attention to whether it offers realistic benefits and is based on the website. currently, the total losses due to fraudulent investment have reached 92 trillion (cnn indonesia, 2020). direct supervision by ojk is already well-done. even though the ojk’s supervisory duties were questioned by the bpk, ojk has vanesa putri wardani and muhammad muinudinillah basri 166 proven it with concrete evidence in updating illegal investments that are rife in society through electronic media. an example of clear evidence that ojk is carrying out its duties properly in investment supervision is in the capital market sector. ojk has issued 184 written warnings, 192 fines, and suspension of two securities brokerage representatives (wppe). ojk also revoked the business licenses of 7 underwriters and 6 wppes. regarding consumer protection, swi and ojk have taken action against 61 illegal investments, 589 illegal online loans, and 25 illegal pawn businesses. in addition, financial services sector investigators have prepared 13 sprindics, 12 delegations of cooperation documents, and 10 complete case files or p-21. there is no specific regulator to discuss specifically in detail regarding islamic investment. stiyana (2018) argues that supervisory arrangements in the syari’ah scope are not detailed in the ojk law. supervision is only carried out on syari’ah banking or syari’ah banks as stated in article 1 point 5. ojk should have made a special regulator and detailing islamic investment. if there is no regulator specifically regarding islamic investment, it will make islamic investment activities operate irregularly.currently there are many sharia-based investment offers, but when compared to conventional investment, there are still many people who prefer conventional investment to islamic investment. ojk encourages sharia finance to develop by establishing a sharia supervisory board (dps), a sharia supervisory board (dps) which must be established in sharia banks and conventional commercial banks that have sharia business units and bprs. based on the law, dps is appointed based on the general meeting of shareholders (gms) on the recommendation of the indonesian ulema council (mui). dps duties include assessing and ensuring compliance with the sharia principles of operational guidelines and products issued by islamic banks. conclusion ojk in supervising sharia investment collaborates with swi, the sharia supervisory board (dsn), and the indonesian ulema council (mui). at current time, ojk has not been journal of islamic economic laws-july, vol. 3, no. 2, 2020 167 optimal in preventive action because many are still deceived by fake investments. the level of literacy and financial inclusion in indonesian society is still low. as for repressive actions, ojk works well-done because it is firm in closing down investment companies that have the potential to be wrong and detrimental, and the form of supervision has been effective due to the creation of an online reporting application technology made by ojk. however, the ojk does not yet have comprehensive regulations regarding sharia investment. references ahmad, s. d. 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(2014). metode penelitian kepustakaan (3rd ed.). yayasan pustaka obor indonesia. journal of islamic economic laws vol. 3, no. 1 january 2020: 32-47 32 macro variable effect analysis and nonperforming financing (npf) against the return on asset (roa) islamic banks in indonesia year 20082017 dwi pratika karisma1, fikri ‘ainul qolbi2, and imron rosyadi3 1faculty of islamic studies, university of muhammadiyah surakarta email: pratikadwikarisma3@gmail.com 2faculty of islamic studies, university of muhammadiyah surakarta email: fikriqolbi@gmail.com 3faculty of islamic studies, university of muhammadiyah surakarta email: ir120@ums.ac.id abstract islamic banks is a business entity that raises and distributes funds from the community and for the community. the study was conducted to analyze the macro variables and npf (nonperforming finance) to roa (return on assets) to determine the relationship between short-term and long-term between variables. the analysis model used is the engle granger ecm stage two test that uses secondary data from the serial data (time series). the results of this study indicate that npf simultaneously, gdp, and interest rates affect the roa. partially gdp positive and significant effects in the long term and short term, npf positive and significant effect in the long term, interest rate, and no significant positive effect on roa. keywords: roa, islamic banks, npf, gdp, two-stage ecm engle granger mailto:fikriqolbi@gmail.com karisma et al. 33 introduction banking stability is essential for the prevailing economic situation of a country. at the time of the 1997 economic crisis and the 2008 global economic crisis, which negatively impacts the stability of the financial system, this confirms the stability of the banking affects the state of the economy. (dimas, 2018) today, the islamic banks are banks that operate profitoriented, then in its operations fixed for profit or gain. rate to performance of a bank can be done by analyzing the financial statements of the bank, particularly the ratio calculation in order to evaluate the financial situation in the past, present, and future. the ability of a company to generate profits or earnings usually referred to profitability, where islamic banks must demonstrate its ability to generate profits obtained through customer deposit and fundraising. in each study, the preparation of the development of statistical data that contains information about the real condition of profitability in islamic banks is needed to determine the development return on assets (roa) of islamic banks, the development of an increasing or decreasing the current quarter in each year is different (nenda, 2016). this definition describes the goals that will be investigated is the company’s profit and use the return on assets (roa) islamic banks in indonesia in 2008 2017. the following is a table return on assets (roa) islamic banks in 2008 -2017. table 1. roa development of islamic banks in indonesia in 2008 2017 year tw 1 tw 2 tw 3 tw 4 2008 1.83 1.81 1.84 1:57 2009 2:44 2:16 1:38 1:48 2010 2.1 1.66 1.77 1.67 2011 1.97 1.84 1.8 1.79 2012 1.83 2:05 2:07 2:14 2013 1:39 2.1 2:04 2 2014 1:16 1:12 0.97 0.8 2015 1.69 0.5 0:49 0:49 journal of islamic economic laws-januray, vol. 3, no. 1, 2020 34 year tw 1 tw 2 tw 3 tw 4 2016 0.88 0.73 0:59 0.63 2017 1:12 1.1 1 0.63 source: fsa, the data is processed in table 1.1, it can be seen that the roa was progressing volatile. in 2008 2017 first quarter, the highest number of roa in 2013 amounting to 2.39% roa considered very healthy this year due. while the lowest roa in 2008 2017 first quarter occurred in 2015 at 0, 69% in the category of pretty healthy. then, in the second quarter, the number of the highest roa in 2009, which amounted to 2, 16% are categorized roa very healthy this year. while the lowest roa second quarter occurred in 2015 at 0.5% categorized as healthy enough. then, the third quarter of the amount of the highest roa in 2009, which amounted to 2.04% roa considered very healthily this year. while the lowest roa third quarter occurred in 2015 amounted to 0.49% less healthy. after categorized it, roa fourth quarter the highest number in 2009, which amounted to 2.00% roa considered very healthily this year. while the lowest roa fourth quarter occurred in 2015 amounted to 0.49% categorized as less healthy. non-performing financing (npf) or often referred to as non-performing loans, can be defined as the ratio to determine problems financing borne by the bank based on the total finance portfolio in order to measure the level of financing issues faced by the bank (rahman, asaduzzaman, & hossin, 2017). the higher this ratio, indicating the quality of bank financing to get worse. here are presented in table npf development of islamic banks in 2008-2017. table 2. the development of npf ((net performing financing) islamic banks in indonesia in 2008 2017 year tw 1 tw 2 tw 3 tw 4 2008 4:17 4:23 4:12 3.95 2009 5:14 4:39 5.72 4:01 2010 4:53 3.89 3.95 3:02 2011 3.6 3.76 3.5 2:52 2012 2.76 2.88 2.74 2:22 karisma et al. 35 year tw 1 tw 2 tw 3 tw 4 2013 2.75 2.64 2.8 2.62 2014 3:22 3.9 4:57 4:33 2015 5:49 5:09 5:14 4.74 2016 5:35 5.68 4:57 4:42 2017 4:51 4:47 4:41 4.67 source: fsa, the data is processed in table 1.2, it can be seen that the average average npf relief the second quarter of 2016 is as high as 5.68%, while the lowest npf in 2008 to 2017 occurred in the fourth quarter of 2012 is relatively low at 2.22%. more detail is the highest first quarter in 2015 is 5.49%, and the lowest in 2012 amounted to 2.75%, the highest. quarterly ii in 2016 is 5.68%, and the lowest in 2013 amounted to 2.64%. quarterly highest iii in 2009 is 5.72%, and the lowest in 2012 amounted to 2.74%. quarterly highest iv in 2015 is 4.84%, and the lowest in 2012 amounted to 2.22%. in the context of the macroeconomy, the widespread use of a variety of products and financial instruments sharia addition to support the financial and business community also reduces the transactions that are speculative thus supporting the overall financial stability, which in time will provide a significant contribution to the achievement of price stability mid-term up with the long-term (syachfuddin, 2017). macro variables that will be tested its effect on return on assets (roa) islamic banks are the bi rate, and the gross domestic product (gdp). this study aimed to determine the effect of macro variables on return on assets (roa), and net performing financing (npf) on return on assets (roa) of islamic banks, as well as determine the relationship short term and long term through cointegration among the variables of writing, this paper is expected to have benefits as a reference for future writing as well as fill material for the institutions involved in policy-making related to the influence of macro variables and net performing financing (npf) on the return on assets (roa) islamic banks. journal of islamic economic laws-januray, vol. 3, no. 1, 2020 36 literature review understanding islamic banks islamic banks are part of islamic banking, by-law no. 21, 2008, article 1, paragraph 1 states “islamic banking is everything related to the islamic banks and islamic business unit, covering institutional, business activities, as well as the manner and process of carrying out its business activities.”(undang-undang, 2008). special definition islamic bank under the law 21, 2008, article 1, paragraph 7 that “islamic banks and by type consisting of islamic banks and sharia bank financing people.” meanwhile, sharia bank principles stated in law no. 21, 2008, article 1, paragraph 12 “sharia is islamic law principles in banking activities based on a fatwa proposed by the agency that has the authority in setting the fatwa in the field of sharia.” islamic banking has a different goal with conventional banking, where islamic banking objectives contained in law no. 21, 2008, article 3, namely, “islamic banking aims to support the implementation of national development in order to improve the fairness of togetherness, and equalization of the people welfare services.” islamic banking functions outlined in law no. 21, 2008, article 4, among others, shall perform the functions of collecting and distributing public funds, running a social function in the form of institutions treasury, which receives funds from the charity, donation, charity, hibah or other social funds and channel them to the organization of zakat, collect social funds derived from endowments money and distribute it to the management of waqf (nazir) something with the will of the giver waqf (wakif), and the implementation of social functions referred to paragraphs 2 and 3 correct with the provisions of the legislation. profitability ratios profitability shows the company’s ability to generate income for a particular year. in the world of banking, income can be obtained from lending. each lending to customers, the customer must repay the loan following the agreement between the customer and the bank. karisma et al. 37 the higher the loans be greater oversight of the loans so that no non-performing loans, due to non-performing loans will lead to a decrease in revenue for banks, due to customers are not able to repay the loan that had been loaned. the benefits of profitability profitability has benefits that are very important and can be used as an analysis of the ability to generate profits shown to detect the cause of the profit or loss generated by object information in the accounting year, describing criteria indispensable in assessing the success of a company data terms of capability and motivation of management. profitability is a tool to make the company profit forecast because it describes the correlation between income and the amount of capital invested. roa is the ratio used to determine the ability of the bank’s management in the overall profit and the bank rate, which is better than the other bank profitability ratios. the greater the roa in getting, the greater the profits obtained and the better position of the bank in terms of asset utilization. the evaluation criteria for the soundness ratios return on assets (roa) can be seen in table 3 as follows: table 3. assessment criteria health level ratios roa ratios predicate roa> 1.5% very healthy 1.25% <roa ≤ 1.5% healthy 0.5% <roa ≤ 1.25% fit 0% <roa ≤ 0.5% unwell roa ≤ 0% not healthy source: bank indonesia definition of net performing financing (npf) the ratio is used to determine the financing problems incurred by the bank based on the total financing disbursed (indah, 2016). based on bank indonesia regulation through bank indonesia journal of islamic economic laws-januray, vol. 3, no. 1, 2020 38 circular letter no. 9/29 / dbps dated december 2007. npf can be calculated using the formula: net interest performing financing (npf) to measure the level of financing problems faced by the bank. the higher this ratio, indicating the quality of financing of islamic banks, is getting worse. in table 2.1 explains the criteria for the rating of the npf ratio. table 4. assessment criteria npf ratio soundness criterion research ranked npf <2% very healthy 2% ≤ npf <5% healthy 5% ≤ npf <8% fit 8% ≤ npf <12% unwell npf ≥ 12% not healthy source: bank indonesia gross domestic product (gdp) gross domestic product (gdp) is one important indicator to determine the economic development in a country in a given year, both based on current prices and based on constant prices (cupian, 2016). gdp is the amount of added value generated by all business units in a particular country in a given year. the total value of final goods and services provided from production must be the same as the value of the goods used. keynes’s theory states that saving in a country is influenced by the amount of income received by society rather than influenced by the interest rate. economic growth is the development of activities in the economy that causes the goods and services produced in society to increase as well. the data used to measure a country’s economic growth is to calculate real national income or gdp (gross domestic product) according to constant prices (prices that apply in the base year) that are applied from year to year (rehmat, 2012). karisma et al. 39 increased income of the community resulted in increased consumption and savings of the community so that when there is economic growth marked by an increase in people’s income, banking profitability can increase because of the savings that encourage banks to increase the allocation of funds through credit. definition of interest rates the bi interest rate is the interest rate policy of bank indonesia, which is a reference for interest rates on the money market. changes in bi interest rates are followed by changes in deposit rates and lending rates with directional (positive) movement. interest rates are divided into two types, as follows: 1. the nominal interest rate (also known as usury) is the interest rate on money in terms of money. 2. real interest rates, corrected for inflation and calculated as nominal interest rates minus inflation. previous research setiawati (2016) analyzed the “macro variable effect on profitability islamic bank.” this study aimed to analyze the influence of macro variables on the profitability of islamic banks in indonesia during the period 2004 2014, the method used in this research is time series by using multiple linear regression analysis models. the results showed that inflation and currency exchange rates did not affect the profitability of islamic banks, the gross domestic product (gdp) significantly with positive direction towards the profitability of islamic banks, and interest rates have a significant effect in the negative direction towards the profitability of islamic banks. kuncoro (2018) analyzed the “impact of macroeconomy an indicator of the profitability of islamic banking in indonesia during the period 2013-2017”. this study aims to determine the effect of variable inflation, bi, capital adequacy (car) and the gross domestic product on the profitability of islamic banks in the premises the period 2013-2017 demonstrated through the return on asset (roa), the method of selecting the sample used is the convention sampling, model analysis using panel journal of islamic economic laws-januray, vol. 3, no. 1, 2020 40 data regression analysis. the results showed that the variables of inflation, interest rates bi, car, gdp together affect roa. in the partial test variable inflation and car does not influence roa. interest rates and gdp have a significant influence in the opposite direction. sari (2014) analyzed the “analysis of the influence of variable non-performing financing (npf), financing to deposit (fdr), and the capital adequacy ratio (car) on the level of profitability in islamic banks.” this study aimed to examine the effect of variable non-performing financing (npf), financing to deposit (fdr) and the capital adequacy ratio (car) of the return on asset (roa) as a proxy for the profitability of islamic banks in the premises the period 2009-2013, the research data the use of secondary data and data analysis method used is multiple linear regression analysis. the results of this study indicate that the variable non-performing financing (npf), financing to deposit (fdr), and the capital adequacy ratio (car) jointly affect the return on assets (roa). partially, npf variable positive and significant impact on roa, fdr variable, and no significant positive effect on roa. meanwhile, car and no significant adverse effect on roa. the third prediction available ability to roa 22.7% while rest influenced by other factors outside of this study. methods the method used in this research is using quantitative research methods. as for the model analysis in this study using dynamic linear regression analysis. data processing equipment used in the research is computer software in eviews8 with stage two analytical models ecm engle granger. the relationship has a functional relationship with the following formula: long-term equation model: roat=⃰βο+β1 npft+β2 pdbt+β3 rt+ut where, roa : return on asset karisma et al. 41 βο : constants npf : net performing financing pdb : gross domestic product r : the interest rate β1, β2, β3 : parameter ut : error correction term short term equation model: δroat=γο+γ1 δnpft+γ2 δlog(pdb)t+γ3 δrt+γ4 ect+ut where, ect : resid01 (-1) ᵧ1 : α1; ᵧ2 = α2; ᵧ3 = α3, short-term coefficients y0 : λβo y4 :λ; adjustment coefficient results and discussion results estimates the estimation results error correction model (ecm) above are presented in table 5 table 5. ecm model estimation results δroat = -0.033738 0.019425δnpft-0.000006 δpdbt 0.073934 δrt (0.8039) (0.0300) ** (0.4683) 0.426307ect (0.0028) ** r2 = 0.270479; dw-stat. = 1.840480; f-stat. = 3.151480; prob. f stat. = 0.026284 source: indonesian banking statistic, processed. notes: * significant atα= 0.01; ** significant atα= 0.05; *** signifikasni at α = 0.10. figures in brackets are the t-statistic probability value. table 5 regression coefficients based ect ((resid01 (-1)) qualify ect coefficient should be negative (-) of 0.426307. this coefficient or probability p-value (significance) empirical t statistics coefficient of 0.0028, which means a significant ect onα= (0.05). this shows that the model is a model tersetimasitwo journal of islamic economic laws-januray, vol. 3, no. 1, 2020 42 stage ecm engle granger, where there is a long-term relationship between the variables dependent and independent variables in the econometric model in this study goodness test model 1. existence model (test f) in a test of the f, the model is said to exist when all independent variables simultaneously or together influence the dependent variable. instead, the model is said not to exist when all independent variables simultaneously or with no effect on the dependent variable, with sig criteria. f <α (where α = 0.05), then the model exists and if sig. f> α, otherwise the model does not exist. based on table 4.6, it can be seen the value of statistical probability or empirical estimation model has f on the value 0.026284, which means that 0.026284> 0.05, the conclusion of the model used in the research exists. 2. interpretation of the coefficient of determination the coefficient of determination (r2) shows the power of prediction of the model digress. based on table 4.6, it can be seen as an r2 value of 0.270479 or 27%. the variation of the dependent variable roa (return on assets) can be explained by the independent variable npf (non-performing finance), gdp (gross domestic product), and r (interest rates). meanwhile, the rest of the 73% is explained by other variables outside the model. 3. test validity effect (t-test) test validity effect (t-test) was conducted to determine the effect of the independent variable on the dependent variable partially or not together. validity test results for the influence of all independent variables in the model of the long-term and short-term model is presented in table 6 karisma et al. 43 table 6. the validity of test results independent variables influence variables sig. t criteria conclusion longterm model npf 0.0009 <0:05 significant at α = 0:05 pdb 0.0011 <0:05 significant at α = 0:05 r 0.6110 > 0.05 not significant shortterm model d (npf) 0.8039 > 0.05 not significant d (gdp) 0.0300 <0:05 significant at α = 0:05 d (r) 0.4683 > 0.05 not significant source: organized data 4. interpretation of independent variables influence based on table 6, it can be seen that the independent variables have a significant effect in the long term is the npf (net performing finance) and gdp (gross domestic product). in contrast, the independent variables that have a short-term effect are the gdp (gross domestic product). variable npf (net performing finance) has a coefficient regression of 0.0009. the pattern of the relationship between the independent variables npf (net performing finance) and variable dependent roa (return on assets) is a linear-linear then when the npf (net performing finance) rose one percent, the roa (return on assets) will rise -0.279377 percent. conversely, if the npf (net performing finance) fell one percent, the roa (return on assets) will go down -0.279377. variable gdp (gross domestic product) in the longterm model regression coefficient of 0.0011, the pattern of the relationship between variable, independent gdp (gross domestic product) and variable dependent roa (return on assets) is a linear-linear then when and variable dependent roa (return on assets ) is a linear-linear then when the gdp (gross domestic product) rose one billion then roa (return on assets) will rise -0.0000011 percent. conversely, if the gdp (gross domestic product) fell one billion, then roa (return on assets) will go down -0.0000011. variable gdp (gross domestic product) in the model of short-term regression coefficient of 0.0300, the pattern of the relationship between the independent variables gdp (gross journal of islamic economic laws-januray, vol. 3, no. 1, 2020 44 domestic product) and roa (return on assets) is a linear-linear then when the gdp (gross domestic product) rose one billion the roa (return on assets) will rise -0.0000014 percent. conversely, if the gdp (gross domestic product) fell one billion, then roa (return on assets) will go down -0.0000014. 5. economic interpretation the data in this study describes the effect of long-term model and a model of short-term macro variables such as gdp, interest rate (r) and non-performing finance (npf) on return on assets (roa) islamic banks in indonesia, where the long-term model independent variables non-performing finance (npf) and the independent variables gdp effect on return on assets (roa). meanwhile, in the short-term model of independent variables that influence. variable gdp-a significant independent variable on the dependent variable can be intrepeted as follows: 6. gross domestic product (gdp) and return on assets (roa) based on estimates of data, gross domestic product, and a significant positive effect on return on assets (roa) islamic banks in indonesia. gross domestic product in the model of longterm and short-term model has a negative effect, but significant on return on assets (roa). gross domestic product is aimed to determine the development of economic growth in a country in a given period. the economic development of a country as well should influence banking profitability in the country, the growing economy of a country may indicate that people in a state of peace with incomes afford their tubes for investment and productivity using funds from the bank. the results are consistent with research conducted by research setiawati (2016) in which the gross domestic product (gdp) significantly with positive direction towards the profitability of islamic banks. the results are also consistent with studies kuncoro (2018) gdp has a significant influence in the opposite direction. karisma et al. 45 7. non-performing finance (npf) and return on assets (roa). based on estimates, data show that in the long-term model of non-performing finance (npf), but the significant negative effect on return on assets (roa) islamic banks in the indonesia quarter of the year 2008-2017. non-performing finance (npf) is a ratio used to determine the financing problems in a bank, in the period from year 2008 to 2017 the development of nonperforming finance (npf) can be said to be concerned about this because the refund of credit due to financing problems or inhibit the growth of bad loans banking itself. results of the study, according to the study sari (2014) npf variable positive and significant impact on roa. however, the results in this study are not consistent with studies saputra (2015), where the research financing problems as measured by non-performing finance (npf) will not lead to profitability or return on assets (roa) increased or decreased. conclusion based on the results of the analysis of the influence of macro variables (gross domestic product (gdp), interest rates and non-performing financing (npf) on return on assets (roa) islamic banks in indonesia in 2008-2017 can be concluded as all independent variables namely non-performing financing (npf), gross domestic product (gdp), and interest rates simultaneously or together affect the return on asset (roa) islamic banks in indonesia amounted to 27.04%. another finding is under the influence of the validity of the test (t test), partially independent variable interest rates did not have a significant effect in the short-term model of 0.4683 and 0.6110 for the long-term model. meanwhile, the independent variable of non performing financing (npf) significantly in the long-term model of 0.0009 and the short-term model is not significant at 0.8039, and for the gdp variable has a significant influence both in the short-term model of 0.0300 and 0.0011 for the long-term model. the research suggests the influence of macro variables, as external variables that gross domestic product (gdp) and central bank interest journal of islamic economic laws-januray, vol. 3, no. 1, 2020 46 rate on return on assets (roa) and internal variables ie nonperforming financing (npf) on return on assets (roa). together or simultaneous external variables and internal variables affect the return on asset (roa) it can be interpreted that external variables and internal variables in the short term and long term effect on the return on assets (roa), partial variable interest rates have a significant effect in the short term and long term, a significant effect dalamjangak npf variable short and insignificant in the long term and gdp variables have a significant effect in both the short and long term. references cupian, a. (2016). “the impact macroeconomic variables on indonesia islamic banks profitability.” jurnal ekonomi dan bisnis islam, vol. 02. dimas, b. w. k. (2018). analysis of the impact on selected macroeconomic indicators on islamic banks profitability indonesia. international journal of economics business and management research (ijebmr), vol. 02(issue. 04). indah, d. p. (2016). pengaruh non performing loan and capital adequancy ratio (car) terhadap propabilitas. jurnal managemen fakultas ekonomi. universitas negeri semarang. kuncoro, g. t. (2018). dampak indikator makro terhadap profitabilitas perbankan syariah. universitas muhammadiyah surakarta. nenda, n. n. (2016). pengaruh car, pembiayaan, np dan bopo terhadap roa bank umum syariah. universitas diponegoro. rahman, m., asaduzzaman, m., & hossin, m. (2017). impact of financial rations on non-performing financings of publicly traded commercial banks in bangladesh. international journal of financial research (ijfr), vol. 08(issue. 01). rehmat, u. a. (2012). foreign direct investment, economic growth, trade, and domestic investment relationship : an karisma et al. 47 econometric analysis of selected south asian countries. interdisciplinary journal of contemporary research in business (ijcrb), vol. 03(issue. 09). saputra, t. a. (2015). pengaruh variabel makroekonomi terhadap profitabilitasperbankan syariah di indonesia periode 2010-2013. universitas muhammadiyah surakarta. sari, a. w. (2014). analisis pengaruh variabel non performing financing (npf), financing to deposit (fdr) dan capital adequacy ratio (car) terhadap tingkat profitabilitas pada bank umum syariah. jurnal kajian ilmiah akuntansi fakultas ekonomi, vol. 3. setiawati, m. l. (2016). pengaruh variabel ekonomi makro terhadap profitabilitas bank syariah. jurnal ekonomi manajemen. syachfuddin, d. (2017). pengaruh faktor makroekonomi, dana pihak ketiga, dan pangsa pembiayaan terhadap profitabilitas industri perbankan syariah di indonesia tahun 20112015. jurnal ekonomi syariah teori dan terapan, vol. 4. undang-undang. uu no. 21 tahun 2008 tentang perbankan syariah. , (2008). _goback journal of islamic economic laws vol. 3, no. 1 january 2020: 1-14 1 the application of maslahah mursalah in a mediation process between disputant parties andika catur prastyo institut agama islam negeri (iain) surakarta email: dikawonkaa@gmail.com abstract the purpose of this study is to explore how is the mediation process in the sragen district court in sharia economic disputes. it also seeks to determine the suitability of the mediation process in terms of the maslahah mursalah. this research is a field research with a qualitative approach. the data source of this study consists of primary data and secondary data. the location of this study is in sragen district court. data collection techniques in this study were using documentation and interviews. this study shows that the mediation process in islamic economic disputes is not much different from other disputes. this research also reveals that there is a non-compliance with the existing regulations, i.e that peace which is carried out by the parties occurs outside the court and there is no peace act. based on this, it will lead to a different legal effect. keywords: mediation process, maslahah mursalah, sharia economic disputes introduction it cannot be denied that islam is a living guidelines. as a guidelines, the teachings of islam consist of the rules encompassing every aspect of human life. generally, the rules can be divided into three parts namely aqida (creeds), akhlaq (ethics) and sharia (law). the first two parts, aqidah and akhlaq are constant, while sharia always changes according to the development of human needs and life. sharia consist of the social affair and area of worship. the worship is to facilitate man how journal of islamic economic laws-january, vol. 3, no. 1, 2020 2 to serve his god (hablum minallah), whereas muamalah has role for man in dealing with others (hablum minannas). the muamala is what the object of the most extensive that must be excavated by people from time to time, because with the advent of the needs human life to be changed. (suprayitno eko, 2005) islamic economic is the science which result from a human effort to overcome financial problems in a systemtic manner, so that it build confidence and trust in the truth of qur’an and sunnah. surely people need prevailing norms in general and get recognition in general to prove islamic economic is also as science. (sudarsono heri, 2002). in today economic development, there have been an expansion of financial institutions operating based on principles of sharia, like the establishment of sharia bank, sharia insurance and other sharia financial institutions. the establishment of those economic institutions with sharia principles would certainly continue to open up the possibility to the occurence of disagreement and breach between the parties. (syukri eska, 2012) for muslims in indonesia, sharia economic disputes is among muamalah problem that needs to be addressed, in order that the harmony and peace of indonesian muslim. it is because the believers are brothers. it is also because the implementation of peace between family and brotherhood should be given higher priority (syukri eska, 2012) based on law number 3 year 2006 on the amendment act number 7 in 1989 which has been replaced with act number 50 in 2009 about islamic court, it is said that the authority who can resolve sharia economic disputes is the religious court. (syukri eska, 2012). the judiciary institutions is one of dispute resolution that play a role so far. but a verdict rendered a trial that has not yet be able to create satisfiction and justice for both sides to the dispute. judicial decions tends to satisfy one of the parties and they were not satified with the other parties. (syahrial abbas, 2009). one form of economic dispute resolution that incalcutes competence the religious court is through mediation. mediation on the court shall take effect as of the issuance regulations in andika catur prastyo 3 indonesia since the supreme court number 1 in 2016 about procedure mediation in a court of law. (syahrial abbas, 2009) mediation is an alternative dispute resolution that can be used by the parties to resolve a dispute over its third party as a mediator. the principle of mediation is both having win-win solution, so that none of the disputing parties feel discontentment. mediatin is not only to speed up the solution, but also remove vindictive and firm relationship (syahrial abbas, 2009). so, this research is going to address two problems, firstly, how is a mediation process to the sharia economic dispute number 0938/ pdt.g/2018/pa.sr in religious court of sragen? secondly, how is the perspective of maslahah mursalah on a mediation process with the sharia economic dispute number 0938/pdt,g2018/pa.sr in religious court of sragen? literature review mediation mediation is an english term. in literature, there are many definitions of mediation (gunawan wijaya, 2001). in the dictionary large indonesian language (kamus besar bahasa indonesia), it is said that mediation is given meaning as the process of participating third parties in the resolution of a dispute as an advisor (kamus besar bahasa indonesia, 1998). according to author, mediation and dispute resolution is a process between two or more parties through negotiations or manner of consensus with the help of the helper who do not have authority to judge. neutral parties are called a mediator with the assistance and subtantial. therefore, by this definition, we can say that the essential elements that make up a mediation are (takdir rahmadi, 2011): a. a mediation is the way of settlement by negotiation based on consensus approach or consensus of the parties. b. the parties asked the other impartial body called a mediator c. a mediator does not have the authority to judge, however it only help the parties to resolve the decision that can be accepted by the parties. journal of islamic economic laws-january, vol. 3, no. 1, 2020 4 the consensus approach or mutual consensus in a mediation process means that everything that is produced in a mediation process should be the result of the agreement of the parties and settlement should be attainable if all parties in a dispute can accept it. (takdir rahmadi, 2011). to integrate the mediation to the next process in court can be one of the effective instruments to reduce the possibility of accumulating case in the court. in addition, to insert mediation process in the justice system can help reinforce and maximize the function of the courts to overcome dispute, besides its work of deciding and judging (takdir rahmadi, 2011). in terms of mediation, a mediator play a role in helping disputant parties in identifying the case, developing option, and deliberating in alternatives that can be offered to the parties to reach an agreement. a mediator, in playing his role, only has right to give advise in order to solve the case. a mediator has no authority with regard to content of the case, but he only keep how the mediation can run well so that it can produce agreement from parties. (syahrizal abbas, 2009). a mediator should be able to find alternatives to solve the disputes. he is not only bound and focus on that which belongs to the parties in the resolution of a dispute. a mediator must be able to offer other solutions, when the parties no longer have any alternatives or when the parties suffer from deadlock in the resolution of disputes. this is where a mediator as the third party shall try to be neutral to assit in resolving the dispute. for that reason, a mediator must be have a number of skill to help and facilitate the parties in the resolution of a dispute. (syahrizal abbas, 2009) maslahah mursalah etymologically, the word ‘maslahah’ is derived from a “salaha” or “salahu” which means good. this word is an antonyms of the “fasada” which means damaged. in kbbi, it is mentioned that al-maslahah convey the meaning of something good and benefits. while the ‘maslahah’ means uses, good, benefits and interest. (rachmat syafi’e, 1999). andika catur prastyo 5 terminologically, al-maslahah is the benefit desired by god to his servants, in the form of maintaining their religion, preserving people/themselves, preserving their descendants, preserving their mind, and preserving their wealth (asmawi, 2011). as for preserving wealth with reference to terminological sense, our scholar then make categorization of al-maslahah. in terms of levels, al-maslahah is divided into three: al-dharuriyat, hajiyat, and tahsiniyat. what is meant by al-dharuriyat is that it is maslahah that was conceived by their action and it is necessary for human life in this world, especially those kinds of al-maslahah on religion, soul, understanding, honor themselves/ descent and wealth. what is referred to hajiyat is al-maslahah that was conceived by their action to bring the smoothness, ease, and succes for human life. while tahsiniyat is al-maslahah that was conceived by their action by bringing beauty, modesty of the glory and for human life. (asmawi, 2011) maslahah mursalah is the proposition to establish new expicity which have not been mentioned in the main source of qur’an and sunnah, whether it is accepted or rejected. (imron rosyadi, 2017) analysis and discussion settlement procedure of sharia economic dispute at the religious court in sragen. the settlement of economic case at religios court in sragen of coursehas been carried out through some procedures, inter alia administrative procedures. it is as have been arranged in book ii about pedoman pelaksanaan tugas dan administrasi peradilan negara (guidelines for performing duties and religious court administration). the procedure as follows (book ii about the guidelines of duties and the admistration of justice religion): 1. the litigant party come to religious court with an information board religious courts in sragen by bringing a lawsuit. 2. the litigant party come to officers of the first table and submit a letter of lawsuit or entreaty, at least 2 (two) copies, added by a number of defendant to the letter of a lawsuit. journal of islamic economic laws-january, vol. 3, no. 1, 2020 6 3. officers of the first table can provide explanation which are deemed necessary with regard to the proposed matter and down payment of the legal costs and written in carte blanche to pay (skum). the down payment the legal costs is estimated to be enough to solve the case, which is based on article 182 paragraph (1) hir or article 90 constitution republic of indonesian number 50 in 2009 revision of the second time constitution number of 7 in 1989 about religious court. with notes: a. for those who are not able, then he is permitted to dispute in prodeo manner. the inability is prooved by attaching a letter from head of urban village. b. for those who are not able, then downpayment of the case is estimated rp. 0.00 and is written in the procuration to pay (skum) which is based on article 237-245 hir c. in the first degree, the parties who are not able or prodeo, should mention the causes to dispute in prodeo in his petitum inside his lawsuits or his letter. 4. the officers of first table hand over a suit or a request to the litigant parties accompanied by a procuration to pay (skum) in three copies. 5. the litigant parties hand over letter lawsuits or the letters to pay (skum) to the cashier. 6. cash holders sign a procuration to pay (skum), affix the ordinal number of the case and the date of receipt into the procuration to pay (skum) and in a lawsuit or entreaty. cash holders hand over the original copy of procuration to pay (skum) to the litigant parties as the basis for down payment of the legal costs to the bank. 7. the litigant parties come to counter in the bank and fill in downpayment slip of legal costs. filling in the data into bank slip is consistent with (skum), that is, the same serial number and the cost of payment. then the litigant parties submit banks slip that had been filled and deposit money with the same nominal written on the bank slip. 8. after the litigant parties received banks slip that had been andika catur prastyo 7 validated by the services, the litigant parties demonstrate the bank slip and hand over the procuration to pay (skum). 9. the cash holder hand over slip bank back to the litigant parties once again. the cash holder, thus, gave the proof of full payment in the procuration to pay (skum) and handed back to the litigant parties the original copy, first copy of the procuration to pay (skum) and lawsuit and the proposal concerned. 10. the litigant parties hand over both of a lawsuit or entreaty as many as the number of defendant added 2 (two) copies and the first copy of the procuration to pay (skum) to the officer of second table. officers of the second table take note on a lawsuit letter or entreaty in a register concerned and give register number on a lawsuit letter taken from admission number that is given by the cash holder. 11. the officer of second table hand over one copy of the proposals or a lawsuit that has been given registering number to the litigant parties. 12. the registration is done, the litigant parties will be called by bailiff to the trial after an arrangement of the judges council being determined and the day a hearing being settled. a mediation process in sharia economic dispute number 0938/pdt.g/2018/pa.sr religious court in sragen. a mediation process in the religious court is as follows firstly, to elect a mediator. this one is conducted by the parties, who will choose a mediator from inside or outside the court. if the parties choose a mediator from within the court, the judge then could not be part of the assembly. (humaidi, 10 july 2019) after a mediator was determined, the second step is to gather the two parties in one assembly. each of parties, whether the plaintiff and defendant, can be deputed by their attorneys. they are put together in an assembly, before the presense of the judge as mediator whose role is to bring reconciliation between parties. (humaidi, 10 july 2019) the third step is that, the parties outlines their problems at hand. in this case the parties make clear to the mediator about the journal of islamic economic laws-january, vol. 3, no. 1, 2020 8 problems that they have, until the parties understand the nature of the problems, and then they know o evercome it. the mediator is hoped as much as possible to reconcile the parties so that dispute are not continuing and sustaining untill it comes to trial. (humaidi, 10 july 2019) fourthly, a mediator give alternative solutions. a mediator (judge) provides a way out or a solution and the best resolution to both sides. the solution given must not bring disadvantage to either parties, or unfairnes for one of the parties. a solution and the alternative should be received by both parties. (humaidi, 10 july 2019) last, the parties give their conclusion. it means that the parties concerned may provide a respond regarding the peace agreement. whether they agree make peace or will continue to bring the case to the court. (humaidi, 10 july 2019) on may 2018, the religious courts in sragen received a sharia economic dispute with registered number 0938/ pdt.g/2018/pa.sr with the plaintiff was mr. fakhruddin nur s. as the operational director of pt.bprs sukowati sragen. which in this case delegated by mr. catur danarto as employees of pt. bprs sukowati sragen. located in sragen sukowati, mojomulyo rt 01 rw 10 sragen. then a defendant is mr. wagiyo work as enterpreneurs with an address in sidorejo rt 02 rw 03 ngrombo, village in the tangen, sragen regency. which in this case delegated mr. hermanu fatah advocates located office in sambirejo rt. 003 rw. 001, banaran, sambungmacan, village sragen. the problems begin when mr. wagiyo as a defendant borrows some money to pt. bprs sukowati sragen. over time mr. wagiyo underwent bad credit, which is injurious to the plaintiff parties namely pt. bprs sukowati sragen. pt. bprs sukowati sragen has the right to carry out the auction of mr. wagiyo’s collateral if the payment of instalment by the defendant is at stake. in this case, pt. bprs sukowati sragen could be conducting the insurance against the defendant to kpknl (service station in the wealth of the country and auction) or the plaintiff may bring this case to litigation track. pt.bprs sukowati sragen prefer to andika catur prastyo 9 choose litigation and the case has been submitted on 23 may 2018 to the religious court in sragen. (catur danarto, 10 august 2019) in the first judge, the parties agreed to conduct a mediation process by appointing a mediator of the court, namely mr. humaidi. based on the mediation report dated 24 july 2018, it is said that implementation of mediation results as follows: 1. that the mediation has been implemented in full on the 24 july 2018, located in the mediation religious court in sragen attended by both sides, but they have put on their own principle. the mediation does not achieve an agreement. 2. that based on aforementioned details, the mediation did not work well. after interviews were conducted by a writer to the relevant party such as, mr. humaidi as a mediator, mr. hermanu as the attorney from the defendant and we have given mr. catur as power by pt.bprs sukowati sragen, some information that can be retrieved are as follows: in this case, resolution of sharia economic dispute no. 0938/ pdt.g/2018/pa.sr ended peace although settled outside court. during the process of mediation, a mediator gave recomendation first, to conduct consultation outside the court and agreed by the parties that, the debtor is mr. wagiyo a defendant in this matter have been failed to pay off credit to pt. bprs sukowati sragen. with this agreement then pt. bprs sukowati sragen authorizes to take mr. catur ended peacefully but no certificate peace. because peace agreed by the parties not in the scope of religious court in sragen. (catur danarto, 10 august 2019). analysis of the implementation of a mediation process at the religious court in sragen. in this case, a mediation process occurring in court in accordance with the supreme court number 1 year 2016 were successfully done, it will given peace certificate to the parties. it has the same legal power as it was decided. so, when peace certicate is issued, the case could not sued back. when peace agreement occuring outside the court is in accord to the ordinance of the supreme court number 1 2016, chapter journal of islamic economic laws-january, vol. 3, no. 1, 2020 10 8 article 36, the parties concerned may hold certificates peace as evidence that the dispute has been agreed to make peace by attaching the result of an agreement of peace, of which evidence shows the legal relation for every party dispute with the object. a mediation process at the religious court in sragen number 0938/pdt.g/2018/pa.sr is not much different from mediation process in divorce case. the difference lies only in a stage, which is the problem of identification. after mediator hear an explanation of the parties and the parties’ wishes, then the mediator gives alternatives or solutions that can be offered for the parties. as for advandages obtained from such mediation process is, in terms of time, it can be more effective or not protracted. then, in terms of costs, it can reduce the legal costs. as for the result obtained by the mediation process is the ultimate result obtained, which is the fairness to both sides. for the principle of mediation itself is the win-win solution. so, a mediation process towards the sharia economic dispute number 0938/pdt.g/2018/pa.sr generally is the same with a mediation process in divorce case. what make it different from mediation process in divorce case is only on alternatives offered by a mediator after problem of identificationis done. as for benefits obtained from holding mediation process is the effectiveness in terms of the time, the cost and the result. analysis of maslahah mursalah over a mediation process in the sharia economic dispute number 0938/pdt.g/2018/pa.sr in this case, the principle used in the process of mediation is win-win solution. as for the purpose of mediation itself, besides minimizing the accumulation of problems, it also seeks to accelerate, to simplify the controversy and to eliminate vengeance and to firm up relationship. a mediator, as the third party who helps to overcome the problem should not be a impartial. a mediator also must play a role in identifying the problems, then develop options and consider an alternatives that can be offered to the parties for reaching the purpose of the mediation, i.e. peacefulness. this research has its focus on alternatives offered by a andika catur prastyo 11 mediator to different parties when a mediation process take place. this is exactly what the author means to be included in maslahah mursalah at the level of hajiyat. hajiyat is everything secondary in nature for mankind business which should be fulfilled in his life to avoid undesirable difficulties arising from its absence. as for the advantages obtained by the parties from the implementation of a mediation process is already in accordance with fiqh rules, that stated that: درء المفاسد مقدم على جلب المصالح based on fiqh rules above and the requirements for maslahah mursalah to happen, if the relations of a mediation process are drawn, it is known that: 1. for mr. wagiyo, he benefited as being prevented from execution which is guaranted to pt. bprs sukowati sragen if the treaty of peace is not signed. then, in terms of time and the fees, it is more effective. because, if a mediation process is carried out succesfully, it will cut the legal costs. also in terms of the time, the dispute between the two parties can be solved quickly. 2. as for pt. bprs sukowati sragen, the benefits that it obtained from are the peaceful mediation is that pt. bprs sukowati sragen get its money lent to mr. wagiyo guaranted. in addition, those money can be circulated again to maintain the liquidity of pt. bprs sukowati sragen. in terms of time and the legal cost, it is more effective. for if the mediation is succesful, it can reduce the legal costs. also in terms of the time, the dispute between the two parties can be solved quickly. in this case, there are three levels of maslahah mursalah, that is: al-dharuriyat, hajiyat, and tahsiniyat. if it is linked with the problem which is currently the focus of writer, it can be mapped as follows: 1. hajiyat, is the second level of human needs whose fulfilment should be achieved, if difficulties and some of pettiness journal of islamic economic laws-january, vol. 3, no. 1, 2020 12 is hoped to be avoided in his life. although in this case a mediation process has been carried out by the parties with the help of a mediator, and it has reached an agreement to come to terms on the recommendation of the given a mediator in a mediation process, this peace agreement happened outside the court. so, there is no peace certificate issued. then based on hajiyat, where conducted by way the meeting of the parties with assistance from mediator or commonly called a mediation process. after a mediation process had been done, a mediator gave any recommendations for deliberation. as a result, the parties have agreed to come to terms. the process this mediation is of hajiyat level. so, it’s include in a moderate degree of hajiyat. for the mediation process bore a peacefulness that shall prevent the parties from difficulty. 2. tahsiniyat, is a maslahah conceived in any work or action in order to produce beauty, decency and glory for human life. in this case, if it is associated with what writer had been focussed on, all mediation process had passed and reach a peace agreement. the truce is a form of beautiful relationship and manners that can be maintained for the future. based on the criteria of tahsiniyat level, this peace agrreement was the best possible output of mediation. for a mediation process and the result of that mediation is peace agreement that can bring any beauty and suavity in a relationship. conclusion based on an analysis in discussion above, conclusion of this research can be taken as follows: the implementation of the mediation in the religious court in sragen especially sharia economic dispute number 0938/ pdt.g/2018/pa.sr generally is not different to the resolution procces through the mediation in divorce case. the difference is only when a mediator is in the stage of problems identification. after he did the stage, then a mediator give alternatives or the solution that can be offered to the parties. as for the benefits obtained from arranging a mediation process is in terms of time it could be more effective or not protracted. then, in terms of the andika catur prastyo 13 cost, it can reduce the legal costs and in terms of results obtained by the presense of a mediation process is the last result available over is fair to both sides. because, based on the principles of the mediation it was win-win solution. so, a mediation process in sharia economic dispute number 0938/pdt.g/2018/pa.sr is mainly equal to a mediation process in divorce case. what make it different from the later is that the alternatives offered by a mediator after identification of the problem is done. as for benefit obtained of a tackle in a mediation process in terms of the time, the cost and the results. as for the mediation process number 0938/pdt.g/2018/ pa.sr at the religious court in sragen that is analyzed by theory of maslahah mursalah could be known by the three (3) levels of maslahah mursalah, that is al-dharuriyat, al-hajiyat, and altahsiniyat. thus, there obtained two levels of maslaha that have the correlation between the theory and the practice that occurs field. at the level of al-hajiyat, the process of the mediation itself is of the criteria al-hajiyat. for the mediation process is to prevent the parties from difficulty. as for the level of al-tahsiniyat. the whole process of mediation it self and the result of it is that the peace agreed by the parties. as the result of the achieved agreement, the beauty and suavity are hoped to be around during gathering between parties. references eko, suprayitno. (2005). ekonomi islam pendekatan ekonomi makro islam dan konvensional, yogyakarta: penerbit graha ilmu. heri, sudarsono. (2002). konsep ekonomi islam, yogyakarta: ekonisia. iska, syukri. (2012). system perbankan syariah di indonesia dalam perspektif fikih ekonomi, yogyakarta: fajar media press. abbas, syahrizal. (2009). mediasi dalam hukum syariah, hukum adat & hukum nasional, jakarta: media grafika. gunawan wijaya. (2001). alternatif penyelesaian sengketa, journal of islamic economic laws-january, vol. 3, no. 1, 2020 14 op.cit, jakarta: pt raja grafindo persada. tim penyusun kamus pusat pembinaan dan pengembangan bahasa. (1998). kamus besar bahasa indonesia, jakarta: departemen pendidikan dan kebudayaan. rahmadi, takdir. (2011). mediasi: penyelesaian sengketa melalui pendekatan mufakat, jakarta: rajawali press. syafe’i, rachmat. (1999). ilmu ushul fiqh, bandung: cv. pustaka setia. asmawi. (2011). perbandingan ushul fiqh, jakarta: amzah. rosyadi, imron, “pemikiran asy-syatibi tentang maslahah mursalah”, jurnal studi islam, surakarta, vol. 14, no. 1 humaidi, hakim pengadilan agama sragen, wawancara, 10 juli 2019, jam 13.35-14.15 wib. danarto, catur, karyawan pt. bprs sukowati sragen, wawancara, 19 agustus 2019, jam 07.3008.00 wib. hermanu, kuasa hukum pihak tergugat, wawancara, 8 september 2019, jam 13.5014.20 wib. team, muamala, “arti-qawaid-fiqhiyah”, https://muamala.net/ retrieved on 29 october 2019 https://muamala.net/ _goback journal of islamic economic laws vol. 2, no. 2 july 2019: 178-192 178 fiduciary dispute settlement of murabaha contract in pt. al-ijarah indonesia finance riska wijayanti1 and kartika marella vanni2 1faculty of islamic economics and business, uin walisongo semarang email: riskawijayanti@walisongo.ac.id 2faculty of islamic economics and business, uin walisongo semarang email: kartikamarellavanni@walisongo.ac.id abstract this study examines the authority of dispute settlement body of a bad financing in murabaha contracts with a collateral of daihatsu car year 2011. according to dsn fatwa number 04/dsn-mui/ iv/2000 concerning murabaha the placement of fiduciary on murabaha contract objects is indeed permissible, but it becomes ambiguous when murabaha objects which are used as collateral in the financing process that have not been repaid are lost, causing late installment payments. the customer argued that the late payment was due to the embezzlement of murabaha objects by third parties beyond the expectations or control of the customer. this study also examines the legal liability for late settlement of murabaha sale and purchase by customers due to the loss of murabaha objects which at the same time become collateral in murabaha financing contracts. this research is normative legal research with a legal approach and a case approach. this study concludes that religious courts have the authority to decide disputes that occur between customers (mushtari) and sharia financial institutions (ṣahib al-māl) for late repayment of murabaha financing. based on the principle of accountability based on the element of error, the customer (mushtari) has legal responsibility for his actions. errors made by customers (mushtari) are in the form of negligence. keywords: dispute settlement, bad financing, collateral security, murabaha contract, islamic finance journal of islamic economic laws-july, vol. 2, no. 2, 2019 179 introduction sharia financial institution has a function as financial intermediary that conducts collection and distribution of funds in accordance with prevailing regulations in meeting the needs of the community in economic sector. planty needs of the community in the economic sector must be balanced with the existence of a fair legal certainty in order to create the effectiveness and efficiency of security in a financial transaction that is vulnerable to legal problems because there are things that deviate from the prevailing regulations. in this case, it is clearly seen that there is a close relationship between law and economics. thus, legal system must exist as an embodiment of the economic system. it also can be seen in the opposite direction that nation’s economic system will be reflected in its legal system (rahardjo, 2009). pt al ijarah indonesia finance is a sharia-based financial institution in which all transactions made apply sharia principles. one of those transactions is the murabaha contract. in murabaha financing contract, it is necessary to have an offer and acceptance to carry out buying and selling transactions. the seller clearly states the item being traded, including the purchase price and the profit to be taken while the buyer agrees by paying the price and profit requested. in accordance with the development of the era the practice of sale and purchase is carried out through intermediaries such as islamic financial institutions. buyers who need the goods or objects come directly to islamic financial institutions and express their desire to buy the goods. islamic financial institutions as intermediaries will buy goods by conveying details of the price to the buyer at the initial stage. afterward, the buyer pays it to islamic financial institutions. in other words, islamic financial institution here act as the party that finances the needs of the buyer in advance. this basic scheme applies to murabaha financing transactions between pt al ijarah indonesia finance and its customers agus pujianto s.e. bin lie gwan lay, a customer who purchases one unit of midnight black daihatsu / vvti 13 xi dlx in 2011 through pt al ijarah indonesia finance. the agreed contract consists of riska wijayanti and kartika marella vanni 180 total payments paid in the amount of rp. 198,060,000. since the payment is agreed to be settled in installments, the buyer has the obligation to make payments of rp. 3,301,000 every month throughout 52 months. in this case, the financing is made through murabahah transaction. for the sake of preventive protection, both parties agree to make an agreement for pledging collateral under the contract of fiduciary certificate no. w22.2536 ah.05.01 dated april 16, 2012 for 1 daihatzu / vvti 13 xi dlx year 2011 which is the murabaha object itself. the status of the buyer here is the collateral provider while pt al ijarah fianance is the recipient the guarantee. here, both parties are subject against law number 42/1999 on collateral guarantee. in implementing the murabaha contract, the first installment up to the seventh month runs smoothly where the buyer paid rp. 3,301,000 monthly. however, the installment at 8th month did not go well. the buyer argued that the car which is the object of financing agreement was borrowed and then taken away by a third party which then caused the buyer to experience late payment. due to this late payment installment, pt. al ijarah finance finally reported it as criminal case to yogyakarta police resort for the violation of law number 42/1999 concerning the collateral guarantee. this criminal reporting of murabaha contracts carried out between pt al ijarah finance and its customers is considered to violate sharia principles. this is because the dispute that occurs will not get islamic solution if it goes into the police report since it has the possibility of being resolved through the district court. based on this notion, the customer registered the lawsuit under religious court on february 7, 2014. the judges of yogyakarta religious court began to conduct a case review between pt. al ijarah indonesia finance (defendant) with a customer named agus pujianto bin lie gwan lay (plaintiff). it eventually had a legal force after being decided by a panel of judges at the supreme court on 31 august 2016 by refusing the plaintiff’s appeal and punishing the plaintiff to pay fees of the cases. in his lawsuit the customer argued that pt al ijarah finance had committed an illegal act by turning the murabahah financing journal of islamic economic laws-july, vol. 2, no. 2, 2019 181 agreement into a fiduciary guarantee agreement that violated the principles of sharia. pt. al ijarah indonesia finance has first reported the customer to yogyakarta police resort by ruling out dispute resolution based on article 55 paragraph (1) and (3) of law number 21 year 2008 where every sharia-related economic case should be settled first using sharia principles whether through deliberations, banking mediation, the national sharia arbitration board (basyarnas) or religious courts if it does not work through a non-litigation route. the contract has a binding legal force for both parties as stipulated in the regulations. it is similar to regulations which states that if a debtor does not do what he promised, then the debtor is said to be default (subekti, 1987). the legal impact that arises in resolving fiduciary collateral disputes must have legal certainty for the parties. this is necessary so that there is no confusion in resolving disputes which results slow legal process and an increasing disadvantage to the disputing parties in the future. the implementation of murabaha financing transactions needs to be closely monitored to minimize aspects that are considered vulnerable to violations of islamic sharia principles as stated in the alquran, hadith, prevailing laws and regulations as well as dsn mui fatwa or compilation of sharia economic law. this is because the regulations and experience in the field of islamic financial institutions which are still relatively new can lead to many loopholes in violation of the law which ultimately lead to losses for both parties who has no prior knowledge and experience in this matter. based on the above explanation, the authors are interested in making further research on “fiduciary disputes settlement of murabaha contract at pt. al ijarah finance islamic financial institution against supreme court decision no. 452k / ag / 2016” the problems in this study are as follows. first, how does the implementaion of regulations in an authorized dispute resolution institutions settle fiduciary collateral disputes in sharia financial institutions? secondly, how is buyers’ legal responsibility for the wrongdoings of third parties which caused delays in the payment riska wijayanti and kartika marella vanni 182 of murabaha financing installments in islamic finance institutions of pt al ijarah indonesia fianance. based on the formulation of the problem above, the purpose of this study is to find out the implementing regulations and the authority of the dispute resolution agency when a guarantee collateral dispute occurs in the murabaha financing agreement at the islamic financial institution pt al ijarah indonesia finance. second, to analyze the legal liability of the city due to the presence of third parties which caused delays in installment payments on murabaha financing contracts in the pt al ijarah fianance islamic financial institutions. literature review theory on the murabaha contract agreement in the qur’an there are at least 2 (two) terms related to the agreement (badrulzaman, 2001) which are the word al-’aqdu and the word al-’ahdu. qur’an uses the first word in the sense of engagement or agreement, while the second word in the qur’an means time, message, improvement and promise or agreement (anshori, 2010). this research is more relevant to the word al‘aqdu where in the qur’an means engagement or agreement. epistemologically, contract means binding or connecting, while terminologically contract is an agreement in an agreement between two or more parties to do or not do certain legal actions as stipulated on supreme court regulation number 02/2008 on compilation of sharia economic law. islamic jurists, divided the contract into two types, named contract and unnamed contract. the sale and purchase agreement of an item between parties in islam is in the category of a contract called the murabaha contract. in the contract, it is necessary to have offer and acceptance to carry out sale and purchase transactions (mardani, 2013). in murabaha, the seller must clearly states the offer of the item being traded, including the purchase price and the profit to be taken while the buyer clearly accepts it by paying the price and profit. the definition of financing is mentioned in the provisions of article 1 number 3 of bank indonesia regulation number 9 / 19 / journal of islamic economic laws-july, vol. 2, no. 2, 2019 183 pbi / 2007 which states: financing is the provision funds or bills/ receivables that can be in the form of: a. investment transactions that are based, among other things, on mudharabah and / or musyarakah contracts. b. lease transactions based on, inter alia, the ijarah contract or the ijarah agreement with the option to transfer ownership (ijārah muntahiyah bittamlīk). c. sale and purchase transactions that are based on various types of murabaha, salam, and istishna contract. d. loan transactions based on, among others, the qardh contract e. multi-purpose transactions based on, among others, ijarah or kafalah contracts. based on these provisions it can be seen that financing is the provision of funds or bills / receivables which can be in the form of investment transactions, leases, buying and selling, loans, and multi-service. in article 20 paragraph (6) of the supreme court regulation number 02/2008 on compilation of sharia economic law states that the meaning of murabaha financing is: “mutual benefit financing is carried out by shahib al-mall with those in need through buying and selling transactions with an explanation that the price of procurement of goods and selling prices have more value which is profit or profit for shahib al-mal and purchases are made in cash or installments”. from the definition above we can understand that the procurement of goods and the selling price of murabaha objects in murabaha financing must be known by sharia financial institutions and the buyer. islamic financial institutions in this case must get profits from the sale of murabaha objects so that the business can continue to run. the murabaha payment system can be done in cash or instalment. the type of murabaha which is mostly used by islamic financial institutions is murabaha based on orders where the payment method can be cash or several times of instalment. riska wijayanti and kartika marella vanni 184 credit risk in murabaha contract the risk has binding consequences for both parties as stipulated in the regulations. the regulation itself states that if the debtor does not do what he promised, then he is said to have defaulted (subekti, 1987). however, it is not the default matter that always might raise from the contract. sometimes a contract raises other legal issues that may not yet be regulated in the law and still require another legal research. the existence of risk causes consequences as to who should be responsible for the murabahah financing contract when a loss occurs to one of the parties. however, the possibilities for the risks that exist in the murabahah financing agreement can be anticipated by looking at the usual risks, including (mardani, 2015): a. default or negligence where the customer deliberately does not pay installments. b. comparative price fluctuations. this happens if the selling price of goods on the market rises after the bank buys it for the customer. the bank cannot change the selling price. c. customer refusal. goods sent can be rejected by the customer for various reasons. it could be because it was damaged in transit, so the customer does not want to accept it. that is why it is better to cover the murabaha object using insurance. another possibility is because the customer feels that the specifications of the item are different from what he ordered. if the islamic financial institution has signed a purchase and sale contract, the item will become the property of the bank. thus, banks have the risk to sell it to other parties. d. on sale. murabaha is trading with debt, so when the contract is signed, the goods belong to the customer. the customer is free to do anything about his assets, including to sell them. if this happens, the risk for default will be large. guarantee on the practice of islamic financial institutions in law number 21/2008 on sharia banking, the term collateral is used to interpret a guarantee which read, “collateral is an additional guarantee, either in the form of movable or journal of islamic economic laws-july, vol. 2, no. 2, 2019 185 immovable property, which is given by the owner of collateral to a sharia bank and / or islamic financial institutions to guarantee settlement of obligations of the facility recipient customer.” according to positive law, a guarantee is something given to a creditor submitted by the debtor to create confidence and guarantee that the debtor will fulfill obligations that can be valued with money arising from the engagement (hadisoeparpto, 1984). guarantees in positive law are divided into two types, namely (salim, 2004): a. personal guarantees. individual guarantees do not give precedence over certain objects, but are only guaranteed by someone’s assets through people who guarantee the fulfillment of the relevant agreement. b. guarantees in the form of asset. asset guarantees give precedence over certain objects and have inherent nature and follow the object in question. the types of material guarantees that are still valid are (salim, 2004): a. pawn b. fiduciary guarantee c. mortgage right d. ship mortgage according to article 1 number 1 law no. 42/1999 concerning fiduciary guarantees, fiduciary is the transfer of ownership rights of an object on the basis of trust with the provision of objects whose ownership rights are transferred remain in the control of the owner of the object. based on article 1 number 2 of law no. 42/1999 concerning fiduciary collateral, it can be understood the fiduciary object might include: a. movable objects consisting of tangible and intangible objects b. immovable objects, especially buildings that cannot be mortgaged as mentioned in law no. 4/1996 concerning mortgage rights. riska wijayanti and kartika marella vanni 186 in order to fulfill legal certainty for recipients of the collaterals and to fulfill the principle of publicity, the fiduciary law requires mandatory registration of guarantees at the fiduciary registration office. after registration, the fiduciary registration office will issue a fiduciary guarantee certificate that lists the “for justice based on the supreme godhead”. thus the fiduciary guarantee certificate has an executorial power which in consequence the fiduciary recipient can directly execute goods that are objects of fiduciary guarantee in case. if the fiduciary provider defaults (lestari and heriyani, 2009). in the implementation of this execution, the leasing company must equip itself with a fiduciary guarantee certificate after taking a summons attempt against the debtor first. in the implementation process, the leasing party can appoint or cooperate with a third party (debt collector or collection service personnel) to carry out the execution (withdrawal of goods) politely and ethically. dispute resolution of islamic finance the legal relationship between customers and islamic financial institutions will run well and smoothly if the parties obey what they have agreed in the contract they made. however, if one party fails or makes a mistake in fulfilling its obligations, the implementation of the contract will face obstacless, problems or even default on payment (musjtari, 2012). a default in a financing agreement is a forerunner to disputes. most disputes in the financing agreement are caused by non-performing financing (npf). when disputes dissent whether in its interpretation and implementation of the contents of the agreement, both parties will try to resolve them through fair discussion. nevertheless, there is still a possibility that the dispute cannot be resolved through discussion. such possibilities are increasingly large, especially in the increasingly diverse world of islamic economic life (ghofur, 2010). settlement of receivables debt in sharia banking practices is carried out among others by (musjtari, 2012): journal of islamic economic laws-july, vol. 2, no. 2, 2019 187 a. resolved through internal institutions. in practice, it is done by the account officer, remidial, or by forming a task force of dispute resolution team; b. resolved through banking mediation; c. resolved through arbitration or through the national sharia arbitration board (basyarnas) d. resolved through the religious courts. overall, dispute resolution can be divided into 2 major groups, namely non-litigation and litigation. non-litigation is an alternative dispute resolution that is currently in high demand, especially for the business community because it is relatively simple, fast and the cost is cheaper. whereas the litigation model means to proceed in front of a court hearing that has competence, both absolute and relative competence in certain disputes (ghofur, 2010). research methodology this study is a legal research which carries out the normative legal research model. the legal material used in this study consists of primary legal material and secondary legal material. collection of legal materials is carried out through document studies which are then analyzed qualitatively. the approach taken in this study is the legislative approach and case approach through the supreme court verdict no. 452k / ag / 2016. the results of this study will be presented in a qualitative descriptive form. results and discussion analysis of supreme court decision no. 452k /ag/2016 related to a fiduciary dispute at pt al ijarah indonesia finance the legal relationship between buyer and pt. al ijarah indonesia finance is a contract based on sharia principles. the contract is a purchase of one unit daihatzu / vvti 13 car xi dlx in 2011 which will be then pledged as collateral. however, riska wijayanti and kartika marella vanni 188 the payment began to run not smoothly because the car was taken away by another person (third party) who borrowed the object of the murabaha contract. based on the default payment by the buyer, pt. al ijarah indonesia finance finally reported the case to yogyakarta polrestabes. disputes that cannot be resolved, either through mediatioin or arbitration will be settled through a judicial institution. the provisions of law number 48/2009 on judicial power explicitly states that in indonesia there are 4 judicial institutions namely general courts, religious courts, military courts and administratial courts. from the four judicial institutions each having different authority in deciding a dispute. in article 49 of law number 3 year 2006 it is stated that the religious courts are one of the judicial institutions with a task and authority to examine, decide upon and settle cases at the first level among people who are muslim in the fields of: marriage, inheritance, wills, grants , waqf, zakat, infaq, sadaqah and islamic economics. based on this regulation, a dispute arises from a murabaha contract which cannot be resolved through mediation or an arbitration becomes the authority of the religious justice institution. this was also reinforced by the constitutional court decision number 93 / puu-x / 2012 on sharia banking which stated that the religious court was the only court authorized to handle islamic economic disputes. indeed, previously it had caused contradictions because there were often several parties who tried to resolve islamic economic disputes both through the district court and the religious court which causes legal uncertainty for justice seekers. the return of authority of the religious court provides clear legal certainty because it does not only apply to islamic banking financial institutions, but also to all islamic financial institutions that use islamic principles. it is not a mistake when this dispute was submitted to the religious court. the only inaccurate thing is that when buyer as the party who should have been guilty of late payment reported back pt al ijarah finance as the defendat. pt al ijarah finance was alleged as committing illegal act by deflecting murabaha journal of islamic economic laws-july, vol. 2, no. 2, 2019 189 contract which its model follows islamic principle as the basis for reporting the buyer to the yogyakarta police resort. after two years since the filing of this lawsuit to the religious court, the dispute was finally decided by the supreme court with a decision rejecting the appeal from the plaintiff agus pujianto s.e bin lie gwan lay as the buyer. the supreme court’s decision which upheld the decision of first level court was correct because from the dispute that occurred the plaintiff clearly had bad intention. the buyer tried to take a legal loophole by distorting the facts and arguing a law breach by pt al. ijarah finance so that the buyer will be free from default allegation caused by late payment of installments. in addition, the plaintiff also could not prove that the murabaha object was indeed taken away by a third party. buyer’s legal liability for the mistakes made by third party in case the buyer as a collateral provider is does not fulfil the payment agreement, then the execution of assets that become objects of fiduciary collateral can be done by several means which are: a. execution of the executorial title b. the sale of assets which become the object of collateral over the power of the recipient of the collateral himself through public auctions as well as taking the repayment of his receivables from the proceeds of the sale (parate executie). c. underhand sales made based on an agreement between the buyer and the fiduciary recipient. particularly for parate executie in collateral objects which is regulated in article 15 sub 3 of law number 42 of 199 on collateral guarantee is a conditional authority. the condition that must be fulfilled is the default debtor does not carry out the contract that has been made jointly. in our case, the buyer started not to pay the installment on the agreed time beginning in the eighth month because the car was taken away by people (third party). the late payment made by buyer is an act of default or breaking the promise of a contract because of its carelessness in riska wijayanti and kartika marella vanni 190 safeguarding murabaha object which is also placed as collateral. buyer’s act is an mistake in the form of negligence that results in violations in criminal law. in law there is a principle of accountability based on the element of mistake. the principle states that a person can be held legally liable if there is an element of mistake made. so that there are some legal consequences when pt al ijarah indonesia finance cannot claim its right to execute a unit of daihatzu / vvti 13 xi dlx 2011 for damages that are borne. first is the demands for compensation under islamic civil law while the second is the buyer can be charged by criminal law to account for his mistake because the violation of regulation article 15 sub 3 of law no. 42 of 1999 on collateral. conclusion collateral is a transfer of ownership rights from debtor to a creditor to guarantee that the debt will be repaid according to the agreement. in this case, based on supreme court’s decision no. 452k / ag / 2016 agus pujianto as buyer delays in paying installments. delay in installment payments to pt. al ijarah indonesia finance led to reporting to yogyakarta police resort. the act of reporting the buyer for the disappearance of the object of murabahah which has been pledged as collateral is a criminal act so that it can be resolved through criminal law. however, before the criminal settlement the parties must resolve the dispute through the civil law for compensation that needs to be paid through a religious court so that the case can be processed through criminal law. musytari has legal responsibility for all his actions in the form of compensation for losses suffered by pt al ijarah indonesia finance and resolve all legal issues that occur as a result of negligence. the research here concludes that it is not a mistake when this dispute was submitted to the religious court. it is only inappropriate when the buyer as the party that should be guilty of having delayed the installment payment reported pt al ijarah indonesia finance by distorting the fact that it was as if pt al ijarah finance had committed an illegal act because it deflects journal of islamic economic laws-july, vol. 2, no. 2, 2019 191 the murabaha contract which is the principal agreement becomes collateral agreement as the basis for reporting the musytari to the yogyakarta police resort. the supreme court’s decision which upheld the verdict of first level court was correct because from the dispute that occurred, the plaintiff clearly had bad intention by trying to take a legal loophole by distorting the facts and arguing against the law against pt al. ijarah finance so that the buyer can be free default allegation. therefore it is appropriate buyer must bear legal proceedings reported by pt al ijarah finance. in addition, the plaintiff also could not prove that the object of murabaha indeed had been taken away by a third party. in this case, there are some legal consequences when pt al ijarah indonesia finance cannot claim its right to execute a unit of daihatzu / vvti 13 xi dlx 2011 for damages that are borne. first is the demands for compensation under islamic civil law while the second is the buyer can be charged by criminal law to account for his mistake because the violation of regulation article 15 sub 3 of law no. 42 of 1999 on collateral. bibliography anshori, a. g. (2008). penerapan prinsip syariah dalam lembaga keuangan, lembaga pembiayaan, dan perusahaan pembiayaan.yogyakarta: pustaka pelajar anshori, a.g. (2010). hukum perjanjian islam di indonesia. yogyakarta: gajah mada university press soenandar, t, djamil, f., badrulzaman m. d., sjahdeini s. r., and seopraptono h. (2001). kompilasi hukum perikatan. bandung: pt. citra aditya bakti ghofur, a. (2010). hukum perjanjian islam di indonesia (konsep, regulasi dan implementasi). yogyakarta: gajah mada university press hadisoeprapto, h. (1984). pokok-pokok hukum perikatan dan hukum jaminan. yogyakarta: liberty sidik, h. s. (2004). perkembangan hukum jaminan di indonesia. jakarta: pt. raja grafindo persada riska wijayanti and kartika marella vanni 192 lestari, a. y. and heriyani e. (2009). dasar-dasar pembuatan kontrak dan akad. yogyakarta: mocomedia mardani. (2013). hukum perikatan syariah di indonesia. jakarta: sinar grafika mardani. (2015). hukum sistem ekonomi islam. jakarta: rajawali pers musjtari, d. n. (2012). penyelesaian sengketa dalam praktik perbankan syariah. yogyakarta: parama publishing rahardjo, s. (2009). membangun dan merombak hukum indonesia (sebuah pendekatan lintas disiplin). yogyakarta: genta publishing subekti. (1987). hukum perjanjian. jakarta: pt intermasa journal of islamic economic laws vol. 1, no. 1 july 2018: 78-98 78 the effect of bank’s internal factors towards micro financing in islamic commercial bank at indonesia ulfa rizki utami faculty of islamic studies, universitas muhammadiyah surakarta email: rizkiulfa22@gmail.com abstract the main driver of indonesian economic wheel is the small and medium-sized enterprises (sme). this sme plays significant role as well in providing employment opportunity while in the same time adding numbers of business units that support the household income from the business. one of the obstacles faced by sme is the capital and financing constraint, especially for the financing from the bank. without financing, sme will lose its capability to grow and develop since the main support for sme is the capital and financing itself. this research aims to know the internal factors affecting the third party fund, inflation and the rate of return in the period of 2012-2014 in islamic commercial banks at indonesia. the research will carry out the ols procedure since this technique allows us to know clearly the factors affecting financing in the sme. our research shows that third party fund significantly affect sme financing with positive sign. meanwhile, the rate of return is observed to affect negatively to the financing. inflation also has significant and positive effect with bigger coefficient compared to others in financing for sme. keywords: sme, third party fund, inflation, rate of return, ols. ulfa rizki utami 79 introduction the free market environment which will be faced by indonesia gives impact on the society to shift their current job towards entrepreneurship. this entrepreneurship could come in many forms, but most of those businesses are small and mediumsized enterprise (sme). in general, sme provides better life. however, capital constraint is the main barrier for people to establish their own business. in indonesia, one of distinguished character from sme can be observed during the economic crisis shock on 1997-1998 which wipes out almost entire economic sector at that time. back at that crisis, sme was able to survive facing the shock compared to other big companies. this sme plays significant role as well in providing employment opportunity while in the same time adding numbers of business units that support the household income from the business. sme also has flexibility compared to other big companies. the growth and development is therefore held as important as sme has important role in boosting economic condition in a country, including indonesia. as an illustration, sme contributes to indonesia by providing employment absorption up to 99.74% out of total national absorption. in addition to that, sme’s contribution for gdp counts for 547 billion rupiah, or equal to 56,73% of gdp. such contribution proves that sme has very strong ability to boost up and enhance national economic condition (prawirokusumo, 2001). according to sme’s development statistic from 2012 until 2014 which is shown at table 1, sme in indonesia experience growth for more or less about 1.4 million yearly. journal of islamic economic laws-july, vol. 1, no. 1, 2018 80 table 1. the growth of sme 2012-2014 no indicator unit 2012 2014 growth 2012-2014 1 number of sme million 56.5 57.9 1.4 2 employment million 110 118 8 3 gdp contribution billion rupiah 4.869 source: ministry of co-operation and sme indonesia the data above shows that sme in indonesia witnesses continuous growing from 2012-2014. this growth is also expected to continue until next following years. this growth is also accompanied with problem faced by sme which according to winarni (2006), the problem is the insufficient capital. in the same time, islamic bank also experiences significant growth from year to year, whether from the financing or deposit side. the financing channeled to sme is also linked tightly to the availability of fund collected by islamic banks from third party. the macro variable whether it is inflation of rate of return is the important component that has to be highlighted after the third party fund amount. the rate of return also influences sme since the higher the rate of return for financing, the more it causes reluctance from society which is the sme to use islamic bank’s profit sharing service when the cost is not equal to profit to be gained by sme. in addition, inflation also affects bank’s decision in channeling the fund. with the variables which have effect on fund allocation on micro financing as mentioned above, this study will focus on the effect of third party fund, inflation and the rate of return towards the total amount channeled for financing sme in islamic ulfa rizki utami 81 commercial bank. the study also will focus on the period of 2012 until 2014. the factors behind the decision which influence financing towards small and medium-sized enterprises from islamic commercial bank are worth to be investigated. this is in addition whether term and condition of financing also counts as priority for the sme to undertake any other party financing on its business. in order to make comprehensive research, this paper will start with the literature review. subsequent to the literature review, some theoretical foundation will be discussed. afterwards, we will explain the research methodology carried out in this paper for investigating the problem. the result of the research comes next along with the discussion of the result. many statistical examinations are also arranged within it. finally, we provide conclusion of the research by acknowledging the limitation of the research as well as providing some suggestions on the topic. literature review there have been some researches which focus on the same topic of our interest. we will sum up those previous researches in a table model to understand its substance in a quick way. there are 10 researches that we will show here which started from 2014 up to 2016 to make sure that we obtain the latest research as new as possible. the result is showed in the following table. journal of islamic economic laws-july, vol. 1, no. 1, 2018 82 table 2. compilation of literature review no. author and journal title variables results 1 sri delasmi jayanti. i-economi vol.2.no.2 (2016) the effect of inflation and bi rate on sme financing (a case study on islamic commercial bank). inflation, bi rate, sme financing the result shows that both inflation and bi rate affects significantly towards sme financing. 2 oki irawan. jurnal liquidity vol.5,no.2 (2016): 127133 third party fund, capital adequacy ratio (car), non-performing financing and the rate of return on investment of sme financing. third party fund, capital adequacy ratio (car), non-performing financing, rate of return on investment of sme financing, amount allocated for sme financing. the result of t-test shows that third party fund has significant effect on total fund allocated towards sme. meanwhile, the f-statistic shows that all variables which are third party fund, capital adequacy ratio (car), nonperforming financing, rate of return are significant. the r-square which is close to the value of 1 shows that the regression can explain much of the problem observed. 3 raden yogi arieffiandi. journal.ipb. ac.id e-issn: 2460-7819 (2016) vol.2,no 3. factors influencing rate of collectible financing fund on sme sector (a case study on certain islamic bank at west jakarta branch). level of financing repayment, type of financing contract, rate of return, maturity, limit ratio of financing, type of collateral, economic sector, type of business body, z-score ratio the result shows that factors which influence the payment collectability from the customer of islamic commercial bank are type of financing contract, rate of return, economic sector, and the z-score of that sme. the analysis on internal and external environment comes out with the important factor which can be used in reducing the number of npf in certain islamic bank at west jakarta that is by doing defensive strategy. ulfa rizki utami 83 no. author and journal title variables results 4 nurhidayah. journal jibeka volume 10, nomor 1 (2016): 42-48 internal and external factors affecting the financing allocation on sme (a case study on islamic banks at indonesia). sme financing at islamic banks, rate of return, financing to deposit ratio, inflation, gdp. the result shows based on the statistical evidence, some variables such as rate of return, inflation as well as gdp does not affect sme financing done by islamic banks. meanwhile, only financing to deposit ratio which has significant effect on the financing allocation to the sme by the islamic banks. 5 muslimin kara. ahkam: vol.xiii,no. 2, juli 2013 contribution of islamic banks financing on the development and growth of sme. islamic financing, small-medium sized enterprise (sme) the results of this study indicate that the development of islamic banking financing in an effort to develop smes in makassar during 2010-2011 experienced a fluctuating increase. this reflects that the role of islamic banking financing in improving smes in the city of makassar has not been optimal. journal of islamic economic laws-july, vol. 1, no. 1, 2018 84 no. author and journal title variables results 6 roikhan mochammad aziz. kinerja volume 21 no.1 (2017) page 17-34 development of small medium entreprise with external, intrernal, and religiosity factors in islamic banks inflation, bank indonesia islamic certificate (sbis), non-performing financing, third party fund, islamic banks. the results of regression analysis finds independent variables for external, internal and religiosity such as inflation, bank indonesia islamic certificate (sbis), non-perfoming financing and third party funds have simultaneous and partial effect on sme financing in islamic banking in indonesia. the most dominant regression variable in influencing sme financing in syariah banking is the nonperforming financing (npf) variable. 7 raras palupi astarini. international journal of science and research volume 5 issue 9 (2016) the impact of internal and external factors on financing of sharia bank in indonesia bank indonesia islamic certificate (sbis), inflation, third party fund, non-performing financing, fdr, roa. based on the result of this research all the variables observed can simultaneously affect smes and non smes conducted by sharia banks. sme financing is influenced by inflation, deposits, npf financing, fdr, and non smes. as a result, sharia banking should consider these variables in conducting sme financing. non-sme financing is influenced by inflation, dpk, fdr, and sme financing. thus, sharia banking should consider these variables in providing financing for smes. ulfa rizki utami 85 no. author and journal title variables results 8 qi zhang hong liu. journal of chemical and pharmaceutical research, 2014, 6(5):18181824 research on small and medium enterperises financing mode based on supply chain finance. supply chain finance, financial crisis, financing on sme. supply chain finance has advantages in solving sme financing difficulties. first, it has more flexibility. with the aid of supply chain strength, upstream and downstream enterprises can use the flexibility of financing strategy to obtain various forms of financial support. second, it helps direct financing where in the mode of supply chain financing, the core enterprise, sme, financial institution and the third party logistics are a whole. third, it is easy to carry out folk financing since supply chain provides an information sharing platform for bank and sme, which effectively solves the problem of information asymmetry between banks and enterprises. journal of islamic economic laws-july, vol. 1, no. 1, 2018 86 no. author and journal title variables results 9 nyankomo marwa. international journal of trade, economics and finance, vol. 5, no. 3, june (2014) micro,small and medium enterprises, external financing challenges: the role of formal financial institutions and development finance intervention in tanzania sme index, financial institutions, financial development. sme in tanzania play a significant role in income generation, job creation and poverty reduction. however, the sector is facing significant credit rationing from e formal financial institutions. as a result, the sector is highly credit-constrained. the credit rationing by formal financial institutions is explained mainly by the mismatch between the requirements of formal financial institutions’ lending process and structural problems in sme’s business processes. the existing mismatch leads to credit market failure in the sme market. 10 gert wehinger. oecd journal: financial market trends volume 2013/2 (2014) smes and the credit crunch : current financing difficulties, policy measures and review of literature foreign export, sme, credit crunch. developments during the crisis have shown that banks significantly reduced their foreign exposures and as ’financial fragmentation’ has taken hold the countercyclical effects of internal capital markets has been working less efficiently. data and methodology this study is quantitative research with descriptive approach. descriptive statistics in research is basically a process of transforming research data in tabulation form so that it can be easily understood and interpreted. as it has been explained, the subject of this study is the fund channeled to sme by islamic commercial banks. thus, the data is also taken according to the topic of interest. the dependent data of the study is sme while the ulfa rizki utami 87 independent variables are the rate of return, third party funds and the rate of inflation. the type of data used in this study is secondary data obtained indirectly from third parties through intermediaries and various sources available which include, bank indonesia, sme department and islamic banking statistics of ojk. this research will use multiple linear regression analysis tool which increases the number of free variable into two or more independent variables. in this study, multiple linear regression analysis is used to determine the relationship and influence level of internal factors towards sme financing in islamic commercial banks. before performing multiple regression analysis, this method requires to test classical assumption to get good result (ghozali, 2006). the equation of regression is as per following: pkmt = α+β1dpkt+ β2inft+ β3tmt+ ut where : pkm : sme financing (billion rupiah) α : constant variable β : coefficient parameter dpk : third party fund (billion rupiah) inf : inflation (%) tm : rate of return (%) u : error term result and discussion descriptive analysis 1. growth of islamic commercial banks financing on sme financing is the provision of funding facilities to meet the needs of the parties of deficit unit which can be in the form of journal of islamic economic laws-july, vol. 1, no. 1, 2018 88 individual or legal body. financing data for sme collected by ojk as compiled at islamic banking statistics in 2012-2014 can be shown by the following graph: graph 1. growth of financing on sme 2012-2014 source: islamic banking statistics (processed data) from the graph above, we can see that at the beginning of 2013 the financing reaches rp. 92,672 billion up to july 2013 when it reaches rp. 108,932 billion. here, the financing for sme gains an increase. it then decreased slightly on august 2013 to rp. 104,727 billion rupiahs before it increased again until the end of 2013 which amounts to rp. 110,086 billion. such increase did not last long since it dropped sharply until the end of 2014 when it touched merely rp 60,000 billion. 2. the growth of third party fund third party fund is the fund obtained by the bank from its customer which is the society. islamic banking statistics had ulfa rizki utami 89 compiled the data for this third party fund. the following graph shows the third party fund statistics from 2012-2014. graph 2. growth of third party fund 2012-2014 source: islamic banking statistics (processed data) from the graphic above, we can see that rp. 147,512 billion financing is recorded until the end of 2012. in the beginning of 2013 the total financing was rp. 148,731 billion rupiah and keep increasing until the end of 2013. there was only slight decrease in the early 2014 which touched rp. 177,930 billion, but then increased again in the next month until the end of year observed amounting to rp. 217,858 billion rupiah. the decline in the development of third party funds is not evident in the graph above because the decrease is not significant. 3. inflation rate inflation can be defined as the increase on prices. the data of inflation rate is shown on the graph 3. journal of islamic economic laws-july, vol. 1, no. 1, 2018 90 graph 3. inflation rate 2012-2014 source: centre body for statistics by observing the year end data from the graphic above, we can see that the lowest inflation rate happened at december 2012 that is 4.30%. in december 2013, the inflation peaked into its higher level at 8.38%. the inflation decreases only slightly in the end of 2014 by 0.02%. from the above table, it is evident that the inflation in 2012 is generally lower compared to other years. 4. rate of return islamic banking statistics also has compiled the data for the change of any rate of return through out the year. the graphic below will show the statistic. ulfa rizki utami 91 graph 4. rate of return 2012-2014 source: islamic banking statistics (processed data) at the of 2012, the rate of return recorded at 8.92%. coming into january 2013, it increased by 0.3% into 9.22% while it decreased into 8.79% at the end of the same year. however, it recorded the highest increase at the end of 2014 which was 10.86%. the rate of return actually fluctuates in each of the months. however, it seems not to be evident in the graphic since the increase or decrease is insignificant. estimation result 1. statistical interpretation as it has mentioned above, we use multiple linear regression in order to know the relation between the variables. the result of the regression is as per following. journal of islamic economic laws-july, vol. 1, no. 1, 2018 92 table 3. regression result pkmt= 269081.2 + 0.251143dpkt + 3146.138inft 25783.53tmt (0.0067)* (0.0104)** (0.0000)* r2 = 0.844232; dw-stat= 1.307656; f-stat= 57.81141; sig.f-stat= 0.000000 diagnosis testing 1. multicollinearity (vif test) dpk=4.434988inf=2.478560 tm=2.963089 2. autocorrelation (breusch godfrey test) x2 (3) = 0.614252 sig(x2) = 0.8932 3. linearity (ramsey reset test) f( 2, 28) = 1.245321 sig(f) = 0.3033 4. normality (jarque bera test) x2 = 4.338550 sig(x2) = 0.114260 5. heteroscadasticity (white test) x2 (9) = 12.03249 sig(x2) = 0.2115 keterangan : *signifikan pada α = 0.01; **signifikan pada α = 0.05; ***signifikan pada α = 0.10; angka dalam kurung adalaah probabilitas nilai t-statistik. before explaining the result, we would like to first discuss the diagnosis testing. this is because when regression falls to fulfill the entire classical assumptions, the regression result could be bias or inefficient. first, we find no multicollinearity after conducting vif test since none of the value exceeds the limit which is 10. the breush godfrey test for the autocorrelation also shows that our regression does not encounter problem of autocorrelation since the sig(x2) = 0.8932. we also test for the model specification using ramsey reset test. the result shows that our model is well specified since the sig(f) = 0.3033. for the normality, we conduct the jarque bera test which shows that sig(x2) = 0.114260 meaning our model has normal distribution function. lastly, the white test for heteroscadasticity shows ulfa rizki utami 93 that the regression does not suffer from any heteroscadasticity problem as the value sig(x2) = 0.2115 we also conducted the model examination to know whether the variables as a whole are significant or not by using f-test. here, the f-stat probability has the value of 0.000000 which means the model is significant or in other word it does exist. apart from the f-test, we also interested in the result of r2. the r2 value which is 0.844232 shows that almost 85% of the change in the dependent variable (pkm) can be explained by three independent variables we investigate here. meanwhile, the rest variation is explained by variables outside the model. since we are done with all the tests, we can now proceed to the estimation interpretation part. the third party fund affects significantly and positively on the sme financing. the coefficient shows the value of 0.251143 which means any one billion rupiah increase in third party fund would be associated with the increase of sme financing by 0.251143 billion rupiah while one billion rupiah decrease in third party fund would by associated with the decrease of sme financing by 0.251143 billion rupiah assuming the other variables hold constant. in the same time, inflation is also has significant and positive impact on the sme financing. since the coefficient is 3146.138, it means that an increase in inflation by 1% will affect sme financing to increase by 3146.138 billion rupiah while the decrease of inflation impacts the same amount of decrease on sme financing assuming the other variables hold constant. the rate of return is also significant with negative sign with the value -25783.53. thus, 1% increase on rate of return will makes the sme financing decrease by 25783.53 billion rupiah, and the opposite is true assuming the other variables hold constant. journal of islamic economic laws-july, vol. 1, no. 1, 2018 94 2. economic interpretation first, the significant and positive effect of third party fund on the sme financing means that more third party fund is needed. thus, bank must attract more people to save their money under their custody so that the amount for financing channeled to the sme could increase. even though the third party fund is not necessarily meant to be channeled to sme, it at least adds the possibility of such financing. the results of this study conforms what has been done by nurhidayah and any isvandiari (2016) with their publication titled “internal factors and external factors affecting allocation of small and medium business financing (study on indonesia islamic banks)”. the results showed that third party fund affects sme financing. second, inflation has a positive and significant effect on the financing of sme. this means that the relationship between inflation towards financing of sme is very influential. the increasing rate of inflation in indonesia will lead to an increase in the amount of funds channeled for the financing of sme. the result here also conform previous study which is done by sri delasmi and deky anwar (2016) entitled “the effect of inflation, bi rate on micro and small business financing (case study at sharia commercial bank)” that there is a significant influence between the independent variable of inflation on the dependent variable of umkm financing. the last variable which is rate of return shows significant effect yet with the negative sign. this means that the increase and decrease in financing of small and medium enterprises is strongly influenced by the rate of return of islamic commercial bank. ulfa rizki utami 95 this is because from the rate of return determination, the bank will get advantage when doing financing to customers. however, the result of this study is in the contrast with the research of nurhidayah and any isvandiari (2016). the t test on margin level variables shows that t value has negative and insignificant value to the allocation of sme financing of indonesian sharia bank, this indicates that the increase and decrease in the level of financing margin does not affect the allocation of financing to sme. conclusion and suggestion the regression model in this study has past all the tests to fulfill the classical assumptions on regression. the test includes normality, multicollinearity, autocorrelation, heteroscadasticity and model specification. according to t-test, all variables in the study are significant with both positive and negative signs and various magnitudes. the third party fund affects significantly with positive sign and having the coefficient of 0.251143. in the same time, inflation impacts significantly and positively towards sme financing with the magnitude 3146.138. at the last, rate of return is significant but having negative sign with the coefficient -25783.53. however, we acknowledge that the study here has limitation in which we only observe from year 2012 until 2014. based on these results, some suggestions can be proposed. first of all, it is important for the government to maintain monetary stability to boost up sme financing. this monetary stability which includes inflation has the effect on sme financing as we have seen above. secondly, islamic commercial banks should pay more attention on their rate of return because all sme players do take into consideration the rate of return the bank would offer journal of islamic economic laws-july, vol. 1, no. 1, 2018 96 based on the result of this paper. reference arieffandi, r. y., firdaus, m., & sasongko, h. 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(2014). diambil kembali dari otoritas jasa keuangan:http://www.ojk.go.id/id/kanal/ syariah/data-dan-statistik/statistik-perbankan-syariah/ default.aspx wehinger, g. (2014). smes and the credit crunch : current financing difficulties, policy measures and a review of literature. journal : financial market trends, vol 2. winarni, s. (2006). strategi pengembangan usaha kecil melalui peningkatan aksesibilitas kredit perbankan. infokop nomor 29 tahun xxii. journal of islamic economic laws vol. 3, no. 2 july 2020: 124-140 124 the effect of internal marketing on the prosperity of maqashid syariah perspective employees on banking in surakarta raisa aribatul hamidah1 and atika fikri tsani2 1universitas islam batik surakarta 2universitas islam batik surakarta email: raisaribatul9@gmail.com, atikafikri47@gmail.com abstract this study aims to determine the effect of internal marketing consisting of the dimensions of the company mission and development of human resources on the welfare of employees from the perspective of maqashid syariah on banking in the city of surakarta. this study uses a questionnaire in primary data collection and a quantitative approach with multiple linear regression analysis. the research sample was 96 employees who worked a minimum of three months in banking in the city of surakarta. sampling using accidental sampling technique, namely determination of the sample by chance. validity and reliability testing is carried out with the help of the spps 15 (statistical product and service solution) program. the result is that internal marketing in the corporate mission dimension (x1) does not have a significant effect, and the sdi development (x2) dimension has a significant positive effect of 0.877 on employee welfare from the maqashid syariah perspective on banking in surakarta. keywords: internal marketing, company mission, human resource development, welfare, maqashid syariah introduction human resources or human resources (sdi) is one of the essential elements in company management activities. every company will always try to employ experts in their fields so that they can be directed in achieving company goals. humans are indirectly one of the factors that determine the success or failure journal of islamic economic laws-july, vol. 3, no. 2, 2020 125 of a company’s goals. humans are individual and social creatures who cannot live and achieve their own goals without others’ help. cooperation is an effort to encourage and strengthen each other in achieving common goals(center for assessment and development of islamic economics (p3ei) yogyakarta islamic university of indonesia & bank indonesia, 2008). some verses of the qur’an also emphasize cooperation in islam, one of which is ْن اْلُخلََطاء لَيَْبِغي بَْعُضُهْم َعلَى بَْعٍض إِلَّ الَِّذيَن آَمنُوا َوَعِملُوا َوإِنَّ َكثِيراً ِمّ الصَّالٌَحاِت it means, “... verily, most of those who associate some of them do wrong to others, except those who believe and do righteous deeds; and there are very few of them ... “(qs. shad [38]: 24)(al-quran, nd). an excellent external relationship and its policies should have an excellent internal relationship foundation, and a supportive work environment makes them more motivated to work productively. internal customer welfare is essential for the success of the company’s services to external customers(caruana & calleva, 1998, p. 108). therefore, internal marketing is needed. internal marketing is the mechanism of the company’s management in recruiting, training, and motivating employees to be able to serve customers well. mornay (2010, p. 362)stated that the main issue underlying the concept of “employees are customers” in internal marketing is similar to external customers, where internal customers also try to meet their needs and desires. internal marketing focuses on people within business boundaries and emphasizes meeting the needs of employees. internal marketing theory states that business emphasizes the realization of employee welfare, and the approach to work as an internal product, aiming to develop the company and the best motivation for employees (mornay, 2010, p. 362). palmatier, dant, grewal, & evans (2006) states that “meeting the welfare of internal customers,” its placement in the business is in a more prominent position, besides providing the desired quality to satisfy external customers. management efforts to meet raisa aribatul hamidah and atika fikri tsani 126 employee needs to increase employee motivation and retention. consequently, the higher the level of employee welfare, the higher the likelihood of generating external customer satisfaction and loyalty (mornay, 2010). berry, conant, & parasuraman (1991) stated that internal marketing consists of dimensions: company mission (mission) and human resource development (development). caruana & calleva (1998) said that the mission is the perspective and steps used as guidelines for the company to get closer and achieve the objectives to be achieved. sdi development is a process or method that is carried out gradually and regularly towards the desired target. one of the happiness felt by humans is when their lives are prosperous. humans interpret ‘welfare’ with different perspectives. most of the economic notions interpret welfare as material world welfare. islam means ‘well-being’ in terms of falah or prosperity in the world and the hereafter(center for assessment and development of islamic economics (p3ei) yogyakarta islamic university of indonesia & bank indonesia, 2008, pp. 4-5). falah can be realized if human life needs are met in a balanced way to create a problem. maslahah is all forms of conditions, both material and non-material, that can increase humans’ position as the noblest creatures (nasution, 2007). the basic maslahah for human life consists of five things commonly referred to as maqashid sharia, namely the preservation of religion (deen), soul (nafs), intellectual (‘aql), descent (nasl), and material (maal)(center for assessment and development of islamic economics (p3ei) yogyakarta islamic university of indonesia & bank indonesia, 2008). these five things are a unity that becomes the basis and general objectives of the shari’a that must be maintained. each objective must be fulfilled to achieve the ultimate goal, namely a happy life in the world and the hereafter (karim, 2007). to be able to retain its employees, one of the ways that can be done by companies is to provide welfare programs (kartaya & sula, 2006; rival & basri, 2005). an employee will work in earnest if his needs have been met(chang, 2009). the welfare program to be implemented can be in the form of benefits and service facilities, which are expected to foster employees’ high welfare so that it will journal of islamic economic laws-july, vol. 3, no. 2, 2020 127 create morale optimally and increase work productivity(ratnasari & aksa, 2011). this condition has encouraged research to discover more about the effect of internal marketing on the welfare of employees working in surakarta city banking. thus the internal marketing mechanism will be known to provide welfare for employees from the perspective of maqashid sharia. table 1. previous research name title method research result ryandono (2009) role and effect of fund raising on fund distribution and bank performance factors and the welfare of islamic bank employees in indonesia quantitative the results of this study state that business performance has a greater influence on the welfare of employees of islamic banks caruana & calleva, (1998) the effect of internal marketing on organizational commitment among retail managers qualitative caruana and calleya introduced the mission and development dimension in measuring internal marketing and the dimensions of affective, continuance, and normative commitment in measuring organizational commitment. the results of this study highlight the critical role of internal factors that drive marketing on organizational commitment. raisa aribatul hamidah and atika fikri tsani 128 name title method research result mornay (2010) employees as customers an internal marketing study of the avis car rental group in south africa qualitative the avis car rental branch management also realizes that the success of the internal marketing strategy will be determined by the level of support received from the employees. they also realize that the creation and establishment of open communication channels with employees is a prerequisite for success in implementing effective internal marketing. methods the research approach used in this study is an explanatory quantitative approach that aims to test hypotheses, measurable data, and produce conclusions that can be generalized (sugiyono, 2008). the measurement method of research will be more readily understood through quantitative methods using a questionnaire as a tool to determine respondents’ perceptions(anshori & iswati, 2009). respondents in this study were banking employees in the city of surakarta. the variables used in this study consisted of two variables, namely exogenous variables and endogenous variables. the exogenous variable (x) in this study is internal marketing, which consists of: (1) dimensions of corporate mission (mission) = x1, and (2) dimensions of development of human resources (development) = x2. the endogenous variable (y) in this study is “the welfare of banking employees from the perspective of maqashid syariah.” sampling using accidental sampling technique, namely determination of the sample by chance. validity and reliability testing is carried out with the help of the spps 15 (statistical product and service solution) program. journal of islamic economic laws-july, vol. 3, no. 2, 2020 129 results and discussion surakarta city is a city that has quite high economic activity. viewed from the grdp based on constant prices in the second semester of 2016, the banking sector and financial institutions rank fifth in contributing to the total grdp of the city of surakarta. the financial services authority (ojk) recorded total banking assets in the working area of the solo ojk office of rp 73.97 trillion as of november 2015. banks in the city of surakarta still dominate the distribution of assets. wilayah solo raya has 191 financial service institutions in the banking sector, conventional commercial banks, 13 sharia commercial bank branches, and 74 bpr head offices and 8 bprs head offices with 393 office networks. meanwhile, there were 196 offices of non-bank financial service institutions in solo. the number consists of 76 insurance company offices, 90 finance company offices, 11 pawnshop offices, two pension fund offices, and 17 securities company offices. research respondents on “the effect of internal marketing on employee welfare of the maqashid syariah perspective on banks in surakarta” are employees or employees of both sharia and conventional rural banks (bpr) in surakarta and surrounding cities. the total respondents were 96 employees. table 2. respondents’ characteristic based on place of work financial institutions status total percentage (%) bpr sharia 9 9,375 conventional 15 15,625 commercial banks sharia 19 19.79 conventional 53 55.21 total 96 100.0 source: processed data based on the table above, from all respondents based on the place of work, it can be seen that most of the questionnaire respondents work at conventional commercial banks. in particular, several 53 people (55.21%) consisting of bri raisa aribatul hamidah and atika fikri tsani 130 employees (20 respondents), mandiri (11 respondents), bukopin (2 respondents), bni (4 respondents), bca (5 respondents), sinarmas (5 respondents), and uob (5 respondents). in comparison, the least number of respondents worked at sharia rural banks, a total of 9 people (9.37%) consisting of bprs dana mulia employees (7 respondents) and bprs insan madani (2 respondents). while respondents who work in conventional rural banks are 15 people (15.63%) and in islamic commercial banks are 19 people (19.79%) consisting of bca syariah employees (7 respondents), muamalat (6 respondents), btn syariah ( 5 respondents) and bri syariah (1 respondent). in this study, internal marketing of the corporate mission dimension is measured by eight indicators. for internal marketing, the human resources development dimension is measured by ten indicators, and 14 indicators measure employee welfare maqashid syariah’s perspective. the following is a description of the respondents’ answers to all research variables. the answers are both in the form of the frequency of answers and the respondents’ average answers. a discussion of the results of this study uses the correlation coefficient and regression analysis techniques. correlation coefficient analysis is used to determine whether there is a relationship between the independent and dependent variables. simultaneously, the regression coefficient is used to measure the magnitude of the relationship between the independent and dependent variables. a validity test is at the correlation between the scores of each question instrument with the total score. validity calculation is done by using the product-moment correlation technique formula. the value of r xy obtained will be consulted with the r product moment table’s price at a significance level of 0.05. if r xy> r table, then the item is declared valid(yamin & kurniawan, 2009). this study has three variables, namely, company mission variable, human resource development, and employee welfare perspective of maqashid syariah. the validity of the questionnaire data for each item can be seen in the table below: journal of islamic economic laws-july, vol. 3, no. 2, 2020 131 table 3. validity test results variable question r count information company mission (x1) item 1 0.522 valid item 2 0.583 valid item 3 0.571 valid item 4 0.390 valid item 5 0.538 valid item 6 0.439 valid item 7 0.580 valid item 8 0.410 valid human resource development (x2) item 1 0.547 valid item 2 0.533 valid item 3 .387 valid item 4 .628 valid item 5 0.552 valid item 6 0.670 valid item 7 0.568 valid item 8 0.586 valid item 9 .481 valid item 10 .653 valid employee welfare perspective maqashid syariah (y) item 1 .353 valid item 2 0.436 valid item 3 .628 valid item 4 0,600 valid item 5 .377 valid item 6 0.567 valid item 7 .627 valid item 8 .486 valid item 9 .483 valid item 10 0.589 valid item 11 0.749 valid item 12 -0,085 non valid item 13 .382 valid item 14 0.668 valid source: processed data question items are said to be valid if the significance value of the correlation between items and total items <0.05. based on the table above, it can be seen that all question items have a raisa aribatul hamidah and atika fikri tsani 132 significant correlation with a total score <0.05 except for variable y point 12. thus, almost all question items can measure indicator variables x and y. on this basis, all items meet the validity requirements, except for variable y point 12, which is invalid, and in the next step, elimination must be made on that point. table 4. test validity of variable y questions after elimination variable indicator n r information item 1 96 0.350 valid item 2 96 0.436 valid item 3 96 .628 valid item 4 96 0,600 valid item 5 96 .374 valid item 6 96 0.563 valid item 7 96 0.630 valid item 8 96 0.490 valid item 9 96 .487 valid item 10 96 0.585 valid item 11 96 0.749 valid item 13 96 0.380 valid item 14 96 .671 valid source: processed data based on the table above, two validity tests for company mission, human resource development, and employee welfare from maqashid syariah perspective have been tested. it is known that the questions that have been tested are declared valid, item scores in all variables have a positive correlation with item scores (r table) which is above 0.2146 so that the question is worth analyzing. test reliability on the question items of each variable from company mission, human resource development, and employee welfare from maqashid syariah perspective, can be summarized as follows: journal of islamic economic laws-july, vol. 3, no. 2, 2020 133 table 5. cronbach alpha reliability coefficient variable n question alpha coefficient reliable internal marketing company mission (x1) 96 8 .704 reliable internal marketing sdi development (x2) 96 10 0.737 reliable employee welfare from the perspective of maqashid syariah (y) 96 13 0.727 reliable source: processed data based on the table above, it can be seen that all research variables have a cronbach alpha coefficient> 0.6, so it can be concluded that the scale to measure each variable in this study has high reliability. high reliability means that the scale used provides consistent measurement results if the measurements are repeated. based on the results of data management, the regression equation results in this study can be seen as follows: table 6. multiple linear regression test results variable regression coefficient beta t-test internal marketing company mission 0.141 0.062 0.578 0.565 internal marketing sdi development 0.877 0.501 4,639 0,000 constant = 12,742 f arithmetic = 13,261 r = 0.471 r2 = 0.222 source: processed data based on the results of the regression calculation above, the regression equation can be formulated as follows: y = 12,742 .141x1 +0.877x2 raisa aribatul hamidah and atika fikri tsani 134 the equation can be explained as follows: 1. the constant in the above equation is 12,742. the positive coefficient indicates the direction of change in the direction of the exogenous variable with the endogenous variable. the result shows a constant price, where when internal marketing in the dimensions of company mission (x1) and sdi development (x2) is worth 0. the employee welfare perspective of maqashid syariah (y) is worth 12,742 units. 2. the coefficient of the internal marketing variable in company mission (x1) is -.141. it means that the corporate mission dimension (x1) has a negative effect on employee welfare from the perspective of maqashid syariah (y). if variable x1 is in the equation increased by one unit, then the employee welfare of the perspective of maqashid syariah (y) will decrease by .141. 3. the coefficient of the variable internal marketing in sdi development (x2) is 0.877. this means that sdi development (x2) dimensions have a positive effect on employee welfare from the perspective of maqashid syariah (y). if variable x2 is in the equation increased by one unit, then the employee welfare of maqashid syariah perspective will increase by 0.877. beta values indicate the exogenous variables that have the highest value are the most dominant influencing endogenous variables. the results showed, internal marketing in the corporate mission dimension was -0.062 and in the sdi development dimension was 0.501. then, the dimension of sdi development is more dominant in influencing employees’ welfare from the perspective of maqashid sharia. the simultaneous determination coefficient measures the proportion of internal marketing in the dimensions of company mission (x1) and sdi development (x2) towards employee welfare from the perspective of maqashid syariah (y). the simultaneous determination coefficient can be seen from the value of r square (r2). journal of islamic economic laws-july, vol. 3, no. 2, 2020 135 table 7. correlation and determination coefficient model r r square adjusted r square std. error of the estimate 1 .471 .222 .205 4,854 source: processed data r square (r2) in the table above explains that simultaneously, internal marketing in the dimensions of company mission (x1) and sdi development (x2) has a proportion of influence of 0.222 or 22.2% on employee welfare from the perspective of maqashid syariah, while others are 77, 8% is influenced by other variables outside the exogenous variables used in the study. possible variables that play a role influence and are not included in the study including business and social performance (ryandono, 2009), job security and communication (kelemen & papasolomou-doukakis, 2004), government labor policies such as compensation, gender, foreign citizenship status (hasibuan, 2005) and others. the f test shows the effect of an exogenous variable (x) simultaneously (together) in explaining an endogenous variable (y). the significance value of the f-test was obtained using spss software (statistical program social science) version 15. the results are presented in the following table: table 8. test results f model sum of squares df mean square f sig. regression residual total 624,910 2191,247 2816,156 2 93 95 312.455 23,562 13,261 0,000 source: processed data the table above shows that an f value of 13,261 with a significance level of 0,000. the significance value of the table shows that the significance value is smaller than the error rate of 5%. this means that internal marketing in the dimensions of company mission (x1) and sdi development (x2) raisa aribatul hamidah and atika fikri tsani 136 simultaneously has a significant positive effect on employee welfare from the perspective of maqashid syariah. table 9. t-test statistics fathanah character practice variable sig information x1 (company mission) 0.565 not significant x2 (sdi development) 0,000 significant source: processed data the t-test shows the effect of an exogenous variable (x) partially on an endogenous variable (y). the table above illustrates that internal marketing in the corporate mission dimension (x1) partially has no influence and sdi development (x2) has a significant positive effect on employee welfare from the perspective of maqashid syariah (y) because the significance level is smaller than the error rate of 5%. the influence of internal marketing in the corporate mission dimension to the prosperity of maqashid sharia employees the first hypothesis is rejected. internal marketing in the corporate mission dimension (x1) does not have a relationship and influence on employee welfare maqashid shia perspective (y), namely, maintenance of religion, soul, reason, family, and property. this finding is not in line with the theory conveyed by tasmara (2001), which states that the company’s mission affects the way of looking at life and seeing what is done and the hopes to be achieved in the future, namely the achievement of prosperity. a muslim will certainly prioritize working in a company that can draw closer to allah and achieves a better tomorrow(tasmara, 2001, p. 10). the influence of internal marketing in the dimensions of sdi development on the welfare of perspectives of maqashid sharia the second hypothesis is acceptable. this result shows that internal marketing in the sdi development dimension journal of islamic economic laws-july, vol. 3, no. 2, 2020 137 has a significant positive effect on employees’ welfare from the perspective of maqashid sharia, namely, maintenance of religion, life, reason, family, and property. this finding is in line with the theory presented by ryandono (2009, p. 83) that sdi development makes employees get input in the form of skills, knowledge, moral enhancement, and experience that is not always obtained by others. islamic banks also carry the goal of islam in combating ignorance and .ty in economic activities to achieve falah (prosperity in the world and the hereafter). development must also include spiritual matters in relation to god in the process of achieving worldly prosperity (tasmara, 2002). the results of this study stated that internal marketing in the corporate mission dimension did not influence development. it had a significant positive effect on employee welfare from the perspective of maqashid sharia. based on research conducted, maintenance of maqashid sharia can be sorted from highest to lowest order is as follows: first, the maintenance of assets (hifzul-maal) gets a good rating with a value of 3.18. this point can be interpreted as the majority of banking companies in surakarta still consider employee welfare to be prioritized on salaries and benefits. whereas by working in a place that prioritizes religious interests, there is no need to worry about salaries that will be obtained. second, maintenance of intellect (hifzul-’aql) gets a good predicate with a value of 3.15. work requires intellectual ability, not just physical, and therefore requires the workforce from college graduates. companies that prioritize religion, also prioritize guarding their intellect and intellect. third, the maintenance of religion (hifzud-diin) gets a good rating with a value of 3.12. this result explains that the welfare of banking employees in surakarta in terms of worship guarantees has not been seen as a primary need by company leaders. fourth, maintenance of the soul (hifzun-nafs) gets a good title with a value of 2.96. the company has provided employees’ health and safety guarantees, but the employees’ logistical or consumption needs have not been given much attention. the last raisa aribatul hamidah and atika fikri tsani 138 priority in the study, is the maintenance of family and heredity (hifzun-nasl) get a good rating with a value of 2.91. the fulfillment of the five aspects of sharia maqashid above has been adequately balanced because, based on the respondents’ assessment, there are no harmful categories of welfare. the need for maintenance of assets is still the core of meeting the needs of employees. allah says: َ يَنُصْرُكْم َويُثَبِّْت أَْقَداَمُكْم يَا أَيَُّها الَِّذيَن آَمنُوا إِن تَنُصُروا للاَّ it means: “o believers, if you help (religion) allah, surely allah will help you and strengthen your position” (surah muhammad: 7). the verse explains that people who always uphold religion and appeal to god, then god will help him from poverty, ignorance, disease, fear, and various difficulties encountered. conclusion this study concludes that internal marketing in the corporate mission dimension does not significantly influence employee welfare from the perspective of maqashid syariah in surakarta. whereas internal marketing in the dimension of sdi development has a significant positive effect on employee welfare from the perspective of maqashid syariah in surakarta. the findings are expected to be a reference for companies to 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(2009). spss complete: teknik analisis statistik terlengkap dengan software spss. salemba infotek. journal of islamic economic laws vol. 3, no. 1 january 2020: 68-85 68 analysis of the efficiency level of sharia rural financing bank (srfb ) using data envelopment analysis (dea ) leyla mariana1 and harun2 1faculty of islamic studies, universitas muhammadiyah surakarta email: leylamariana220@gmail.com 2faculty of islamic studies , universitas muhammadiyah surakarta email: har179@ums.ac.id abstract this research aims to analyze the efficiency level of sharia rural financing bank (srfb) in surakarta. this study used data from four rural sharia banks taken from www.ojk.co.id, which published its annual report. this study conducted inputoutput variables with the data envelopment analysis (dea) method as a tool of analysis. the results of the research showed that the srfb dana amanah is indicated as efficient during the 2017 period. the other three are indicated as inefficient in the last quarter. the inefficiency source came from its operational cost and its incapability to get higher output. keywords: efficiency, data envelopment analysis, sharia rural financing bank, analysis. introduction sharia rural financing bank (srfb) is a bank that conducts business activities based on sharia principles, which in its activities do not provide interest or usury in payment. an srfb is a business entity and similar to a conventional credit bank in the form of a limited liability company or regional company (jianti, 2015). srfb, as one of the institutions in the bank, has a financial intermediation function. according to zammir & mirakhor mailto:leylamariana220@gmail.com https://translate.google.com/translate?hl=id&prev=_t&sl=id&tl=en&u=http://www.ojk.co.id leyla mariana, harun 69 (2008), the function of financial intermediation is the process of collecting or purchasing surplus funds from the business sector, government, and households, to be channeled to deficit economic units. in its financial activities, the srfb facilitates this intermediation function by providing a contract or contract that is implemented following sharia provisions. according to sholahuddin & hakim (2018), srfb can be interpreted as banks whose work system has implemented a sharia economic system based on islamic sharia. srfb was established in general and correctly to fill opportunities with conventional bank policies in setting interest rates and also various financial and monetary policy packages. then srfb is known as a system that adheres to the islamic economic system based on islamic sharia principles. srfb in surakarta has shown considerable development, as it can be seen from several aspects. table 1 shows the number of srfb offices and customer development in surakarta from 2014 to 2018. table 1. srfb office and customer data in surakarta city in 2014-2018 srfb 2014 2015 2016 2017 2018 number of offices 5 5 5 6 6 number of customers 472 539 689 757 795 source: financial services authority (data processed). the table above illustrates the number of sharia rural financing in surakarta has increased from 2014-2018. viewed from 2014, the number of offices that initially had five offices in 2018 increased to 6 offices. in 2014 the number of srfb customers had reached 472 then escalated in 2018 to 795 customers. it can be concluded that sharia rural finance banks have excellent performance from year to year. in addition to the number of offices and customers, the ability of srfb to generate profits can also be a benchmark for srfb performance. table 2 shows the increase in srfb companies in generating profits. journal of islamic economic laws-january, vol. 3, no. 1, 2020 70 table 2. srfb profit in surakarta city in 2014-2018 srb 2016 2017 2018 dana mulia 3,527,784 4,436,354 6,518,594 trust funds 2,685,627 4,228,446 5,079,008 central syariah utama 2,366,937 3,292,529 4,399,636 harta insan karimah 9,683,034 15,153,444 21,011,920 total 18,263,382 27,110,773 37,009,158 source: financial services authority (data processed). table 2 shows the increase of srfb profit in surakarta within a period of 5 years from the year 2016 -2018. srfb in surakarta city was able to generate profits 18,263,382 in 2016 and increased to 27,110,773 rupiahs in 2018. in 2018 srfb profit became higher to 37,009,158 rupiahs. this concluded that the srfb in surakarta shows a relatively rapid development and has an excellent performance from year to year. the purpose of this study was to determine the level of efficiency of the sharia rural financing bank (srfb) in surakarta for the 2017 period and determine the steps that must be taken to improve performance. it is hoped that the government and bank indonesia would use this research as an information tool and consideration for rural banking policy. in order to achieve national economic stability, srfb efficiency needs to be improved. besides, this paper is expected to be a guide for evaluating srfb performance in surakarta, so it can be taken into consideration to make corrective policies to improve the performance of rural banks. this research also can be used as reference material for future research discussing the efficiency of sharia rural financing bank. literature review definition of islamic people’s financing bank banking law no. 10 of 1998 stated that a rural bank is a bank financial institution that carries out its business activities conventionally or based on sharia principles (darsono, 2003). bpr conducting activities based on sharia principles have obtained leyla mariana, harun 71 implementing regulations in the form of a letter from the board of directors of bank indonesia no. 32/36 / kep / dir concerning rural credit banks based on sharia principles dated may 12, 1999. in technical terms, sharia rural banks can be interpreted as financial institutions as conventional srfb whose operations use sharia principles (darsono, 2003). sharia bank financing bank businesses according to darsono (2003), srfb has several businesses to carry out its activities, including the following: 1. collecting funds from the public in the form of deposits in the form of time deposits, savings, and or other forms. 2. give credit. 3. provide funding and placement of funds based on sharia principles under the provisions stipulated by bank indonesia. 4. placing funds in the form of bank indonesia certificates, time deposits, certificates of deposit, and or savings with other banks. the forms of sharia rural bank fund distribution to the public can be categorized below: 1. wadiah savings in this savings, the bank accepts savings ( saving accounts ) from customers in the form of free savings. whereas the bank binds the contract with the customer in the form of a wadiah. the deposit is not borne by the customer, and the bank provides a bonus to the customer. the bonus is obtained by the bank from profit sharing and credit financing activities to other customers. wadiah savings bonuses can be calculated daily and paid to customers every month. 2. mudharabah savings in mudarabah financing, banks enter into contracts with customers (entrepreneurs). the bank provides venture capital financing for projects managed by the company. profits will be shared (profit-sharing agreement) by the agreement that has been bound by the bank and the entrepreneur. journal of islamic economic laws-january, vol. 3, no. 1, 2020 72 3. murabahah receivables in this murabahah account, the bank as the provider of funds to the customer to buy goods by confirming the purchase price to the buyer (customer) and the buyer (customer) pays it at a price more than the agreed profit of the bank. in addition to conducting business activities as referred to above, the sharia rural bank may also act as a baitul mal institution, namely receiving funds from zakat, infaq, alms, endowments, grants or other social funds and channeling them to those entitled to in the form of compensation and or benevolent loans ( qardhul hasan )(darsono, 2003). definition of efficiency the concept of efficiency is fundamental and was born from the concept of economics. however, the concept of efficiency can be defined in various perspectives and backgrounds. in general, efficiency can be directed to the concept of achieving an outcome with optimal use of resources. according to (karim) 2004, efficient is doing the things right, which means that doing everything in the right way to get optimal results. in economic theory, there are two general concepts about efficiency, the efficiency in terms of economic concepts ( economic concept ), and efficiency in terms of the concept of production ( production concept ). efficiency, which is reviewed by the economic concept, has a broader scope, which is viewed from a macro perspective. in contrast, efficiency from a production point of view is viewed from a micro perspective (sukirno, 2008). measurement of efficiency through data envelopment analysis frontier approach, according to silkman (1986) in muhammad & puspitasari (2007 ), can be divided into two types, namely parametric and non-parametric frontier approaches (muhammad & puspitasari, 2007). parametric tests are tests whose models specify certain conditions regarding population parameters that are the source of leyla mariana, harun 73 research. in contrast, non-parametric statistical tests are tests whose models do not specify conditions regarding population parameters that are the parent of the research sample. .the parametric frontier approach can be measured by parametric statistical tests such as the stochastic frontier analysis (sfa) and distribution free analysis (dfa) methods. while the non-parametric frontier approach can be measured by non-parametric statistical tests using the data envelopment analysis (dea) method. the concept of efficiency in islamic perspectives islam strongly advocates efficiency, starting from financial efficiency, time, even in saying and doing the things that are in vain (no benefits and no badness) alone is ordered to leave it, let alone do something that contains evil or loss. islamic sharia is not only focused on regulating the way of worship but also pay attention to guide daily activities, including economic activities as well. the concept is summarized in islamic economics or islamic economics, which regulates individuals in their muamalah. islamic attention to dynamic behavior is strongly emphasized by allah. islam encourages people not to behave extravagantly, in this case, economic activity, because behaving luxury is classified as a devotee who was denied renounced to allah. the application of islamic teachings in companies or financial institutions and srfb can be measured by looking at the level of efficiency in the use of the existing input to generate the maximum output level without any wastage of resources (inputs) owned. efficient in this case does not mean by reducing costs as low as possible to produce maximum output, so that legalizing all means and actions in achieving it (puspitasari, 2017). previous research observing srfb in semarang city, septianto & widiharih (2010) used data envelopment analysis (dea) and found that the data envelopment analysis method can provide a picture based on the relative efficiency value of a bpr unit compared to other srfb in semarang city so that srfb can reorganize the journal of islamic economic laws-january, vol. 3, no. 1, 2020 74 operational conditions of srfb in order to achieve even better performance. in his research, the intermediation approach is used, using input variables: capital, interest costs, and other operating costs, and the output variables include: loan credit income and other operating income. yahya (2012) used data envelopment analysis (dea) found that srfb in central java in the 2005-2010 period experienced an average efficiency of 95.19%, and no one-year span spans the optimal efficiency of 100%. in his research, an intermediation approach was used, using input variables, including ib savings, ib deposits, and paid-in capital. at the same time, the output variables included placements with other banks, mudarabah, murabahah, ijarah, and qard. nugroho (2016) observed 2 srfb in surakarta using data envelopment analysis (dea) and found the result that srfb in surakarta that operated efficiently during 2015 there were 2 srfb, where the efficiency values were 1.00 each. in his research, the intermediation approach used wadiah savings, mudarabah savings, and mudarabah deposits as input variables, and placements with other banks, receivables, and financing as output variables. ramadhan (2017) found that the output variables on the srfb in 2016 were, on average efficient. however, there were several srfb units that had to increase their output variables to reach the most efficient point. in his research, the intermediation approach is used by using input variables, including wadiah savings, mudarabah savings, and personnel expenses. in contrast, the output variables include placements with other banks and mudarabah receivables. methods analysis tools and models the analytical tool used in this study is dea (data envelopment analysis). dea is a procedure specifically designed to measure the relative efficiency of an organizational unit called the dmu (decision making unit) that uses several inputs and output variables, where the combination of inputs and outputs is leyla mariana, harun 75 not possible. the relative efficiency of a dmu is the efficiency of a dmu compared to other dmus in the sample (a group of comparable dmus) that use the same type of input and output. according to septianto & widiharih (2010), the dea model as a device to measure performance efficiency has at least three advantages compared to other models, such as multiple linear regression models. advantages from dea model can measure input and output variables, and not require assuming a functional relationship between the variables measured, and can have different measurement units. the relative efficiency values range from 0 to 1 or 0 to 100%. a dmu has the best ability if the relative efficiency value is 1 or 100%. in contrast, another dmu whose value is below 100%, then the ability is still below the dmu that has been efficient (septianto & widiharih, 2010). there are two types of data envelopment analysis (dea) models. the model that was first introduced was the dea constant return to scale (crs) model or seen from the inventor’s name also known as the charnes, cooper, and rhodes (ccr) model and the second model was the dea variable returns to scale (vrs) model or commonly referred to as also the barnes, charnes, and cooper (bcc) models according to their inventor’s name. this study used dea constant return to scale (crs) method. dea identifies efficient dmus and is used as a benchmark for inefficient dmu repairs. the dea also makes it possible to calculate the amount needed to improve input and output in the dmu so that it becomes efficient. efficiency analysis the concept of efficiency used in this study refers to technical efficiency ( technical efficiency ), namely the ability of a company to obtain maximum output from the use of input. the frontier production function is a production function that describes the maximum output that can be achieved from each level of input use. if a company is at a point in the frontier production function, it means that the company is technically efficient. if the frontier production function is known, then technical inefficiency can be journal of islamic economic laws-january, vol. 3, no. 1, 2020 76 estimated by comparing the actual position relative to the frontier. definition of input and output variable to determine the efficiency of the intermediary function of the srfb requires input and output variables. input and output variables in this study are: 1. input variable: a. wadiah saving is a customer deposit that must be maintained and returned at any time when the customer concerned wants it, with a unit of measurement of thousands of rupiah (karim, 2004). b. mudarabah savings is a fund that is saved as a form of investment because the customer gets a profit (ratio/ profit share), the unit of measure is thousands of rupiah (karim, 2004). c. personnel expenses are funds incurred by srfb to pay employees, with a unit of measurement of thousands of rupiah (ramadhan, 2017). 2. output variable: a. fund placements in other banks are bank deposits held by other banks to support the smooth operation of operations, with a unit of measurement of thousands of rupiah (nugroho, 2016). b. murabahah receivables are bills arising from the transaction between banks and customers, with a unit of measurement of thousands of rupiah (nugroho, 2016). data source the type of data used in this study is secondary data. the data is collected from the balance sheet, income statement, and other information of each sfrb in surakarta. the data is obtained from government agencies and website official financial services authority (fsa) www.ojk.go.id. also, the data obtained is supported by reading various sources, including journals, books and other scientific paper related to banking efficiency https://translate.google.com/translate?hl=id&prev=_t&sl=id&tl=en&u=http://www.ojk.go.id leyla mariana, harun 77 results and discussion development of islamic people’s financing banks in indonesia the development of srfb in indonesia is always experiencing growth every year. the number of srfb in indonesia in 2017 grew to 167 units. for central java province, the number of srfb in 2017 is banks. in this study, the data used 4 srfb in surakarta and would be measured its efficiency by using data envelopment analysis (dea). analysis of input and output variables used in research this study compared the efficiency of the syari’ah people’s financing bank (srb) as a calculation using the data envelopment analysis (dea) analysis method. in this study using three inputs and two outputs. the input variables are wadiah savings, mudarabah savings, and personnel expenses, while the output variable used is placement in other banks, and murabahah receivables. the first variable in this study is wadiah’s savings. the development of syari’ah people’s financing banks (sharia rural banks) is shown in the table below. table 4.5 tabungan wadia h (in rupiah) 2017 dana srb dm csu srb srb hik march 1,785,072 1,206,143 1,793,324 5,770,910 june 1,713,055 1,684,424 1,636,097 6,100,344 september 2,382,421 1,160,843 1,846,296 7,402,574 december 2,424,255 1,790,879 1,909,748 7,731,655 amount 8,304,803 5,842,289 7,185,465 27,005,483 source: financial services authority (data processed). based on table 4.5 shows that there is an increase in wadiah savings, there is a decrease every month. of the four syari’ah people financing banks (srfb) used as research samples, srfb harta insan karimah has the highest value with a total of 27,005,483 ( srfb hik ), while srfb dana mulia which has the lowest value with a total of 5,842,289 ( srfb dm ). journal of islamic economic laws-january, vol. 3, no. 1, 2020 78 the second variable in this study is mudarabah savings. the development of syari’ah people’s financing banks (sharia rural banks) is shown in the table below. table 3. mudarabah savings (in rupiah) 2017 dana amanah dana mulia csu srb srb hik march 24,936 9,409,166 786,417 1,119,395 june 32,497 10,616,349 182,060 1,138,101 september 21,388 13,115,141 176,907 1,383,648 december 24,463 12,098,257 197,327 1,515,893 total 103,311 45,238,913 1,342,711 5,157,037 source: financial services authority (data processed). based on table 3, the data shows that there is an increase in mudarabah savings, and there is a decrease every month. of the four syari’ah people financing banks (srfb) used as research samples, srfb dana mulia has the highest value, with a total of 45,238,913 (srfb dm ). in contrast, srfb dana amanah has the lowest value, with a total of 103,311 ( srfb da ). the third variable in this study is the personnel burden. the development of syari’ah people’s financing banks (sharia rural banks) is shown in the table below. table 4. personnel expenses (in rupiah) 2017 srfb da srb dm csu srb srb hik march 242,704 219,870 267,094 955,388 june 527,354 449,165 581,913 1,929,834 september 757,316 693,238 875,455 2,861,838 december 985,724 952.147 1,164,178 3,714,759 amount 2,513,098 2,314,420 2,888,640 9,461,819 source: financial services authority (data processed). based on table 4 shows that the burden of personnel has increased every month. of the four syari’ah people financing banks (srfb) used as research samples, srfb harta insan karimah has the highest value, with a total of leyla mariana, harun 79 9,461,819 (srfb hik ), while srfb dana mulia which has the lowest value with a total of 2,314,420 ( srfb dm ). output variables are placements with other banks and murabahah receivables. the first output variable in this study is placed in another bank. the development of srfb (sharia rural financing banks) is shown in the table below. table 5. placements with other banks (in rupiah) 2017 srfb da srb dm csu srb srb hik march 3,465,549 1,681,640 2,806,377 6,153,909 june 1,949,325 3,123,000 1,903,178 9,490,571 september 4,561,295 6,030,699 3,454,997 9,033,301 december 5,266,229 3,645,929 3,699,329 14,119,983 amount 15,242,398 14,481,268 11,863,881 38,797,764 source: financial services authority (data processed). based on table 5, it is shown that placements with other banks have increased, while there have been decreases every month. of the four sharia rural financing banks (srfb) which were used as research samples, srfb harta insan karimah had the highest value with a total of 38,797,764 ( srfb hik ), while the srfb central syariah utama which had the lowest value with a total of 11,863,881 ( srb csu ). the second output variable in this study is murabahah receivables. the development of srfb is shown in the table below. table 6. murabahah receivables (in rupiah) 2017 srfb da srb dm csu srb srb hik march 12,154,203 15,599,883 8,909,149 44,366,894 june 13,117,453 16,382,838 9,286,253 52,668,599 september 13,390,137 16,352,066 10,742,434 54,961,250 december 15,302,237 16,962,245 13,228,803 57,847,929 total 53,964,030 65,297,032 42,166,639 209,844,672 source: financial services authority (data processed). journal of islamic economic laws-january, vol. 3, no. 1, 2020 80 based on table 6 shows that murabahah receivables have increased every month. of the four syari’ah people’s financing banks (srfb), which were used as research samples, srfb harta insan karimah had the highest value with some 209,844,672 ( srfb hik ), while the srfb central syaria’ah utama which had the lowest value with a total of 42,166,639 ( srb csu ). analysis of srfb efficiency in surakarta city based on data envelopment analysis (dea) in this study, the dea analysis with output orientation will be analyzed, so if there is an srb that is not significant, the output will be increased. overall, efficient and inefficient srbs can be seen in table 7. table 7. results of calculation of srfb efficiency quarter i-iv in the 2017 period srb quarter i quarter ii quarter iii quarter iv da 1,000 (efficient) 1,000 (efficient) 1,000 (efficient) 1,000 (efficient) dm 1,000 (efficient) 1,000 (efficient) 1,000 (efficient) 0,770 (inefficient) csu 0,770 ( inefficient) 0,604 ( inefficient) 0,877 ( inefficient) 0,975 ( inefficient) hik 1,000 (efficient) 1,000 (efficient) 0,860 ( inefficient) 0,974 ( inefficient) source: deap data processing results 2.1 table 7 shows the value of each srfb units. based on this result, it can be seen that in the first quarter of 2017, there are 3 srfb that have been efficient, namely srfb dana amanah, srfb dana mulia, and srfb harta insan karimah. while srfb that experience inefficiency are srfb central syari’ah utama (0,770). in the second quarter of 2017, there were 3 srfb that was already efficient, namely srfb dana amanah, srfb dana mulia, srfb harta insan karimah. while srfb that experience inefficiency are srfb centra l syari’ah utama (0,604). in the third quarter of 2017, there were 2 srfb that had been efficient, namely srfb dana amanah and srfb dana mulia. while srfb that experience inefficiencies are srfb centra syari’ah utama ( 0,877 ) and srfb harta insan karimah (0,860). in quarter iv leyla mariana, harun 81 of 2017, there was only 1 srfb that had been efficient, namely srfb dana amanah, while the three srfb that experienced inefficiencies were bpr dana mulia (0,770), srfb centra syari’ah utama (0,975), and srfb harta insan karimah (0,974). inefficiency analysis and improvement from the 4 srfb that became the object of research in the 2017 period, there will be an analysis of the sources of inefficiency that occurred in quarter iv. the following can be seen in the level of bpr s inefficiency based on each input and output, as well as the causes. srfb dana mulia quarter iv in quarter i v 2017, srfb dana mulia experienced an inefficiency with te 0.770. the scenarios for achieving efficiency from srfb dana mulia can be seen in table 8. table 8. value of original value and projected value of srfb dana mulia quarter i v original value radial movement slack movement projected value quarter i, the efficiency level is 0.770 placements with other banks 3645929,000 1087150,226 0,000 4733079,226 murabahah receivables 16962245,000 5057835,325 0,000 22020080,325 wadiah savings 1790879,000 0,000 0,000 1790879,000 mudharabah savings 12098257,000 0,000 0,000 12098257,000 personnel burden 952147,000 0,000 362998,606 589148,394 source: deap data processing results 2.1 the table illustrates that to achieve the conditions of efficiency. the srfb dana mulia should raise output placements with other banks that previously 3645929,000 (in rupiah) to 1087150,226 (in rupiah), and the output of murabahah receivables previously 16962245,000 (in rupiah), must be raised to 5057835,325 (in rupiah). this because there is a slack condition; the personnel journal of islamic economic laws-january, vol. 3, no. 1, 2020 82 expenses input must be reduced by 362998,606 (in rupiah) from 952147,000 (in rupiah) to 589148,394 (in rupiah). srfb central syariah utama quarter iv in quarter i v 2017, srfb central syariah utama experienced an inefficiency with te 0,975. the scenarios for achieving efficiency from the srfb central syari’ah utama can be seen in table 9. table 9. value of original value and projected value of srfb central syari’ah utama quarter iv original value radial movement slack movement projected value quarter i, the level of efficiency is 0.975 placements with other banks 3699329,000 96335,321 0,000 3795664,321 murabahah receivables 13228803,000 344495,173 0,000 13573298,173 wadiah savings 1909748,000 0,000 0,000 1909748,000 mudharabah savings 197327,000 0,000 0,000 197327,000 personnel burden 1164178,000 0,000 447321,954 716856,046 source: deap data processing results 2.1 table 9 depicts that in order to achieve efficient conditions, the srfb central syari’ah utama must increase the output of placements with other banks which were previously 3699329,000 (in rupiah) to 96335,321 (in rupiah), and the output of murabahah receivables which were previously 13228803,000 (in rupiah), must be increased 3444495,173 (in rupiah). this because there is a slack condition that causes personnel expense input must be reduced by 447321,954 (in rupiah) from 1164178,000 (in rupiah) to 716856,046 (in rupiah). leyla mariana, harun 83 srb harta insan karimah quarter iv in quarter i v 2017, srfb harta insan karimah utama experienced an inefficiency with te 0,974. the scenarios for achieving efficiency from the srfb central syari’ah utama can be seen in table 10. table 10. value of original value and projected value of srfb harta insan karimah quarter iv original value radial movement slack movement projected value quarter i, the level of efficiency is 0.974 placements with other banks 14119983,000 375366,002 0,000 14495349,002 murabahah receivables 57847929,000 1537830,877 0,000 59385759,877 wadiah savings 7731655,000 0,000 0,000 7731655,000 mudarabah savings 15,15893,000 0,000 0,000 15,15893,000 personnel burden 3714759,000 0,000 988697,447 2726061,553 source: deap data processing results 2.1 table 10 shows that to achieve the conditions of efficient, and then the sfrb harta insan karimah should raise output placements with other banks that previously 14119983,000 (in rupiah) into 375366,002 (in rupiah), and the output of murabahah receivables previously 57847929,000 (in rupiah), should be raised 1537830,877 (in rupiah). because of a slack condition, the personnel expense input must be reduced amount 988697,447 (in rupiah) from 3714759,000 (in rupiah) to 2726061,553 (in rupiah). conclusion based on the data analysis, only the srfb dana amanah ummah is efficient for the full year. while the other 3 srfb, there were inefficiencies in the last quarter of 2017. sources of inefficiency from the three srfb were sourced from the suboptimal output or results that included placement of cash in other banks and murabahah receivables. also, the source of journal of islamic economic laws-january, vol. 3, no. 1, 2020 84 inefficiency is caused by personnel expenses and mudarabah savings funds, which need to be reduced. this study provides suggestions for inefficient srbs to be able to make improvements to the input and output variables that cause inefficiency, such as by reducing the burden on personnel. this research is limited to many srfb in the surakarta region and is expected to be able to increase the number of srfb examined in subsequent studies. references darsono, h. (2003). bank dan lembaga keuangan syariah: deskripsi dan ilustrasi. jakarta: raja grafindo persada. jianti, l. g. (2015). efisiensi bank umum syariah dan bank pembiayaan rakyat syariah. universitas negeri semarang. karim, a. (2004). bank islam (analisis fiqih dan keuangan). jakarta: raja grafindo persada. muhammad, h., & puspitasari, r. (2007). analisis perbandingan efisiensi bank syariah di indonesia dengan metode data envelopment analysis periode 2005. jurnal ekonomi dan bisnis islam, 2(3), 86–88. nugroho, t. a. (2016). analisis efisiensi bank pembiayaan rakyat syariah (bprs) di surakarta menggunakan data envelopment analysis (dea) periode 2016. universitas muhammadiyah surakarta. puspitasari, a. (2017). analisis efisiensi bank umum syari’ah di indonesia dengan metode data evelopment analysis (dea). (studi pada busn devisa bank umum syari’ahperiode 2014-2015). universitas muhammadiyah surakarta. ramadhan, a. 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(2008). pengantar keuangan islam: teori dan praktik. jurnal ekonomi islam, 4(2), 11–12. _goback journal of islamic economic laws vol. 5, no. 2, july 2022: 199-215 199 islamic financial literacy: evidence from indonesian urban middle-class women alfina rahmatia1, andy putra wijaya2, arief dwi saputra3, muhammad imam ma’ruf4 1university of ahmad dahlan 2university of ahmad dahlan 2universitas muhammadiyah yogyakarta 3hungarian university of agriculture and life sciences email: alfina.rahmatia@pbs.uad.ac.id, andy.wijaya@pbs. uad.ac.id, ariefdwisaputra18@gmail.com, maruf.muhammad imam@phd.uni-mate.hu abstract issues related to islamic financial literacy are always interesting to study, especially because financial literacy has a close relationship with financial inclusion, including the intelligence of women who are often questioned in terms of financial literacy. the paradigm that women are backward seems to be ingrained in some indonesian society. therefore, this study aims to prove that women have the same opportunities, especially in terms of islamic financial literacy. this study uses an explanatory sequential mixed method, in which qualitative data is taken from the study literature, then analyzed using the nvivo 12 application. quantitative data is taken from a questionnaire, then analyzed using the spss application. the result from qualitative data analysis would explain more the findings. this study proves that gender does not affect financial literacy, it can be said that women in indonesia urban middle-class are not left behind. everyone has the same rights in learning about islamic financial literacy. keywords: islamic financial literacy, urban, woman mailto:alfina.rahmatia@pbs.uad.ac.id mailto:andy.wijaya@pbs.uad.ac.id mailto:andy.wijaya@pbs.uad.ac.id mailto:ariefdwisaputra18@gmail.com mailto:maruf.muhammad.imam@phd.uni-mate.hu mailto:maruf.muhammad.imam@phd.uni-mate.hu 200 rahmatia et al. introduction from the top ten countries with the largest muslim populations, indonesia ranks first with 12,7% of the global population (lopus, 2019). this statement is backed up by data from the indonesia central bureau of statistics, which estimates that 207,2 million indonesians or 87,18% are muslim, in which 150 million individuals have access to financial products and services. still, just 2% of the population can do so (wasiaturrahma, 2020). as the world’s largest muslim country, indonesia has unique advantages as a possible location for developing islamicbased cultural, governmental, and financial instruments. in the late 1990s, indonesian muslims became aware of the need for financial institutions based on islamic principles (saputra & rahmatia, 2021). the emergence of sharia banks is a sign of the islamic financial system’s beginning point in indonesia, providing a breath of fresh air for muslim society and serving as the main foundation of islamic financial establishment (rahmatia, 2019). individual preferences in using sharia financial services are defined by knowledge and comprehension, competence or skills, and personal confidence to meet financial needs, which is referred to as financial literacy (yamori & ueyama, 2021). financial literacy is the capacity to comprehend financial matters, and also how a person can understand and assess essential information on decision-making to learn its effects (kawamura et al., 2021). financial literacy enables a person to make judgments based on relevant information; as a result, knowing data is critical in each individual’s decision-making process (esquivel, 2017). according to rahmatia and saputra (2021), nowadays, people must prepare for long-term investments and children’s education, a payment for a house and a vehicle. financial literacy is essential if people want to avoid financial scum. there are now financial advisers and planners who look out for their client’s interests, as well as consumers bombarded with a variety of financial products (kim et al., 2021; panos & wilson, 2020; rahmatia et al., 2021; yamori & ueyama, 2021) as muslims understand that choosing islamic finance is responsibility. this is especially essential for the middle class, which makes up the bulk journal of islamic economic laws-july, vol. 5, no. 2, 2022 201 of financial product users (engels et al., 2020; hassan et al., 2019; sampson et al., 2021; wasiaturrahma et al., 2020). talking about women, it is not far from the paradigm regarding gender equality, especially in urban areas. many women can do men’s professions (syed & ali, 2019). on the other hand, men can take on women’s task experts. even though it is true that in earning a living, men are still dominated by men as the head of the family, and women are dominated for housework (lawless et al., 2022). women, in general, dominate the pattern of decision-making in the field of family expenditure, men in production expenditures, while for the area of family formation and social activities, the decision-making is shared and equal (kaffenberger & pritchett, 2020; pla-julián & díez, 2019; valls martínez & cruz rambaud, 2019). in general, men show better spatial abilities, while women show more advanced verbal skills (tinghög et al., 2021). gender is closely related to small businesses related to people’s economic activities with equitable development in social justice, economic efficiency, and efforts to encourage regional development (dilli et al., 2019). in the past, women rarely became leaders or founded a company, although many were key figures (nguyen et al., 2020). what is clear is that gender is a very complex issue, with many factors influencing these differences (biological, environmental, cultural, power, economic status) (ghosh & vinod, 2017). combining these factors further strengthens the opinion that male and female leadership are indeed different (valls martínez & cruz rambaud, 2019). moreover, in a rapidly evolving world, society’s impression of men and women is constantly shifting. as a result, gender development becomes a lifelong process (marcil et al., 2020). in addition, there is very little research on financial literacy, especially with a focus on gender. this paper aims to prove that gender is not something that affects a person’s ability to understand islamic financial literacy, especially in urban areas. instead, factor such as income per capita needs be rigorously examined as to whether it affects islamic financial literacy or not. 202 rahmatia et al. literature review the ability to read and comprehend financial items is referred to as financial literacy (riepe et al., 2020). financial literacy is defined as the capacity to identify between financial statements belonging to wealthy individuals and those belonging to the poor and middle classes (kaffenberger & pritchett, 2020). financial literacy requires knowledge of at least cash flow and assets (bijli, 2012). a person can be said to be ‘literate’ in islamic finance if he knows islamic financial products and services, can distinguish between islamic banks and conventional banks and can control himself in making economic decisions according to sharia (rahmatia & saputra, 2021). believing in divine teachings, without usury, without haram investments, without gharar (uncertainty), without maysir (gambling/speculation), all risks and financing based on tangible assets are the fundamental principles of islamic finance (ghlamallah et al., 2021). there are five aspects of financial literacy: general personal finance knowledge, saving and borrowing, insurance, investment, and islamic financial institution knowledge (rahmatia, 2019). in addition, understanding and habits regarding the basics of islamic financial literacy also influence the behavior of business owners in running a business following islamic economic rules and ethics, as well as on the basics of islamic finance: usury, halal haram, zakat, maysir, gharar, and bathil (false) transactions (grira & labidi, 2021). in this era of globalization, the gender divide is narrowing (esquivel, 2017). many academics argue the relationship between economic development and women’s social status in economics and politics (pla-julián & díez, 2019). however, some feminists are still fighting for women’s empowerment. the implication is that, rather than depending exclusively on economic growth to do the work and make money, direct involvement is required to improve women’s standing (dilli et al., 2019). even in emerging countries like bangladesh, indonesia, malaysia, and pakistan, women participating has consistently climbed (bijli, 2012). in essence, there is no difference between journal of islamic economic laws-july, vol. 5, no. 2, 2022 203 man and woman regarding their formation. various physiological and biological natures and patriarchal economic structures result in different developmental roles (nguyen et al., 2020). instead of diminishing women’s participation in development, it proposes that their positions be differentiated. to prepare for the future, women’s contributions should be prioritized for intergenerational continuity through children’s education (struckell et al., 2022). for the sake of future generations, socio-economic issues related to their participation in the workforce can be addressed by lowering (not eliminating) either their workload or women’s employment in general (lyons et al., 2019). the gender variable has no bearing on the level of financial literacy awareness (grohmann et al., 2021). this finding is inconsistent, given that previous research has found that gender significantly impacts financial literacy awareness. financial literacy among marginalized rural women is extremely low (marcil et al., 2020). financial literacy will aid women when choosing better financial opinions and making accurate use of financial services and products. it would assist them in accumulating riches and improving their financial situation (kiss et al., 2014). it will help them grow socially and personally. their financial support would aid the economic development of our country (razen et al., 2020). women’s employment is one of the current concerns receiving particular attention in the islamic world, particularly from women activists who seek more freedom in their lives (lopus et al., 2019). nonetheless, the difficulties highlighted are not very evident from an islamic standpoint because islam has provided women the opportunity to express their rights equitably (ghlamallah et al., 2021). indeed, islam accepts various distinctions between men and women based on physical and biological characteristics. because these variances may have different roles and contributions to development and nation-building (rohman et al., 2021). as a result, the application of a sexual division of labor between men and women is achievable (wasiaturrahma et al., 2020). this is not intended to discriminate between men and women but rather to distinguish their roles and responsibilities (grira & labidi, 2021). 204 rahmatia et al. methods this study uses primary (questionnaire) and secondary data (literature studies). however, this study uses a mixed-method (explanatory sequential design) means that the researchers collect the quantitative data from the questionnaire and analyze it using the spss application. then, collect the qualitative data (from reputable journals and articles) to identify the instruments and analyze them using nvivo 12 application. this test could explain the result more clearly (creswell, 2018). table 1. methodology summary approach method source q ua lit at iv e (l ite ra tu re re vi ew ) instruments: general personal finance knowledge (f1) saving and borrowing (f2) insurance (f3) investment (f4) islamic financial institution knowledge (f5) (saputra & rahmatia, 2021) (philippas & avdoulas, 2020)asymmetric information in those markets, increasing complexity of financial products, and the rapidly increasing growth in financial technology (fintech (razen et al., 2020) q ua nt ita tiv e (q ue st io nn ai re ) independent variables: gender income per month dependent variable: islamic financial literacy (esquivel, 2017) (lyons et al., 2019) (rahmatia, 2019) the article argues that the win-win conclusions are contingent on particular notions of gender equality, measurement of output, work, well-being and policy. more importantly, these arguments also constrain the quest for substantive gender equality (“equality of outcomes” the researchers used random and purposive sampling methods (grohmann et al., 2021). in this study, there are 100 journal of islamic economic laws-july, vol. 5, no. 2, 2022 205 respondents with the criteria; a person who lives in yogyakarta city (yogyakarta as one of the particular regions in indonesia could represent urban society), a person of productive age, and a person who works. figure 1. research flow source: developed by the researchers results and discussion the technique of corrected item correlation is used to determine if a research topic is valid or not. it is legitimate if all of the variables’ items have a correlation (r) of less than 0.25 with the overall score of each variable. table 2. validity test item corrected item correlation explanation financial individual knowledge 0,772 valid investment 0,753 valid saving and loan 0,825 valid insurance 0,733 valid financial institution knowlege 0,844 valid source: developed for the research 206 rahmatia et al. if the cronbach alpha is smaller than 0,70, the data is credible. conversely, if the cronbach alpha value is less than 0,70, the data is considered unreliable. table 3 shows the cronbach’s alpha table 3. reliability test cronbach’s alpha n of items 0,80 50 source: developed from the research then, after the validity and reliability test, the researchers put the data into spss to regress it. table 4 shows that the r square is 0.052, which means that the variable gender and monthly income can explain 5.2 percent of islamic financial literacy; variables outside the model influence the rest. table 4. coefficient of determination test results model r r square adjusted r square std. error of the estimate durbin-watson 1 .228a .052 .031 17.468 1.889 a. predictors: (constant), gender, income b. dependent variable: financial_literacy source: developed from the research after testing the coefficient of determination, next is the t-test to see how partially each independent variable influences the dependent variable. tabel 5 shows the result. table 5. t-test result model unstandardized coefficients standardized coefficients t sig. b std. error beta (constant) 121.432 5.935 20.461 .000 gender 1.454 3.651 .041 .398 .691 income 7.836 3.504 .231 2.236 .028 source: developed from the research journal of islamic economic laws-july, vol. 5, no. 2, 2022 207 the table above shows that the gender variable has a significant value of 0.691, greater than 0.05, and income per month is a substantial value of 0.028, which is smaller than 0.05. so, it can be concluded that the gender variable does not significantly influence islamic financial literacy, while monthly income influences islamic financial literacy significantly. then, the researchers conducted the f test, which was used to see whether or not there was a simultaneous effect on the independent variable on the dependent variable. from table 6, it can be concluded that there is a negative and insignificant effect on the independent variable on the dependent variable because the f significant level of 0.08 is greater than 0.05. table 6. f-test result model sum of squares df mean square f sig. regression 1527.611 2 763.806 2.503 .087b residual 27766.602 91 305.127 total 29294.213 93 a. predictors: (constant), gender, income b. dependent variable: financial_literacy source: developed from the research based on table 7, it can be concluded that the regression model equation in this study meets the non-heteroscedasticity assumption because there is no significant relationship between all independent variables and the absolute residual value, where the considerable value for each independent variable is more significant than (0,05). table 7. heteroscedasticity test result model sig. (constant) .149 gender .330 income .712 source: developed from the research 208 rahmatia et al. a normality test is necessary to determine whether the residual value in a regression model is normally distributed or not. table 8 shows the result. table 8. normality test kolmogorov-smirnov statistic df sig. unstandardized residual .076 94 .195* source: developed from the research the result of the normality test above shows that the significant value of 0.195 is greater than 0,05. so, it can be concluded that the data in the regression model in this study is normally distributed. table 9. multicollinearity test result model collinearity statistics tolerance vif (constant) gender .823 1.224 income .827 1.239 source: developed from the research based on table 9, it can be concluded that all vif values are less than 10, and the tolerance value is greater than 0.1. so, it can be supposed that there is no multicollinearity in this study. in table 5, the results of the t-test, it can be concluded that gender does not significantly influence islamic financial literacy in urban middle-class society in indonesia (especially in yogyakarta) due to the probability value of sig 0,691 being bigger than 0,05. as in the current era of globalization and modernization, gender equality is the main focus in the country’s development, both in the economy, society, and politics (esquivel, 2017). this is because the times had changed and developed rapidly, in contrast to when discrimination against women was still limited in scope and movement (potrich et al., 2018). so, it is not surprising that journal of islamic economic laws-july, vol. 5, no. 2, 2022 209 many women are no longer left behind in terms of intelligence from men. the assumption and research that says that women are better able to manage finances than men have now been firmly refuted. this statement is reinforced by research that says that a person’s financial literacy does not affect what gender he is (rahmatia, 2019). however, some studies argue that women’s financial literacy in marginal and remote areas is still minimal because it is influenced by educational background (shannon et al., 2019). however, this is mediated by research that states that gender equality depends on a region’s socio-cultural environment. this includes equality in islamic financial literacy (gupta et al., 2019). this research is more interesting when looking at the results of qualitative data analysis from the study literature. figure 2. nvivo analysis result source: developed for the research from figure 2, we can see that personal financial knowledge plays a more dominant role in financial literacy for gender by 30%, followed by saving and investing at 25% and 20%, respectively. on the other hand, investment plays a dominant role for the monthly income at 33%, while saving and knowledge of personal finance is in the second-lowest position. 210 rahmatia et al. figure 3. word similarity result source: developed for the research figure 3 explains the relationship between instruments to gender and income per month, seen from the interconnected lines. the thicker the connecting cable, the closer the relationship, and vice versa. conclusion from the findings and analysis, it can be concluded that gender has no effect on islamic financial literacy in middle-class urban communities in indonesia because the probability value of sig. of 0.691 is more significant than 0.05. this proves that women are not left behind in terms of financial intelligence. both men and women have the opportunity to learn about islamic financial literacy. from the five aspects of islamic financial literacy (general personal finance knowledge, saving and borrowing, insurance, investment, and islamic financial institution knowledge), it can be seen that general personal financial knowledge plays the most dominant role in the gender variable. meanwhile, investment has the most dominant position in the income variable per month. journal of islamic economic laws-july, vol. 5, no. 2, 2022 211 references bijli, h. k. 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(2021). financial literacy and low stock market participation of japanese households. finance research letters, march, 102074. _heading=h.gjdgxs journal of islamic economic laws vol. 3, no. 1 january 2020: 15-31 15 economic empowerment of pesantren through agribusiness (study on al-mawaddah entrepreneurial pesantren) muhammad baqi mustaghfiri institut agama islam negeri salatiga email: muhammadbaqimustaghfiri@gmail.com abstract this paper aims for several research objectives. it aims to find out the agribusiness sectors developed by al-mawaddah entrepreneurial pesantren. it also aims to find out the empowerment of agribusiness developed by this pesantren. last, it also aims to determine the impact of empowering agribusiness developed on improving the economy al-mawaddah entrepreneurial pesantren’s alumni. this research is a field research. the approach used by researcher is a qualitative descriptive approach with a case study strategy. research location is at pesantren entrepreneur almawaddah honggosoco kudus rt. 06/ rw. 01, jekulo district, kudus regency. data collection techniques used are observation, interviews, and documentation. the data analysis technique used is descriptive qualitative. the results show that: (1) the agribusiness sector that was developed at al-mawaddah entrepreneurial pesantren touched only agriculture and educational sectors; (2) agribusiness empowerment developed by al-mawaddah entrepreneurial pesantren consists of three stages, namely: input, process, and output; (3) agribusiness entrepreneurship is better than working under other people. keywords: economic empowerment, pesantren, agribusiness. introduction pesantren (islamic boarding school entities) as educational institutions is indeed familiar in islamic scientific studies, especially in indonesia. pesantren is one of the centers of science journal of islamic economic laws-januray, vol. 3, no. 1, 2020 16 that contributes a lot to the development of indonesian science, such as national defense, economy, social culture and specifically on religious matters. in its development, pesantren experienced a paradigm shift from an institution that had relied on religious education to become an institution which generates reliable human resources who are able to create jobs. this paradigm shift requires pesantren to direct their development in the economic field. as a result, there appears a typology of pesantren based on the characteristics of pesantren. various types of pesantren that emerge in the community are classified into three types, namely traditional pesantren or salaf islamic boarding schools, modern pesantren called khalaf islamic boarding schools, and comprehensive islamic boarding schools (a combination of salaf and khalaf) (ghazali, 2002). one of those three type pesantren that appears in the community is al-mawaddah entreprenurial pesantren, honggosoco, kudus regency. this pesantren can be categorized as a comprehensive type of pesantren. this can be seen in the application of the concept of education that refers to the spirit of sunan kudus, known as the spiritual, leadership, and entrepreneur. in addition to religious learning as it applies generally in salaf pesantren, santri (students of pesantren) is also trained in entrepreneurship program and business units developed by almawaddah entreprenurial pesantren. some of the business units include: travel agency, umroh agency, educational tour, shop, pertamini, beverage shop, and weighbridge. in the agribusiness sector, al-mawaddah entreprenurial pesantren developed the concept of an integrated farming system (roziki, 2016). agribusiness business units are developed ranging from food crop cultivation, plantations, dragon fruit gardens, hydroponic houses and culinary products made from local raw materials and expands to sugar cane land management in collaboration with five sugar companies. it also expands to the management of cassava land for the production of pt. indofood (nashr, 2018). from the business activities that developed by the pesantren, every month a student can get a monthly income. the amount of muhammad baqi mustaghfiri 17 income depends on the performance of the students, the highest is reaching 5-6 million rupiah a month. thus, students can fulfill their daily needs independently. based on this management system, pesantren applies rule where students who have been accepted at the al-mawaddah entrepreneurial pesantren are not allowed to receive remittances from parents. for its seriousness in training its santri’s entrepreneurship, pesantren won the santri of the year 2018 award for the pesantren entrepreneur category. the award was received from islam nusantara center at uin sunan ampel surabaya. previously the pesantren also received the adhikarya pangan nusantara award from the ministry of agriculture, and the kalpataru award (nashr, 2018). literature review literature review is a study of theories obtained from related literatures that will support this research. several studies on pesantren economic empowerment have been carried out by academics. for example, (sunarsih, rahmawati, & qamaruzzaman, 2013) conducted research on “development of sharia-based entrepreneurship culture to create entrepreneurs from santri environments in islamic boarding schools in jember regency”. the author uses the turla and hawkins research method to identify the potential abilities of students’ entrepreneurial culture by distributing questionnaires to 9 kopontren (pesantren’s cooperative unit) as research objects. as a result, students and boarding school administrators have entrepreneurial potential, but at different levels. 5 kopontrens require the sharpening of entrepreneurial instincts, while the other 4 require an increase of prudence in moving forward. this shows that students need education and training in entrepreneurship development. the other research was done by (wahid, 2011) on “economic empowerment of islamic boarding schools: case study of nurul mursyidah islamic boarding school pandegelang.” the results of the study indicate that there are policies from pesantren in focusing economic sector to be developed by pesantren. there is also policy on the stage of strengthening students’ creativity about fishery livestock. journal of islamic economic laws-januray, vol. 3, no. 1, 2020 18 the other research was done by (ulfa, 2015) on, “santri entrepreneurial interests and factors that influence it” which carried out ar-riyadh islamic boarding school in palembang as the objectthe research method used in that paper is quantitative through questionnaire technique. the research describes the intensity of entrepreneurship among senior students of arriyadh palembang which found to be very high for conducting entrepreneurship in pesantren. this high interest is influenced by several internal and external factors. the other research was done by (sulaiman, masrukin, & chusmeru, 2016) on “empowering islamic boarding school cooperatives as santri social and economic education”. the research aims to analyze the empowerment of the islamic boarding school cooperative (kopontren) as a social and economic education of students. the study used participatory learning and action (pla) method. data collection was done through interviews, direct observation, focus group discussion (fgd) and documentation. the selection of informants was done by purposive sampling. the informants include chairman, management and members of the kopontren. research locations is in the islamic education foundation (ypai) darussalam islamic boarding school in hamlet waluh, banyumas and el bayan 1 majenang, cilacap. research uses interactive analysis. the results showed (1) kopontren management has a high determination and enthusiasm to improve management, membership and develop business units as social and economic education for the independence of students. (2) kopontren needs support from the head of the boarding school and the participation of all students to become kopontren members and cadres. (3) kopontren needs empowerment programs such as counseling, training and assistance on institutional management, management, membership and finance. another study was conducted by (chusmeru, masrukin, & pangestuti, 2017) on “islamic boarding school cooperatives as santri economic empowerment”. the study used the participatory learning and action (pla) method and while the selection of of informants was done through purposive sampling. muhammad baqi mustaghfiri 19 the sample consists of students, religious teachers, and boarding school board members. data collection was done by interview, observation, documentation and focus group discussion (fgd) as well as interactive analysis. the research location was in elbayan majenang kopontren cilacap district. the results showed that the strategy of kopontren in the economic empowerment of students is very important by improving institutional management, membership, management, finance, partnerships and the development of agribusiness-based business units to improve the welfare of islamic boarding schools, students and the community. another study was conducted by (bustomi & umam, 2017) with the title: “strategies for empowering santri and community economic empowerment in the cirebon city boarding school entrepreneurship environment”. this type of research uses qualitative approach using case study strategy. the results of this study mentions that the strategy of economic empowerment through islamic boarding school business units consists of: goat farms, catfish farming, and plantations. santri was also given the opportunity to undergo internships in several business units in boarding school partners. the pesantren also empowered the economy through entrepreneurship training involving the society and a number of students. in its implementation the main factors that hamper economic empowerment are the limited number of students, lack of teaching staff, differences in learning methods, and the lack of entrepreneurial spirit among the community. there is also another study done by (ningsih, 2017) on „economic empowerment of islamic boarding schools through the development of local resources (study at daarut tauhid islamic boarding school)“. this article writes the role of pesantren in local resource-based economic empowerment in the era of development. this aims to determine the institutional form of the pesantren and its impact on the existence of the pesantren and to find out the pesantren‘s economic system that is appropriate and relevant to be applied in maintaining the existence of the pesantren. the study is carried out through literature and field study to find out a detailed description of the aspects that will be studied using qualitative approach. the results of the analysis journal of islamic economic laws-januray, vol. 3, no. 1, 2020 20 illustrate that pesantren, as a „cultural institution“ that was born on the initiative of independent community is a strategic potential that exists in the midst of community life since the beginning of its emergence. even though there are many pesantren that position themselves (only) as educational and religious institutions, but until now some pesantren have tried to reposition themselves in dealing with various social problems of society, such as economic, social and political. therefore, pesantren are required to make updates that can optimize the potential they have. specifically, in community empowerment through the economy. the last is research by (ansor, 2019) on „kiai‘s strategy in santri empowerment at apis sanan gondang blitar islamic boarding school blitar.” pesantren as islamic educational institutions are not only required to prepare religious scholars and preaching students but also as a stronghold of the people and community development in various sectors of life. because of that, pesantren need to develop themselves into a hub for social based economic as pesantren has such strenght. the kiai as the top leader of the pesantren must be able to analyze the resources of the santri in order to become a qualified hr. to achieve this goal, the kiai‘s strategy in empowering students in apis sanan gondang blitar islamic boarding school are: (a) establish a mission to provide life skills to students in the form of cooperatives and skills programs, (b) deliberations in all forms of student empowerment programs, (c) establishing clarification in resolving problems or organizational conflicts, both at the top level (leadership‘s decision) or subordinates (d) role models. the studies above are researches conducted in pesantren that develop the economy using the model of economic empowerment through entrepreneurship. various strategies have been carried out in improving the pesantren economy, but the main factor that has become the problem of empowering the pesantren economy is the problem of human resources (hr) as an insufficient economic agent. in the author’s perspective, the al-mawaddah entrepreneur boarding school honggosoco jekulo kudus is very relevant as an object of pesantren economic empowerment research. because since its establishment in 2008, al-mawaddah has developed muhammad baqi mustaghfiri 21 various business units covering several fields, especially in agribusiness. even more interesting, with the existence of pesantren business units, santri income reaches millions of rupiah. of course this is not a small income for a santri, with that income santri can independently in meeting their daily needs. theoritical framework the theoretical framework model in this study can be described as follows: the model of theoritical framework research methodology this research is a field research. field research is one of the studies with an intensive, detailed and in-depth approach. this type of research makes an object as a case that exists in a community or agency environment (moeloeng, 2005). the approach used in this research is a qualitative descriptive approach with a case study strategy. case studies are research strategies in which researchers carefully investigate a program, event, activity, process, or group of individuals. journal of islamic economic laws-januray, vol. 3, no. 1, 2020 22 the data needed is qualitative data. data sources needed are primary data and secondary data. primary data were obtained from observations of the pesantren agribusiness sector and interviews with informants including the founder and caregiver of the pesantren boarding school, santri, agribusiness management, and several communities around the boarding school. secondary data used are books, thesis, journals, and data derived from pesantren. data collection technique 1. observation observation is a data collection tool that is done by observing and recording systemically the phenomenon being investigated (narbuko & ahmadi, 2007). observation is also one of technique done through observing the object being studied. in this case the researcher uses non-participant observation, which only sees and listens to certain situations without active participation in it (emzir, 2012) or better known as passive participatory observation (sugiyono, 2014). this observation was conducted to obtain data from information from actual situation, in which the researcher observes what agribusiness sectors were developed by almawaddah entreprenurial pesantren and their activities. by doing so, researchers can get an idea of the agribusiness system developed by pesantren. 2. interview interview is a question and answer process in research that takes place verbally where two or more people face to face, listen directly to information or further information (narbuko & ahmadi, 2007). through this interview, the researcher intends to obtain historical data on the pesantren, find out the agribusiness sectors developed by the pesantren, the agribusiness empowerment developed by the pesantren, and the impact of developing agribusiness empowerment on the economic improvement of al-mawaddah entrepreneurial pesantren. muhammad baqi mustaghfiri 23 3. documentation documentation is a search for data about things or variables in the form of notes, transcripts, books, newspapers, magazines, minutes, inscriptions, laggers, agendas, etc, (subagyo, 1991). the collected documents are then selected and adjusted to the purpose and focus of the problem. data analysis technique in general, qualitative research uses a lot of analytical models in analyzing data that are coined by miles and huberman which are often referred to as interactive data analysis methods. there are three activities in qualitative data analysis, namely the stage of data reduction, data display, and conclusions or verification (sugiyono, 2006). 1. data reduction the researcher records all data objectively according to the findings in the field. data in this study were collected using documentation study techniques. 2. data display after the data has been reduced, the second step is to present the data. at this stage the researcher records the data obtained from the field carefully, summarizes, selects the main points, and focuses on the important matters. through the presentation of these data, the data is organized and arranged in a relationship pattern, so that it will be more easily understood. 3. drawing conlcusions the third step in data analysis in qualitative research according to miles and huberman is drawing conclusions. the initial conclusions put forward are still temporary, and will change if no strong evidence is found to support the data collection stage. result and discussion al-mawaddah islamic boarding school (pesantren) is located in honggosoco village, rt 06 rw 01, jekulo district, kudus regency. this boarding school is located next to its journal of islamic economic laws-januray, vol. 3, no. 1, 2020 24 manager which is near to the road to stain kudus so it is easy to reach. geographically, the location of al-mawaddah islamic boarding school in the north is bordered by vast fields, in the east it is bordered by a house with a pharmacy, in the south it is bordered by baitul mu’minin mosque and in the west it is bordered by the kiai miftahuddin house and mts-ma hasyim asy’ari 03 honggosoco jekulo kudus. al-mawaddah islamic boarding school was founded around 2008 by kh. sofyan hadi, lc., m.a who was studied sharia and law at al-azhar cairo, then proceeded for post graduate at the faculty of interregious and cross-cultural studies ugm yogyakarta. it is obvious that kh. sofyan hadi, lc., m.a is not alone in establishing al-mawaddah. it was also the encouragement and determination of his wife hj. siti khodijah al-hafidzah, alumni of the yanbu’ul quran islamic boarding school kudus. the establishment of al-mawaddah is with an aim of serving god using da’wah. that determination was also assisted by a group of people, one of whom was his own parents. al-mawaddah pesantren has a vision of “becoming a global institution that encourages the birth of a noble successful civilization” while its mission is: “to inspire and provide the best thing in the process of empowerment to reach the highest achievement, based on universal principles and local wisdom”. based on this missionn, al-mawaddah also accommodates the local wisdom possessed by kudus society in carrying out their education. it carries out the teachings of sunan kudus about gusjigang which is an acronym of: bagus akhlak lan budine, pinter ngaji lan dagang. this acronym is actually a javanese language. this acronym means: gus (bagus or good). through the word “gus” it is hoped that the santri will always instill and actualize good and virtuous attitudes and behavior in their social lives. ji (ngaji or learning islamic teaching). the students are then taught about religious knowledge, so that students have a deep understanding of religious sciences and technology as their provisions to live happily in the world and the hereafter. gang (dagang or trading). trading is an activity carried out input muhammad baqi mustaghfiri 25 by the prophet muhammad in the past, and also activities carried out by the wali, one of which is sunan kudus. through trading activities people will benefit. this will encourage everyone to keep on trying to get a reward for what they have been trying. al-mawaddah combines formal and non-formal education in presenting education with the aim to change those uncapable of doing things to be good in it. particularly, al-mawaddah emphasizes entrepreneurship in this boarding school. the number of santri studying at al-mawaddah islamic boarding school is 30 students. most of the students come from around kudus, some from districts in java and outside java and others even come from east kalimantan. the number of students enrolled is indeed limited because it is designed for producing great pesantren alumni in the field of entrepreneurship. while the number of teacher (kyai) is 8 people, namely kh. sofyan hadi, lc., m.a, nyai hj. siti khodijah, kh. miftahuddin, ustadz khaiyuddin, ustadz mu’taddin ali, ustadz rasyidi, ustadz nur said, m.a., m.ag, ustadz ersyad qomar, st. in an institution, whether it is an educational institution or others, it certainly has a clear management structure. management structure is useful to facilitate the sustainability of an institution or organization. likewise, al-mawaddah islamic boarding school also has a clear management structure, each of which has clear different functions, stewardship and performance but remains within one goal. agribusiness sector is one of the targeted sectors in entrepreneurship education at al-mawaddah. through entrepreneurship education in the field of agribusiness, it is expected that the students have adequate abilities, ranging from land management, crop cultivation, to marketing activities. the ultimate goal of all education is basically that students can live independently, without relying on other parties (looking for work) after graduating from pesantren by pursuing agribusiness sector that has been taught. the agribusiness sector that was developed at al-mawaddah entrepreneur boarding school up to today, has only touched the agricultural sector as well as education and yet to touch other journal of islamic economic laws-januray, vol. 3, no. 1, 2020 26 agribusiness sectors such as: fisheries or animal husbandry. however, theory of the other two agribusiness sectors are also taught. the agricultural sector developed includes (1) agricultural food crops, such as: rice, corn, soybeans, vegetables, and cassava; (2) fruit crops, such as: longan, and dragon fruit (3) plantation crops, such as sugar cane. the choice of plants cultivated in the pesantren has basically also been made with careful consideration. for example: rice because people eat rice everyday so the need for rice gradually increases. therefore, rice becomes one of the choices of plants that is developed by pesantren. santri are also taught how to cultivate, process, and even its marketing strategy. another interesting thing at the pesantren is that the students were not only taught traditional cultivation of plants, but the students were also taught to carry out modern crop cultivation including using hydroponic techniques. this technique is very useful. apart that students being able to take advantage of the small piece of land, the students can also produce fresher vegetable crops. so in this case, the hydroponic technique taught is to cultivate vegetable crops. for the needs of the land, basically the pesantren that provides it. it comes either through land owned by the pesantren or by renting land owned by farmers around boarding school. what is taught by al-mawaddah entreprenuerial pesantren mentioned above makes agriculture as an attractive and profitable business system. agribusiness can not only rely on one part of the system that runs in it. a sugar cane plantation, for example, will not experience success if it only pays attention to or focuses on the process of increasing and improving production alone while ignoring the marketing factors. a good and attractive quality sugar cane will only become junk if not accompanied by good marketing, ecause no one buys it. therefore, agribusiness is a system that must be run as a whole in an integrated and harmonious way. what was stated above when it was related to the opinion of isbandi rukminto adi, it can be inferred that the empowerment efforts carried out by al-mawaddah entrepeneurial muhammad baqi mustaghfiri 27 pesantren through some ways : (1) growing people’s desire for entrepreneurship, struggling in economic aspects, acting by designing the discussions about the problem in society, (2) providing information about the experiences of other groups that have been successful and prosperous, (3) helping the community to make an analysis of the business situation prospective systematically about the nature and causes of business problems, (4) connecting people with resources that can be utilized (bariadi, zen, & hudri, 2005). meanwhile, if it is associated with mardikanto’s opinion, the agribusiness empowerment developed by al-mawaddah entrepreneurial pesantren is carried out through 3 (three) stages, namely input, process and output. first, input is to determine and analyze the needs of empowerment through identifying needs and setting targets. this is intended to achieve goals that can be measured in the form of improvement and better change. second, the process is the implementation of planned empowerment programme. third, output is monitoring, evaluating and analyzing empowerment. the explanation of the three process in the context of al-mawaddah entrepreneurial pesantren is as follows: journal of islamic economic laws-januray, vol. 3, no. 1, 2020 28 conclusion from the analysis that have been done, the following conclusions can be drawn: 1. the agribusiness sector developed at the al-mawaddah entrepreneur pesantren in honggosoco kudus has so far only touche the agriculture and tourism sectors, not yet to other agribusiness sectors, such as fisheries or livestock. the agricultural sector developed includes: agricultural food crops, such as: rice, corn, soybeans, vegetables, and cassava; fruit plants, such as: longan, and dragon fruit; even in the cottage also developed plantation crops, such as sugar cane. 2. agribusiness empowerment developed by al-mawaddah muhammad baqi mustaghfiri 29 entrepreneur pesantre consists of 3 (three) stages, namely: input, process, and output. at the input stage almawaddah entrepeneur pesantren carrries out various planning processes, namely: planning and determining the types of plants to be cultivated, preparing the land needed. determining which parties can be invited to cooperate in improving agricultural scientific knowledge and processing of agricultural product, planning for entrepreneurship material that needs to be given to students, planning how to motivate the students so that they have a high interest in the field of agribusiness entrepreneurship, planning how to assist and evaluate agribusiness entrepreneurship activities, designing pray that can support spiritual strength so that students have a high interest in the field of agribusiness entrepreneurship. in the process step, al-mawaddah enterpreneurial pesantren has many activities including: inviting officials from the kudus regency agriculture office to improve agricultural technical knowledge, inviting smes practicioners (including santri alumni), encouragement from the head of pesantren every end of the study on the importance of agribusiness entrepreneurship, giving tasks for santri to implement their technical knowledge on agribusiness on their daily live, the head of pesantren and its manager provides prayer for the spiritual strength. in the output stage, this pesantren has many activities as well including: the head of pesantren and its manager provide assistance, the head of pesantren, its manager along with santri evaluate agribusiness activities that has been done. 3. agribusiness empowerment conducted by al-mawaddah entrepreneurial pesantren is able to improve the alumni economy through agribusiness entrepreneurship. the results also show that agribusiness entrepreneurship is better than working with other people (companies). because in addition to providing freedom (not bound), from the aspect of income generated is also higher. journal of islamic economic laws-januray, vol. 3, no. 1, 2020 30 references ansor, m. s. 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(2011). pemberdayaan ekonomi pesantren: studi kasus pesantren nurul mursyidah pandeglang. edukasi, 9(1). https://doi.org/10.32729/edukasi.v9i1.280 _goback journal of islamic economic laws vol. 2, no. 2 july 2019: 234-251 234 analysis of factors affecting islamic insurance profitability (case study of sinar mas islamic insurance period 2011-2017) siti nurbaya1 and azhar alam2, 1faculty of islamic studies, universitas muhammadiyah surakarta email: aya.elmudza@gmail.com 2faculty of islamic studies, universitas muhammadiyah surakarta email: aa123@ums.ac.id abstract profitability is one benchmark to show a company operational performance. various factors influence the amount of profitability. this research aims to analyze the influence of the amount of premium income, total investment, claims expense and operational costs on the profitability gained during the period 2011-2017. this paper conducts multiple linear analysis, namely ols (ordinary least square) with secondary data in the form of time-series data. the results of the t-test indicate that the claims expense variable has a negative and significant effect. meanwhile, the operational cost variable has a positive and significant impact. on the contrary, the premium variable and the amount of investment both have a positive but not significant effect. moreover, the results of the f test show that the variables of premium, investment, claims expense and operating costs have a considerable impact on the profitability of sinar mas islamic insurance. keywords: islamic insurance, premium, claims expense, operational cost, profitability introduction as a country with moslem majority, the existence of financial institutions following islamic principles is urgently needed, journal of islamic economic laws-july, vol. 2, no. 2, 2019 235 including islamic insurance. the presence of islamic insurance is potentially able to attract the interest of muslim communities. this because it can reach the public need for confident risk management based on the principles of islamic law (damayanti and mawardi, 2015). insurance is a financial institution that aims to form a social gathering to alleviate the individual’s financial burden and avoid financing difficulties. in general, the concept of insurance is a preparation made by a group of people whom each face small losses as an unpredictable one. insurance is an agreement in which there is an agreement from the party that guarantees to the insured party, to receive some premiums instead of losses that might be suffered by the guaranteed, because of the consequences of the event (purnomo, 2017). existence of law no. 40 of 2013 as a form of government attention to the islamic insurance industry. supervision of islamic non-bank financial industry (iknb) through ojk, one of which is islamic insurance. according to law no. 40 of 2013 islamic insurance is a collection of agreements, which consist of agreements between islamic insurance companies and policyholders and arrangements between policyholders, to manage contributions based on islamic principles to help and protect each other (mariana, 2016). the operational system of syariah insurance (takaful) is mutually responsible, helpinghelping and protecting each other among the participants. islamic insurance companies are given trust or trust by the participants to manage premiums, develop a halal way and provide compensation to those who experience disaster according to the agreement deed (sula, 2016: 176). as the global islamic economic development began to increase, currently, the development of islamic-based business activities and financial institutions (banks, insurance, capital markets, pawnshops, pension funds, etc.) is growing. in the last three decades, this institution can increase the volume and value of islamic-based. until the period of january 2016, the development of financial institutions based on islamic insurance grew significantly. the growth can be seen in table 1 below, the siti nurbaya and azhar alam 236 increase in islamic insurance financial institutions from 2015 to the beginning of 2016 has increased according to bank indonesia data (meiliana, 2015). table 1. number of islamic insurance and reinsurance company and unit period 2015-2016 no type of insurance 2015 2016 1 general islamic life insurance 3 5 2 general islamic insurance 2 4 3 units of islamic general life insurance 18 19 4 units of general islamic insurance 23 24 5 units of islamic reinsurance 3 3 total 49 55 source: www.bi.go.id with the enormous potential of this sharia product, many insurance companies in indonesia offer sharia products. the growth of the sharia insurance industry is targeted at 35% per year. even the latest data from the financial services authority (ojk), recorded growth in the total assets of islamic insurance companies until june 2015 amounted to 24.06%. the placement of investment funds managed by islamic insurance also increased by 27.59% while the contribution of islamic premiums rose by 15.59% compared to the period in 2013 (ramadhani, 2015). islamic insurance in indonesia is a prospective business opportunity because it suits with the development towards political and economic stability, with a population of more than 180 million people, indonesia is one of the countries with the potentiality for investment by foreign investors. the fact that around 90% of the population is muslim and the awareness to express their muslim culture is increasing and has become a potential market share. for example, efforts in the field of halal labelled food and beverage, muslim clothing and accessories, pilgrimage, umrah, education and islamic publications, all of these have increased rapidly in the last 15 years (ichsan, 2016). journal of islamic economic laws-july, vol. 2, no. 2, 2019 237 the success of a company can be measured by looking at a company’s ability to earn profits, profits or profits can be defined in two ways, gain with a real economy is defined as an increase in an investor’s wealth as a result of capital investment, after deducting costs associated with the venture. meanwhile, profit in accounting is defined as the difference between sales prices and production costs. operational profit is defined as the difference between realized revenues arising from transactions during one period with related costs (belkaoui, 2006). this research is essential, considering that profitability is the benchmark of a company in carrying out its operations to the fullest. with a high level of profitability shows that the company can optimize its assets well, so that profitability is the basis for management to decide whether the company’s system will be maintained or improved, and maintain public trust in the potential of islamic insurance companies. literature review definition of islamic insurance in article 246 of the indonesian commercial law act, it is explained that insurance is an agreement in which an insurer binds himself to an insured with a premium that provides compensation for him due to a loss, damage and calamity he suffered, which suffered because of something he did not certainly (ali, 2008). sula (2016) defined insurance is a way or method to protect and avoid risk or danger that is furious that can happen anytime and anywhere in everyday activities. islamic insurance according to the national sharia council of the indonesian ulema council (dsn-mui) no: 21 / dsnmui / x / 2001 is described as an effort to protect each other and help between a number of people or parties through investments in assets and / or tabarru ‘which provide a pattern of returns to deal with specific risks through a sharia-compliant agreement. islamic insurance has several equivalent words, namely taka>ful, tami>n dan tad{a>mun, which has the meaning of bearing and helping each other. so that insurance is mutually protective, and help is called ta’awun, which is the principle siti nurbaya and azhar alam 238 of mutual protection and improve based on ukhuwah among members of sharia insurance participants in the face of risk. thus the insurance company is only limited to the operational manager of the insurance company and investment funds received from the insured party to the company as guarantor (ali, 2008). the concept of profitability in islamic insurance at present, the national bank’s alignment with the agricultural sector is very low. based on bi data, domestic bank lending as of march 2007, only 5.4 per cent of total loans amounted to 800.337 billion. furthermore, credit is dominated by the services sector by 37.21 per cent, industrial sector 22.93 per cent, trade 20.93 per cent. therefore, the role of islamic banking is expected to drive the agricultural sector in indonesia. profitability is the ability of a company to earn profits concerning sales, total assets, as well as its model or an overview of management’s performance in managing the company. profitability shows the ability of the model invested in all assets to generate profits for investors, namely the extent of the effectiveness of all management in creating benefits for the company (patriana, 2014). safitri (2015) stated the higher the level of profitability the better for the company itself. the higher the level of profitability of a company, the greater the level of prosperity provided by the company, so that it will be more attractive to many investors, and will have a positive impact and increase the value of the company. there are several ratios used to measure profitability, namely: 1. return on assets (roa) roa is usually referred to as the return on assets, which shows how much the asset contributes to generating net income, and this ratio is the ratio between net income and total assets or assets. 2. return on investments (roi) this ratio is the ratio between net income and total investment, where the percentage of this receipt journal of islamic economic laws-july, vol. 2, no. 2, 2019 239 3. return on equity (roe) the return on equity is a ratio that shows the amount of equity contribution in creating net income, and this ratio shows the efficiency of the use of its model, which can be calculated by dividing net income with total equity. in the insurance industry, there are several variables to determine its performance by managing these factors : 1. amount of premium premium is a payment of a sum of money made by the insured party to the insurer to replace a loss, damage or loss due to the emergence of an agreement for the transfer of risk from the insured to the insurer. the premium amount is determined from the results of risk selection carried out by the underwriter or after the company carries out risk selection at the request of the insured fund. thus the prospective insured will pay insurance premiums according to the level of risk or their respective conditions (amrin, 2006). 2. amount of investment investment is one of the supporting components of sharia insurance growth. investment is to invest or place assets in the form of funds or assets in a manner that is expected to provide income results or will increase its value in the future. investment can also be interpreted as a component of aggregate expenditure after consumption. investments sourced from public funds collected through financial and non-financial institutions are then channelled to institutions or companies, and the investment funds are invested by related parties to obtain profits. 3. number of claims claims are processes in which participants can get coverage for losses available under the agreement. all efforts given to ensure these rights are fully respected as they should be. therefore it is crucial for sharia insurance managers to handle claims efficiently. in resolving complaints in the form of siti nurbaya and azhar alam 240 damage or loss, the insurance company refers to the contract and the agreement written in the policy. the procedure in determining both takaful and conventional insurance is almost the same, except in terms of speed and honesty in assessing claims(sula, 2016). 4. operational costs cost is the amount measured in money from cash issued or other property transferred, share capital issued, services provided, or obligations that occur about goods or services that have been or will be received. operating expenses (operating expansion) are costs in the form of spending money to carry out necessary activities, namely in the way of sales and administrative costs to obtain income that supports operations or activities carried out by the company (belkaoui, 2006). previous research some studies found that the claim and investment variables had a significant effect on profitability in islamic insurance, while the premium and profit variables have no significant impact on it. other studies found that the premium variable, claim investment and underwriting has a substantial impact on corporate insurance earnings. the research conducted by ashal (2006) about the position of the tijarah and tabarru contract in sharia insurance obtained results that the concept of multi contract in sharia insurance aims to stay away from usury, gharar and maisir. the double contract contained in insurance is not a thermal contract that is prohibited following the hadith of the prophet. the contract provided in sharia insurance is an agreement that is takaful, bearing each other’s burden and help. hypothesis based on the discussion of various theories and previous research, the following hypotheses are formulated: 1. the amount of premium has a positive influence on the profitability of sinar mas syariah insurance for the period journal of islamic economic laws-july, vol. 2, no. 2, 2019 241 2011-2017. 2. the amount of investment has a positive influence on the profitability of sinar mas syariah insurance for the period 2011-2017. 3. claim expenses have a negative influence on the profitability of sinar mas syariah insurance for the period 2011-2017. operational costs have a positive influence on the profitability of sinar mas syariah insurance for the period 2011-2017. methods analysis of tools and econometric model the tools and analysts used in this study are ols (ordinary least square) model regression analysis. the econometric model used is as follows: log (profit) t = β0 + β1log (pre) t + β2log (inv) t + β3 log (bkl) t + β4 log (bop) t + εt note: β0 = constants, β1β2β3 = regression coefficient, pre = amount of premium, inv = amount of investment, bkl = claim expense, bop = operational costs, ε = error element, and t = year the estimation of the regression model includes several stages, namely: parameter estimation of econometric models; classic assumption testing consisting of multicollinearity test, residual normality test, autocorrelation test, heteroscedasticity test, model specification test, model goodness test, and validity test of influence. model goodness test will include a model existence test (f test), and coefficient of determination r2; and effect validity test (t-test). ols regression model (ordinary least square) this study used ols regression model (ordinary least square) to analyze the data. regression analysis is a study of the dependence of a dependent variable with one or more independent variables, to estimate or predict the average population or the average expansion of the dependent variable based on the value siti nurbaya and azhar alam 242 of the known independent variable. the focus of analysis is to explain and evaluate the relationship between a variable with one or more independent variables (kuncoro, 2009). the ols method or the smallest quadrant method is the most commonly used. according to the gauss-markov theorem based on assumptions from classical linear regression, ols estimation has the lowest variance among other linear estimators, in this case, the ols estimator is called the best linear unbiased estimator blue using assumptions certain, the ols method has interesting statistical properties that make it the most robust approach. ols estimators have the following features (gujarati, 2008). classic assumption test 1. multicollinearity test the term multicollinearity means that there is a definite linear relationship between several independent variables from multiple regression models. then the term multicollinearity is interpreted more broadly, namely the occurrence of high direct correlation among explanatory variables. problem multicollinearity often appears in the econometric model because economic variables are interrelated (kusrini, 2010). 2. residual normality test the normality test aims to test whether, in the regression model, the residual has a normal distribution. as it is known that the t-test and f test assume the residual value follows a normal distribution. if this assumption is violated, the statistical test becomes invalid for a small number of samples. the test is used to detect whether the residual has a normal distribution or not by using graph analysis and statistical tests (ghozali, 2011). 3. heteroscedasticity test heteroscedasticity occurs when the variation of the ut changes systematically as the value of the independent variable changes. the consequence of the existence of heteroscedasticity is that regression analysis will produce an estimator that is biased journal of islamic economic laws-july, vol. 2, no. 2, 2019 243 for the variation value of ut. as a result, the f test t and the estimated dependent variable costs are invalid (gujarati, 2003). 4. model specification and model goodness fit test this paper conducted a model specification test to test the linearity assumption of the model, so it is often called the linearity test model. the test used here is the ramsey reset test or also called the general specification error test. this paper uses the f statistical analysis. the f statistical test shows whether all the independent variables included in the model have a joint or simultaneous influence on the dependent variable. the null hypothesis is the joint hypothesis that β1, β2 ... βk simultaneously equals zero (ghozali, 2011). the coefficient of determination (r2) is used to determine the extent to which the accuracy of the regression lines formed in representing groups of observational data. the coefficient of determination describes a part of the total variation that can be explained by the model. the higher the value of r2 (close to 1) then the accuracy is said to be better, in general, the coefficient of determination for cross-data is relatively low because of the significant variations between each observation, while for time series data usually has a coefficient value (ghozali, 2011). this study also used the t statistical test to demonstrate how far the influence of one independent variable on the dependent variable by assuming the other independent variables is constant. the t-test is used for partial significance testing (utomo, 2015). 5. type and sources of data this study examined two variables, the dependent variable and the independent variable. the dependent variable used in this study is the profitability of islamic insurance. this profit calculation is derived from the income variable and the insurance cost or expense variable, profitability is the company’s ability to generate or earn profits. this profitability analyst describes the company’s performance in terms of the level of efficiency and effectiveness of the company’s operations in obtaining benefits. siti nurbaya and azhar alam 244 the independent variables used in this study are four variables. first, the premium amount which is defined by payment of a sum of money paid by the insured party to the insurer. second, investment of a certain amount of funds at this time to obtain gain in the future. third, claim as the application of participants to get coverage for their agreed losses based on the agreement or the process of submission by insurance participants to obtain rights and coverage after the participant has fulfilled his obligations under the contract. fourth, operational costs that must be incurred by the company to run the insurance company. this research used secondary data in the form of time series data with the period 2011-2017. the data was obtained from the financial statements of pt. sinar mas syariah insurance that has been published by the relevant agencies. the used data are the number of premiums, the amount of investment, claims expense and operational cost. results and discussion the description of sinar mas islamic insurance the islamic-based business activities and financial institutions in indonesia are overgrowing; one of them is sinar mas islamic insurance. with the majority of moslems in indonesia, islamic financial institutions possibly get huge market potential. in 2004 sinar mas insurance developed islamic products, using the concept of helping in kindness and loyalty and stipulating contracts that are under islamic law which do not contain gharar (uncertainty), maysir (gambling), usury (interest), illicit goods and immorality because those re prohibited in islamic financial contracts. sinar mas islamic insurance is one of the largest general insurance companies in indonesia. throughout the journey, sinar mas insurance shows continuous growth. the gross premiums and total assets of the company consistently increase from year to year, as well as services to its customers through quick and precise claim payments. the estimation results in this study to analyze the effect of the amount of premiums, journal of islamic economic laws-july, vol. 2, no. 2, 2019 245 the amount of investment, the claim burden and operational costs on profitability this research used the ordinary least square (ols) regression analysis with the result as follows: table 2. result of econometric model estimation 7.2237+ 0.1470 + 0.2176 – 0.6784 + 0.0437 (0.6482) (0.3412) (0.0006)* (0.0007)* r2 = 0.7856; dw-stat. = 2.0599; f-stat. = 13.7426; prob. f-stat. = 0.0000 diagnosis test (1) multicollinearity (vif) pre = 1.9808; inv = 2.0739; bkl = 1.5878; bop= 3.3619 (2) normality jb = 0.8353; prob. (jb) = 0.6585 (3) autocorrelation(bruesch godfrey) c2 = 1.8414; prob. (c2) = 0.6060 (4) heterocedasticity (white) c2 = 6.9535; prob. (c2) = 0.5417 (5) linearity (ramsey reset) f = 1.3336; prob. (f) = 0.2976 source: bps data organized. note:*significance pada a = 0,01; **significance pada a = 0,05; ***significant at a = 0,10. the number in parentheses is the empirical (p-value) probability of t-statistics. classic assumption test this study used time series data and acquired the classic assumption including multicollinearity test, residential normality test, autocorrelation test, heteroscedasticity test and model specification test. multicollinearity test the multicollinearity test in this study is the variance inflation factor (vif) test. if the vif value is> 10, there is a multicollinearity problem, but if the vif value is <10, there is no multicollinearity problem in the model. vif test results can be seen in table 3 below : siti nurbaya and azhar alam 246 table 3. result of vif test variabel vif criteria conclusion pre 1.9808 < 10 does not cause multicollinearity inv 2.0739 < 10 does not cause multicollinearity bkl 1.5871 < 10 does not cause multicollinearity bop 3.3619 < 10 does not cause multicollinearity table 3 demonstrates that each of variable does not cause multicollinearity. it means that data fulfill classic assumption in multicollinearity. residual normality test the normality test used in this study is the linear test with hypothesis formulation h0: utnormal distribution and ha: ut distributions are not normal, with the h0 test criteria accepted if the jb> α and h0 probability statistics are rejected if the jb <α probability statistics are rejected. from table 2, it can be seen that the probability of a quarrel value is 0.6585 (> 0.01), then h0 is accepted, so the ut distribution is normal. autocorrelation test the autocorrelation test used in this study is the breuschodfrey test with hypothesis formulation h0: there is no problem of autocorrelation in the model and ha: there is an autocorrelation problem in the model, with the testing criteria. h0 is accepted if the empirical significance of statistics c2 bg test > α and h0 are rejected if the practical significance of the statistics c2 bg test £ α. table 2 shows there is a probability value or statistical, empirical significance test bg at 0.6060 (> 0.10). then, h0 is accepted by the conclusion that there is no autocorrelation in the model. heteroscedasticity test heteroscedasticity test in this study used the white test with the hypothesis formulation, namely h0 means there is no journal of islamic economic laws-july, vol. 2, no. 2, 2019 247 problem of heteroscedasticity and the ha model that means there is heteroscedasticity problem. in the model. criteria estimation is described by h0 is accepted if the empirical significance of statistics c2 test bg> α and h0 is rejected if the practical significance of the statistics c2 test bg £ α. from table 2 the probability value or empirical significance of statistics is known as statistic c2 about 0.5417 (> 0.10), so h0 is accepted by the conclusion that there is no problem of heteroscedasticity in the model. model specifications test the model specification test used in this study is the ramsey reset trial with hypothesis formulation h0: linear model (exact model specification) and ha: the model is not linear (the model specification is incorrect), with criteria estimation namely h0 is accepted if the probability statistics f> α and h0 is rejected if the probability statistic f <α. from table 2, it is known that the probability value f of ramsey is equal to 0.2976 (> 0.10), so then h0 is accepted and declares the exact model specification (linear model). model existence test (f) the existence test in this study used the f test with hypothesis formulation h0: β1 = β2 = ... = βn = 0 means the used model does not exist and ha: β1 ≠ β2 ≠ ... ≠ βn ≠ 0 means the used exists, with the criteria estimation the h0 test is accepted if the statistical significance of f> α and h0 is rejected if the statistical significance of f <α. table 2 illustrates that the significance value of f is 0.000 (<0.01), so then h0 is rejected and as a consequence the used model exists. interpretation of the determination coefficient (r2) based on table 2 the estimation results show the r2 value is 0.7856, which means that 78.56% of the variable profit variation can be explained by the variable premium, total investment, claim expense and operating costs, while the remaining 21.44 is explained by other variables not included in the model. siti nurbaya and azhar alam 248 effect validity test (t test) the t-test is used to determine the magnitude of the influence of each independent variable on the dependent variable partially. if the probability is t > α, then variable has a significant effect. the results of the t-test can be seen in table below: table 4. validity test results of independent variabel effects variable sig. t criteria conclusion pre 0.6482 > 0.10 not significant at α = 0.10 inv 0.3412 > 0.10 not significant at α = 0.10 bkl 0.0006 ≤ 0.01 significant at α = 0.01 bop 0.0007 ≤ 0.01 significant at α = 0.01 table 4 shows that two of four independent variable have significant influence on the islamic insurance profitability. interpretation of independent variable effects from the validity test of the influence it shows that the variables that have a significant effect are the claim burden and operational costs. while the variable amount of premiums and the amount of investment has no significant influence. variable burden of sinar mas islamic insurance claims in indonesia has a regression coefficient of -0.678442. the pattern of the relationship between insurance profitability and claim expense is logarithm-logarithms, meaning that if the claim burden rises by one thousand rupiah, the insurance profitability will decrease by 67.84%. conversely, if the claim expense drops by one thousand rupiah, profitability will increase by 67.84%. the operating cost variable in sinar mas islamic insurance in indonesia has a regression coefficient of 0.0437. the pattern of the relationship between insurance profitability and operational costs is logarithms-logarithms, meaning that if the operational costs increase by one thousand rupiahs then the insurance profitability will increase by 4.37%. conversely, if operating costs fall, profitability will decrease by 4.37%. the rise and fall of the profitability of operational costs here is in the form of increased assets owned by insurance companies such as office equipment and supplies. journal of islamic economic laws-july, vol. 2, no. 2, 2019 249 economic interpretation based on the results of the research, the results of variable claim costs and operational costs are significant, meaning that even though insurance gets a large amount of income, if the amount of claim expenses and operational costs is also large, it will result in little net income income processing. the results of this study are in accordance with the research conducted by ainul (2016) which states that the claim burden has a negative effect and operational costs have a positive effect, so that a large number of the two variables with large income also shows that the insurance company is growing well with good corporate performance. healthy growth is considered as a basic requirement of the success of the company that has the opportunity to increase market share and attract investors to invest their funds in sharia insurance companies. insurance as a protection system for the risks faced by society from financial losses requires professionalism from the insurance company that manages it. that is by keeping the finances in such a way that they can give high trust to the community. conclusion based on the results of the ols (ordinaryleast square) model analysis that was carried out this paper conclude that the claim fund variable in this study has a negative effect and operational costs have a positive influence which are both significant to the profitability of sinar mas islamic insurance. the premium variable and the amount of investment do not have a significant influence on the profitability of sinar mas syariah insurance in the period 2011-2017. this paper used classic assumption test and it shows that all models meet classic assumptions, meaning that regression results can be used as a conclusion tool. high claims costs and operational costs can have an impact on the ability to maintain company finances which later can be considered by the community to join insurance companies, as well as investors who will invest their funds in sharia insurance companies, and have the opportunity to encourage economic growth. siti nurbaya and azhar alam 250 further researchers would better add other variables that can affect the profitability of islamic insurance, so that it can provide better research results. this is because there are few research variables. as well as the expected use of different measurements in seeking profitability efficiency. the investment ratio does not significantly affect the profitability of islamic. however, this investment activity must be fully supported by the government, so as to encourage investors to invest their capital in sharia insurance companies, which in turn will support economic growth. reference ali, z. (2008) hukum asuransi syariah. jakarta: sinar grafika. amrin, a. (2006) asuransi syariah. jakarta: pt alex media komputindo. ashal, f. f. (2006) ‘kedudukan akad tijarah dan akad tabarru’ dalam asuransi syariah’, human falah, pp. 239–252. belkaoui, a. r. (2006) teori akuntansi. jakarta: salemba empat. damayanti, f. e. and mawardi, i. (2015) ‘analisis faktor-faktor yang mempengaruhi surplus undewriting asuransi umum syariah di indonesia’, jurnal ekonomi syari’ah teori dan terapan., 4. ghozali, i. (2011) ekonometrika teori konsep dan aplikasi dengan spss 17. semarang: universitas diponegoro. gujarati, d. n. (2003) basic econometric. singapore: mcgrawwhill companies. gujarati, d. n. (2008) dasar-dasar ekonometrika. jakarta: erlangga. hartono, s. r. (1992) hukum asuransi dan perusahaan asuransi. jakarta: sinar grafika. kuncoro, m. (2009) metode riset untuk bisnis dan ekonomi. jakarta: erlangga. patriana, e. (2014) ‘model perhitungan tarif premi asuransi syariah dalam hubungan segmentasi pasar dan laba perusahaan’, jurnal etikonomi, 03(02). journal of islamic economic laws-july, vol. 2, no. 2, 2019 251 safitri, a. w. n. (2015) ‘pengaruh struktur model dan keputusan investasi terhadap profitabilitas dan nilai perusahaan’, jurnal ilmu dan riset manajemen., 4(2). sula, m. s. (2016) asuransi syariah (life and general) : konsep dan sistem oprasional. jakarta: gema insani press. utomo, y. p. (2015) ekploitasi data dan analisis regresi dengan spss. surakarta: fakultas ekonomi dan bisnis universitas muhammadiyah surakarta. journal of islamic economic laws vol. 3, no. 2 july 2020: 108-123 108 optimization of islamic peer-to-peer lending for micro and small enterprises (mses) after pandemic of covid-19 firsty izzata bella universitas airlangga email : firsty.izzata.bella19@feb.unair.ac.id abstract indonesia and the rest of the world are grieving over the covid-19 pandemic from december 2019 to the present, besides, no body known when this pandemic will end. in addition to impacting global health, the economy also experience the effects. one of the sectors that most got the impact of covid-19 was the micro and small business sector (mse). this research applied descriptive qualitative method through literature study utilized from books, scientific journals and other sources as supporters. the data used is intended as support for the phenomenon that occurs in indonesia. finally, the researcher tried to propose a new scheme in the form of filing mse financing in groups according to business categories through the islamic peer-to-peer lending (p2p) platform to provide easy capital access for the enterprises after the covid-19 pandemic. keywords: islamic p2p lending, mses, covid-19, financial technology introduction since december 2019 until now (may 2020), not only indonesia, but the whole world has experienced a pandemic (global emergency condition) coronavirus disease or covid-19. reporting from the world health organization (who) website, coronavirus is a group of viruses that can cause disease in animals or humans. unlike the middle east respiratory syndrome (mers) that occurred in 2012 and severe acute respiratory syndrome (sars) in 2002-2003, the cause of covid-19 is a new mailto:firsty.izzata.bella19@feb.unair.ac.id journal of islamic economic laws-july, vol. 3, no. 2, 2020 109 type of coronavirus the impact of the existence of this pandemic is known to not only cause a global health crisis, more than that it also has an impact on an unprecedented socio-economic crisis. a study conducted by suryahadi et al (2020) from the smeru research institute made five projections of increasing poverty levels in indonesia, namely if the economy only grew by 1% in 2020, then the poverty rate would increase to 12.4% or as much as 8 , 5 million people will become poor. in addition to the poverty level, other impacts of covid-19 in indonesia will be strongly experienced by the micro and small business sector (mse). data published by the ministry of cooperatives and small and medium enterprises shows that by 2018 the number of msmes in indonesia reached 64 thousand units, of which 99% were in the micro business category. this shows that micro-business will be very bad during the covid-19 pandemic, especially of course the actors in this business category are those who have low income. this was proven as reported in the online news portal republika, minister of cooperatives and small and medium enterprises (ukm) teten masduki stated that the decline in msmes in indonesia during the pandemic was also caused by a sluggish global economy, so demand was down. so, he invited the smes to be innovative in trying and capturing the opportunities that exist in the middle of the covid-19 pandemic. this was also supported by a statement that president joko widodo prepared four steps to mitigate the impact of covid-19 on msmes. first, it is the acceleration of relaxation efforts for msme credit restructuring that are experiencing difficulties. second, during this pandemic, the president requested that a new financing scheme be prepared. especially with regard to investment and working capital, where submissions are easier to reach, especially for various affected areas. third, include micro entrepreneurs or people in need in social assistance schemes. especially relating to food packages. and fourth, msmes are given the opportunity to continue producing in the agricultural sector and the home industry. including firsty izzata bella 110 traditional food stalls, with strict health protocols (septyaningsih & rahardjo, 2020). teten added that there were two steps to deal with the impact of covid-19 on msmes, namely through e-learning through eduukm.id and training through a webinar by smesco. with the current technological developments and the emergence of financial technology (fintech) products, one of which is capital access through peer-to-peer lending (p2pl), its use should be optimized both in terms of lenders or investors as well as borrowers or business actors. moreover, lending on p2pl always increases, especially if it highlights the data available on the ojk website, from december 2017 to march 2020, amounting to rp 2.56 t in december 2017 to rp. 102.53 t in march 2020, meaning an increase of rp 99.97 t, or as much as 50x more than the initial distribution. from the background explanation above, the author is interested in discussing islamic peer to peer (p2p) lending as a solution to meet the mse capital in indonesia, especially after the covid-19 pandemic because the policy or relaxation provided by the government is only temporary, then the umk must look for other sources of venture capital funding. literature review micro and small business the practice of msmes in indonesia is regulated through the issuance of the republic of indonesia law no. 20 of 2008 concerning micro, small and medium enterprises (msmes). in the act and supported by the definition of the central statistics agency (bps), it can be concluded that the difference in definition between micro, small and medium enterprises lies in three categories, namely (1) in terms of net worth, (2) ownership of annual sales results, and ( 3) number of workers. micro business is defined as a productive business owned by an individual and / or an individual business entity whose net assets are not more than 50 million rupiah, excluding land and buildings for the place of business or having a maximum annual sales proceeds of 300 million rupiah. and has a workforce of journal of islamic economic laws-july, vol. 3, no. 2, 2020 111 between 1-4 people. small businesses are those who have a net worth of between 50 million and a maximum of 500 million or have annual sales results of between 300 million and a maximum of 2,500 million and workforce ownership between 5 and 19 people. in indonesia, mses have an important role in driving the growth of the indonesian economy, namely through employment (jatmika, 2016), the development of remote areas, increasing women’s entrepreneurship, as well as the production of goods and services to meet the basic needs of households with lower middle income. however, this sector is often faced with difficulties to fulfill business capital, especially from the banking sector because it does not have collateral that are deemed sufficient by banks or are categorized as non-bankable (tambunan, 2018). furthermore, the results of the study stated that the people’s business credit (kur) coverage provided by the government had a limited range. investment in mses reporting from the cambridge dictionary, investment (investment) is defined as “the act of putting money into a business to buy new stocks, machines, etc., in order to make a profile”, or a behavior of putting money in a business activity to buy goods , machinery and so on with the aim of making a profit. investment is the main element in every business, whether on a micro, small, medium or large scale. identical access to capital is obtained by submitting to financial institutions, but for some parties this is not possible, this is due to the requirements set by banks in accepting loan or funding applications. ironically, businesses in the mse sector are often categorized as unbankable, so access to capital tends to be limited to obtain. if seen in the data below, micro enterprises which in fact have a proportion of 99% in indonesia still get investment with a nominal that tends to be small. it is true that there is an increase every year, but the increase is not significant, namely below 1%. as of 2018, data from kemenkop& ukm stated that micro enterprises only made an investment of rp. 290 billion, and small businesses only absorb investment in the amount of rp. 996 billion, with a total firsty izzata bella 112 investment in incoming mses of rp. 2,564 billion. that is, the micro sector only gets access to capital or less than 10% followed by small business around 30%. peer to peer (p2p) lending peer-to-peer (p2p) lending is defined as a financing platform that directly connects lenders to borrowers using online intermediaries without involving financial institutions (chen, lai, & lin, 2014). on the official website of the financial services authority (ojk), fintech lending / peer-to-peer lending / online loans is defined as the service of borrowing and borrowing money in rupiah directly between creditors / lenders (lenders) and debtors (borrowers) information technology based. p2pl began in the united kingdom in 2005, the nominal financing provided by the platform reached usd 3.5 billion in 2013 and reached usd 64 billion in 2015 and is estimated to reach 1 trillion usd in 2025 (pişkin&kuş, 2019). in indonesia, the practice of p2p lending began to emerge in september 2015 (darmawansyah&aguspriyani, 2019) has been regulated through ojk regulation (pojk) no. 77 of 2016 concerning technologybased money lending and borrowing services (lpmubti). as of april 30, 2020, there were 161 platforms registered with ojk, but only 15% or as many as 25 platforms had business licenses (ojk, registered and licensed fintech organizers at ojk as of 30 april 2020, 2020). fintech lending is very potential to be used as the main source of funding for mses, this can be seen from the increasing accumulation of loan disbursement nationally which in march 2020 reached rp. 102.53 trillion, an increase of 208.83% from march 2019. plus, this funding source has apparently been in the hands of 640,233 people, and as many as 24,157,567 borrowers who have benefited. research conducted by darmansyah, finto, hendratmi, and aziz (2020) states that the tendency of individual actors to use islamic financial technology is influenced by planned behavior, acceptance and use of technology. the most significant influential factor is the use of technology, therefore, this study suggests journal of islamic economic laws-july, vol. 3, no. 2, 2020 113 that ojk and islamic fintech providers can develop software or applications that are easier to access and use (user friendly). p2p lending sharia with the development of the practice of p2p lending in indonesia, as well as the existence of fatwa requests regarding technology-based financing (fintech financing) in accordance with islamic principles by pt. investree radhika jaya in 2017 and pt ammanafintek syariah in 2018, the mui national sharia board (dsn) issued dsn-mui fatwa no.117 of 2018 concerning information technology-based financing services based on sharia principles as guidelines and guidelines for the implementation of sharia p2p lending. the islamic p2p lending model differs from the credit model with the conventional banking system of interest. in investment and credit processes in an islamic perspective, a financing product must be transacted, or in the form of physically visible goods and services, based on profit sharing (pişkin&kuş, 2019). covenants that can be used in the implementation of p2p lending based on sharia principles are al-ba’i, ijarah, mudaraba, musharaka, wakalah bi-l ujrah, and qardh. the fatwa also states that the service model that can be carried out by the organizers is limited to six categories, namely (1) factoring, (2) financing of procurement of goods for third party orders (purchase orders), (3) financing of procurement of goods for actors businesses that sell online (online seller), (4) financing procurement of goods for business people who sell online with payment through payment gateway operators, (5) financing for employees, and (6) community-based financing (community based ). based on data from ojk, there are thirteen (13) sharia p2p lending platforms that have been registered with only two (2) platforms that have obtained ojk permits, namely investree and ammana.id. however, when referring to the membership data of the indonesian sharia fintech association (afs) (fintechsyariah. id), there are fifteen (15) sharia p2p platforms. if prospective investors or prospective borrowers are interested in the p2p lending sharia field, they should choose a platform that has firsty izzata bella 114 received a business license from ojk and has registered as a member of afsi so that transaction security can be maintained. however, it is unfortunate because dsn-mui has not provided sharia certification for the p2p lending sharia platform. methods this research uses descriptive-qualitative method, which is an approach to gather information through a relatively flexible discussion of research subjects needed to get an idea or a complete view of a phenomenon that occurs (starr, 2014). through library research, researchers collect literature sources in the form of academic journals, books, news portals, and several official websites of related institutions. likewise the data listed is used as a support of the facts that occur in the field. results and discussions impact of covid-19 on mses in indonesia covid-19 pandemic not only had an impact on the declining level of health in indonesia and throughout the world, but its impact was also felt in the economy, especially the micro and small business (mse) sector. statistics on fintech lending development published by ojk stated that as of march 31, 2020 in march, the 90-day success rate (tkb90) of 95.78% had decreased from december 2019 with 96.35% and had been the lowest loan value of rp. 1716. reporting from the bbc news portal (bbc.com), chairperson of the indonesian msme association, ihsan ingratubun, revealed that umkm’s business income had vanished due to the covid-19 outbreak, so that they had difficulty paying costs and workers’ salaries or salaries. the impact is that many of the msme workers are forced to return home (amindoni, 2020) this issue was responded by the indonesian government through the statement of president joko widodo (29/04) with the existence of five (5) major schemes to assist entrepreneurs in the msme sector in dealing with the covid-19 pandemic. the first scheme is the provision of direct assistance to msmes that are classified as poor and vulnerable. the second scheme is the journal of islamic economic laws-july, vol. 3, no. 2, 2020 115 provision of tax incentives for msmes with a turnover of rp 4.8 billion per year. the third scheme is the restructuring of msme loans, which can be in the form of delays in installments and interest subsidies. kempat, working capital assistance stimulus for smes. fifth, asking all ministries, institutions, and regional governments to be the frontline in the economic recovery of msmes (taher, 2020). in addition to the stimulus carried by the government, people who have more funds (surplus units) can help the economy in the msme sector by investing their funds in msme actors (deficit units) through sharia p2pl. in addition to promoting islamic finance in indonesia, sharia p2pl as a form of financial technology can also function as a collector and distribution of islamic social funds such as infaq, waqf, and sadaqah (hudaefi, 2020). mses financing scheme through sharia p2pl micro business has the biggest proportion, which is 99% of the total msmes in indonesia. as of 2018 based on data published by the ministry of cooperatives and small and medium enterprises (smes), it is known that there are 62 million micro business units in indonesia with a total workforce absorbed as many as 105 million people. it can be seen that micro-businesses have a significant impact on reducing the existing unemployment rate, in addition to that it turns out that micro-businesses have contributed to indonesia’s gdp in 2018 of 4.8 billion rupiah from indonesia’s total gdp of approximately 14 trillion. the contribution of the msme sector in determining gdp and the sector of producing foreign exchange is also unquestionable. this can be seen that msmes are the main agenda of indonesia’s economic development, also with the government’s policies that show msmes’ favor. despite having a large contribution to development in indonesia, micro business also has weaknesses such as the quality of human resources, legal entities, capital loans, lack of knowledge and experience in dealing with obstacles in the field, and so on (jatmika, 2016). research conducted by rosavina et al (2019) shows that some firsty izzata bella 116 of the factors that determine msmes using p2pl in obtaining access to capital are the processes for proposing financing, interest rates, financing costs, total financing, and financing flexibility. moreover, with the sharia p2pl scheme, interest rates can be replaced by profit-sharing schemes. following the p2pl scheme uses the contract as stated in the poverty &kus research (2019) figure 1. p2p lending scheme source: piskin & kus (2019) the above scheme shows the investment process in p2p lending in general. in process (1) a number of requested financing is collected from investors, then (2) the platform requests authorization to channel funds to the borrower, then (3) the investor approves the granting of power to the platform. after that, (4) the platform requests the power of the borrower to disburse the loan, then (5) the borrower approves the power granted by the platform for investor funds, and finally the financing funds are given to the borrower. reporting from the lppi and bank indonesia publications titled msme business profile in 2015, it was mentioned that from a number of constraints on the msme business, access to capital was the most dominant ie around 60-70% of msmes did not yet have access or bank financing. among the causes are geographical obstacles, administrative obstacles, msme business management which is still managed manually and traditionally, especially journal of islamic economic laws-july, vol. 3, no. 2, 2020 117 financial management, as well as lack of interest and efforts to expand msmes (lppi & bi, 2015; kusumawardhani, rahayu, &maksum, 2015). then alternatively, funding for msmes covered by micro enterprises can be obtained through the p2pl sharia with a group system consisting of several businesses with the same line or type of business. if we look at the p2pl syariah platform which is already operating in indonesia, such as pt investree and ammana.id, this concept has not yet been used by both. because the majority of borrowers only come from one business with a financing range of rp 10 million to 2 billion, while the capital costs needed for micro enterprises are under rp. 10 million. therefore, the authors offer to call the concept of financing that can be applied to the p2pl sharia platform. the concept proposed by the author is in accordance with one of the types of financing allowed and stated in the dsn-mui fatwa n0.117, which is community based financing, which is defined as financing provided to community members who need financing, with the payment scheme coordinated through the coordinator / community administrator. so, later on the financing will be grouped based on the borrower’s line of business such as culinary, fashion, handicraft, and so on. from each of these business sectors, there are 3-5 micro businesses that are made into one group, with the condition that the location of business people is still in the same region so that it is easy to coordinate with each other. if the capital requirements of each business actor have been determined, the next step is to propose financing to p2pl syariah. finally, an investor can choose a business in what category he chooses as well as in which region the business is located and henceforth can be given funding through the platform. following is the description of the scheme or model as explained above. firsty izzata bella 118 figure 2. proposed p2p lending scheme for mses source: processed data basically, the above scheme can also be applied to borrowers in the category of small and medium enterprises, with conditions that are still in the same business category, business locations in one regional area, and do not exceed the maximum financing limit as stated in pojk no.77 of 2016 which is equal to rp 2 billion. risk of funding for msmes and their mitigation on p2pl sharia sharia peer-to-peer lending as a form of financial technology practice in terms of financing cannot be separated from the risk. risks in p2pl are generally caused by several things (fitriyadi, 2019), namely: a. default. the definition of default in the civil code (kuhper) is a debtor declared negligent by a perinah, or with a similar deed, or based on the strength of the agreement itself, that is if this agreement resulted in the debtor must be considered negligent with the elapsed time. one example of default is the default that can be caused by the absence of provisions to become a debtor at a fintech company, and there is no collateral object in the agreement at the initial agreement b. bad credit, which is a situation where the debtor is unable to pay bank loans on time. just like in the world of banking, bad credit at fintech is also known as non-performing loan (npl). this can occur if the debtor does not understand the workings, terms and conditions of the p2pl, and cannot measure the ability to repay or repay the loan. journal of islamic economic laws-july, vol. 3, no. 2, 2020 119 however, if the problems that arise are caused by intentions such as late payments, then based on dsn-mui fatwa no. 17 of 2000 concerning sanctions for able nassabah able to delay payments, the customer concerned is entitled to be fined (darmawansyah&aguspriyani, 2019). nisar, prabhakar, and torchia (2020) stated that credit risk can be minimized by predicting it earlier, one of which uses a rating system (rating system). the results of their research show that loans by borrowers with a high level of appraisal in the system will be less likely to default, or experience bad credit. among the determinants of high or low credit rating are marital status, income level, and home ownership. it is known that those who are married, have a higher income, and have fixed assets such as houses will be more feasible to be given financing. development of p2p lending sharia platform basically the concept of p2pl sharia uses the islamic crowdfunding concept, which is by collecting funds from many parties as investors to then be deposited to the platform and channeled to the borrower. this concept is highly recommended as a funding solution for mses. therefore, this model becomes important to be developed better through a website platform so that it can connect investors from even small areas to business units to increase the growth and sustainability of a business (hendratmi, ryandono, &sukmaningrum, 2019) a study conducted by au, tan & sun (2020) states that the p2p lending platform can be further developed in a particular sequence at three stages, this is certainly also useful to reduce the risks that may occur during the contract. the three stages are (1) p-side development carried out by increasing partnerships with external companies to develop the ability to assess risk and the financial resources needed, (2) l-side development by subsidizing lenders for example by preparing a user guide or organizing monthly meetings lenders, and (3) b-side development, which facilitates borrowers by providing additional services to increase the value provided and reduce the need for multi-homing. firsty izzata bella 120 conclusion from the discussion above, it can be concluded that the mse sector can optimize financing applications through the sharia p2p lending platform primarily after the covid-19 pandemic. because although during the covid-19 pandemic, the mse sector received assistance and policy support such as credit relaxation, tax reductions, etc. from the government of indonesia, such assistance will not last for a long time. therefore, the surplus unit ie investors in indonesia can help sustain mse business by providing funding through the p2p lending sharia platform. specifically, the field of micro business through the filing of financing collectively as proposed in this study, by classifying the types of businesses and locations in the same region. apart from being overseen by the ojk, and fulfilling sharia compliance from dsn-mui, the use of p2p lending sharia can also increase public literacy and the development of sharia finance in indonesia. reefrences amindoni, a. 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(2018). the performance of indonesia’s public credit guarantee scheme for msmes a regional comparative perspective. journal of southeast asian economies 35(2), 319-332. doi:10.1355/ae35-2 who. (2020, march 2). media statement on confirmed covid-19 cases. retrieved may 16, 2020, from world health organization website: https://www.who.int/indonesia/ news/detail/02-03-2020-media-statement-on-covid-19 who. (2020, april 17). q&a on coronaviruses (covid-19). retrieved may 16, 2020, from world health organization website: https://www.who.int/emergencies/diseases/novelcoronavirus-2019/question-and-answers-hub/q-a-detail/qa-coronaviruses journal of islamic economic laws vol. 5, no. 2, july 2022: 246-262 246 islamic economic empowerment model during the covid 19 pandemic in lazismu surakarta saiev dzaky el kemal1, qurroh ayuniyyah2, rio erismen armen3, mufti maula alfani4. 1ibn khaldun bogor university 2ibn khaldun bogor university 3sekolah tinggi ekonomi islam (stei) sebi depok 4islamic university of madinah email: saievdzaky@gmail.com, qurroh.ayuniyyah@uika-bogor. ac.id, rio.erismen@sebi.ac.id, muftialfani17@gmail.com abstract the covid 19 pandemic is a new challenge for the islamic economy to be able to be a solution to various problems that arise due to the impact of the spread of the covid 19 virus in every community. the impact caused by the pandemic is not only on the health aspect but also on the economic aspect. this study aims to find out what are the models of economic empowerment in the islamic economy that can be done during the covid 19 pandemic. the research method used is qualitative descriptive. this method explains the phenomena that occur in society and then a conclusion is drawn. the results of this study are the first, the empowerment model carried out by lazismu surakarta during the pandemic has been in accordance with government rules, namely the funds are distributed to those who are entitled to receive it legally islamic and also pay attention to the scale of community priorities. second, the category of consumptive empowerment is 11% greater than productive empowerment. third, the benefits obtained by the community from consumptive empowerment are greater when the number of pandemic cases is increasing, while when the trend of confirmed case numbers is falling, productive empowerment is more expected by the community. fourth, the islamic economy is still able to play a mailto:saievdzaky@gmail.com mailto:qurroh.ayuniyyah@uika-bogor.ac.id mailto:qurroh.ayuniyyah@uika-bogor.ac.id mailto:rio.erismen@sebi.ac.id mailto:muftialfani17@gmail.com journal of islamic economic laws-july, vol. 5, no. 2, 2022 247 role in tackling emergencies such as the covid 19 pandemic. this is evidenced through lazismu surakarta which has been able to empower people’s funds professionally. keywords: pandemic, zakat, empowerment, lazismu introduction islam is a complex religion which is covering many dimensions of life, including the social economic dimension. kind of worship in islam is not only an individual ritual that without any connection each other, but also there is a kind of worship in islam which is caring and bringing many impacts to each other. the benefits in islam is very considered by islam it’s self, with the fulfillment of the general benefit. hoped by fulfilled it benefits that muslim can be more focus on their activity and also doing other kind of worship. the five pillars of islam there is one of them that includes several dimensions at once, namely zakat. zakat is one of the pillars of islam which is included in the type of social, economy and spiritual worship§ (susila, 2018). zakat gives attention to special group of people who are in need of an assistance in terms of finances and necessities of life. they are eight group only that have been determined with certainty in alquran, contained in chapter at taubah verse 60: “zakat is for the poor and for the needy and for those employed to collect (zakat). and for those whose hearts will be brought together (for islam) and for slaves and for those in debt and for (those) on the way of allah and for the travelers an obligation by allah. and allah is all-knowing, all-wise” zakat is not only interpreted as a worship that is related to the obligation of a servant to allah s.w.t, but zakat can also be a very effective solution to overcome poverty in a country (irawan, 2020). the potential of zakat actually is very big if the government or institutions that have the authority to collect it able to maximize it. optimization of this big potential will bring a positive impact on economic side of a country. this enormous potential has not been directly proportional to the reality of collecting zakat as the 248 kemal et al. potential economic strength of muslim. the era development continuously provides innovation in the form of zakat funds empowerment. zakat funds are no more seen just as fund that can only be used to feed the poor, but have been formulated so that how can be given to groups of zakat recipients can change their status from a recipient become who pays zakat. this is a special power possessed by muslim (hafidhuddin, 2012, yayuli et al., 2021) 2019 is a very historic year in human life story. in december 2019 there has been a very fast and wide virus spread. wuhan, china being the starting place for the spreading this new virus. this virus is called covid 19, and the continues to spread toward all regions in china and even throughout the world (guan et al., 2020) . the data from ministry of health of indonesia republic stated that the number of confirmed cases of covid 19 at october 14 2021 was 4.233.014 cases, whereas the national total number of confirmed deaths is 142.889 cases. the impact of this pandemic is not only on the health sector it’s self, but also on socio-economic aspect. therefore, one of the ways to prevent the continued spread of this virus is by improving the economic sector (ceylan et al., 2020) the economic sector really needs support and must continue to improve in order to overcome this bad pandemic situation. proven by the decline in indonesia economic growth rate in 2020 when it compared to the economic growth rate in 2019 before covid 19 pandemic. economic growth in 2019 was 5,02% then decreased in 2020 to 2,79% (ahmad, 2022). ministry of finance released a data that showed economic condition in indonesia is strengthening in 2021 after previously experiencing a decline. the case of this economic decline will be very helpful if zakat in a country which has a large enough fundraising potential can be maximized in terms of its empowerment. therefore the model of islamic economic empowerment during the pandemic needs to be rearranged in order to its benefit felt by community can be appropriate and also and target. the method of fundraising and distributing zakat fund during the pandemic is expected to have a model that is journal of islamic economic laws-july, vol. 5, no. 2, 2022 249 appropriate to the condition of affected community in terms of health, social or economic. lazismu surakarta is one of the professional institutions that has permission from the government to manage zakat, infak and shadaqah (zis) funds. the phenomenon that occurred in lazismu surakarta was an increase in the number of philanthropic fundraisers during the pandemic. based on lazismu surakarta’s annual financial report in comparison in 2019 before the covid 19 pandemic and in 2020 after the spread of the covid 19 virus, there was an increase quite high. zis funds in 2019 amounted to rp. 1.240.974.376 and zis fundraising in 2020 rp 1.640.505.341 (khaerunisa et al., 2021). the increase in the number of gatherings in 2020 reached 33%. lazismu surakarta also received an award during the pandemic in the form of the best humanitarian social program award nationally in 2020. literature review islamic economy islamic economics is an identity that describes an economic system based on the teachings of islam. an identity that makes a difference with various other economic systems. according to yusuf qardhawi islamic economy is an economic system based on divinity. allah says in chapter al mulk verse 15: “he is the one who smoothed out the earth for you, so move about in its regions and eat from his provisions. and to him is the resurrection of all.” the verse explains that economic concept comes from allah s.w.t as a shari’a maker by using the tools and means that allah has provided and ends with a purpose to allah s.w.t as well (qardhawi, 2016). the difference lies in the nature of principles and practices. islamic economic orientation is also different from other economic systems, in islamic economy welfare is not only worldly but also in order to achieve prosperity in the afterlife (arifqi, 2019). islamic economics is not the same as socialist economic thinking which blatantly rejects the existence of an individual property rights but the common interest is the foremost. in accordance with the vision they made is “mutual benefit above the benefit of the individual” (qardhawi, 2016). 250 kemal et al. the concept of a socialist economy is more concerned with the interests of the state than the affairs of the individual even though it must be by depriving it. islamic economics does not teach this, but rather gives a portion to each state and individual affairs. the islamic economic system pays great attention to the rights of individuals without leaving the interests of the state of a general nature. islamic economic principles make its adherents more respectful of the rights of others and more careful in collecting property so as not to take the share of others. unlike the concept of socialist economy does not mean islamic economy becomes a concept that teaches to miser and only attaches importance to personal interests so that it is similar to capitalist economic understanding. capitalist economies really only attach importance to individual interests. the slogan of the capitalist economic group is “compete and fight” (qardhawi, 2016). the slogan makes them free to act to be able to meet each other’s needs without regard to the affairs of others. islam is the middle ground for these two economic systems, namely socialist and capitalist (tho’in, 2015) islamic economics introduces to the world that in the property we have there are also parts and rights of others who need help from our property. zakat is also proof that the concept in islamic economics teaches that the benefit of others or so-called mustahiq is people who are entitled to receive zakat funds derived from certain provisions only. not all individuals are required to be taken from their zakat, but come from those who are already required to pay zakat. such obligations come from the type of property, the amount of property and the length of time to store the treasure is not taken from an individual who has any amount of property. islamic economy is very different from the capitalist economic system, socialist and also the welfare state system (welfare state). the socialist concept is often aligned with islamic economics because it excludes the benefit of the general or the state. socialist economy and islamic economy the difference journal of islamic economic laws-july, vol. 5, no. 2, 2022 251 lies in its portion and provisions that are very binding to meet the interests of the public or the state, because in islam there are special terms and conditions to obtain it. islamic economics has differences not only in its concept, but also has certain instruments that are not found in other economic systems. in addition, there are also other instruments in islamic economy besides zakat, namely waqaf, infaq and alms (almahmudi, 2020). zakat worship is one of the instruments of islamic economic empowerment that contributes to realizing the welfare of the community (widiastuti et al., 2021). covid 19 pandemic corona virus disease 2019 (covid 19) is a variant of a new disease that attacks the respiratory tract (wölfel et al., 2020)2. initial outbreaks in china involved 13.8% of cases with severe courses, and 6.1% of cases with critical courses3. this severe presentation may result from the virus using a virus receptor that is expressed predominantly in the lung2,4; the same receptor tropism is thought to have determined the pathogenicity—but also aided in the control—of severe acute respiratory syndrome (sars appeared in the chinese of wuhan and then spread rapidly and very widely(guan et al., 2020). the spread is so fast and has a death impact for many people who are exposed to the disease. pandemic is an epidemic that spreads very widely, occurs throughout the region in the international world and affects the entire community in general (mascie taylor & moji, 2021)or over a very wide area, crossing international boundaries and usually affecting a large number of people. pandemics have occurred throughout human history and appear to be increasing because of rising emergence of viral diseases from animals (zoonoses. the impact caused by the pandemic is very large, not only on the health aspect but extends to various aspects such as economy, social, education, tourism and even to the aspect of national security (qiu et al., 2017). 252 kemal et al. the impact of the pandemic on the economy pandemic has had a very wide impact in various aspects of human life. the sector most affected and vulnerable to a domino effect on the spread of the covid 19 pandemic is the political economic sector until it is feared that it will cause a trade war (kusno, 2020). the economic impact is also seen from the decrease in the scale of economic growth in indonesia. in 2019, before the spread of the covid 19 pandemic, the economic growth rate in indonesia reached 5.02% and dropped dramatically in 2020, namely after the pandemic entered and spread widely in indonesia to 2.79% (ahmad, 2022). the pandemic has also directly affected increasingly difficult employment. the number of unemployed in indonesia during the covid 19 pandemic is increasing and increasing (mardiyah, rahma ainul., nurwati, r. nunung., 2020). this increase in unemployment also has an impact on national economic growth. various government policies in order to overcome the large number of virus spread in indonesia such as the enactment of the lock down system and large-scale social restrictions (psbb) are one of the causes of the decline in indonesia’s economic growth rate along with reduced employment (teguh ali fikri, 2021) . the existence of this pandemic also affects the demand figures for goods and services so that it also has an impact on the income of business actors, especially in the micro and small business sectors and household industries (aeni, 2021). among the sectors most directly affected by the covid 19 pandemic is the health care facilities sector. the impact on the service included; modification of services by health workers, changes in the quality of health services, changes in the use of hospital facilities and infrastructure, changes in the quality of health services, the addition of health worker workloads and also the psychological impact for health servants (nina et al., 2021). the impact of the covid 19 pandemic has been very widespread to various sectors, causing many changes in habits and systems in many ways. adaptation of new habits began to be applied in various places and situations such as, at home, at work, journal of islamic economic laws-july, vol. 5, no. 2, 2022 253 in schools, in places of worship and other public places. these new habits aim to get a better quality of life health(rohmah, 2021) at school, at work, on the road, at the right place of worship and anywhere. new habits for healthier living must be continuously carried out in society and in every individual, so that they become social norms and new individual norms in everyday life. if the new habit is not carried out in a disciplined manner or is only carried out by a group of people, then this could be a threat that the corona virus outbreak will have a longer duration. old habits that are often carried out, such as shaking hands, crowding / clustering, lazy to wash hands must begin to be abandoned because they support the transmission of covid-19. various responses and reactions are shown by the community, some are sad, anxious, afraid, anxious, worried, angry but there are also those who are calm or remain confident. changing attitudes and behavior in society requires struggles in the form of adaptation or adjustment. individuals in society always describe themselves with their changing environment, either autoplastically or alloplastically. thus the relationship between individuals who interact are always a relationship that influences each other (reciprocally. it cannot be denied that there will be new systems in many aspects of life will arise with the occurrence of the covid 19 pandemic. economic empowerment of people during the pandemic definition of empowerment when viewed from the meaning of english translation is derived from the word empowerment whose origin is power which means the ability or strength to do and achieve something. get additional em derived from greek and latin which means in it. so the word empowerment is a source of strength that is in humans as a source of activity (murti & yulianti, 2018). empowerment or here in after referred to as the utilization of ziswaf funds has been regulated in law number 38 of 1999 concerning zakat management, namely: a) the results of the collection of zakat are used for mustahiq in accordance with religious provisions. 254 kemal et al. b) utilization of zakat collection results based on the priority scale of mustahiq needs and can be used for productive business. c) the requirements and procedures for the utilization of zakat collection results as intended in paragraph (2) are regulated by ministerial decree. the law provides an affirmation that the name of utilization is to provide portions that are in accordance with what is needed by the mustahiq or zakat recipients. the appropriate portion is included in the size and shape of the grant, whether as a consumptive fund or if it can be maximized to be given in the form of productive funds so that it does not run out of thin air and then does not give a longer change effect. model of community empowerment during the pandemic must pay attention to the priority aspects of the distribution program to be on target. the characteristic present during the pandemic is its very wide impact. the impact caused by the pandemic is not only found in the health aspect but extends to various aspects such as economic, social, educational, tourism and even to the aspect of national security (qiu et al., 2017). the existence of this pandemic also affects the demand figures for goods and services so that it also has an impact on the income of business actors, especially in the micro and small business sectors and household industries (aeni, 2021). the model of economic empowerment during the pandemic should be in addition to meeting the basic needs of the community as the top priority of those directly or indirectly affected should also be able to affect the increase in demand for goods and services from the producer side. methods this research is seen from the type of research place used is included in the type of field research, field research is research that takes a certain place to be used as an object of research so that it looks natural about what really happens in a place (hendri tanjung, 2013). according to its use, this research belongs to the journal of islamic economic laws-july, vol. 5, no. 2, 2022 255 type of pure / basic research with the aim to deepen or explorative research a phenomenon that occurs in society and within a certain period of time. this method or level of research is qualitative descriptive research. descriptive research is research that is exposure or in the form of an explanation of an event that occurs in society. the data source in this study is to use primary data and secondary data. in this study, the primary data source is lazismu surakarta as a zakat management institution that collects and distributes zakat funds in figures for the economic empowerment of the people and also the community recipients of empowerment programs. secondary data in this study is data that can be directly obtained from the results of a scientific publication, official report by an institution or agency related to research needs. the data collection methods carried out in this study are observations (observations), interviews, secondary data studies and triangulation or combining several methods. the data analysis method used is through several stages, namely data reduction, presentation of data and then drawing conclusions. qualitative data analysis model is by drawing conclusions or verifying data that has been reduced and presented in the form of tables or descriptive narratives (sugiyono, 2017). results and discussion lazismu surakarta is a zakat institution owned by muhammadiyah organization domiciled in the of surakarta and started its activities in 2012. lazismu surakarta then officially obtained a decree through the muhammadiyah regional office (pdm) of surakarta in 2013 with the number sk no. 202 / kep / iii.0 / d / 2013. through the issuance of the decree, it was later confirmed by the government through government regulation number 14 of 2014, and decree of the minister of religious affairs of the republic of indonesia number 333 of 2015. furthermore, lazismu as a national zakat institution was re-confirmed in 2016 through the decree of the minister of religious affairs of the republic of indonesia number 730 of 2016. 256 kemal et al. in managing zakat funds, infak and alms lazismu surakarta follows the general guidelines of lazismu center, while the development and innovation of the program is specifically different from lazismu in other regions. during this pandemic, lazismu surakarta has been empowering people’s funds through various programs that are consumptive and productive. the community fund empowerment program carried out by lazismu surakarta during the pandemic is divided into five main program pillars, namely, pillars of health, economy, education, social humanity and da’wah. table 1. fund distribution according to lazismu’s pillars (in rupiah) program distribution in 2020 distribution in 2021 education 285,500,000 16,600,000 dakwah 99,572,000 175,233,598 economics 37,300,000 10,850,000 social & humanity 650,871,000 1,508,640,306 health 97,440,000 routine program 346,581,000 644,380,601 total 1,517,264,000 2.355.704.505 the distribution of funds carried out by lazismu surakarta during the pandemic was more given to the pillars of humanitarian social programs (see table 1). recorded in 2020 and 2021 the amount of ziska funds distributed to humanitarian social programs is the largest when compared to distributions in other lazismu surakarta city programs. the humanitarian social distribution program is distributed through the food security granary program which is a derivative of the lazismu surakarta social program. this program became the best social program nationally in 2020. in 2020, the target of recipients of covid 19 food security granary services is as many as 1000 packages and successfully realized as many as 5,747 service packages. in 2021, the covid 19 food security granary program is 5,640 logistics distribution packages. journal of islamic economic laws-july, vol. 5, no. 2, 2022 257 this program is in accordance with the provisions of government empowerment and the central lazismu, this is seen from the priority scale of the type of distribution and the group of beneficiaries of zakat, infak and alms funds (zis). the advantages and disadvantages of this program are first, it has been good in the quantity aspect alone, not yet in the quality aspect. second, this program is very able to empower the welfare of the community when the number of confirmed cases of covid19 is increasing, while when the number of confirmed cases of covid 19 begins to experience a downward trend that is needed by the community is another program in the form of productive funds. the impact of this empowering model during this pandemic, namely through the social humanitarian program in the form of basic food packages distributed to the poor, is very helpful for them to be able to survive during the pandemic alone. the impact of the program did not last long, the benefits were only able to last a maximum of 14 days and then after that there was no longer any. the recipients of the packages are greatly helped even though the benefits are only temporary, not sustainable because of their circumstances who are really affected by the covid-19 pandemic disaster. the community is greatly helped because getting this kind of program is very easy and affordable. the contents of the basic food packages are entirely edible and suitable for consumption, so there is nothing left in the slightest of the type of goods given. the community also wants programs like this to continue to programs that are productive in nature. . the conclusion of this program is that it is very beneficial for the community during the pandemic, especially when the number of confirmed cases has increased only because of its consumptive nature, but the benefits cannot be felt for the long term because they are not productive so they are helpless when the goods given have been used up. conclusion the conclusion of the model of empowerment of community funds carried out by lazismu surakarta as a professional amil zakat institution during this pandemic is the first, the model of 258 kemal et al. empowerment of community funds carried out by lazismu surakarta is in accordance with the concept of community empowerment regulated by the government, namely by paying attention to the priority scale of beneficiaries and also the collection of zakat are used for mustahiq in accordance with shari’a. second, the model of empowerment of community funds by lazismu surakarta during the pandemic is divided into two categories of utilization, namely consumptive and productive. consumptive as much as 55.8% while productive utilization as much as 44.2%. the amount of funds distributed by lazismu surakarta is more for consumptive funds compared to productive funds. third, the impact felt by the beneficiary community of the empowerment of community funds during this pandemic is divided into two phases of time based on the number of cases of the covid 19 pandemic. the two phases of time are when the number of confirmed cases of covid 19 is soaring, the empowerment that is consumptive has more impact on the welfare of the community, but when the number of confirmed cases of covid 19 begins to decline until the beginning of 2022 then what is more expected by the community is empowerment that is productive to be further propagated such as business capital and employment. fourth, the islamic economic system is able to bring a positive impact during the covid 19 pandemic. islamic economics plays a big role in disaster management by empowering philanthropic funds that are well managed by professional institutions. recommendation for the next research or research which has similarity is, the first for the for the government and the owners of community fund management policies such as baznas and laznas, they can appreciate and cooperate in terms of collecting and distributing similar programs. can coordinate and collaborate with other zakat institutions so that there is no waste of expenses on each party. collaboration and coordination are very necessary to maximize benefits and reduce the risk of distribution that is not on target, both in form, quantity and recipients. second, for lazismu agencies, it is better to evaluate the impact of utilization received by the community. not only the number or quantity or number of packages that have journal of islamic economic laws-july, vol. 5, no. 2, 2022 259 been successfully distributed but also can assess the quality of goods by considering the greater benefits. the allocation of very large funds should also be combined with advanced programs that are long-term productive in nature. it is hoped that there will be a follow-up coaching program for beneficiaries during the pandemic so that the form of empowerment can have a greater positive impact, not only as a consumptive fund but also as a productive thing. the portion of the distribution of productive funds can be a priority option to do after the number of cases of the covid-19 pandemic begins to decline. third, for the recipient community of the program to be able to make the most of all the assistance provided properly and responsibly. people should not rely on the distribution of assistance programs like this but also try to continue to find decent jobs to survive. if given advanced programs that are productive in nature such as business capital, employment and educational scholarships so that they can be mandated in receiving them. references aeni, n. 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(2020). virological assessment of hospitalized patients with covid-2019. nature, 581(7809). https://doi. org/10.1038/s41586-020-2196-x 262 kemal et al. yayuli, y., athief, f. h. n., & utari, d. n. (2021). studi komparatif pemikiran yusuf qardhawi dan sahal mahfudh tentang zakat produktif sebagai sarana pemberdayaan ekonomi. profetika: jurnal studi islam, 1(1), 98-113. journal of islamic economic laws vol. 2, no. 2 july 2019: 193-211 193 analysis of effect of zis (zakat, infaq, and shadaqah), regional domestic products of bruto, regional minimum wage and inflation on levels poverty in indonesia 2012 – 2016 fiky nila mustika1, eni setyowati2, azhar alam3 1faculty of islamic studies, universitas muhammadiyah surakarta email: fikynila@gmail.com 2faculty of economics and business, universitas muhammadiyah surakarta email: es241@ums.ac.id 3faculty of islamic studies, universitas muhammadiyah surakarta email: aa123@ums.ac.id abstract this study investigated the impact of zis (zakat, infaq, and sadaqah) gross regional domestic products, regional minimum wages, and inflation on poverty levels in indonesia during the 2012-2016 period. .this paper used secondary data in the panel data form. this research conducted a quantitative approach using panel data regression. based on the results of the panel data testing, the best model chosen is the random effect model (rem). variables of gross regional domestic products and regional minimum wages have a significant effect on poverty levels in indonesia while the variables of zakat, infaq, and shadaqah (zis) and inflation do not influence the level of poverty in indonesia. keywords: zis (zakah, infaq, sadaqa), gross regional domestic products, regional minimum wages, poverty mustika et al. 194 introduction poverty for indonesia several other developing countries is still a significant problem. this poverty problem is very complex and related to economic aspects. poverty becomes a significant obstacle and is very calculated by a country in the process of fixing various problems in that country (ihsan and ikshan, 2018). poverty arises due to differences in abilities, differences in opportunities, and differences in resources. poverty was allegedly able to cause various social crimes and unkindness. poor people are not able to carry out religious obligations to the fullest as people who are not poor, are less able to carry out social functions, cannot access good education, a decent life, quality health care (maipita, 2014). (maipita, 2014). poverty impedes people because of limited funds, difficulties in obtaining an education, health, and the necessities of a decent life. poverty is a very serious problem and requires an important role from various parties so that it can help the government in poverty alleviation efforts in indonesia. the poverty rate must be reduced in order to increase and overall community welfare. poverty reduction is the main objective of development policy throughout the world. this is also the main objective of islamic economics and institutions, especially zakat institutions. effective poverty reduction strategies must be designed and implemented. this perspective also applies to zakat institutions because muslims generally believe that zakat is a real islamic institution to combat the problem of poverty (kasri, 2017). poverty alleviation and reducing income inequality deserve priority in national economic development strategies. the only way to solve problems is to use instruments based on local culture or religion. in this case, the zakat institution is considered as one of the most effective traditional mechanisms for dealing with the problem of poverty (ayuniyyah, pramanik and ariffin, 2018) zakat is an obligation for every muslim whose wealth when it has reached the minimum value called nisaab. poverty alleviation and economic empowerment are some of the main objectives of zakat. zakat plays a unique role because it is the only one that journal of islamic economic laws-july, vol. 2, no. 2, 2019 195 connects the payer with the hands of the recipients of the poor intending to reduce their poverty and empower them(kareem and bankole, 2016). gross regional domestic product, according to hamrolle (2004), is the value of the entire production of goods and services produced by certain people (in a certain period of time) / 1 year. grdp is an indicator to regulate the extent to which the success of the government in utilizing existing resources and can be used as a plan and decision making, one of which is to reduce the amount of poverty. minimum wages are directed at achieving the needs of a decent life by paying attention to productivity and economic growth. wages are a source of income, if the source of income decreases or remains, then welfare also decreases or remains, and it also will certainly affect the level of poverty (ningrum, 2017). rising production costs can trigger inflation through rising output prices, lowering purchasing power, reducing exports, reducing output, reducing economic growth, and increasing poverty rates, although sometimes high growth is also accompanied by high levels of poverty (maipita, 2012). this study tried to give an illustration of the influence of zis distribution zis (zakat infaq, and sadaqah), gross domestic product, minimum wage, and inflation on indonesia poverty level. this research is expected to provide additional insights into the field of islamic economics, especially about the study of islamic macroeconomics and monetary. besides that, this research can also be used to add research field experience and discussion of the policymaker to overcome the problem of poverty. literature review effects of zakat, infaq, and sadaqah (zis) on poverty zakat is one component in the islamic welfare system. aside from being a means to purify lives and property, zakat is also a tip for guaranteeing the protection, development, and regulation of the distribution and distribution of wealth. utilization and distribution of zakat funds so far have experienced many obstacles, especially the distribution of zakat mustika et al. 196 related to productive zakat products. zakat distribution is still a problem and one of inefficiency source for zakat institutions(alam, 2018). the distribution has to be made in more productive and creative ways to stimulate the poor economy. zakat, infaq, and sadaqah are sources of state revenue. one of the efforts in reducing poverty in indonesia is to do income distribution between the able and the poor. zakat is one of the efforts to distribute income to the poor. zakat purifies the soul from stinginess, greed, and selfishness and it has a positive impact on the economy of the community by reducing poverty and increasing economic growth (canggih, fikriyah, and yasin, 2017) zakat is also able to influence the economic policies of the islamic government to improve the welfare of the people, especially the weak. in the structure of the conventional fiscal policy, zakat is not yet one of the instruments. the implementation of zakat so far is more an activity of the people who want to purify their wealth. the collection and distribution are done traditionally and not in the productive form. as a result, zakat was made to deal with the poverty levels that plagued muslim countries, including indonesia. the basic principles of islam about development with all its aspects, especially the problem of economic development is an interesting thing to be studied more deeply because on the one hand it is hoped to be able to solve the economic problems that have plagued the world throughout time with complete islamic teachings. zakat, infaq and shadaqah (zis) can actually be used as a means of poverty alleviation because they can reduce income disparities between classes in society, as well as can be a door for the creation of motivation in the real sector, if the management of zakat, infaq, and shadaqah (zis) is directed at a form that is directed more productive (yusuf, et al., 2014). zakat has a strategic role in efforts to reduce poverty or economic development. in contrast to other financial sources for development, zakat does not have any backlash except s merit expectation from allah swt alone. however, it does not mean journal of islamic economic laws-july, vol. 2, no. 2, 2019 197 the mechanism of zakat does not have a control system. if the value of zakat, infaq and sadaqah increases, it will increase the welfare of the community so that the community will prosper and the number of poor people decreases effect of gross regional domestic product on poverty gross regional domestic product (grdp) is one indicator to determine the performance of development, primarily regional economic development. gross regional domestic product (grdp) is the amount of added value created from all the economic activities in an area without regard to the owner of production factors. grdp illustrates the ability of an area to manage natural resources and human resources to create added value. thus, the availability of crackers, both physical and non-physical, is one of the factors that determine the amount of grdp. gross regional domestic product is used to measure the rate of economic growth. economists believe that the best way to pursue economic backwardness is to increase the rate of economic growth as high as possible so that it can surpass the rate of population growth. in this way, the per capita income figure will increase so that there will automatically be an increase in community prosperity. the development process requires high national income and many countries the main condition for creating a permanent poverty reduction is economic growth. economic growth is not enough to alleviate poverty, but economic growth is usually something that is needed, even though good economic growth will not be meaningful for the decline of the poor if it is not accompanied by equitable distribution of income. economic growth is an indicator to see the success of development and is a must for poverty reduction. the condition of sufficiency is that economic growth is effective in reducing poverty. that is, the growth should spread in each income group, including the poor population. gross regional domestic product is generated income through goods and services by all economic activities in a region within a specified period. the higher the gross regional domestic product in an area, the higher the level of revenue of the region, mustika et al. 198 but the gross regional domestic product does not guarantee that all residents enjoy prosperity. gross regional domestic product is only a general description of the welfare of the community. the increase in gross regional domestic product cannot be concluded whether the condition of the low-income population has improved or not(sudiana and sudiana, 2015). lack of capital, low levels of education, traditional economic activities with low productivity and rapid population growth have hampered efforts to accelerate development so that the state of poverty can not be eliminated (sukirno, 2008) effects of regional minimum wages on poverty one of the goals of national development is to improve economic performance to be able to create jobs and organize a decent life for all people, which in turn will bring prosperity to the population in a country. the efforts made by the government in terms of poverty alleviation are earnest; it can be seen in terms of the many programs run by the government. many macroeconomic variables can be used as a cause of increasing or decreasing poverty in an area, including regional minimum wages (sari and mangkuwinata, 2017). in general, the review of minimum wages can be viewed from three sides, namely from the side of workers, companies, and the government. from the worker side, wages become an obligation to finance the needs of life for themselves and their families. wages are also a motivation for workers in the productivity of their work. from the company side, wages are a deduction from profits, because wages are a cost factor that must be incurred by the company in the production process. moreover, from the government side, wages become a means to create equitable income and improve community welfare(ihsan and ikshan, 2018) (ihsan et al., 2018). the minimum wage is an attempt to raise the level of the lowincome population, especially poor workers. the minimum wage is a minimum standard used by employers or industry players to provide wages to workers in a business or work environment. the main objective of setting minimum wages is to meet minimum journal of islamic economic laws-july, vol. 2, no. 2, 2019 199 living standards such as for the health, efficiency, and welfare of workers (sari and mangkuwinata, 2017). wages are a source of income, if the source of income decreases or remains, then welfare also decreases or stays, and it also will affect the level of poverty (ningrum, 2017) influence of inflation on poverty inflation is the tendency for prices of goods to rise continuously. an increase in the prices of goods is comprehensive if only a few types of goods are not said to be inflation unless the increase in the price of one item extends and results in an increase in other goods. high inflation causes a decrease in the real income of people who have a fixed income, can also reduce the value of public wealth such as savings in banks and owned cash (ihsan and ikshan, 2018) the relationship between inflation and poverty can be explained in two ways. first, inflation causes the real value of money held to go down. when prices increase, purchasing power goes down. second, inflation causes the real interest earned from saving money in banks to decrease so that purchasing power decreases. this decline in purchasing power has resulted in people becoming more impoverished than before. inflation affects the income of the community and company households because of the weak purchasing power of the community (sari and mangkuwinata, 2017). there is a very close relationship between high inflation and poverty because people want to live beyond their economic capabilities. there is a struggle for the fortune section among social groups who want more than what is already available or obtained by the community. inflation can drive income redistribution. this will affect people’s welfare because the redistribution of income that occurs will cause the real income of one community to increase and the real income of other people to fall. review of related research mahendra (2016) concluded that economic growth, per capita income, inflation, and unemployment during the period 2003 to 2014 did not have a significant simultaneous effect on the number of poor people in north sumatra at a significance level of 5%. thus mustika et al. 200 the research hypothesis was rejected; based on the partial test (t test), the variables of economic growth, income per capita, inflation and unemployment did not significantly affect the variable number of poor people in north sumatra by testing at a 95% confidence level. susanto, rochaida, and ulfah (2018) found that inflation has an indirect and insignificant effect on poverty in samarinda city. susanto, rochaida, and ulfah (2018) explained that there was a simultaneous influence of grdp, education, and agricultural labor structure on poverty levels in bali province. the t test shows that there is a negative but significant influence on the level of poverty in the province of bali, while the agricultural labor structure is partially influential but not significant to poverty in the province of bali. ihsan and ikshan (2018) stated that minimum wage has a positive and significant effect on poverty, inflation has a positive but not significant effect on poverty, while the amount of unemployment is negatively and significantly related to poverty in aceh province. andria, hamzah, and nasir (2014) explained that the gdp per capita, unemployment, and inflation together have a significant effect on the number of poor people in aceh province. hassanain (2017) found there is a positive and significant relationship between the zakat system program in the republic of sudan and poverty alleviation in sudan. zakat also is indicated to have a positive and significant relationship between the zakat system program in the republic of sudan and poverty alleviation in sudan (kareem and bankole, 2016). abdussalam, johari, and alias (2015) stated that zakat and its institutions were not significantly and effectively in reducing poverty among poor muslims in kwara state, nigeria. however, recommendations are made towards the introduction of zakat standards institutions in the state to help in poverty alleviation among poor muslims ayuniyyah, pramanik, and ariffin (2018) found that in general, the current zakat distribution program can reduce poverty and reduce income inequality among the recipients of zakat journal of islamic economic laws-july, vol. 2, no. 2, 2019 201 observed. kasri (2017) concluded that the incidence, depth, and severity of poverty between recipients had decreased along with the contribution made by the zakat management organization. a group of people who have a lower age, lower education, less formal employment, smaller household sizes, and non-economic charity assistance should be the main target of zakat intervention in indonesia (kasri, 2016). other study concluded that the distribution of zis funds had a significant adverse effect on msme growth and grdp growth in east java. the distribution of ifi funds has a significant positive effect on msme growth and gdrp growth in east java. (hamidah et al., 2017) methods this paper used panel data from 34 provinces in indonesia during 2012-2016. the data sources of this research are the central statistics agency, the national amil zakat agency, and others. this paper conducted two kinds of variable, dependent, and independent. the dependent variable in this study is poverty (y) while the independent variable consists of zakat, infaq, and sadaqah (x 1 ), gross regional domestic product (x 2 ), regional minimum wage (x 3 ), and inflation (x 4 ). this research used a panel data regression model to analyze quantitatively and estimate the effect of several independent variables simultaneously or partially on the dependent variable. the model used in this study is a modification of a research journal conducted by ihsan and ikshan (2018) km it = β 0 + β 1 zis it + β 2 grdp it + β 3 rmw it + β 4 inf it + u it where: km = poverty for the i-th region and t-time β 0 = intercept coefficient which is a scalar zis = zakat, infaq, sadaqah for the i-th region and t-time grdp = gross regional domestic product for the i region and t-time rmw = regional minimum wage for the i-th region and mustika et al. 202 t-time inf = inflation for the i-th region and t-time β 1 β 2 β 3 β 4 = slope coefficient i = shows cross section data of provinces in indonesia t = shows time series data for 2012-2016 u it = error term research framework this paper used framework as described below : source: ihsan and ikshan (2018) graph 1. research framework the framework of this research is that poverty is influenced by four variables, namely zis (zakat infaq, and sadaqah), gross regional domestic product, regional minimum wage, and inflation. this paper also designed the hypothesis as follows: 1. zakat, infaq, and sadaqah (zis) have a significant effect on poverty levels. 2. gross regional domestic product significantly influences the poverty levels 3. regional minimum wage has a significant effect on poverty levels. 4. inflation does not affect poverty levels journal of islamic economic laws-july, vol. 2, no. 2, 2019 203 results and discussion the estimation results of panel data regression is described through the pooled ordinary least square (pls) approach, fixed effect model (fem), and random effecet model (rem) as can be seen in table 1 table 1. cross panel regression results variable regression coefficient pls fem rem c 13,51388 12.78654 12.50397 zis -5.54e-11 4.97e-12 2.60e-12 grdp -1.96e-06 -6.72e-06 -5.45e-06 umr 3.52e-07 4.86e-07 4.71e-07 inf -0.259820 -0.018208 -0.018407 0.072392 0.986789 0.076193 adj. 0.049905 0.983086 0.053798 f-statistics 3.219232 266.4792 3.402181 prob f-statistics 0.014156 0.000000 0.010542 source: processed data panel data model selection test to determine the best estimation model from pls, fem, and rem estimation results, the chow test and hausman test are used. chow test is a test used to determine whether the fem model is better than the pls model. the results of processing chow test can be seen in table 2 below table 2. results of panel data estimation using chow test effects test statistic d.f. prob. cross-section f 276.860747 (33,132) 0.0000 cross-section chi-square 722.765986 33 0.0000 source: data processed table 2 depicted that the p-value or probability f test at 0, 0000 ≤ alpha (0.05) and chi-squared by 0,0000 ≤ alpha (0.05) then the chosen model would be a fixed-effect model (fem). mustika et al. 204 the hausman test is a test used to see whether the fem model is better than the rem model. the results of processing the hausman test can be seen in table 3 below table3. results of panel data estimation using hausman test test summary chi-sq. statistic chi-sq. d.f. prob. cross-section random 4.493161 4 0.3434 source: data processed if the p-value or probability of the chi-squared statistic or random cross-section is 0, 3434 > α (0.05), then the conclusion is using a random effect model. based on the results of the panel data estimation, the best-chosen model is the random effect model (rem). analysis of random effect model estimation results random effect model (rem) results can be seen in table 4 and five below: table 4. random effect model estimation results = 12.50397 + 2.60e-12 zisi5.45e-06 pdrbi + 4.71e-07 umri (0.6936) (0.0098)* (0.0162)** 0.018407 infi (0.4986) r2 = 0.076193; dw-stat. = 0.811110; f-stat. = 3.402181; sig. f-stat. = 0.010542 explanation: *significant at a = 0,01; ** significant at a = 0,05; the number in parentheses is the probability of the t-statistic value. the coefficient of determination shows the full capacity of the selected statistical model. based on table 4 the result indicates the r 2 of 0.076193, it means that 7.61% of poverty level variable variation can be explained by a variety of variables including zakat, infaq, and sadaqah (zis), regional gross domestic product, regional minimum wages, and inflation while the remaining 92.39 journal of islamic economic laws-july, vol. 2, no. 2, 2019 205 % are influenced by variations of other variables not included in the model. variable gross regional domestic product has a regression coefficient of -5.45e-06, and the pattern of the relationship of poverty level with the gross regional domestic product is linear, meaning that if the gross regional domestic product variable rises 1 billion, the poverty rate will decrease by 0.00000545 %. local minimum wage variable has a regression coefficient of 4.71e-07, and the pattern of the relationship of poverty level with regional minimum wage is linear, meaning that if the regional minimum wage variable rises rp. 1,000,000.00 then the poverty rate will rise by 0.471%. table 5. random effect model estimation results no province effects constant 1 aceh 4.922164 17.426134 2 sumatera utara -0.54464 11.959327 3 sumatera barat -4.91842 7.585546 4 riau -2.65311 9.850856 5 jambi -4.03525 8.468722 6 sumatera selatan 1.87544 14.37941 7 bengkulu 4.707711 17.211681 8 lampung 2.53305 15.03702 9 kep. bangka belitung -7.69056 4.813413 10 kep. riau -5.99585 6.508119 11 dki jakarta -2.49715 10.006823 12 jawa barat 2.76339 15.26736 13 jawa tengah 5.495696 17.999666 14 di yogyakarta 2.294646 14.798616 15 jawa timur 6.574819 19.078789 16 banten -5.48637 7.017597 17 bali -7.95319 4.55078 18 nusa tenggara barat 4.652462 17.156432 19 nusa tenggara timur 8.357469 20.861439 20 kalimantan barat -4.20967 8.294302 21 kalimantan tengah -6.79957 5.704401 mustika et al. 206 no province effects constanta 22 kalimantan selatan -7.73881 4.765156 23 kalimantan timur -4.54356 7.960415 24 kalimantan utara -9.95253 2.551436 25 sulawesi utara -4.54927 7.954704 26 sulawesi tengah 1.822393 14.326363 27 sulawesi selatan -2.17658 10.327393 28 sulawesi tenggara 0.543616 13.047586 29 gorontalo 4.706353 17.210323 30 sulawesi barat -0.72372 11.78025 31 maluku 6.680088 19.184058 32 maluku utara -5.69999 6.803976 33 papua barat 13.37639 25.88036 34 papua 16.86256 29.36653 source: processed data based on table 4.5, it can be seen the constant values of each province. the highest constant value is papua province at 29.36653, which means that it is related to the influence of zakat, infaq, and shadaqah (zis), gross regional domestic product, regional minimum wages and inflation on poverty levels, so the poverty level in papua province tends to be higher than other regions. followed by west papua province with a constant value of 25,88036. then the third largest constant value is east nusa tenggara province at 20.861439. the fourth largest constant value is maluku province with 19.184058. moreover, the fifthlargest constant value is east java province at 19.078789. while the lowest constant value is north kalimantan province which is 2.551436 which means it is related to the influence of zakat, infaq, and shadaqah (zis), gross regional domestic product, regional minimum wages and inflation on poverty levels, the poverty level in north kalimantan province tends to be lower compared to other regions. the second-lowest constant value is bali province, which is 4,55078, then south kalimantan province ranks third with a constant value of 4,765156. the fourth lowest constant value sequence is kep. bangka belitung province, which journal of islamic economic laws-july, vol. 2, no. 2, 2019 207 is 4.813413, then central kalimantan province ranks fifth with a constant value of 5.704401. beside analysis random effect model based on each province, this study conducted a validity test of independent variables as summarized in table 6 below. variables sig. t criteria conclusion zis 0.6936 > 0,05 has no significant influence gdrp 0.0098 ≤ 0,05 significant at α = 0.05 rmw 0.0162 ≤ 0,05 significant at α = 0.05 inf 0.4986 > 0,05 has no significant influence source: processed data table 6 depicts that regional gross domestic product and regional minimum wage individually variables have a significant effect on poverty levels while the variables of zakat, infaq, and shadaqah (zis) and inflation do not have a significant influence on poverty levels. economic interpretation based on the cross section panel data estimation results show that the variables of zakat, infaq, and shadaqah have no significant effect on poverty levels in indonesia in 2012-2016. this is not following the hypothesis that zakat, infaq, and shadaqah influence poverty levels in indonesia. management of zakat, infaq, and shadaqah in several regions has not been carried out optimally, so zakat, infaq, and shadaqah have not been able to alleviate poverty levels. public awareness is not yet optimal to issue a zakat, infaq, and sadaqah for the poor (poor people). gross regional domestic product on poverty rate based on the cross section panel data estimation results show that the gross regional domestic product variable has a negative and significant effect on poverty levels in indonesia in 2012-2016. the rate of economic growth is the increase in the regional gross domestic product (grdp) regardless of whether the increase is large or small. economic growth is not merely measured by mustika et al. 208 overall grdp growth, but also must pay attention to the extent of the distribution of income that has spread to all walks of life so that people can enjoy the results. if the distribution of income spreads evenly to all strata of society, the welfare of the community will increase and reduce poverty. these results are consistent with research conducted by rudi masniadi et al. (2017), who said that gross regional domestic product had a negative and significant effect on poverty levels in west sumbawa regency in 2008-2016. regional minimum wage on poverty rate based on the cross section panel data estimation results show that the regional minimum wage variable has a positive and significant effect on poverty levels in indonesia in 2012-2016. with the minimum wage, it will lift the degrees of the poor as wages increase, community welfare increases. if the welfare of the community increases, then the community is free from poverty. however, with the stipulation of the minimum wage must also pay attention to the extent to which the welfare of the community is achieved and whether the community has enjoyed the results of wages to meet their daily needs or not if the welfare of the community decreases, the level of poverty increases because the community cannot meet their needs. these results are consistent with research conducted by khairil ihsan and ikhsan (2018), who said regional minimum wages had a positive and significant effect on poverty levels in aceh province in 2008-2015. inflation on poverty rate based on the cross section panel data estimation results show that inflation does not have a significant effect on poverty levels in indonesia in 2012-2016. this is consistent with the hypothesis that inflation does not influence poverty levels in indonesia. high inflation causes the purchasing power of people on low incomes to decline due to rising prices. so that the poor cannot fulfill their needs optimally because their purchasing power is under their income. journal of islamic economic laws-july, vol. 2, no. 2, 2019 209 these results are consistent with research conducted by edyson susanto et al. (2017), who said inflation was not significant for poverty in samarinda city. conclusion this paper concluded that the regional gross domestic product has a significant negative, and the regional minimum wage has a significant positive effect on the poverty level in indonesia during 2012-2016. on other hands, zis (zakat, infaq, and sadaqah) and inflation variables do not influence the poverty level. for further research, it is expected to analyze more variables, such unemployment rate to give a more in-depth understanding. regional government should pay more attention in order to maximize the capability of zakat, infaq, and sadaqah to lower the poverty level. references abdussalam, o. i., johari, f. and alias, m. (2015) ‘is zakah effective to alleviate poverty in a muslim society?: a case of kwara state, nigeria’, global journal al thaqafah, 5(1), pp. 33–41. doi: 10.7187/gjat762015.05.01. alam, a. (2018) ‘analisis efisiensi pengelolaan dana zakat infak sedekah (zis) di baznas kabupaten/kota sekaresidenan surakarta dengan menggunakan metode data envelopment analysis dea’, iqtishoduna: jurnal ekonomi islam, 7(2), pp. 262–290. andria, s., hamzah, a. and nasir, m. (2014) ‘faktor-faktor yang mempengaruhi kemiskinan relatif di kota banda aceh’, jurnal ilmu ekonomi, 4(1). ayuniyyah, q., pramanik, a. h. and ariffin, m. i. (2018) ‘zakat for poverty alleviation and income inequality reduction : west java, indonesia’, journal of islamic monetary economics and finance, 4(1), pp. 85–100. canggih, c., fikriyah, k. and yasin, a. (2017) ‘potensi dan realisasi dana zakat indonesia’, al-uqud : journal of mustika et al. 210 islamic economics, 1(1), p. 14. doi: 10.26740/jie.v1n1.p1426. hamidah, r. a. et al. (2017) ‘impact of zis (zakah, infaq, and sadaqa ) distribution and islamic financial institutions to msmes (micro, small, and medium enterprises ) and gross regional product growth in east java ( 2011-2014 periods )’, 1(1). hamrolle, h. (2004) analisis peningkatan pad. yogyakarta: bpfe-yogyakarta. hassanain, k. m. a. (2017) ‘zakah for poverty alleviation : evidence from sudan’ (january 2016). ihsan, k. and ikshan (2018) ‘analisis pengaruh ump, inflasi dan pengangguran terhadap kemiskinan di provinsi aceh’, 3(3), pp. 408–419. kareem, m. k., and bankole, a. s. (2016) ‘zakah, poverty alleviation, and inclusive growth in nigeria’, journal of islamic finance, 5(2), pp. 53–65. kasri, r. a. (2016) ‘effectiveness of zakah targeting in alleviating poverty in indonesia’, al-iqtishad: journal of islamic economics, 8(2), pp. 169–186. doi: 10.15408/aiq. v8i2.3005. kasri, r. a. (2017) ‘international journal of islamic economics and finance studies,’ pp. 30–40. doi: 10.25272/j.21498407.2017.3.3.03. mahendra (2016) ‘analisis pengaruh pertumbuhan ekonomi pendapatan perkapita, inflasi dan pengangguran terhadap jumlah penduduk miskin di provinsi sumatera utara’, jrak, 2(2), pp. 123–148. maipita, i. (2012) mengukur kemiskinandan distribusi pendapatan. yogyakarta: upp stim ykpn. maipita, i. (2014) mengukur kemiskinan dan distribusi pendapatan. yogyakarta. yogyakarta: upp stim ykpn. ningrum, s. s. (2017) ‘analisis pengaruh tingkat pengangguran terbuka, indeks pembangunan manusia, dan upah journal of islamic economic laws-july, vol. 2, no. 2, 2019 211 minimum terhadap jumlah penduduk miskin di indonesia tahun 2011-2015’, jurnal ekonomi pembangunan, 15(2), pp. 185–192. sari, j. and mangkuwinata, d. s. (2017) ‘pengaruh variabel makro ekonomi terhadap kemiskinan di provinsi aceh’, jurnal ekonomi dan bisnis, 18(2), pp. 94–107. sudiana, i. w. and sudiana, i. ketut (2015) ‘pengaruh pdrb, pendidikan dan struktur tenaga kerja terhadap kemiskinan di provinsi bali’, e-jurnal ekonomi pembangunan universitas udayana, 4(6), pp. 608–620. sukirno, s. (2008) makro ekonomi teori pengantar. jakarta: pt raja grafindo jakarta. susanto, e., rochaida, e. and ulfah, y. (2018) ‘pengaruh inflasi dan pendidikan terhadap pengangguran dan kemiskinan’, inovasi, 13(1), p. 19. doi: 10.29264/jinv.v13i1.2435. journal of islamic economic laws vol. 3, no. 1 january 2020: 48-67 48 factors influencing the preference of customers towards islamic banking: evidence from malaysia qosdan dawami kulliyah of economics and management sciences international islamic university malaysia email: qosdan.dawami@live.iium.edu.my abstract the purpose of this research is to investigate the pivotal determinants influencing the consumer’s preference towards the products and services of islamic banking, apart from reviewing previous studies that considered perceived religiosity has an intense relationship with the individual’s intention and attitude. moreover, this study also examines the direct relationship between the preference of customers and the service quality offered by islamic banks. this study utilizes quantitative approach through conducting a survey to 60 students of international islamic university malaysia from various departments. correlation and regression will be applied for data analysis. the result of the study indicated that the attitude and the service quality offered by islamic banks are the major determinants influencing the customers’ behaviour towards islamic banking. on the other hand, the image of the bank and the religiosity were determining insignificantly to the intentions of customers to choose its products and services. keywords: islamic banking, religiosity, customer behaviour, shariah compliance. introduction in the economic globalization, the proliferation of islamic banking institutions all over the world has been taking place in tremendous pace particularly in three past decades. it is the leading sector in islamic finance industry which contributed 71 percent or us$1.7 trillion to the global islamic finance assets in 2017 mailto:qosdan.dawami@live.iium.edu.my qosdan dawami 49 (ifsb, 2018) . kaakeh et al (2018) further argued that islamic finance market in the european countries also has exhibited positive progress even though they are a minority muslim country such as the uk, the netherlands, france, luxembourg and germany. this remarkable growth indicates that the demand and merits of islamic banking has been increasing over the years as it is fulfilling the dire needs of muslim society towards alternative financial institution. historically, islamic banking framework is not a new concept in islam as islam has provided an outline in all aspects of life. alharbi (2015) stated that zubair bin awwam has performed basic framework at the beginning of islam in which he was receiving deposits from the people who has excess money as loans. finally, his son counted that the loan accounted reached 2,200,00 dinars. the deposits as loans have several advantages, whereby we utilise the fund in business activity and the depositor are able to withdraw anytime they need. furthermore, chachi (2005) emphasized that the awakening of interest-free banking institution in the last three decades started by the establishment of the mit-ghamr islamic savings banks (mgisb) by dr. abdul hamid an-naggar in 1963 in egypt. this is followed by emergence of the nasser social bank as non-profit institution established in egypt in 1975 and by establishment of the islamic development bank (idb) in jeddah in 1975 as islamic inter-governmental institution in order to accelerate the economic and social development of muslim countries and the member countries in particular. the wide deployment of islamic banking over the world indicated that it has a significant opportunity attracting the new investors and customers. consequently, the islamic finance market share will increases tremendously in the future whereby it is proven by the emergence of over 500 islamic finance institutions throughout 75 countries (karim et al, 2008). asian banker research group further reported that 100 greatest islamic banks had an annual growth at 27.7% and the islamic finance industry had increased annually at 15-20% (kunhibava, 2012). hence, islamic banking has attracted beyond the religiousjournal of islamic economic laws-january, vol. 3, no. 1, 2020 50 geographic dimension that it has been flourished in both muslim and non-muslim dominated countries. in the southeast asian region, malaysia is a precursor of the emergence of islamic finance institution which the concept and idea of islamic banking was implemented earlier in 1963 by pooling funds of future pilgrims of haj which was lately known as tabung haji. this institution was operated based on shari’ah compliance in offering free-interest investment opportunities to malaysian muslim depositors (kunhibava, 2012). this movement was followed by the inception of formal islamic bank institution, known as bank islam malaysia, established in 1983. ten years later, malaysian government introduced islamic banking scheme that offers diffusion services of islamic banking all over the country (nakagawa, 2009). hence, islamic finance institutions has been developed remarkably since the inception. the tremendous growth of islamic banking and finance in malaysia has appeared as a significant sector of economic development in the last decade. the central bank of malaysia reported that islamic banking assets has achieved extraordinary values, whereby it was accounted around usd65.6 billion in 2011 with an annual average growth rate of 18-20% (kunhibava, 2012). moreover, islamic financial services board further emphasized that the market shares of islamic banking industry in malaysia has become the leading market globally in which the assets reached around 24.9% of the total banking assets in malaysia (ifsb, 2018). despite of having several signs of remarkable growth, the issues and challenges to gain customers’ satisfaction and loyalty remains inevitable. dusuki & abdullah (2007) argued that islamic banks in malaysia are having the issue of customers’ negative perception, whereby dual banking system has been adopted since 1983 and has compelled islamic bank to be able to compete with the more established conventional banks. furthermore, ahmad et al (2011) further emphasized that measuring the customers’ preference and satisfaction is significant challenges in the banking marketing dimension, particularly islamic banking in malaysia. meanwhile, several previous studies have probed customers’ qosdan dawami 51 attitudes towards islamic banking. some studies mentioned attitude of customer, religiosity, awareness and pricing as the significant determinants that influencing a customer to patronize islamic banking (kaakeh et al., 2018). few studies also found that quality of product and services to be crucial factors on customers’ motivation to deal with islamic banking (bashir, 2012). based on above phenomena, this study will examine the variables that influence the preference of customers towards islamic banking in malaysia. the study utilizes a theoretical framework derived from the theory of reasoned actions (tra) where the data collected will be analysed through correlation and regression. the next part of this article will be literature review which will be followed by research methodology. the result and discussion will come afterward followed by the conclusion to highlight all important elements within this paper. literature review islamic banking is a banking system playing a significant contribution to the socioeconomic with the objective fulfilling of islamic law under the maqasid shari’ah (alharbi, 2015; dusuki, 2008; kunhibava, 2012)microfinance requires innovative approaches beyond the traditional financial intermediary role. among others, building human capacity through social intermediation and designing group-based lending programmes are proven to be among the effective tools to reduce transaction costs and lower exposure to numerous financial risks in relation to providing credit to the rural poor. this paper also suggests the use of a special purpose vehicle (spv. soemitra (2009) further defined islamic banking as banking system that operates based on the shariah complaint. whereby the products and contracts made under line of shariah principles. therefore, islamic banks provide to the customers financial services without prohibited element such as interest (riba), uncertainty (gharar), and gambling (maysir). furthermore, islamic banking promoting the noble values of brotherhood and cooperation in which it utilized the profit and loss sharing (pls) system to develop the business journal of islamic economic laws-january, vol. 3, no. 1, 2020 52 activites (dusuki & abdullah, 2007). kaakeh et al (2018) further emphasized that pls contracts are inducing all the parties of the underlying contract to bear together not only the profit but also the risk of business activities such as musharaka, mudaraba and muzara’a. hence, islamic banking creating the justice system in which profit and loss of business is shared between the borrower and the banks as a lender. meanwhile, analysing factors that determine the preference towards islamic banking was part of the customer’ behaviour in dealing with the particular item. according to business dictionary (2020), consumer buying behaviour means the mental and physical activities whereby a person look for, deal with, purchase and utilize the goods and services in achieving their needs and wants. several studies have been conducted to find out the motivation of customers to deal with islamic banking. interestingly, these studies also have been conducted in some countries whereby muslim population are a minority. kaakeh et al (2018) studied the behaviour of muslims in spain in dealing with islamic banks. the results pointed that the most important factors influencing the customers to prefer islamic banking are attitude, religiosity and awareness. according to regional dimension, there are several studies have been conducted on factors determining the intention of customers of islamic banking in malaysia. for instance, haque et al (2009) studied on malaysian customers preferences towards islamic banks, they found that quality and availability of services, social and religious perspective and confidence are the major determinants in affecting the customers. another study conducted by amin et al (2011) the customers’ motive of two fully fledged islamic banks in malaysia, namely bank islam malaysia berhad and bank muammalat malaysia berhad. whereby they found that the most influent factors are attitude, pricing of islamic personal pricing and social influence. moreover, another study conducted by ltifi et al (2016) in tunisia, they also further emphasized that the most important determinant of customers’ satisfaction towards islamic banking qosdan dawami 53 are the quality of services, trust and shariah compliance perspective. bizri (2014)through addressing the perceptions of existing and potential clients. the study has two objectives: one is to identify and measure the factors that clients perceive as important in deciding to patronize an islamic bank, and the other is to draw a client profile for islamic banks operating in lebanon. design/methodology/approach: the literature review provided the theoretical framework this study builds on. a survey instrument was developed and the data were analyzed using spss (19.0 further emphasized based on the result of his study on determinants of customers’ preference towards islamic banks in the non-gcc mena region, he found that five significant variables in patronizing islamic banking, namely trust towards islamic banks, knowledge about islamic modes of finance, cost and pricing, accessibility of islamic banks and quality services. theoretical framework and hypothesis development theory of reasoned actions the study adopted the theoretical framework from a wellknown theory called as the theory of reasoned actions (tra). fishbein & ajzen (1975)developed by martin fishbein and icek ajzen (1975, 1980 developed this theory of attitude in order to resolve the clutter of the traditional research of attitudebehaviour of people. this theory has been used extensively in social science research including in the islamic finance studies dimension. for instance, kaakeh et al (2019)utilized the theory to identify the critical factors determine intention of customers to patronize islamic banking in uae. they adopted attitude as a mediating role in the model, whereby several factors investigated are as image, awareness, shariah compliance and individual. in addition, amin et al (2011) also conducted the research based on this model in which they added three latent factors, namely religiosity, government support and pricing of islamic personal financing. accordingly, with refer to the theorical framework above, this study tries to determine the pivotal factors influencing the journal of islamic economic laws-january, vol. 3, no. 1, 2020 54 preference of customers in international islamic university malaysia towards islamic banking by extending three new factors, namely the image, the religiosity, and the service quality. moreover, demographic analysis is added in this study in order to strengthen the most influential factors found in this study. hypothesis development 1. attitude attitude of the public has become a main concern considered by the experts of socio-economic including players of financial industry. burgoyne (1972) emphasized that attitudes were having a major role in determining the way of people acts in his daily dealing and the sort of decision taken in fulfilling their needs. moreover, oliver (1980) further supported that attitudes are function of satisfaction that affect the consumers behaviour to repurchase the item in the future. hence, attitudes are reflecting consumer’ theoretical feelings and thinking towards something including products and services of islamic banking. numerous studies conducted on islamic banking have included attitude of customers as one of the important factors affecting towards islamic banking. for instance, kaakeh et al (2019) discovered that attitude of customers is influencing directly the intention to deal with islamic banks. furthermore, albaity & rahman (2019) also found in their study that attitudes, awareness and reputation are determining significantly the intention of customers to choose islamic banks. h1. attitudes influence the preference of customers towards islamic banking 2. the image of the bank the image of an institution is very important in constructing the trust and confidence of partners or clients to deal with. leblanc & nguyen (1996) explained corporate image as corporate identity by which consumer can evaluate and compare their satisfactory level towards a corporation. flavián et al (2005) also emphasized that corporate image is a significant variable affecting the trust qosdan dawami 55 of costumers including in a financial market. so that, this study analyses the relationship between the image of the banks and the preference of customers. previous studies included this factor in their empirical research. albaity & rahman (2019) concluded their research that reputation of islamic banks as corporate image plays an important role in determining the intention of consumers to patronize an islamic bank. kaakeh et al (2019) further reported that image influenced directly the behaviour of customers towards islamic banking in uae. h2. the image of the bank influences the preference of customers towards islamic banking 3. religiosity the religiosity plays an important role in islam in guiding and organizing the way of life of its adherents. adam smith in anderson (1988) defined religion as a rational instrument determining self-interested of customers in maximizing their satisfaction among several choices. metawa & almossawi (1998) further found on their study that religiosity factor having the most importance role in the patronizing process to deal with islamic banks. abror et al (2019) namely, service quality, customer satisfaction, customer engagement and religiosity. design/ methodology/approach: this study is a survey of 335 islamic bank customers in west sumatra, indonesia. this research deployed purposive sampling and analyzed the data by using covariancebased structural equation modeling. findings: service quality has a positive and significant impact on customer satisfaction. religiosity has a significant and negative moderating impact on the service quality–customer satisfaction relationship. service quality has no significant influence on customer loyalty. customer satisfaction is a significant antecedent of customer engagement and loyalty. finally, customer engagement has a significant and positive effect on customer loyalty. research limitations/ implications: this study is a combination of cross-sectional journal of islamic economic laws-january, vol. 3, no. 1, 2020 56 and a single-country case. accordingly, the results may not be representative of other countries. similar studies in longitudinal data collection are conducted in other countries (e.g. asean countries, for instance, found in their study on islamic banks customer in west sumatra that religion motivation is playing significant role in moderating the correlation between customer satisfaction and service quality of the banks. moreover, haque et al (2009) also discovered on their study that religiosity is having positive relation with the satisfaction of islamic banks customers. h3. religiosity influences the preference of customers towards islamic banking 4. service quality services quality of islamic banks are very critical dimension in attracting the people to deal with, whereby the current open markets including financial market forcing all market players to compete on all sides because consumers always behave rationally. several prior studies have exhibited the results that service quality of islamic banks is affecting to the customers loyalty and trust (abror et al., 2019)namely, service quality, customer satisfaction, customer engagement and religiosity. design/ methodology/approach: this study is a survey of 335 islamic bank customers in west sumatra, indonesia. this research deployed purposive sampling and analyzed the data by using covariancebased structural equation modeling. findings: service quality has a positive and significant impact on customer satisfaction. religiosity has a significant and negative moderating impact on the service quality–customer satisfaction relationship. service quality has no significant influence on customer loyalty. customer satisfaction is a significant antecedent of customer engagement and loyalty. finally, customer engagement has a significant and positive effect on customer loyalty. research limitations/ implications: this study is a combination of cross-sectional and a single-country case. accordingly, the results may not be representative of other countries. similar studies in longitudinal data collection are conducted in other countries (e.g. asean qosdan dawami 57 countries. estiri et al (2011) also revealed that service quality of banks is major determinant leads to customers’ satisfaction and loyalty. moreover, their satisfaction and loyalty caused them to recommend other potential customer to patronize this bank. h4. services quality influence the preference of customers towards islamic banking accordingly, the research framework of this study is constructed based on the above hypothesis development. whereby this study adopted four independent variables and one dependent variable, namely attitudes, the image, the religiosity, the service quality and preference of customers as the dependent variable. the research framework is presented on figure 1 below: figure 1. research framework research methodology sample and data collection the use of the right research methods is like taking the right key to unlock the box. whereby research methods determine the procedure of data collection, data analysis, and interpretation (grover, 2015) . this study investigates variables determine customers’ selection process in preferencing islamic banking. journal of islamic economic laws-january, vol. 3, no. 1, 2020 58 hence, the population of this study is students international islamic university malaysia (iium). the study applied quantitative approaches through gathering quantifiable data and performing statistical and computational techniques with the help of spss. the primary data had been collected through distributing self-administrated questionnaires to the several student of international islamic university malaysia (iium). the questions in the questionnaires were structured by the researcher in order to customize the need and circumstances available. the 60 respondents answered the questionnaires of this study were selected randomly from a total of more than 18,800 students. the students of iium are from 125 countries in the world, therefore it reflects the geographical and cultural diversity of the ummah. the questionnaires required to realize the opinions of the respondents on the customer preference level using a fivepoint scale. the survey consists of twenty-three questions and divided into two parts. the first part consisted of five question focused on the demographic information such as gender, religion, qualification, nationality and ownership of islamic banking. the second part consist of seventeen questions related to independent variables, namely, namely attitude, the image of the bank, the religiosity, and the service quality and five questions towards the dependent variable. the questionnaires were distributed manually. survey design methods the survey framework and explanatory factors were mainly adjusted from the prior studies on this topic. the demographic part of questionnaires were adjusted from the study conducted by haque et al (2009) in which they used six important articles, namely gender, age, race, education, occupation and monthly income. whereas the explanatory factors influencing the qosdan dawami 59 customers towards islamic banking were adapted from previous study conducted by (amin et al., 2011) furthermore, reliability test was adopted using the cronbach’s alpha. this test conducted in order to measure the internal consistency, the rule of this test showed that the closer value of cronbach’s alpha to one, the higher the internal consistency or reliability of that variable. (leblanc & nguyen (1996) further emphasized that if the alpha value is less than 0.60, it is considered as poor consistency, alpha equal to 0.70 is acceptable, alpha equals to 0.80 is good, and alpha equals 0.90 or above considered as excellent. in addition, this study also employed pearson correlation coefficient to determine the strength of the relationship between each independent variable. correlation is a statistical technique that measure whether multicollinearity problem is exist or not among the variables. the rule of this analysis stated that the closer the pearson value to one or negative one (-1 or +1), the stronger correlation associated between variables that means problem of multicollinearity is exist. whereas, this study utilised regression as a quantitative technique to analyse and measure the important factors influencing the dependent variable. the extent of the relationship between preference of customers and the four factors, namely attitude, the image of the bank, the religiosity, and the service quality can be measured and expressed mathematically. result and discussion the demographic analysis table 1 is the questionnaires of this study. it consists of gender, religion, qualification, nationality and ownership of islamic bank account. the demographic analysis is the one of the significant parts of study that should be noticed because it described with whom the study was conducted. the summary of demographic analysis had been generated as shown in table 1. journal of islamic economic laws-january, vol. 3, no. 1, 2020 60 table 1. demographic data descriptions frequency percentage valid (%) cumulative (%) gender male 38 63.3 63.3 63.3 female 22 36.7 36.7 100.0 religion islam 60 100 100.0 100.0 qualification degree 30 50.0 50.0 50.0 master 27 45.0 45.0 95.0 phd 3 5.0 5.0 100.0 nationality malaysia 22 36.7 36.7 36.7 international 38 63.3 63.3 100.0 islamic bank account yes 48 80.0 80.0 80.0 no 12 20.0 20.0 20.0 table 1 above represents the respondents of the study which consists of both male and female. nevertheless, the male respondents are more than the female respondents, whereby the frequency was accounted that 38 respondents or 63% of the sample are male and 22 respondents or 37% of the sample are from female. since the majority of iium students are muslim, all the respondents are muslim because it is very difficult to find non-muslim student in this university. furthermore, the data exhibited the student from different qualification. the highest percentage sample of qualification was degree students at 50% (30 students) and it was followed by the master students at 45% samples (27 students). the lowest percentage sample was phd students at 5% (3 students). the data also collected from both malaysian and international students i which 22 students were malaysian, and 38 students were foreigner such as indonesian, chinese, bangladeshi, pakistani, somalian, algerian, etc. in addition, the most of respondents notified that they have an islamic bank account. the frequency showed that qosdan dawami 61 48 respondents or 80% were having an islamic banking account and 12 respondents or 20% were not having an islamic banking account. it indicated that the majority of respondents were having awareness and preference towards islamic banking. table 2: reliability statistic of variables variables no of item cronbach’s alpha attitudes 4 .750 the image of the bank 4 .773 religiosity 3 .807 the service quality 3 .787 preference of customers 6 .749 the table 2 presented the reliability test of variables in this survey. based on the result above, the alpha value of attitude is 0.750, the image of the bank is 0.773, religiosity is 0.807, the service quality is 0.787, and preference of customers is 0.749. overall, the internal consistency of variables was consistent and reliable because all values of cronbach’s alpha were greater than 0.7. meanwhile, the result summary of correlation coefficient analysis had been presented in the table 3 below. table 3: dimension of correlation analysis factor attitude the image of islamic bank religiosity the service quality attitude 1 .522** .429** .488** the image of islamic bank .522** 1 .432** .397** religiosity .429** .432** 1 .292* the service quality .488** .397** .292* 1 note: **. correlation is significant at the 0.01 level (2-tailed). *. correlation is significant at the 0.05 level (2-tailed). accordingly, the table 3 above indicates that all four independent variables have significantly positive relationship. all the independent variables have no any multicollinearity journal of islamic economic laws-january, vol. 3, no. 1, 2020 62 problems since the correlation of each is less than 0.95 (r<0.95). all correlations of the variables are significant at the level 0.01 except the correlation between the religiosity and the service quality is significant at the level 0.05. hence, as the problems of multicollinearity are not found, we have enough evidence to reject null hypothesis (h0) and to do not reject the alternative hypothesis (h1 up to h4) it can proceed with the regression analysis to identify which variable is affecting the customers’ preference towards islamic banking. finally, regression analysis had been presented in the table 4 below. table 4: dimension of correlation analysis factor costumers’ preference p-value constant .468 .096 attitude .286 .011 the image of the bank .159 .176 religiosity .098 .341 the service quality .304 .009 the table 4 above showed constant or the slope value and the value estimated of each variable, namely constant is 0.468, attitude is 0.286, the image of the bank is 0.159, the religiosity is 0.098, and the service quality is 0.304. however, as the p-value indicated in the table above, it exhibited that not all those variables are affecting significantly the customers’ preference, some of the variable are not important to be considered when the p-value of that variable is more than 0.05. accordingly, the study found that attitude and the service quality are determining significantly the customers’ preference towards islamic banking because p-value of the variables are 0.011 and 0.009 respectively. whereby it indicated that the p-value is less than 0.05. on the other hand, the study found that the image of the bank and the religiosity are not determining significantly the customers’ preference towards islamic banking because p-value of the variables are 0.176 and 0.341 respectively. whereby it showed that its p-value is more than 0.05. qosdan dawami 63 conclusion the study exhibited the factors determining the preference of customers to patronize islamic banking. the study denoted the significant effect of the attitude and the service quality on preference of customers to subscribe islamic banks. on the other hands, the study pointed the insignificant effect of the image of the bank and the religiosity towards preference of customers to deal with islamic banks. accordingly, the results provide suggestion for the managers and staff of the banks to improve their service quality in order to attract more consumer and to develop the islamic banking industry. furthermore, it is very necessary for the managers and staffs of banks focus in improving the attitudes of customers. amin et al (2011) further argued that bank customers’ attitude is complex dimension of study whereby it may change and vary over time, place and environment. hence, this factor should be analysed over time in order to strengthen the competitive quality of islamic banks towards its counterparts’ conventional banks. limitations this study has two main limitations. first, the number of samples is small and limited due to limitation of time because this is part of final semester work in quantitative research methods subject. however, the sample has more than 30 respondents which means it is still reliable. second, the nature of respondents analysed were variety in the background. 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(2009). bank & lembaga keuangan syariah (pertama). jakarta: kencana prenada media group. journal of islamic economic laws vol. 1, no. 1 july 2018: 31-52 31 ownership risk in the perspective of islamic law of contract: concept and application on modern practices wan ahmad syafiq bin wan ahmad ikram shariah compliance review unit at standard chartered saadiq berhad malaysia email: wan.syafiq@outlook.my abstract daman milkiyyah or ownership risk is an important element in islamic law of contract as there are many implications arising from it. this concept also highlights one of the unique features of islamic law of contract which promotes justice in transactions. the lack of a proper understanding of this concept may lead people to breaching shariah principles as well as dealing with non-shariah compliant transactions. it is the purpose of this paper to shed light on the fundamental concepts of ownership risk and its application on some of modern financial instruments. this work will write down the scattered though of ownership risk which has been discussed by islamic classical scholars and continued by matching this concept to the existing modern financial instruments. in the end of the paper, we suggest further enhancement in the financial industry to adhere more towards shariah principle. keywords: ownership, risk, liability, damān introduction islam as a religion which brings bless for the universe (rahmatan lil-ālamīn) comes to improve the various concepts in life. of the many things that islam introduces, one of the points emphasized is to uphold justice. the concept of justice for islam journal of islamic economic laws-july, vol. 1, no. 1, 2018 32 has several dimensions, both for the internal individual and for the mutual good of society. for the social dimension, the concept of islamic justice can be seen clearly in aspects such as criminal law, family law as well as that one which becomes a lot of spotlight in this modern era: the financial dealing (mu’āmalah māliyah) matters. in the case of financial dealing, the most distinct character that has been embedded in the teachings of islam is to bear the risk of all acts as a natural consequence of life. an islamic scholar is at risk if his fatwa or teachings went wrong. a security guard is at risk if the place he is guarding is burglarized. also someone who has any property must accept all the consequences and risks, including maintenance costs, risk of damage, and risk of loss. the last type of risk above is often referred to in the islamic law of contract as ownership risk. this ownership risk becomes one of the essential cores in the financial dealing model in islam because justice is really upheld by implementing this concept. this is because it does not make sense when someone else has a car for example but it is us who have to endure the damage done to it. for that, many types of financial dealing that is forbidden at the beginning of the period of islam because it does not contain the concept of ownership risk. since ownership risk is a concept that has long been introduced by islam, it becomes interesting to discuss it in a modern context. this paper attempts to investigate this by first explaining the concepts. therefore his paper is divided to two parts, in which the first part will be discussing the general concept of ownership risk in islamic law of contract, while the second part will be discussing on the application of the concept of ownership risk in some of modern financial instruments. wan ahmad syafiq bin wan ahmad ikram 33 methodology since this study try emphasizes on two thinks which are theoretical and application part, descriptive analysis will suit best for this research. it first tries to find out and elaborate the ownership risk concept through the existing literature considering that it is rare to be found from our classical scholars to discuss this topic specifically. this topic is usually scattered in whole of their fiqh book by relying on some legal maxims (see the work of shabir, 2007). next, we will explain in general the existing financial instruments to see how the ownership risk concept is applied there. discussion part 1: the concept of ownership risk in islamic law of contract the concept of ownership risk is among the fundamental principles which builds the islamic law of contract. there are two islamic legal maxims which describe this concept as discussed below. al-kharrāj bi al-damān the two keywords in the maxim are kharrāj and damān. linguistically, kharrāj means ‘yield, return or revenue’. its meaning in this maxim is the yield or separable benefit or corpus resulting from an owned asset. linguistically, damān means ‘responsibility, liability or guarantee’. its meaning in this maxim is specifically referring to the liability or an asset in case it is damaged or destroyed (laldin, 2013). the general meaning of this maxim is that the benefit of an asset is the right of the one (usually the owner) who indemnifies journal of islamic economic laws-july, vol. 1, no. 1, 2018 34 it if it is damaged. in other words, a person who is held liable in case an asset is damaged deserves to take its benefit or yield as compensation. hence, in a sale contract, the buyer, who has the option (khiyar) to return the purchased asset to the seller due to non-disclosure of a defect in it, is entitled to the benefit of that asset during the option period as compensation or his liability to indemnify in case the asset is damaged. those who do not bear any responsibility are not entitled to any compensation and revenue as the prophet prohibited the profit earned without bearing liability or risk (laldin, 2013). this legal maxim is originated from a few hadiths narrated from the prophet peace be upon him as described below. • narrated from aishah radiyallahu ‘anha: a man bought a slave, and he remained with him as long as allah wished him to remain. he then found defect in him. he brought his dispute with him to the prophet and he returned him (the slave) to him (the seller). the man said: messenger of allah, my slave earned some wages. the messenger of allah (ملسو هيلع هللا ىلص) then said: profit follows responsibility. • from abdullah bin ‘amr abdullah bin ‘amr: “the messenger of allah (ملسو هيلع هللا ىلص) said: ‘it is not lawful to lend and sell, nor two conditions in a sale, nor to profit from what is not possessed, nor to sell what one does not have. from this hadiths above, we know that selling what one does not have means that it is not permissible to gain profit out of something that someone does not bear risk in it. wan ahmad syafiq bin wan ahmad ikram 35 al-ghurm bi al-ghunm this legal maxim is regarded as the inverse version of the previous maxim, in which one who expects profit must accept responsibility in case of loss (al-qahtany, 2013). linguistically, ghurm means ‘damage or loss’. technically, ghurm is defined as: “the burden borne by a person in his wealth in compensation for harm that is neither a crime nor treachery”. as for ghunm, linguistically it means ‘gain, profit or advantage’. technically, it means acquiring something which was not owned before. the general meaning of the maxim is that the owner of an asset has to bear all the risks and costs that attend ownership of the asset since he is entitled to enjoy any benefit resulting from it just as non-owners have no right to share in the benefits of ownership, so too, no one but the owner should have to bear the attendant risks and costs (laldin, 2013). from here, we can make correlation between riba (usury), sale (al-bay’) and risks (ghurm). allah said in the quran that: “allah has permitted trade and forbid riba” (al-baqarah: 275). from the understanding of this verse, allah has encouraged us to avoid riba which bear no risk and to go for al-bay’ which is not risk-free. risk-taking and risk sharing are a manifestation of islamic ethical principles, such as just and cooperation. al-bay’ is therefore legitimate because it assumes risk-taking while profit from loans (i.e. riba) rejected the idea of risk sharing and risktaking. al-bay’ is a contract of sale, and no sale in islam is free from risks. profit from sale is an outcome of risk-taking, as the seller takes the risk to make sure that the market for the goods journal of islamic economic laws-july, vol. 1, no. 1, 2018 36 exist, that the price is right and goods are in good condition. he will lose money if the goods are destroyed by natural calamities or if the market price dropped below cost. this is a legitimate way of making profit. this type of risk is called ghurm. in economics, ghurm means price and market risks. in finance, it means systematic risks (rosly, 2010). apart from the legal maxim, it is necessary to mention in discussing the concept of ownership risk in islam that that when someone is holding someone else’s property, regardless of whether it is done via contracting means or without it, he is either holding the asset in the capacity of a trustee (yad amānah) or a liable party (yad damān). further elaboration on these two types of position is in the following notes. yad amānah in principle, someone is said to have a trustee position of a property (yad amānah) if the holding of the property is done via permissible means in shariah or with the permission from its owner or someone who has authority over it, but without the intention from the holder to own the property as his ownership. for instance, a lessee in ijarah contract, a custodian in wadiah contract, a partner in musyarakah contract and a mudharib in mudharabah contract, all of them are holding the property given to them in the capacity of a trustee (yad amānah). this is because, the possession of the property on them is not meant to transfer its ownership, but rather for them to hold it for a certain period of time to achieve certain objective from the use of the respective contracts. muslim scholars have unanimously agreed that, a trustee of a property is not liable in case of damage or destruction of the property unless there is transgression or negligence from him. wan ahmad syafiq bin wan ahmad ikram 37 yad damān yad damān can be defined as a state where a person takes possession of a property or a form of wealth as an owner or to the possessor’s benefit, but not as a trustee (ameen). examples of dealings based on yad damān include taking possession by a buyer, borrowing, pawning or rahn (the party holding the pawned items), usurpation (holding by a usurper), etc. also included in the category of yad damān is someone who is originally holding yad āmanah position, but due to transgression or negligence, his position is now changed to yad damān. the shariah ruling on yad damān maintains that whoever lays his hand on a form of wealth by way of possession or use is bound to guarantee it in all circumstances, whether the object possessed perishes because of some natural catastrophe or act of god (force majeure), or when the possessor simply fails to return it to its rightful owner. a possessor is also bound to guarantee in the cases of intentional or unintentional destruction. the discussion on ownership risk is closely related to the yad damān position. it is also interesting to see whether transferring ownership risk from the original owner (yad damān holder) to person who holds yad amanāh as in the case of mudarabah, musharakah and ijarah contracts. muslim scholars has two opinion regarding this matter. (abu zaid, 1996) the first opinion says that the clause is invalid. this opinion is held by the majority of muslim scholars from hanafi, maliki, shafii and hanbali school. this opinion is based upon a few hadiths where one of which is the hadith of aishah and barirah. barirah the slave came to aishah to seek her help for her manumission. however, barirah’s masters agreed to free her on a condition that the wala’ was to remain with him. aishah brought this issue to http://investment-and-finance.net/islamic-finance/r/rahn.html journal of islamic economic laws-july, vol. 1, no. 1, 2018 38 the prophet and the prophet said: “buy barirah and manumit her and the wala’ (right of freeing person from slave state) will be for the liberator.” allah’s messenger (ملسو هيلع هللا ىلص) then got up and said, “what about those people who stipulate conditions that are not present in allah’s laws? if anybody stipulates a condition which is not in allah’s laws, then what he stipulates is invalid. allah’s condition (laws) are the truth and are more solid” (see the hadith of bukhari no. 2560). from this hadith, we can learn few lessons relating to the ownership risks. firstly, in this hadith, the prophet has clearly stated that, any condition which is not recognized in allah’s laws is not valid. therefore, any condition to transfer ownership risk from the original risk owner to others is not valid as it is not supported by any quranic verses as well as the hadiths of the prophet. secondly, we can understand from the hadith that the prohibition of stipulating wala’ on other than the liberator of the slaves contains an element of changing the inherent nature and implication of the contract. shariah law has made the various shariah contracts to have unique characteristics with certain rulings and implications. the condition to transfer the ownership risk to other than the original owner contains an element of changing the inherent nature of the contract resulting to a different implication to the contracting parties which is not intended to from shariah perspective. in addition, this kind of arrangement may lead to the violation of the objective of shariah. therefore, the inclination is to invalidate this kind of arrangement by using analogy to the above hadith. thirdly, the arrangement to transfer ownership risk to other than its original risk owner contains high possibility of falling into wan ahmad syafiq bin wan ahmad ikram 39 prohibited transactions in shariah, especially for contracts which are used for investment purposes and for gaining profit such as exchange and partnership contracts. for instance, the prohibited transactions that this arrangement may be leading to are such as, to gain profit out of something that one does not bear the risk, and also the involvement with riba. to illustrate, in mudharabah contract, if the return is to be guaranteed by the mudārib (despite the mudārib is yad amanāh holder), this arrangement has altered the nature of the mudharabah contract to resemble a qard, in which the contract now needs to follow the qard’s strict requirement such as no interest is to be charged on the principal amount. the second opinion says the clause is valid. this opinion is held upon by some of hanafi scholars specifically for borrowing contract (al-’āriyah), and also by some of maliki scholars and some contemporary scholars. their arguments are based on a few hadiths as below. • it is narrated by safwan bin umayyah that, the prophet had borrowed from him a breastplate during the hunain war on the basis of yad dhaman despite the original ruling of al’āriyah (borrowing) is a amanah. based on this hadith, this group of scholars has justified the permissibility of transferring the ownership risk of a contract to others. however, this hadith is regarded as a weak hadith which cannot be used in deciding a ruling. • the second hadith that they rely on is the prophet’s saying that: “muslims will be held to their conditions.” according to this group of scholars, the condition to transfer risk is valid because it can be included in this general principle as well. however, we can argue against this opinion by saying that journal of islamic economic laws-july, vol. 1, no. 1, 2018 40 this general principle is actually confined to only conditions that are present in the allah’s law. this is based on the following part of the abovementioned hadith which says: “any conditions which are not present in allah’s books is not valid.” based on the above arguments by the two groups of scholars, the inclination is to the opinion that says the impermissibility to transfer risk to other parties due to stronger arguments than those who opined otherwise. part 2: the application of the concept of ownership risk in some of modern financial instruments from islamic law of contract’s perspective preferred stock according to finance literatures, preferred stock is referring to the type of stocks which has preference over common stock in the payment of dividend and in the distribution of corporation assets in the event of liquidation. preference means that the holders of the preferred shares must receive a dividend (in the case of an ongoing firm) before holders of common shares are entitled to anything. some features of preferred stock include (ross et al., 2008). senior securities – the seniority of preferred stocks applies to both the distribution of corporate earnings (as dividends) and liquidation of proceeds in case of bankruptcy. with preferred, the investors are standing closer to the front of the line for payment than common shareholders, although not by much. payment of dividends – preferred stockholders are prioritized in receiving payment of dividend from the company. common stock dividends are paid after the company’s obligations to all preferred stockholders have been satisfied. dividends payable on wan ahmad syafiq bin wan ahmad ikram 41 preferred stock are either cumulative or noncumulative; most are cumulative. if preferred dividends are cumulative and are not paid in a particular year, they will be carried forward as an arrearage. usually, both the accumulated (past) preferred dividends and the current preferred dividends must be paid before the common stockholders can receive anything. this kind of feature of preferred stock guarantees a return to the stockholders despite the company making profit or not. in addition, the dividends paid on preferred stock are normally higher than common stock. capital guaranteed – in certain cases of preferred stock, the company may guarantee the return of original capital to the preferred stockholder during liquidation, even when the company is losing. this way, the interest of the preferred stockholder is always protected and regardless the performance of the company. for the purpose of this discussion, we would like to highlight two shariah issues concerning the ownership risk in the application of preferred stock in capital market. first issue: the preferred stockholders are given the priority over other stockholders in receiving back their original capital in full during liquidation of the corporation (sharikah). among the basic principles of a musharakah contract which the modern corporation is based upon is that, all partners shall bear the risk of the business proportionately to their capital contribution, and no one of the partners shall be made responsible to the risk beyond the actual contribution he has made into the partnership. by having the ownership risk of the business under their responsibility, the shariah has made all the partners to be eligible in receiving return generated from the business partnership (al-haqil, 2011). this feature of musharakah is aligned with the two islamic legal maxims discussed earlier. however, the features journal of islamic economic laws-july, vol. 1, no. 1, 2018 42 of a preferred stock are shifting the ownership risk of particular partners to be borne only by common stockholders which makes the capital of the preferred stockholders is guaranteed from any loss. this practice is contrary to the abovementioned principle of musharakah which encourages risk sharing among the partners. by having the capital guaranteed, the preferred stockholders are gaining profit without bearing the ownership risk in the partnership which the practice has been prohibited by the prophet in his saying: “it is not permissible to lend on the condition of a sale, or to stipulate two conditions in one transaction, or to make a profit on that which you do not bear the risk” (see the hadith narrated by nasai no. 4630). second issue: the feature of a preferred stock has given its holders the priority over other stockholders in receiving dividend payments, which usually a certain portion of the profit will be segregated specifically for them, and only after the profit is distributed to them, the remaining will be distributed to other stockholders. this kind of arrangement has made it possible for the preferred stockholders receiving profit distribution above the proportion of actual capital contribution they have made. this additional profit they received is considered as the profit on which the preferred stockholders do not bear the risk. as mentioned above, each partner in the musharakah contract bears the risk proportionately to their capital contribution. and the profit they received from this partnership shall also be proportionate to the size of their contribution. if in any way the partner received a profit above the proportion of their capital contribution, it must be compensated either by certain work contributed to the business (the additional profit will be considered as a fee for him), or to bear additional risk. otherwise, the additional profit is considered wan ahmad syafiq bin wan ahmad ikram 43 as an illegitimate profit. resolution of international islamic fiqh academy pertaining to preferred stock: “it is not permissible to issue preferred stock, because it contains financial benefits (to the preferred stockholder) that will lead to the guarantee of capital or to guarantee a certain amount of profit or to give priority (in receiving back the capital) during liquidation or during profit distribution. however, it is permissible to give certain features to some stocks relating to the procedural and administrative aspects.” wadi’ah-based deposit products in islamic banks in malaysia in wadi’ah-based deposit products, a bank is deemed as a keeper and trustee of funds. a person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it. the depositor, at the bank’s discretion, may be rewarded with a hibah (gift). this kind of deposit arrangement is termed as wadi’ah yad damānah which resembles a qard (lending) contract in the context of malaysia. according to the shari’ah standard on qard contract which was published by bank negara malaysia, a qard contract is established when ownership of a sum of money belonging to the lender is transferred to the borrower and the borrower is obliged to repay the lender in full. from this definition, it is safe to say that in wadi’ah-based deposit, when a customer of a bank deposits a sum of money, he actually transfers the ownership of that money to the bank so that the bank can utilize it for its own purpose, with the obligation on the bank to repay it whenever the customer needs it. journal of islamic economic laws-july, vol. 1, no. 1, 2018 44 based on the two legal maxims discussed above, the benefit of an asset can be enjoyed only if one bears its ownership risk. meaning that, the loss of the asset will be borne by him in the event of force majeure or natural calamity. in the case of wadiahbased deposit product, a depositor transfers the ownership of the money to the bank and the bank is liable to repay the depositor. this transfer of ownership from depositor to the bank has made the bank to bear all the risk associated with that money. because of this risk-bearing, any return generated from the utilization of that money is solely owned by the bank. customer does not have any claim over and above the principal amount deposited as he does not bear the risk of that money in the first place. any promise or guarantee to return the money to the depositor with excess will be tantamount to riba. any return above the principal amount must be justified by a valid reason approved by shariah such as in a mudharabah contract where the customer bears the ownership risk. in the current practice of wadiah-based deposit by islamic banks in malaysia, banks are normally repaying the deposited money to their customer with some excess so that it can gain competitiveness against other banks. this excess is termed as “discretionary hibah”. in principle, since the bank owns the profit generated from the lended money, it is up to the bank to spend the profit the way it wants. and this hibah is totally at the discretionary of the bank whether or not to give it, or on what amount to pay it. if we look at this kind of arrangement superficially, it has some kind of resemblance to the conventional deposit product which guarantees a certain rate of return on the deposited money. however, the shariah requirement for a wadiah-based deposit is that, the discretionary hibah rate which the bank may pay to their wan ahmad syafiq bin wan ahmad ikram 45 customer cannot be publicly disclosed upfront as it may lead to a wrong perception of the bank guarantees a certain rate of return on the deposits. musyarakah mutanaqisah-based (diminishing partnership) property financing offered by islamic banks in malaysia for the discussion on this type of product, we will use a sample structure of property financing product offered by one of islamic banks in malaysia. the applicable shariah principles for diminishing musharakah products offered by the bank consist of musharakah and ijarah. the musharakah and ijarah contract are often bundled all together to resemble new product called diminishing musharakah. it is descrbed as the transaction whereby customer and the bank jointly acquire and co-own an asset/property. for instance, customer forms partnership with the bank to acquire a property, whereby customer owns 10 percent of the property and the other 90 percent is owned by the bank. since it is the customer who wants to own the complete ownership of the property, the bank will sell and lease its 90 percent share in the property to the customer under ijarah (lease) contract for 30 years. customer will pay monthly installment to the bank in which one portion of it will be used to acquire bank’s equity and the other portion will be used as rental payment to the bank. through this monthly installment, the bank’s ownership in the property will gradually decline while customer’s ownership increases. the ownership of the property will progressively move towards the customer and the financing ends when the customer owns 100 percent ownership of the property. in assessing the shariah aspects of this financing facility, we have reviewed the terms and conditions document of the facility journal of islamic economic laws-july, vol. 1, no. 1, 2018 46 offered by the bank, and based on our review, we would like to highlight the issue of takaful coverage of the financed property which will be borne solely by the customer, while in fact the property is jointly owned by the bank and the customer, with the bank as the majority owner of the property at the initial phase of the financing tenure. below is the quoted clause from the terms and conditions document of the facility: “in consideration of the bank giving and/or agreeing to give to the customer the exclusive right to occupy, possess, use and enjoy the property, the customer must obtain and maintain takaful coverage of not less than the outstanding buyout amount or for such amount as may be acceptable to the bank on the property against all insurable risks including but not limited to, loss or damage by fire, explosion, lightning, tempest, flood, riot, civil commotion, strike and malicious acts and other risks as the bank may require. the customer must, if permitted, name the bank as an additional party covered in the takaful policy and its renewals or if not permitted, to include the bank as financier and/or loss payee.” according to the legal maxim “al-ghurm bi al-ghunm”, the person who enjoys the benefit of an asset shall be the one who bears the cost to sustain the asset. in our case here, the takaful coverage is subscribed in order to protect the property in the event of loss, without which the loss shall be borne jointly by the owner of the property, which is the bank and the customer as both of them bear the ownership risk in that asset. in other words, the takaful is subscribed in order to protect their interest as the joint wan ahmad syafiq bin wan ahmad ikram 47 owner of that property. hence, the arrangement for the customer to be the sole bearer of the takaful cost seems inappropriate to me as the benefit of the takaful coverage is actually for the interest of both the bank as the majority owner and the customer as the minority owner. both the bank and the customer should jointly pay for the takaful cost as it is for the benefit of the two of them. in my point of view, this kind of arrangement seems to breach the principle of “al-ghurm bi al-ghunm” which says, the person who enjoys the benefit of an asset shall bear its liability. sukuk musharakah in definition, sukuk musharakah is a type of financing instrument whereby investors (sukuk holders) form a musharakah partnership as partners with the issuer for the purpose of undertaking a venture to invest directly in an identified asset or business. each sukuk musharakah shall represent the respective sukuk holder’s undivided proportionate interest in the musharakah venture. proceeds raised from the sukuk musharakah shall be the capital contribution of the sukukholders to the musharakah venture. income from the musharakah venture shall be distributed to each partner based on a profit sharing ratio which will be determined prior to the issuance of the sukuk musharakah. any losses incurred in the musharakah venture shall be borne by each partner in proportion to each partner’s respective capital contribution in the musharakah venture. the sukuk issuer shall also grant to the sukukholders a purchase undertaking whereby the issuer shall undertake to purchase the sukukholders’ interest in the musharakah venture at the exercise price on the maturity date. journal of islamic economic laws-july, vol. 1, no. 1, 2018 48 for the shariah issue part, we find there is an undertaking from the sukuk issuer to top up the profit amount distributed to the investors in the event there is a shortfall between the expected profit rate of the sukuk and the actual realized profit, making the true risk bearing of a musharakah on the part of sukuk holders is not reflected. below is the said clause quoted from the terms & conditions of a sukuk musharakah issued by northport (malaysia) berhad: “any shortfall between the periodic distribution amount and the sukukholders’ entitlement to distributable income generated from the musharakah venture shall be paid by northport as a top up payment. the top up payment will be set-off against the exercise price payable by the obligor following the exercise of a purchase undertaking.” in principle, all partners in a musharakah partnership own the underlying asset of the business proportionately to their capital contribution. as such, the ownership risk of the musharakah that they have to bear must be also proportionate to this portion, and no partner shall be responsible for the risk more than what they have contributed. as for the profit distribution, it does not necessarily to be proportionate to the capital contribution, but inactive partners who do not involve in managing the business shall not be entitled to the profit more than their portion of capital contribution. and as generally known, sukuk holders do not involve directly in managing the business (dusuki, 2010). thus, from the aforementioned clause, by guaranteeing the profit distribution to be always fixed regardless of the performance of the underlying business, i see this does not reflect the true wan ahmad syafiq bin wan ahmad ikram 49 bearing of ownership risk on the part of sukuk holders as the ownership risk bearer supposedly to be exposed to the market risk which may affect the performance of the underlying business of the sukuk musharakah. the sukuk holders are entitled to profit because of ownership risk they have in the business. similarly, they must also be entitled to suffer loss arising from his ownership risk (usmani, 2007). the profit distribution to the sukuk holders should rely totally on the performance of the business. on my opinion, the abovementioned clause has violated the principle of musharakah in the aspect of the sukuk issuer is guaranteeing the profit distribution to the sukuk holders which contrary to the ownership risk principle. purchase undertaking by the sukuk issuer: the price of which the issuer will repurchase the asset is predetermined which include the original amount of musharakah capital plus accrued profit. on my opinion, this is inappropriate way to determine the repurchase price of the asset. the price should be determined by its market value, or by a price to be agreed during the actual purchase date by taking into consideration all the economic aspects which may affect the real value of the asset at maturity date. the question is what if the market price of the asset is actually depreciated below its nominal price? it is easy to think that this actually benefits the issuer as they can buy the asset with lower price. anybody with a sane mind would have definitely buy an asset with a lower price. however, this is not the case in this structure of sukuk musharakah. it is structured in a way that the capital of the investors is fully protected, which resembles a lot like the conventional bond and has the same economic outcome. in my view, this kind of structure does not reflect the risk bearing on the part of investors which contrary to the principle journal of islamic economic laws-july, vol. 1, no. 1, 2018 50 of musharakah. the true ownership risk bearing should entitle the sukuk holders to be exposed to the market risk of the asset which may affect its value in the future. to illustrate, if the market price of the asset is above the musharakah capital, sukuk holders may gain higher profit from it. similarly, if the market price of the asset is lower than the original musharakah capital, the sukuk holders shall be entitled to suffer loss arising from his ownership risk in the asset. from here, a question arises as to whether the investors are actually eligible to receive the profit while the true risk bearing is not reflected in this sukuk structure? again, it is contrary to the fundamentals of muamalat in islam, namely alghurm bi al-ghunm and al-kharrāj bi al-damān. conclusion the above discussion on the concept of ownership risk and its application in the modern financial system shall have shed some lights for the readers to understand this important element in islamic law of contract. the importance of this concept lies in the fact that it determines the eligibility of a person to gain profit from a transaction, as well as the implications it has on a person in terms of right and obligation arising from the ownership risk. from some of the applications brought into this paper, we noted more enhancement need to be done to the practice of islamic finance industry to ensure full compliance with shariah, as well as to achieve the objectives of shariah from the islamic law of contract. this should be a continuous effort by all the stakeholders for the prosperity of the society by complying with shariah in commercial transactions. wan ahmad syafiq bin wan ahmad ikram 51 disclaimer this paper represents author’s personal opinion. none of the written thought above shall be interpreted as reflecting neither any companies nor affiliations attached to the author. reference arabic أبو زيد، حممد عبد املنعم، 6991. الضمان يف الفقه اإلسالمي وتطبيقاته يف املصارف اإلسالم. املعهد العاملي للفكراالسالمي ، قاهرة: مصر. احلقيل، ابن عبد هللا ابن حممد، 1102. ربح ما مل يضمن (دراسة أتصيلية تطبيقية(. دار امليمان للنشر والتوزيع. رايض: اململكة السعودية. شبري، حممد عثمان، 7002. القواعد الكلية والضوابط الفقهية يف الشريعة االسالمية.دار النفآس، بريوت: لبنان. القحطاين، فواز حممد علي فارع، 3102. القواعد والضوابط الفقهية املؤثرة يف املعامالت املالية االسالمية. مؤسسة الرسالة الناشرون. بريوت: لبنان english brealey, r.a., myers, s.c. and marcus, a.j., 2007. fundamentals of corporate finance. mcgraw-hill. dusuki, a.w., 2010. do equity-based sukuk structures in islamic capital markets manifest the objectives of shariah? journal of financial services marketing, 15(3), pp.203-214. laldin, m.a., 2013. islamic legal maxims & their application in islamic finance. international shari’ah research academy for islamic finance. rosly, s.a., 2005. critical issues on islamic banking and journal of islamic economic laws-july, vol. 1, no. 1, 2018 52 financial markets: islamic economics, banking and finance, investments, takaful and financial planning. dinamas publishing usmani, m.t., 2007. sukuk and their contemporary applications. translated from the original arabic by sheikh yusuf talal delorenzo, aaoifi shari’a council meeting, saudi arabia. . journal of islamic economic laws vol. 5, no. 2, july 2022: 177-198 177 local halal cosmetic products purchase intention: knowledge, religiosity, attitude, and islamic advertising factors moh farid najib1, wawan kusdiana2, and izyanti awang razli3 1politeknik negeri bandung 2politeknik negeri bandung 3universiti malaysia sabah email: mohfaridnajib@polban.ac.id, wawan.kusdiana. mpem417@polban.ac.id, izyanti@ums.edu.my abstract the demand for halal cosmetic products in various parts of the world has increased, especially in muslim-majority countries like indonesia. the potential demand for halal cosmetic products will continue to increase in the future. indonesia has the opportunity to become the world’s largest producer and consumer of halal cosmetic products. therefore, indonesia must be able to take advantage of these opportunities by maximizing its potential. this study aims to determine the effect of knowledge, religiosity, attitudes, and islamic advertising factors on the purchase intention of local halal cosmetic products. in addition, it also aims to find out the reasons for the purchase intention of muslim consumers towards local halal cosmetic products and to determine the purchase intentions of muslim consumers towards imported cosmetic products in the future. this study used 400 respondents who are muslim and domiciled in west java. then to test the model and hypothesis using smart pls software. the results of this study indicate that all hypotheses are accepted. knowledge and religiosity have a positive and significant influence on attitudes and purchase intentions. then attitude and islamic advertising have a positive and significant influence on the purchase intention 178 najib et al. of local halal cosmetic products. thus, in building the intention to buy local halal cosmetic products, the company must know and understand what factors underlie consumers’ intentions to buy local halal cosmetic products. keywords: local halal cosmetic products, knowledge, religiosity, attitude, islamic advertising, purchase intention. introduction halal products are produced according to islamic sharia and are attractive to muslim consumers because the products follow their needs guided by their religious teachings (hussain‐ gambles, 2020; suhartanto et al., 2019; wilson, 2014). the standard interpretation of halal products is that the ingredients do not contain pork, alcohol, and slaughtering animals must be following islamic teachings (abd rahman, asrarhaghighi, and ab rahman 2015). this statement is in accordance with the law of the republic of indonesia number 33 of 2014 concerning halal product guarantee, which states that halal products are products that have been declared halal in accordance with islamic shari’a and halal product processing is a series of activities to ensure the halalness of products including the provision of materials, processing, storage, packaging, distribution, sale and presentation of products. one of the halal products that are currently trending is cosmetics, halal cosmetic products are considered as innovations and revolutions because halal cosmetic products offer high quality that follows halal compliance (khan, sarwar, and tan 2020) and are considered healthier, safer products and can increase their power. consumer attraction (mohezar, zailani, and zainuddin 2016). halal cosmetic products are one of the potential products in the future (abd rahman, asrarhaghighi, and ab rahman 2015). indonesia is a country with the largest muslim population in the world. based on data centre released by ministry of religious affairs on 2018, muslim population in indonesia reached 231 million people. indonesia is expected to become one journal of islamic economic laws-july, vol. 5, no. 2, 2022 179 of the five potential markets for cosmetic products in the next ten to fifteen years (briliana and mursito 2017; cheong et al. 2016). the ministry of industry of republic of indonesia recorded an increase in imported cosmetic products from 2017, amounting to us$ 631.66 million to us$ 850.15 million (hamdani 2019). there will still be illegal imported cosmetics and cosmetics with dangerous raw materials with a fantastic amount of 10 billion rupiahs, in indonesia during 2020. however, according to databoks, indonesian consumers prefer global cosmetic products to local cosmetic products. this is due to the loss of local cosmetic products, which are thought to be influenced by several factors, including the small scale of local producers’ businesses, imported cosmetic products whose image is already known, and the lack of training and assistance from relevant agencies (nursyamsiah 2018). the previous research, consumers purchase intentions for halal cosmetic products can be identified through consumer attitudes towards halal cosmetic products (abd rahman, asrarhaghighi, and ab rahman 2015; briliana and mursito 2017). consumers who have a positive attitude towards halal cosmetic products will be more likely to buy halal cosmetic products (briliana and mursito 2017). knowledge has a positive and significant relationship to attitudes (adriani and ma’ruf 2020; briliana and mursito 2017). furthermore, consumer religiosity also has a positive and significant relationship with attitudes (abd rahman, asrarhaghighi, and ab rahman 2015; adriani and ma’ruf 2020; mukhtar and butt 2012). the purpose of this study is to determine and explain the influence of knowledge, religiosity, attitude, and islamic advertising on the purchase intention of local halal cosmetic products. in addition. the results of this study are expected to help the development of the halal cosmetic industry in indonesia to be able to compete nationally and globally and expected to provide understanding and education to indonesian muslim consumers in using local halal cosmetic products. 180 najib et al. literature review knowledge, religiosity, islamic advertising, attitude and purchase intention in general, knowledge is based on facts, feelings, or experiences that specific individuals or groups can know of people (abd rahman, asrarhaghighi, and ab rahman 2015). knowledge of attitudes and purchase intentions had a positive and significant relationship with halal cosmetic products consumers’ purchase intentions (abd rahman, asrarhaghighi, and ab rahman 2015; briliana and mursito 2017) consumers who know halal products will be more selective in choosing the products to be used (adriani and ma’ruf 2020). however, previous research (abd rahman, asrarhaghighi, and ab rahman 2015) showed that knowledge and attitudes did not significantly affect halal cosmetic products. religiosity indicates the level of individual commitment to religion (suhartanto et al., 2019; suhartanto et al., 2020). based on previous research shows that religiosity has a positive and significant relationship with attitudes towards halal cosmetic products (abd rahman, asrarhaghighi, and ab rahman 2015; adriani and ma’ruf 2020; mukhtar and butt 2012; rohmatun and dewi 2017). the religious belief plays the least important role in the purchase intention of halal cosmetic products (khan, sarwar, and tan 2020). the better the level of consumer religiosity, the more positive attitudes towards halal cosmetic products will be and the higher purchase intention for halal cosmetic products (adriani and ma’ruf 2020) consumers who have a more positive attitude towards halal cosmetics will decide to buy halal cosmetic products (briliana and mursito 2017). based on previous research, attitudes positively influence interest in buying halal products, especially halal cosmetic products (abd rahman, asrarhaghighi, and ab rahman 2015; adriani and ma’ruf 2020; mukhtar and butt 2012). so, the hypothesis of this research are as follows: the concept of islamic advertising emerged. islamic advertising is a new concept for the world (shafiq et al. 2017). islamic advertising is a form of communication message that contains islamic values disseminated to consumers to introduce journal of islamic economic laws-july, vol. 5, no. 2, 2022 181 and offer products, services, and ideas (saifudin 2019). consumers accept islamic advertising as a good advertising category (safira 2017). islamic advertising is sharia and “can be used for da’wah methods” (mokhtar and samsudin 2015). the presence of islamic advertising brings positive emotions to muslim consumers in indonesia, making them feel more calm and peaceful so that it can influence the attitudes and behavior of indonesian muslim consumers (safira 2017). islamic advertising has a significant and significant influence on purchases (sari 2020). all islamic advertising variables (islamic story illustration variables and muslim advertising stars) have a positive and significant influence on purchase intention, except that the islamic advertising message variable does not affect purchase intention (saifudin 2019). research that uses islamic advertising as a variable determining purchase intention of a product or service is still limited, especially in halal cosmetic products. therefore, this study was conducted to determine the effect of islamic advertising on halal cosmetic products. the following is the research hypothesis: hypothesis 1: there is a positive and significant relationship between knowledge and attitudes towards local halal cosmetic products. hypothesis 2: there is a positive and significant relationship between knowledge and purchase intention of local halal cosmetic products. hypothesis 3: there is a positive and significant relationship between religiosity and attitudes towards local halal cosmetic products. hypothesis 4: there is a positive and significant relationship between religiosity and purchase intention of local halal cosmetic products hypothesis 5: there is a positive and significant relationship between attitudes and buying interest towards local halal cosmetic products. hypothesis 6: there is a positive and significant relationship between islamic advertising and purchase intention of local halal cosmetic products. 182 najib et al. research model this research model is adapted from (abd rahman, asrarhaghighi, and ab rahman 2015) and has been modified by adding an islamic advertising variable. islamic advertising has a significant and significant effect on purchasing decisions (sari, 2020) and has a positive and significant effect on purchase intention, except that the islamic advertising message variable has no effect (saifudin, 2019). in addition, the theoretical basis of this adapted model is based on theory reasoned of action (tra) (ajzen, i., & fishbein 1980). this model is considered valid in predicting the intention to choose halal products (mukhtar and butt 2012). in the reasoned theory of action, individual intentions are a function of two essential determinants, including personal factors (attitudes) and social influences (lada, harvey tanakinjal, and amin 2009). the detail of the research model can be seen at figure 1. knowledge religiosity attitude purchase intention islamic advertising h1 h3 h4 h5 h6 h2 figure 1. research model methods research design quantitative research methods are used in this study. quantitative methods are used to determine and measure the extent to which consumers agree with some of the statements put forward in this questionnaire. in this study, the author uses a descriptive design to describe something (malhotra et al. 2004) (malhotra, 2004). the descriptive design used is a cross-sectional journal of islamic economic laws-july, vol. 5, no. 2, 2022 183 design, namely a research design in which data collection is carried out once in a while in answering questions from questionnaires (suhartanto, 2014). population and sample in this study, the sample used is muslim consumers with a minimum age of 17 years until 28 years old, and domiciled in west java. the research was conducted on 2021. this research is included in marketing research with a minimum sample size requirement of 200 respondents (malhotra, nunan, and birks 2017). however, the samples size used in this study was 400 samples. based on table 1 shows that 400 respondents responded to this questionnaire. the majority of respondents who responded to this questionnaire were female muslim respondents with 354 people or the equivalent of 88.5%. then followed by male muslim respondents as much as 46 or 11.5%. after the age of the respondents is categorized into several, the following is the order of age categories that make up the majority in filling out this questionnaire. first respondents aged 20-22 years old (63.5%) followed by 17-19 years old (28%), followed by 23-25 years old (7.5%), and the last category was 26-28 years old (1%). half of the respondents in this study had a high school education background (58.5%) followed by the latest education d1/d2/d3 (25.5%), undergraduate (15.3%), less than junior high school or equivalent (0.5%), and postgraduate (0.3 %). the majority of respondents in this study, almost half, were students (79%). then some respondents work as private employees (12.3%) and entrepreneurs (3.5%), and respondents who have other jobs. in addition, the income of the majority of respondents ranged from <idr 1,000,000 (65.3%), considering that the dominant respondents in filling out this questionnaire were still students. 184 najib et al. table 1. respondent demographics description freq % gender male 46 11.5 female 354 88.5 age (years) 17 19 112 28 20 22 254 63.5 23 25 30 7.5 26 28 4 1 last education < junior high school or equivalent 2 0.5 senior high school or equivalent 234 58.5 d1/d2/d3 102 25.5 bachelor 61 15.3 postgraduate 1 0.3 occupation student/college 316 79 government employees 2 0.5 private employees 49 12.3 entrepreneur 14 3.5 housewife 4 1 not yet working 8 2 others 7 1.8 income < idr 1.000.000 261 65.3 idr 1.000.000 idr 2.999.000 90 22.5 idr 3.000.000 idr 4.999.000 39 9.8 > idr 5.000.000 10 2.5 data collection instruments the data used in this study is primary data. primary data is obtained from questionnaires that have been distributed via google form to samples that meet the criteria. the method of data collection is done using a self-administered survey. the researcher used a 5-point likert scale ranging from 1 (strongly disagree) to 5 (strongly agree) in measuring all items. there were journal of islamic economic laws-july, vol. 5, no. 2, 2022 185 open and closed questions to be used as material for qualitative analysis. the construct of this study adopted variables from previous studies (abd rahman et al., 2015; mokhtar & samsudin, 2015; suhartanto et al., 2020). in addition, researchers used secondary data as supporting material for this research, such as books, articles, reports, and other sources. measurement model the outer model in this study was measured by conducting validity tests and reliability tests. to determine the validity, convergent validity can be used. if the average variance extracted (ave) value is above 0.5, it can be categorized as valid (joe f. hair et al. 2014; joseph f. hair et al. 2019). in addition, discriminatory validity testing can use the fornell-lacker criterion (henseler, ringle, and sarstedt 2015). next, reliability measurement can be done by looking at cronbach’s alpha and composite reliability values. if cronbach’s alpha value is more than 0.6 (joe f hair et al. 2018; haque et al. 2018) and the composite reliability value is more than 0.6, then it can be categorized as reliable (joe f. hair et al. 2014; haque et al. 2018). structural model after measuring the outer model and the results that meet the criteria, the next step is to test the structural model (inner model). there are several testing steps in this stage, including testing goodness of fit (gof), coefficient of determination (r2), predictive relevance (q2), and testing hypotheses. goodness-offit (gof) is used to evaluate the suitability of the research model made. the results of the calculation of goodness-of-fit (gof) can be categorized as follows: 0.1 (small), 0.25 (medium), and 0.38 (large) (tenenhaus, amato, and vinzi 2004). the r² test was conducted to measure the effect of the independent variable on the dependent variable. r2 values can be categorized as follows 0.75 (substantial), 0.50 (moderate), and 0.25 (weak) (joseph f. hair et al. 2019). q2 testing was conducted to test the relevance of the model in this study. the research model can be categorized 186 najib et al. as having a high level of relevance if the resulting value is greater than 0 (hair et al., 2014). hypothesis testing in this research is through path coefficient analysis. path coefficient analysis was carried out to calculate the strength of the relationship using a matrix or covariance as the input (malhotra, nunan, and birks 2017). the test method used in this hypothesis is the bootstrap method. the value of each variable will be entered. the test results can later be used as a benchmark for acceptance or rejection of the proposed hypothesis. results validity and reliability the purpose of testing the validity and reliability is to determine which research indicators can explain and reflect latent variables through the evaluation of the outer model. the outer model is one part of the measurement model used to determine the validity and reliability of each construct in a study (malhotra, nunan, and birks 2017). this is done to determine whether the analysis will be carried out further or not. table 2 shows that all variables in this study can be categorized as reliable because of the value of cronbach’s alpha 0.60 (haque et al. 2018). in addition, the composite reliability value is also 0.60 (joe f. hair et al. 2014; haque et al. 2018). in this study, several variables have indicators that do not match the criteria. thus, the author does not include this indicator in the following analysis because it can affect the average variance explained (ave) value. the ave value is acceptable if the value is ≥ 0.50 (joe f hair et al. 2018; joseph f. hair et al. 2019). there are three indicators on the knowledge variable that were not included in the subsequent analysis. among them are the understanding of islamic law about halal and haram food and drinks, knowledge about what islamic teachings prohibit foods and drinks, and knowledge to distinguish between food ingredients allowed and not allowed by islam. furthermore, there are four indicators on the religiosity variable that are not included in the subsequent analysis, namely the implementation of the five daily prayers, paying zakat, journal of islamic economic laws-july, vol. 5, no. 2, 2022 187 avoiding illicit income, and knowledge of the pillars of faith and islam. the factor loading value for each indicator is less than 0.708. the condition for the factor loading value is ≥ 0.708 (joe f hair et al. 2018; joseph f. hair et al. 2019). thus, the author does not involve indicators on these variables. table 2. measurement model results construct loading α cr ave knowledge 0.652 0.852 0.742 • know hazardous materials such as e471 (example: lard) 0.869 • knowing the difference between halal certification for product and premises 0.854 religiosity 0.766 0.864 0.68 • avoid sin 0.834 • following the commands of islam in life 0.877 • read al-qur’an regularly 0.758 attitude 0.866 0.903 0.65 • like to choose halal food products 0.765 • always looking for a halal label 0.828 • local halal cosmetic products are important 0.821 • using local halal cosmetic products is my own choice 0.804 • most important people use local halal cosmetic products 0.812 islamic advertising 0.908 0.926 0.611 • based on islamic teachings 0.748 • encouraging to do good deeds and avoiding bad deeds 0.798 • showing advertising models in a dignified way 0.704 • promoting halal guaranteed cosmetic products 0.737 • promoting islamic values and spreading the correct information 0.854 • increasing knowledge about halal cosmetic products 0.764 188 najib et al. construct loading α cr ave islamic advertising 0.908 0.926 0.611 • teaching islamic values in yourself 0.833 • promote positive attitude and strong emotions 0.804 purchase intention 0.844 0.896 0.682 • paying more for local halal cosmetic products with authentic halal logo 0.835 • looking for local halal cosmetic products with authentic halal logo 0.882 • spending more effort to get local halal cosmetic products with authentic halal logo 0.811 • intention to buy local halal cosmetic products in the future 0.773 table 3 shows that all variables in this study can be categorized as valid because they have an ave value of ≥ 0.50 (joe f. hair et al. 2014; joseph f. hair et al. 2019). discriminant validity in this study can be determined by the fornell-larcker criteria shown in table 3. it can be seen that all latent variables have greater values than other constructs in the same model. therefore, the construct in this study meets the requirements of discriminant validity. table 3. fornell-larcker criteria at ia kn pi rg attitude 0.806 islamic advertising 0.473 0.782 knowledge 0.384 0.395 0.861 purchase intention 0.625 0.51 0.331 0.826 religiosity 0.512 0.403 0.385 0.427 0.825 goodness-of-fit the next stage is to evaluate by assessing the structural model with calculations that have been done previously manually based on the existing formula. there are three criteria for gof scores with the following conditions 0.1 (small), 0.25 (medium), and 0.38 (large) (tenenhaus, amato, and vinzi 2004). based on table journal of islamic economic laws-july, vol. 5, no. 2, 2022 189 4 shows that the gof value is 0.501 and can be categorized as large. thus, this research model is accurate for testing hypotheses. table 4. goodness-of-fit, r2, and q2 results construct ave r2 q2 knowledge 0.742 religiosity 0.68 islamic advertising 0.611 attitude 0.65 0.3 0.181 purchase intention 0.682 0.447 0.287 average 0.673 0.374 ave × r2 0.251 gof = √(ave × r2) 0.501 coefficient of determination (r2) and predictive relevance (q2) the next step is to measure the effect of the independent variable on the dependent variable. r2 values can be categorized as follows 0.75 (substantial), 0.50 (moderate), and 0.25 (weak) (joseph f. hair et al. 2019). based on the results of the calculation of r2 shown in table iv.5, attitudes are influenced by 30% of knowledge and religiosity. in contrast, the other 70% are influenced by other factors that are not included in this study. so, it can be categorized as weak. furthermore, purchase intention is influenced by 44.7% of islamic knowledge, religiosity, attitude, and advertising. in addition, 55.3% are influenced by other factors not included in this study. therefore, based on the calculation results, it can be categorized as weak. in table 4, there is a relevant predictive value (q2). the value of the variables in this study has a relevance value above 0. this means that this research model has high relevance. the research model is categorized as having a high level of relevance if the resulting value is greater than 0 (joe f. hair et al. 2014). path analysis hypothesis testing is done through path coefficient analysis. the purpose of path coefficient analysis is to calculate the 190 najib et al. strength of the relationship using a matrix or covariance as the input (malhotra, nunan, and birks 2017). the bootstrap method is used in testing this hypothesis. each value of each variable will be entered. the results of this analysis test can be used as a benchmark for the acceptance or rejection of the hypothesis that has been made. figure 2. path model figure 2 and table 5 displays the results of the empirical evaluation of the hypothesis. based on the path coefficient calculation results, it shows that knowledge and attitudes have a coefficient value of 0.22 with t-value of 4.45. this means that it can be assumed that knowledge has a positive and significant influence on attitudes. thus, h1 in this study can be accepted. knowledge of purchase intention has a coefficient value of 0.109 with t value of 3.888. therefore, it can be concluded that knowledge has a positive and significant indirect effect on purchase intention. thus, h2 in this study can be accepted. religiosity to attitude and religiosity to purchase intention have coefficient values of 0.427 and 0.211. then each obtained t values as follows 10.314 and 6.732. it can be assumed that religiosity has a positive and significant direct and indirect influence on attitudes and purchase intentions. thus, h3 and h4 in this study can be accepted. journal of islamic economic laws-july, vol. 5, no. 2, 2022 191 table 5. path analysis results path direct effect indirect effect β t-value β t-value knowledge à attitude 0.22 4.45* knowledge à purchase intention 0.109 3.888* religiosity à attitude 0.427 10.314* religiosity à purchase intention 0.211 6.732* attitude à purchase intention 0.494 10.013* islamic advertising à purchase intention 0.276 5.788* note: *p < 0.01 the results of the path coefficient calculation show that the attitude towards purchase intention has a coefficient value of 0.494 and t value of 10.013. based on the coefficient value and t value results, attitudes towards purchase intentions have a positive and significant influence on purchase intentions. thus, h5 is accepted. in addition, based on the calculation of the coefficient of the islamic advertising path, it has a coefficient value of 0.276 and t value of 5.788. it can be concluded that islamic advertising has a positive and significant effect on purchase intention. that is, h6 is accepted. from the results of the path analysis, it can be concluded that all hypotheses (h1, h2, h3, h4, h5, and h6) have a positive and significant effect. so, all hypotheses can be accepted. interestingly, the findings from this analysis show that the religiosity variable towards attitude and the attitude variable towards purchase intention has the highest significance value (t: 10.314 and 10.013). in addition, the indirect effect of the religiosity variable on purchase intention has a high significance value (t: 6.732) compared to the knowledge variable on purchase intention (3.888). discussion this study aims to determine and explain the influence of knowledge, religiosity, attitudes, and islamic advertising on the purchase intention of local halal cosmetic products. in addition, 192 najib et al. this study also aims to find out and confirm the respondents’ reasons for buying local halal cosmetic products and buying imported halal cosmetic products in the future. this study indicates that knowledge has a positive and significant influence on attitudes and purchase intentions of local halal cosmetic products. this means that consumers who know local halal cosmetic products will positively influence attitudes and purchase intentions. if consumers know a product, it will affect them in using or not using the product (adriani and ma’ruf 2020). the results of this study are in line with several previous studies (adriani and ma’ruf 2020; haro 2018; rohmatun and dewi 2017). furthermore, knowledge has a positive and significant influence on attitudes (putri, daryanti, and ningtias 2019). however, the results of this study contradict the results of the previous studied (abd rahman, asrarhaghighi, and ab rahman 2015). the latest findings from this study show that the effect of islamic advertising on the purchase intention of local halal cosmetic products has a positive and significant effect on the purchase intention of local halal cosmetic products. the addition of islamic advertising variables in this study can differentiate indicators from previous studies. the results of this study are in line with several previous studies (saifudin 2019; sari 2020). in general, islamic advertising is accepted by consumers as good advertising (safira 2017). advertisements found to have inserted elements of religious symbols influence the value obtained by consumers (jayanegara and najib 2020). thus, it can be concluded that islamic advertising is a good advertisement and can significantly influence consumers to buy local halal cosmetic products. in addition, based on the analysis of islamic advertising, it can be categorized as informative ads and has its value. informative advertising can help increase consumer purchase intention (dehghani et al. 2016). this proves that product promotions are intensely carried out during the months associated with the holy month, such as; ramadan, shawwal, and dzulhijjah. suppose consumers in some markets have a high level of religiosity. in that case, there needs to be adjustments and preparations in promoting journal of islamic economic laws-july, vol. 5, no. 2, 2022 193 these products according to the beliefs held by consumers themselves (ateeq-ur-rehman and shabbir 2010). then as a promotional strategy, companies need to display models that have a high level of religiosity in advertising halal cosmetic products (abd rahman, asrarhaghighi, and ab rahman 2015). conclusion the findings of this study indicate that all hypotheses are accepted. knowledge and religiosity variables have a positive and significant effect on attitudes. the attitude variable and islamic advertising have a positive and significant influence on the purchase intention of local halal cosmetic products. then, the variables of knowledge and religiosity have a positive and significant indirect effect on the purchase intention of local halal cosmetic products. interestingly, the findings of this study show that religiosity has the greatest significant effect on attitudes. religious consumers will have a positive attitude in acting or making decisions. in addition, the attitude variable towards the purchase intention of local halal cosmetic products is the variable that has the second-largest significant effect. suppose consumers have a good and positive attitude towards a product, the greater their potential to buy it. islamic advertising variables in this study can be one of the differentiators and expand previous research. unexpectedly, the research findings show that islamic advertising has a positive and significant influence on the purchase intention of local halal cosmetic products. islamic advertising can influence and attract consumers to use local halal cosmetic products. then based on the results of qualitative analysis, respondents intend to buy local halal cosmetic products due to several reasons, such as quality products. the purpose of quality here is to have guaranteed ingredients to be safe, comfortable, and halal for sure. in addition, consumers also follow islamic teachings and help local cosmetic products to be able to compete locally and globally and for other reasons. in addition, some consumers intend to buy imported halal cosmetic products for reasons of quality, interested in making comparisons between local and imported products. 194 najib et al. limitations of research and future research the limitation of this research is the lack of coverage of the research area, considering that the respondents of this study came from only one area. i hope for the next research, the scope of the area can be expanded again. in addition, this research has not been specific to local halal cosmetic products. the following research can be focused on local halal cosmetic products. especially local halal cosmetic products produced by small and medium industries (smes). so, later it can help smes in the field of local halal cosmetic products. next, the advice given is to use other variables that can influence the purchase intention of muslim consumers and non-muslim consumers towards local halal cosmetic products. furthermore, subsequent research can determine the loyalty of muslim consumers and non-muslim consumers to a local halal cosmetic product brand. in addition, there are shortcomings in conducting qualitative analysis because there are manual calculations and subjective statement code analysis. references abd rahman, a., asrarhaghighi, e., & ab rahman, s. 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(2020). does religiosity matter for customer loyalty? evidence from halal cosmetics. journal of islamic marketing. https://doi.org/10.1108/jima-03-2020-0069 tenenhaus, m., amato, s., & vinzi, e. v. (2004). a global goodness-of-fit index for pls structural equation modelling. the xlii sis scientific meeting, 739–742. wilson, j. a. j. (2014). the <i>halal</i> phenomenon: an extension or a new paradigm? social business, 4(3), 255– 271. https://doi.org/10.1362/204440814x14103454934294 _hlk61292128 journal of islamic economic laws vol. 1, no. 1 july 2018: 99-125 99 determinants of the industrial manufacturing stock’s holding period rima islamiah faculty of islamic studies, universitas muhammadiyah surakarta email: rima.islamiah@gmail.com abstract this study aims to identify the effect of market value (mv), return on asset (roa), earning per share (eps) and bid-ask spread (bas) over the holding period of manufacturing companies listed in jakarta islamic index (jii). the data used here is period between 2014-2016. this research is a quantitative research. the data used in this research are the outstandingnumber of shares, the volume of stock transactions, closing price, roa, and eps. the technique for data analysis which will be used in this research is panel data regression test using rem model. the results of this study show that: 1). market value have a significant positive effect on the manufacturing company stock’s holding period, which is shown by the value of sig t 0,0075. 2). roa has no significant effect on on the manufacturing company stock’s holding period, which is shown by the value of sig t 0.1269. 3). eps did not significantly affect the holding period of the manufacturing company’s shares which was shown by the sig t value 0.7358. 4). the variable of bid-ask spread does not significantly affect the holding period of the manufacturing company’s stock which is shown by the value of sig t 0.1031. 5). mv, roa, eps, bas according to test of model existence / f test is the existing model used with the value of f statistics 0.000397. 5). the value of adjusted r2 of 19.85% indicates that variations in the variable of holding period can be explained by independent variables, and the remaining 80.65% of journal of islamic economic laws-july, vol. 1, no. 1, 2018 100 the variable of holding period are explained by other variables outside the research model. keywords: holding period, market value, rem modelling, jakarta islamic index. introduction the capital market is a market for various long-term tradable financial instruments, such as bonds, equities (stocks), mutual funds, derivative instruments and other instruments. the stock market is also called the securities exchange, because there is a sale and purchase of securities. stock exchange itself is the physical capital market. the indonesian stock exchange provides various types of securities offered by the company and they can be selected by investors in accordance with their various consideration (sari and abundati, 2015). an investor has the freedom to choose the type of stock, buy the number of shares and determine the length for holding financial assets. if investors know that stocks of the companies they buy are profitable, then they will likely hold those shares for longer periods, in the hope that the future selling price of these shares will be higher. by contrary, investors will soon release the shares they have bought, if they predict the price of those shares will decline. they will do this because by doing this they canget bigger gain on the investment made and to minimize risks that will be faced (arma, 2013). the length of period in which an investor holds companies stock or or other finansial asset is known as holding period (sari and abundati, 2015). one of the stock indexes available in the indonesian stock exchange is the jakarta islamic index (jii). companies listed in this index are companies that have the criteria in accordance with rima islamiyah 101 the principles of sharia. the data below shows the growth in the volume of shariah stock transactions filtered by jii index. table 1. companies and their volume of transaction in 2014-2016 year number of companies volume oftransaction (billion) 2014 30 239,894 2015 30 240,793 2016 30 463,405 source: www.idx.co.id. this shows that the interest of investors to invest in sharia stocks is getting bigger. although the interest of investors to transact sharia stocks is quite large, but that does not meanthat to hold thosestocks can be fully profitable. at some point, an islamic stocks must be worthy of an investor’s hold for a certain period of time to show that the investor feels secure in holding the stocks. from this background, the writer is interested to do this research by taking several similar variables and using the related research about holding period of shares manufacturing companies stocks. literature review previous studies to begin this research, i will be benefiting from previous literature as a reference in conducting further research. no previous research is exactly the same as what i wil be undertaking. however, some previous research can be used as reference and learning material for researchers in preparing advanced research. visita yales a (2013) in his research entitled faktor penentu holding period saham lq-45 di bursa efek indonesia discusses what are determining factors for the length of holding period. by using variables like, bas, market value, variance return, http://www.idx.co.id journal of islamic economic laws-july, vol. 1, no. 1, 2018 102 his study explains that the bas variable has no significant effect on the holding period, which illustrates that investors will hold stocks with long time. the character of these stocks, are among others, of a higher market value and of shorter time when having a higher risk. ni luh ayu y u and ida bagus panji s (2016) in his research entitled pengaruh spread, market value, variance return (vr), devidend payout ratio (dpr) terhadap holding period saham discussed some independent variables like spread, mv, vr, dpr, whether they have significant effect on holding period. the results of this study indicate that investors should consider two variables; that is market value and house of representatives in order to predict exactly the benefits that will be gained, especially in basic and chemical industry sectors. novita selvia m warin-angin and syarief fauzie (2013) discussed the effect of bas, market value, and variance return on mining sector holding period. by using variables like bas, mv, and vr, the results of this study indicate that these variables greatly affect the holding period in the mining sector. ely winda sari and nyoman abundanti (2015) studiedabout the determinants of holding period determinants on lq45 index. they used some independent variables, such as bas, mv, house, risk of return, earning per share. the results of this study indicate that internal and external factors also affect the holding period, in order to obtain optimal return. ade nahdiatul hasanah (2016) analysed the effect of transaction cost on holding period of lq45 shares in indonesia stock exchange (idx). using independant variables like bas, mv, vr, devidend yield, earning per share, the results of rima islamiyah 103 this study states that in taking a decision about the duration of holding common shares in the bei, one should also see the macro economic conditions. because when economic conditions are uncertain, investors should be careful in holding or selling stocks that have a more dominant risk. definition of invesment activities investment, conceptually, is a commitment to a number of funds or other resources at this moment with the aim of gaining profit in the future. thus, in the other words, it is to invest money now, in order to get benefits (reward or profit) in the future. investment means the expenditure of investors or companies to purchase capital goods and production equipment to increase the ability to produce goods and services available in the economy (sukirno, 1997). investments are also defined as expenditures to purchase capital goods and production equipment in order to replace and primarily to add the capital goods in the economy that will be used to produce goods and services in the future. in the theory of investment economy, it is a shopping activity to increase the capacity to produce something in the economy (sukirno and sadono 2005). definition of investment by kamus besar bahasa indonesia (kbbi), is putting the money in a company or project for the purpose of obtaining profit. it is basically to buy an asset that is expected in the future to be resold at a higher value. it can also be interpreted as the placement of funds or the exchange of money with other forms of wealth over a certain period, which is expected to earn income and / or increase the value of investment. journal of islamic economic laws-july, vol. 1, no. 1, 2018 104 as a delay of consumption of the present for the foreseeable future, in which there is a risk, it requires a compensation for the delay, in the form of profit. in general, the object of investments is real assets (land, gold, and buildings) as well as financial assets (securities or securities). investors have the freedom to choose the type of securities to invest in a go public company. investors also have the freedom to determine the amount of securities they buy and the duration of holding or holding such securities. those who feel the securities they buy will bring profits, will hold the securities for a longer period of time, or immediately release the securities if it is predicted to be less profitable (sari & abundati, 2015). there is relationship between investment and consumption, because the delay of consumption is an investment in the future, then below is a curve that explains about this (fauzan, 2005). figure 1. indefference curve of current and future consumption source: fauzan, et all. (2005) in buku pengantar teori investasi dan pasar modal investment and consumption are two interrelated activities. the current consumption delays can be interpreted as an investment for future consumption. it can be described with rima islamiyah 105 indefference curve, i.e. a curve that shows the same satisfaction (utility) for each point. figure 2.1 shows that the combination of current consumption (k0) and upcoming consumption (k1) gives the same satisfaction at points along the indefference curve. both point a for a combination of current and future consumption (k0y & k1y) and point b for a combination of current and upcoming consumption (k0x & k1x) will provide the same level of satisfaction. point a has a current level of consumption (k0y) greater than the current consumption level (k0x) at point b. vice versa, point b has an upcoming consumption level (k1x) greater than the next level of consumption at point a. point c is a combination of consumption that has the highest degree of satisfaction, since point c lies on ic3 position above the other indifferencecurve (ic1 ic2). point a and point c have an upcoming level of consumption higher than point a. definition of sharia investment investment in the view of sharia is slightly different, in that it is sharia itself that has anauthoritative rule in running a good and perfect life. it can be achieved by maintaining human relationships and other creatures, in which all of this are all carried out in the framework of good relationships with god. islam has a different view about investment, especially in the use of wealth. in addition, the concept of wealth in islam is also not the same as the western view. the difference between islamic views and that of western views is related to god’s position. in the western view, god is put aside. he is beyond human capacity to be known. everything happens with the power of human effort. the rationality of the individuals becomes the driving force of all activity. journal of islamic economic laws-july, vol. 1, no. 1, 2018 106 the concept of islamic investment is the concept of investment in accordance with the guidance of religion of islam. therefore, it is necessary to consider the aspects that will become the determinants of investment activities, normative aspects that trigger the investment activities, the conception of wealth and the usage of wealth. investments in islamic perspective can only be done on instruments that are in accordance with sharia and they must not contain usury. investments can also be made only on securities issued by the issuer whose type of business activities are not contrary to sharia. sharia investment in the capital market means an investment activity in securities which conform islamic principles that have received recognition from the dsn (national sharia council). the definition sharia investment in general according to veithzal rivai, et al (2010) is the activity to increase money through the utilization of various sources with the intention of gaining profit that is in line with islamic principles. apart from paying attention to the issuer, we should also see carefully the types of investment transactions since there are several types of transactions which are prohibited. the selection and execution of investment transactions must be carried out according to prudential management principles and it is not allowed to make speculations that are contrary to sharia principles. there are several shariah compliance products in the islamic investment area, among others are mudharabah deposits, asuransi syariah , education savings, syariah mutual funds, sharia shares, gold investment. rima islamiyah 107 definition of capital market capital market is a market for various long term instruments that can be exchanged, including bonds, shares, mutual funds and any other instruments. capital market is a funding facility for companies, institutions (including those government institutions) as it is a facility for investment activity as well (rivai, 2010). according to act no.8 year 1995 on capital market, it is stated there that capital market is “an activity related to the public offering, trading on issued securities and other body and professions related to the securities (article 1 point 13). the securities itself is issued shares, debt certificates, commercial debt certificates, stocks, bonds, debt receivables certificates, collective investment funds, future contracts on stocks and any other derivative with stocks as it underlying units (article 1 point 5). capital market is a compliment for other two industries within financial sector, the banking and insurance industry. it bridges the capital owner called investor and the fund users called stock issuers or simply those companies which went public (hermuningsih, 2012). capital market is a market for various instruments and long term securities which can be traded, whether in the form of debt or capital, whether it issued by government, public authorities or private companies (husnan, 1994). definition of islamic capital market according to burhanuddin, the word capital from the fiqh perspective means all things (property or asset possession) which journal of islamic economic laws-july, vol. 1, no. 1, 2018 108 has the capable of producing another asset. the capital market is a place of buying and selling the securities with the purpose of getting profit for both buyer and seller under the umbrella of islamic principles (s, 2008.) islamic capital market is one of the alternative funding resources for companies while in the same time it is an investment facility for the investors by using contracts comply to the shariah requirement that dsn-mui (national shariah advisory council) has enacted (umam, 2013). the islamic principles for capital market activities according to the fatwa of dsn-mui, whether the laws enacted under the law of supervisory body for capital market and financial institutions (bapepam lk) or dsn-mui’s fatwa introduced prior to the decision of bapepam lk number: kep/-130/bl/2006 on shariah securities issue. according to umam (2013), the activities in the capital market can be classified under the mu’amalah type of economic activity that is a type which manages the trading in the daily life. the legal maxim of fiqh asserted that the basic principle in the mu’malah is mubāh (permissible) based on the postulate “all mu’amalah activities are basically permissible unless it is mentioned otherwise by the other proof (dalīl). according to fatwa of dsn-mui number 40/dsnmui/x/2003, islamic securities mean the securities which is mentioned under national law of capital market specifically for those securities with the contracts, company management and the issuing steps conforms the islamic principle. the prohibition in financing and investment activities according to shariah include transaction containing riba and that is the reason why the transaction in the capital market must be rima islamiyah 109 free from riba. other activities also include those which contain speculation and garar element or uncertainty that is the transaction which might have the cheating aspect. in general, capital market activity in indonesia is not much different from the capital market in general. islamic capital market operate under the islamic principle stipulated under bapepaklk rule number ix.a.13 which states that islamic principles in capital market activities are based on the fatwa of dsn-mui as long as the prescribed fatwa is not contraty to the bapepam-lk regulations.1 stocks or shares stocks are the certificate indicating proof of ownership of a company, and shareholders have a right to claim on the earnings and assets of the company. stock prices are affected by the law of demand and supply. the stock price may increase if it is overdemand and tends to decrease if it experiences an excess supply (umam, 2013). shares may also be construed as a certificate of capital participation of a person or legal entity against a company, and is a written evidence for investors on the ownership of a company which has gone public (s, 2008). the stock in islam is essentially a modification of the joint venture system of capital and wealth, which in fiqh terms is known as syirkah or cooperation (s, 2008). sharia stock is securities or securities that have the concept of equity participation to companies that do not have activities or business activities that violate sharia principles with the right of profit sharing based on sharia principles (heykal, 2012). 1note that bapepam-lk is currently replaced by ojk (financial services authority). journal of islamic economic laws-july, vol. 1, no. 1, 2018 110 holding period of stocks financial investment in the form of stocks has a high level of risk if investors are not careful. this makes investors have to decide the length of time they should hold the shares (holding period) in order to obtain the expected profit levels. holding period of shares is the length of time investors are willing to hold assets or securities by taking into account the profits and losses gained (rianto & hutomo, 2008). holding period of shares is the length of time the investor is willing to hold the asset or the securities by taking into account the gains and losses earned. holding period of stock is shown by comparison between the number of shares outstanding with the volume of stock transactions. the figure indicated from the holding period of the stock does not mean that an investor holds its stock for that with certainty, but the figure indicates that the greater the nominal price, the longer the length of time an investor holds the stock. investors activities of holding and selling their stocks is done to maximize their profit or to reduce the risk they will face. the length of period holding their fund in certain securities is called as holding period and the each investor has their investment analysis in determining of holding or selling the securities they have. holding period is the variable that indicates the average length an investor hold the shares of certain companies he has. when an investor is about to invest, he must look ahead towards the return expected. the high fluctuation rate of trade transaction volume indicates the investors decision on holding period which keeps changing over the time. the high volume of trade transactions indicating that investors are often traded which also rima islamiyah 111 means that investors do not hold shares in longer periods of time (ningsih and asandrimitra, 2017). holding period adalah variabel yang mengindikasikan mengenai rata-rata lamanya waktu investor dalam memegang saham suatu perusahaan yang dimilikinya. ketika seorang investor akan melakukan investasi, tentunya mereka juga akan menginginkan pengembalian (return) sesuai yang diharapkan. tingkat fluktuasi volume transaksi perdagangan yang tinggi mencerminkan keputusan investor terhadap holding period suatu saham yang berubah-ubah. tingginya volume transaksi perdagangan menunjukkan bahwa saham yang dimiliki investor sering diperjualbelikan yang juga berarti bahwa investor tidak menahan sahamnya dalam kurun waktu yang lebih lama (ningsih & asandrimitra, 2017). jakarta islamic index (jii) jakarta islamic index (jii) consists of 30 companies that fall within the criteria of sharia (list of sharia securities issued by ojk) and includes shares with large capitalization and high liquidity. jii was formed from the cooperation between pt. bei (it was bursa efek jakarta during that time) with pt danareksa investment management (pt dim). jii operates since july 3, 2000. the purpose of establishment of jii is to increase investor confidence to invest in syariah-based stocks and provide benefits for investors who invest in stock exchanges (s, 2008). the criteria in choosing stocks as jii is the shares of companies which businesses are not contrary to the shariah principle. dsn-mui fatwa number 40/dsn-mui/x/2003 sets the criteria of business types which are in the contrary of islamic principle. those businesses are 1) gambling and any prohibited journal of islamic economic laws-july, vol. 1, no. 1, 2018 112 trade, 2) conventional financial institution (riba-based financial institutions) including banks and conventional insurance, 3) distributor producer and the seller of prohibited food and beverages, 4) producer, distributor and or provider of goods and services which damages moral and has the dangerous element, 4) doing investment on companies which has the debt to capital ratio is higher then 1. research methods tool and analysis model the analysis carried on this paper uses panel data regression with the econometrics model as the following: hpit = β0 + β1mvit + β2roait + β3epsit + β4basit+ µit where : hp : holding period mv : market value roa : return on asset eps : earning per share bas : bid ask spread i : indicating the companies t : indicating the timeseries from 2014-2016. β0,1,2,3,4,5 : coefficient µ : unobserved error term the econometrics model above will be estimated using some stages of pls, fem and rem. the decision of best model will be through chow test and hausman test. the goodness of the model estimation includes the f-test and t-test. rima islamiyah 113 dependent variables dependent variable is a variable which is affected by the independents. the dependent variable is the main object in the research. we will estimate the dependent variable and all changes associated with it later on this paper. the dependent variable in this research is the holding period, that is the variable which indicates the average period an investor willing to hold their stocks (ningsih and asandrimitra, 2017). the length of an investor holding his securities is not expressed in the unit of time. instead, holding period of stocks is expressed by the comparison between the circulating shares in time of t with the transaction volume in the same year (ningsih and asandrimitra, 2017). hpt = total circulating shares in time t stock transaction volume in time t independent variable independent variable is the variable which explains or affects another variable. the independent variables in this research are market value, return on asset, earning per share and bid ask spread. source of data the data in this research which is compiled, used and processed is the secondary data which is obtained indirectly from the third party through any existing means available. this includes the data available from literatures, articles, journals, idx, yahoo finance, jii, icmd (indonesian capital market directory) which can be accessed from www.idx.co.id and the manufacturing sector companies listed at jii. the data ranges from 2014-2016. journal of islamic economic laws-july, vol. 1, no. 1, 2018 114 result and discussion descriptive analysis of choosen independent variables the holding period of manufacturing companies listed at jii experience fluctuation from 2014-2016. the fluctuation did not only happen in general, it also occurred at each company. in 2014, the longest holding period is happened for unilever company which has been held up to 18 days. meanwhile, the fastest holding period is experienced by adhi karya company which has been hold for no longer than one day. in 2015, the longest holding period is experienced by indofood sukses makmur tbk while the fastest one is experienced by hanson international. in 2016, the longest holding period is again experienced by unilever tbk while the fastest holding period is experienced by hanson international again. it is also observed that all the fastest holding period never went longer than one day. graphic 1. holding period of shares on manufacturing companies at jii year 2014-2016 just like the holding period, the market value in the finance world also experiences fluctuation. from year 2014-2016, the highest market value was 335,001 billion rupiah for the asii rima islamiyah 115 company. meanwhile, the lowest market value was 2,995 billion rupiah for the antm company. graphic 2. market value (mv) of manufacturing companies at jii year 2014-2016 for the roa, the growth experienced only insignificant fluctuation from year to year. from the graphic, the data shows that the highest value of roa from 2014 until 2016 held by perkembangan roa dari tahun ke tahun mengalami fluktuasi yang tidak terlalu signifikan. matahari department store with the figure of 45.79%. meanwhile, the lowest roa held by antm company with the value of -4.75% graphic 3. return on asset (roa) of manufacturing companies at jii year 2014-2016 journal of islamic economic laws-july, vol. 1, no. 1, 2018 116 eps also did not experience high fluctuation through the year in each company. it is also important to be noted that the highest eps from 2014 to 2016 held by untr (united tractors) company with the value of 1,439.50 rupiah for each piece of share. in the same time, the lowest eps held by antm with the value of -81.28 rupiah per piece of share. this is because the total profit after tax is smaller compare to the issued shares during the year. graphic 4. earnings per share (eps) of manufacturing companies at jii year 2014-2016 the bid-ask spread experienced increase and decrease in 2014 until 2016. the highest bas was 47,800 rupiah on three companies namely unvr (unilever) for year 2014 and 2016 and adhi company on year 2015. the lowest bas from 2014 until 2016 was 140 which occurred on 2014 for the wyrx company (hanson international). rima islamiyah 117 graphic 5. earnings per share (eps) of manufacturing companies at jii year 2014-2016 estimation result estimation result of panel data regression on pls, fem or whether we have to use rem is shown on table 2 table 2. cross section panel data regression result variabel coefficient model pls fem rem c 0.813969 2.280738 1.300662 mv 2.57e-05 6.97e-07 1.51e-05 roa 0.043861 0.062101 0.059839 eps -0.000264 -7.56e-05 -0.000296 bas 5.54e-05 2.77e-05 5.39e-05 r square 0.522446 0.950647 0.233834 adj.r square 0.497311 0.921035 0.193510 f-stat 20.78606 32.10357 5.798810 prob f-stat 0.000000 0.000000 0.000397 deciding the best estimation model the step of choosing the best estimation model involves chow test as well as hausman test. journal of islamic economic laws-july, vol. 1, no. 1, 2018 118 1. chow test chow test is a test used to know whether the fixed effect model best suites rather than pls. the h0 on chow test means that the pls is better while the ha means that the fem is better. the h0 is accepted when p-value > α while h0 is rejected when the p-value < α. the result of chow test is shown at table 3. table 3. chow test result effects test statistic d.f. prob. cross-section f 16.685141 (26,50) 0.0000 cross-section chi-square 183.843822 26 0.0000 from the table 3 we can see that the p-value or the probability of f-test is 0.0000 which is lesser than 0.01. this means that the null hypothesis is rejected. in other word, we should follow the fixed effect model. 2. hausman test hausman test is a statistical test used to determine whether fem or rem model is needed to model a panel data equation. the null hypothesis (h0) of hausman test is that the model follow the random effect while the alternative hypothesis says that the model follows fixed effect. the h0 is accepted when p-value > α while h0 is rejected when the p-value < α. the result of hausman test is shown at table 4. table 4. hausman test result test summary chi-sq. statistic chi-sq. d.f. prob. cross-section random 6.650197 4 0.1556 rima islamiyah 119 from table 4 we can see that the p-value of chi-square is 0.1556 which is greater than 0.1. thus, the null hypothesis where random effect suits best for the model stands. from both test of chow test and hausman test, the random effect model is chosen as the best way to model the equation in our case. rem estimation result as it has been discussed earlier, rem fits best for the equation in our case. the regression result on random effect model is shown at table 5 (note that the constants of all equation is attached in the appendix part). table 5. estimation result on rem hpi = 1.300662 + 1.51e-05 mvi + 0.059839 roai 0.000296 epsi + 5.39e-05 basi (0.0075)** + (0.1269) – (0.7358) + (0.1031) r2 = 0.233834; dw-stat = 1.711942; f-stat = 5.798810; sig. f-stat = 0.000397 note: *significant at α = 0,01; **significant at α = 0,05; *** significant at α = 0,10; number inside the brackets shows the t-test probability. before discussing the estimation result, we first will elaborate on the validity test of the result first using t-test. the t-test shows the significant level of the independent variable individually on towards the dependent variable. the h0 means that the independent variable has no significant effect on the dependent variable while the ha means that the independent variable affects significantly on the dependent variable. the h0 is rejected when the t-test < α and the h0 is accepted if t-test > α. journal of islamic economic laws-july, vol. 1, no. 1, 2018 120 table 6. validity test on the effect of independent variables variabel t sig.t criteria decision mv 2,7471 0,0075 < 0,05 significant roa 1,5431 0,1269 ˃ 0,10 insignificant eps -0,3387 0,7358 ˃ 0,10 insignificant bas 1,6497 0,1031 ˃ 0,10 insignificant economic analysis based on the p-value of the t-test at table 6, we can conclude which variable is significant and which one is not. the result of rem estimation shows that only mv (market value) which affects the holding period of the shares in manufacturing industries listed on jii. mv is significant with positive sign on the length period an investor willing to hold their stocks. the result is in line with the assumption that high market value will trigger people to hold their stocks longer. the result of this research is also in line with the previous study done by sari and abundati (2015) titled “determinant of the holding periods on lq45 index” since they also point out that market value is significant with positive sign. thus, market value is a detrimental factor for investor of holding or selling their stocks. in addition to that, rem estimation shows that roa is insignificant in affecting the holding period of stocks in manufacturing industry. roa has no significant effect on the length period of an investor in holding the stocks. this indicates that roa does not affect investors’ decision of holding or selling their stocks longer. it does not matter how much the roa a company is able to generate since their main concern is the return on the asset they hold now. the result here is in the contrary of previous study done by kusumawaty (2016) with the title “the effect of securities rima islamiyah 121 return, market value and roa on the holding period for the manufacturing industries listed under indonesia stock exchange. the study there finds that roa is significant and positively affects holding period which means when the roa increases, the stock will be held longer by the investors. in the same time, the rem estimation result also shows that eps is insignificant in affecting holding period of stocks in manufacturing industries. eps is insignificant in affecting the length of investors’ holding period. this indicates that eps does not become factor driving investors’ decision whether to hold or sell their assets. this result supports the previous research done by hasanah (2016) who wrote a paper with the title “analysis on transaction cost effect towards holding period of lq45 shares at indonesia stock exchange” which concludes that eps is insignificant in affecting holding period. the result goes to the opposite of the assumption that high earning per share could attract more investors and make them willing to hold their assets longer. last but not least, rem estimation also shows that bas (bidask spread) has no effect on the holding period of manufacturing industries’ shares. bas is insignificant on the length the investors’ are willing to hold their assets. therefore, bas is not the main factor for investor in determining the length of their holding period. the result here also supports the earlier study done by perangin-angin and fauzie (2013) with the title “analysis of bid-ask spread, market value and variance return on holding period for mining industries”. the study there recorded that bas is insignificant so that this variable has no effect on investors’ consideration when deciding whether to hold or sell their asset. journal of islamic economic laws-july, vol. 1, no. 1, 2018 122 conclusion and suggestion conclusion based on the analysis done above, we can draw inferences that the independent variables of market value (mv), return on asset (roa), earning per share (eps) and bid-ask spread (bas) are jointly significant in affecting holding period on companies of manufacturing industries listed under jakarta islamic index (jii). however, the effect of market value, return on asset, earning per share and bid-ask spread partially is as the following: a. market value is significant and has positive effect on holding period of companies’ shares for manufacturing industries listed under jakarta islamic index (jii). b. return on asset is not significant in affecting holding period of companies’ shares for manufacturing industries listed under jakarta islamic index (jii). c. earning per share is not significant in affecting holding period of companies’ shares for manufacturing industries listed under jakarta islamic index (jii). d. bid-ask spread is not significant in affecting holding period of companies’ shares for manufacturing industries listed under jakarta islamic index (jii). suggestion from the result of this study which has been elaborated above, there are some suggestions that can be made. 1. for investors who wants to make investment on shariah stocks, they should take into consideration the market value since it has proofed that company’s market value affects the holding period on stocks of manufacturing industry company. 2. it is also suggested for the next research to add more variables rima islamiyah 123 or replace the insignificant variables in this research using other variables which are assumed to have impact on holding period, especially the variables which have fundamental value on companies perform. by doing so, it is expected that the result would be more accurate and significant. reference arma, v.y., 2013. faktor penentu holding period saham lq-45 di bursa efek indonesia. journal of business & banking, 3(2), pp.201-212. burhanuddin, s., 2008. pasar modal syariah. yogyakarta: uii press. dsn-mui. 2014. himpunan fatwa keuangan syariah. jakarta: erlangga. hermuningsih, s., 2012. pengantar pasar modal indonesia. yogyakarta: upp stim ykpn. heykal, m., 2012. tuntunan dan aplikasi investasi syariah. jakarta: elex media komputindo. husnan, s., 1994. manajemen keuangan. yogyakarta: bpfe. nahdiatul, a., 2017. analisis pengaruh transaction cost terhadap holding period saham-saham lq45 di bursa efek indonesia (bei). jurnal akuntansi: kajian ilmiah akuntansi (jak), 3(1). ningsih, t.r. and haryono, n.a., 2017. pengaruh bid-ask spread, market value dan variance return terhadap holding period saham sektor pertambangan yang listing di bursa efek indonesia (bei) tahun 2011-2015. jurnal ilmu manajemen (jim), 5(3). journal of islamic economic laws-july, vol. 1, no. 1, 2018 124 perangin-angin, n.s. and syarief, f., 2013. analisis pengaruh bid-ask spread, market value dan variance return terhadap holding period saham sektor pertambangan. jurnal ekonomi dan keuangan, 1(3). rivai, v., firmansyah, r. and veithzal, a., rizqullah. 2010. islamic financial management. (teori, konsep, aplikasi). bogor: ghalila indonesia. riyanto, a. and hutomo, y.s., 2008. analasisi pengaruh perubahan market value dan laba per lembar saham terhadap perubahan holding period. saham, kinerja 12(2), 197-205 sari, e.w. and abundati, n., 2015. determinan penentu holding period pada indeks lq45. e-jurnal manajemen unud vol, 4, pp.4529-4558. sukirno, s. 2005. mikro ekonomi teori pengantar. jakarta: pt raja grafindo persada. _________ 1997. pengantar teori mikro ekonomi edisi 2. jakarta: grafindo persada. triyono, f., ‘unnurain i., sutarto. and rosyadi. i., 2005. pengantar teori investasi dan pasar modal. surakarta: ums. utami, n.l.a.y. and sedana, i.b.p., 2016. pengaruh spread, market value, variance return dan dividend payout ratio terhadap holding period saham. matrik: jurnal manajemen, strategi bisnis dan kewirausahaan, pp.168178. umam, k., 2013. pasar modal syariah & praktek pasar modal syariah. bandung: pustaka setia. rima islamiyah 125 appendix appendix 1. effect and the constants of cross section no code of companies effect (beta) constant 1 icbp 8.551977 9.852639 2 unvr 4.672449 5.973111 3 inco 1.189635 2.490297 4 indf 0.510326 1.810988 5 aali 0.346669 1.647331 6 adro 0.236706 1.537768 7 akra -0.316340 0.984322 8 antm -0.046246 1.254416 9 wika -0.303428 0.997234 10 bsde 0.295709 1.596371 11 intp -0.650618 0.650044 12 klbf 0.285035 1.585697 13 lpkr -0.890401 0.410261 14 wskt -0.585299 0.715363 15 lsip -0.977364 0.323298 16 untr -0.002000 1.298662 17 pgas -0.020892 1.27977 18 ptba 0.123336 1.423998 19 ptpp -0.317227 0.983435 20 pwon 0.029130 1.329792 21 smgr -1.006548 0.294114 22 smra -0.025117 1.275545 23 myrx -1.125673 0.174989 24 ssms -1.193679 0.106983 25 adhi -2.491097 -1.19044 26 asii -2.702601 -1.40194 27 lppf -3.586441 -2.28578 journal of islamic economic laws vol. 3, no. 2 july 2020: 141-158 141 cahsless society on gopay: an islamic economic perspective dita anis zafani1 and moh. musfiq arifqi2 1universitas islam negeri sunan ampel 2staim terate sumenep email: dita.zafani@gmail.com, musfiqarifqi18@gmail.com abstract technological developments have led to massive cashless society activities among the public, especially in gopay transactions. indonesian people, who are predominantly muslim, have started to shift their payment system from cash to cashless transactions. therefore, the study of islamic economics is important to see this phenomenon. the qualitative-descriptive research methodology was used by researchers to examine this research. a standard general procedure of library research is done to obtain data from several scientific papers in the form of books, magazines, journals, articles, documentation and other relevant media. the results of this study state that the cashless society’s activities through gopay transactions can be said to be in accordance with the principles of islamic economics. this can be proven in the transaction that there is no party that loses money between the customer and the service provider, and there is no interest in the transaction. in addition, the cashles society can provide convenience in transactions between economic actors, as well as a more reliable guarantee of security. keywords: cashless society; gopay; indonesia; islamic economics. introduction economic activity in general has continued to experience development, back to the time of the prophet muhammad continued to the period of khulafaurrasyidin, followed by classical economist thought and even contemporary economists dita anis zafani and moh. musfiq arifqi 142 figure. this development continues to occur until now where peopleenter the era of industry 4.0 due to the increase in science, technology, and the diverse needs and desires of humans. this requires economists to continue to compete no longer on a local or national scale but have increased on a global or international scale. indonesia is one of the countries which also has a very fast economic development. this development is partly due to the increasingly massive development of technology. indirectly, people are being demanded to continue to develop various innovations to boost the economy. among the innovations that continue to develop today is the use of digital transaction exchange tools. the transaction scheme has gradually been passed by economists and has been applied by the community, starting from the barter system using a medium of exchange for valuable goods in the form of coins from gold or silver, continued by the use of fiat money as we use today, next to the cashless payments that start to develop, such as gopay, ovo, dana and others. digital transactions in indonesia have experienced significant growth. from 2013 to 2017 it has grown by 169 percent from idr 49 trillion to idr 132 trillion. the highest growth was dominated by transactions via mobile applications, which grew by 383 percent since 2013. in addition to that, transactions for retail through mobile applications grew the highest with a growth of 2,437 percent from idr 1 trillion in 2013 to idr 38 trillion in 2017 (bpsi, 2018). in 2018 the center body for indonesian statistic reported that the number of electronic transactions reached rp. 24,82 million transactions with a transaction value of rp. 17,21 trillion and is expected to grow along with the increasing number of internet, mobile and social media users. this data represents a revolution of people’s lifestyle in the era of the digital economy. they have switched to use noncash financial instruments in their daily transactions. this is an opportunity as well as a challenge for the development of the islamic economic system in indonesia. so far, islamic economics is known as one of the economic systems that upholds ethical journal of islamic economic laws-july, vol. 3, no. 2, 2020 143 values and is transparent in all its activities. this is a necessity for islamic economists to be able to provide education about all forms of these changes. by doing so, the current social revolution can be increased to continue to uphold islamic economic values, as well as provide opportunities to continue the development of islamic economics among the community amidst this digital era. in addition, the cashless society revolution in the digital era has become one of the master plans ofislamic economics in indonesia for 2019-2024 as a form of strengthening indonesia’s digital economy. this is due to the existence of the largest digital product consumer market in southeast asia which is estimated to continue to grow and the increasingly rapid presence of e-commerce, which will also result in an increase in the number of electronic transactions in indonesia (bpsi, 2018) (bppn, 2018). gopay is present as a new payment system in indonesia where the largest muslim population reside in this country. this phenomenoninspires the author to conduct an in-depth study on this occurence from islamic economic perspective. however, to support the islamic economy ecosystem in indonesia, the use of sharia label must be supported with concrete evidences in accordance with the rules of ushul fiqh and fiqh. when such work is done, the presence of a new islamic payment instrument will truly become the identity of indonesian people embedded with islamic spirits. academists continue to conduct research on transactions based on islamic economics in order to contribute ideas and education to society in carrying out economic activities. one of the most recent studies regarding the development of economic transactions was conducted by indra and rofiqoh (2019).the results of his research state that payments using the go-pay balance on the go-jek application can be used by muslim, provided that go-pay must comply with the principles of shari’ah by avoiding ribawi transaction, gharar, maysir, tadlis, risywah, israf and transactions on objects that are haram or immoral. in addition, the existence of go-pay is included in the protection of assets (hifdz al mâl) and has a positive impact on the movement of the indonesian economy. dita anis zafani and moh. musfiq arifqi 144 furthermore, research conducted by muamar and alparisi (2017) states that electronic money (e-money) emerges as a new innovation that answers people’s needs for micro payment instrument that can make the payment process faster, more efficient and safer. the results of this study imply that electronic money is very helpful for the public in making transactions. however, in addition, based on research conducted by hiyanti et al., (2020), it is stated that there are opportunities and challenges for sharia fintech in indonesia which consist of: regulation, human resources, and control of technology from the community. this challenge is one of the responsibilities of muslim economists or muslim communities to continue to preserve islamic economic values in all their economic activities. besides, go-pay as digital wallet also fulfilled four islamic business ethics that has been explained by zulni and achiria (2020). the ethics consist of 4 axioms which the author concludes as follows: unity, fairness or justice, free will, and responsible. unity is when the services provided by digital wallet are the in same form despite of customers’s background. as for the fairness, digital wallet is not only meant for business transactions, but is also expected to become a wallet as a place for social funds so that the social transaction can be easily conducted trough digital wallet. next is the free will which means digital wallet is expected to work together with various halal merchants to be able to facilitate users in making transactions so that muslim users can feel safe when he transacts purchases with halal merchants to get the pleasure of allah. last is the responsibility where digital wallet as a financial digitalization is expected to be able to secure the nominal or balance of users who use their services such as the history of transactions using the digital wallet and also the security of user data. furtehrmore, garcia-swartz, hahn and layne-farrar (2006) in examining the empirical evidence of the move toward cashless society using cost-benefit framework found interesting result. the research concludes that when all key parties to a transaction are considered and benefits are added, cash and checks are more costly than many earlier studies suggest. in general,the shift toward a cashless society appears to be a beneficial one. journal of islamic economic laws-july, vol. 3, no. 2, 2020 145 financial ability, ease and security have a positive and significant impact on financial technology (go-pay) as documented in a research by kamil (2020). financial ability will make it easier to charge the electronic money (gopay), the more ease that is offered, the more interested in using, and also the greater security is offered, the greater a person’s interest in using to be cashless society. based on some of these previous studies, the more sophisticated technology can affect the form of the economic payment system which will have an impact on people’s lives today. in modern times, people prefer to use an electronic payment system instead of using a cash system transaction. this is due to the ease with which electronic payments are offered. therefore, the revolution in the cashless payment system needs to be continuously studied, in order to provide education and knowledge to the people of indonesia in their daily transactions. this study wants to try to examine it from a different point of view based on previous research. this research focuses more on the study of the islamic economic view of the existence of gopay non-cash transactions that are increasingly developing in indonesia and supports the realization of the cashless society. the researcher wants to see the position of the islamic economy when faced with the form of this transaction. literature review cashless society the term cashless society is a new term that has emerged along with technological developments. this technological development requires economists to be more creative and innovative. bank indonesia is making one of the efforts to support improvements in the efficiency and business climate, namely the national cashless movement (ncm) on august 14, 2014. ncm is intended to increase public awareness of the use of noncash instruments so that a proper cashless society who utilizes more cashless instruments can be gradually formed, especially in conducting transactions for their economic activities. cashless society is inseparable from the development of information dita anis zafani and moh. musfiq arifqi 146 technology which encourages more easy, innovative, efficient and safe to use means of payment (bank indonesia, 2014). cashless society is where people or communities no longer see money in its physical form such as pieces of paper or metal coins. it is rather replaced by electronic money as the medium of transactions. the emergence of the cashless society is also based on the fact that physical use of cash in transactions requires a large amount of money, especially in the issuance of physical money, circulation and distribution, maintenance and replacement of damaged/obsolete money. apart from the reasons above, there are several other factors that trigger the idea of the cashless society which includes (rif’ah, 2019): 1. awareness of several potential fraud and crimes caused by physical money, such as the circulation of counterfeit money. 2. public awareness that does not depend onn physical money will in fact facilitate the government in coordinating and supervising any financial and trade transactions through access to electronic reports that are difficult to manipulate. 3. transactions without involving physical transfer of money will also reduce the possibility of corruption and collusion against the transacting parties, especially those related to public services. 4. speed up the economic transactions. electronic money as an innovative and practical means of payment is expected to help in smoothing payments for mass, fast, and micro economic activities, so that its development can further be used in any other transactions such as in highway payment, railways, public transports, minimarkets, food courts and even the parking services.electronic money in indonesia is still not massively used. according to bank indonesia, as of january 2020, the number of electronic moneysin circulation was still 313,785,298 billion rupiah. this is totally different from developed countries such as china which had already gone cashless (kasali, 2018). bank indonesia showed special attention to electronic money by presenting the quick response indonesia standard (qris) to make it easier for people to transact via digital. journal of islamic economic laws-july, vol. 3, no. 2, 2020 147 its legitmation comes from regulation of the board of governors number 21/18 / padg / 2019 concerning the implementation of the national standard quick response code for payment. quick response indonesia standard is a qr code payment standard set by bank indonesia to be used in facilitating payment transactions in indonesia using only one qr code. as a result, one qr code can be used for all digital payment platforms. gopay has become a registered platform in it. thus, as we can see, in order to make indonesia a cashless society, support, competence of its human resource, and optimistic mindset from both the government and indonesian people is absolutely needed. medium of exchange in islam the medium of exchange is one of the most important things to fulfill life. in islamic economics, money is often associated with the terms dinar and dirham. muslims use the word dinar to denote currency made of gold, while the word dirham to denote a medium of exchange made of silver. they also used the word wariq to denote silver dirhams and the word ‘ain to denote gold dinar. meanwhile, the word fulus (copper money) is an additional medium of exchange used to buy cheap goods (hasan, 2005). in addition, some muslim scientists such as abu ubaid, imam ghazali, ibn rushd and ibn qayyim identified money as a measure of price. abu ubaid stated that dirham and dinar are the value of the price of something while in the opposite everything else cannot stand as valuation of those two (abu ubaid, 1988). imam ghazali emphasized that allah created the dinar and dirham as an intermediary judge between all assets so that they could be measured by both. it is said “this camel equals 100 dinars, this is the size of this za’faran oil equals to 100”. both are approximately equal to one size, so they both have the same value. ibn rushd stated that when it is difficult for someone to find the equivalent value between different items, use dinars and dirhams to measure them. if someone sells a horse with clothes, the value of the horse’s price for several horses is the value of the clothes for several clothes, so if the horse is worth 50, of course the clothes dita anis zafani and moh. musfiq arifqi 148 must also be worth 50. ibn qayyim said that dinar and dirham are the price values of commodity goods. thus the price value must be a known measurement, so it must be specific and accurate with no upward nor downward fluctuation. this is because if the unit of price value can go up and down like a commodity itself, of course it will no longer have a unit of measure that can be confirmed to measure the value of the commodity (a. a. karim, 2015). money is also a legitimate medium of transaction when the states declare it. umar bin khattab when he was caliph once aspired to issue a policy of making dirhams from camel skin. this history isquoted in tafsir al-shan’any which read “i wanted to make dirham money from camel skin”. then he was told” then, there will be no more camels.”then umar gave up his mind (alharitsi, 2006) here there is an affirmation of the tradition (‘urf) in accepting money. money is not limited to the two existing currencies (dinar and dirham). money is also a storage medium for value, because people who get money sometimes do not spend it all at one time, but they set aside a portion to buy goods or services they need at the time they want, or they save it for unexpected things such as illness. suddenly or face unexpected losses (hasan, 2005). from the description above, money can be distinguished in three ways: a. the definition of money in terms of economic functions as a standard measure of value, medium of exchange, and pending means of payment. b. by looking at its characteristics, money is everything that is widely accepted by each individual c. in terms of laws and regulations, as anything that has legal force in settling liability obligations. ibn taymiyyah expressed his opinion in majmu ‘al-fatawa that there is no natural or shar’i limitation regarding the use of dinars and dirhams rathere the reference is to custom (‘ adah) and agreement. this is because basically the purpose of people using dinars and dirhams is not related with the substance, but as a standard for the object of the transaction they do (ibnu taimiyah, 2002). physical dinars and dirhams are only used as journal of islamic economic laws-july, vol. 3, no. 2, 2020 149 a means to make transactions. therefore, the dinar and dirham (only) functioned as a tsaman (price, standard of value). unlike other assets (goods), goods are intended to be used physically. therefore, goods must be measured in natural or syar’i terms (measurements). only means that are physical or in form are not the end may be used to achieve the goal, regardless of form. islamic economics islamic economics is an alternative economic system that is able to offer a more ethical economic management concept. this islamic economic system departs from the awareness of the importance of an ethical economy, while other economic systems, both capitalism and socialism, depart from interests. capitalism departs from individual interests (selfishness) and socialism departs from collective interests (collectivism). with such ethics based economics, religion does not become a tool for an interest. the task of the people is to think that their religion demands an ethical economy but is still responsive to real interests (kuntowijoyo, 1997). in the islamic economic system all forms of activity are always associated with worship. this worship then affects all forms of production, consumption, distribution and other economic interactions. specifically, there are at least three main motives in islamic economic behavior, namely mashlahah (public interest), needs and obligations (khan, 1997). meanwhile, according to al-shadr (1994), islamic economics consists of three basic components that differentiate it from other economic system theories, namely: a) the principle of multi-faceted ownership, b) the principle of economic freedom within set limits, c) the principle of social justice. metwally (1995) explains in detail some of the principles in islamic economics that make it different from other economic systems as described below: 1. in islamic economics, various types of resources are viewed as gifts or entrusted by god to humans. humans must make use of them as efficiently and optimally as possible in production to meet the welfare together in the world, namely for themselves and others, and most importantly these dita anis zafani and moh. musfiq arifqi 150 activities will be accounted for in the hereafter. this concept has important implications regarding ownership of assets or means of production. 2. islam recognizes private ownership within certain limits, including ownership of means of production or factors of production. however, individual property rights are not absolute and conditional. individual ownership in islam is limited by the interests of society. if the country wants a certain asset, then the owner of the asset must release it. this is one of the principles contained in the shari’ah which states that individual interests must be number two compared to the interests of society as a whole. 3. the main driving force of islamic economics is cooperation, which is very different from the free market system in achieving a level of balance in various fields. cooperation is an islamic spirit to satisfy buyers and sellers of goods, services or production factors. 4. the role of ownership of wealth / assets in an islamic economy is different from other economies. pure satisfaction obtained from the control of private wealth in other economic systems will produce human beings who are selfish. whereas in islam, personal wealth must play a role as productive capital which will increase the amount of national production and improve the welfare of society. this concept of ownership is the opposite of the capitalist system. therefore, the islamic economic system rejects the accumulation of wealth controlled by several people. 5. in a free market economy, industrial ownership is dominated by monopoly and oligopoly, and these industries are very important to the public. islam guarantees the ownership of society and its planned use for the benefit of many people. 6. a muslim must believe that all his activities in this world will be accounted for later in the hereafter. therefore, islam denounces excessive profit, dishonest trade, unfair treatment, all forms discrimination and oppression. journal of islamic economic laws-july, vol. 3, no. 2, 2020 151 methods the method used in this research is descriptive qualitative. qualitative method is research that aims for limited objects while under this circumstance it can come up with an in-depth data analysis (bungin, 2001). meanwhile, descriptive research, according to sugiyono sugiyono (2014), is a systematic description of the theory and research results relevant to the variables studied.the type of research used is library research, namely the technique of collecting data through libraries, in the form of books, magazines, internet media and some relevant references. after the data was collected, the researcher analyzed it qualitatively. qualitative data analysis can be carried out starting from organizing the data, sorting it into manageable units, looking for and finding patterns, finding what is important and what is learned and deciding what to tell others (moeloeng, 1989).the steps taken include data reduction, data display, data verification and conclusions. results and discussion gopay transaction services the use of electronic money as a medium of transaction in indonesia is officially legalized by bank indonesia under bank indonesia regulation number 20/6/pbi/2018 on electronic money. it is stipulated there that electronic money is a legal payment instrument in accordance with prevailing elements. the regulation is reinforced by the fatwa of the national sharia council of the indonesian ulama council no: 116/dsnmui/2018 onislamic electronic money, that all electronic money administrators consist of: 1. issuers, both bank and non-bank 2. electronic money holders, who are the users of electronic money 3. principals, system managers among members 4. acquirers, non-bank institutions cooperating with traders so that they are able to transact from electronic money 5. merchants, sellers of goods / services who accept electronic money payment transactions dita anis zafani and moh. musfiq arifqi 152 6. clearing operators, banks or non-banks that calculate the rights and obligations of each issuer 7. the final settlement organizer, is responsible for the final settlement of financial rights and obligations 8. a third party digital financial service agency in collaboration with the issuer. gopay is an electronic money and digital wallet founded by pt. dompetanakbangsa which is legalized and supervised by bank indonesia. gopay has a function as physical money and can be used as a valid payment instrument with the same value as the first cash deposit in the gopay account (danuarta & darma, 2019). gopay is an account that is given to gopay users after registering. gopay is a payment transaction media that connects consumers and businesses with several services used (ferdiana & darma, 2019). here are some terms contained in gopay transactions, namely: 1. top-up. top-up is a service to top up your gopay account balance that can be done via a gojek driver, transfers via certain banks, or through institutions or platforms specified by pt. dompet anak bangsa as the founder of gopay. 2. payment. gopay can be used to make direct payments on transaction bills where each payment will automatically reduce the balance by the same payment amount. 3. transfer of fund. transfer of funds is a gopay service for transferring funds to other gopay accounts which will automatically reduce the transferer’s balance and will increase the amount of the balance of the transfer recipient by the same amount. gopay is made by the gojek ride-hailing application founded by nadiemmakarim.gojek has received funding from several companies, including google, tencent holdings, temasek holdings, astra interansional and meitundianping with a total funding of usd 585 million (bpsi, 2018). gojek combines several features and services in one application based on needs, namely, 1) daily need, such as gomassage, goclean, gofitness; journal of islamic economic laws-july, vol. 3, no. 2, 2020 153 2) food and fmcg, gofood, goshop, gomart, gomart, gomed, gomall; 3) news and entertainment, such as gotix, goplay, gogames, gonews; 4) payments, such as gopulsa, gopoints, gonearby, gobills, gogive, gosure; 5) transport and longistic, such as goride, gocar, gobluebird, gosend, gobox. costumers prefer to use gopay in gojek due to its offered promotions. in addition to that, it is easy to use and speed up the transaction process by eliminating the difficulty of finding change. besides, gopay is a safe and trusted platform with a certificate license from bank indonesia since october 2017. gopay transactions have contributed 30% of the total number of electronic money transactions in indonesia. in 2017, gojek was awarded as the most proactive fintech company in supporting the national non-cash movement(raharja, muhyi, & herawaty, 2020). gopay transactions in islamic economics the pattern of transaction innovation in accordance with islamic economics is always based on al-quran, hadith and ijma’. all forms of business transactions which comply the principles of islamic economics always pay attention to individual rights that must be protected as well as to uphold a high sense of solidarity with the community (a. karim, 2013). basically the contract contained in the gopay transaction or on other similar fintech does not contradict islamic economic principles. this refers to one of the principles of muamalah, namely ‘an-taradhin which means mutual approval between the two parties. it is on this basis that the contract or transaction between the two parties becomes valid (arner, 2014). however, it is not enough to analyze gopay transactions based on the rules of an-taradin. this requires a more detailed study if it is related to the existing islamic economic principles. the basic principle of islamic economics is based on ethics in all its activities. here, gopay transactions have provided ethical code of conduct that consumers should comply with. the code of ethics is none other than to regulate the patterns of services provided to consumers, such as top-ups, payment services and dita anis zafani and moh. musfiq arifqi 154 others. from an islamic economic point of view, all forms of services in gopay can be said to be ethical, because no one is disadvantaged in their activities. considering that the gopay payment system has the same function as cash, bank indonesia has set several provisions that must be fulfilled by banks and non-bank institutions in conducting gopay transactions. among the provisions are these three elements:1) in issuing gopay, it must be based on the value of money that has been previously deposited to the issuer; 2) value of money is stored electronically in a media server or chip; and 3) the value of electronic money managed by the issuer is not a deposit as referred to in the law on banking. in addition, bank indonesia has also set several regulations that must be fulfilled by all e-money operators including gopay transactions, such as the obligation to implement risk management, reporting, system security and others. furthermore, gopay transaction service meets several standards in the islamic economy. among them, based on its function, gopay already has a function as a means of exchange in the islamic economy, namely as a standard measure of value, a medium of exchange and a deferred payment instrument (karim, 2015). in addition, gopay is widely accepted by each individual and has been legitimized by law in all its activities. the suitability of practices between gopay transactions or electronic money and the function of the cash money exchange tool has been confirmed by the fatwa of the national sharia council of the indonesian ulama council no: 117/dsn-mui/ ii/2019concerning information technology-based financing services based on sharia principles. bank indonesia also regulates electronic money as a legal payment instrument by complying with the following principles (see regulation 20/6/pbi/2018): 1. does not pose a systemic risk. 2. operations are carried out based on sound financial conditions. 3. strengthening consumer protection. 4. businesses that are beneficial to the indonesian economy. 5. prevention of money laundering and terrorism financing. journal of islamic economic laws-july, vol. 3, no. 2, 2020 155 in terms of the contract used in gopay transaction service, according to the opinion of researchers, gopay transactions are included in the wadiah contract. the reason is, because gopay is a wallet to pay for all transactions made by go-jek and merchants who accept transactions via gopay. the implementation of the qris system makes it easier for people to pay from various platforms using just one qr code wheregopay is included in it. customers only deposit their money in gopay which will later be used in transactions. so that the contract that occurs to the customer and gopay is wadi’ah. in gopay there is no addition or interest to the gopay balance when the customer top-ups. there are several provisions and limitations of the wadi’ah contract that must be fulfilled which are: 1. the nominal amount of electronic money is deposited. this means that holders can make usegopay at any time. 2. the nominal amount of electronic money deposited may not be used by the recipient of the deposit (issuer), unless with the card holder’s permission. 3. the relevant authorities are obliged to limit the issuer in the use of funds deposited by cardholders. 4. the use of funds by the issuer may not conflict with sharia principles and laws and regulations. based on some of the islamic economic principles above, the cashless society’s activities on gopay transaction need to be continuously improved. this is one form of support for the ease of electronic transactions in indonesia, because at this time it is possible that world economic competition has begun to shift to electronic systems. in addition, indonesia is facing a world trade war that continues to innovate along with technological developments. the cashless society not only supports ease of transactions, but also supports the smooth operation of bank indonesia’s duties in maintaining monetary stability and supports the government’s efforts to prevent corruption or money laundering. dita anis zafani and moh. musfiq arifqi 156 conclusion based on explanations on gopay transactions and cashless society above, the researchers conclude that gopay transaction practice is in accordance with the rules in islamic economics. as a result, this study asserts that the cashless society’s activities through gopay transactions can be said to be in accordance with the principles of islamic economics. this can be proven in the transaction that there is no party that loses money between the customer and the service provider, and there is no interest in the transaction. this gopay transaction can make transactions easier. there are provisions that must be fulfilled by banks and non-bank institutions in conducting gopay transactions. among them include three elements: 1) in issuing gopay, it must be based on the value of money that has been previously deposited to the issuer; 2) value of money is stored electronically on a media server or chip; 3) the value of electronic money managed by the issuer is not a deposit as referred to in the law on banking. in terms of the contract used in the gopay transaction service, the researcher states that gopay transactions are included in the wadiah contract. the reason is, because gopay is a wallet to pay for all transactions made in go-jek as well as certain merchants that have accepted digital payments. customers only deposit their money at gopay to make transactions on go-jek so that the contract that occurs to the customer and gopay is wadi’ah. in gopay there is no addition or interest to the gopay balance when the customer top-ups. references abu ubaid, a. bin s. 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(2020). implementation of islamic business ethics in digital wallet: literature review approach. ekbis: jurnal ekonomi dan bisnis, 3(1), 232– 241. journal of islamic economic laws vol. 3, no. 2 july 2020: 86-107 86 the impact of roa, bopo, fdr, car, npf on mudharabah profit sharing rate bramandita1 and harun2 1universitas muhammadiyah surakarta 2universitas muhammadiyah surakarta email: bramamufc@yahoo.co.id, har179@ums.ac.id abstract this research was conducted to analyze the effect of return on assets (roa), operational cost of operating income (bopo), financing deposit ratio (fdr), capital adequacy ratio (car), and non-performing financing (npf) on the level of profit-sharing at mudharabah banks syariah with case study of bni syariah bank in indonesia. the data used is using the data recorded in the financial services authority and financial reports published in 2016-2018. the data analysis method that will be used is ordinary least square ols after a series of classical assumptions tests. this research results that were partially finding the independent variables roa, bopo, fdr, and car have a significant effect. meanwhile, the npf variable does not have a significant effect on the mudharabah profit sharing variable. this study shows that the npf ratio is a picture of non-performing loans that do not significantly affect mudharabah profit-sharing, emphasizing the superiority of sharia contracts, especially mudharabah contracts. keywords: return on assets (roa), operational costs operating income (bopo), financing deposit ratio (fdr), capital adequacy ratio (car), and non-performing financing (npf), mudharabah profit-sharing financing. introduction banks can provide loans to people who need funds. the public can directly get a loan from the bank, as long as the borrower can meet the requirements provided by the bank. banks have a role in two ways, namely collecting funds directly from people who journal of islamic economic laws-july, vol. 3, no. 2, 2020 87 are excess funds (surplus units), and channeling funds directly to people who need funds (deficit units) to meet their needs (ismail, 2011). banks in indonesia are divided into two, namely conventional banks and islamic banks. in each bank’s system, conventional banks rely on the interest system, while islamic banks that use islamic sharia rely on the profit-sharing system that has been agreed by two parties. law no. 10 of 1998 and its implementing regulations are the development of bank business activities based on sharia principles. in-law no. 10 of 1998, regulations on the implementation of financing based on the sharia system are further emphasized and expanded again in the legislation. the law also states that the position of islamic banks in indonesia is legally starting to become influential even in that it is written that conventional banks are allowed to open sharia-based units (ismail, 2010). support for sharia banking is getting stronger with the passing of law no. 21 of 2008 concerning islamic banking(antonio, 2011). in october 2018, there were 13 bus (sharia commercial banks) and 25 uus (sharia business units) with an average total asset of rp 454,249 billion in 2018 and successfully absorbed more than 56,691 workers. this data does not include data from the islamic people’s financing bank (bprs). one of the significant supports from the indonesian government is the implementation of office channeling policies. it also accelerated government support in the form of hajj account management that will be entrusted to sharia banking. the presence of new investors will encourage the growth of sharia business(“statistics on sharia development,” 2018). according to mawardi (2008), in novianti et al. (2015), factors that are considered by the public to invest their funds in islamic banks are the profit-sharing return factor. that is, fund depositors will always consider the level of return earned in investing. if the level of profit-sharing of an islamic bank is too low, customer satisfaction with the islamic bank will decrease, and the customer will likely transfer the funds to another bank. such customer characteristics make the profit-sharing level a bramandita and harun 88 determining factor for the success of islamic banks in collecting third party funds (dpk). based on the background and formulation of the problem, the purpose of this study was to determine the effect of the variable roa, bopo, fdr, car, npf on mudharabah profit-sharing in bni syariah, 2016-2018 period. the results of this study are expected to be useful and broaden knowledge and references for academics and stakeholders in the islamic economic environment. literature review mudharabah profit sharing profit-sharing is the profit or the results obtained from the management of funds, both investment and sale and purchase transactions provided by customers. the principle of profit-sharing, according to wiroso (2005), consists of (1) determination of the magnitude of the risk of profit-sharing made at the time of the contract based on the possibility of profit and loss. (2) the size of the profit-sharing ratio is based on the amount of profit obtained. (3) the amount of profit-sharing distribution increases following the increase in the amount of revenue. (4) no one doubts the profit sharing. (5) revenue sharing depends on the profit of the project being carried out. if the project does not benefit, the loss will be shared by both parties. profit-sharing is a critical characteristic for islamic banks, so in their operational mechanism, islamic banks use principles under islamic law. the principle of profit-sharing is an instrument that distinguishes the operations of islamic banks with conventional banks. so that the calculation is also far different from the calculation of interest used as a basis for conventional banks, based on the above understanding, it can be concluded that islamic banking in its operations does not recognize the term usury (interest). instead, it uses profit and loss sharing or better known as profit sharing(yudiana, 2015). the principle of profit-sharing in al-mudharabah differs from the principle of fixed interest. the bank will collect the recipient journal of islamic economic laws-july, vol. 3, no. 2, 2020 89 of financing (the customer) a fixed amount regardless of the profit generated by the customer. there are two profit-sharing calculation systems in islamic banking, namely: 1. profit-sharing is a calculation of profit-sharing, which is the net profit of the total revenue after deducting the costs incurred for that income. in islamic banking, profit sharing is known as a profit and loss sharing, meaning that is where the division between profits and losses from operating income. 2. revenue sharing is the process of dividing revenue that is carried out before calculating operational costs borne by the bank. in another sense, revenue has a meaning, namely, the results of sales revenue made both from goods or services to produce sales revenue. in addition to profit-sharing from mudharabah deposits, there are several service products in islamic banking, including the following: mudharabah profit sharing, according to ismail (2011), is an investment fund that is placed by a customer that is not contrary to islamic principles and can only be withdrawn at a particular time, under an agreement between the bank and the investor’s customer. a unique form of financial contract that has been developed to replace the interest mechanism in financial transactions is the profit-sharing mechanism. the profit-sharing mechanism is a core product for islamic financial institutions, such as islamic banks. because islamic banks explicitly prohibit the application of interest rates on all financial transactions(muhammad, 2014). according to muhammad (2014), in general, the principle of islamic banking profit sharing can be done in 4 (four) central contracts, but the most widely used in islamic banking is al-musyarakah, al-mudharabah. pillars in the mudharabah transaction include (1) the existence of a capital owner (shahibul maal), (2) mudharib (implementation or businessman, (3) capital (maal), (4) work or business, (5) profit, and (6) ijab kabul. bramandita and harun 90 mudharabah profit sharing financing mudharabah is a cooperation agreement in which a person becomes a shahibul maal owner of capital or his wealth to the manager (mudharib) to be managed in the form of a business or business. in this context, the financial institution acts as shahibul maal (the owner of the funds) to finance 100% of the needs of a business project. in contrast, the entrepreneur who gets the funds, serves as the mudarib (fund manager). the business period, procedures for refunding, and sharing of profits are regulated by both parties. in conducting business, financial institutions do not participate in business management. the financial institutions here are only business supervisors. the amount of funding must be precise (cash) and not receivable. financial institutions here bear all the losses that occur when the business is carried out except when mudharib make a deliberate mistake, or not by the agreement. mudharabah profit sharing financing is financing provided by financial institutions to other parties for a productive business(indonesian, nd). the following are the characteristics of the provisions for financing profit-sharing mudharabah: a. mudharabah profit sharing financing is intended for a halal productive enterprise. b. islamic financial institutions or islamic banks only finance 100% of business needs, and customers act as mudarib. c. during the period of the business, the procedures for controlling and sharing profits are determined at the time of the initial agreement. d. islamic financial institutions or islamic banks do not participate in business management but have rights in business supervision and business coaching. e. the agreed amount of funds must be definite and not in the form of receivables. f. islamic financial institutions or islamic banks bear all losses except if mudharib commits intentional, negligent, and violates the agreement. journal of islamic economic laws-july, vol. 3, no. 2, 2020 91 g. in principle, mudharabah financing is no guarantee. so that mudarib does not make any deviations, the islamic financial institution may ask for guarantees from mudarib or a third party. guarantees can be disbursed if mudharib is proven to have violated the contract. the effect of roa on mudharabah profit-sharing rate according to hanafi (2009), roa is a profitability ratio. this ratio measures companies’ ability to generate profits at a certain level of sales, assets, and share capital. according to khairiyah & sunaryo (2012), roa is one of the profitability ratios used to measure the effectiveness of the company in generating profits and utilizing the total assets it has. the higher the value of roa, the greater the company’s performance because of the greater company return. based on the understanding of the experts above, it can be concluded that roa illustrates the ability of banks to manage funds invested and generate profits. novianti et al. (2015) found to yield positive and not significant roa findings on the mudharabah profit-sharing rate. whilehfiah et al. (2016)m generating roa has a positive and significant effect on the level of mudharabah profit sharing. otherwise, rahmawaty & tiffany (2015) produce findings that roa has a negative and not significant effect on the level of mudharabah profit sharing. the influence of operational income operational cost (bopo) ratio against mudharabah profit-sharing rate according to rahayu & bustamam (2016), bopo is the ratio between operating costs and operating income. the operating cost ratio is used for the distribution of bank costs in carrying out its operations. because the main activity of a bank is in principle acting as an intermediary that is raising funds and channeling funds, the lower the bopo means, the more efficient the bank is in controlling its operational costs. with the existence of cost efficiency, the higher profits the bank will get. bramandita and harun 92 bopo (operating expenses to operating income), a ratio often called the efficiency ratio, is used to measure the ability of bank management to control operational costs to operating income. based on the opinion of the experts above, it can be concluded that the bopo is a ratio that shows the efficiency of the bank’s operational performance. if the bopo ratio is small, the bank’s income will increase so that the profit-sharing that will be received by customers will increase as well, and vice versa. farianto (2014) produces findings that bopo has a positive and not significant effect on mudharabah profit sharing. otherwisekhairiyah & sunaryo (2012); rahayu & bustamam (2016) found that bopo had a negative and insignificant effect on the level of mudharabah profit sharing. effect of financing to deposits ratio (fdr) against the rate of profit-sharing mudharabah according to tosjahdeini (1999), financing to deposit ratio (fdr) is a comparison between financing provided by banks with third-party funds that have been successfully mobilized by banks. fdr is a ratio that illustrates the ability of islamic banks to return funds to third parties through profits derived from mudharabah financing(setiawan, 2012). rahmawaty & tiffany (2015)making findings that fdr has a negative and not significant effect on the level of mudharabah profit sharing. on the other hand, other research shows that fdr has a positive and significant effect on mudharabah profit-sharing rates(gundari, 2015; harfiah et al., 2016). effect of capital adequacy ratio (car) on the rate of profitsharing mudharabah according to umiyati & syarif (2016), car is the ratio of bank performance to measure the capital adequacy of banks in maintaining capital and controlling the risks that arise that can affect the amount of capital because capital is an essential factor in a bank’s business unit. the higher the car value (according journal of islamic economic laws-july, vol. 3, no. 2, 2020 93 to bi regulation 8%), the better the financial performance, but if the car is lower than 8%, the financial performance is reduced. based on the expert opinion above, it can be concluded that car is a capital ratio that illustrates banks’ ability to control the likelihood of risks that occur so that their capital can be fulfilled. so, the higher the car ratio, the rate of bank profits will also increase, and the level of profit-sharing that will be given to customers will increase, and vice versa. rahayu (2015) produces car findings that have a positive and not significant effect on the level of mudharabah profit sharing. findings of positive effects are also found in gundari (2015), but car is significant on the level of mudharabah profit sharing. the effect of non-performing financing (npf) on the rate of profit-sharing of mudharabah npf is the ratio between problem financing and the total financing channeled by islamic banks. npf is the ratio between the amount of financing that is uncollected or classified as non-current with substandard, doubtful, and lousy quality(arifa, 2008). if the npf is high, the probability decreases, and the rate of profit sharing decreases. conversely, if the npf goes down, then the probability will rise, and the rate of profit sharing will also increase. the npf standard is less than 5%. based on the opinion of experts, npf can conclude that financing is terrible or problematic. the higher the npf ratio, the bank’s income will decrease so that the profit-sharing that will be given to customers will also decrease. conversely, if the npf ratio is low, then the bank’s income will be high so that the profitsharing that will be given to customers will decrease. novianti et al. (2015) indicate that npf has a positive and not significant effect on the level of mudharabah profit sharing. research framework based on the development of hypotheses, a research model can be built as follows: bramandita and harun 94 figure 1. research framework source: (iryana, 2017) hypothesis the hypothesis is a temporary conjecture of a study. based on the discussion of various theories and results of previous studies, hypotheses are formulated as follows: table 1: previous research hypotheses hypothesis statement h1 return on assets (roa) has a positive effect on the profit sharing rate of mudharabah deposits. h2 bopo negative influence over profit-sharing rate mudharabah deposits. h3 fdr has a negative effect on the profit-sharing rate of the easyarabah deposit. h4 car negatively influences the profit sharing rate of mudharabah deposits. h5 npf has a negative effect on the profit sharing rate of mudharabah deposits. journal of islamic economic laws-july, vol. 3, no. 2, 2020 95 methods object of research this study uses a quantitative approach. the dependent variable in this study is roa, bopo, fdr, car, npf. the independent variable is mudharabah profit-sharing financing. this study intends to analyze the effect of roa, bopo, fdr, car, npf on the mudharabah profit sharing of the syariah commercial bank case study at bni syariah from 2016 to 2018. types and data sources the type of data used is secondary data in the form of time series data in january 2016 december 2018. the data is obtained from the monthly publication financial statements website published by the financial services authority on the official website www.ojk.go.id. the data used are mudharabah profit-sharing data and roa, bopo, fdr, car, npf ratio data at sharia commercial banks case study at bni syariah. population and samples the population in this study is the publication of mudharabah profit-sharing financing statistical data on islamic commercial banks with the sample used is the publication of monthly islamic commercial statistics. data from january 2016 to december 2018 so that 36 months of monthly data have been obtained. definition of variable operations operational variables are aspects of research that provide information to us about how to measure variables. operational definitions are scientific information that significantly helps other researchers who want to conduct research using the same variables. 1. dependent variable the dependent variable used in this study is mudharabah profit sharing 2. independent variables the independent variables used in this study are: a) return on assets (roa) http://www.ojk.go.id bramandita and harun 96 b) operating costs against operating income (bopo) c) financing to deposit ratio (fdr) d) capital adequacy ratio (car) e) non-performing financing (npf) analysis tools and methods analysis of the data in this study is a quantitative analysis expressed by the numbers by processing time-series data through the e-views program. the data analysis method used to determine the effect of the variables that affect mudharabah profit-sharing financing at islamic banks is used multiple regression with the partial adjustment model (pam), where the mudharabah profitsharing variable is the dependent variable. the variables roa, bopo, fdr, car, npf, are influencing variables (independent variables). the author modifies the model from iryana, sofiyani. roa, bopo, fdr, car, npf against sharia mudharabah profit sharing for case studies at bni syariah. using the ordinary least square (ols) multiple regression analysis tool, the estimation equation is as follows: y = a + b1x1 + b2x2 + b3x3 + b4x4 + b5x5 + e where : y = mudharabah profit sharing a = constant b = regression coefficient x1 = roa x2 = bopo x3 = fdr x4 = car x5 = npf then the authors change the model, namely the partial adjustment model (pam) approach, the formulation of the estimator model is as follows: journal of islamic economic laws-july, vol. 3, no. 2, 2020 97 bhmt = α0 + α1roat + α2bopot + α3fdrt + α4cart + α5npft + t where : roet = mudharabah profit sharing (millions of rupiah) roat = return on assets (%) bopot = operational costs operating income (%) fdrt = financing deposit ratio (%) cart = capital adequacy ratio (%) npft = non-performing financing (%) t = year before applying regression, it must be tested by the parameter estimator model and classic assumption tests. results and discussion estimated results in this study, as stated that, to determine the effect of roa (return on assets), bopo, fdr (financing debt ratio), car, and npf on mudharabah profit sharing for the period january 2016 december 2018, ordinary least square regression analysis ( ols) with the econometric model as follows: y = a + b1x1 + b2x2 + b3x3 b4x4 + b5x5 + e where: y = mudharabah profit sharing a = constant b = regression coefficient x1 = roa x2 = bopo x3 = fdr x4 = car x5 = npf e = year bramandita and harun 98 table 2. model estimation results foreign reserves in indonesia 1999-2018 y = -50241.81 + 3071,710 x1t + 333.5557 x2t + 628.3732 x3t -1157,604 x4t + 199.9311 x5t (0.0000) ** (0.0068) ** (0.00000) ** (0.0000) ** (0.6857) r2 =0.998543; dw-stat =1.518870; f-stat =4111,242 sig. f-stat =0.000000 diagnosis test (1) multicollinearity (vif test) x1 = 5.185230; x2 = 3.857771 ; x3 = 7.335192 ; x4 = 5.056882 ; x5 =2.962333 (2) autocorrelation (breusch godfrey test) χ2 (3) = 3.573337 sig (χ2) = 0.3114 (3) normality (berque jarque test) χ2 (2) = 2.152166 sig (χ2) = 0.340758 (4) heteroscedasticity (white test) χ2 (20) = 20,20416 sig (χ2) = 0.4452 (5) linearity (ramsey reset test) f (3, 127) = 0.003799 sig (f) = 0.0699 source: {bps, processed} note: * significant atα= 0.01; ** significant toα= 0.05; *** significant toα= 0.10; numbers in parentheses are empirical probabilities (p values) t-statistics. classic assumption test multicollinearity test the multicollinearity test used in this study is the vif test. if vif> 10 then there is a problem in the variable, conversely if vif <10 then there is no multicollinearity problem table 3. multicollinearity test results variable vif criteria conclusion roa (x1) 5.185230 <10 no multicollinearity problems. bopo (x2) 3.857771 <10 no multicollinearity problems. fdr (x3) 7.335192 <10 no multicollinearity problems. car (x4) 5.056882 <10 no multicollinearity problems. npf (x5) 2.962333 <10 no multicollinearity problems source: data processed journal of islamic economic laws-july, vol. 3, no. 2, 2020 99 residual normality test the residual normality test in this study uses the jarque bera (jb) test. if ho is accepted if the value of p (p-value), probability, or empirical statistical significance is jb> 0.05, then the data is concluded to be normally distributed. in contrast, if jb <0.05, ho is rejected, the data concluded are not normally distributed. from table 2, it can be seen that the jb statistic is 0.340758 (> 0.05), so ho is accepted, which can be concluded that the data is typically distributed. heteroscedasticity test heterokedastisitas test in this study uses the white test, where ho is accepted if the probability or empirical significance of chi. square statistics> 0.05, then the data concluded there is a heteroscedasticity problem; conversely, if chi. square <0.05 then ho is rejected, the data concluded there is no heteroscedasticity problem in table 4.1, the chi. square white test probability is 0.4452 (> 0.05), so ho is accepted so that it can be concluded in the data there is no heteroscedasticity problem. autocorrelation test the existence test for autocorrelation, which will be discussed here, is the breusch-godfrey test. if h0 is accepted, there is no autocorrelation problem in the model. ho was denied there was an autocorrelation problem in the model. h0 is accepted if χ2 arithmetic or statistics χ2 ≤ χ2 (α, p), h0 is rejected if χ2 arithmetic or statistics χ2> χ2 (α, p). it can be seen in table 2, the chi. square white test probability is 0.3114 (> 0.05), so ho was accepted. it can be concluded that in the data, there is no autocorrelation problem. linearity test model specification test or linearity test, in this study, using the ramsey reset test. h0: linear model (correct bramandita and harun 100 model specification), ho: non-linear model (incorrect model specification). h0 is accepted if f arithmetic or statistics f ≤ f (α, p, nk), h0 is rejected if f arithmetic or statistics f> f (α, p, nk). in table 2, it can be seen that the value of empirical statistical significance of the ramsey reset f test is equal to 0.0699 (> 0.05). ho is accepted; it can be concluded that the model used is linear (valid model specifications). model goodness test model existence (f test) the existence test of the model uses the f test, wherein h0: β1 = β2 ... = β5 = 0, the model used does not exist and ha: β1 ≠ 0 | β2 ≠ 0 | ... | β5 ≠ 0, the model used exists. h0 is accepted if the statistical significance of f> α and h0 is rejected if the f ≤ α. this f test uses probability (f statistic) compared to α. if α> probability (f statistic), then all independent variables influence the dependent variable. from table 2, it can be seen the p-value, probability, or empirical statistical significance f of 0.0000 (<0.10); so ho is rejected, the conclusion of the model used exists, and overall / simultaneous independent variables affect the dependent variable. coefficient of determination (r2) the coefficient of determination (r2) shows the predictability of the estimated model. from table 2, you can see the value (r2) of0.998543. thus, 99.8% of the variation of the mudharabah profit-sharing variable can be explained by variations in the roa, bopo, fdr, car, and npf variables. in comparison, the remaining 0.2% is influenced by variations of variables or other factors outside the model. validity test of effect of independent variables the validity test of the effect used in this study is the t-test, h0: = 0; independent variable i dependent variable that is mudharabah profit sharing with the dependent variable. ha: ≠ 0; independent variable, it has a significant effect on the dependent journal of islamic economic laws-july, vol. 3, no. 2, 2020 101 variable. h0 is rejected if the statistical significance ≤ α = 0.05 and h0 is accepted if the statistical significance> α = 0.0. t-test results can be seen in table 4. table 4. effect validity test results variabel sig. t criteria conclusion roa (x1) 0.0000 <0.05 significant at α = 0.01 bopo (x2) 0.0068 <0.05 significant at α = 0.01 fdr (x3) 0.0000 <0.05 significant at α = 0.01 car (x4) 0.0000 <0.05 significant at α = 0.01 npf (x5) 0.6857 > 0.05 not significant source: data processed interpretation influence independent variable based on the results of the validity test, the influence of table 4.3 shows that all independent variables, namely the variable roa, bopo, fdr, and car, have a significant influence on the dependent variable that is the mudharabah profit sharing. while the npf variable has a positive but not significant effect on mudharabah profit sharing. the following are interpretations of the effect of significant independent variables on the dependent variable in the study: the roa variable has a regression coefficient of 3071,710. the pattern of the relationship between mudharabah profit-sharing variables and roa variables is linear-logarithmic, meaning that if mudharabah profit-sharing increases by one percent, roa profitability will increase by3071,710/ 100 = 30.72%. conversely, if roa drops 1%, mudharabah profit sharing will decrease by 30.72%. the bopo variable has a regression coefficient of 333,5557. the pattern of the mudharabah profit-sharing variable relationship with the bopo variable is linear-logarithmic. this result means that if the mudharabah profit share increases by one percent, the bopo will increase by333,5557/ 100 = 33.34%. conversely, if the bopo drops by 1%, the mudharabah profit sharing will decrease by 33.34%. bramandita and harun 102 the fdr variable has a regression coefficient of 628,3732. the relationship pattern of n variables for mudharabah profit sharing with fdr variables is linear-logarithmic, meaning that if mudharabah profit sharing increases by one percent, then fdr profitability will increase by628,3732./ 100 = 6.28%. conversely, if fdr goes down 1%, mudharabah profit sharing will decrease by 6.28%. car variable has a regression coefficient of -1157,604. the pattern of the relationship between mudharabah profit-sharing variables and car variables is linear-logarithmic, meaning that if mudharabah profit sharing increases by one percent, car profitability will decrease by-1157,604/ 100 = 11.58%. interpretation the economy based on the results of the study above, it states that mudharabah profit sharing is influenced by several variables, including roa, bopo, fdr, car, and npf variables. to find out the economic interpretation and influence of each variable will be explained as follows: effect of roa (x1) on mudharabah profit sharing based on the research results, roa or population has a positive and significant effect on mudharabah profit sharing. according to harfiah et al. (2016), roa has a positive and significant effect on the profit-sharing rate for mudharabah deposits. according to khairiyah & sunaryo (2012b) (roa is one of the profitability ratios used to measure the company’s effectiveness in generating profits and utilizing its total assets. the greater the value of roa, the greater the company’s performance because of the greater corporate returns. based on the above understanding, experts can be drawn roa conclusions illustrate the ability of banks to manage funds invested and generate profits. the roa situation in this study shows that the data obtained on average per year of profitability or financial gain from islamic banking is 1.22%. in 2016 amounted to 1.18%, in 2017 amounted to 0.96 and in 2018 amounted to 1.52%. although the benefits journal of islamic economic laws-july, vol. 3, no. 2, 2020 103 obtained are not so maximal, at least every year, the profits of islamic banks experience positive fluctuations. effect of bopo (x2) on mudharabah profit sharing based on the results of research that has been done, bopo has a positive and significant effect on mudharabah profit sharing. this finding is in accordance with research(iryana, 2017)concerning the analysis of the effect of roa, bopo, fdr, car, and npf on the profit sharing rate of mudharabah deposits. thesis. faculty of islamic economics and business, iain salatiga. the results of his research explained that partially bopo had a positive and significant effect. according to rahayu & bustamam (2016), bopo is the ratio between operating costs and operating income. the operating cost ratio is used for the distribution of bank costs in carrying out its operations. because the main activity of a bank is in principle acting as an intermediary the lower, the bopo means the more efficient the bank is in controlling its operational costs, with the existence of cost efficiency, the greater profits the bank will get. bopo (operating expenses to operating income), a ratio that is often called the efficiency ratio, is used to measure the ability of bank management in controlling operational costs to operating income. this means that bopo has an effect on profit-sharing in the mudharabah contract. for three years in the bopo research, it has continued to decline, meaning that bank management in controlling operational costs towards operating income is running well. profit-sharing obtained by islamic banking depends on the size of the bopo. effect of fdr (x3) on mudharabah profit sharing based on the results of research that has been done, fdr has a positive and significant effect on mudharabah profit sharing. this is in accordance with research harfiah et al. (2016), which shows the fdr has a positive and significant effect on the profitsharing rate of mudharabah deposits. fdr is a comparison between financing provided by banks bramandita and harun 104 with third-party funds that have been successfully mobilized by banks (rahmawaty & tiffany, 2015). according to setiawan (2012) is a ratio that illustrates the level of ability of islamic banks in returning funds to third parties through profits derived from mudharabah financing. comparison between financing and third-party funds, in this case, the customer or investor. fdr in this study is said to be positive and significant for mudharabah profit-sharing in islamic banks, meaning that financing provided by banks with third-party funds has been successfully mobilized by banks. profit-sharing using the mudharabah contract at fdr provides a return of profits for islamic banks. effect of car (x4) on mudharabah profit sharing based on the results of research that have been done, carnegative, and significant effect on mudharabah profit sharing. this is following the research that car has a negative but significant effect. according to umiyati & syarif (2016), car is the ratio of bank performance to measure the capital adequacy of banks in maintaining capital and controlling the risks that arise that can affect the amount of capital because capital is one crucial factor in a bank’s business unit. the higher the car value (according to bi regulation 8%), the better the financial performance, but if the car is lower than 8%, the financial performance is poor. based on the economic conditions in islamic banking in 2016 2018, the condition of the high car ratio and the level of bank profit will also increase, and the level of profit-sharing that will be given to customers will increase, and vice versa. effect of npf (x5) on mudharabah profit sharing based on the results of research that has been done, npf has no significant effect on mudharabah profit sharing. this is following research novianti et al. (2015), which shows the npf has no significant effect on the level of profit-sharing mudharabah. npf is the ratio between problem financing and the total financing channeled by islamic banks. based on the npf journal of islamic economic laws-july, vol. 3, no. 2, 2020 105 conditions for mudharabah profit-sharing in sharia banking in 2016 2018, the bad credit in this research is a case study at bni syariah bank in indonesia. this can be seen in the data that npf within 36 months is not so large, an average of 4.75% in the medium category, so that in bni syariah npf does not affect mudharabah profit sharing. conclusion based on the research and estimation results of the regression that has been done, this research shows partially the independent variables roa, bopo, fdr, and car have a significant effect. besides, the npf variable does not have a significant effect on the mudharabah profit sharing variable. further research is expected to modify the independent variables by adding variables or adding time series data. so it will be more objective and varied in conducting research. this study shows that the npf ratio that is a picture of non-performing loans does not significantly affect mudharabah profit-sharing, emphasizing the superiority of sharia contracts, especially mudharabah contracts. references antonio, m. s. (2011). bank syariah dari teori ke praktek. depok: gema insani. arifa, u. (2008). analisis pengaruh non performing financing(npf) dan financing to deposits ratio(fdr) terhadap persentase return bagi hasil deposito mudharabah mutlaqah pada bank muamalat indonesia. uin syarif hidayatullah jakarta. farianto, a. (2014). analisis pengaruh return on asset(roa), bopo dan bi-rate terhadap tingkat bagi hasil mudharabah pada bank umum syariah di indonesia tahun 2012-2013. 2. gundari. (2015). pengaruh tenaga kinerja keuangan terhadap tingkat bagi hasil mudharabah pada bank mega syariah indonesia tahun 2004-2013. jurnal profita, 3. hanafi. (2009). analisis laporan keuangan. yogyakarta. bramandita and harun 106 harfiah, l. m., purwati, a. s., & ulfah, p. (2016). the impact of roa, bopo, and fdr to indonesian islamic banks mudharabah deposit profit sharing. jurnal ekonomic, 15. indonesia, m. u. fatwa dewan syariah nasional. iryana, s. (2017). analisis pengaruh roa, bopo, fdr, car, dan npf terhadap bagi hasil mudharabah pada bank umum syariah indonesia 2012-2018. institut agama islam negeri salatiga. ismail. (2010). manajemen perbankan (edisi pert). jakarta: kencana. ismail. (2011). manajemen perbankan (cetakan ke). jakarta: kencana. khairiyah, a. i., & sunaryo, k. (2012a). analisis pengaruh return on asset (roa), bopo, dan suku bunga terhadap tingkat bagi hasil mudharabah pada bank umum syariah. jurnal ekonomi dan bisinis, 11. khairiyah, a. i., & sunaryo, k. (2012b). analisis pengaruh return on asset (roa), bopo, dan suku bunga terhadap tingkat bagi hasil deposito mudharabah. jurnal ekonomi dan bisnis, 11. muhammad, s. (2014). lembaga keuangan dan ekonomi islam. yogyakarta: ombak. novianti, n., badina, t., & erlangga, a. (2015). analisis pengaruh return on asset (roa), biaya operasional terhadap pendapatan operasional(bopo), suku bunga, financing to deposits ratio(fdr), dan non performing financing(npf) terhadap tingakat bagi hasil mudharabah (studi empiris pada bank umum syariah. rahayu, p. a., & bustamam. (2016). pengaruh return on asset(roa), bopo, dan suku bunga terhadap tingkat bagi hasil mudharabah pada bank umum syariah. ilmiah mahasiswa ekonomi akuntansi(jimeka). rahayu, s. (2015). pengaruh return on asset, bopo, suku bunga, dan capital adequacy ratio(car) berpengaruh journal of islamic economic laws-july, vol. 3, no. 2, 2020 107 positif dan tidak signifikan terhadap tingkat bagi hasil mudharabah. jurnal ilmiah mahasiswa s1 akuntansi universitas pandanaran, 1(2502–7697). rahmawaty, & tiffany. (2015). pengaruh return on asset(roa) dan financing to deposits ratio terhadap tingkat bagi hasil mudharabah pada bank umum syariah. jurnal dinamika akuntansi dan bisnis, 2. setiawan, a. (2012). analisis pengaruh kinerja keuangan dalam memprediksi pertumbuhan laba. 10. sjahdeini, s. r. (1999). perbankan islam. jakarta: pt pustaka utama grafiti. statistik perkembangan syariah. (2018). umiyati, & syarif. (2016). pengaruh prinsip bagi hasil dan kualitas pelayanan terhadap keputusan anggota menggunakan produk tabungan mudharabah. yudiana. (2015). analisis perbandingan kinerja keuangan bank konvensional dan bank syariah. jeam, 14. journal of islamic economic laws vol. 1, no. 1 july 2018: 53-77 53 an enquiry on fish selling culture at south sumatera: investigation from islamic perspective reno juwarno faculty of islamic studies, universitas muhammadiyah surakarta email: multazam.reno@yahoo.co.id abstract the diversity in indonesia makes each region having their model of live, behavior and the mode of transactions. south sumatera is one of those regions that have been practicing a way of fish sale which is different from others. fish is sold directly from a pit underneath water flow called lebung through an auction model. this different model of regular sale and auction evokes curiosity as to whether it conforms to shariah requirements or not. the purpose of this research is to investigate the habitual transaction of fish sale in this region. this paper will focus on the practice of people at seri kembang i village about the sale by carrying out qualitative approach in a field research involving observation, interview and documentation as the means for collecting data. all data collected will be analyzed through evaluation process by comparing the practice over the actual standard. we conclude that such practice is deemed to be non-permissible since it does not pass some of the standards, especially the garar element. we also provide some suggestion as the alternative of this habitual practice. keywords: lebung, garar, indonesia, fish sale introduction indonesia is a multi-culture country with 261 million of its citizen living in a separated place and various islands. the way journal of islamic economic laws-july, vol. 1, no. 1, 2018 54 of conduct in each region is highly different to the extent that two neighboring places might have different language (not to say dialect), preferable type of food, marriage custom, celebration days and many others. it is close to what we typically observe of the european countries which the member of it differs from one to another. as the distinctness of the cultures reaches many aspects of life, the manner of people selling and buying in some areas is different from others. it is south sumatera, one of indonesian province, which has that type of different manner in sale, specifically for fish commodity. south sumatera which prior to 1983 was governed by the classical type of inhabitant’s governance called marga has been changed into a modern type of administration by the establishment of a province in exchange of marga. marga afterwards become an autonomy body within south sumatera province which stands independently from country’s structural body. thus, it has no revenue post from government meanwhile the obligation to pay its employee still remains. marga has to recourse on exploiting their authorized land, one of which is by the way of selling fish with specific method called termed as fish selling in “lebung” the practice of fish selling in lebung is not only done by marga, but also has been practiced widely by citizen. while the ordinary fish selling can be found at the market, some people prefer to buy it from lebung auction. this widespread model of fish selling becomes norm lately and no people questioning regarding its conformity towards shariah standard for sale. lebung itself is a pit underneath a river, canal or any water channel whether it is naturally existed or artificially made by reno juwarno 55 human. fishes within lebung would then be sold to the people through auction model. before dealing the auction, buyer will make rough investigation on the fishes within lebung by catching it using fishnet. the price agreement is determined by this rough investigation and according to the wide of the lebung. this kind of selling has no clarity in the characteristic of the subject matters (i.e. the fish) since rough investigation which is done prior to make the dealing is highly possible to be misleading. islam puts big concern in buying and selling by emphasizing that the contract has to be done in fair manner. not knowing the subject matter in a contract will lead into unfair condition in which one of the party will borne the lose. thus, investigation on shariah conformity for the type of fish selling described above is important to enlighten people on how shall they conduct the fish selling according to the shariah principle. this in addition that selling fish within lebung is one of main business to which people lay their life upon it. this research will investigate the practice of south sumatera people in selling fish within lebung, specifically at seri kembang i village, ogan ilir region. using the qualitative approach for a field research, there will be three types of methods to collect the data needed, which are observation, interview and documentation. evaluation technique will be carried out to produce the result. thus, this paper will start with some literature review to show some previous related researches in the same field. the next session will be theoretical underpinning which will be used as the standard of shariah investigation. data and methodology will be presented after it, continued by elaborating the discussion and result at the following session. journal of islamic economic laws-july, vol. 1, no. 1, 2018 56 literature review the diverse culture in indonesia results in many types and manners in selling. each region has its uniqueness. a village in lamongan for instance, there is a practice of fish selling by the way of tebas. this tebas model is done by determining the lower and higher price based on the length and width of the pool. the auction comes next in which the price cannot be lower then the minimum price and must not exceed the upper limit. the next step uses lottery to decide the winner of the auction since in many cases there are number of buyers who agree on the same price. na’imah (2012) in his research concludes that there is no clarity over subject matter in such dealing. that is because the fishes are still inside the pool. besides of that, the fishes actually come naturally to the pool and neither nurture nor breeding is needed. however, the research concludes that the vagueness of subject matter is eliminated by showing evidences of subject matters by seller and buyer. thus, this kind of selling is shariah compliant. another type of fish selling model is found at a village in sleman. here, the selling is done through fishing with a limited time in an agreed pool. the subject matter which is fish is observed roughly prior of fishing to know the approximate quantity within the pool. the observation is of course based on the experience of the buyer. the price is determined here based on the time agreed and approximate quantity of fishes. however, the buyer can only take all the fishes if he is able to catch all of it in a given time agreed before. this type of selling seems to have no clear subject matter (garar) that could make the selling being prohibited. however, nurudin (2009) in his research finds this type of fish selling is permissible since it fulfils all the pillars of buying and selling in islam. apart of it, he gives some notes in the reno juwarno 57 end of his research which emphasizes the transparency from both parties and more thorough investigation from buyer part when quantifying the fishes within the pool. in addition to that, yudianto (2015) also did a research on how fisherman at rembang typically sells their fish. it is found that the middleman tends to be superior in determining the price so that results in forced condition for the fisherman part. besides, there is found indication on fraudulent exercise in measurement process. based on those facts, the conclusion of the research states that this type of sale is not shariah compliant and thus prohibited. based on some papers above, the research will be conducted here has some differences. first, this research focuses on islamic perspective of fish selling inside lebung with the auction model as the object of investigation. second, the place in which this research conducted is seri kembang i village which makes it different from the previous papers. therefore this research is believed to be the new for the specific object and place mentioned. theoretical underpinning the concept of sale the discussion on sale must be concerning on its validity, while the validity itself goes back to fulfillment of its pillar when the sale conducted. selling fish inside lembung is type of sale that becomes debatable for the vagueness of the pillars. thus, deep understanding on the pillars of sale must be elaborated well in order to measure the compliance of fish sale inside lembung. the pillars explained here will be the basic for the assessment later in the discussion part of this paper. there are four main pillars in sale, according to majority of scholars. the pillars have specific conditions that must be fulfilled journal of islamic economic laws-july, vol. 1, no. 1, 2018 58 in order to make a sale shariah compliant (hasan, 2003). the four pillars are: 1. the contracting parties (buyer and seller) 2. subject matter (the commodity) 3. the price (anything that will be exchanged with the commodity of subject matter) 4. statement of contract (shighah) within those pillars, there are some conditions: 1. conditions for the contracting parties the contracting parties must be sane (‘aqil), able to distinguish the right from the wrong (mumayyiz), mukhayyar or having freedom of its action (afandi, 2009). thus, the contract of an insane person, drunk, a child and people under forced situation is invalid. the contract of a children will be dependent on the permission of their parents (sabiq, 2011). 2. conditions for subject matter a. the purity of subject matter. the subject matter must not contain najasah (unclean substance from shariah perspective) and must not be prohibited by shariah. thus, the sale of wine, pork and sort of those things are not allowed. b. usefulness aspect of the subject matter. the subject matter transacted must be useful and such selling of the cockroach, ants or other things are not allowed unless the usefulness can be justified. c. possession of the subject matter the subject matter must be possessed by the contracting parties or by the permission of its owner. reno juwarno 59 d. deliverability of the subject matter the transacted subject matter can be delivered to the right holder of the commodity after transaction. e. subject matter is known to both parties the contracting parties must know the subject matter when involving into the dealing, whether by direct view, knowing the criteria or other way of it. dealing on an unclear subject matter attracts people to make speculation of getting more even though the possibility of getting less is the same. this could lead into dispute and make clash within society. 3. conditions for the price. a. the agreed price has to be determined clearly b. the price has to be delivered during contract. in case the price is paid by credit, the maturity has to be agreed and clearly determined. c. in case the transaction is done by barter exchange, the conditions of riba will be applied. it is prohibited to exchange same type of ribawi items unless by the same quantity in cash. when the type of ribawi items is different exchanging by the different quantity is allowed, but has to be in cash. however, when the exchanged items are between ribawi and non-ribawi item, no riba rule is applied (harun, 2015). 4. conditions of statement of contract (offer and acceptance). a. clarity of both statements. b. conformity of both statements. c. connection of acceptance with offer. this condition journal of islamic economic laws-july, vol. 1, no. 1, 2018 60 refers to the connection of majlis. thus, the connection of offer and acceptance could be occurred within same physical or virtual place. d. the firmness of both statements. in the arabic context, the firmness can be shown by using past tense. however, this might be different from one country to another. the concept of garar in addition to the knowledge on the pillars of sale, the case discussed in this paper necessitates understanding about the concept of garar. this is because from what can people observe roughly there might contain garar during the process of sale. garar literally means risk or faking. it technically means a type of commercial exchange, including sale, which contains jahalah (less knowledge of subject matter) and uncertainty (azhim a, 2011). this includes the possible inability of delivering subject matter, unclear characteristic of the subject matter itself. some jurists also defines it as a sale that its legal implication is doubtful (tarmizi, 2017). in operational sense, garar can be occurred when two contracting parties has no certainty upon the subject matter they are going to deal it, whether its quality, quantity, and delivery time which lead into harm for one side (karim, 2015). there are some conditions for a sale to be concluded as prohibited due to its garar characteristic. a garar sale is when a sale has one or more conditions below (tarmizi, 2017): 1. the garar is excessive in a contract. jurists differentiate two types of garar according to its level (portion). first is the excessive garar while the second is the light garar. the excessive garar is defined by abu walid al baji as reno juwarno 61 something that frequently occurs which makes people consider it as the part of the sale. in a simple word, excessive garar is type that can be avoided. this type of garar might appear in various form depends on the situation and place. thus, the measurement of the garar is referred back to the custom of that place (‘urf). when the market custom views the conduct as an excessive garar, then shariah will judge it as excessive as well. for example, selling a watermelon which still in growing process has excessive garar since the watermelon might grow or not. the light garar is the unavoidable uncertainty within the contract so that no parties will be harmed. for example, buying a house without seeing its foundation has unavoidable garar. this is because seeing the foundation is clearly not doable. islam provides relaxation for this type of garar and thus making the contract allowed. thus, the allowable garar is the light one, while the excessive is prohibited (tarmizi, 2017). 2. the garar happens in the core contract. the garar becomes prohibited when it is found in the core contract. meanwhile, the garar in a complementary contract does not invalidate the contract as a whole. a legal maxim pertaining this matter says, “things can be relaxed in a complementary contract, while it is not in others.” this maxim means shariah provides relief when only when the garar occurs on the complementary contract, while it cannot be relaxed in the core one (arfan, 2013). for example, someone sells crop which does not appear its fruit. if the sale concerns on the fruit itself, then this transaction is broken for the garar element (possibility of the fruit not to ripe) inside it. however, if the concern is sale of the tree of fruit, any journal of islamic economic laws-july, vol. 1, no. 1, 2018 62 garar arises on the fruit produced by that tree will not be counted for making invalidity of the contract. this is because the fruit is complementary and not as the core contract (karim, 2015). 3. there is no authentic need (hajat syar’i) for the contract. the authentic need is a state when everybody is estimated to encounter hardship by not engaging on that garar activity. the need itself has to be clear as no other recourse can be utilized except that garar contract such as using conventional insurance as long as the islamic one is provided in that region. however, when islamic insurance exists, then the permissibility of using conventional insurance is replaced. this confirms with the legal maxim which says, “a need (hajah) takes the position of primary need (dharurah) whether it is general or specific.” it is also mentioned by imam nawawi, the prominent jurist of syafii mazhab, that when the contract which contains garar is important in the daily life which might cause hardship upon its prohibition, it makes the contract permissible. ibnu taimiyah also said that the harm of garar is below the level created by riba and thus can be given relief in case the contract is needed by vast number of citizen. this is because the prohibition of such makes bigger harm (tarmizi, 2017). 4. the garar happens in commercial contract garar is counted as making contract invalid when the type of contract is for commercial purpose. thus, garar does not apply in charity contracts such as sadaqah, hibah, waqf and sort of those things. the reason is because no party is harmed for the injustice arises from garar in social contract, and thus will not lead into any dispute. this concept confirms the purpose of both commercial reno juwarno 63 and charity contract where in the initial both parties demand the exchanged commodity as it is prescribed and expected whether it is in the form of commodity or profit. meanwhile, the case is different for the latter as the recipient of any charity has no right to demand anything in the first place (karim, 2015). the concept of auction sale the sale according to its price is classified into many types, one of which is called auction. in the book of fiqh or hadith, this type of sale is termed as bai’ al muzayadah (sale with the increment of price), dalalah or munadah. it is defined on those books as a sale when the seller offers his commodity in a market while the buyers competes each other by increasing the price they agree. the commodity then sold to the highest bid of price. auction is allowed in islam as we can understand from a hadith narrated by abu daud. the content of the hadith states that rasul did during his life auction by himself. it is why the majority of jurists opine that auction is allowed except alnakha’i who said that auction is makruh. meanwhile, hasan al-bashri, ibnu sirin and auza’i opines that auction is makruh unless on inheritance and booty properties (ath-thayyar, 2015). it is important to be noted that the price increment in auction is not regarded as riba since the increase is in the offer of the price from the seller perspective, or in the acceptance price from the buyer perspective (rusyd, 1992). the increase in the riba is for the exchange of nothing, while the increase in auction is based on the supply-demand pull on the price. just like the other contracts, islam also gives guideline and criteria to prevent any deviation, violation of right, norms and ethics during the sale. in general, the pillar of auction is similar journal of islamic economic laws-july, vol. 1, no. 1, 2018 64 with the general sale. some conditions that might be relevant to be highlighted again are the following: 1. the transaction must be done by those who acquire legal capability and based on consent from both parties. 2. the subject matter must be halal and useful. 3. total possession and authority on the subject matter. 4. clarity and transparency over the subject matter of auction without any manipulation. 5. ability to deliver the subject matter to the buyer. 6. clarity and transparency over the price without any possibility of further dispute. 7. the auction is done with no collusion or bribe to win the bid. methodology and data description methodology this paper is a type of field research that is a direct research in the field or daily life to know what actually happens (nasehudin and gozali, 2012). qualitative method is used to come into the solution. the data is collected using various methods. first is observation method that is a type of direct or indirect observation to acquire the data (satori and komariah, 2013). the purpose is to get valid data as source of analysis. the second is interview which is conducted with any involved party of sale fish inside lembung, including villagers, public figure as well as seller and buyer of fish sale inside lembung at seri kembang village i. the expected result from this interview is to know deeper on the practice of this particular sale. the third method used is documentation by collecting any physical documentary such as rules, activity report and other relevant sources (ridwan, 2010). after collecting all the data, we will conduct the analysis using evaluation technique, reno juwarno 65 that is by comparing the practice of fish sale inside lebung in seri kembang i village described on the data description part below and the shariah parameter described on the theoretical part above. data description this research takes the observation data particularly at seri kembang i village at ogan ilir district, south sumatera province indonesia. this village is characterized by the upper hill land with the landscape constituted of agriculture land, villager area and swamps. most of its inhabitant works as farmer for their main livelihood with the addition as trader, fisherman and some other profession. people at ogan ilir practiced the sale of fish inside lebung since long time ago. it can be said that this practice has been the culture of people inhabit this area. lebung itself is a pit underneath a river, canal or any water channel whether it is naturally existed or artificially made by human. the lebung has many sizes, from big one to the small. the big lebung is usually possessed by the local authority in such they have full right of doing auction for fishes within it. meanwhile, the small lebung is does not come under the possession of local authority and thus any people who appears to have that lebung within his area of land acquire the right to do the auction.1 in general, ogan ilir has many lebung so that its fish source is quite abundant, this include in the area of seri kembang i village. there are at least 4 lebung at the village: lebung tengah pematang, batang ari rengas, batang ari lubuk bandong, batang ari betong.2 usually the artificial lebung dug on the land of particular person where during the rainy season the volume of that lebung 1based on interview with mr. kurai, a buyer from seri kembang ii village. 2based on interview with mr. lakoni, citizen of seri kembang i village. journal of islamic economic laws-july, vol. 1, no. 1, 2018 66 will raise up. during that rainy season, fishes are allowed to enter from the main river to the lebung. when it comes to the dry season where the water began to dry or decrease, the river mouth will be closed so that the fish will be trapped and can not get out of the lebung. the lebung then will be traded to the public using auction system. in this moment, those who have occupation of selling fish will approach the lebung owner to buy it. the seller himself reno juwarno 67 may announce to public that the lebung will be sold. the seller does it whether by verbal announcement or visual (leaflet). the buyer of this auction could be individual, group of people or legal body. 3 the object of this sale is fish and water organism (all creatures which inhabit at water to live and reproduce) within the lebung. there are many types of fishes that usually captured inside the lebung. it is also important to be noted that there is no any breeding process. all fishes come naturally from the river. pertaining to the price determination, it goes back to the auction agreement between seller and all bidders. seller initially gives standard price for the auction to start. prior to that, seller describes the approximate condition about the fishes and water organism inside the lebung he wants to sell. the description is not a one-side, it is rather from both side. buyer asks the seller about the lebung while walking around lebung area followed by rough checking using net by the buyer himself. in addition to it, buyer will observe the fishes which appear at the top level of water. the width and length also can be determinant factor of the price. apart from it, previous experience of the buyer will help to make more exact approximation. after all those steps, the auction starts until the winner is decided. the auction can be done in private or for public. once the winner is found, the agreement which ties between seller and buyer of this sale is executed. when both parties have agreed on the price of fish in the lebung, then the buyer will give the amount of money that has been agreed from the auction process to the seller of fish in the lebung. the payment is done by cash while it is still possible when a buyer only delivers part of 3based on interview with mr. asmadi, a buyer at seri kembang i village. journal of islamic economic laws-july, vol. 1, no. 1, 2018 68 the price and settles the remaining in the next days after catching and selling all the fishes. sellers and buyers of the fish will be both happy and accept the risk of the sale. in case in the following days it is found that the value of fishes is more then the sale price, then the seller is not allowed to make complaint. the opposite is true, when the value of fishes is less then the sale price, buyer is not allowed to make complaint. however, some buyers or sellers are disappointed from the lose they get. the auction is done during the dry season because the volume of water will decrease so that the fishes can be seen clearer and facilitate the process of fish catching. the winner of auction has right to utilize the lebung until the next rainy season comes.4 another case is when the lebung runs of fishes, the winner of auction may return it back directly to the seller.5 discussion and result analysis on the conditions of sale the practice of fish sale inside lebung using auction model in seri kembang i village has to be examined thoroughly using the parameter on the theoretical part above. a. condition for contracting parties for what we observe, both parties involved in this practice are sane, mumayyiz and has freedom on what they do. b. conditions for subject matter there are five elements we have to focus in this parameter as it is mentioned at theoretical part. we conclude that the first until fifth element are fulfilled, meaning the practice confirms its theoretical requirements. nevertheless, the 4based on interview with mr. kurai, a buyer from seri kembang ii village. 5based on interview with mr. asmadi, a buyer at seri kembang i village. reno juwarno 69 fourth element of this condition which is deliverability of the subject matter need be to discussed further. this is because the actual subject matter of this sale is the fish which still remains inside lebung cannot be delivered during the time of contract. the fifth element, that is subject matter must be known to both parties, needs even more inquiries. the subject matter of this sale is the fish inside lebung. from our opinion, both seller and buyer has made their best attempt to predict the fish inside lebung. the attempts include description of the fish and water organism by seller, and five steps done by the buyer himself: catching the fish using net, observation of fishes which appear on the top level of water, measuring the width and length of lebung, walking around lebung, and using past experiences. thus, it represents the very close estimation of fish inside lebung. in a simple word, the fifth element of this condition has been fulfilled. c. conditions for the price the seller set the standard price for the beginning of auction to potential buyers. in the other side, buyer has their cash ready except for cases when the buyer wants to pay part of the price within clear and agreed date. thus, this sale fulfills the condition for the price. in addition, the exchanged item here is not type or ribawi item which makes the rule of riba does not apply here. d. conditions of statement of contract from what we observe on both seller and buyer, the auction is done in the same place (majlis), that is around the lebung. both parties are also willing to accept the consequence on such sale (have consent). the offer and acceptance is journal of islamic economic laws-july, vol. 1, no. 1, 2018 70 done by oral agreement which also constitutes firmness of the statement. we conclude that the practice confirms all condition along with all its elements. no standard conformity 1 conditions of contracting parties  sane (‘aqil)   mumayyiz  2 conditions of the subject matter  purity of subject matter   usefulness of subject matter   possession over subject matter   deliverability of subject matter  subject matter must be known to both parties  3 conditions of the price  clarity of the price   deliverability of the price   free from riba  4 conditions of statement of contract  clarity of the statement   conformity of the statement   connection of acceptance with offer   firmness of both statement  for the conditions on the auction, the practice fulfills all the requirements. this is because the auction itself is type of the sale. thus, the discussion on the parameters of sale can be said covers the inquiry on auction in particular. so far, the practice of fish sale within lebung only has one thing that seems to deviate from the parameter, that is the deliverability of the subject matter. this is because the fishes are inside the water during the process of transaction. reno juwarno 71 garar analysis every human being must face uncertainty in their life whether in social or business activity. islam does not deny this reality and does not prohibit human from facing such risk of uncertainty in life (iqbal, 2005). exercising garar is prohibited, but it does not mean islam prohibits facing the risk. in fact, dealing with risk has been acknowledged and supported by islam (warde, 2009). thus we can find an islamic legal maxim saying that any profit must come with its necessary risk which implies riskless profit is almost impossible. from this point, we can understand why riba is completely prohibited while garar has the allowed and prohibited type. the practice of fish sale inside lebung at seri kembang i village seems to contain garar. nevertheless, there must be analysis as the level of garar is excessive enough to conclude that the contract is prohibited or vice versa. the analysis of garar uses the parameter mentioned at the theoretical part above. 1. the garar is excessive in a contract. from the observation on the practice at the field, people do not consider this contract as bad or containing excessive garar. instead, it has been mutually understood. in addition, it has been the practice of the local government marga from past decades until today that still exercised yearly. garar meant in this sale cannot be avoided on the quantity, quality and variety of the fishes and other water organism inside lebung. however, attempts to minimize the element of garar so that it does not reach the level of excessive garar have been done by all parties. this is to ensure that no undesirable outcome after the auction by the dispute between the parties. in a simple word the prohibited garar is that leads into dispute journal of islamic economic laws-july, vol. 1, no. 1, 2018 72 while the allowed one is the garar which cannot be avoided yet does not lead into dispute. the practice here is the type of the latter. 2. the garar happens in the core contract. from the observation on the practice at the field, the main object of this sale is the fish inside lebung. according to authors’ opinion, it is in fact the fish becomes the subject matter here since the ultimate purpose of this exercise is to own the fish inside lebung, not the lebung itself. the lebung remains under the ownership of seller. thus, the rule of garar applies here. this is different if the buyer buys a part of land which contains lebung with fishes inside it. the land in this sale becomes the main subject matter while the lebung and fishes are complementary. in a simple word, any rule regarding garar applies in the sale of fish inside lebung practiced at seri kembang village i. 3. there is no authentic need (hajat syar’i) for the contract. from the observation on the practice at the field, the garar character within the sale cannot be denied while such transaction is important among the society, especially for sellers and buyers of fish. however, it is need to be discussed further whether there is no any more appropriate halal way to fulfill the need of citizen. in authors’ opinion, there are still some ways to avoid this garar that is the owner of the lebung itself who manages and catch the fish to sell to the market. another way is by letting the buyer himself to catch all the fishes within lebung and the price is decided later based on the quantity and quality of the fishes. for a better offer, the price must be different from the market price. the agreement of using different price from market can be done prior to reno juwarno 73 catching the fish to ensure the buyer. the conclusion of our research in this point is that the sale is importantly needed by buyer and seller of fish sale inside lebung. however, we find no authentic need so that it can support the practice of garar in this transaction since there are some other permissible ways which are more appropriate for both buyer and seller. in case that the practice is prohibited, it does not necessarily make people suffer. in a simple word, this practice does not conform the third parameter of garar. 4. the garar happens in commercial contract form the observation on the practice at the field, the subject matter of this transaction is the fish inside lebung. it means that such transaction is type of commercial contract and thus the rule of garar applies here. from all garar analysis elaborated above, we can see that the garar does exist in this transaction. it comes from the first point even though both buyer and seller make their best attempt to minimize the garar. however, when it comes to the analysis of garar in point two until four, the existence of garar cannot be neglected anymore which result the prohibition of this contract from islamic perspective. no standard violation 1 the garar is excessive in a contract 2 the garar happens in the core contract 3 no authentic need for the contract 4 the garar happens in commercial contract from the two tables which summary the analysis, we can see that all of the pillars are fulfilled, while there is one of the journal of islamic economic laws-july, vol. 1, no. 1, 2018 74 condition remains in question. the deliverability of the subject matter is not yet fulfilled since the fishes are still inside lebung during the process of contract. selling commodity which cannot be delivered is kind of gambling and speculation since no one knows whether the fish really can be caught or not and thus such sale is invalid (sabiq, 2011). this practice resembles the prohibition from hadith which states that it is not allowed to sell milk inside the stocks and an explicit hadith for prohibition of selling fish inside water which narrated by ahmad, “do not sell fish inside water as it contains garar.” also as we know that selling things which its quantity and quality are not known is type of seeking profit by the way of speculation which potentially leads into dispute within society. the hadith above has the basis for garar analysis summarized at the table above. three out of four criteria of garar is fulfilled which confirms the garar element inside this contract. the analysis leads us to conclude that the practice of fish sale inside lebung at seri kembang i village is prohibited. the social benefit of this prohibition is not to take others wealth without their proper consent. apart from that, the prohibition closes the possibility of conflict and dispute that may arise from the result of injustice and harmed part of the transaction. of course, it also keeps the wealth to be under his blessing conclusion and suggestion fish sale inside lebung is a common practice in south sumater. the fish sale inside lebung is done through some steps. first, the buyers come to the owner to ask questions related to the subject matter of the sale followed by the description by the reno juwarno 75 seller. both parties then check together the subject matter, that is the fish inside lebung. only then the fish will be sold through auction model to the buyers commenced by the seller setting standard price at the beginning of auction. from the islamic perspective on the practice of fish sale in lebung through auction model, there is one condition that has not been fulfilled that is the non-deliverability of the subject matter, makes this transaction cannot be said as valid. thus, the nonfulfillment of such condition resulting in this sale contains the elements of garar and gambling which is prohibited in islam. apart from it, both buyer and seller do not know exactly the quality and quantity of the fish that will be sold. finally, this research reaches the conclusion that the practice observed is prohibited. we also want to provide some suggestion that hopefully can be useful • first of all, for all buyers and sellers have to be more careful in doing transactions so as to conform with shariah requirements, including its pillar, conditions and free from any prohibited elements. this is to ensure that all sale and purchase will always be blessed by allah. • in our opinion, there is still another way can be done to avoid the element of garar in this sale. the owner himself who manages the lebung and catch the fishes, continued by selling it to the market or directly to the society. another way is by selling the fish inside lebung to the usual buyer yet the process of catching done by the buyer himself. the price that buyer has to pay is determined by the actual quality and quantity of fishes caught. it also has to be noted that prior to the catching of fishes by buyer, there has to be an agreement journal of islamic economic laws-july, vol. 1, no. 1, 2018 76 that the must be different from market price since the buyer puts his effort to catch the fish. this way of conducting sale is more appropriate and the justice for both parties can insured. reference afandi, m.y. (2009) fiqh muamalah dan implementasinya dalam lembaga keuangan syari’ah: dilengkapi dengan kamus istilah perbankan syariah. yogyakarta: logung pustaka. arfan, a. (2013) 99 kaidah fiqh muamalah kulliyah: tipologi dan penerapannya dalam ekonomi islam dan perbankan syariah.malang: uin maliki press. ath-thayyar, a. m. (2015) ‘al-fiqh al-muyassar’ in khairi, m. (translated) enskilopedi fiqih muamalah dalam pandangan 4 mazhab. yogyakarta: maktabah al-hanif. azhim, a. (2011) ‘al-wajiz fi fiqhis sunnah wal kitabil’aziz’ in jalil m. a. (translated) al-wajiz ensiklopedi fikih islam dalam al-qur’an dan as-sunnah ash-shahihah. jakarta: pustaka as-sunnah. hasan, m.a. (2003) berbagai macam transaksi dalam islam (fiqh muamalat). jakarta: raja grafindo persada. harun (2015) islam dan ipteks. surakarta: lpik ums. iqbal, m. (2005) asuransi umum syariah dalam praktik upaya menghilangkan garar, maisir, dan riba. jakarta: gema insani karim, a.a., (2015) riba garar dan kaidah-kaidah ekonomi syariah analisis fikih dan ekonomi. jakarta: pt. raja grafindo persada. na’imah, i., (2012) tinjauan hukum islam terhadap praktek reno juwarno 77 jual beli ikan dengan sistem tebasan di desa sekaran kecamatan sekaran kabupaten lamongan. skripsi, fakultas syari’ah dan hukum uin sunan kalijaga yogyakarta. nasehudin, t. s., & gozali, n. (2012) metode penelitian kuantitatif. bandung: pustaka setia. nurudin, (2009) tinjauan hukum islam terhadap praktik jual beli ikan dengan sistem pancingan (studi kasus di dusun ringin sari maguwwoharjo kecamatan depok kabupaten sleman). skripsi, fakultas syari’ah dan hukum uin sunan kalijaga yogyakarta. rusyd i. (1992) bidayatul mujtahid vol. ii. lebanon: beirut. sabiq, m. s. (2011) ‘fiqhus sunnah’ in muhayan m. (translated) fiqih sunnah 5. jakarta: pena studi aksara. satori, d. a. aan komariah. (2012) metode penelitian kualitatif. bandung: alfabeta. riduwan, m. b. a. (2006) belajar mudah penelitian untuk guru-karyawan dan peneliti pemula. bandung: alfabeta tarmizi, e., (2017) harta haram muamalat kontemporer. bogor: pt. berkat mulia insani. warde, i (2009) islamic finance keuangan islam dalam perekonomian global. yogyakarta: pustaka belajar. yudianto, m., 2015. tinjauan hukum islam terhadap praktek akad jual beli ikan nelayan (studi kasus di desa pangkalan kecamatan sluke kabupaten rembang). sskripsi, fakultas agama islam universitas muhammadiyah surakarta. journal of islamic economic laws vol. 5, no. 2, july 2022: 323-344 323 sharia economic law perspective on online meeting premium account leasing muhamad izazi nurjaman1, sofian al-hakim2, iwan setiawan3, doli witro4 and mualimin mochammad sahid5 1state islamic university of sunan gunung djati bandung 2state islamic university of sunan gunung djati bandung 3state islamic university of sunan gunung djati bandung 4state islamic university of sunan gunung djati bandung 5university sains islam malaysia email: muhamadizazinurjaman@gmail.com, sofyanalhakim@ uinsgd.ac.id, iwansetiawan@uinsgd.ac.id, doliwitro01@gmail. com, mualimin.sahid@usim.edu.my abstract in general, in leasing, the object of the contract is the benefit of a tangible object. however, it is different from renting a zoom meeting premium account whose position is as application software. so that its position will have benefits if its use has collaborated with hardware as hardware. meanwhile, what is being rented is the software only. therefore, this study will discuss the rental of zoom meeting premium accounts according to the perspective of sharia economic law. this research uses a descriptive case study method with an empirical juridical approach. the data analysis technique was carried out through three stages namely data reduction, data presentation and conclusions. this study found that the position of zoom meeting is premium as a software application that is part of a computer program. at the same time, the computer program is part of the copyright in the form of intangible movable objects. so that there is the development of the object of the ijarah contract, generally in the form of benefits from tangible objects, which can also be in the form of benefits from intangible objects. however, the development of intangible objects as contract objects needs to be mailto:muhamadizazinurjaman@gmail.com mailto:sofyanalhakim@uinsgd.ac.id mailto:sofyanalhakim@uinsgd.ac.id mailto:iwansetiawan@uinsgd.ac.id mailto:doliwitro01@gmail.com mailto:doliwitro01@gmail.com mailto:mualimin.sahid@usim.edu.my 324 nurjaman et al. studied further by researchers so that they can be applied to all contract objects, such as intangible objects becoming objects of buying and selling contracts, mudharabah, musyarakah and other contracts. keywords: ijarah, zoom meeting premium, intangible assets, and copyright. introduction social distancing is one of the government’s policies restricting people’s activities not congregating. this was done to prevent the spread of the covid-19 outbreak that hit all corners of the world, including indonesia (busni, witro, & purwaningsih, 2021; nasruddin & haq, 2020; sidqi & witro, 2021). this policy certainly impacts all sectors of people’s lives (far-far, 2021). one of them is the large-scale social restriction (psbb) policy carried out by the government by closing access to community activities, such as access to education and offices. so students are encouraged to study remotely (amalia & sa’adah, 2020), and employees have to work from home (witro, nurjaman, ayu, & al-rasyid, 2021). therefore, to support learning and facilitate office work, media or facilities that are easy and effective to use are needed. one of the media that is widely used is the zoom meeting premium platform. this application provides direct remote communication services via video with a large user capacity (kelana, wulandari, & wardani, 2021; latifah, nurasih, waliko, rasidin, & witro, 2021)with the threat of covid-19, it is hoped that educational institutions (university. this makes this application not only used for online learning activities but can be used for office, religious and other activities. the cost of paid services is one of the obstacles experienced by users of the zoom meeting premium application. however, of the benefits felt by users, the need for using this application is very substantial in the current pandemic conditions. so this is an opportunity for yr to rent out her zoom meeting premium account to users at an affordable price. with a zoom meeting premium account, marketing is done through instagram with a cheap zoom @rental account. yr has 50 zoom journal of islamic economic laws-july, vol. 5, no. 2, 2022 325 meeting premium accounts and 200 reseller account rentals with a monthly turnover of 30 million rupiah. yr rents out her zoom meeting premium account for various purposes such as learning media, webinars, religious activities, etc. the rental prices quoted vary according to the rental account. that is, the determination of the rental price is adjusted to the period and capacity for how many users rent their account. some periods are hourly, daily, weekly, monthly, and yearly. in comparison, the capacity consists of 100 people, 300 people, 500 people, 1000 people, and more than 1000 people, so the period and the selected capacity will determine the rental price paid by the user. in islamic economic law, these legal events are included in the ijarah contract. the thing that must be considered in carrying out the ijarah contract must meet the requirements and pillars. yr is located as a renter (mu’jir) and a service user or customer as a recipient of rental goods (musta’jir), zoom meeting premium account as ma’qud ‘alaih (mahal al-manfa’ah/where benefits occur), manfa;ah (learning media, religious activities, webinars, etc), ujrah (according to the timeframe and capacity) and statements of consent and qabul as a binder for the ijarah contract. however, what is no less important to note in the ijarah contract are the conditions that support the validity of the ijarah contract. one of them is ma’qud ‘alaih which can be used for its benefits, where the rented goods must be able to be used and handed over and must be prescribed in the form of eternal goods ‘ain (substance) (abdullah, 2011). the dsn/mui fatwa number 112 of 2017 concerning the ijarah contract states that mahal al-manfa’ah is an item that can be utilized according to sharia provisions and can be handed over at the time of the contract or except in other cases (dewan syariah nasional majelis ulama indonesia (dsn-mui), 2017). then what becomes ma’qud ‘alaih in the rental practice is the zoom meeting premium account. zoom meeting premium is application software that makes it easier to perform the desired function, namely as a direct remote communication service in the form of video conferencing in the capacity of many users and 326 nurjaman et al. for a long period of time. software functions can be used when collaborating with hardware as hardware. without hardware, software cannot perform the desired function, and vice versa. thus, whether the position of this software including objects/ goods? so if the position of the software is as an object, then its position is as a complementary item. complementary goods are goods that have uses and benefits when used together with other goods (siahaan, 2015). so that if it is not used with other items, it will not function. indirectly, it makes the software useless. whereas in the ijarah contract, ma’qud ‘alaih/the place where the manfa’ah occurs must have a manfa’ah. departing from that, this study will describe the practice of renting a zoom meeting premium account according to the perspective of sharia economic law. this research aims to add to the scientific treasures of sharia economic law, especially in leasing the account, so that this research is expected to provide broad insight for all readers, both practitioners and academics of sharia economic law. literature review ijarah contract concept ijarah means buying and selling benefits or renting, namely taking the help of goods. some translate it as buying and selling services or wages, namely taking the benefits of human labor (busni, witro, setiawan, abdurrahman, & alghani, 2022; syafe’i, 2001). this can affect one of the pillars of ijarah, namely the parties to the contract, namely mu’jir (the lessor of goods) and musta’jir (the tenant of goods) or mu’jir (the provider of services) and ajir (the tenant of services) (suhendi, 2016). meanwhile, according to the term, several meanings of ijarah were put forward by scholars. according to sayyid sabiq, ijarah is a contract to take benefits by way of replacement (busni, witro, alghani, setiawan, & abdurrahman, 2022; sabiq, 1983). this is also in line with what was stated by the hanafiyyah scholars. thus, an ijarah contract is a contract or transaction of benefits or services with specific rewards. if the object is the benefit of an object, it is called ijarah al-’ain, in contrast, if the object is in the journal of islamic economic laws-july, vol. 5, no. 2, 2022 327 form of benefits or services from a person’s energy, it is called ijarah al-dzimah (ghazaly et al. 2018). meanwhile, according to the sharia economic law compilation, ijarah is the rental of goods for a certain period with payment (makamah agung republik indonesia, 2008). the pillars of the ijarah contract consist of: first, the parties to the contract, namely mu’jir (the lessor of goods) and musta’jir (the tenant of goods) or mu’jir (the provider of services) and ajir (the tenant of services). second, the object of the contract (al-ma’qud ‘alaih/mahal al-manfa’ah/the place where the benefits occur) and the benefits of a person’s goods or services (al-manfa’ah) and the reward for services (ujrah). third, is the statement of offer and acceptance (shighat al-’aqd/ ijab wa al-qabul). although, according to the majority of scholars, the goods that are rented or the workers who sell their services are the pillars of the contract (mubarok & hasanudin, 2017). it is impossible for there to be any benefit if there is nothing that can produce the benefit itself. zoom meeting premium position in the legal classification of objects zoom meeting premium is application software that facilitates the provision of provides direct remote communication services via video conferencing with a large user capacity (kelana et al., 2021)with the threat of covid-19, it is hoped that educational institutions (university. this application is usually used for various remote activities such as webinars, work meetings, learning, religious activities, etc. based on the definition and use, the position of zoom meeting is as application software. application software is defined as a subclass of computer software that utilizes the computer’s capabilities directly to perform the commands desired by the user (rahmat, 2019). software is defined as part of a computer program that has a function as a medium of interaction (liaison) between the user (user) and the hardware (al-faizi, 2014). so that the position of the software has a critical role in running computer programs, without software, users will not be able to perform specific commands on their hardware. 328 nurjaman et al. when zoom meeting is part of the application software, while the software specific part of a computer program, the position of zoom meeting is part of a computer program in carrying out particular orders, namely as a communication medium through video conferences with many users. according to article 1 (9) of law number 28 of 2014 concerning copyright, it is stated that a computer program is defined as a set of instructions that are expressed in the form of language, code, scheme, or in any document intended for the computer to work to perform certain functions or to achieve results. confident, based on article 40 letters of the law, computer programs are part of protected creation. when a computer program is part of protected copyright, the copyright position, as referred to in article 16 (1), is stated as an intangible movable object. so the question is, are all computer programs part of a transcendental movable object? the minister of finance regulation (pmk) number 90 of 2019 concerning the statement of accrual-based government accounting standards number 14 concerning accounting for intangible assets states that software is part of intangible assets based on the type of resource. the software in question is software that can be stored in various storage media such as flash disks, diskettes, tapes and other storage media and is not an integral part of specific computer hardware (pmk number 90 of 2019 concerning statements of accrual-based government accounting standards number 14 concerning accounting for intangible assets, 2019). an asset can be said to be atb if it meets several criteria, among others: it can be identified, controlled by the entity, and has potential benefits in the future. the first criterion for the position of assets as atb is that it can be identified, meaning is as follows: a) separable, meaning that an asset allows it to be separated or clearly distinguished from other sets of assets in an entity. therefore, this asset can be separated from other assets so that atb can be sold, transferred, licensed, rented, or exchanged, either individually or collectively. b) arise from binding agreements, such as treaty rights and other legal rights, regardless of whether those rights are journal of islamic economic laws-july, vol. 5, no. 2, 2022 329 transferable or separable from the entity or other rights and obligations. the software is identified as atb if the software can be separated from the associated hardware and provides future benefits. for example, the software can be installed on some hardware, and hardware can still be run without depending on the software, the software is recognized as atb. on the other hand, if computer software cannot be separated from hardware, for example, without the software, the hardware cannot operate, the software cannot be treated as atb but as an inseparable part of hardware and is recognized as part of equipment and machinery. the second criterion for the position of assets as atb is that it can be controlled. the entity exercises this control to obtain future economic benefits from the assets owned it can limit other parties from receiving benefits from these assets. in general, asset control is evidenced by asset ownership documents issued by authorized institutions so that they have legal force. the paper is not a mandatory prerequisite that the entity must fulfill because it allows for other means used by the entity to control the asset. the third criterion for the position of an asset that can be said to be atb is to have economic benefits in the future. this means that an investment can provide economic benefits in the form of income derived from the agreement mechanism in the form of the sale of goods or services, cost savings or efficiency, and other results such as income from leasing, licensing, or other benefits obtained from the use of atb. the zoom meeting premium application software is included in the intended atb criteria because it can be used on various hardware, and its use on other hardware does not affect the previous hardware. what is meant by software that cannot be separated from hardware is system software (system software). so that zoom meetings can be identified by the separation of these devices. in addition, zoom meeting premium can be controlled by the owner with proof of asset ownership from the software purchase process he does. so that other parties cannot use 330 nurjaman et al. privilege unilaterally but must obtain permission from the party who owns it. as for the third criterion, zoom meeting can provide economic benefits in the future. this can be seen from the transfer of ownership of assets through the sale process. so that someone who buys the zoom meeting application to help their needs. so it is advantageous for the application maker company or other parties with licenses or permits to use the application in commercial terms. thus, according to the law, the domicile of zoom meeting premium is part of the intangible assets. methods this research uses a descriptive case study method supported by data obtained from the field where the research object is located. so that researchers will examine the data obtained in detail and in-depth with sharp analytical techniques and see from various points of view (wahyuningsih, 2013). then the researcher will describe or explain a complete and integrated analysis result in the form of facts that can be accounted for their validity. in this case, the researcher will provide an overview of the analysis of intangible assets as the object of the contract according to the perspective of islamic economic law, namely the rental of the zoom meeting premium account. this approach is carried out to reveal the views of written and unwritten legal sources to provide guidance and direction on legal events that occur in people’s lives (bachtiar, 2018). techniques data is collected through interview techniques, literature studies, and documentation studies. regarding the interview technique, the author conducted interviews with two rental business owners renting premium zoom meeting accounts who promote their services through instagram accounts, including: journal of islamic economic laws-july, vol. 5, no. 2, 2022 331 table 1 informant list no. name of business owner instagram name number of leased accounts monthly income 1. yr jualan_junayy (sewa zoom meeting dan webinar) 50 accounts 30 million/ month 2. dp sewa zoom murah 2 accounts 1 million/ month in contrast, the data analysis technique was carried out in three stages: data reduction (focusing on data), presenting data, and conclusions. results the object of the contract (ma’qud ‘alaih) is one part of the pillars of the contract. this is when referring to the opinion of most scholars regarding the pillars of the contract. because when referring to the opinion of the hanafiyyah scholars, the object of the contract is only a condition for the contract’s validity. as for the pillars of contract for hanafiyyah scholars, it is only a statement of the will of each party, namely in the form of consent and qabul. when the object of the contract is part of the pillars of the contract, the pillars are interpreted as everything that becomes the elements of the formation of something. so something will be formed because of the elements that make it up. the object of the contract is property. wealth is defined as something that has value and can be used. so that the definition of property, according to the majority of scholars, is apart from being in the form of objects, the benefits of objects are also part of the property. like living at home. so between goods and the benefits of an item, in general, can be the object of the contract. benefits are defined as the benefits or use that result from an object. muhammad mustafa syalabi and wahbah al-zuhayli also put forward this definition by including examples such as the benefits of living in a house, driving a car, wearing clothes, 332 nurjaman et al. etc. so related to the meaning of benefits, there is no significant difference in the editorial (musa, 2018). mustafa ahmad al-zarqa distinguishes the position of benefits from haq al-intifa based on the perspective of legal events in general and particular forms. when viewed from the strength or weakness of rights, it can be understood that it is ownership of benefits because it comes from contracts such as waqf, ijarah, ariyah, and wills of a benefit. meanwhile, the intifa rights are general because apart from the property owner, they also include the right to use them as benefits that are allowed with the property owner’s permission without having to own the property fully. in this case, the benefit is interpreted as the use or benefit of ownership that is naqis (imperfect). meanwhile, based on this definition, the scholars only describe the benefits of a visible and tangible object and have not explained the benefits of an object or intangible asset. as for the question, what is the position of the benefits resulting from intangible objects? can such benefits be used as contract objects, such as renting a zoom meeting premium account? as explained above, its position is application software that is part of a computer program. in contrast, the computer program is part of the copyright, an intangible movable object. according to article 1549 of the civil code, all types of goods, movable and immovable, can be rented out (subekti & tjitrosudibio, 1996). as for referring to article 509-511 of the civil code, immovable objects have movable properties, which can be in the form of tangible objects such as boats. meanwhile, due to statutory provisions, movable objects must be considered as usufructuary rights and usufructuary rights over movable objects. so that which includes movable objects can be leased objects, including copyright in the form of computer programs. in addition, article 3 of law number 28 of 2014 concerning copyright states that copyright is an exclusive right consisting of moral and economic rights. as for economic rights, according to article 9, which is interpreted as the exclusive right of the creator or copyright holder to obtain financial benefits for his creation. one of the economic rights of copyright related to leasing is journal of islamic economic laws-july, vol. 5, no. 2, 2022 333 article 9 paragraph 1 letter i that the creator or copyright holder has the right to lease copyright so that everyone who will exercise economic rights on work must obtain permission from the creator or copyright holder. meanwhile, article 11, paragraph 2 states that the economic right to rent out work or a copy thereof does not apply to computer programs if the computer program is not the virtual object of the rental. the essential object in explaining the law is computer software which is the main object of the rental agreement. so that when the software becomes the vital object of a contract, it can be used as an object of lease. regarding copyright, the indonesian ulema council (mui), in its mui decree number 1 of 2005 concerning the protection of intellectual property rights (hki), states that: first, ipr in islamic law is seen as one of the huquq maliyyah (wealth rights) that are protected law (mashun) as mal (wealth) as long as it does not conflict with islamic law. second, intellectual property rights can be used as contract objects (al-ma’qud ‘alaih), both in mu’awadhat (commercial) contracts and tabarru’at (noncommercial) contracts, and can be waqf and inherited. third, every violation of intellectual property rights is an injustice, and the law is unlawful (majelis ulama indonesia (mui), 2005). the second point needs to be studied when ipr can be used as the object of the contract, both for commercial contracts (mu’awadhat) and non-commercial contracts (tabarru’at) (witro, nuraeni, & januri, 2021). so the question is whether ipr can be used as the object of the contract. it applies to all types of arrangements of both nature and purpose. meanwhile, commercial contracts (mu’awadhat) can be categorized into two parts: exchange contracts and mixed contracts (nurjaman, witro, & hakim, 2021). meanwhile, non-commercial contracts are divided into three parts: lending assets, lending services, and giving something (karim, 2014). in addition, in psak no. 19 of 2009 regarding the accounting for intangible assets, there are rules regarding special recognition of externally obtained computer software, namely: 334 nurjaman et al. first, the acquisition of software externally can be made through purchases, grants or exchanges. the investment through the purchase method can be done with a development contract with a third party or directly. the acquisition of the software must also have a license to use or useful life of more than 12 months so that the acquisition value of the software and the license fee can be capitalized as atb. second, computer software that is built or developed through a contract with a third party, the software is recognized as atb, and the value of the atb is in by the agreed contract value. so, on the contrary, software built or developed through a contract with a third party is used alone, and the computer software is an integral part of a piece of hardware, or without the software, the hardware cannot be operated. therefore, the software cannot be recognized as atb but is recognized as part of the cost of hardware which is capitalized as equipment or machinery. third, computer software purchased from a third party is intended to be sold or delivered to a third party. the computer software is recorded as inventory. based on the various explanations above, intangible assets can be the object of the contract, especially the object of the contract. zoom meeting premium is used as the object of the lease because this account includes application software that is part of a computer program. in contrast, the computer program is part of the copyright, which is included in the category of movable intangibles. meanwhile, according to the decision of the mui fatwa, copyright can be used as the object of the contract, both mu’awadhat (commercial) contract objects and tabaru’ (non-commercial) contract objects. in contrast, the lease contract (ijarah) is included in the category of a contract that is mu’awadhat, namely a contract to make a profit or commercial. discussion if you look at the previous presentation, that zoom meeting premium is part of the application software. in contrast, the application software is part of a computer program whose position is part of the copyright. meanwhile, according to the law, copyright journal of islamic economic laws-july, vol. 5, no. 2, 2022 335 is part of the intangible movable goods or the accounting records referred to as intangible assets (atb) or intangible assets. the practice of renting a zoom meeting premium account is mainly done by the account owner giving orders to access the application to the tenant in the form of a username and password. the tenant can determine username and password according to the purpose of using the zoom meeting premium application. so when, for example, the tenant is going to hold a webinar about something, then the lessor performs the account editing process according to the order given by the tenant, both regarding the username and password as well as the title of the application. then the tenant who has previously downloaded the application can access the zoom meeting premium application through the username and password provided by the lessor on his hardware, such as computers, laptops, notebooks, cellphones, and so on provided that the hardware is connected to internet network. without even renting, the tenant can access the application, but in a short period or what is called a free service that users can enjoy for only 40 minutes. as for the use that is needed for an extended period with a large user capacity, users need the benefits of zoom meeting premium. the main reason tenants rent for the help of the application software is due to the cost of account ownership, which is too large. through this rental, it is a solution for them to enjoy the benefits of application software that facilitates all their activities. the concern is that the rental is carried out without being accompanied by hardware as a medium to carry out the functions and uses that the application software can enjoy. renting accounts from this application software does not only occur in the zoom meeting premium application software. however, it has previously happened to other application software such as renting grab and gojek accounts for transportation services and even online game account rentals by gamers. seeing this, ‘urf tijari’ applies among the perpetrators, namely renting out application software accounts without being accompanied by hardware that can make the application software usable as it should be. so that the position of this application software is a complementary item 336 nurjaman et al. that requires other things to be able to make these items have benefits. from the practical aspect in the field, the rental of application software as part of atb (intangible assets), which is not accompanied by hardware as a device or media to make the application helpful software useful, is the result of a change in ownership of these assets. in the past, people did not have the tools to enjoy the services or benefits of using various computer devices. so there is an internet cafe that provides complete service facilities. people just come to the location where the cafe is located and enjoy the desired service. whereas today people already have a computer device or its equivalent. so to fulfill the desired benefits or uses, such as the benefits of the zoom meeting premium application software, the owner can add features to the application software. either the addition is done by downloading it, for application software that can be accessed for free or by buying or by renting it. about renting a zoom meeting premium account whose position is atb (intangible assets). so to make these goods have benefits is with the help of other goods. so that the benefits of the goods or atb can slowly generate benefits according to their functions and capacities. the goods or atb are part of the nafi’ property which is invisible and cannot be stored but has a’radl nature which gradually grows according to the development of the times (ash-shiddieqy, 2012). in other words, this atb requires time and media or a place in the form of tangible objects as the foundation of an atb that can generate benefits. as for what becomes atb in this rental practice, it is in the form of software or application, so to make it work requires hardware. as for when software and hardware are simultaneously used as objects of lease, in the practice of leasing, the object of the lease is tangible goods or objects, namely a combination of hardware in collaboration with software so that it can be used by the intended function desired. on the other hand, if what is being leased is software or software only because the tenant already has hardware (computers, laptops, notebooks, mobile phones), then the object of the lease journal of islamic economic laws-july, vol. 5, no. 2, 2022 337 is goods or atb. the existence of hardware owned by the tenant is part of making the application software that is the object of the lease valid. according to the researcher, the need for other goods or a method or process of how the atb can generate benefits is a legal requirement for the atb, which is used as the object of the contract to fulfil the objectives of a contract. the argument can be equated when intellectual property rights (ipr) are used as objects of waqf in article 16 paragraph 3 letter e of law number 41 of 2004 concerning waqf. because the ipr is by article 8 of law number 28 of 2014 concerning copyright, it has economic rights for its creators. one of the economic rights owned by the creator is to distribute copyright, either by selling, renting, or giving permission to other parties to distribute it (shiddiq, 2019). so that from the process of utilizing this distribution economic right, the creator is entitled to receive royalties. the proceeds from these royalties become the object of waqf to manage or use as agreed by the creator and nazhir. in other words, there is a process of the creator’s economic rights through distribution so that the copyright has benefits that can be used as the object of the contract. based on the explanation above, the ‘urf tijari’ of renting a zoom meeting premium account as application software that is not accompanied by hardware due to changes in user needs regarding the software only has become a habit that can be used as the source in determining a law. because the ‘urf tijari performed does not conflict with the provisions of syara; and the ijarah contract has fulfilled the requirements and pillars, especially about the object of the contract (ma’qud ‘alaih), namely in the form of benefits from atb, which must be realized with the help of other goods (tangible goods) or through a method/ process that will generate benefits for atb, which is used as the object of the contract, so that the purpose of the ijarah contract, namely the transfer of ownership of the benefits of an item/asset, can be realized. determination of ‘urf tijari as a source of legal conclusion by the rules of fiqh, among others: 338 nurjaman et al. اِر َكاْلَمْشُرْوِط بَْينَُهْم اَلَمْعُرْوُف بَْيَن التُّجَّ “what is known between merchants is a condition between the two” (djajuli, 2016). this habit is allowed as long as it does not conflict with sharia. this is by the proper position of ‘urf sahih. this means that every transaction carried out according to what is known to the parties becomes the principle or condition for the contract’s validity. as for the habits that do not conflict with sharia in terms of commerce, they are habits that do not violate sharia rules for the contracts carried out. the point is that the practice does not injure the position of the agreement about the terms and pillars and also avoids behavior that makes the position of the contract invalid or legally invalid, such as habits that lead to the practice of usury, gharar, maisir and causes harm, so that this habit causes losses between one of the transacting parties. meanwhile, the habit of renting a zoom meeting premium account whose position is as application software. so, it requires hardware to make the helpful application software useful. however, the rental is not accompanied by the hardware. as for the consequences of the leasing practice, it does not cause any loss or harm to those who make the contract, especially to the lessee. because the combination of software and hardware has become a single entity that cannot be separated (ridwan, sambharakreshna, & nurhayati, 2011). so that when the two computer devices are used as rental objects, in general, they must be one unit. if they are separated, they will not have a function with each other. as for when the hardware that makes the application software (zoom meeting premium) comes from the tenant. this is because the tenant’s need for this account rental is only the application software, and the hardware it owns is part of how the rented application software has benefits or can be used according to its functions and capacities. in addition, when reviewing the special treatment for software by psak no. 19 of 2009 concerning the accounting for intangible assets, which states that the acquisition of software externally can be made through purchases, grants, or exchange. so when software can be used as an object of a sale and purchase contract, it can also journal of islamic economic laws-july, vol. 5, no. 2, 2022 339 be used as an object of a lease contract (ijarah). this is by the rules, among others: فَُكلُّ َماَجاَزبَْيعُهُ َجاَز اَِجاَرتُهُ “everything that can be traded can be rented” (al-qurafi, 1994). this rule relates to the position of the lease contract (ijarah) which is part of the sale and purchase contract, namely the exchange of property for property. the assets exchanged are in the form of goods (ujrah) with benefits (benefits of an object, both tangible and intangible). so that something is legal to be traded, it is also legal to rent (hidayat, 2019). therefore, a review of sharia economic law on the position of ‘urf tijari on atb rentals, especially in leasing a zoom meeting premium account whose position is application software that is not accompanied by the hardware that makes the application software position has benefits. this is permissible because it does not cause harm between the parties, by the provisions of syara’, and does not damage its position as an object of the contract (ma’qud ‘alaih) that must exist because it is part of the pillars of the ijarah contract. as emphasized in the rules of fiqh, among others: اْلَْصُل فِى اْلُمعَاَملَِة اْلبَاَحةُ إِلَّ أَْن يَُدلَّ َدِلْيٌل َعلَى تَْحِرْيِمَها “the original law in all forms of muamalah is permissible unless there is evidence that forbids it” (djajuli, 2016). the purpose of this rule is that every form of muamalah and transaction is permissible. in this case, it is a lease (ijarah) unless there is evidence that forbids it, as in the practice of leasing, there is harm, deception, gambling, and usury, then the law becomes prohibited to do so. thus, with the preparation of leasing intangible assets, there is the development of the object of the contract (ma’qud ‘alaih) for the ijarah contract, which in general is usually in the form of benefits from a tangible object (treasure ‘ain) but also comes from expensive al-manfa’ah (where the miracles occur) from objects or intangible assets (nafi’s help). 340 nurjaman et al. as for the utilization of intangible assets requires other objects (tangible objects) or methods/processes that make them useful. so that the purpose of the contract (maudhlu al-aqd) in the ijarah contract is the exchange of property with property, the property exchanged is the benefit of goods for goods (ujrah) can be fulfilled. without other objects (tangible objects) or methods/ processes, intangible assets cannot have benefits, so it will affect the purpose of the contract (maudhlu al-aqd) that is carried out, namely the non-fulfillment of the agreement, which will cause losses between one of the parties, in this case, the tenant. so that the lessor rents out objects that have no benefit, if that is the case, the ijarah contract does not meet the requirements and pillars. indirectly, requiring other goods (tangible objects) or methods/ processes that make intangible assets have benefits are part of the conditions for the occurrence of a contract (syuruth in’iqaad) related to objects on intangible assets that used as the object of the contract (ma’qud ‘alaih). conclusion leasing of intangible assets in the form of leasing the zoom meeting premium application the software that is not accompanied by hardware, which is a medium that allows the software to function according to its capacity, is an ‘urf sahih is ‘urf that does not conflict with the provisions of the sharia. this does not affect the position of the terms and pillars of the contract and does not cause harm to the parties to the contract. in general, the rental of software always coincides with the hardware, hence the rental includes the rental of tangible objects/assets. as for the rental of the software only and the hardware comes from the lessee. so what is being rented is an intangible object or asset, and the provision of hardware is part of how the software has the benefits and objectives of the ijarah contract (maudhu al-’aqd), namely the exchange of the benefits of goods for goods (ujrah). has been fulfilled. so that according to sharia economic law, urf tijari in the practice of leasing may be carried out as long as it does not conflict with sharia principles. as for the practice of renting zoom meeting premium, there is the development of journal of islamic economic laws-july, vol. 5, no. 2, 2022 341 the object of the contract (ma’qud ‘alaih) for the ijarah contract, which is usually in the form of benefits. from tangible objects or assets but can also come from mahal al-manfa’ah (where the benefits occur). from the benefits of objects or intangible assets (immaterial/intangible assets). 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(2021). kontestasi marketplace di indonesia pada era pandemi: analisis strategi promosi tokopedia, shopee, bukalapak, lazada, dan blibli dalam pemulihan ekonomi nasional. oikonomika : jurnal kajian ekonomi dan keuangan syariah, 2(2), 33–42. https://doi.org/10.53491/oikonomika. v2i2.178 _goback _heading=h.gjdgxs journal of islamic economic laws vol. 2, no. 1 january 2019: 30-59 30 analysis of impact of car, bopo, npf on profitability of islamic banks (year 2015-2017) wahyu intan kusumastuti1 and azhar alam2 1faculty of islamic studies, universitas muhammadiyah surakarta email: wahyuintan70@gmail.com 2faculty of islamic studies, universitas muhammadiyah surakarta e-mail: aa123@ums.ac.id abstract islamic banks have been known as the resistant banks to the global crisis that hit indonesia a few years ago. the unique maintenance of islamic bank performance leads to business continuity. some islamic bank performance can be measured by its profitability. there are some factors that affect the profitability islamic bank and used in this study including car, bopo, and npf. while the purpose of this study is to determine the effect of car, bopo and npf on the profitability of islamic commercial banks. the population of this research is the islamic commercial bank whose financial statements have been published to the statistics of islamic banks from 2015 -2017. this research used secondary data from ojk website. data analysis in this paper conducted multiple linear regression analysis method. the results of this study indicate that the bopo variable has a significant effect on roa. on the other hand car and npf variables have no significant effect on roa. keywords: impact, bopo, npf, profitability, islamic commerical banks wahyu intan kusumastuti and azhar alam 31 introduction according to banking act no. 10 year 1998 bank can be defined as a bank is a business entity that collects funds from the public in the form of savings and distributes to the community in the form of credit and or other forms in order to improve the standard of living of many people. the banking industry in indonesia is increasingly crowded with the establishment of islamic commercial banks. the development of islamic banks gives an indication that the preference of indonesian society is increasingly leading to islamic transactions, the condition shows that the community has started to realize the existence of islamic banks as a means of managing financial funds that based on islamic principles that really blessed by allah. the existence of islamic banking in indonesia is currently increasing since the existence of law no. 21 of 2008 on islamic banking which provides a clearer operating platform for islamic banks. it can be justified from the islamic institutional development that has been increasing since the issuance of law no. 7 of 1992 concerning banking. the existence of islamic banks is also driven by the high interest of the public to place their funds in islamic banks because the products of islamic banking funds have an appeal to depositors considering the profit-sharing ratio and product margins are still competitive compared to interest in conventional banks. the development of islamic banking institute shows that the amendment of law no. 7 of 1992 became law no. 10 in 1998 responded positively by the perpetrators of the banking industry. this can be seen from the rapid growth of islamic banking that exceeds the development of conventional banking. the development of islamic banking is evident from the number journal of islamic economic laws-january, vol. 2, no. 1, 2019 32 of islamic commercial banks operating to 12, followed by 22 islamic business units, and 162 bprs. these data indicate that the banking industry in indonesia has enormous potential to develop. the tight competition between islamic banks and conventional banks, requires that islamic banks must always improve their performance well in order to compete in the national banking market in indonesia and create a bank with the principles of islamic healthy and efficient. banking performance is very important, because the banking business is a trust business, the bank must be able to show its credibility so that more people will be transacting the bank, one of them is through the increase of profitability. profitability can be regarded as one of the most appropriate indicators to measure the performance of a company.because the company ability to generate profits can be a benchmark of the company’s performance. the higher the profitability, the better the company financial performance. the usual ratios used to measure and compare the performance of bank profitability are return on equity (roe) and returnon asset (roa) (suhardjono 2005). both can be used to measure the financial performance of the banking industry. however, the return on equity (roe) only measures the return earned from the investment of the owner of the company) while the return on asset (roa) is used to measure the effectiveness of the company in generating profit to utilize its total assets (siamat 2007). bank indonesia as the supervisor and supervisor of banking prioritizes the profitability of a bank as measured by assets with funds mostly from public savings funds. the greater the return on asset (roa) of a bank, the greater the level of profitability achieved by the bank and the better the bank’s position in terms of wahyu intan kusumastuti and azhar alam 33 asset use (dendawijaya 2009). therefore, in this study return on assets (roa) is used as a measure of banking performance. the reason for choosing return on assets (roa) as a performance measure is because roa is used to measure the ability of bank management in obtaining overall profit. there are several factors that can affect bank profitability, namely internal factors and external factors. internal factor of the bank can be measured by using the financial ratios, because in analyzing financial statements will be easy if calculate the financial ratios of a company. ratios affecting roa are car, bopo, npf. while external factors are factors beyond the control of banks, these factors include exchange rate fluctuations, monetary policy, technological developments and competition among bank developers. bopo (cost-to-income ratio) which is a comparison between operational costs and operating income. the bigger the bopo, the smaller the bank’s roa, because the profit earned by the small bank. some previous studies showed that bopo had no significant effect on roa. while other researchs showed that bopo had significant effect on roa. with this research gap this paper try to do further research. according to the results of some research showed non perfomingloan (npl) has a negative and significant impact on return on assets (roa). while the results of some research showed nonperfoming loan (npl) has a negative and not significant impact on return on assets (roa). in contrast to these results, other research indicated non perfoming financing (npf) has a positive and significant impact on return on assets (roa). this research will examine the factors affecting roa in islamic bank in indonesia such as car, bopo, and npf. journal of islamic economic laws-january, vol. 2, no. 1, 2019 34 literature review definition of banks according to law no. 10/1998 on banking act, the bank is defined as a business entity that receive from society in the form of savings and distributes it to the community in the form of credit and / or other forms in order to improve the standard of living of the people (kasmir 2005). the bank aims to support the implementation of national development and increase equity of development and drive economic growth and encourage national stability by improving the living standards of the people. in indonesia bank type consists of commercial banks and rural banks (nadratuzzaman 2013) . based on the above definition, it can be seen that the main activity of the bank is to collect funds from the public in the form of savings that become the source of bank funds, then channeled in the form of credit, which should not only be driven by the motive to gain the maximum profit for owners but also aims for increasing standard living of people. definition of islamic bank in general, islamic bank is a financial institution whose main business is to provide credit and other services in the payment transaction and money circulation operating in accordance with the principles of islamic. islamic bank is a bank that conducting its business activities based on islamic principles which in its activities provide services in the payment trasanction. the rule of islamic bank agreement based on islamic law between banks and other parties for the storage of funds or financing of business activities, or other activities stated in accordance with islamic, among others, financing based on wahyu intan kusumastuti and azhar alam 35 principles for (mudharabah), financing based on the principle of capital (musyarakah), the principle of sale and purchase of goods with profit (murabaha), or financing of capital goods based on the principle of pure lease without choice (ijarah), or with the option of transferring ownership of leased goods from the bank by another party (ijarahwa iqtina). so it can be concluded that the main difference between islamic banking and conventional banking is the prohibition of interest (riba) for islamic banking. muhammad (2005) stated that the fundamental thing that distinguishes between non-islamic financial institutions and islamic is the return and profit sharing provided by customers to financial institutions and / or provided by financial institutions to customers. the financing portfolio at commercial banks occupies the largest portion, generally around 50% 60% of total assets. from the financing issued or channeled banks are expected to get results. the yield on financing is the highest rate of income for the bank (muhammad 2005). thus, the source of revenue for islamic banks can be obtained from profit sharing on mudaraba contract and musharaka contract, advantages on contract of sale buy (al bai ‘), rents on ijarah and ijarah wa iqtina contracts, fee and administrative fees for other services. islamic financial statement there are seven types of islamic financial statements as explained by suwiknyo (2010). first, balance sheet, this is a report showing the financial position of the bank on a certain date, the intended financial position is the position of the assets (assets) and liabilities of a bank. second, income statement describing the performance and business activities of islamic banks in journal of islamic economic laws-january, vol. 2, no. 1, 2019 36 a certain period covering income and expenses incurred in the bank’s main operations and other operations. third, cashflow report that addresses all aspects related to the activities of the bank, either directly or indirectly affecting cash. the cash flow statement should be prepared based on the cash concept during the reporting period. fourth equity change report that show changes in the bank’s equity reflecting an increase or decrease in net assets or wealth during the reporting period. fifth, report on the source of zakat funds derived from the external and internal entities of islamic, the policy of disbursement of zakat to each asnaf. and the proportion of funds disbursed for each recipient of zakat is classified on the parties concerned. sixth, source and use report of the virtue fund over a certain period of time, as well as a balance of demonstrated benevolent funds and virtues that have not been distributed on a specific date. last, notes to the financial statements include the information required to be disclosed in the psak and other disclosures necessary to produce reasonable presentation of financial statements financial ratio analysis the ratio of finance is a study that looks at the comparisons of the amounts contained in the financial statements by using formulas that are considered representative for application. ratio analysis is basically not only useful for internal corporate interests but also outside parties . financial ratios can be classified into six types. first, liquidity ratio that is used to measure the company’s ability to meet its short-term liabilities. some liquidity ratios are often used in assessing the performance of a bank that is cash ratio, reserverequirement, loan to deposit ratio, loan to assets ratio, ratio of net call liabilities. second, solvency wahyu intan kusumastuti and azhar alam 37 ratio (leverage) that measure the extent to which the company is financed from debt. some ratios are capital adequacy ratio (car), debt to equity ratio, long term debt to assets ratio. third, activity ratio, the ratio used to measure how effectively a company uses its resources. fourth, profitability ratio to measure the effectiveness of management seen from the profits generated on sales and investment companies. analysis of rentability ratios of a bank in this chapter include return on assets, return on equity, net profit margin, operational ratio. fifth, growth ratio to measure a company’s ability to maintain its economic position in economic and industrial growth. sixth, assessment ratio to measure management’s ability to create market values that go beyond investment cost. the valuation ratio is the most complete measure of company performance, as it reflects the risk ratio (the first two ratios) and the returns ratio (the next three ratios). the ratio of valuation is very important because the ratio is directly related to the purpose of maximizing the value of the company and the wealth of the shareholders. profitability profitability is the result of the policy taken by management. profitability ratioaims to measure how much the level of profits shows the better management in managing the company. the profitability of a company can be assessed in various ways depending on the profits and assets or capital to be compared with each other. firms with high and stable profitability tend to be free from the practice of income smoothing because managers feel confident about their performance as measured by profits generated by companies, while firms with low profitability tend to open up the possibility of income smoothing because if the journal of islamic economic laws-january, vol. 2, no. 1, 2019 38 company has a level profitability is low then the performance of managers will be questioned by the owner of the company and the existence of the eyes of society will be doubted, this will also impact on investment decisions by investors. this study carry out return on assets (roa) as the indicator used to measure profitability. it should be noted here that in determining the soundness of a bank, bank indonesia is more concerned with the valuation of return on asset and does not include the return on equity element. this is because bank indonesia, as the supervisor and supervisor of the banking system, prioritizes the profitability of a bank as measured by assets with funds mostly from public savings funds (dendawijaya 2009). return on asset (roa) return on assets (roa) is one of the ratios used to measure the bank’s management capability in gaining overall profit. return on assets (roa) is the ratio used to measure the ability of banks to earn an overall profit. the greater the return on assets (roa), the greater the level of profit achieved by the bank and show the company’s better performance.return on asset (roa) is chosen as an indicator of financial performance of banking because return on asset (roa) is used to measure the effectiveness of companies in generating profits by utilizing assets owned. return on assets (roa) is the ratio between profit before tax to average total assets. the greater the roa, the greater the level of profit the bank . based on the provisions of bank indonesia, roa is formulated as follows: roa = (profit before tax) / (average total assets) x 100% wahyu intan kusumastuti and azhar alam 39 capital adequency ratio (car) capital adequency ratio (car) is the ratio of capital ability to show how far bank assets have risks. the risk is also derived from the capital itself, where the bank obtained the capital from sources outside the bank. under the terms of bank indonesia, the value of the capital adequency ratio has a minimum value of eight percent (8%). therefore, bank management should increase the value of the capital adequency ratio (car) .when a capital is sufficient, then the bank can easily expand the business (business) in order to improve bank profitability. to obtain high profitability, many banks must be able to make capital adequency ratio (car) ratio more than eight percent (8%).in other words, capital adequency ratio is the ratio of bank performance to measure the capital adequacy of the bank to support the assets that contain or generate risk. car = (bank capital) / (total rwa) x 100% operating cost of operating income (bopo) bopo is the ratio between operating costs and operating income. operational cost ratio is used to measure the level of efficiency and ability of banks in conducting operations. same smaller this ratio means the more efficient operational costs are laid by the bank concerned so that the possibility of a banks in less problematic conditions. the smaller this ratio then the better bank performance. thus, the operating efficiency of a bank proxied by bopo ratio will affect the bank’s performance. mathematically, bopo can be formulated as follows: bopo = (operating cost) / (operating income) x 100% journal of islamic economic laws-january, vol. 2, no. 1, 2019 40 non performing loan (npf) according to the dictionary of bank indonesia, non performing loans (npls) or non performing financing (npf) are non performing loans consisting of substandard, doubtful and loss classifications. the npl term is for commercial banks, while npf for islamic banks. loans in this case are credits granted to third parties and excludes credits to other banks. while nonperforming loans are credits with substandard quality, doubtful, and loss. so the higher this ratio, the worse the credit quality of the bank that causes the number of problem loans is greater then the possibility of a bank in the increasingly troubled condition. nonperforming loans are credits with substandard quality, doubtful and loss (almilia, 2005). hasbi (2011) wrote this npf ratio can be formulated as follows: npf = (financing) / (total financing) x 100% the effect of car on roa capital adequacy ratio (car) is also commonly referred to as the capital adequacy ratio, measuring the capital adequacy of banks to support risk-bearing assets. this capital adequacy ratio is an indicator of the bank’s ability to cover its asset decline as a result of bank losses caused by risky assets so with the increase in capital itself, the bank’s health associated with the capital ratio (car) is increasing and with large capital then the opportunity to earn corporate profits is also getting bigger. because with large capital, bank management is very flexible in placing the funds into investment activities that benefit. so it can be concluded that the higher the car, the higher the roa. this is in accordance with research mahardian which shows that the increasing car wahyu intan kusumastuti and azhar alam 41 effect on roa is also increasing. the bank indonesia regulation concerning capital adequacy ratio (car) states that the minimum car must be met by 8% bank. so the bank should always keep the car ratio always above 8%. however, the car which is too high means that there is idle fund. thus, the bank’s opportunity to earn profits will decrease, consequently will reduce the bank profitability. the high car can be caused by the addition of capital from the owner in the form of fresh money to anticipate the development of business scale in the form of credit expansion. however, in fact, the bank intermediary function is still not optimal yet, wherein third party funds in the form of public funds deposits by banks are given bank indonesia certificates in which the sbr sbi is 0, thus the atmr of bank is relatively small, so capital adequacy ratio (car) big. as a result, idle funds will also be large, so the profitability of banks proxied with return on assets (roa) will decrease further. the effect of bopo on roa bopo is the ratio of the ratio between operational cost and operating income, the lower the ratio of bopo means the better performance of the bank’s management, because it is more efficient in using the existing resources in the company bopo ratio shows the efficiency of the bank in running its main business, especially credit, where the loan interest becomes the biggest income of the bank. financing management is needed by the bank, considering the financing function as the largest contributor of income for islamic banks. the level of health financing (npf) influences the achievement of bank profit (suhada, 2009). the smaller bopo indicates the more efficient the bank in carrying out its activities. a healthy bank bopo ratio of less than 1 otherwise journal of islamic economic laws-january, vol. 2, no. 1, 2019 42 bank less healthy bopo ratio is more than 1. the higher the cost of the bank’s income means that its operational activities are increasingly inefficient, so its opinion jugasemakin small. in other words bopo negatively related to bank profitability. the effect of npf on roa non performing financing (npf) which is analogous to non performing loan (npl) reflects the size of credit risk faced by the bank, the smaller non performing loan (npl), the less the credit risk borne by the bank. thus, if a bank has a high non performing loan (npl), indicating that the bank is not professional in credit management, as well as providing an indication that the level of risk on the lending in the bank is quite high in line with the high npl faced by banks (riyadi, 2006 ). credit risk proxied by non performing financing (npf) has a negative effect on the bank’s financial performance proxyed with return on assets (roa). thus, the greater non performing financing (npf), will result in a decrease in return on assets (roa), which also means the financial performance of banks that decline because of the greater credit risk. vice versa, if the non performing financing (npf) down, then the return on assets (roa) will increase, so the financial performance of banks can be said the better. previous research previous research is conducted by wibowo et al. (2013) entitled “analysis of influence of interest rate, inflation, car, bopo, npf on profitability of islamic bank”, using data collection technique by purposive sampling. the method used is f-statistic test and t-statistic test. the result of research wahyu intan kusumastuti and azhar alam 43 indicates that bopo has significant effect to roa while car, npf, inflation and interest rate variables have no effect. the previous research conducted by silfani permata sari, a (2017) under the title “the influence analysis of capital adequacy ratio, net operating margin, fanancing to deposit ratio, non performing financing and profit sharing financing on islamic commercial banks in indonesia. (case study of islamic commercial banks in indonesia). using population data collection techniques only take from several banks. the result of research shows that car variables have positive effect on profitability (roa) of syariah bank, nom variable have positive effect to islamic bank profitability (roa), fdr variable have positive effect on islamic bank profitability (roa), variable of npf negatively affect profitability (roa) islamich, and profitsharing sharing have a positive effect on the profitability (roa) of islamic banks. previous research conducted by iskandar et al. (2016) under the title “the influence of risk-based bank rating components to profitability of islamic commercial banks in indonesia (period 2011-2014)”, using data collection techniques by purposive sampling.method used is multiple linear regression . the results showed that all variables used to measure the four aspects of bank soundness rating by risk-based bak rating method, ie npf, fdr, gcg composite value, bopo, and car simultaneously significantly influence the profitability of islamic commercial banks prior research conducted by sri windarti mokoagow (2015), entitled “factors affecting profitability of islamic commercial banks in indonesia”, using data collection techniques in this study population of all islamic commercial banks in indonesia journal of islamic economic laws-january, vol. 2, no. 1, 2019 44 in 2011-2013. the method used is descriptive statistics, classical assumption test, multiple regression analysis, and hypothesis test. the result of research shows that car variable has a significant positive effect on profitability (roa) of islamic commercial bank, kap variable has a significant negative effect on profitability (roa) of islamic commercial bank, bopo variable has significant negative effect to islamic bank profitability (roa) insignificant to the profitability (roa) of islamic commercial banks, and minimum reserve requirements (gwm) variable positively insignificant to profitability (roa) of islamic commercial bank previous research conducted by yeyen kumalasari (2016) entitled “analysis of factors affecting profitability at islamic commercial bank in indonesia period 2010-2014”, using data collection techniques secondary obtained from the publication of the semester financial reports of several banks at commercial banks islamic. the method used is multiple linear regression. the research results show that simultaneously car, lta, market share of financing have positive and significant impact to profitability of islamic commercial bank period 2010-2014. in partial car have negative and significant impact on profitability (roa, lta variables, market share, financing, and nim have a positive and significant impact on profitability of islamic commercial bank. methods object and type of research data the object of this research is the influence of car, bopo, npf on profitability of islamic commercial bank. the study in this study is the islamic commercial bank. the study intends to analyze the effect of car, bopo, npf on profitability of wahyu intan kusumastuti and azhar alam 45 islamic commercial bank. type of research that researchers use in this research is statistical research with descriptive approach. descriptive statistics in research is basically a process of transforming research data in tabulation form so easily understood and interpreted. the type of data used in this study is secondary data obtained indirectly from third parties through intermediaries and various sources available. in this study the source data taken from the statistics of islamic banking taken from the website www.ojk.go.id and other supporting data. data analysis model the analysis model uses multiple linear regression analysis tool that is increase the number of free variable previously only one into two or more independent variables. in this study, multiple linear regression analysis is used to prove the extent to which the influence of car, bopo, npf on profitability of islamic commercial bank. the authors replicate the model from edhi satriyo wibowo, et al, 2013, influence analysis of interest rates, inflation, car, bopo, npf against profitability of syariah commercial bank.diponegoro journal of management vol.2, no. 2. with the model of the following regression equation: y = a + b1x1 + b2x2 + b3x3 + e information: y = dependent variable (roa) a = constants b1-b3 = independent coefficient of independent x1 = car (capital adequacy ratio) interest rate x2 = bopo (international expenditure per oo revenue) journal of islamic economic laws-january, vol. 2, no. 1, 2019 46 x3 = npf (non performing fund) e = standard error classic assumption test there are several classic assumption test in this study. first, normality test this normality test aims to test whether in the regression model the dependent variable and the independent variable both have a normal distribution or not. a good regression model is a normal or near normal distribution. second, multicolinearity test. the problem of multicollinearity arises when there is a definite or definite relationship between one or more independent variables in the model. in the case of serious multicollinearity, the regression coefficient no longer shows the pure effect of the independent variable in the model. third, heteroskedacity test. occurs when variance is not constant or varies with the change of independent variables. the consequence of the existence of the heteroskedasitas is the ols regression method will produce a biased estimator for the ut variation value and thus the variation of the regression coefficient. fourth autocorrelation test to prevent autocorrelation because it occurs when the value of a past variable has an effect on the value of the present, or future variable. the consequence of the existence of autocorrelation is the ols regression method will result in an overestimation of the value of ut variation and hence produce an overestimate estimate for r2. fifth, test specification linearity model . this test is used to test clrm assumptions about model linearity, so it is often referred to as model linearity test. this study used ramsey raset test as general to test specification error. wahyu intan kusumastuti and azhar alam 47 results and discussion the profitability development of islamic commercial banks profitability is the result of the policy taken by management. the profit ratio to measure how much the profit rate shows the better the management in managing the company. profitability of a company can be assessed in various ways depending on the profits and assets or capital to be compared with each other. from the data collected by syariah banks in islamic banking statistics shows profitability in 2015 2017. profitability data can be shown by the following graph: graph 1 profitability development of islamic commercial banks 2015-2017 source : islamic banking statistic graph 1 above shows profitability of 2015-2017 had an initial increase in the beginning of 2016 at 1.01%. in february 2016 it decreased at 0.81% until the end of 2016. in 2017 profitability increased again at 1.01%. the increase and decrease journal of islamic economic laws-january, vol. 2, no. 1, 2019 48 of profitability development is not seen clearly in the graph above because the increase and decrease is not too significant. the capital adequacy ratio (car) development of islamic commercial banks capital adequency ratio is the ratio of capital ability to show how far bank assets have risks. the risk is also derived from the capital itself, where the bank obtained the capital from sources outside the bank. under the terms of bank indonesia, the value of the capital adequency ratio has a minimum value of eight percent. therefore, bank management should increase the value of capital adequency ratio.from the data collected at islamic commercial banks in the statistics of islamic banking show capital adequacyratio (car) in 2015 2017.data capital adequacyratio (car) can be shown at graph the following graph graph 2 car development of islamic commercial banks 2015-2017 source : islamic banking statistic wahyu intan kusumastuti and azhar alam 49 based on graph 2 above, capital adequacyratio (car) of 2015-2017 has increased in 2015 at 15.02% in 2016 has increased at 15.09%. in 2017 again decreased at 17.00%. the increase and decrease of capital adequacyratio (car) development is not seen clearly in the graph above because the increase and decrease is not too significant. the cost-to-income ratio (bopo) development of islamic commercial banks operating cost to operating revenue ratio is often called the operational efficiency ratio, this ratio is used to measure the ability of bank management in controlling operational costs to operating income. from collected data at islamic banking statistics shows operational cost and operating income (bopo) at 2015 2017. operational cost and operating income (bopo) data can be shown at the following graph: graph 3 cost-to-income ratio development of islamic commercial banks 20152017 source : islamic banking statistic journal of islamic economic laws-january, vol. 2, no. 1, 2019 50 based on graph 4.3 above, cost-to-income ratio (bopo) of 2015-2017 increased in 2015 at level 97.01% and in 2016 decreased at level 96.23%. in 2017 this ratio decreased to level 94.05%. there were increase and decrease in the development of cost-to-income ratio (bopo). the non performing loan (npf) development of islamic commercial banks non performing financing is a comparison of financing provided to third parties and excludes financing of other banks. non-performing financing is financing of substandard, doubtful, and loss. from the data collected at syariah banks in the statistics of syariah banking shows non performing financing (npf) in 2015 2017. data non performing financing (npf) can be shown at the following graph: graph 4 performing loan (npf) development of islamic commercial banks 2015-2017 source : islamic banking statistic based on graph 4 above, non performing financing (npf) of 2015-2017 decreased in 2015 at 4.84% in 2016 decreased at 4.42%, in 2017 increased at 5.27% increased and decreased wahyu intan kusumastuti and azhar alam 51 development non performing financing (npf) is not seen clearly in the graph above because the increase and decrease is not too significant. estimation result in this research, as mentioned above, to know the effect of capital adequacy ratio (car), operational cost and operating income (bopo), non performing financing (npf) to profitability of islamic commercial banks during 2015-2017 period, ordinary regression analysis least square (ols) with the econometric model as follows: roa = a +β1car+ β2bopo+ β3npf + ut note: y = dependent variable (roa) car = capital adequacy ratio bopo = cost-to-income ratio npf = non perfoming financing α = constants or intercept 321 ,, βββ = regression coefficient of independent variables u = component error (error term) t = time to t (for time series data, replace with i for cross section data) the estimation results of the above econometric model along with the various complementary tests are summarized in table 1 journal of islamic economic laws-january, vol. 2, no. 1, 2019 52 table 11 estimation result of econometric model profitability of islamic commercial banking 2015-2017 = 11.05352 + 0.006241cart 0.110703bopot + 0.022916npft (0.8372 )(0.0000)* (0.6701) r2 = 0.843111; dw-stat = 1.414835; f-stat = 55.53079 sig. f-stat =0.000000 description: * significant at α = 0,01; ** significant at = 0,05; *** significant at α = 0,10; the number in parentheses is the probability of the t-statistic value source : islamic banking statistics (organized data) classic assumption test multicolinearity test (vif test) multicollinearity test in this study using variance inflation factor (vif). a multicollinearity problem occurs when vif (> 10). from table 4.1, the value of vif capital adequacy ratio (car) of 2.770758 (<10), vif of operating income operating cost (bopo) is 2.041429 (<10), and vif non perfoming fund (npf) value is 1.892556 (< 10). conclusion there is no problem multicollinearity. autocorrelation test (breusch godfrey test) autocorrelation test in this study using breusch godfrey test. h0 breusch godfrey test: there is no problem of autocorrelation in the model. ha breusch godfrey test: there is an autocorrelation problem in the model. h0 is accepted when the statistical significance of x ^ 2> α and h0 is rejected when the significance of x ^ 2 <α.from table 4.1 in advance the value of wahyu intan kusumastuti and azhar alam 53 probability or sig (x ^ 2) is 0.2352 (> 0.10), then h0: there is no autocorrelation problem in the model. linearity test (ramsey reset test) linearity test in this research use ramsey reset test. h0 ramsey reset test: linear model (exact model specification). ha ramsey reset test: not linear (model specifications are not exact). h0 is accepted when f arithmetic or sig (f)> α and h0 are rejected if f arithmetic or sig (f) <α. from table 4.1 in advance seen the value of sig (f) = 0.0127 (<0.05) then h0 rejected, means that the model used is a model that is not linear. normality (jarque bera test) normality test in this study using jarque bera test. h0 test jarque bera: normal ut distribution. ha jarque bera test: ut distribution is not normal. h0 is accepted when the statistical significance of jb> α and h0 is rejected if statistical significance jb <α.from table 4.1 in advance, the value of statistical significance of jarque bera 0.002557 (<0.01) then h0 is rejected, meaning that the regression distribution of ut is not normal. heteroscedasticity (white test) heteroscedasticity test using white test. h0 white test there is no problem of heteroscedasticity in the model. ha white test there is a problem of heteroscedasticity in the model. h0 is accepted when the statistical significance value x ^ 2> α and h0 is rejected when the significance value x ^ 2 <α. from table 4.1 in advance the value of sig (x ^ 2) = 0.1702 (> 0.10) then h0 is accepted, meaning there is no heteroscedasticity problem in the model. journal of islamic economic laws-january, vol. 2, no. 1, 2019 54 goodneess-of-fit test test of existence model using test f. h0 test f: β1 = β2 = β3 = 0, the model used does not exist and its ha: β1 ≠ β2 ≠ β3 ≠ 0; the model used exist, h0 accepted when the statistical probability f> α. h0 is rejected if the probability statistic f <α. from table 4.1 in advance the f-statistic probability value of 0.000000 (<0.01) then h0 rejected means the model used exist. from table 4.1 in advance, the value of r-squared (r2) of 0.843111 or 84.3111% means variable variable dependent profitability of islamic commercial bank can be explained by variation of independent capital adequacy ratio (car), operational and operating income (bopo), non perfoming fund (npf) of 84.3111%. while the rest of profitability of islamic commercial bank is explained by variation of other variables which are not included in statistical model equal to 15.6889%. validity test of independent variables influence (ttest) the validity test of influence used in this research is t test. h0 test t: βi = 0; independent variable to i has no significant influence and its ha βi ≠ 0; independent variables to have a significant influence. h0 is rejected if statistical significance ti <α and h0 is accepted when statistical significance ti> α. t test results can be seen in table 2. wahyu intan kusumastuti and azhar alam 55 table 2 estimation resulft of validity test of independent variables influence (t-test) variable t sig.t criteria conclusion car 0.207152 0.8372 > 0.01 not significant at α = 0.01 bopo -9.075178 0.0000 <0.01 significant at α = 0.01 npf 0.430049 0.6701 >0.01 not significant α = 0.01 source : islamic banking statistic (organized data) interpretation of influence of independent variables from the test of validity of advance influence seen that variable which have significant influence to profitability of islamic commercial bank operational cost and operating income (bopo). while the variable capital adequacy ratio (car), non perfoming fund (npf) has no significant effect. the coefficient of variable operational cost and operating income (bopo) equal to 0.110703 means that if operational cost and operating income (bopo) increase 1% it will cause profitability down by 0.110703%, with other variable notes considered constant. if operating cost and operating income (bopo) decreased by 1% then profitability will increase by 0.110703%. economic interpretation economic interpretation is intended to interpret the results of the analysis of economic sciences on the overall results of the analysis. to know the influence of each independent variable (car, bopo, npf) to the dependent variable (profitability) can be seen from the magnitude of the regression coefficients of each variable. the magnitude of the regression coefficient can be seen in the appendix. interpretation of each regression coefficient value journal of islamic economic laws-january, vol. 2, no. 1, 2019 56 of independent variable and dependent variable can be described as following paragraphs capital adequacy ratio (car) variable capital adequacy ratio (car) variable has no significant effect on profitability in islamic commercial bank. decrease in capital adequacy ratio (car) in islamic banks can decrease the profitability implemented by islamic commercial bank. to maximize the increase of capital adequacy ratio (car), the issuer is expected to always maintain the capital adequacy level so that in the end with adequate capital adequacy level, the bank’s financial performance will increase. because the greater the ratio of capital adequacy ratio (car) of a bank, the higher the profit also means the higher the financial performance of the bank. other research also indicated that capital adequacy ratio (car) has no significant effect on roa, this means roa changes from the banks in question are not influenced by changes in the capital adequacy ratio (car) ratio. cost-to-income ratio(bopo) variable cost-to-income ratio (bopo) to profitability have significant negative effect to profitability. in other words, the increase in operational costs and operating income (bopo) can spur a decline in profitability of roa in islamic commercial banks. if the bank in running its operations in an efficient way will reduce the ratio of operational costs and operating income (bopo) then the income obtained by the bank will increase and also offset the increased profitability. other researh that operational cost and operating income (bopo) have a negative and significant wahyu intan kusumastuti and azhar alam 57 impact on profitability. this is evidenced by the significance of operational costs and operating income (bopo) is lower than the required maximal significance requirements. non perfoming fund variable (npf) non perfoming fund (npf) variable has no significant effect on profitability that is roa of islamic commercial bank. so the greater the non perfoming fund (npf), will result in a decrease in return on assets (roa), which means the financial performance of banks decreased because of the greater credit risk. therefore, the bank in handling the non perfoming fund (npf) rescheduling, which is to rescheduling the installment period and to minimize the installment amount. reconditioning also becomes one of the alternative banks in dealing with non perfoming fund (npf) problem, that is minimize profit margin or profit sharing. other previous research showed that the variable non perfoming fund (npf) has a significant effect on profitability. conclusion from research process this paper demonstrate a number of findings that can be used as a conclusion. these conclusions are the findings of the analysis by the authors. in seeking the influence of capital adequacy ratio (car), cost-toincome (bopo), non performing financing (npf) to profitability of islamic commercial bank. the formulation of the problem thus can be answered clearly.these facts are the answer and the final part of the initial question on the formulation of the problem during the preparation of the study. based on the research that has been described above statistically, then to obtain a more comprehensive journal of islamic economic laws-january, vol. 2, no. 1, 2019 58 description of research results will be reviewed further each data calculation results in accordance with the underlying financial aspects, can be described below: 1. the variable of capitaladequancy ratio (car) does not significantly affect the roa. it is busy with the test t with a significant significance of 0.8372 greater than 0.01. 2. the variable of cost-to-income ratio (bopo) is negatively influential to roa. it is busy with the test t with a significant significance of 0.0000 being significantly less than 0.01. 3. the non-performing financing (npf) variable does not affect the roa. it is busy with the test t with a significant significance of 0.6701 more significant than 0.01. 4. the result of testing of hypothesis shows that f calculate 55,53079 with significant value of 0.000000, because it is more significant than 0.01 then ho is rejected and receives ha. it may be stated that the significant effect of capital investment equity ratio (car), international operational costs and revenue (bopo), and non performing financing (npf) secarasimultant to roa. this research provides several suggestions related to the research that already conducted. the management of the islamic commercial banks is expected to pay attention to the variables of capitaladequancy ratio (car) and cost-to-income (bopo) ratio. management of islamic commercial bank should be able to operate the available capital of the operational activities, so that if the bank has a high capital investment equity ratio (car), it increases the profitability of the bank and the unpredictable providers are in good condition to keep the funds held unemployed. in terms of cost-to-income (bopo ) ratio is instantly greater wahyu intan kusumastuti and azhar alam 59 than (-9.075178). this indicates that the operational activities of banks are inefficient, because management needs to be more costeffective and the costs incurred by the bank to make the profitrate gained by the bank itself. reference dendawijaya, l., 2009. manajemen perbankan, jakarta: ghalia indonesia. iskandar, aprigati, b. & laila, n., 2016. pengaruh komponen risk – based bank rating terhadap profitabilitas bank umum syariah di indonesia ( periode 2011-2014. jurnal ekonomi syari’ah teori dan terapan., 3(3). kasmir, 2005. bank dan lembaga keuangan lainnya, jakarta: raja grafindo. muhammad, 2005. pengantar akuntansi syariah, jakarta: salemba empat. nadratuzzaman, m., 2013. produk keuangan islam di indonesia dan malaysia, jakarta: gramedia pustaka utama. siamat, d., 2007. manajemen lembaga keuangan, jakarta: lembaga penerbit fe ui. suhardjono, m.k., 2005. manajemen perbankan, teori dan aplikasi cetakan 2., suwiknyo, d., 2010. kompilasi tafsir ayat-ayat ekonomi islam cetakan 1., yogyakarta: pustaka pelajar. wibowo, satriyo, e. & syaichu, m., 2013. analisis pengaruh suku bunga, inflasi, car, bopo, npf terhadap profitabilitas bank syariah. journal of management, 2(2). journal of islamic economic laws vol. 2, no. 2 july 2019: 212-233 212 murabaha dispute settlement in a sharia rural bank (bprs) of klaten rifanatus sarah dzatihanani1 and imron rosyadi2, 1faculty of islamic studies, universitas muhammadiyah surakarta email: rifanatussarah7@gmail.com 2faculty of islamic studies, universitas muhammadiyah surakarta email: imron.rosyadi@ums.ac.id abstract in august 2018 the religious court accepted the sharia rural bank al-mabrur, located in the city of klaten, application as plaintiff under number 1135 / pdt.g / 2018 / pa / klt. they sued tri suyatmi and panut basuki, for their violation of disobeying the murabaha contract number: 2414 / apjbm / al mabrur / vi / 2017. based on the case above, a review of decision number 1135 / pdt.g / 2018 / pa.klt will be examined. in this article, we will review first of all, what is the basis for the consideration of the klaten religious court judges in completing case number 1135 / pdt.g / 2018 / pa.klt. secondly, is the religious court judge’s decision regarding the murabaha contract in the sharia rural bank al-mabrur in accordance with the dsn-mui fatwa? this research is a type of qualitative research, which uses an evaluative method that is by measuring certain benefits and activities, as well as collecting and analyzing data systematically to determine the value or benefits of the contents of decision file number 1135 / pdt.g / 2018 / pa.klt. the data were obtained from observations, interviews with judges and clerks of the klaten religious court, and documents in the religious courts. based on the results of the study it can be concluded that: 1) judge’s decision on case number 1135 / pdt.g / 2018 / pa.klt is to declare legal murabaha contract number 2414 / apjbm / al mabrur / vi / 2017, 2) defendant is proven to have defaulted and must journal of islamic economic laws-july, vol. 2, no. 2, 2019 213 pay material compensation of rp. 36,269,864 and pay the costs of the case, 3) the legal basis used by the panel of judges in setting decisions is in accordance with islamic economic law, namely using the fatwa of the sharia council of the indonesian ulema council (dsn-mui) concerning the murabaha contract. keywords: murabaha, tort, fatwa dsn-mui, the courts. introduction conflicts and disputes that occur in islamic banking are increasing in their types, all of which are in need of solutions and sttelement. one of the cases that occurred was a dispute at the bprs al-mabrur in a murabaha contract. tri suyatmi, in this matter, acts for and on behalf of himself who has received the approval of her husband, panut basuki, hereinafter referred to as the customer. the customer has submitted an application to the bprs al mabrur to purchase land, and based on the customer’s request the bprs al mabrur agrees, and with this murabaha agreement, binds itself to finance the entire purchase price, provides and then sells the land to the customer in accordance with the existing provisions of the murabaha contract. then the two parties agreed to make and sign this murabaha contract. then the customer violates the terms, or in other words, breaks promises to the agreed murabaha contract. the customer promises to make installment payments in accordance with the established installment schedule. the customer agrees to make payments according to the installment schedule each month until the contract is due. however, in reality the customer does not carry out these obligations. there was a dispute in carrying out this contract, then the customer and the bprs al mabrur tried to settle the meeting. the event that seeks to resolve differences of opinion through deliberation does not bear any fruitthat can be agreed by both parties. the customer and the bprs al mabrur hereby agree to appoint, determine and authorize the klaten religious court office to give its decision, whose legal opinion or the decision determined is of a nature final and binding. rifanatus sarah dzatihanani and imron rosyadi 214 the klaten religious court on august 1, 2018, in the registrar’s office, received a lawsuit regarding the fulfillment of the murabaha financing agreement with case number 1135 / pdt.g / 2018 / pa / klt filed by the bprs al mabrur, which is domiciled in the avenue klaten highway -solo km 04, kerubaru, belangwetan. north klaten, in this case was represented by arifin hidayat, se. in his position as managing director of the bprs al mabrur. here they sued tri suyatmi and panut basuki as the sustomer. in the court’s decision, the court granted the suit in its entirety, stating that by law, the defendant’s act of achievement was breaking the promise to the plaintiff. literature review previous studies from this study, the authors found several previous researchers who discussed related issues by the author, inter alia: eko mulyono, (an essay of the sharia faculty of iain salatiga university, 2017) in his essay entitled analisis terhadap putusan hakim dalam kasus sengketa ekonomi syariah di pengadilan agama (pa) purbalingga tentang wanprestasi akad murabaha (decision no 1720 / pdt.g / 2013 / pa. pbg), states that the legal considerations used by the panel of judges in deciding decision no. 1720 / pdt.g / 2013 / pa.pbg is law number 7 of 1989 as amended by the first amendment to law no.3 of 2006 and amended by the second amendment to law no. 50 of 2009 concerning religious courts, law no. 1 of 1995 concerning limited liability companies, compilation of sharia economic law (khes) and herzien inlandsch reglement (hir). with regard to legal considerations by the judge, the use of law no. 1 of 1995 concerning limited liability companies is incorrect because the law has been replaced by law no. 40 of 2007 concerning limited liability companies. while the use of law no.50 year 2009 concerning religious courts, khes and hir as legal considerations by judges is appropriate. ilyas hanafi, (an essay of the sharia faculty of iain university salatiga, 2017) in his essay entitled analisis putusan journal of islamic economic laws-july, vol. 2, no. 2, 2019 215 pengadilan agama purbalingga tentang wanprestasi akad murābaḥah studi kasus putusan perkara number 0311 / pdt.g / 2014 / pa.pbg, states that the legal basis used by the panel of judges is law number 7 of 1989 as amended by law no. 3 of 2006 and amendments to (2) two of law no. 50 of 2000 concerning religious courts which contains the absolute authority of the religious courts law no. 1 of 1995 as amended by law no. 40 of 2007 concerning limited liability companies (pt) contains the position of directors in being responsible for the interests of the company as representatives in and outside the court. the compilation of sharia economic laws contains the forms established legally in force nash sharia. and hir (herzien inlandsch reglement) contains the verstek decision and the imposition of court fees. ulfa kharisaturrodiyah, (an essay of the sharia faculty of iain ponorogo university, 2018) in her essay entitled analisis hukum ekonomi islam terhadap putusan hakim dalam sengketa ekonomi syariah (studi putusan pengadilan tinggi agama yogyakarta nomor 63/pdt.g/2011/pta.yk), states that the reason for consideration used by the assembly in determining the decision number 63 / pdt.g / 2011 / pta.yk is in accordance with islamic economic law, namely the interpretation of law or in terms of islamic law called ijtihad tatbhiqi in this case the panel of judges uses the ijtihad method namely istislāh or al masālih al-mursalah. while the legal basis used by the panel of judges in setting decisions is also in accordance with islamic economic law, namely dsn-mui fatwa number / dsn-mui / iv / 2000 concerning murabaha financing, compilation of sharia economic laws (khes) regarding agreements. in setting the decision, the panel of judges also included the legal basis for the civil code (kuhp) to strengthen the referral and outcome of the decision. the researches above are different from the research that will be carried out by the author. aforementioned essays and previous studies that also discuss the analysis of the judge’s decision have some differences from the research conducted by the author, regarding the settlement of murabaha contract disputes in the rifanatus sarah dzatihanani and imron rosyadi 216 bprs al-mabrur of klaten (analysis of the klaten religious court’s decision number 1135 / pdt.g / 2018 / pa.klt) murabaha contract the financing is a form of providing funds or capital goods by not withdrawing funds directly from the community (sunaryo, 2008). in the narrow sense, financing is used to define funding carried out by financial institutions such as islamic banks to customers (muhammad, 2005). there are several forms of sale and purchase agreements and contracts that are often used by islamic banks in financing their customers, one of which is murabaha. therefore, what is meant by murabaha financing is an agreement on the provision of goods based on buying and selling where the bank finances or buys the needs of the customer’s goods or investments and resells them to the customer plus the agreed profit. customer payments are made in installments within the specified time period (bagya agung prabowo, 2012). the default defaults come from dutch, which means poor performance. what is meant by default is a condition caused by negligence or mistake, so the debtor cannot fulfill the achievement as specified in the agreement and not in a compelling condition (nindyo pramono, 2008). defaults are certainly inseparable from the agreements that are the basis for determining whether or not there is a default. in connection with the form of the content or achievement of the engagement, there are classification of the engagement as follows (1) the obligation to give something, (2) the obligation to do or do something, and (3) the obligation not to do something (satrio, 1992). defaults that are a person’s negligence can take four forms, namely: 1) not doing what he is promised to do, 2) doing what he promised, but not as promised, 3) doing what he promised but too late, 4) doing something according to the agreement do not do it (subekti, 2002). journal of islamic economic laws-july, vol. 2, no. 2, 2019 217 confiscation guarantee a guarantee seizure (conservatoir-beslag) is a seizure carried out by the court at the request of the plaintiff over someone else’s property (ie the defendant’s property) so that the plaintiff’s rights are guaranteed to be fulfilled by the defendant after the plaintiff is adjudicated to win in his case later (roihan, a rasyid, 2007 ). the application of confiscation is basically restricted only to disputes over debts incurred by defaults. with the seizure put on the property of the defendant to a third party, so that it remains intact until the verdict is legally binding. if the defendant does not fulfill the voluntary payment, the payment of the debt or compensation, is forcibly taken from confiscated goods through auction sales. thus, the act of confiscating the property of the defendant is not to be submitted and owned by the plaintiff, but is intended to pay off the defendant’s debt payments to the plaintiff (m. yahya harahap, 2012). if the claim regarding a dispute is imposed to immovable property, the confiscation of the guarantee is intended to guarantee the integrity and presence of the goods so that they are maintained during the inspection process. research methods this research is of field research that intends to collect data directly (supardi, 2005). in this case the object of research is the case number 1135 / pdt.g / 2018 / pa.klt. about the murabaha contract in the religious courts. the research approach used by the authors in this study is a qualitative approach that is evaluative. the evaluative method aims to measure certain benefits and activities, as well as systematically collect and analyze data to determine the value or benefits of the contents of decision file number 1135 / pdt.g / 2018 / pa.klt. about the murabaha contract in the religious courts. type of data this type of research data refers to primary data and secondary data. primary data, or first-hand data, is data obtained directly. secondary data or second hand data is data obtained from other rifanatus sarah dzatihanani and imron rosyadi 218 parties, not directly obtained by researchers (saifuddin azwar, 2007). the primary research, namely, the researcher went directly to the field, dealing directly with a guest speaker of the klaten religious court judge. while secondary research refers to the contents of the decision file number 1135 / pdt.g / 2018 / pa.klt. and other literature relating to the contents of the decision. method of collecting data interview is an oral question and answer process, carried out by two or more people dealing physically. klaten religious court acts as one of the parties concerned as the subject of the interviewer’s author to obtain valid data information (sutrisno hadi, 2007). in this case the researcher is interviewing the judge who closed the case, and the clerk. documentation is a data collection technique or searching for the subject of documents. with this method the researcher is expected to get information in the form of decision files and photographs relating to the research subject. data analysis technique analysis is an attempt to systematically search and organize the notes of interviews and others to improve the writer’s understanding of the case under study and to present it as a finding for others (kusdiyanto, 2010). the data obtained is qualitative data and will be analyzed by evaluative methods. this research is using inductive descriptive approach, by which the method of collecting data aims to determine whether the objectives of implementing activities are in accordance with the objectives set. in this case the researcher conducted an analysis of the contents of the judge’s decision number 1135 / pdt.g / 2018 / pa.klt. by using literature relating to the content of the decision namely the dsn-mui fatwa. journal of islamic economic laws-july, vol. 2, no. 2, 2019 219 analysis and discussion principal case no. 1135 / pdt.g / 2018 / pa.klt regarding the murābaḥah agreement of the klaten religious court based on case number 1135 / pdt.g / 2018 / pa.klt in relation to this breach of dispute is a lawsuit between the defendant (tri suyatmi) and the plaintiff (arifin hidayat, se). tri suyatmi has submitted an application to the bprs al mabrur to buy land, and based on tri suyatmi’s request the bprs al mabrur agreed, and with this murābaḥah contract, committed itself to buy, provide and then sell the land to tri suyatmi in accordance with the provisions of the murabaḥah contract. then the two parties agreed to make and sign this murābaḥah contract. then tri suyatmi violated the provisions / broken promises against the agreed murābaḥah contract, the forms of default were: 1) did not meet the achievements at all; 2) meet the achievements but not on time; 3) fulfills achievements but is not appropriate or wrong. tri suyatmi promised to make installment payments according to the stipulated installment schedule, tri suyatmi agreed to make payments according to the installment schedule each month until the contract was due. but in reality tri suyatmi does not want to pay the remaining obligations. there was a dispute in carrying out this contract, then the bprs al mabrur tried to settle the meeting. in the event that efforts to resolve differences of opinion through deliberation do not result in a decision agreed by both parties, the bprs al mabrur hereby agrees to appoint and determine and authorize the klaten religious court office to give its decision, that the legal opinion or decision made is final and binding. principal case number 1135 / pdt.g / 2018 / pa.klt is a default of the murabahah contract of rp. 20,000,000 with the calculation of the basic price of rp. 30,800,000 with a profit margin of rp. 10,080,000, the period (period) of the receivables lasts for 36 months, counting from the date of signing the contract which is 12 june 2017 to 12 june 2020. based on article 6 of the agreement on the period and method of payment of installments it is mentioned that the article states rifanatus sarah dzatihanani and imron rosyadi 220 that the defendant promised to make installment payments in accordance with the stipulated repayment schedule and is settled when due. but in reality, the defendant did not carry out this obligation and until now, the defendant’s installment payments have been delayed. as a result of the breach of contract, the consequence follows in accordance with the murabahah financing agreement number 2414 / apjbm / al mabrur / vi / 2017, with the breakdown of july 2018 as follows: the remaining principal : rp 17,222,220 profit : rp 8,680,000 late fee : rp 367,644 auction fee : 10,000,000 + total cost : 36,269,864 defendants always buy time in installment payments. the plaintiff has collected the defendant’s billing related to the late installment payment but the defendant always avoided and was difficult to find. then from the plaintiff’s party has sent several warning letters and provided an opportunity for the defendant’s party, but until this lawsuit was filed the defendant’s party could not complete its obligations to the plaintiff’s party. to guarantee the claim, the plaintiff requested the head of the klaten religion court to agree to impose a confiscated seizure of the defendant’s permanent property which was placed by the klaten religious court in the form of shm land no. 01979 no. measurement letter 00297 / jogosetran / 2016, dated 28/09/2016 area 167 m2 with tri suyatmi located in jogosetran, jogosetran, kalikotes, klaten which has been bound by binding the deed of imposing rights (apht) with a certificate of mortgage number: 2895 / 2018 with the mortgage rights holders on behalf of pt. bprs al mabrur klaten. the plaintiff has made various billing efforts, to warn but the defendant still has no good intention to settle his obligations until now, therefore it is very reasonable for the plaintiff to submit a sharia economic dispute lawsuit, to the chairperson of the journal of islamic economic laws-july, vol. 2, no. 2, 2019 221 klaten religious court this matter is in accordance with the provisions of article 49 letter (i) law no.3 of 2006 concerning amendments to law number 7 of 1989 concerning religious courts no. article 55 paragraph (1) of law no. 21 of 2008 concerning islamic banking. on the day of the trial that has been set for that, the plaintiff, namely the managing director of pt syariah islamic boarding bank al mabrur klaten, was present at the hearing, so defendant 1 and defendant 2 were present personally at the hearing. whereas, the examining judge has tried to reconcile the plaintiff and the defendant, but to no avail, then the plaintiff’s claim was read out, the contents of which were retained by the plaintiff. based on the plaintiff’s claim, the defendant has submitted an answer, which is basically “according to the defendant, everything that was stated by the plaintiff in the lawsuit is entirely true”. basically the defendant wants to settle the obligation, but the defendant is unable to, unless restructured and given grace. the settlement time is 10 months, while the plaintiff is no longer willing to restructure the debt, because so far the plaintiff has done so and the plaintiff still wants the defendant to settle the obligations in accordance with the given deadline. judge’s considerations in case decision number 1135 / pdt.g /2018/pa.klt in deciding the islamic economic dispute case number 1135 / pdt.g / 2018 / pa.klt the judge of the klaten religious court has several considerations in deciding the case, among others as follows: 1. that according to the provisions of article 130 hir (herziene indonesisch reglement), “the examining judge has tried to reconcile the litigants”, but to no avail. 2. that before considering the principal claim of the plaintiff, the examining judge will first consider the authority of the klaten religious court to hear the aquo case and the plaintiff’s legal standing to file the aquo case. 3. that based on the provisions of article 49 of law number 3 of 2006 concerning religious courts as an amendment to the rifanatus sarah dzatihanani and imron rosyadi 222 law no. 7 of 1989 states, the religious court has the duty and authority to examine, decide upon, and settle cases at the first level among people who are muslims in field of marriage, inheritance, wills, grants, endowments, zakat, infaq, sadaqah and sharia economy (which includes sharia banking). 4. that what is meant by “sharia economy” is an action or business activity carried out according to sharia principles, including but not limited to: sharia banks, sharia micro financial institutions, shari’ah insurance, sharia reinsurance, funds retirement of shari’a financial institutions, shari’ah business, shariah mutual funds, sharia bonds and shari’ah mid-term securities, shari’ah securities, sharia financing, and sharia pawnshops. 5. that in accordance to the provisions of the supreme court regulations r.i. number 14 of 2016 concerning procedures for settlement of sharia economic cases, the court which has the authority to make decisions is a court within the religious court environment, and the judge is the first level judge in a religious court environment that has been certified by a sharia economic judge. 6. that because this case is included in shari’ah economic disputes and “simple lawsuit” as stipulated in supreme court regulation number 14 of 2016 concerning sharia economic dispute settlement, the procedure for submission, examination, verification, decision and / or procedural law over the aquo case follows the provisions of supreme court regulation number 2 of 2015 concerning simple procedure settlement procedures. 7. that based on evidence p.1, up to p.5, namely: p.1 photocopy of financing agreement number 2414/ apjbm/al mabrur/ vi/2017 p.2 photocopy of certificate of ownership number 01979 no. letter of measurement 00297/ jogosetran/ 2016, dated 28/09/2016 as wide as 167 m2 a.n tri suwarni located in jogosetran, jogosetran, kalikotes, klaten p.3 photocopy of old age benefit number 2895/2018 p.4 financing history report of customer (tri suyatmi) up to rp. 20.000.000,journal of islamic economic laws-july, vol. 2, no. 2, 2019 223 p.5 photocopy of warning letters: • p.5.a letter of notification n : rem.188/sp/al mabrur/xii/2017 • p.5.b first warning letter no : rem.004/sp1/ al mabrur/i/2018 • p.5.c second warning letter no : rem.028/sp2/ al mabrur/ii/2018 • p.5.d third warning letter no : rem.049/sp3/ al mabrur/iii/2018 • p.5.e invitation letter no : rem.097/spg/al mabrur/vi/2018. it is proven that this case is a dispute of “sharia economy” which is categorized as a “simple lawsuit” or small claim court, and the plaintiffs and defendants themselves want this case being examined and decided by the religious court. therefore, the klaten religious court has the authority to examine and try and resolve this case. 8. that based on p.7 and p.8, namely: p.7 photocopy of deed of extraordinary general meeting of shareholders’ statement of the bprs al mabrur klaten, number 4 dated 19 august 2014 p.8 photocopy of deed of extraordinary general meeting of shareholders’ statement of the bprs al mabrur klaten, number 8 dated march 22, 2016. stating that the plaintiff is the main director of the bprs al mabrur which carryies out its business activities based on sharia principles, and the plaintiff is as a creditor and or sahibul maal, while something in question with regard to the defendant as a debtor or mudharib is the non-compliance of the defendant in fulfilling his obligations upon the contract made or breach of contract. then according to the examining judge, the plaintiff has a legal standing as a party in the aquo case. rifanatus sarah dzatihanani and imron rosyadi 224 9. that the basis for the aquo plaintiff’s claim and argument is the fact that there have been 3 (three) funding agreements based on sharia principles between the plaintiff and the defendant, namely: the contract was made on june 12, 2017 with the contract number: 2414 / apjbm / al mabrur / vi / 2017, the defendant himself unanimously acknowledged the trial. however, the defendant has been in breach of contract by failing to carry out his obligations, so that the plaintiff has suffered a principal and margin loss or profit sharing that must be received in the amount of rp. 25,902,220 (twenty five million nine hundred and two thousand two hundred twenty two rupiah). 10. that on the argument of the plaintiff, the defendant confirmed and acknowledged unanimously about the existence of a murabaha financing agreement as described in the plaintiff’s claim, however the defendant no longer has the ability to repay these obligations and the plaintiff and defendant agreed to be resolved and decided by the klaten religious court. 11. that the plaintiff has submitted evidences p.1, p.2, dan p.3: p.1 photocopy of financing contract no. 2414/apjbm/al mabrur/ vi/2017; p.2 photocopy of certificate of ownership number 01979 no. letter of measurement 00297/ jogosetran/ 2016, dated 28/09/2016 as wide as 167 m2 a.n tri suwarni located in jogosetran, jogosetran, kalikotes, klaten p.3 photocopy of old age benefit number 2895/2018 the evidence is an authentic deed and there is no objection to the evidence, so based on the provisions of article 165 hir, the evidence has the strength of proof (voilledig) and binding (bindende). therefore, it must be proven that between the plaintiff and defendant there has been an agreement of murabahah financing with a guarantee in the form of shm number 1659 and shm number 1660. 12. that based on evidence p.4, namely, payment history, it is validly proven that the principal of the defendant’s loan to the plaintiff is as follows: journal of islamic economic laws-july, vol. 2, no. 2, 2019 225 value (rp) total profit (rp) principal and profit (rp) time period initial value 20,000,000 10,080,000 30,080,000 36 paid 2,777,780 1,400,000 4,177,780 5 not paid 17,222,220 8,680,000 25,902,220 31 based on the plaintiff’s explanation, it is stated t that murabaha financing that must be paid by tri suyatmi is rp.30,080,000, with a period of (receivable) period that lasts for 36 months, starting from the signing date of the contract, which is 12 june 2017 to 12 june 2020, and has been paid in the amount of rp.4,177,780, as for the remaining unpaid liabilities of rp. 25,902,220, 13. that based on evidences p.5.a, p.5.b, p.5.c, p.5.d, and p.5.e that follow: p.5.a notification letter no : rem.188/sp/al mabrur/ xii/2017 p.5.b first warning letter no : rem.004/sp1/al mabrur/i/2018 p.5.c second warning letter no : rem.028/sp2/al mabrur/ii/2018 p.5.d third warning letter no : rem.049/sp3/al mabrur/iii/2018 p.5.e invitation letter no : rem.097/spg/al mabrur/ vi/2018. it is proven that the plaintiff has notified the maturity of the defendant’s debt obligations, and has been given a reprimand, but is not heeded, even tends to let and has ignored the reprimand without any good intention to resolve it. 14. that default in dutch means “bad achievement”. what is meant by the term default in the other words is a condition caused by negligence or mistake, the debtor cannot fulfill the specified agreement and is not in a forced condition. considering, that from the results of the examining judge’s examination of the evidence submitted by the plaintiff, the following legal facts were obtained : rifanatus sarah dzatihanani and imron rosyadi 226 that it is proven that the defendant has not fulfilled the obligations (achievements) of the plaintiffs as stated in the contract of murabaha financing agreement article 6 paragraph 1 of the murabaha agreement number 2414 / apjbm / al mabrur / vi / 2017 signed on june 12, 2017. that it is evident that the plaintiff has notified the obligations to the plaintiff, as in exhibit p.6 in the form of a photocopy of the plaintiff’s id card, but the defendant tends to leave without any good intention to resolve it. 15. that with respect to this promise or breach of contract, in accordance with article 1243 of the civil code, which has been strengthened by the jurisprudence of the supreme court no. 186 k / sip / 1959 dated july 1, 1959, the “engagement is intended to give something, to do something, or not to do something” or if it turns out in the agreement there is a clause stating that the debtor is considered negligent without requiring a summons (summon) or warning. 16. that the calculation of compensation on defaults is calculated from the moment of negligence, in accordance with article 1237 of the civil code, “on an agreement to provide certain goods, the goods are the responsibility of the creditor since the engagement was born. if the debtor fails to surrender the item in question, then the item, since the engagement was made, become his responsibility”. 17. that based on the aforementioned facts, it must be legally proven that the defendant “has not fulfilled the promised achievement and or has broken the promise (default)”, so that the defendant’s actions have harmed the plaintiff as a “creditor”, where the plaintiff himself as the creditor must bear the responsibility answer to its customers. therefore all negligence committed by the defendant against the plaintiff must be calculated as negligence that contains a real loss.. 18. that “profit sharing” is a form of alternative financing scheme, which has very different characteristics compared to interest-based financing scheme. in reality, this scheme is in journal of islamic economic laws-july, vol. 2, no. 2, 2019 227 the form of sharing of the results of operations financed, in the form of direct financing or financing through islamic banks (in the form of mudhārabah and musyārakah financing). based on profit sharing aggrement, it is necessary to design an optimal profit sharing scheme, in the form of an efficient way to encourage entrepreneurs (debtors) to make their best efforts and can reduce the occurrence of falsification. 19. that what underly the financing agreement between the plaintiff and the defendant is “profit sharing” (sometimes also called profit-and-loss sharing. wat is used as the basis for calculation is profit, which is the spread between business income and business costs, both in the form of cost of goods sales, production costs, sales costs, and general and administrative costs or in other terms profit sharing can be interpreted as a system of profit sharing derived from a business. 20. that based on the aforementioned facts, the examining judge is of the opinion that because the defendant has been proven to have defaulted on the plaintiff, the defendant was sentenced to return the loan principal and the profit share that should have been received by the plaintiff totaling rp. 25,902,220, (twenty-five million, nine hundred and two thousand, two hundred twenty rupiahs). 21. that with regard to the demand for a “late fee”, this is a real loss of the creditor due to non-operation of the money circulating in the bank, while has been promised. because such matter is considered to be grounded and reasonable, an amount of rp. 367,644 can be granted (three hundred sixty seven thousand, six hundred forty four rupiah). 22. that while claims for auction costs amounting to rp.10,000,000 (ten million rupiah), in principle because the auction is a real and measurable loss suffered by the plaintiff due to the defendant’s actions, then the claim according to the examining judge has sufficient reasons and the claim can be granted 23. that based on the aforementioned considerations, the claim of the plaintiff may be granted and rejects other than the rest. rifanatus sarah dzatihanani and imron rosyadi 228 24. that because the defendant was on the losing side, it was in accordance with the provisions of article 181 paragraph (1) hir, the defendant is charged to pay all the costs of this case. analysis on the conformity of the klaten religious court’s verdict with dsn-mui fatwa in the following, the author tries to analyze the verdict regarding the case of default of the murabaha contract as stated in the klaten religious court decision on case number 1135 / pdt.g / 2018 / pa.klt. 1. based on the legal aspects handed down by the judge, stating that the actions of tri suyatmi committed breach of promise to the plaintiff, the defendant promised to make installment payments in accordance with the stipulated repayment schedule and paid at maturity. but in reality, the defendant did not carry out this obligation. defendants always buy time in installment payments. the plaintiff has collected the defendant’s billing related to late installment payments but the defendant has always avoided and is difficult to be contacted. in addition to that, the plaintiff’s party has sent several warning letters and provided an opportunity for the defendant’s party, but until this lawsuit was filed the defendant’s party could not complete its obligations to the plaintiff’s party. in terms of dsn-mui fatwa number 17 / dsn-mui / ix / 2000 concerning sanctions on eligible customers who can postpone payment that: a. sanctions referred to in this fatwa are sanctions imposed by sharia-compliant financial institution on customers who can afford to pay, but delay payments on purpose. b. customers who are unable to pay due to force majeure may not be subject to sanctions. c. capable customers who delay payment and / or do not have the will and good faith to pay their debts may be subject to sanctions. journal of islamic economic laws-july, vol. 2, no. 2, 2019 229 based on what has been explained above with regard to sanctions on eligible customers, the judge’s decision is correct procedurally and in accordance with dsn-mui fatwa number. 17 / dsn-mui / ix / 2000. 2. based on the legal aspects imposed, the judge decides that the defendant pays all remaining obligations to the plaintiff in the form of: a. the principal debt as well as some margin of rp. 25,902,220,b. an amount of late cost of rp. 367.644,c. maintenance and auction fees that amount rp. 10.000.000, in terms of dsn-mui fatwa no. 43 / dsn-mui / ii / 2004 concerning compensation (ta’wiḍ): 1) compensation (ta’wiḍ) may only be imposed on the party who intentionally or because of negligence to do something that deviates from the terms of the contract and causes harm to other parties. 2) real losses that can be calculated clearly, in the form of real costs incurred in the context of collection of rights that should be paid. 3) promised parties are responsible for case costs and other costs arising from the case resolution process. based on what has been explained above with regard to compensation, the judge’s decision is correct procedurally and in accordance with dsn-mui fatwa no. 43 / dsn-mui / ix / 2004. 3. to punish the defendant to voluntarily sell collateral objects or to hand over collateral objects to the plaintiff for sale, otherwise the sale is made by force through a public auction process to the surakarta state wealth and auction services office (kpknl), if the defendant cannot pay all the rest the plaintiff’s obligation a number that has been described in the decision number 2 above. rifanatus sarah dzatihanani and imron rosyadi 230 judging from the procedure of confiscation and dsn-mui fatwa no. 47 / dsn-mui / ii / 2005 concerning settlement of murabaha receivables for customers unable to pay: a. the procedure of confiscation 1) confiscation can only be carried out on the basis of a court ruling 2) confiscation is carried out by a bailiff or clerk based on the assignment letter designated in the stipulation letter 3) the notice of confiscation must have been informed to the confiscated respondent or defendant 4) the bailiff was assisted by two witnesses 5) the confiscation was stated in the official report of confiscation. 6) seizure registration, confiscation minutes are registered and announced at the authorized registration office. 7) declares confiscation to be legal and valuable b. dsn-mui fatwa no. 47 / dsn-mui / ii / 2005 concerning settlement of murabaha receivables for customers not afford to pay: 1) murabaha objects or other collateral are sold by the customer to or through the sharia-compliant financial institution at an agreed market price 2) the customer repays the remaining debt to the sharia-compliant financial institution from the proceeds of the sale 3) if the sales proceeds exceed the remaining debt, the sharia-compliant financial institution returns the remainder to the customer; 4) if the sale proceeds less than the remaining debt, the remaining debt remains the customer’s debt. based on what has been explained above with regard to settlement of murabaha receivables for customers not afford to pay, the judge’s decision is correct procedurally and in accordance with dsn-mui fatwa no. 47 / dsnjournal of islamic economic laws-july, vol. 2, no. 2, 2019 231 mui / ii / 2005. 4. to punish the defendant to pay the entire cost of the case until the verdict is pronounced in the amount of rp. 401,000,according to the author, the judge’s decision used is procedurally appropriate. in setting the decision, the panel of judges also included the legal basis for the civil code (kuhp) to strengthen the referral and outcome of the decision. in the legal basis of the panel of judges, the dsn-mui fatwa is not listed. it is therefore preferable that before the panel of judges uses the civil code, the panel of judges should first use the references issued by the indonesian ulema council. for the religious courts, references issued by the dsnmui fatwa are very important to include. because judges of the religious courts in settling islamic economic cases are required to refer to the provisions of islamic economic law in force in indonesia, both in the form of legislation specifically discussing sharia economics and fatwa issued by mui institutions. based on the above analysis, it can be concluded that the legal basis used by the panel of judges in determining decision no. 1135 / pdt.g / 2018 / pa.klt is in accordance with islamic economic law, namely using the fatwa of the sharia council of the indonesian ulema council (dsn-mui) concerning the contract murabaha. in setting the decision, the panel of judges also listed the legal basis of the civil code (kuhp) to strengthen the reference and outcome of the decision. closing conclusion based on the analysis of the case of islamic economic resolution number. 1135 / pdt.g / 2018 / pa.klt with the discussion in the previous chapter, the author concludes several things as follows: 1. the panel of judges decided by, 1) declaring the defendant who had been legally called and deserved to appear before the court, but the defendant was no longer present, 2) granting rifanatus sarah dzatihanani and imron rosyadi 232 the plaintiff’s claim, stating that it was legally valid akad murābaḥah number 2414 / apjbm / al mabrur / vi / 2017 dated june 12, 2017 which was made and signed by the plaintiff with the defendant, 3) stating that the defendant has broken promise to the murābaḥah contract number 2414 / apjbm / al mabrur / vi / 2017 dated june 12, 2017, which harmed the plaintiff in the form of material loss of rp. 36,269,864, (thirty six million two hundred sixty nine thousand eight hundred sixty four rupiah), 4.) sentencing the defendant to pay damages of rp. 36. 269,864, (thirty six million two hundred sixty nine thousand eight hundred sixty four rupiah) to the plaintiff, 5) sentencing the defendant to pay for this whole case, which until now has been calculated as rp. 401,000 (four hundred and one thousand rupiah). 2. the results of the analysis over the resolution of the klaten religious court judge panel in deciding case number 1135 / pdt.g / 2018 / pa.klt. shows that the legal basis used by the panel of judges in determining decision no. 1135 / pdt.g / 2018 / pa.klt is in accordance with islamic economic law, namely using the fatwa of the sharia council of the indonesian ulema council (dsn-mui) concerning the murābaḥah contract. in setting the decision, the panel of judges also listed the legal basis of the civil code (kuhp) to strengthen the reference and outcome of the decision. suggestion to the klaten religious court, it should further improve islamic economic services, that the resolution of islamic economic disputes is good. the achievement should be maintained or even more enhanced. as for society in general, the customer / community should resolve the problem of dispute at the institution concerned. however, if the relevant institution cannot resolve the problem then it should be resolved at a more competent institution, namely the religious courts. journal of islamic economic laws-july, vol. 2, no. 2, 2019 233 reference law number 21 year 2008 concerning sharia banking. national sharia council, national sharia council fatwa no. 07 / dsn-mui / vi / 2000, 2000. national sharia council, national sharia council no. 43/dsnmui/vi/2004, 2004. prabowo, bagya agung. 2012. aspek hukum pembiayaan murabahah pada perbankan syariah. yogyakarta: uii press. azwar, saifuddin. 2007. metode penelitian. yogyakarta: pustaka pelajar. hadi, sutrisno. 2007. metodologi research. yogyakarta: andi. harahap, m. yahya, 2012, hukum acara perdata, jakarta: sinar grafika. kusdiyanto, 2010. metodologi penelitian. bandung: universitas pendidikan indonesia, buku pegangan kuliah. muhammad. 2005. manajemen bank syariah, yogyakarta: ekonisia. pramono, nindyo. 2008. hukum komersil, jakarta: pusat penerbitan ut. rasyid, roihan a. 2007. hukum acara peradilan agama. jakarta: rajawali pers. satrio, j. 1992, hukum perjanjian (perjanjian pada umumnya, bandung, citra aditya bakti subekti. 2002. hukum perjanjian. jakarta: intermasa. supardi. 2005. metodologi penelitian ekonomi dan bisnis, yogyakarta: uii press. sunaryo. 2008. hukum lembaga pembiayaan, jakarta: sinar grafika. journal of islamic economic laws vol. 2, no. 1 january 2019: 60-87 60 the islamic law perspective of universitas muhammadiyah surakarta pension fund management ikhwanul huda faculty of islamic studies, universitas muhammadiyah surakarta email: ikhwanulhuda25@gmail.com abstract pension fund is one of the non-bank financial institutions that manages and implements program to generate retirement benefits. pension fund is one of potential resources of fund which operation can be based on either conventional or islamic principle. this research will focus on the type of contracts used by universitas muhammadiyah surakarta (ums) pension fund whether its operation conforms the requirements of shariah princple or not. this research aims to know, elaborate and evaluate the conformity of shariah principle in the ums pension fund operation. the type of research carried out here is qualitative with the descriptive evaluative approach. the data is obtained through observation, documentation and interview. the result of the research shows that the contracts used in managing the fund by ums pension fund are muḍārabah, wakalah, ijārah and hibah. muḍārabah contract is used between the pension fund and the participants as well as between pension fund and investee. wakalah contract is used between the employer which is ums in this case and the pension fund. meanwhile, hibah contract is used between employer and participants. keywords: management, pension fund, islamic law. ikhwanul huda 61 introduction pension fund has many aspects embedded within it, they are social, psychology and economic aspect. an individual or employee will continously struggle to strengthen or sustain their economic welfare right along with their increasing age. this can be achieved through enrolling at many financial programs such as individual saving, life insurance or joining as member of pension fund run by private organization or by government. welfare during retirement of society or employees in general related to the social and psychological stability because the certainty of peace of life in the retirement days will affect the behavior of society, both in the company and in the wider community. in addition, the development of pension fund institutions themselves is also one of the social outcomes and economic growth of the community, especially modern companies (tunggal, 1996). one of the pension fund institutions that manages funds as long-term savings collected specifically for the purpose of providing benefits to employees when they reach retirement age is the pension fund of universitas muhammadiyah surakarta (we will call it as pfums hereafter) which is located at siti walidah main building, muhammadiyah university, surakarta. the pension fund was formed by the universitas muhammadiyah surakarta with the decision of the chancellor of that university. pension fund of universitas muhammadiyah surakarta provides guarantees to employees of the muhammadiyah university of surakarta after retirement so that they are more productive and loyal during their working age. in that state, they will not worry about their fate at retirement. however, it is important to see whether the management of the pfums is in accordance with sharia or not. in addition to that, it is also journal of islamic economic laws-january, vol. 2, no. 1, 2019 62 important to investigate whether pfums involves usury and conventional practive during its investment which is prohibited by islam. in the view of islam, an activity that raise and attracts benefit. nevertheless whether the benefit is in accordance with the principle of islam or only gives benefit for some parties while harming another party. for the case of pension fund, there are two types of it, namely conventional pension fundsand islamic pension fund. for the conventional pension fund, it involves usury and conventional financial instruments during its investment process. of course such management is prohibited by islamic religion. meanwhile, the management of islamic pension fund always try to avoid the interest and any conventional financial instruments. based on the background described above, the are several issues this research aims to investigate. first, this study is focusing on what type of contract is used by the management of pfums. this first aim is followed by the islamic law perspective on the management of pfums which constitutes as the second focus in this research. by carrying out field research with the descriptive qualitative approach, this paper will try to figure out the aforementioned issues concerned in this topic. literature review pension fund is not something that recently appears in modern day. it has been practiced far before 21th century. pension fund is one of the non-bank financial institutions in indonesia that has activities to guarantee the welfare of the community both for pension and accident purposes. the exact definition of pension fund can be seen in chapter i article 1 in law number 11 of ikhwanul huda 63 1992 on pension funds which states, “pension funds are legal entities that manage and run programs that promulgate retirement benefits.” in a more general definition, pension a decision made to prepare a number of funds or build financial planning so that the funds can be used to support a person during his retirement age. this means that when a retirement period comes, a person will still get financial income sourced from the pension fund. by having this fund, that person could do various activities that help him to get rid of his boredom since usually an employee was used to have full day activities in the office during his working period (fahmi, 2014). meanwhile, pension benefits mean periodic fund distribution paid to participants within time and through mechanism specified by article 1 number 1 and 9 at pension fund law (wahab, 2005). in a more specific definition in the regard of islamic pension fund, it has quiet different meaning. mardani (2015) says that islamic pension fund is defined as pension fund managed and run based on shariah principle. in other word, it must be free from forbidden elements in islam such as interest, brabing, gharar (uncertainty), maisir (speculation) and void things. the underlying islamic principle for the practice of pension fund can be found at chapter an-nisa verse 9, “and let those [executors and guardians] fear [injustice] as if they [themselves] had left weak offspring behind and feared for them. so let them fear allah and speak words of appropriate justice.” in this verse we can see allah encourages us not to left weak offspring. this can be done by many means, one of which is to participate in a pension fund. allah also says in other verse, “o you who have journal of islamic economic laws-january, vol. 2, no. 1, 2019 64 believed, fear allah . and let every soul look to what it has put forth for tomorrow and fear allah . indeed, allah is acquainted with what you do.” this verse also states that every people has to prepare better future. meanwhile, it is also has been mentioned in the hadith, “indeed, if you leave your offspring in a rich state, it is better for you than leaving them in a state of burden to others and begging for others.” there are several studies that has investigated pension fund of any institutions. for example, meilani (2015) in her undergraduate thesis investigated the pension fund management of bank muamalat indonesia. in that study, she explained the contractual form between the first party (i.e. the customer) with bank muamalat takes the mudarabah mutlaqah type of contract. unfortunately, this makes the study conducted by her focuses too much on the mudaraba system from its definition until its implementation. the evaluation on the management of bank muamlaat pension fund is barely touched. here, the main focus is not on the islamiw law perspective, but more towards mechanism of the muḍāraba in bank muamalat pension fund. another study is done by bukit (2012) for his undergraduate thesis as well. the context of the study was pension fund of pertamina with the emphasis on the accountancy side. thus, the research investigates the procedure and pension accountancy treatment at the pertamina pension fund to see whether the accountancy standard is well applied or not. it is clearly seen from the study that she tried to seek the confomity between psak (accountancy standard) and the accounting application at pertamina. hasibuan (2017) also have done similar research yet in a more general way. he made theoritical comparison between ikhwanul huda 65 conventional pension fund management and the islamic one. in the conventional practice for pension fund management, they invest in the instruments such as bonds including the indonesia sovereign bond where the interest becomes one of its core source of profit. meanwhile, the islamic pension fund management uses the islamic instruments such as sukuk, islamic mutual fund and islamic stocks. one other study was conducted by rifanto (2017) who focuses more on the determinant of factors affecting customers intention in using pension fund instruments. in his study, the researcher analysed the impact of service, promotion and products towards the intention of customers in the context of bank muamalat yogjakarta. the difference between this conducted research and the one that will be conducted here is that the initial contributes in the field of customer intention rather then islamic legal aspect. from the previous studies above, it is interesting to discuss the management of pension fund from islamic law perspective apart from being it is not yet covered on the studies above. methodology the approach taken in this study is descriptive-evaluative approach. descriptive research is a systematic, factual and accurate description or illustration of phenomenon or relationships between phenomenons being investigated (suprayogo and tobroni, 2001). meanwhile, the evaluative approach is every activity of collecting data or information that will be compared and drawing conclusion afterward. this conclusion is called evaluation (arikunto, 1992). evaluative research is basically focused on the final recommendation which confirms that an evaluation object can be maintained, repaired or even dismissed in line with the data obtained. journal of islamic economic laws-january, vol. 2, no. 1, 2019 66 this research was conducted to obtain data and produce conclusions on the practice of pfums with the regard on the evaluation of contracts used in the management. the type of data that will be observed will be both the primary and secondary data. the primary data is gathered through interview with the director of pfums. the author also observes each individual and the events that exist in the research location as well as making direct observation on the management of pfums regarding the used contract. the secondary data is obtained from the available literatures and documentations related to the topic of our interest. the data collection method used is the first observation, interview and documentation. data analysis was carried out by means of the author searching for data by conducting review of books, literature, scientific papers and data that have relationship with the problem being studied. for the research purpose, we limit the conformity of pfums practice towards fatwas issued by dsn-mui. neglecting this limitation causes bias in interpretation since there are enormous views regarding the muamalah practice. one mazhab might differ with another even though they embarked from similar evident (dalil) because the analysis tool (usul fiqh) is also different. therefore, we stick on the fatwa issued by the highest authority in indonesia for this field. the fatwas here are fatwa dsn mui nomor no. 07/dsn-mui/iv/2000, fatwa dsn mui nomor no. 10/dsn-mui/iv/2000 dan fatwa dsn mui no. 88/dsn-mui/ xi/2012 (sam, et al., 2014). discussion and result general overview on the pfums ums pension fund channeled the investment into three main categories. the categories are time deposit, sukuk and land purchase. the report of those three activities can be seen at the table below. ikhwanul huda 67 table 1. time deposit investment by 2017 no investment value of investment (in billion rupiah) percentage of total time deposit investment 1 pt. muamalat indoensia, tbk x,000 4,20% 2 pt. bank tabungan negara, tbk x,720 9,43% 3 pt. bank panin syariah x,200 11,50% 4 pt. bank mega syariah x,400 8,99% 5 pt. bank bukopin syariah xx,000 14,04% 6 pt. bank cimb niaga syariah x,100 8,56% 7 pt. bank victoria syariah x,245 7,36% 8 pt. bank sinarmas syariah x,028 4,25% 9 pt. bank bri syariah x,000 1,40% 10 pt. bank jateng syariah x,300 3,23% 11 pt. bank btpn syariah x,250 5,96% 12 pt. bank mandiri x,500 7,72% 13 pt. bank syariah mandiri x,000 7,01% 14 pt. bprs madina 0,x00 0,71% 15 pt. bprs margirizki 0,x000 0,71% 16 pt. bprs arta surya barokah x,000 1,40% 17 pt. bprs danagung 0,x00 0,71% 18 pt. bprs dana mulia x.000 1,40% 19 pt. bprs sragen 0,x00 0,71% 20 pt. bprs al mabrur 0,x00 0,71% total xx,293.55 100% note: this table shows time deposit investment done by pfums. the value of investment is showed in billion rupiah form. the “x” sign in the value column is intentionally used instead of actual number to keep the privacy of pfums financial statement. pfums channeled most of its fund into time deposit within various banks. it counts for 60% of whole investment (see table 4). in time deposit investment, the largest amount is channeled to pt. bank bukopin syariah while the smallest amount is channeled to pt. bprs madina, pt. bprs margirizki, pt. bprs danagung, pt. bprs sragen. it is rational to keep small amount in bprs journal of islamic economic laws-january, vol. 2, no. 1, 2019 68 rather than at regular bank since the initial cannot manage and accommodate big investment and typically meant for a narrower coverage compared to the regular bank. table 2. sukuk investment by 2017 no investment value of investment (in billion rupiah) percentage of total sukuk investment 1 bank nagari x,000 7,69% 2 ritel seri sr-008 x,000 11,54% 3 sbsn pbs 012 xx,000 42,31% 4 sukuk bri syariah x,000 19,23% 5 sukuk angkasa pura 1 x,000 11,54% 6 sukuk pt. timah x,000 7,69% total xx,000 100% note: this table shows sukuk investment done by pfums. the value of investment is showed in billion rupiah form. the “x” sign in the value column is intentionally used instead of actual number to keep the privacy of pfums financial statement. meanwhile, sukuk investment done by pfums counts only for roughly one-third of total time deposit investment and fourth of whole investment (see table 4). the reason might include the difficulty on managing sukuk compared to time deposit to the extend that it needs human resource with deep understanding on financial market. in addition to that, sukuk issuance in indonesia is still quite low compared to other region. at the table 2 above, it can be obviously seen that sbsn pbs 012 counts for almost half of total sukuk investment (42,31%) while the smaller amount is channeled to both bank nagari and sukuk pt. timah. ikhwanul huda 69 table 3. land purchase investment by 2017 no investment value of investment (in billion rupiah) percentage of total land purchase investment 1 shm 215 x,625 12,25% 2 shm 2764 x,625 12,25% 3 shm 2716 x,625 12,25% 4 shm 3666 x,625 12,25% 5 shm 578 x,625 12,25% 6 shm 412 x,080 14,38% 7 shm 2893 x,625 12,25% 8 shm 3665 x,593 12,11% total xx,424 100,00% note: this table shows land purchase investment done by pfums. the value of investment is showed in billion rupiah form. the “x” sign in the value column is intentionally used instead of actual number to keep the privacy of pfums financial statement. the last channel of investment is land purchase. in general, land purchase is considered as one of investment options on the basis that the price of land will always increase in the future. however, the fact that pfums only make investment of roughly one-sixth of whole investment indicates some possible reasons. the reason includes the availability of land which can be purchased by pfums. as it is obvious, it is difficult to find piece of wide land which is promising to get it sold at the far future. table 4. total investment by 2017 journal of islamic economic laws-january, vol. 2, no. 1, 2019 70 no investment value of investment (in billion rupiah) percentage of total investment 1 time deposit xx,293 60% 2 sukuk xx,000 22% 3 land purchase xx,424 18% total xxx,717 100% note: this table shows total investment done by pfums. the value of investment is showed in billion rupiah form. the “x” sign in the value column is intentionally used instead of actual number to keep the privacy of pfums financial statement. the contracts (‘aqd) used in the management of pension fund every contract and transaction has its own pillar and condition in order to make it to be valid. for this research purpose, we will first elaborate shortly on the pillar and condition of the contracts used in the management of pension fund. a. wakalah there are some important elements in wakalah which are the parties including the delegator and the delegate, as well as the subject matter being delegated. for the contracting parties, they must be in full capacity of their act, being lawful and and mature. the delegate also must be able to do the matters being delegated. meanwhile, the subject matter itself must be clear and not in the contrary with shariah principle. b. mudarabah the pillars and conditions for mudarabah are as following. fund provider and fund manager must be lawful, mature and act on their free will. the offer and acceptance must be expressed to show their intention in forming the contract. ikhwanul huda 71 the capital provided by fund owner can be in form of cash or asset but not in debt. the profit must be shared between parties as agreed in the contract while the financial loss is borne by the fund owner. the business activity as the exchange of the capital provided must be legal. c. ijarah in ijarah, both parties must do the rental activity on their own concern. the parties involved also must understand fully the usage of subject matter to avoid dispute. the subject matter also must be ensured its usefullness from both shariah and economic perspective. the subject matter must also be able to get deliverd during contracting time. since ijarah concern most on the benefit rather than on the tangible asset, thus the benefit must not be haram. d. hibah hibah requires the person must have the subject matter he wants to grant. the grant giver must have full capacity on his asset and wealth, mature, lawful and act on his willingness. meanwhile, the grantee must really be in existence. therefore, if the existence is still uncertain such as womb, the grant becomes void. in case the grantee exists during granting time but in the insane condition, the grant will be accepted and managed by its guardian (wali), or educator even though the person is stranger for that insane grantee (sabiq, 1987). while the above explanation is for the usual hibah, there is hibah that come under spesicif condition, called as hibah with condition (hibah bil sharth). hibah is actually done without any expectation of reward, whether in the form of another hibah, gift, charity or any other means. however, hibah can be tied upon condition such as if a person says, “i will give journal of islamic economic laws-january, vol. 2, no. 1, 2019 72 you a motorcycle if you pray five times in mosque for 10 days.” in this type of hibah, the giver of hibah might ask back the grant if the condition is not fulfilled. in one of hadith mentioned that a person gived something to rasulullah by requesting some conditions that is rasul must give some sort of things rasul likes (suhendi, 2002). the pension fund is an alternative way to provide welfare guarantees to employees during the retirement period. the welfare guarantee is not only for employees who get retired, but also their families get that welfare. the main thing that has to be emphasized here is that the management of the pension fund must be in accordance with sharia principles and in accordance with the fatwa that has been established by the dsn-mui (national shariah council). the pension fund itself has been regulated by dsn-mui on their fatwa to make it in line with the shariah requirements. the fatwas are fatwa of dsn mui number no. 07 / dsn-mui / iv / 2000, fatwa of dsn mui number no. 10 / dsn-mui / iv / 2000 and was joined by fatwa dsn mui no. 88 / dsn-mui / xi / 2012. it is discussed within the fatwa regarding the contract used by the sharia pension fund in the definite retirement benefit plan (program pensiun manfaat pasti) and the definite retirement fee plan (program pensiun iuran pasti). those fatwas above become reference for analyzing the validity and conformity between the contracts stipulated in the sharia pension fund and the contract applied by the pension fund of the muhammadiyah university of surakarta (pfums). pfums itself uses several contracts in their transaction. the details are as following: ikhwanul huda 73 a. all the parties involved are the head of university as the “employer” while ums employee as the “participant”. pfums here acts as the “manager” of the pension fund, the real sector as the “investee” and the retired ums employee as the “recipients” of pension benefits. b. the contract used between employer and participant is hibah bi al-sharth (grants with condition) in the form of granting funds (mauhūb bih) from employer (wāhib) to the participant in organizing pension funds. the conditional grant happens when the requirements are met. the example is such as the right of participant to receive pension fund benefit after that participant being enrolled at the program for specific period and being retired at normal retirement age. the normal retirement age means 56 years old for the educative staff and 65 years for non-educative. another condition is the accelerated age for minimum 10 years prior to normal retirement age. after the conditions are met, the employer will provide pension benefits to participants. c. the contract used between employer and manager of pension fund is wakālah where the employer delegates pfums to manage the wealth sourced from the premium and investment in accordance with the directions set by the founder. this type of practice can be nivestigated from the terms and rules of wakālah. first is the one who delegates. shariah stipulates that the condition for this person is that he must be the legal owner who are allowed to act as he pleased over his ownership. in this case, the person who delegates is the employer who acquire full ownership on the wealth. in addition to that, the person who makes delegation must be mukallaf (eligible to be responsible from islamic point of journal of islamic economic laws-january, vol. 2, no. 1, 2019 74 view) and mumayyiz (able to distingusih between good and bad thing). here it is obvious that the employer is mukallaf and mumayyiz. second, the delegation (wakīl) must be lawful and able to do the task assigned to him. in this case, the manager of pfums who accepts the delegation mandate is confirmed to be lawful and accepts the trust given by the employers to the as the manager. third, the matters being delegated must be known by the delegated party and doesn’t go against shariah principle. in this case, pfums as the manager understand well the mechanism, including the wealth of pension fund and regulations that have been passed. in addition to that, there is no element of riba and gharar within it. the pension fund also gives benefit for all parties. d. the contract used between pfums and the participant is muḍārabah. pfums acts as the fund manager (muḍārib) while particpant as the owner of the fund (ṣāḥibul māl). pfums receives premium from the particpants which is equal to 5% of their monthly salary. pfums manages the premium obtained from participants by priortizing the interest of participants/retirees and those who are entitled to pension benefits. pfums has the right to deposit and invest the money under shariah system in order to grow it. this practice can be investigated through the pillars and conditions of mudarabah. some of the conditions states that both fund owner and manager must be lawful, the offer and acceptance between them also must express their intention in concluding contract. the offer and accpetance also must ikhwanul huda 75 take into consideration some aspects, including the explicit expression on the purpose of the contract, being done within same time frame of contract as well as being written or through any other modern means of communication. the offer and acceptance which is expressed by pfums and the participant is written down in a paper. another pillar of mudarabah is the capital which is sum of money or any asset given by the owner to manager for business purpose. there are some conditions such us the amount of the capital must be known. in case the capital is in the form of asset, there need valuation in the time of contract. the capital cannot be in the form of debt since the capital must be paid to the manager directly, whether through instalment or paid in lump sum as stated in the contract between parties. in this regard, participants give the premium contribution by 5% of their monthly salary. this sum of money will be managed by pfums and given back to the participants during their retirement period. the next pillar of mudarabah is about the profit which is the surplus of the initial capital. after the participants give the premium 5% of their monthly salary, pfums will manage and invest it until it grows in number. afterwards, the profit must be splitted between both parties and cannot be given to only one party. the profit is distributed equally according to the agreed contract of mudarabah. one other pillar is the type of business run by manager in exchange of the capital paid by fund owner. there are some conditions that need attention. the business activity is an exclusive right of the manager without any interruption from the fund owner. howerver, fund owner has the right of supervision. journal of islamic economic laws-january, vol. 2, no. 1, 2019 76 fund owner must not limit manager’s activity that might hinder the goal of the mudarabah contract formation which is the profit. the manager also must not do things contrary to the shariah principle in their mudarabah activity. therefore, the type of activity and business is an exclusive right of fund manager without any interruption from fund owner while still giving the owner right of supervision to ensure that the activities do not breach islamic law and teachings. e. the contract used between pfums and investee is mudarabah and ijarah contract. in mudarabah contract, pfums invests the contribution of business founder and the participants’ fund on islamic financial institutions. the investment is in the form of deposit so that any sum of money accumulated by pfums can grow and given back to the respective owner later on. the profit earned will be disbursed through hibah or based on the profit sharing margin. this thing can be investigated from the pillars and conditions of mudarabah. the first pillar of mudarabah is that all parties must be lawful. in this regard, pfums acts as the fund owner while investee as the fund manager. second pillar is the offer and acceptance that must be pointed out by all parties to express their intention in concluding contract. in this regard, pfums and investee will make written contract agreement by priortizing the benefit (maslahah) for both parties. the third is capital which is sum of money or asset given to the fund manager for business purpose. in this regard, pfums invests its money to islamic financial institution for deposit where the profit will be calculated on the basis of profit loss sharing. fourth condition is the profit which is surplus of initial capital. afther the money invested by pfums grows, ikhwanul huda 77 the profit obtained from the deposit must be distributed according to the agreement which is the profit loss sharing under mudaraba model. the next pillar of mudaraba is the business type as the exchange of given capital. fund manager must obtain full and exclusive authority in managing the fund given by pfums as the fund owner. pfums must stop themselves in intervining in the management of the fund. however, pfums has right of supervision to ensure that the management avoids activitites prohibited by sharia. for the ijarah contract, pfums invests up to 30% of its money in the corporate sukuk, particularly to the pt. angkasa pura, pt. timah, bank nagari, pln and some sovereign sukuks i.e. pbs12 and sr008. pfums as the sukuk holder who gives fund to the sukuk issuer so that the issuer can expand their business using the proceed of their sukuk. the issuer in the other hand must pay specific amount of money to the holder as the fee of ijarah while paying back the initial capital of sukuk at maturity time. pfums also uses mudaraba contract in investing their money through mudarabah sukuk i.e. to bri islamic. pfums as the sukuk holder gives fund to bri islamic as sukuk issuer for the purpose of funding specific project run by bri islamic. the profit will be distributed periodically according to the profit loss sharing agreement made by both parties. f. in order to do the investment or non-investment activities, pfums is allowed to make agreement with other party under islamic principle which also must be not contrary to the laws enacted by respective jurisdiction. in this regard, pfums makes investment in the form of deposit, sukuk and land journal of islamic economic laws-january, vol. 2, no. 1, 2019 78 purchase investment which is in line with shariah principle. analysis from islamic perspective in general, the contract applied by the ums pension fund conforms sharia principles. therefore the transactions applied are lawful since it fulfills the pillar and conditions of wakalah, mudarabah ijarah and hibah bil sharth (grants with condition). the contracts also don’t contain elements which are prohibited by islamic sharia such as interest and gharar. the contract used between employer and participants is the agreement of grant with condition which needs to be reviewed its pillars and conditions. the first condition is wahib or person who gives the grant. wahib must have full ownership on the subject matter, must have full capacity to exercise his right, being mature and not under forced condition. in this case, wahib is the employer. the next pillar is the grantee (mauhub lahu). the grantee must really exist during the time of grant. here, the grantee is the participant. the third pillar is the grant itself. the grant gave by employer is the pension benefit in this case. it is important to be noted that the pension benefit is given to the participant under certain conditions: (1) the participant must be enrolled at the program for specific period of time, (2) the participant is retired at the regular retirment age or at the accelarated age. the fourth is the statement from employer to the recipient by both verbal and writing. fifth is the distribution of pension benefit to the recipient which is given monthly after declared as retiree from ums and fulfilled the administration procedure of pfums. judging from the analysis above, it can be seen that all pillars and conditions are fulfilled and thus conforms shariah requirements. meanwhile, the contract used between pfums and ikhwanul huda 79 participant is mudarabah contract. the conditions are a. management mechanism of pfums the main activity of the pfums is managing routine contributions from participants and founders to be invested in investments as it is set out in the investment direction made by the founders. investment returns from funds is used to pay pension benefits to participants who have entered the retirement period. pfums has set up the detail of the procedure and mechanism. here, we would like to highlight some important points. the highlighted points will include aspects on membership requirements, premium payment, rights of participant, source of money, and investment process. the membership of the pension fund begins when the employee is registered with the pension fund as a participant and ends when the employee dies or retires or stops working by transferring his rights to another pension fund. this participant cannot resign or claim his rights from pfums if he still meets the membership requirements. employees who are active as either educative or non-educative staff who reach the age of 18, whether single or married, are eligible to be participant. for the premium payment, each of participant must pay fee equal to 5% of their monthly salary. the payment starts from the beginning participant enrolled and ends at the time the participant stops from the job by resigning, retiring or died. as participant of pfums, all members are entitled for pension benefit which includes normal benefit, accelerated pension benefit, benefit of retirement caused by disability and late pension benefit. normal benefit is given to participant who retired at normal age while the participant who retired in advance entitled the benefit of accelerated pension. in addition, participant journal of islamic economic laws-january, vol. 2, no. 1, 2019 80 who is forced to stop from their work due to disability will receive the benefit or retirement caused by disability. for the participant who get retired with the membership time range from 3 years up to the age below the accelerated pension age will be entitled for late pension benefit. apart from it, participants has right to raise their opinion and suggestion regarding portfolio progress to the founder, manager and board of supervisor. the initial wealth of the pension fund comes from the transfer of funds collected by the muhammadiyah university of surakarta as an employer, which will then be collected from the employer contribution, participant contribution (premium), investment returns, and transfer of pension funds. 1. employer contribution the employer in this case is the founder of the pension fund, the chancellor of the muhammadiyah university of surakarta, who is obliged to pay a fee which amount is determined based on the actuary calculation. the employer or founder must pay a contribution of 19% of the income or salary received for one month. 2. participant contribution (premium) participant contributions are contributions intended to fund the pension program which is obliged for participants. this type of contribution has been regulated by the pension fund regulations of the muhammadiyah university of surakarta. each participant must pay a contribution of 5% of his salary or income for one month. 1 3. investment return apart from employer and participant contribution, 1 interview with muhroji, director of pension fund universitas muhammadiyah surakarta at 09/04/2018, 08.30 wib. ikhwanul huda 81 pfums source of fund comes from investment return. the types of return obtained by pfums are below: • profit sharing the return of protif sharing is income earned by pfums through investment instruments such as deposits, sukuk, and land price increment.2 deposits are futures fund deposits whose withdrawals can only be made at a certain time based on the agreement of the depositing customer. deposits themselves are one of the banking products used to make futures investments(sam, et al., 2014). this type of investment is aimed at participants / individual customers or companies using mudarabah contract. here, the calculation method obtained by the participant / customer will be done by means of profit sharing ratio. the collected fund by pfums are invested using investment deposits into islamic financial institutions. some of islamic financial institutions that become investment venues are pt. muamalat indonesia. tbk, pt. state savings. tbk, pt. bank panin syariah, pt. bank mega syariah, pt. bank bukopin syariah, pt. bank cimb niaga syariah, pt. bank viktoria syariah, pt. bank sinarmas syariah, pt. bri syariah bank, pt. bank jateng syariah, pt. btpn syariah bank, pt. bank mandiri, pt. bank syariah mandiri, pt. bprs madina, pt. bprs margirizki, pt. bprs arta surya barokah, pt. bprs danagung, pt. bprs 2 interview with muhroji, director of pension fund universitas muhammadiyah surakarta at 09/04/2018, 08.30 wib. journal of islamic economic laws-january, vol. 2, no. 1, 2019 82 dana mulia, pt. bprs sragen, pt. bprs al mabrur. pfums plays the role as sohibul mal or fund owner while islamic financial institutions as mudarib or the fund manager. • sukuk starting from 2016, pfums has been investing 30% of its fund in sukuk. sukuk (islamic bonds) is long-term securities based on shari’ah principles issued to sukuk holders which require issuers to pay income to sharia bond holders in the form of profit sharing / margins / fees as well as repayment of principal bonds at maturity (sam, et al., 2014). there are two types of sukuk, sovereign sukuk and corporate sukuk. sovereign sukuk is type of sukuk issued directly by the government. it is also possible for any city to issue municipal sukuk. in the other hand, corporate sukuk is the sukuk issued by institutions, agencies, corporation and sort of those entities. the purpose of the sovereign sukuk is to build country’s infrastructure or finance other project. some sukuk issued by the government that bought by pfums are pbs12 and sr008. in both pbs12 and sr008, government order the rental object (which is the property owned by government or any project) which later on managed and eventually offered to the public to become sukuk holder of the project. in this regard, pfums becomes the sukuk holder to fund the project held by government through sukuk pbs12. the proceed of sukuk issuance to rent government-owned ikhwanul huda 83 property or fund any project. later on, government gives payment benefit to the holders per six months for sukuk pbs12 and monthly for sukuk sr008 as the holders are entitled to rental benefit. this mechanism will apply until maturity. apart from the sovereign sukuk, pfums also buys the corporate sukuk from various companies. the companies are bri syariah, angkasa pura, pt. timah, bank nagari and pln. for bri syariah sukuk, the company issues mudarabah sukuk to increase the asset of the institution. pfums agrees to become sukuk holder through buying it at specific price. the proceed of the sukuk will be then used by bri syariah to open branches in several regions. the return on developing its business through sukuk proceed then distributed to the respective holders. in the other hand, angkasa pura, pt. timah, bank nagari and pln issues sukuk ijarah in which pfums invests its money. those companies use the proceed to rent assets in order to develop their business. in exchange for the sum of money given, issuers must pay rental fees periodically to the sukuk holders. during the maturity date, the companies must pay back all the initial capital. the return distribution earned from renting activities between pfums (and also other sukuk holders) and angkasa pura, bank nagari as well as pt. timah is paid per three months while investment return distribution for pln is paid per two months. journal of islamic economic laws-january, vol. 2, no. 1, 2019 84 pfums gets monthly return from both deposit and sukuk. in addition to that, the land purchase as one other tool of investment by pfums provides great value increment. pfums bought piece of land last year since it saw the price increase of that particular land.3 the money pooled by pfums which consists of employer and participant contribution is in fact fund that must be managed and invested in various instruments in order for the money to grow. this is simply because the long distance period between the time of the premium paid and the time participant gets pension benefit, starting from the participant get enrolled at pfums until his retirement. this is why the money pooled at pfums is said as having long-term characteristic.4 d. transer of fund between of pension fund institutions the transfer between pfums and any other pension fund institutions occurs when the participant decides to make advanced retirement, exit from the pension plan or changing the pension fund institution. in that case, all the contributions paid to pfums will be returned to the respective participant or transferred to other institutions. by doing so, participant is still able to continue the pension contribution even though not attached any more to ums. of course, the continuation of contribution is given to other pension fund, not to the pfums. 3 interview with muhroji, director of pension fund universitas muhammadiyah surakarta at 09/04/2018, 08.30 wib 4 interview with muhroji, director of pension fund universitas muhammadiyah surakarta at 09/04/2018, 08.30 wib ikhwanul huda 85 the wealth of pension funds is separated from the wealth of the work. the wealth of the pension fund is developed in accordance with the investment direction set by the founder. the wealth of pension funds cannot be used as collateral for loans of any kind, except in the form of investments that are allowed by laws and regulations in the field of pension funds. letters, documents or any files regarding certain pension fund investments determined by the founder, are entrusted to the trustee. conclusion and suggestion based on the research above, we can make conclusion as following: 1. the contract used between employer and participant is hibah bi al-sharth (grants with condition) from employer as wahib to the employee as mauhub lah. 2. the contract used between employer and manager of pfums is wakālah (delegating authority) where the employer delegates its authority to the manager of pfums to manage the fee contribution as directed by the establisher. 3. the contract used between pfums and participant is muḍārabah where pfums act as muḍārib (manager) while participant as ṣāhibul māl (fund owner). 4. the contract used between pfums and investee is muḍārabah and ijārah where pfums invests all contributions collected into three main categories of channel: time deposit, sukuk and land purchase. 5. for the shariah conformity of pfums towards the available fatwa which includes fatwa of dsn mui 07/dsn-mui/ journal of islamic economic laws-january, vol. 2, no. 1, 2019 86 iv/2000, fatwa of dsn mui 10/dsn-mui/iv/2000 and fatwa of dsn mui no. 88/dsn-mui/xi/2013, we find that all contracts applied by pfums have fully followed the requirement. in addition to that, the management of fund doesn’t involve any type of gharar and riba. thus, we conclude that the transactions are shariah compliance. apart from the conclusion, it is also important to give suggestion based on the research result that has been summarized above. even tough pfums succeed in implementing the contracts based on shariah requirements, there are still points to emphasize. one of the points is keeping the good work pfums has done so that it will always kept on the track of islamic finance. business always brings turbulence. once it happens, pfums must still hold tightly the islamic principle that they currently do. references arikunto, s., 1992. prosedur penelitian: suatu pendekatan praktik. jakarta: rineka cipta. bukit, e. o., 2012. analisis penerapan pernyataan standar akuntansi keuangan 18 mengenai akuntansi dana pensiun pertamina. universitas hasanudin makasar: bachelor thesis. fahmi, i., 2014. bank dan lembaga keuangan lainnya teori dan aplikasi. bandung: alfabeta. hasibuan, r.i.p., 2017. dana pensiun dalam perspektif hukum bisnis syariah. al-’adalah, 13(3), pp.99-108. mardani, 2015. aspek hukum lembaga keuangan syariah di indonesia. jakarta: prenadia grup. ikhwanul huda 87 meilani, t., 2015. sistem pengelolaan dana pensiun pada pt bank muamalat indonesia, tbk. universitas islam negeri syarif hidayatullah jakarta: bachelor thesis. rifanto, m., 2017. faktor yang mempengaruhi minat nasabah menggunakan produk dana pensiun (studi kasus pada bank muamalat cabang jogjakarta). universitas islam negeri sunan kalijaga yogyakarta: bachelor thesis. suprayogo, i., & tobroni, 2001. metodologi penelitian sosialagama. bandung: remaja rosdakarya. sabiq, s., 1987. fikih sunnah translated by kamaludin a. marzuki. bandung: al-ma’arif. sam, m.i., et al., 2014. himpunan fatwa keuangan syariah: dewan syariah nasionaal mui. jakarta: erlangga. suhendi, h., 2002. fiqh muamalah. jakarta: rajagrafinda persada tunggal, a.w., 1996. dasar-dasar akuntansi dana pensiun. jakarta: rineka cipta. wahab, z., 2005. segi hukum dana pensiun. jakarta: rajagrafindo persada. journal of islamic economic laws vol. 5, no. 1 january 2022: 61-83 61 islamic economic perspective and potential of zakah on cryptocurrency rozi irfan rosyadhi1, abu salim2 1jntuh school of management studies., jawaharlal nehru technological university, hyderabad 2economy syariah, itb ahmad dahlan (institut teknologi dan bisnis ahmad dahlan jakarta) email: rozirosyadhi@gmail.com, salimabu790@gmail.com abstract indonesia is a muslim-majority country, the survival of extensive zakat is very important for society. in the era of digital technology, the government encourages the government to improve classical zakat administration to ensure transpiration and the principle of facilitating zakat payments. this paper provides a study of the islamic economic perspective and the potential application of zakat on cryptocurrencies. this paper provides a study of the islamic economic perspective and the potential application of zakat on cryptocurrencies. in this study the author uses a qualitative approach where the main source is from the indonesian zakat administration law and the secondary sources are published journals, articles, and reports. the findings of this paper suggest that governments and ngos should facilitate and accept zakat payments in cryptocurrencies, because one of the advantages is the ability to make transactions more transparent and cross-border using blockchain technology. provide a sense of security and more trust to the community towards zakat organizations in indonesia. this study also found a way to calculate cryptocurrency zakat by determining the nisab, consistently above 85 grams for 12 months, so you can pay 2.5% zakat using the value of currency or value of precious metal. this research will help zakat managers in indonesia to adopt technology in this regard. keywords: zakah, blockchains, cryptocurrency. 62 rozi irfan rosyadhi, abu salim introduction in islam, zakah is third pillar of the religion islam. every muslim who is capable of paying zakah shall do so without an excuse. in islam, there are two types of zakah; which is zakah al-fitr and zakah al-maal. irrespective of the country in which a person resides and the legal system adopted by the country, every muslim is obliged to pay zakah as long as the person fulfils the religious requirements to give it. in simple term, zakah can be defined as almsgiving. zakah literally means to purify or increase or grow. this literal meaning of zakah indicates that via zakah a person’s wealth can be purified and this lead one’s wealth to grow and be increased not only physically, but spiritually as paying zakah leads to increase of barakah (blessing) of allah (sw) in one’s wealth. in the holy book of muslim, al quran, more than 30 different verses allah (sw) has mentioned zakah. in al-quran zakah has been described as a way in which the redistribution of wealth is practised in an economy considering the rights of the poor that must be fulfilled by those who are financially capable in the society. indonesia, is the largest country in terms of muslim population. it is estimated that there are approximately 231 million adherent muslims in indonesia accounting for with 86.7% of the indonesian population and there is no exact estimate on how much zakah is collected in “the collection of zakah at the center is quite good, every year it increases. in 2020, we got 387 billion, now it’s almost 500 billion more. there is a significant increase every year,” he said when he was a resource person at the ijtima sanawi held by the national sharia council (dsn mui), thursday (02/12/2021), reports mui.or.id. as such, administration of zakah in indonesia is important and there is a need to effectively manage zakah. the objective of this paper is to suggest the ways in which technology could enhance the administration of zakah in indonesia. currencies have been invented since ancient times to facilitate transactions between the societies and their members. naturally, with the invention of the internet, digital communications and the advent of the virtual community, some form of digital currency 63 journal of islamic economic laws-january, vol. 5, no. 1, 2022 was invented for transactions in virtual space. cryptocurrencies, supported by blockchain technology, fall into this category. in other words, cryptocurrencies represent a natural evolution of the currency as it adapts to the growth of internet and online transactions. the test ventures for the cryptocurrency zakah installment stage found are all from private activities exterior malaysia. none of the states in malaysia are prepared to acknowledge installment in cryptocurrencies through installment in fiat money can be acknowledge for crypto zakah payment. in may 2018, shacklewell path mosque in hackney, london, begun to acknowledge cryptocurrencies (bitcoin and ethereum) for sadaqah and zakah. a modern blockchain-based online stage was developed in collaboration with a start-up company called combo innovation. the company specializes in giving blockchain financial arrangements. within the case of the london mosque, the company provides islamic compliant budgetary arrangements permitting the mosque to get sadaqah and zakah in cryptocurrencies. concurring to its website, gifts can be made through a qr code, and givers will then be electronically exchanged to its crypto-currency difficult wallets. each exchange will be straightforward to counter and minimize cash laundering exercises. the gotten sadaqah or zakah will be traded to fiat cash through a crypto trade like local bitcoin uk. another reference site is bloom ack a us-ased company with offices in jakarta indonesia. he advertises a free service as a private company to help transfer crypto-zakah money from cryptorich people to zakah-eligile institutions in indonesia. according to their wesite people should contact the company y mail in case they need to pay zakah for their crypto. cryptocurrency zakah payments can be made by sending payments to bloom-controlled crypto wallets held in a crypto exchange in indonesia. the resulting cryptocurrencies will then be replaced by indonesian rupiah by bloom distributing them to qualified coconspirators of nice nonprofits. the company claims to disperse in general to the poor and the poor especially the dead and the vagrants of central java and sumatra. the benefit seems to be to 64 rozi irfan rosyadhi, abu salim include or perhaps unmistakably steps that require the calculation of zakah and email communications yourself. it doesnt seem to offer the client meeting a comprehensive program for zakah benefactors and payers. islamichain is possibly a dubai-based startup focused on harnessing blockchain innovation to ring simplicity to zakah sadaqah and waqaf. according to the companys website the company claims that “magnanimity” generates up to $1 trillion a year. therefore due to various complex variables such as coordination legislation and neighborhood its useful effect is often the need for transparency and responsible transport components. it is very easy for the program to encounter a situation where we have to send the contact information of the cross-order alms to the beneficiaries abroad. sending cryptocurrency is much less complicated and simpler than conventional methods. cryptocurrencies and blockchains can enhance the speed and transparency of the transfer of computing resources through cross-order zakah sadaqah and waqaf installment payments. literature review administration of zakah in indonesia pursuant to law no. 23 of 2011 zakah management is an activity of planning implementing coordinating distributing and using zakah (republik indonesia 2011). the management of the zakah in indonesia is always changing and evolving from time to time depending on the time and the government regulations applicable at that time. below is a brief explanation of the zakah management model in indonesia from the pre-independence period the independence period the reform period until the postmodernization period or commonly known as digitization era. zakah during the reform period significant changes in the administration of zakah occurred during the reform period that is since indonesian law as know as undang-undang (uu) no. 38 in 1999 was issued on the management of zakah ministerial decree religion no. 581 and haj case no. d291 of 2000 on zakah management technical guidelines (fakhruddin 2008). regarding the settlement fakhrudin said the settlement becomes the official 65 journal of islamic economic laws-january, vol. 5, no. 1, 2022 legal basis for the management and distribution of zakah in indonesia. fakhrudin also said the government has an obligation to facilitate the establishment of zakah authorities at both central and regional levels. if at the beginning of independence until the new era the collection of zakah was only done on zakah fitrah and zakah on property (but zakah payment on property is not global because there is no mandatory regulation. forced) then in this reform. at that time it was also mentioned in the law regarding the types of property that are subject to zakah one of which is the property of income and services. this asset class in uu no. 38 of 1999 should e classified as an income class known only in modern times and did not exist during the time of the prophet muhammad. this zakah is called professional zakah (muhammad 2002). since the indonesian law as know as undang-undang was issued the management of the zakah fund has become more organized transparent and also more professional. indeed the administration of zakah at each facility is overseen by the government religious and community leaders. in case of error or negligence in the registration of zakah property it is severely punished and even considered an offense (fakhruddin 2008). the presence of this act also ignited a new enthusiasm among indonesian muslims as zakah is no longer considered an exclusively muslim activity but has become a government program in the socioeconomic sector. such administration of zakah is in line with what was practiced in the days of the prophet i.e. zakah is administered by the state and the government acts as a representative of the poor so that they gain rights to the poor. with a portion of the wealth of the rich (ali 1988). zakah during the reform period significant changes in the administration of zakah occurred during the reform period, that is since uu no. 38 in 1999 was issued on the management of zakah, ministerial decree religion no. 581 and haj case no. d291 of 2000 on zakah management technical guidelines (fakhruddin, 2008). since the uu was issued, the management of the zakah fund has become more organized, transparent and also more professional. the presence of this act also ignited a new enthusiasm among indonesian muslims as zakah is no 66 rozi irfan rosyadhi, abu salim longer considered an exclusively muslim activity but has become a government program in the socioeconomic sector. . such administration of zakah is in line with what was practiced in the days of the prophet, i.e. zakah is administered by the state and the government acts as a representative of the poor so that they gain rights to the poor. however, in 2011 there was an amendment to the law on zakah management which was replaced by uu no.23 of 2011, in this law, the zakah institution that has sole authority is the national zakah agency (baznas) and any institution that wants to manage it, have to permission to baznas. zakah in digital era mosconi in rolek meško and krapež, (2016) argue that the industry 4.0 phenomenon was first mentioned in 2011 in germany as a proposal for the development of a new concept of german economic policy based on high-tech strategy. the ministry of industry of the republic of indonesia (2019) has announced that indonesia is ready to enter the industry 4.0 era marked y the launch of the indonesia 4.0 implementation roadmap in april 2018 digitization computing power and data analytics has changed people. life in various fields including the institution of zakah. zakah institutions in this case the national zakat amil agency (baznas) are implementing various digitalization processes in the management of zakah so that they remain agile in this digital age. baznas has started the digitization phase before launching the indonesia 4.0 opening roadmap. this means that baznas is one of those organizations that prepared from the ground up before others were ready to enter this era. the development phase of digitalization of zakah management at baznas began in 2017 in cooperation with the portal mataharimall.com which provides payment services and zakah calculators. in addition baznas cooperates with e-commerce and elevenia which are shopping centers and online sales. in 2018 baznas launched zakah service through a digital payment machine mcash located at 700 shopping malls in jaodetaek. next baznas partnered with an 67 journal of islamic economic laws-january, vol. 5, no. 1, 2022 app-ased collaorative chat service with financial features called oy! this cooperation makes it easy for indonesians to give zakah to help those in need. in 2019 gopay which is an online payment service provided by gojek in collaboration with baznas introduces an innovation in the easy provision of digital zakah through gozakah. not only that baznas is also working with monster ar to launch an app called augmented reality based on android. this app allows android users to scan every baznas logo they come across and the service features will appear until paying with zakah (repulika.co.id 2020). blockchain makes processes traceable, auditable, and irreversible. this is the most important part of successful philanthropy. this was inspired by a pious muslim who wanted to use cryptocurrency for donation activities but did not have an interesting place. blockchain has significant potential for use in the world of islamic philanthropy for the folowing reason: (1) transparency: blockchain provides origin, traceability and transparency of transactions; (2) control: access to the whitelist is restricted to identified users; (3) security: the digital ledger cannot be changed or tampered with after data has been entered. the chances of fraud are very small and easier to spot; (4) real-time information: when information is updated, it is updated for everyone on the network at the same time. table 1. 2020 national zakah collection and distribution based on data entry no zakat management organization (opz) zakah collection (in rp) distribution 1 baznas 386.203.760.730 326.156.796.566 2 baznas province 428.549.988.109 406.025.213.388 3 baznas district/city 1.348.522.770.559 1.199.720.391.209 4 laznas 2.462.462.924.177 2.188.385.135.311 68 rozi irfan rosyadhi, abu salim no zakat management organization (opz) zakah collection (in rp) distribution 5 laz province 209.929.277.973 153.805.434.422 6 laz district/province 128.467.852.292 125.316.041.097 total 4.964.136.573.780 4.329.408.411.943 source: 2020 national zakah collection and distribution based on data entry note: 1. baznas: badan amil zakat nasional/national zakat amil agency. 2. laznas: lembaga amil zakat nasional/national zakat amil institute. 3. laz: lembaga amil zakat (laz)/amil zakat institution (laz) private. islamic view about cryptocurrency islamic scholars could not come to an agreement on the matter of cryptocurrencies. there are three different views on the use of cryptocurrencies among muslims. the different views would directly dictate the status of zakah payment in cryptocurrencies. the three views can be summarized as follows: table 2. the three different views on the use of cryptocurrencies among muslims views scholars prohibiting (haram) darul iftaa‘ misriyyah, syeikh ali qaradaghi, wifaq al-ulama, dr. ahmad sufyan che abdullah, datuk dr. zulkifli al-bakri, mui permitting datuk dr. mohd daud bakar, dr. zaharuddin & mufti muhammad abu bakar tawaqquf (pending) official view international shari’ah research academy for islamic finance (isra) source: mohd faiz, alif, & raja rizal iskandar (2019); international journal of zakah and islamic philanthropy (2019). 69 journal of islamic economic laws-january, vol. 5, no. 1, 2022 based on the table above we can conclude that there is three view regarding the islamic scholars view about cryptocurrency prohibiting, permitting, tawaqquf / pending. legal criterion of property (māl) in islam in sharia law the most important aspect of exchange value is that it has the status of māl which means property. therefore before discussing the state of cryptocurrencies it is essential to understand the concept of māl in sharia law. when it comes to the concept of property in islam scholars differ. in aidin of the hanafi school of thought defined property as anything that is desired and can be kept for use in the future. according to the maliki al mal are defined property as something at will and whose usage is both customary and legally valid. according to hanabilah this is something that is often useful. an asset according to the shafie school is defined as something that is useful or ready to be mined. according to the majority of muslim scholars māl refers to something of exchangeale value and must be compensated for by anyone who damages it. islam: mutaqawwam (authorized and legal in sharia) and customary review (urf). mutaqawwam. it is a necessary condition to classify something as māl. something that is allowed in sharia is called mutaqawwam. mutaqawwam was defined y in āidīn as “something stored or present and authorized for use.” so if it is not registered or present it is not considered māl. sharia he cannot e regarded as māl like dead animals pigs and wine. however it is important to note that according to the majority of scholars (shafie māliki and hanali) al-mal mutaqawwim (valued), namely assets that are allowed to use it by the shari’ah and has the nature of exclusivity according to syara’, such as houses, food, livestock, vehicles and clothing. kind of treasure it is protected by law and action destruction or elimination of which is subject to sanctions for compensation ‘urf. in the absence of specific judgments or rulings drawn from the scriptures of sharia (al quran and sunnah) custom plays an essential role. according to jurists what is taken from urf is exactly the same as what is taken from the scriptures. jurists 70 rozi irfan rosyadhi, abu salim from the four schools of islamic law agree that if something increases in value because of custom and acceptance by people it is considered acceptable. according to the facts and opinions obtained digital assets are still classified as commodities (financial assets) and do not yet qualify as currencies. this is because in order to e considered a currency it must meet certain requirements which digital assets do not. according to the facts and opinions obtained digital assets are still classified as commodities (financial assets) and do not yet qualify as currencies. this is because in order to e considered a currency it must meet certain requirements which digital assets do not. the criteria to qualify are as follows; i) māl (regarded as valuales); ii) accepted and approved as a medium of exchange y all or a large group of people; and iii) thamaniyyah: standard of value and independent unit of account. the current state of bitcoin is that it is not an independent indication of value. the value of bitcoin has always been determined by the value of fiat currency. thamaniyyah insists on a clear standard of value for money. bitcoin is not enough to be a standalone store of value. furthermore for something to be an independent standard of value it must be stale and widely accepted. bitcoins volatility and instability defeat the purpose of money which is to protect and balance our daily lives. the position and key characteristics of bitcoin have been lost due to uncertainty and volatility. 12 thamaniyyahs second function is to act as a unit of account. this is true for those who use it as a primary reference point and yardstick when viewing rates and tracking bonds. it is a unit of measurement used to determine the be value of products and services. cryptocurrency is permissible in principle other researchers argue that bitcoin is in principle permissive. this view can be analyzed on the basis of our earlier discussion of other criteria and definitions of (evil) and monetary 71 journal of islamic economic laws-january, vol. 5, no. 1, 2022 assets. there is a well-known legal maxim explained by jurists: this means that rules of origin are legal .األصل في المعامالت اإلباحة“ in financial and commercial transactions. in other words no matter what unless we can see it clearly it contradicts the principles of sharia law 1. treated as valuable thing among the people, 2. accepted as medium of exchange by all or substantial group of people, 3. it is a measure of value, 4. and it serves as unit of accounts. therefore any cryptocurrency that meets these conditions (such as bitcoin) is accepted as currency. the fatwa center of the south african islamic seminary darul uloom zakariyya has made the point that bitcoin qualifies for crime and is therefore licensed for trading. however they note that in order to qualify as a currency it must be approved by the relevant government agencies. zakah on cryptocurrencies zakah on cryptocurrencies based on the facts and opinions acquired, digital money is to be deemed a commodity or financial asset rather than currency, it is necessary to do study on the zakah rule to determine whether it may be imposed on digital currency or not. to that end, this section will go through the essential aspects of zakah before delving into the zakah judgement for digital money. zakah, also known as mandatory charity, is a type of duty that every muslim is required to fulfil according to the fifth pillar of islam. it is a religious responsibility for muslims who satisfy the required parameters of a common minimum amount (nisab) and a one-year term (haul) to contribute 2.5 percent of their wealth to eight categories of particular recipients each year. muslims are exempt from paying zakah if their wealth is less than a certain level known as the nisab. in addition zakah is not only a spiritual obligation but also an important component of the islamic welfare system. zakah acts as a kind of redistribution of wealth benefiting the whole 72 rozi irfan rosyadhi, abu salim community especially those who have been designated as specific beneficiaries. the muslim responsibility to pay the zakah is mainly taken from the quran while the details of the types of wealth owed to the zakah the circumstances and the percentage deducted for the zakah are mainly taken from the hadith rasulullah saw. therefore before considering zakah it is essential to understand the requirements of zakah as well as the elements embedded in it. zakah is divided into two types: zakah fitrah and zakah harta or wealth. instead of zakah fitrah, the debate will center on zakah on wealth. zakah on wealth is classified into numerous sorts or categories, including zakah on earnings or income, zakah on business, zakah on savings, zakah on gold and silver, zakah on farming, and zakah on animals. as a result, the question of whether digital money fits within the classification of wealth that can be subjected to zakah has emerged. to that end, we must investigate its character in order to determine the right zakah decision. the differing views on the permissibility of digital currency have influenced views on the zakah regulation that can be applied on such currency. despite the fact that digital currency is an intangible, it has values that can be transferred, distributed, and exchanged. furthermore, ownership may be transferred from one person to another (peer to peer) without the need for any intermediaries like as financial organizations or banks. when considering the nature of such a currency (based on previous discussions of digital currencies) it is necessary to infer the judgment of zakah for digital currency in this case. in general the classification of digital currency as a commodity is considered appropriate due to its nature and status as a new financial instrument. then it is considered as a commodity with characteristics and functions similar to money. however sharia scholars suggest several cases for enforcing zakah on products including, i. the reasons for paying zakah from it is due to the purpose of selling and buying of it. ii. the commodity acquired resulted from the transaction of buying and selling. 73 journal of islamic economic laws-january, vol. 5, no. 1, 2022 iii. the intention to sell the commodity once the commodity has been acquired. this also subjected to those who buy the commodity for his own uses but then decided to sell after the price increases, such act also considered as intention to sell. iv. fulfill the nisab requirement where the minimum amount is benchmarking on the value of gold or silver. v. fulfill the haul requirement where the owner own such assets for one completed owning year. vi. the commodity is being valued according to the market value. to that the zakah then will be calculated when the market value fulfilled the nisab requirements. under malaysian law the correct to gather and distribute zakah rests with the state. the mission is allotted y the islamic state religious council (sirc) or the majlis agama islam negeri (main). accordingly any zakah-related fatwa is within the purview of the aforementioned authorities.17 perlis sirc is that the only state that has issued a politician statement on the bitcoin zakah thus far. in 2020 perlis fatwa commission officially announced that bitcoin (one of the digital currencies) could also be subject to zakah if it meets the shipping and nisab requirements to be classified as a commodity. some digital currencies are issued with a particular underlying asset while others are issued to satisfy a particular project or for a selected purpose. therefore the underlying assets of the digital currency or the rationale for its issuance will determine whether zakah will be imposed thereon. as an example if a digital currency reflects gold united of its underlying assets it’s subject to the gold zakah law. additionally he said that issuance of such digital currency must be shariah compliant for the zakah to be applied to that for if the issuance is for non-sharia compliant purposes or with a digital currency failure to fits this sharia will automatically lose valuable elements (mutaqawwam) in shariah law and can now not be considered a sound financial asset under islamic law. however since there aren’t as many pillars as currency or money digital currencies will be classified as a commodity or financial asset instead of a currency. he then added that 74 rozi irfan rosyadhi, abu salim commodity digital currencies are exempt from zakah. however if the holders involved in digital currency trading and making profits from the transaction want to pay zakah he proposes that such action e done by enforcing the zakah regulation on savings in such situations. so my research on this subject is predicated on the idea that such a digital currency can be punished by zakah this is often because cryptocurrency trading generates profits for its owners. this makes it a fantastic property because it meets the expansion criteria (alnama) additionally it’s also considered a commodity or financial asset because of its value and characteristics. accordingly it’s going to be profitable to trade such a product making it eligible for zakah. however while we decide to believe that zakah can be applied to digital currency in our research further research is required to see that the imposition of zakah on digital currency is thanks to regulatory authorities. its abilities and qualities meet the desired criteria of wealth which is accountable for zakah. this can be to avoid those assets being taxed in zakah just to extend zakah revenue. methods this study is a descriptive study as it has describe or elucidated the combination of cryptocurrency zakah and blockchain in indonesia. the research method used is qualitative. the subjects of this study are zakah organizations in indonesia. the object of this study is the mechanism between muzakki and nadzhir in indonesia. this study further clarified the production mechanism of the zakah lockchain as the authors argue that the management of zakah is not optimal efficient and simple for everyone. it is hoped that the national zakah organizations will e trustworthy responsible and professional with this model. on the other hand this study will give another perspective on the enefits of accepting cryptocurrency from zakah. the source of this research is secondary data which includes previous research lockchainrelated books and national and international journals related to zakah and lockchain. blockchain zakah description: descriptive analysis is performed to analyze the relationship between zakah 75 journal of islamic economic laws-january, vol. 5, no. 1, 2022 and lockchain and connect zakah to blockchain and create a zakah blockchain model that can be used by zakah stakeholders. results blockchain is an open distributed database that executes transactions on an open decentralized ledger (nor rahman rahman & abdullah 2017). specifically it’s an information series of user-to-user transactions stored in locks where each lock records a particular amount of information encrypted through cryptographic hashing. if the user wants to create a transaction he must announce the transaction to any or all other users on the network to verify the authenticity of the transaction. each user will have a duplicate of the info registry; as a result all transactions are visible and available to any or all making any fake transactions fraudulent actions or hacking activities impossible additionally to transparency reliability and precise and detailed monitoring of funds the decentralized structure of the blockchain network reduces transaction costs by eliminating any middlemen. the process of promoting transactions within the blockchain first begins with the generation of a digital security token by implementing encryption. the second step is where the user tries to authenticate the transaction while preserving personal information. finally the transaction is thus recorded as immutable and automatically distributed to any or all users (changa baudier zhangc xua zhanga and aramid 2020). the method explained above is illustrated within the following figure 1 encryption digital security code validation confirmed without private information distribution immutable record & transaction completed figure 1. blockchain promote transaction blockchain may be a new technology that has been known after the 2008 financial crisis (nakamoto s., 2008), and everybody can accept and has been adopted by everyone. blockchain will be 76 rozi irfan rosyadhi, abu salim understood as a digital record of block transactions. to confirm transactions, cryptography is employed supported a digital signature chain. each block may be a group of transactions that are added to the ultimate block by reaching a consensus on authenticity among users; the block is then passed to every network user to update their database. the blockchain system records all transactions that are made, shared by consensus, distributed and shared among the users of every participant, and it’s very difficult to enforce it because each process is entered with two keys and every transaction is cryptographed and maintained simultaneously within the distributed ledger of every node, making it nearly impossible to hack, as stated by alessio et al (2019) following figure 2 source: alessio et al 2019) figure 2. how blockchain promotes transaction currently, zakah funding is just 10 trillion out of a complete potential of 217 trillion. therefore, technology is required to facilitate and accelerate access from receiving zakah, recording zakah to distributing zakah to mustahiq with zakah blockchain technology to create everything easier in any case associated with zakah. below is illustrated the mixture of zakah and blockchain so muzakki, mustahiq and muzakki are more focused and arranged in zakah management figure 3 77 journal of islamic economic laws-january, vol. 5, no. 1, 2022 source: model has modification from hazik mohammed, 2017 figure 3. model zakah blockchain muzakki transfers zakah funds to zakah institutions, both baznas and laznas because only two of those institutions have a mustahiq zakah database. it encompasses information about whether compulsory zakah is in accordance with the nisab or not when it’s checked, and amil will send muzakki funds within the sort of cryptocurrency. technically, people won’t use cryptocurrency quite a medium of exchange during the method, and for this, individuals will adopt a set parity exchange system from one local currency to at least one cryptocurrency unit to avoid fluctuations in value (an & seo, 2018) individuals use stable coins, a sort of cryptocurrency designed to supply security regarding other major currencies that leading central banks struggle to keep up purchasing power over time within the crypto-asset market (bullmann, klemm, & pinna, 2019). this kind of cryptocurrency is characterized by extremely low volatility (usually near zero). “tether” is employed, which is that the most well-liked and commonly used cryptocurrency for this operation type. the massive specialty of tether is that it belongs to the category of fiat currency stabilized stable coins. tether holds parity of 1 tether unit (1usdt) for one dollar. connecting mustahiq to the network, every mustahiq identified in zakah institutions’ database will automatically have a blockchain 78 rozi irfan rosyadhi, abu salim account on the network. he receives these zakah funds in cryptocurrency and so transfers them in folding money on the exchange platform. in terms of sending zakah funds, the muzakki can trace the whereabouts of the zakah funds, where the amil zakah party only checks the database that the zakah funds have reached their haul or nisab, and the level of zakah value is appropriate; because the database must always be updated, whether the mustahiq died or has turned into muzakki. there are two binding passwords in blockchain zakah, and no one can change this; even if something changes later, encryption and other descriptions will lock and fix each other, so it is not affected by only one key aspect or item. thus, the process will be traceable, auditable, and irreversible, which are the main qualities to ensure a successful zakah collection system (elasrag, 2019). the muzaki registered on the blockchain network of zakah institutions will automatically have a permanent account. their zakah fund will thus be represented in the tether cryptocurrency. on the other hand, each mustahiq who has been recorded in the database of zakah institutions have met the requirements to allow themselves to be part of those who must be given zakah and have a blockchain account. upon completion, a smart contract will be signed between the institution and the muzaki, where it will be automatically executed, i.e., zakah funds will be collected in the cryptocurrency if the nisâb is reached and remains in possession for one lunar year. zakah institutions will receive operational funds as an additional cost. once the funds are raised, they will be exchanged for fiat money on the exchange platform for the parity “1 tether = 1 dollar” and transferred to mustahiq (rejeb, 2020). there is no fixed recipe for presenting the findings of a study therefore, first consider general guidelines and then turn our attention to options for reporting descriptive statistics and the results of hypothesis test. reporting research results based on the explanation above we can conclude a formula that, each of crypto owner can registers them self in some 79 journal of islamic economic laws-january, vol. 5, no. 1, 2022 particular platform to give announcement and information to pay the zakah of their crypto with the formula below : how to calculate zakah cryptocurrency so how then do you determine how much crypto you have to hold in order to be liable for zakah. here are a few rules of thumb: 1. zakah is due on the market value of your crypto. 2. regardless of whether your cryptocurrency holdings are tokens (utility or work) or exchangeable coins, both are liable for zakah. steps for calculating your zakah on crypto: a. find the value of 85 grams of gold in your crypto currency. b. if you’ve had a consistent value greater than 85 grams of gold in your wallet on the month’s end for an entire 12 months, then you will pay zakah on the total value of your wallet. c. pay 2.5% of your wallet’s value either in the same cryptocurrency or in it’s value of fiat currency or precious metals. if you cannot find a reliable market quote for converting your crypto value into gold, you can take the market price for gold in your local currency, then convert your crypto value into your local currency to find out how much you should give.there is no fixed recipe for presenting the findings of a study. we will, therefore, first consider general guidelines and then turn our attention to options for reporting descriptive statistics and the results of hypothesis test. discussion blockchain is an open dispersed data set that executes exchanges on an open decentralized record (nor rahman and abdullah 2017). explicitly it’s a data series of client to-client exchanges put away in locks where each lock records a specific 80 rozi irfan rosyadhi, abu salim measure of data encoded through cryptographic hashing. to make an exchange he should report the exchange to any or any remaining clients on the organization to check the credibility of the exchange. every client will have a copy of the information vault; thus all exchanges are noticeable and accessible to any or all making any phony exchanges deceitful activities or hacking exercises unimaginable also to straightforwardness dependability and exact and nitty gritty observing of assets the decentralized design of the blockchain network diminishes exchange costs by wiping out any mediators. the most common way of advancing exchanges inside the blockchain initially starts with the age of a computerized security token by executing encryption. the subsequent advance is the place where the client attempts to validate the exchange while saving individual data. blockchain can be a brand new generation that has been acknowledged after the 2008 monetary crisis (nakamoto s., 2008), and all of us can receive and has been followed via way of means of everyone. blockchain might be understood as a virtual report of block transactions. to verify transactions, cryptography is hired supported a virtual signature chain. each block can be a set of transactions which are introduced to the last block via way of means of attaining a consensus on authenticity amongst customers; the block is then handed to each community consumer to replace their database. technically, people won’t use cryptocurrency quite a medium of exchange during the method, and for this, individuals will adopt a set parity exchange system from one local currency to at least one cryptocurrency unit to avoid fluctuations in value (an & seo, 2018) individuals use stable coins, a sort of cryptocurrency designed to supply security regarding other major currencies that leading central banks struggle to keep up purchasing power over time within the crypto-asset market (bullmann, klemm, & pinna, 2019). the massive specialty of tether is that it belongs to the category of fiat currency stabilized stable coins. so how then do you determine how much crypto you have to hold in order to be liable for zakah steps for calculating your zakah on crypto: 81 journal of islamic economic laws-january, vol. 5, no. 1, 2022 • find the value of 85 grams of gold in your crypto currency. • if you’ve had a consistent value greater than 85 grams of gold in your wallet on the month’s end for an entire 12 months, then you will pay zakah on the total value of your wallet. • pay 2.5% of your wallet’s value either in the same cryptocurrency or in it’s value of fiat currency or precious metals. conclusion blockchain technology are often applied in national zakah institutions, both baznas and laznas, because this mechanism can bring significant changes within the world of national zakah. during this case, the role of amil zakah and muzakki is that the key in implementing zakah using blockchain technology in managing zakah that’s quality, efficient, accountable, and professional in distributing zakah to asnaf. blockchain technology is that the answer to time and financial efficiency and cryptocurrency technology, making muzakki more confident about zakah management meted out by amil because all data sources are tracked. muhammadiyah as the largest islamic organization in indonesia must immediately be aware of this potential, take advantage of existing opportunities so that later they will not be left behind in receiving crypto zakah. majelis tarjih council can conduct more in-depth research related to the potential and law of crypto zakah, facilitate parties who will pay zakah using crypto by creating applications or payment media that are easy and safe. references abu-bakar, m. m. (2018). shariah analysis of bitcoin, cryptocurrency, and blockchain. shariah analysis in light of fatwas and scholars’ opinions. bakar, n. a., rosbi, s., & uzaki, k. (2017). cryptocurrency framework diagnostics from islamic finance perspective: a new insight of bitcoin system transaction. international journal of management science and business administration, 4(1), 19-28. 82 rozi irfan rosyadhi, abu salim bullmann, d., klemm, j., & pinna, a. (2019). in search for stability in crypto-assets: are stablecoins the solution?. ecb occasional paper, (230). https://doi.org/10.2866/969389 chang, v., baudier, p., zhang, h., xu, q., zhang, j., & arami, m. (2020). how blockchain can impact financial services– the overview, challenges and recommendations from expert interviewees. technological forecasting and social change, 158,120166. https://doi.org/10.1016/j. techfore.2020.120166 elasrag, h. (2019). munich personal repec archive blockchains for islamic finance: obstacles challenges. fakhruddin, f. (2008). fiqh dan manajemen zakat di indonesia. uin-maliki press. hamdani, l. (2020). zakat blockchain: a descriptive qualitative approach. ekbis: jurnal ekonomi dan bisnis, 4(2), 492502. https://doi.org/10.14421/ekbis.2020.4.2.1270 kumar, d. s., & rahman, m. a. (2017). simplified hdfs architecture with blockchain distribution of metadata. international journal of applied engineering research, 12(21), 11374-11382. nakamoto, s. (2008). bitcoin: a peer-to-peer electronic cash system. decentralized business review, 21260. paizin, m. n. (2017). usage of islamic alms’s online portal: case study on pusat pungutan zakat (ppz), federal territories of malaysia. intel prop rights, 5(175), 2. paizin, m. n. (2021). community views about zakat on cryptocurrencies. al qalam: jurnal ilmiah keagamaan dan kemasyarakatan, 15(2),146-165. https://doi.org/10.35931/ aq.v15i2, rejeb, d. (2020, october). blockchain and smart contract’s contributions to zakat management system. in international conference of zakat (pp. 15-24). roblek, v., meško, m., & krapež, a. (2016). a complex view of industry 4.0. sage open, 6(2), 2158244016653987. https://doi.org/10.14421/ekbis.2020.4.2.1270 https://doi.org/10.35931/aq.v15i2 https://doi.org/10.35931/aq.v15i2 83 journal of islamic economic laws-january, vol. 5, no. 1, 2022 rofiqo, a., muslih, m., & sari, d. n. (2021). reputation, transparency, trust and waqif’s perception on nadzir’s professional toward intention to act waqf: empirical study in pondok modern darussalam gontor (pmdg). journal of islamic economic laws, 4(2), 42-66. yusof, m. f., & rasid, l. a. (2021). perilaku pembayaran zakat mata wang digital kripto : isu, cabaran dan strategi. international journal of behavioral analytics, 1(june), 0–12. journal of islamic economic laws vol. 2, no. 2 july 2019: 152-177 152 inacoin cryptocurrency analysis: an islamic law perspective filka catur windiastuti1 and fauzul hanif noor athief2 1faculty of islamic studies, universitas muhammadiyah surakarta email: vilka.caturwindiastuti@gmail.com 2faculty of islamic studies, universitas muhammadiyah surakarta email: fauzul.hanif@ums.ac.id abstract the existence of money makes buying and selling activity easier than the barter system. however, the increasing globalization of the world economy demands speed accelaration, ease and security of financial transactions. the discovery of cryptocurrency provides solution for the current payment system which relies highly on the third party in conducting digital transactions. one of those cryptocurrency products is inacoin which is originated from indonesia. because this cryptocurrency is a contemporary problem that cannot be concluded directly from the classical fiqh book, a thorough investigation is needed to obtain the validity of this money from islamic perspective. this research is a qualitative research that uses multimethod of normative-empirical islamic law perspective in discussing the aforementioned problem. this study concluded that the existence of inacoin cannot be accepted as money since there are islamic requirements or criteria that are not met. in addition, the use of inacoin is mostly for trading commodity, not as money. the inacoin trade is legitimate but unlawful, because inacoin has fulfilled the pillars and requirements of the al-ṣarf, yet contradicted some islamic principal such as maisir, gharar, and possibility of harming its user keywords: inacoin, cryptocurrency, al-ṣarf journal of islamic economic laws-july, vol. 2, no. 2, 2019 153 introduction the history of commerce notes that humans used various means to survive in fulfilling their day to day needs. at the level of civilization which is still simple, humans use barter system. along with the development in human society, it was found that transacting using barter system is difficult due to an increase many complex problems. with the existence of these problems, there arose a thought that provides an alternative means of exchange which facilitates buying and selling and can be accepted by society, namely money. the existence of money makes buying and selling transactions easier from the barter system. however, the increasing globalization of the world economy has resulted in the increasing need for speed, convenience and security of financial transactions. this makes paper money has many limitations in meeting human needs. bank indonesia as the payment system authority in indonesia divides two types of payment system instruments, namely cash and non-cash (mulyanto, 2015). cash payment instruments are in the form of paper money while non-cash payments use cards, checks, banknotes, debit notes, and electronic money. in this regard, it is important to note that payments using non-cash is favorable for public in making their transactions nowadays. the development of money from time to time shows the existence of an increasingly advanced civilization in science and technology. one of them is the emergence of the invention of cryptocurrency as an answer to the constraints faced by the current payment system that relies heavily on third party as a trusted payment product developer to manage digital transactions. cryptocurrency is the name given to a system that uses cryptography to securely transmit data and to process the exchange of digital tokens (mulyanto, 2015). at the end of 2008 there was a programmer who claimed to be called as satoshi nakamoto (pseudonym) to create a new digital currency named bitcoin (mulyanto, 2015). bitcoin’s fame has steadily accelerated since its introduction in early 2009, reaching a price of more than rp200 million per coin. the success filka catur windiastuti and fauzul hanif noor athief 154 of bitcoin was followed by the emergence of the cryptocurrency industry which now has more than 1.000 products sold in various cryptocurrency markets throughout the world (wijaya, 2018). those thousands of type of cryptocurrency come one after another. each of it tries to overcome the shortcoming found in bitcoin and any other cryptocurrency. based on the intense and wide usage of cryptocurrency, along with the shortcoming from every type of cryptocurrencies, a community in indonesia introduced new type of it called inacoin. this cryptocurrency is purely made by the hand of indonesian people which follows the system applied by bitcoin. inacoin crypto was founded by iwan kurniawan who has been working in the networking field and founder of an mlm company. he combined the concept of networking and cryptocurrency which was launched in july 2018. people in indonesia starts to pursue inacoin which price is still affordable compared to bitcoin which already reached million rupiah per coin. those who try to buy incation is in the hope that in the future inacoin prices will compete against bitcoin. therefore, one of the members’ goals is to buy inacoin when prices are low and resell it when the prices skyrocket and hit its peak. buying and selling in the view of al-qur’an, as-sunnah and ijma is permissible. in addition, all scholars agree on its permissibility. the sale and purchase of foreign exchange of any currencies is known as al-ṣarf contract in islam. all scholars fully agree on the permissibility of al-ṣarf as it has been practiced by people since the time of the prophet up until today without objections from anyone (isra, 2015). in definition, al-ṣarf is the sale of money to get money which is analogous to the principle of the gold and silver exchange which must be done in cash to avoid ribawi transactions as it is narrated from prophet in his hadith (al-mundziri, 2002). the most important function of money is as unit of account and medium of exchange. however, depending on what is being used as money, money can also function as a store of value (isra, 2015). to be able to function as money, it must fulfill several requirements. the purpose of the requirements is that once it journal of islamic economic laws-july, vol. 2, no. 2, 2019 155 is as considered money, it is acceptable by all levels of society and thus can be used as a medium of exchange by the owner. as mentioned in the purpose of the requirements, we can infere several criteria as the standard requirement (kasmir, 2002). these criteria include guarantees, common acceptability, stable value, easy storage, easy to carriage, not easily damaged, easily divided, and an elastic supply. sharia is the cornerstone of the islamic worldview which is used as a source of knowledge that provides the basis for the system and operation of islamic finance. it also serves as the guidance in facing countless change within society throughout the time (kasmir, 2002). the foundation or legal basis of islamic worldview sourced from the qur’an, al-hadith, ijma’, and qiyas. apart from it, it is also important to mention that rules and regulation diverse from every jurisdiction. thus in case of indonesia, the positive law also serves as the additional basis of the law (marzuki, 2017). regulation in indonesia regarding the use of cryptocurrency still faces many pros and cons. this is because this currency does not meet the elements and criteria of money in indonesia. bank indonesia has also issued a circular letter through its press media on february 16, 2014: “bitcoin and other virtual currencies are not legal currencies or payment instruments in indonesia. people are encouraged to be careful of bitcoin and other virtual currencies. all risks related to ownership / use of bitcoin are borne by the owner / user of bitcoin and other virtual currencies.” (bank indonesia press release no. 16/6/dkom). based on the background of the aforementioned problem, we are interested in examining this problem and analyzing it from an islamic perspective. therefore, the author conducted a research in a thesis entitled: inacoin cryptocurrency analysis: an islamic law perspective filka catur windiastuti and fauzul hanif noor athief 156 literature review research on money in the viewpoint of islam and positive law has indeed been done a lot. however, the research of the inacoin currency which was created by iwan kurniawan from indonesia and launched on july 2018 is still vacuum from any research. thus, no one has carried out research on what the inacoin currency is from islamic perspective. nevertheless, there are some studies that are relevant to the topic of our interest here. first, it is important to us to know that there are types of money circulated nowadays. this classification is based on the purpose of its use in accordance with the needs of various parties. the types of money evolve according to the the times whether the evolution occurs in its intrinsic value, nominal value or the function of money itself (kasmir, 2002). the first one is the commodity money which is seen as the oldest form of money. it was used during the barter system age (hasan, 2004). second is the fiat money which was created out of paper or metal with lower price so that this money can have higher value than its intrinsic value. the third is giral which is a form of bank’s money. it can only be used for transactions by check (demand deposit). however, not all people want to accept it because it is not perfectly liquid unless the first two money. fourth, we have near money which is almost perfectly liquid. thus, it is a type of money that must be disbursed or exchanged first before it can be used. the example of this type of money is atm cards, credit cards, deposits, and savings books (murni, 2006). fifth is the electronic or digital money which is circulated through digital transactions. usually, these transactions involve the use of computer networks (such as the internet and digital price storage systems). the last is virtual currency which is a digital money issued by parties other than monetary authority. this type of money is obtained by purchasing, transferring (reward), or mining (the process of producing a number of new virtual currencies, involving complicated mathematical processes). this digital money is issued or controlled by the developer of a community and is used and accepted by members of that virtual community (bank indonesia press release no. 20/4/dkom). journal of islamic economic laws-july, vol. 2, no. 2, 2019 157 since this research focuses only on the virtual currency, we will deliver the previous studies on that topic only. the discussion of any other type of money will not be included since it is outside the range of our study here. we have documented some of the studies on virtual currency that can be seen in the next paragraph. first is the research conducted by (mulyanto, 2015) entitled “utilization of cryptocurrency as the application of the rupiah in the digital form using bitcoin technology”. the type of research is qualitative research and narrative analysis methods with sources of data from various media publications. the results of the study stated that bitcoin cryptocurrency is a relatively new technology and needs further study. there is no standardization of payment system protocols in indonesia, making third parties (banks and non-banks) create their respective payment infrastructure. after conducting an electronic currency study in indonesia, the results of a comparison were made between electronic money technology that uses store value and product access with electronic money that uses bitcoin technology. several assessment criteria were obtained from the result. if bitcoin technology is implemented, it can be possible to combine computing resources (banks and nonbanks) to create a decentralized peer-to-peer network so that providers have a shared access data system. the impact for the community is enough to have one type of electronic money both in physical and digital form so that it can be recognized by various reading terminals from each service provider. there was also another study conducted by che ludin et al., (2014) which concluded that bitcoin has not been accepted as a legitimate currency from islamic perspective because its value is still unstable. using the maqasid shariah approach of maslahah and mafsadah, there is still no need for the use of bitcoin in malaysia. it is also found that there is no need for ḍaruriyyat, hājiyyat and taḥsiniyyat. it also still possesses high risk because of the potential to conduct illegal trading activities. malaysia is not yet willing to do bitcoin sale and purchase due to the the low level of people’s knowledge on bitcoin. besides it requires additional regulation certainty to ensure that every user gets guaranteed safety and thus the transaction can be watched over. filka catur windiastuti and fauzul hanif noor athief 158 another study is done by sholihah (2014) in a bachelor thesis entitled “overview of islamic law on bitcoin digital money with studies on dsn-mui and artabit companies”. in this thesis, the author uses qualitative-descriptive research method. it is said in the result of the thesis that bitcoin-based money exchange mechanism at arbit company is done by filling in the form on the website that continued by following the next instructions. in addition, in the review of fiqh muamalah through studies on dsn-mui, it was stated that bitcoin-based money exchange transactions cannot be said to be legitimate money exchange transactions in islam. apart from bitcoin has no legality from the government, it also does not fulfill the requirements as a currency in both conventional and economic economics. here, bitcoin is prone to fraud. methodology this study uses qualitative approach since this type of approach helps to produce in-depth descriptions of the behavior that can be observed in the inacoin group from a comprehensive and holistic perspective (sujarweni, 2014). since the main purpose of the discussion in this paper is the study of law, the author uses multi methods in the form of empirical normative islamic law model. the model in normative legal research is intended to be the foundation as starting basis for researcher’s framework of thinking and conducting the analysis (fajar nd and achmad, 2015). in addition, the empirical legal research is legal research taken from facts that exist in a society, legal entity or government agency. there are two types of data used in this study, namely primary and secondary. the source of primary data is obtained from the results of interviews with the inacoin community, data collection through www.indoco.io and www.indoco.co.id and data provided by the community. the secondary data in this study is obtained from literature studies, journals, papers, media in the form of writings, videos and sound recordings related to inacoin. interview techniques are deliberately used for data collection because the technique helps to find out things from respondents in journal of islamic economic laws-july, vol. 2, no. 2, 2019 159 more in-depth manner while having small number of respondents (sugiyono, 2010). the form of interview conducted is an unstructured interview addressed to the inacoin community where the questions arevery open and uncontrolled. this interview aims to find out updated information about inacoin.. in addition, researchers also used observation techniques in the form of non-participatory observations where researchers were not involved and stood only as independent observers (sugiyono, 2010). therefore, the researcher only became an observer of the inacoin community in the whatsapp group inacoin team. the authors created inacoin and indoco exchanger accounts as well to help understand more about how inacoin works. during the observation for the research, authors tried to be natural so that not seen as doing research. the target of this observation is the inacoin trading website www.indoco.io and www.indoco.co.id. furthermore, the analysis will be carried out using deductive logic that departs from the general facts of inacoin and the legal theory that relates to it which in the end providing the conclusions obtained (yusuf, 2014). the presentation of the results of the analysis will be carried out using a descriptive data model. result and finding cryptocurrency is a decentralized digital currency and is managed by a peer-to-peer technology network. the implementation depends on the principles of cryptography to validate transactions and the generation of the currency itself. in the other word, it can be called as a form of currency based on calculations or mathematics. unlike paper currency or printed metal coins, cryptocurrency is produced by solving mathematical problems based on cryptography. the blockchain is a transaction recording technology integrated with modern technology, which has a unique, irreversible (eternal) code that revolutionizes the workings of the internet, banking and other things (inacoin, 2018). blockchain is like a big book where all transactions are transparent and can be checked by everyone to ensure its credibility. filka catur windiastuti and fauzul hanif noor athief 160 inacoin is a new breakthrough in the world of cryptocurrency in indonesia as a work of the indonesian people in the field of financial technology (fintech) using blockchain technology. it is, as said, developed for the purpose of advancing the national creative economy, especially the msme sector to create new entrepreneurs in all fields by utilizing the latest technology like cryptocurrency and blockchain. inacoin has a vision to develop creative economy and to bring indonesian cryptocurrency into the future by utilizing blockchain technology. inacoin also has a mission for being a very safe, decentralized digital asset and cannot be influenced by anyone or other countries. inacoin was founded by iwan kurniawan, an indonesian nationality who since 1990 has been working in the field of netweok and society. he also established mlm companies in indonesia. by following the development of cryptocurrency, he combined the concept of networking and cryptocurrency to present inacoin and the cryptocurrency exchanger. inacoin introduced in april 2018 and afterward in july 2018 inacoin and indoco exchangers were inaugurated. the grand launching of inacoin was held on march 31, 2019 and in accordance with their launding of ina academy. inacoin only has 18,000,000 coins in supply. 5 coins is given for free for the first 60,000 registrants. the remaining 17,700,000 are for stacking, networking and mining programs. inacoin can be mined for the next 200 years. table 1. inacoin specification name inacoin transaction code ina algoritm x11 blockchain pow/pos total supply 18,000,000 stacking dan networking 6,300,000 free coin ina 300,000 mining 11,400,000 source: self-documentation journal of islamic economic laws-july, vol. 2, no. 2, 2019 161 main concept of inacoin 1. networking networking is a referral network built by an upline. referral itself means anyone who is invited and agreed to join the inacoin network based on a reference called upline. upon a deposit of a referral, the upline as network creator will get 10-30% of the deposit amount the referrals do provided the user who registers uses an upline referral link must participate in the program provided (inacoin, 2018). however, after the stacking program is complete, this 10-30% bonus is no longer valid. currently networking bonus is 6-15% of the amount of deposits that referrals do. figure 1: project networking source: inacoin (2018) filka catur windiastuti and fauzul hanif noor athief 162 2. stacking stacking is storing and holding coins in a virtual wallet, so that an active member can get up to 120% annual return depending on type of the coin (inacoin, 2018). figure 2: stacking project management source: inacoin (2018) figure 3: project stacking source: inacoin (2018) journal of islamic economic laws-july, vol. 2, no. 2, 2019 163 3. mining mining is a process of producing new coin of inacoin or any cryptocurrency through operations from combining special software, mining equipment, and pcs. the term miining can also be defined as an attempt to break new blocks by solving algorithms. in this way, a new coin will be obtained and ready to be transacted. of course this requires huge costs and enormous time during coin mining process (inacoin, 2018). mining in inacoin is done by companies using their mining farm or could be done privately by individual if they have the mining tools. since the mining tools and mining processes requires a lot of costs, the company provides mining programs with inacoin orders on the www.inacoin.io account. the minimum order to join the mining program is 1 lot (20 inacoin) and it applies to a maximum of 50 lot = 1000 inacoin.1 1 interview with andri putra, a member of inacoin community filka catur windiastuti and fauzul hanif noor athief 164 figure 4: project mining source: inacoin (2018) 4. trading trading is the activity of exchanging goods or services or both based on an agreement between two parties (seller and buyer) rather than coercion. crypto trading is a digital coin trading. trading always has two components, namely profit and loss (inacoin, 2018). trade activity here requires a service provider or exchanger. exchanger is a provider of crypto trading services or meeting place for crypto buyers and sellers where the law of supply and demand is applied. the four points mentioned above are the basic concept of how inacoin network works. apart from those four, basically the what excites most for the user of inacoin is the trading acitvity. journal of islamic economic laws-july, vol. 2, no. 2, 2019 165 trading activity in digital world is not much different from buying and selling that exists in the real world which involves presence of sellers, buyers, objects traded and form of the contract. however, what differs between those two world is means and model of transaction. in the real world the transaction model used is face to face between sellers and buyers. thus, it is different from transaction model that exists in cyberspace where most people make a transaction such as buying and selling without knowing the condition or existence of the object being traded. based on observations in the inacoin community whatsapp group, thing that often occur in the inacoin trade is the use of fluctuations in inacoin values which is then exploited as the reason behind the trading. the fluctuation actually attracts people to do more speculation.. the price of one inacoin at the commencement of the trading platform in july 2018 was only rp. 15,000. on march 2019 the price already became rp.463,000. this opens a great opportunity for users to benefit from inacoin trading. table 2. price record of inacoin july 2018 – march 2019 month price 24 july 2018 rp.15.000 august 2018 rp. 97.000 september 2018 rp. 131.000 october 2018 rp. 176.000 november 2018 rp. 349.000 december 2018 rp. 368.000 january 2019 rp. 394.000 february 2019 rp. 408.612 march 2019 rp. 463.000 source: indoco.io.id if someone buys inacoin in july when the price was still rp. 15,000 with a minimum purchase of 10 inacoin as a condition of inacoin, then rp. 15,000 x 10 is rp. 150,000. then someone resells inacoin in march 2019 when the price per inacoin is rp. 463,000 means that the person has made a profit of rp. 4,480,000 in approximately 8 months. this advantage can be gained by only filka catur windiastuti and fauzul hanif noor athief 166 using trading activity. however, if someone takes part in other program provided such as networking, stacking or mining, then that person absolutely will get more benefits. according to an explanation from the inacoin community activist shiwa hadi on april 4, 2019 through whatsapp, the grand launching of inawallet was held on march 31, 2019. it is the all-in-one application which will have several menus which are: 1. inacoin pawnshop. this app is used when inacoin stakeholders suddenly need money. in this case, there is no need to sell the coin. they might pawn the coin they own through inawallet so that when the coin experiences an increase in price it does not suffer a loss. the disbursement of the pawn will range from 70% to 80% of total inacoin assets that person own. minimum credit is 5 million with unlimited maximum. 2. ppob (payment point online bank). this app is used for online payments such as payment of electricity bill, water bill, motorbike loans, and other payments. 3. payment gateway. all stakeholders of inacoin can make payments through inawallet to merchants who work with inacoin. however, this program still cannot be used, because it still waits regulation from the ojk (financial services authority). shiwa hadi also stated that inacoin cryptocurrency has been recognized by bappepti (commodity futures trading regulatory agency). this was proven by the presence of ministry of trade act no. 99/2018 which states that all types of crypto assets are legally traded in indonesia as commodities that can be used as futures contract subjects and can be traded on the future exchange. analysis of inacoin existence as virtual currency in meeting the needs or carrying out economic activities, human beings need tools as payments called money. the fulfillment of the need to use the money makes money have a function. however, the money does not provide a direct function. journal of islamic economic laws-july, vol. 2, no. 2, 2019 167 in the other word, when money is used to buy goods, it is the item purchased that will provide utility, not the money itself (hasan, 2004). in islamic economics the most important function of money is to provide usage as a unit of account and medium of exchange. however, depending on what is being used as money, money can also function as a store of value (isra, 2015). to make money can be used as its function and accepted by all levels of society, it is necessary to know some of the requirements and criteria that must be fulfilled for a thing to be regarded as money. first: the availability of guarantee. it is important to note that in nowadays transacation, every money issued by certain country must be backed and guaranteed by that country as its issuer. thus, the guarantee is in the form of back up regulation to help ensuring its acceptability among society. however, we find no regulation regarding inacoin currently. inacoin members only rely on government regulation no. 99 of 2018 concerning general policy for the implementation of crypto asset futures trading. however, this regulation does not mention the meaning of crypto assets nor the cryptocurrency word within it. on the other hand, on january 13, 2018 bank indonesia conducted a question and answer session in its press release about the notion of virtual currency. in that press release, it mentioned that virtual currency is digital money issued by parties other than monetary authority obtained by means of purchases, transfers, or mining (i.e. a process of generating new virtual currencies through the means of complicated mathematical processes). this digital money is issued / controlled by the developer community and is used and accepted by members of the virtual community (bank indonesia press release no. 20/4/dkom). from this press release, we can understand that inacoin falls under this notion. in addition, bank indonesia continued its statement to the public, which was conveyed through its press release on february 16, 2014. this statement also has been delivered many times by bi to the public. bank indonesia read: filka catur windiastuti and fauzul hanif noor athief 168 “pertaining to law no.7 of 2011 on currencies and law no. 23 1999 which was later amended several times, most recently by law no.6 of 2009, bitcoin and other virtual currencies are not legal currencies or payment instruments in indonesia. people are encouraged to be careful of bitcoin and other virtual currencies. all risks related to ownership / use of bitcoin are borne by the owner / user of bitcoin and other virtual currencies.” (bank indonesia press release no. 16/6/dkom). the press release underlines two things. first, bitcoin and other virtual currencies are not considered as legitimate money in indonesia. second, the risk of cryptocurrency circulation is borne by each individual. however, it is not clearly mentioned in the statement about prohibition of virtual currency and its punishment as consequences that will be borne by cryptocurrency users. meanwhile, it is stated in article 33 no. 7 of 2011: “as referred to in article 21 paragraph (1) shall be punished with imprisonment at most, a 1 (one) year and a fine of a maximum of rp. 200,000,000.00 (two hundred million rupiahs)”. in the meantime, ojk in its press release stated that the application of digital currencies still needs further study. as we can see here, there is disagreement in this case between government institutions which are bappebti, bi and the ojk. those institutions have not synchronized cerain legal basis for the virtual currency to the public. however, with regard to this cryptocurrency, it is refers more to the policies introduced by bi and ojk since these two body has more authority for the monetary system in indonesia. second: publicly acceptable. it means that the money must be generally accepted by the public so that the money might carry out its functions. inacoin is still running nowaday and is used by some people until they become the member of journal of islamic economic laws-july, vol. 2, no. 2, 2019 169 inacoin users. regarding this matter, there is a maxim says what many people usually practice) مااستعمله الناس حجة يجب العمل بها is hujjah which must be practiced). however, it must be noticed that some people cannot accept inacoin. meanwhile, this rule only applies if all countries agree that inacoin can be used as a currency. third: stable value. money must have stable and determined value which allows only small fluctuation. in reality, inacoin prices experience price changes from time to time which expose its user into high risk of loss. in the same time, pt indoco solusi pratama (as the company issuing inacoin) is not responsible for changes in fluctuations in inacoin exchange rate. fourth: money must be easily stored in various places including in small space yet having large quantities. this means that money must have flexibility. regarding this criterion, any amount of inacoin is easily stored because it is only a digital form that can be stored via e-wallet on a pc, smartphone or tablet. fifth: easy to carry. inacoin is indeed has no physical form. however, since inacoin is stored in e-wallet, inacoin can be accessed anywhere and anytime as long as it is connected with internet access via pc, smartphone or tablet. sixth: not easily damaged. when we try to compare between prevailing rupiah currency with inacoin virtual currency, inacoin seems to be more durable. however, both types of currency can be damaged. rupiah money can be damaged by tearing while inacoin can suffer damages from lossing due to viruses, spam, or piracy. seventh: easy to share. it means that money must be easily divided into smaller unit. inacoin exists in the digital form which amount is difficult to break down into smaller unit. eight: supply must be elastic. the amount of available money must be sufficient for current conditions with no excess or shortage. meanwhile, the supply of inacoin is only 18 million. on the other hand, the number of inacoin members has increased. with the limited supply, inacoin members and its users will face difficulty in using this cryptocurrency. filka catur windiastuti and fauzul hanif noor athief 170 ninth: the concept of money in islamic economics is different from the concept of money in conventional economics. in islamic economics, the concept of money strongly states that money is money, money is not capital. conversely, the concept of money in a conventional economy is often interpreted falsely. sometimes, money is considered as money and sometimes it is also considered as capital (karim, 2007). here, inacoin can be used as money for payments as well as can be stored to serve as regular commodity. according to al-ghazali in his book ihya ulumuddin, money functions as a medium of exchange, but money is not desired for the money itself. in short, al-ghazali points out that money is created to facilitate exchange and establish the fair value of the exchange while emphasizing that money is not a commodity (hasan, 2004). in reality, inacoin members make inacoin as a digital commodity or asset. from the analysis described above, the researcher draws the conclusion that the existence of inacoin cannot be called a currency, because it does not fulfill most of the terms or criteria for a thing to be considered as money. the function of inacoin is also not in accordance with the function of money in the islamic economy. this is because inacoin serves as the commodity traded in most of the time, not as a medium of exchange. inacoin transaction from islamic perspective the development of science and technology from time to time shows the existence of an increasingly advanced civilization. inacoin is one part of this development. inacoin uses cryptography where its value refers to the power of supply and demand. anybody who wants to own and use inacoin must have a virtual wallet where it can function to receive or send inacoin to other people as well as any financial transaction. inacoin’s sell and purchase services is held by indoco exchager at the site address www.indoco.co.id. if we try to see the trading scheme within inacoin, we can understand that it is similar to al-ṣarf transaction. technically, bay’ al-ṣarf is the sale of money for money. this transaction is permissible in islam as long as it fulfills the required pillars and journal of islamic economic laws-july, vol. 2, no. 2, 2019 171 conditions mentioned in qur’an, hadith, as well as ijma the basis of its permissibilty lays on surah an-nisa verse 29 read: “o you who have believed, do not consume one another’s wealth unjustly but only [in lawful] business by mutual consent. and do not kill yourselves [or one another]. indeed, allah is to you ever merciful” there is also another verse in qur’an chapter al-baqarah verse 275 related to this matter which read: “...but allah has permitted trade and has forbidden interest. so whoever has received an admonition from his lord and desists may have what is past, and his affair rests with allah . but whoever returns to [dealing in interest or usury] those are the companions of the fire; they will abide eternally therein.” apart from it, there are some fatwa that has been produced regarding the permissibility of al-ṣarf in the form of digity currency. the fatwa are as below: fatwa no. 219328: “electronic money is the money circulated in the digital world. this type of money even though has no similar shape with the rest of money, it has similarity in term of its substance. thus, such electronic money takes the ruling of the currency in which its value is stored.2 fatwa syabakah islamiyah no. 191641 “digital currency or electronic money is a currency in electronic form other than paper or metal. therefore, buying it using different currency is considered as al-ṣarf.” 2 https://islamqa.info/ar/answers/ ما-حكم-النقود-االلكترونية accessed on 23 february 2019. filka catur windiastuti and fauzul hanif noor athief 172 fatwa syabakah islamiyah nomor 251170 “whoever posesses any of that electronic money through a lawful means, then there is no harm for that person to use it in permissible activities.” the aforementioned two verses are used as a guideline by muslims in doing al-ṣarf transactions. as it is mentioned in the verses, allah justifies trading on the basis of mutual consent while allah forbids usury and prohibits taking property from others in a vanity way. besides that, from three fatwa mentioned earlier, we can conclude that the sale and purchase of digital currency has same ruling with al-ṣarf as long as it is used in permissible way. furthermore, to find out whether or not inacoin is valid, it is necessary to refer to pillars, terms and ruling on al-ṣarf. there are several pillars of al-ṣarf which must be fulfilled. if one of these pillars is not met, the contract becomes fāsid or void. the pillars include: 1. parties involved in contract: the buyer and seller (ascarya, 2012). in inacoin, the sellers are member who sells inacoin in exchange of rupiah currency. meanwhile, the buyers are member of inacoin community who purchases inacoin with rupiah. 2. subject matter: the object intended to get exchanged and the exchange price (ascarya, 2012). in inacoin the object is the inacoin itself while the exchange price is money in form of rupiah currency. in terms of object which is traded, inacoin can be handed over from the seller to the buyer in non physical form. however, if any of the parties requested its physical form, then they will find nothing. 3. ṣighah: the offer and acceptance. offer means statement delivered at the initial of contract time. acceptance (qabul) is an express of agreement for receiving the offer from another party in a contract (ascarya, 2012). in this inacoin sale and purchase transaction, the ṣighah delivered through the journal of islamic economic laws-july, vol. 2, no. 2, 2019 173 online contract is in principle has same character with other agreement in general. since it can only be done within an online system, the contracting parties cannot communicate in one and same place (majlis). however, the parties can directly communicate through the means of electronic devices connected to the internet. in this transaction, the identity of the buyer is unknown. apart from the pillars, there are conditions of al-ṣarf that must be fulfilled. the conditions are as follow: 1. each party must possess the ownership before leaving apart. this is to avoid riba nasi’ah (deferment type of riba). 2. transactions must be done under equal value for some types of commodities. this is to avoid the change of contract substance towards kāli` bil kāli` transaction (sale and purchase of debt with another debt) which leads into riba fadhl. 3. free from khiyar al-shart. this is to prevent actual procurement or completion of ownership transfer (isra, 2015). 4. non deferred payment (must be done in cash). based from the explanation above, inacoin can fulfill the pillars and the terms of al-ṣarf. however, there is another requirement that must be fulfilled emerges from majority opinion of contemporary moslem scholars. this opinion can be found in fatwa of the national sharia council no. 28 / dsn-mui / iii / 2002 concerning sale and purchase of currency (al-ṣarf). this fatwa contains provisions the exchange is not meant for speculation purpose. in addition, sale and purchase for different types of currencies must be done under the prevailing exchange rate in the time the transaction is done. currently, trading transactions that occur in inacoin are more often used for speculation by the mean of purchasing inacoin in order to take advantage of price fluctuations through commonly understood method which is buy at low prices and sell at high filka catur windiastuti and fauzul hanif noor athief 174 prices. in addition, inacoin is also not only considered as a virtual currency, but is also used as a commodity that can be invested while the underlying investment is not clear. maqāṣid shariah from the issuance of money is to help easing our life. to fulfill that, money must have legal force and existence. unfortunately, since the value of inacoin is not guaranteed and even the government does not guarantee its existence, then this cryptocurrency will be prone to fraud. on the other hand, inacoin is only stored on computers or smartphones, where it is prone to damage due to viruses, and theft by hackers. unstable price fluctuations are also feared as a means of money game. therefore, the existence of inacoin is in the contrary with maqāṣid shariah since there is a fear that this inacoin will collapse due to lack of maintenance for its system. in this case, if we try to analyze it through legal maxim of fiqh which says that harmful thing must be removed, then inacoin has that harmful characteristic which renders its existence in a whole must be avoided. this fiqh rule is based on the hadith narrated by ibnu majah read, “no harm and causing harm is allowed.” majority of moslem scholars agrees that the wisdom of prescribing laws to humans is to achieve benefits and reject harm. imam ghazali asserted that the sentence of prescription of law is not to achieve human desire and interests, but on the contrary is to maintain the five sharia goals (kulliyāt al-khamsah) which is to maintain religion, soul, mind, wealth and offspring (che ludin, 2014). the development of science and human needs becomes increasingly complex which makes virtual currency can be used as another alternative of payment along with the guideline provided and explained in number of fatwa above. however, the rule of the fatwa can apply in areas that have used virtual currency legally and have been recognized by the country concerned. whereas at present, the fatwa cannot be applied in indonesia because it has no legitimacy from the government. after going through the analysis, the authors conclude that transaction that occurs in inacoin trading are legal but unlawful. this is because inacoin has fulfilled the pillars and requirements journal of islamic economic laws-july, vol. 2, no. 2, 2019 175 of the al-ṣarf but violates some elements that are prohibited by islam such as the existence of gharar, speculation and fear of the occurrence of harm to the user. conclusion and suggestion conclusions 1. based on our analysis, inacoin cannot be called as a currency because it does not meet the requirements or criteria of money. in addition to that, the function of inacoin is also not in accordance with the function of money in islam because inacoin is more dominant as a commodity traded, not as a medium of exchange. besides, we found no law that explicitly allows the circulation of inacoin. 2. transactions that occur in the sale and purchase of inacoin are legal but unlawful. this is because inacoin has fulfilled the pillars and conditions of the al-ṣarf but violates some elements that are prohibited by islam such as the existence of gharar, speculation and fear of the occurrence of harm to the user. suggestions 1. regulations regarding virtual currency in indonesia are still not detailed and firm. bank indonesia only said that the virtual currency in indonesia is not valid. however, there is no strict regulation regarding punishment to follow up the statement that using a virtual currency is really in violation of law. for this reason, it is expected that bank indonesia can make regulations regarding the use of virtual currency in indonesia in more detail. in addition to that, there is a need for synchronization between bi, ojk, and bappebti so that the community will not be confused about which regulation prevails as to avoid the room for bias regulation. 2. for people who recently get to know about inacoin and want to use inacoin as a tool for doing business, it is expected that they must be careful. this is because there is no guarantee or protection for the loss of inacoin. when a person or company that owns inacoin is stored in a virtual wallet on a filka catur windiastuti and fauzul hanif noor athief 176 pc or smartphone, then a virus or hack can cause inacoin to disappear. 3. for the next researcher, the author realizes that there are still many limitations in this study. thus, the authors suggest next researcher to re-examine the conclusion provided when the circumstances change along with the development of inacoin. in addition, the authors also suggest next researcher to examine whether the vitual currency can be said to be equivalent if exchanged for fiat currencies. bibliography al-mundziri. (2002). mukhtasar shahih muslim, diterjemahkan oleh syinqithy djamaluddin dan mochtar zoerni. ringkasan shahih muslim. bandung: mizan. ascarya. 2012. akad dan produk bank syariah. jakarta: pt rajagrafindo persada. che ludin, che mohd fakhri dkk. t.th (2014).“bitcoin: analisis bitcoin melalui muamalat dan maslahat.” ijtihad dalam isu-isu sains dan pemikiran saintifik. malaysia: universiti malaya. fajar nd, m & achmad, y. (2015). dualisme penelitian hukum: normatif & empiris. yogyakarta: pustaka pelajar. hasan, a. (2004). al-auraq al-naqdiyah fi al-iqtishad al-islamy, diterjemahkan oleh saifurrahman barito dan zulfakar ali. 2005. mata uang islami: telaah komprehensif sistem keuangan islami. jakarta: pt raja grafindo. inacoin. (2018). “inacoin white paper”. jakarta: pt. indoco sosusi pratama. isra. (2015). sistem keuangan islam prinsip & operasi. jakarta : pt raja grafindo persada. karim, a. a. (2007). ekonomi makro islam. jakarta: pt rajagrafindo persada. kasmir. 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(2014). metode penelitian kuantitatif, kualitatif, dan penelitian gabungan. jakarta: prenadamedia group. journal of islamic economic laws vol. 2, no. 1 january 2019: 120-149 120 the impact of companies’ internal factors on the performance of their stock returns erifa aldiena1 and muhammad hanif al hakim2 1faculty of islamic studies, universitas muhammadiyah surakarta e-mail: mha961@ums.ac.id 2faculty of islamic studies, universitas muhammadiyah surakarta e-mail: erifaldiena@gmail.com abstract it is commonly known that in the capital market, not all stocks of companies that have a good profile will provide good returns to investors. therefore, an in-depth analysis of the companies’ overall health is needed. this study aims to discuss the impact of companies’ internal factors on the performance of their stock returns. the companies meant here are those listed in the jakarta islamic index (jii). the tool by which the data is analysed is panel data which is a combination of time series data and cross section. by employing companies’data of year 2014-2016, the study shows that return on assets (roa), net profit margin (npm), debt to equity ratio (der) and price to book value (pbv) simultaneously had a significant effect on the formation of stock returns of companies listed in the jii. likewise, those four variables namely; roa, npm, der and pbv partially have a significant effect on the formation of stock returns of companies listed in the jii. keywords: roa, npm, der, pbv, jii. erifa aldiena and muhammad hanif al hakim 121 introduction investment is one of the muamalah activities that is highly recommended. it is because by investing, property becomes more productive and also benefits others. another reason why it is so recommended is because investment is also an active form of islamic economics. islam recommends that the existing resources be not only stored, but produced so that they can provide benefits for the people (akbar and herianingrum, 2015). investments can be made by various parties, including: creditors, bankers, investors, and the government. investment is to allocate a number of funds at the present time in the intention that the funds will be safe, or increase in value, or be making a return in the future. there are various ways by which the capital owners can invest. one of them is by investing in the capital market. in this case, the capital market is defined as a place where activities such as, public offerings and securities trading take place. it is also a place where public companies have their shares issued, as well as where institutions and professions related to securities exist (fitri and herlambang, 2016). the capital market has an important role to improve the efficiency of the financial system and is one of the financial intermediary institutions that is vital in the modern economy of a country. the capital market has become a mean for developing a country’s economy because the capital market can be an alternative source of funds for companies. in line with the development of indonesia capital market in general, the shariabased capital market industry is believed to be one of the pillars of the strength of the indonesian capital market industry. the rise of islamic economics in indonesia today is an interesting and exciting phenomenon for the indonesian people, the majority journal of islamic economic laws-january, vol. 2, no. 1, 2019 122 of whom are muslims, while those who are non-islamic are minorities. in general, islamic capital markets with conventional capital markets is not much different. however, conceptually sharia capital market that trades shares must meet sharia criteria and is free from the elements of usury. stock transactions is carried out by avoiding various speculative practices. this group of islamic stock is listed in the jii which consists of 30 companies whose business activities are in line with sharia. the companies listed in the jii criteria are those whose operations do not contain elements of usury, as well as the capital of the company is not predominantly in form of debt. so, we can say that the shares listed in this jii are shares whose management and management are fairly transparent (aryanti, mawardi and andesta, 2016). in the capital market, not all stocks of companies that have a good profile will provide good returns to investors so that a more in-depth analysis of the company is needed. a company may experience fluctuating returns at any time due to various factors in microeconomy and macroeconomy. fluctuations of stock return can be seen in companies that experience fluctuations in the value of stock returns from year to year (aryanti, mawardi and andesta, 2016). the ratio between investment income over several periods and the amount of funds invested is called the return level. in general, investors expect high profits with the lowest possible risk, so investors try to determine the optimal level of return on investment returns by determining the concept of adequate investment. this concept is important because the expected level of profit can be measured. based on these problems, the author arises to research about the impact of companies’ internal factors on the performance of their stock returns. erifa aldiena and muhammad hanif al hakim 123 literature review previous studies i will refer to previous literature as a reference in conducting further research. there are no previous studies exactly the same to what researchers will research. however, some previous studies can be used as reference sources and learning for me in developing follow-up research. aryanti, mawardi and andesta (2016) in their research entitled pengaruh roa, roe, npm dan cr terhadap return saham pada perusahaan yang terdaftar di jakarta islamic index (jii) revealed that roe and cr partially have a significantly negative effect on stock returns. their research also show that roa has a positive and insignificant effect on stock returns, while npm has no significant effect on stock returns. simultaneously, roa, roe, npm and cr affect stock returns. pantawis, rachmansyah and ermasari (2016) in their research entitled analisis pengaruh roa, der, pbv terhadap return pada perusahaan sektor makanan dan minuman yang terdaftar di bei 2012 – 2014 reported that roa does not significantly influence stock returns, while der and pbv have a significant effect on stock returns. fitri and herlambang (2016) in their research entitled pengaruh rasio profitabilitas, rasio solvabilitas, dan rasio likuiditas terhadap return saham perusahaan properti dan real estate yang terdaftar dalam indeks saham syariah indonesia (issi) periode 2011 – 2014 revealed that roa, der and cr simultaneously have no significant effect on stock returns. while partially roa has a positive and significant effect on stock returns, der has a negative and insignificant effect on stock journal of islamic economic laws-january, vol. 2, no. 1, 2019 124 returns, and cr has a positive and insignificant effect on stock returns. akbar and herianingrum (2015) in their study entitled pengaruh price earning ratio (per), price book value (pbv) dan debt to equity ratio (der) terhadap return saham (studi terhadap perusahaan properti dan real estate yang listing di indeks saham syariah indonesia) reported that partially per has a significant negative influence on changes in stock returns; that pbv has a significant positive effect on changes in stock returns; that der has a non-significant negative effect on changes in stock returns. however, the per, pbv and der variables simultaneously are proved to have a significant effect on stock returns. abdullah and merdekawati (2015) in their research entitled pengaruh return on assets (roa), return on equity (roe), current ratio (cr) dan debt to equity ratio (der) terhadap return saham pada perusahaan manufaktur yang terdaftar di bursa efek indonesia periode 2009-2011 reported that partially roa, roe, cr, der have no effect on stock returns. however, independent variables simultaneously do not affect stock returns. investment investment is in essence to put a number of funds at this time in the hope of obtaining profits in the future. generally, investments are divided into two, namely investment in financial assets and investment in real assets. investments in financial assets are carried out in the money market, for example in the form of certificates, deposits, commercial papers, money market, securities and others. investment can also be done in the capital erifa aldiena and muhammad hanif al hakim 125 market, for example in the form of stocks, bonds, warrants, options and others (arisandi, 2014). in general, investment means to delay current consumption for consumption in the future, in the sense that investment is placing capital or funds in an asset that is expected to yield results or to increase its value in the future. from here, investment means to sacrifice current consumption to get better or greater opportunities in the future (rivai, et al. 2010). as for investment objectives, kamaruddin ahmad suggested that someone will invest with some goals in his mind (burhanuddin, 2008): firstly, to get a more decent life in the future. a wise person will think how to improve the standard of living from time to time, or at least how to try maintaining the current level of income so as not to decrease in the future. secondly, to reduce inflationary pressures. by investing in the selected companies or other objects, one can protect his wealth in order for it not to decrease in value due to inflation. thirdly, an encouragement to save taxes. there are some countries which set up many policies to encourage the growth of investment in the community through tax facilities. it is dedicated to people who invest in certain business fields. sharia investment islamic law or sharia is a rule of living a good and perfect life, by nurturing relationships between humans and nature, all of which are carried out within the framework of establishing good relations with god. thus, faith and charity are the core of sharia, including public relations through commerce and investment. islamic investment is an activity to develop money through the use of various resources with the motivation to gain profits as journal of islamic economic laws-january, vol. 2, no. 1, 2019 126 long as it is in line with islamic principles (rivai, et al. 2010). according to burhanuddin, sharia investment is to invest or to place capital in a place that is expected to bring halal benefits in the future (burhanuddin, 2008). capital market the capital market is a market of various long-term financial instruments (or securities) that can be traded. the finansial instrument take a form of money and capital, and it can be issued either by the government, public authorities or private companies (umam, 2013). the capital market is also an alternative source of funding for companies . it is also an investment tool for investors. through capital market, the company can get funded by issuing the securities, either in the form of equity or debt securities. on the other hand, investors can also invest in the capital market by buying these securities (umam, 2013). the capital market plays an important role in a country’s economy because it creates facilities for industry or investor needs in meeting capital demand and supply. the capital market has a very large role for the economy of a country because the capital market carries out two functions at once, namely the economic function and financial function. it is said to have an economic function because the capital market provides facilities that bring together two interests, namely those who have excess funds (investors) and those who need funds (issuers). through the capital market, those who have excess funds can invest these funds in the hope of obtaining a return, while the issuer (in this case the company) can use the funds for investment purposes without having to wait for the allocation of gain from the company’s operations. it is said erifa aldiena and muhammad hanif al hakim 127 to have a financial function because the capital market provides the possibility and opportunity to get a return for the owner of the fund, according to the characteristics of the selected investment (umam, 2013). definition of capital market according to the law of the republic of indonesia no. 8 of 1995 is an activity concerned with public offerings and securities trading, public companies involved in issuing the securities, as well as institutions and professions related to these securities. the capital market acts as a liaison between investors and companies or government institutions through long-term financial instrument trading (umam, 2013). according to warkum sumitro, the capital market is one of the means to conduct investment activities. the capital market is the same as the capital market in general, which is the meeting place between sellers and buyers with the object being traded, the company’s rights and ownership, as well as the company’s debt statement (umam, 2013). islamic capital market capital market activities carried out with sharia principles can be called sharia capital markets. what is meant by sharia principles in the capital market is the principles of islamic law in activities in the capital market sector based on the fatwa of the national sharia council of the indonesian ulama council (dsn-mui), either the dsn-mui fatwa stipulated in bapepam and lk regulations or dsn fatwas -mui which was issued before the enactment of this regulation (decree of the chairman of bapepam number: kep-130 / bl / 2006 concerning sharia securities issuance), as long as the fatwa is not contradictory to this regulation and or other bapepam and lk regulations based journal of islamic economic laws-january, vol. 2, no. 1, 2019 128 on dsn-mui fatwa (burhanuddin, 2008). activities in the capital market can be categorized as economic activities which are included in muamalah activities, namely an activity that regulates commercial relations (umam, 2013) as in qs. an-nisa ‘: 29. according to the islamic jurisprudence, the law of muamalah activity is mubah (permissible), unless there is a clear argument that prohibits it “basically, all forms of muamalah may be carried out, unless there is a argument that forbids it” (umam, 2013). transactions that are prohibited according to the fatwa of the national sharia board no: 40 / dsn-mui / x / 2003, are those that contains elements of dharar, gharar, riba, maysir, risywah, immoral, and injustice. therefore, the transaction must be carried out according to the precautionary principle, and manipulation as well as speculation must be avoided. several propositions that are used as the basis for determining the contract in capital market activities that are in accordance with sharia according to the dsn-mui fatwa are qs. al-ma’idah: 90, qs. al-baqarah: 275, as well as the hadith of the prophet below: نـََهى َرُسوُل اللِّ صلَّى الّل عليِه وسلََّم عن بيِع الَغَرِر )رواه البيهقي عن ابن عمر( “the messenger of allāh prohibited the sale and purchase (containing gharar).” (narrated by al-bayhaqiy from ibn ‘umar). the transaction that contain elements of dharar, gharar, riba, maysir, risywah, immorality, and tyranny include: to make false offers (najsy); to make sales of goods (sharia securities) erifa aldiena and muhammad hanif al hakim 129 that have not been owned (short selling / bay’u al-ma’dum); to use insider information to gain profits on prohibited transactions (insider trading); to generate misleading information; to conduct transactions on sharia securities with interest-based loan facilities for the obligation to settle the purchase of the sharia securities (margin trading); to make a purchase or collection of a sharia securities to cause changes in the price of a sharia securities, with the aim of influencing the other party (ikhtikar / hoarding); and other transactions containing the above elements (dsn-mui, 2014). the stock stocks are certificates that show proof of ownership of a company, and by which shareholders have claim rights over company income and assets. the price of a stock is strongly influenced by the law of demand and supply. the price of a stock will tend to rise if a stock experiences excess demand and tends to fall if there is an excess supply (umam, 2013). the term stock can be interpreted as a certificate of equity participation from a person or legal entity to a company. stocks are written evidence for investors of ownership of a company that has publicly owned. through the purchase of shares in a certain amount, the shareholders have the rights and obligations to share profit and loss with the entrepreneurs, to attend the general meeting of shareholders (gms), and even to take ownership of the company (burhanuddin, 2008). stock is one of the most dominant securities instruments traded in the capital market. to issue certain amount of shares is an option for the company management to obtain funding sources. for entrepreneurs, the existence of funding sources can journal of islamic economic laws-january, vol. 2, no. 1, 2019 130 serve as capital to establish a company and development. as for investors, stocks are an attractive investment instrument because their existence is considered promising certain benefits. these benefits can usually be obtained from the spread between the purchase price and the sale of shares (capital gain) or through the distribution of profits (dividends) from the results of operations carried out by the company in a certain period. sharia stock sharia stocks are shares of companies (issuers) which in their operations are in accordance with the principles of islamic law (aryanti, mawardi and andesta, 2016). in islam, the stock is essentially a modification of the joint venture system of capital and wealth, which is known as syirkah in the literature of islamic jurisprudence. the definition of syirkah is a contract of cooperation between two parties or more to run a particular business, with profits divided by agreement, while the risk of loss will be borne jointly according to the contribution given (burhanuddin, 2008). basically there is no much difference between islamic stocks and non-sharia stock. however, the shares as proof of ownership of a company, can be differentiated according to business activities and the purpose of buying the shares. the shares is licit (according to sharia) if the shares are issued by a company whose business activities are engaged in a halal sector and in the intention to purchase the shares are for investment, not for speculation. to be more secure, the shares listed in the jakarta islamic index (jii) are stocks that are in accordance with sharia. it is said so, because issuers listed in the islamic index will always undergo a screening process based on predetermined criteria. erifa aldiena and muhammad hanif al hakim 131 jakarta islamic index (jii) in the indonesia stock exchange (idx) there are several types of indices. however, among those indices it is only the jakarta islamic index (jii) that operate based on sharia principles. jii was formed from the collaboration between pt bei (at that time the jakarta stock exchange) and pt danareksa investment management (pt dim). jii first operated on july 3, 2000. it uses january 1, 1995 as base date (with a value of 100). the purpose of establishing jii is to increase investor confidence to invest in sharia-based shares and toprovide benefits for investors who invest in the stock exchange (burhanuddin, 2008). jii is one of the two indeces, a part from issi, in indonesia that calculates the average price index of shares for types of business activities that meet sharia criteria. it is said so because the stocks listed in the shariah index are issuers whose business activities do not conflict with sharia principles. based on fatwa no.40 / dsn-mui / x / 2003 concerning capital markets and general guidelines for the application of sharia principles in the capital market field, it is stipulates that the criteria for business activities that are contrary to sharia principles are (burhanuddin, 2008): 1) gambling and game business classified as gambling or prohibited trading, 2) conventional financial institutions (ribawi), including conventional banking and insurance, 3) producers, distributors, and traders of illicit food and beverages, 4) manufacturers, distributors and or providers of goods or services that are dangerous morally 5) to invest in issuers (companies) whose ratio of corporate debt to usury financial institutions are more dominant than their capital. based on these criteria, the stocks preferred to be listed in the shariah index are as follows (burhanuddin, 2008): 1) a collection journal of islamic economic laws-january, vol. 2, no. 1, 2019 132 of shares with a main business type that does not conflict with sharia principles and has been recorded for more than three months, with exception if it is listed in the first ten list in term of capitalization, 2) shares based on annual or mid-year financial statements that have a maximum liability ratio of 90%, 3) sixty shares of the above stock composition based on the average order of the largest market capitalization for the last one year, 4) thirty shares in the order based on the level of liquidity of the average regular trading value for the last one year, 5) evaluation of the index components is done biannually. changes in the issuer’s main business types will be monitored continuously based on available public data. companies that change their business lines so that they are inconsistent with islamic principles will be excluded from the index. while the issuer’s shares previously listed will be replaced by shares of other issuers. all of these procedures aim to eliminate speculative stocks. although some speculative stocks have a high level of liquidity on average regular trade value, but the have a low real sector capitalization rate (burhanuddin, 2008). based on (article 3 paragraph 4) fatwa no.40 / dsn-mui / x / 2003, it is mentioned that in order to ensure the consistency of the shariah index, a company that has joined the jii is required to have a shariah compliance officer (sco). sco is a party or official of a company or institution that has received certification from dsn-mui in understanding islamic principles in the capital market (burhanuddin, 2008). the main difference between the islamic index and other non-sharia indices is that all shares that are listed in the jii must be in accordance with sharia principles. to find out the level of education, there is a need for a screening process for companies erifa aldiena and muhammad hanif al hakim 133 that want to be registered in the jii. this screening process is required to determine whether the company’s shares can be categorized as a “halal” effect (burhanuddin, 2008). there are to approaches to screen a stock in order know whether it is a sharia stock or not. firstly, approach in relation to the contract; and secondly aproach in relation to the companies’ product. with regard to the contract, if the stock is assumed to be a company asset that can be exchanged for money, the the type of this contract is selling and purchasing. whereas if the stock is assumed as a statement of cooperation, then the contract is in the form of profit and loss sharing (burhanuddin, 2008). research methods analysis tools and models data analysis used is panel data regression analysis, using the econometric model as follows: rsit = β0 + β1roait + β2npmit + β3derit + β4pbvit + µit legend: rs : stock return roa : return on assets npm : non profit margin der : debt to equity ratio pbv : price to book value i : a given company t : 2014-2016 period β0,1,2,3,4,5 : intercept coefficient and slope µ : interference factor journal of islamic economic laws-january, vol. 2, no. 1, 2019 134 the econometric model above will be estimated with the stages of the pls, fem and rem models. selection of the best estimation model will be using the chow test and the lagrange multiplier test. the model goodness test includes model existence test (f test) and effect validity test including t test. dependent variable dependent variables are variables that are affected by the existence of independent variables (sugiyono, 2010). the independent variable in this study is the annual stock return (y) of each listed company. independent variable the independent variable is a variable that affects or causes changes or the emergence of the dependent variable (sugiyono, 2010). the independent variable in this study consists of four factors that influence stock returns, including: 1) return on assets or roa (x1), 2) net profit margin or npm (x2), 3) debt to equity ratio or der (x3) , 4) price to book value or pbv (x4). source of data data used in this study are secondary data obtained from published financial reports accessed through the www.idx.co.id and yahoo finance sites which are then reprocessed as needed and then analyzed. the data consists of the annual financial statements of companies listed in the indonesia stock exchange and stock returns on companies listed in the jakarta islamic index (jii) for the period 2014-2016. erifa aldiena and muhammad hanif al hakim 135 result and discussion descriptive analysis of independent variables statistics based on figure 4.1 below, stock returns in companies listed in the jakarta islamic index (jii) in 2014-2016 experienced an increase and decrease each year. the highest stock return value in 2014 was waskita karya (wskt), then in 2015 the company was akr corporindo (akra), then the highest value of stock return in 2016 was adaro energy (adro). in addition to the highest value of stock return, there is also the lowest value of stock returns. the lowest value of stock returns in 2014 was united tractors (untr), then in 2015 the company was aneka tambang (antm), then the lowest value of stock returns in 2016 was semen indonesia (smrg). figure 4.1 stock returns of companies registered in the jakarta islamic index (jii) period 2014-2016 e source: financial report of jakarta islamic index (jii) based on figure 4.2 below, return on assets of companies listed in the jakarta islamic index (jii) in 2014-2016 experienced journal of islamic economic laws-january, vol. 2, no. 1, 2019 136 an increase and decrease each year. the highest value of return on assets in three consecutive years namely 2014-2016 is the matahari department store (lppf) company. in addition to the highest return on assets, there is also the lowest return on assets. the lowest return on assets in 2014-2015 was aneka tambang (antm), then in 2016 vale indonesia (inco). figure 4.2 return on assets (roa) of companies listed in the jakarta islamic index (jii) period 2014-2016 source: financial report of jakarta islamic index (jii) based on figure 4.3 below, net profit margins of companies listed in the jakarta islamic index (jii) in 2014-2016 experienced an increase and decrease each year. the highest net profit margin value in 2014-2015 was bumi serpong damai (bsde), then the highest net profit margin value in 2016 was pakuwon jati (pwon). in addition to the highest net profit margin, there is also the lowest net profit margin value. the lowest net profit margin value in 2014-2015 was aneka tambang (antm), then the lowest net profit margin in 2016 was vale indonesia (inco). erifa aldiena and muhammad hanif al hakim 137 figure 4.3 net profit margin of companies listed in the jakarta islamic index (jii) period 2014-2016 source: financial report of jakarta islamic index (jii) based on figure 4.4 below, the debt to equity ratio of companies listed in the jakarta islamic index (jii) in 2014-2016 experienced an increase and decrease every year. the highest debt to equity ratio in 2014 was matahari department store (lppf), then in 2015 was a housing development company (ptpp), then the highest debt to equity ratio in 2016 was adhi karya (adhi). in addition to the highest debt to equity ratio, there is also the lowest debt to equity ratio. the lowest debt to equity ratio in 2014 was hanson international (myrx), then in 2015 was the mitra keluarga kary advice (mika) company, then the lowest debt to equity ratio in 2016 was the indocement tunggal prakarsa (intp) company. journal of islamic economic laws-january, vol. 2, no. 1, 2019 138 figure 4.4 debt to equity ratio of companies listed in jakarta islamic index (jii) period 2014-2016 source: financial report of jakarta islamic index (jii) based on figure 4.5 below, the price to book value of companies listed in the jakarta islamic index (jii) in 2014-2016 experienced an increase and decrease every year. the highest price to book value for three consecutive years in 2014-2016 is unilever indonesia (unvr). besides the highest price to book value, there is also the lowest price to book value. the lowest price to book value in 2014 was matahari department store (lppf), then in 2015 the company was adaro energy (adro), the lowest price to book value in 2016 was lippo karawaci (lpkr). erifa aldiena and muhammad hanif al hakim 139 figure 4.5 price to book value of companies listed in jakarta islamic index (jii) period 2014-2016 source: financial report of jakarta islamic index (jii) estimation result of panel data regression estimation result of panel data regression with three methods pooled ordinary least square, fixed effect model, random effect model can be seen below in table 4.1. table 4.1 summary of study result variable coefficient model pls fem rem c -6.074965 -121.4550 -6.074965 roa -2.097993 4.200698 -2.097993 npm 1.059067 1.640559 1.059067 der 22.10831 55.61723 22.10831 pbv 1.174214 3.044464 1.174214 r2 0.149176 0.426242 0.149176 adj. r2 0.107672 0.086237 0.107672 journal of islamic economic laws-january, vol. 2, no. 1, 2019 140 variable coefficient model pls fem rem f-statistic 3.594291 1.253633 3.594291 prob f-statistic 0.009455 0.228020 0.009455 sources: idx selected model of goodness test model selection is based on the results of the test through the chow test and the lagrange multiplier test, hence the selected model is the random effect model (rem). that way it needs to be analyzed further, namely by using the test of the goodness of the model which consists of the existence test model (f test) and interpretation of the coefficient of determination (r2). based on the estimation results in table 4.1, the results of the f test show that prob (f-statistic) is smaller than α which is 0.009455 <0.05, so h0 is rejected, the model used exists. independent variables like return on assets (roa), net profit margin (npm), debt to equity ratio (der) and price to book value (pbv) contained in the regression equation simultaneously or jointly influence the performance of stock returns of companies listed in the jakarta islamic index (jii) for the 2014-2016 period. r-squared (r2) interpreted the determination coefficient or r square (r2) is the amount of the independent variable contribution to the dependent variable. the higher the coefficient of determination, the higher the ability of the independent variable to explain variations in changes in the erifa aldiena and muhammad hanif al hakim 141 dependent variable. however, the determination coefficient has a weakness, namely the bias towards the number of independent variables included in the regression model where each addition of one independent variable and the number of observations in the model will increase r2 even though the entered variable does not have a significant effect on the dependent variable. to reduce these weaknesses, the adjusted determination coefficient is used, which is adjusted r square (adj r2). the adjusted coefficient of determination means that the coefficient has been corrected by entering the number of variables and the sample size used. by using the adjusted coefficient of determination, the value of adjusted coefficient of determination can go up or down by adding new variables in the model. in table 4.1, the amount of adjusted r-square is 0.107672 or 10.77%. it can be concluded that the effect of roa, npm, der and pbv is 10.77%. while the remaining 89.23% (100% 10.77%) is influenced by other variables not included in this study. validity of test of the influence of independent variables in the selected model after carrying out the overall panel data regression coefficient test, the next step is to calculate the regression coefficients individually, which is called by t test. the t test is used to determine the influence of each independent variable individually (partially) on the dependent variable. the results of testing the hypothesis with the t test (partial) are as follow: journal of islamic economic laws-january, vol. 2, no. 1, 2019 142 table 4.2 estimation result of random effect model methods variable t sig. t criteria conclusion roa -2.097993 0.0145 < 0.05 have a significant effect npm 1.059067 0.0703 < 0.10 have a significant effect der 22.10831 0.0004 < 0.01 have a significant effect pbv 1.174214 0.0039 < 0.01 have a significant effect source: idx. based on the table above, we know that variables that have a significant influence are return on assets (roa), net profit margin (npm), debt to equity ratio (der) dan price to book value (pbv). explanation of independent variable’s effect in the selected model based on the effect validity test, variables that have a significant influence are return on assets (roa), net proit margin (npm), debt to equity ratio (der) dan price to book value (pbv). what follows is the interpretation of the influence of the selected model: 1. return on assets (roa) based on the estimation results in table 4.2, we know that return on assets (roa) affects stock returns. return on assets (roa) has a negative and significant effect on stock returns in 2014-2016 with the magnitude of the coefficient of the variable return on assets (roa) of -2.097993. this erifa aldiena and muhammad hanif al hakim 143 means that if the variable return on assets (roa) increases by one percent, it will reduce the company’s stock return by 2,097993 percent. 2. net profit margin (npm) based on the estimation results in table 4.2, we know that return on assets (roa) affects stock returns. return on assets (roa) has a negative and significant effect on stock returns in 2014-2016 with the magnitude of the coefficient of the variable return on assets (roa) of -2.097993. this means that if the variable return on assets (roa) increases by one percent, it will reduce the company’s stock return by 2,097993 percent. 3. debt to equity ratio (der) based on the estimation results in table 4.2, we know that debt to equity ratio (der) affects stock returns. debt to equity ratio (der) has a positive and significant effect on stock returns in 2014-2016 with the magnitude of the coefficient of the debt to equity ratio (der) variable of 22.10831. this means that if the debt to equity ratio (der) variable rises by one percent, the company’s stock return will increase by 22,10831 percent. 4. price to book value (pbv) based on the estimation results in table 4.2, we know that debt to equity ratio (der) affects stock returns. debt to equity ratio (der) has a positive and significant effect on stock returns in 2014-2016 with the magnitude of the coefficient of the debt to equity ratio (der) variable of 22.10831. this means that if the debt to equity ratio (der) variable rises by one percent, the company’s stock return will increase by 22,10831 percent. journal of islamic economic laws-january, vol. 2, no. 1, 2019 144 economic analysis the panel data estimation results show that return on assets (roa) affects stock returns in companies incorporated in the jakarta islamic index (jii). return on assets (roa) has a negative and significant effect on stock returns in 2014-2016. this shows that the management of the company is still less efficient and effective so that investors see that the company’s performance is not good and therefore it causes the stock price to go down. as a result, the stock return is declining. to increase stock returns, the management of the company must be improved effectively and efficiently. increasing roa shows better company performance and shareholders will benefit. this will encourage an increase in stock prices which will ultimately increase the stock returns received by investors. this research contrasts with previous research conducted by novia eka fitri and leo herlambang (2016) entitled “pengaruh rasio profitabilitas, rasio solvabilitas, dan rasio likuiditas terhadap return saham perusahaan properti dan real estate yang terdaftar dalam indeks saham syariah indonesia (issi) periode 2011-2014”. the results show that the coefficient of retrun on assets (roa) has a significant positive direction. now we have npm. the estimation results of panel data show that net profit margin (npm) affects stock returns in companies that are members of the jakarta islamic index (jii). net profit margin (npm) has a positive and significant effect on stock returns in 2014-2016. increasing npm shows good management ability in managing the company to get net profit. this research was supported by previous research conducted by ferdinand eka putra and paulus kindangen (2016) entitled “pengaruh return on assets (roa), net profit margin (npm), dan earning per erifa aldiena and muhammad hanif al hakim 145 share (eps) terhadap return saham perusahaan makanan dan minuman yang terdaftar di bursa efek indonesia (periode 20102014)”, that shows that net profit margin (npm) has a positive and significant influence on stock returns. as for der, the estimation results of panel data show that the debt to equity ratio (der) affects the stock returns of companies listed in the jakarta islamic index (jii). debt to equity ratio (der) has a positive and significant effect on stock returns in 2014-2016. der, which is the ability of a company to manage its debt will affect the company’s ability to make a profit. der that is too high has a negative impact on the company’s performance, because higher debt levels will further reduce profits. the greater the profits earned by the company, the more attractive investors will be, and therefore will increase stock sales. an increase in stock sales compared to sales in the previous year will increase the company’s stock returns. this research is supported by previous research conducted by setyo pantawis, yanuar rachmansyah and ika ermasari (2016) entitled “analisis pengaruh roa, der, pbv terhadap return saham pada perusahaan sektor makanan dan minuman yang terdaftar di bei 2012-2014”. the results of this study indicate that the debt to equity ratio (der) has a significant effect. and then pbv. the estimation results of panel data show that price to book value (pbv) affects stock returns of companies incorporated in the jakarta islamic index (jii). price to book value (pbv) has a positive and significant effect on stock returns in 2014-2016. changes in the value of price to book value (pbv) make a significant positive contribution to stock returns, namely an increase or decrease in pbv will have an impact on the increase or decrease in stock returns in the same direction. this means that journal of islamic economic laws-january, vol. 2, no. 1, 2019 146 when pbv rises it will be followed by an increase in stock returns and when pbv has decreased, the stock return will also decrease. the fact that the pbv is so significant shows that investors view pbv as one of the factors that need to be considered before they invest in the capital market. pbv is the market ratio (market ratio) used to measure the performance of stock market prices on the value of the book. the higher the pbv rasio, the more successful the company gives divident for shareholders. the better the value of the company, the more interested investors will be to invest their funds. that way the stock price will rise and stock returns will also increase. it can be concluded that in this research period, investors made pbv as one of the reasons or factors for investing in the capital market. this can be seen from the significance of pbv and its coefficient value. this research was supported by previous research conducted by rendra akbar and sri herianingrum (2015) entitled “pengaruh price earning ratio (per), price book value (pbv) dan debt to equity ratio (der) terhadap return saham (studi terhadap perusahaan properti dan real estate yang listing di indeks saham syariah indonesia)”. the results showed that the coefficient of price to book value (pbv) had a significant positive direction. closing conclusion based on the results of the analysis that has been carried out, it can be concluded as follows: 1. independent variables such as return on assets (roa), net profit margin (npm), debt to equity ratio (der) and price to book value (pbv) simultaneously have a significant effect on the dependent variable, namely stock returns in erifa aldiena and muhammad hanif al hakim 147 companies listed in the jakarta islamic index (jii). 2. independent variables, such as return on assets (roa), net profit margin (npm), debt to equity ratio (der) and price to book value (pbv) partially have the effects, with the explanation as follows: a. return on assets (roa) has a negative and significant effect on stock returns in companies incorporated in the jakarta islamic index (jii). b. net profit margin (npm) has a positive and significant influence on stock returns in companies incorporated in the jakarta islamic index (jii). c. debt to equity ratio (der) has a positive and significant influence on stock returns in companies incorporated in the jakarta islamic index (jii). d. price to book value (pbv) has a positive and significant influence on stock returns in companies incorporated in the jakarta islamic index (jii). suggestion for future researchers, it is expected to add more variables, such as: a) earning per share (eps) because the company’s needs cannot be separated from their desire to make a profit from the issuance of shares, b) price earning ratio (per) because it is useful to fulfill the wishes of investors or prospective investors in deciding on an investment place that offers a return that is worthy of a stock investment reference abdullah, hilmi., & eka merdekawati. (2015). pengaruh return on assets (roa), return on equity (roe), current ratio journal of islamic economic laws-january, vol. 2, no. 1, 2019 148 (cr) dan debt to equity (der) terhadap return saham pada perusahaan manufaktur yang terdaftar di bursa efek indonesia periode 2009-2011. dinamika ekonomi jurnal ekonomi dan bisnis vol.8 no.2 september, 1-19. akbar, rendra., & sri herianingrum. (2015). pengaruh price earning ratio (per), price book value (pbv) dan debt to equity ratio (der) terhadap return saham (studi terhadap perusahaan properti dan real estate yang listing di indeks saham syariah indonesia. jestt vol. 2 no. 9 september, 698. arisandi, meri. (2014). pengaruh roa, der, cr, inflasi dan kurs terhadap return saham (studi kasus industri makanan dan minuman yang terdaftar di bei periode 2008-2012). jurnal dinamika manajemen vol. 2 no.1 januari-maret. issn: 2355-8148, 34-46. aryanti, mawardi, & selvi andesta. (2016). pengaruh roa, roe, npm dan cr terhadap return saham pada perusahaan yang terdaftar di jakarta islamic index (jii). i-finance vol. 2 no. 2 desember, 54. burhanuddin. (2008). pasar modal syariah (tinjauan hukum). yogyakarta: uii press. dsn-mui. (2014). himpunan fatwa keuangan syariah dewan syariah nasional mui. penerbit erlangga. fitri, novia eka. & leo herlambang. (2016). pengaruh rasio profitabilitas, rasio solvabilitas, dan rasio likuiditas terhadap return saham perusahaan properti dan real estate yang terdaftar dalam indeks saham syariah indonesia (issi) periode 2011 – 2014. jurnal ekonomi syariah teori dan terapan vol. 3 no. 8 agustus 2016, 625. erifa aldiena and muhammad hanif al hakim 149 pantawis, setyo. yanuar rachmansyah. & ika ermasari. (2016). analisis pengaruh roa, der, pbv terhadap return saham pada perusahaan sektor makanan dan minuman yang terdaftar di bei 2012 2014. jurnal ilmiah komputer akuntasni. issn: 1979-116x. vol.9 no.1 april, 49-60. putra, ferdinan eka & paulus kindangen. (2016). pengaruh return on assets (roa), net profit margin (npm), dan earning per share (eps) terhadap return saham perusahaan makanan dan minuman yang terdaftar di bursa efek indonesia (periode 2010-2014). jurnal emba. issn: 2303-1174. vol.4 no.4 september, 235-245. rivai, veithzal. rinaldi firmansyah. andria permata veithzal. & rizqullah. (2010). islamic financial management (teori, konsep, dan aplikasi: panduan praktis bagi lembaga keuangan dan bisnis, praktisi, serta mahasiswa). bogor: ghalia indonesia. sugiyono. (2010). metode penelitian administrasi. bandung: alfabeta. umam, khaerul. (2013). pasar modal syariah dan praktik pasar modal syariah. bandung: pustaka setia. journal of islamic economic laws vol. 5, no. 2, july 2022: 297-322 297 relevance of islamic banking in indonesia to the muamalah system of the prophet and the caliph malta anantyasari1, agus endro suwarno2, muh. nashirudin3, chabibatul mu’awanah2, nuraini binti asri5 1institut studi islam muhammadiyah pacitan 2universitas muhammadiyah surakarta 3iain surakarta 4universiti malaysia sabah email: maltaana@inismupacitan.ac.id, aes202@ums.ac.id, muh.nashirudin@gmail.com,i000180176@student.ums. ac.idbg18110300@student.ums.edu.my abstract the emergence of islamic banks in indonesia today is increasingly mushrooming. this emergence is inseparable from the role of the number of muslim populations in indonesia who want an islamic economic and banking system that is far from usury. the islamic banking system has been exemplified by the prophet muhammad and his companions in the past. his companions have become the basis or foundation for establishing islamic banks. however, in reality, in indonesia, the relevance of the islamic banking system is less attractive. this research is descriptive qualitative research, using the library research method. this study aims to examine the practice of islamic banking as exemplified at the time of the prophet muhammad saw and to see the relevance and development of islamic banking practices in indonesia. this study concludes that the model of banking services, products, and activities exemplified by the prophet is still used in the islamic banking system in indonesia. however, many islamic bank practices deviate and are not by sharia rules. keywords: banking; syariah; indonesia; rasulullah mailto:maltaana@inismupacitan.ac.id mailto:aes202@ums.ac.id mailto:muh.nashirudin@gmail.com mailto:i000180176@student.ums.ac.id mailto:i000180176@student.ums.ac.id 298 ananstyasari et al. introduction the word bank is a word that is no longer foreign to the lives of indonesian citizens because the economic life in indonesia is more or less supported by the growing and developing banking system. the state has involved the banking system in almost all payment systems in the daily lives of indonesian citizens, whether it is in the form of small or large transactions, in any case. the bank acts as the main guard in the capital and savings and loan system that involves business actors in indonesia, even in the capital. a bank is a financial institution used to store funds or money belonging to private individuals or individuals, institutions, business entities, organizations (simatupang, 2019). the dutch first introduced the banking system in indonesia in 1828, which was used to facilitate the trading system of agricultural products and spices from the archipelago to outside the archipelago, which is currently called the export trade (meirisa et al., 2021). in attracting customers, banks in indonesia must compete to issue superior products such as low credit interest, high deposit interest, cashback system, demand deposits, and time deposits (simatupang, 2019). two types of banking are developing in indonesia today: the conventional banking system and islamic banking (kasmir, 2013). conventional banks work with a profit-seeking system through conventional principles by setting interest on savings and loan products and other bank services, such as administrative fees on atm transactions. the bank applies a fee system that is taken from the customer. in comparison, the sharia system implements an islamic banking system based on sharia law by implementing a profit-sharing system, namely financing from all transactions in the form of buying and selling, equity participation, pure leases, as well as the transfer of ownership of goods rented from the bank to other parties. indonesia is a country with the most significant number of muslims globally, with a population of 204 million (aziz & susetyo, 2019) of the total population in indonesia, 271,349,889 people (chrysnaputra & pangestoeti, 2021). with journal of islamic economic laws-july, vol. 5, no. 2, 2022 299 the development of communication and information technology, people are increasingly literate and literate. this condition impacts the intellectual maturity of the community and affects spiritual maturity. so, in the practice of everyday life, people begin to apply religious aspects into the practices that are carried out every day, including in the economic and banking aspects. along with the increasing tendency of the public to switch to islamic banks, islamic banking systems are experiencing rapid growth in indonesia. this movement fulfills the thirst of the indonesian people for religious banking services, far from usury, and by islamic law and guidance. however, the question is, is the islamic banking system implemented in indonesia following sharia law as taught by the prophet muhammad? then how exactly is the banking system carried out by the prophet muhammad in his era? this study discusses the banking system exemplified by rasulullah saw when he entered into a trade agreement with siti khadijah. wherein the trade agreement siti khadijah acted as the owner of capital, and rasulullah was the person who ran the business capital and used it for trading capital. then the trade profits were divided in half, partly for siti khadijah, the owner of the capital, partly for the prophet himself as the person who runs the business capital (maimory, 2019). then the system was adopted by the banking system in indonesia as the basis for establishing a sharia banking system. this study tries to see the relevance of the trading system in the development of islamic banking in indonesia. literature review syariah/ islamic banking system islamic bank is a business entity included in the scope of islamic financial institutions (lks). the definition of lks, according to the national sharia council, is a financial institution that issues sharia financial products and has an active license as a sharia financial institution. this definition emphasizes that two elements must be met by an lks, namely, the element of conformity with islamic shariasharia and the legality of operations as a financial institution (maimory, 2019). 300 ananstyasari et al. islamic bank is a financial institution whose primary business is providing financing and other services in payment traffic and money circulation whose operations are adjusted to islamic sharia principles (suhendro, 2018). islamic banking is banking based on sharia principles. based on economic democracy and the principle of prudence, it must contain the values of justice, togetherness, equity, and benefit. in contrast to the banking law, the regulation concerning this principle emphasizes the phrase based on “sharia principles” (warka & hariyanto, 2016). muamalah the word muamalah comes from arabic, etymologically the same as the word mufa’alah (to do each other). this word describes an activity by a person or several people to meet their individual needs (mardani, 2012). in another sense, muamalah can be seen from two aspects, first in the meaning of language and second in the meaning of terms. according to language, muamalah comes from a joint action, mutual action, and mutual practice. according to the term, the notion of muamalah can be divided into two types: understanding of muamalah in a broad sense and the understanding of muamalah in a narrow sense. in a broad sense, muamalah is allah’s rule (law) to regulate humans concerning worldly affairs in social interaction. in a narrow sense, god’s rules must be obeyed that regulate human relations with humans concerning how to obtain and develop property (suhendi, 2013). previous research as a reference, the researcher brought an article from (iqbal, 2021), which discusses the practice of mudharabah in islamic banking in indonesia. this study concludes that the prophet muhammad has exemplified the mudharabah system and has been known by the arabs for a long time. islamic law allows this practice of mudarabah. according to the law of the qur’an, the practice of mudarabah is sunnah or ijma. whereas in the islamic banking system in indonesia, the practice of mudharabah journal of islamic economic laws-july, vol. 5, no. 2, 2022 301 is applied in the provision of facilities or financing, business management is carried out by customers or mudharib, and profitsharing refers to revenue sharing. the profit-sharing system can change according to the agreement made at the beginning of the contract. the second research is the work of (maimory, 2019) which discusses the development of islamic banking from the time of the prophet. this research shows that the banking system adopted by islamic banking today has been exemplified in the time of the prophet muhammad. it is just that at that time not yet formed institutionally. along with its growth, the islamic banking system is increasingly emerging in indonesia. however, it is not fully supported by the indonesian government because from a political perspective, and the islamic banking system tends to have an ideological connotation. the government is doubtful about the willingness of entrepreneurs to put their capital in a joint venture or profit-sharing system as is applied in the islamic banking system for reasons of concern for the fate of the invested capital. the thing that distinguishes this research from previous research is that in this research, it is reviewed as a whole and in more depth about islamic banking practices and tries to find relevance and conformity with the muamalah system in the era of the prophet and his caliph. methods this research is qualitative research using the library research method. the data collection technique is in the form of documentation using secondary data originating from books, journals, official government websites, which follow the theme of the study of islamic banking practices at the time of the prophet and their relevance to the development of islamic banking in indonesia. results banking practice in the prophet (pbuh) era in general, banks have three roles or functions: receiving money for a deposit, providing loans or money, and making 302 ananstyasari et al. money transfers (maimory, 2019). these practices are a form of transaction system carried out in conventional banking, where there is still an exciting system which in islam is known as riba. in sharia law contracts, the interest or usury system is prohibited (sudanto, 2019). the same forms of transactions have also been carried out since the time of the prophet, such as sending money, lending money for daily needs, and receiving deposited assets (karim, 2006). likewise, the prophet saw did this with the profit-sharing system when trading (susanto, 2008). it can be seen that various forms of economic activity have the same characteristics as the character of modern banking as it is currently developing throughout the world, especially in indonesia. to see the series of banking activities practiced at the time of the prophet muhammad, please see table 1 table 1 banking activities done in prophet pbuh era note: s: saving; f: funding; p: payment; t: transfer period descriptions type or banking activities saving funding payment transfer nabi muhammad saw. 622-632 m because of his honesty and trustworthiness, the prophet was given the title al-amin, which means trustworthy, so the people of mecca trusted him to guard their wealth so that many meccans entrusted their wealth to him. until the emigration of rasulullah saw, he ordered sayyidina ali to return the treasure deposited in full. the prophet did not use the treasure that was deposited. √ √ √ zubbaid bin awwam please do not accept the deposited property but accept it as a loan so that the entrusted party can use it, but the entrusted party must return it in full. √ √ ibnu abbas ibn abbas sent money to kuffah √ abdulllah bin zubbair sending money to his sister who lives in iraq √ the reign of abu bakr ashshidiq 632-634 m during his reign, abu bakr ash-shidiq founded the baitul maal, which used to distribute state assets. √ √ umar bin khattab 1-644 build a house to store his treasures. he used checks to pay his employees and took grain from baitul maal. provision of working capital with a profit sharing system (mudharabah), muzara’ah, musaqah, musyarakah. √ √ √ √ journal of islamic economic laws-july, vol. 5, no. 2, 2022 303 period descriptions type or banking activities saving funding payment transfer khalifah utsman bin affan 644-656 m baitul maal functions as a regulator of income, expenses, and organizer. √ √ √ √ khalifah ali bin abi thalib 656-661 m baitul maal functioned as before, namely to channel state wealth. √ √ bani abbasiyah 750-1258 m they are emerging banking activities such as: accepting savings/deposits, financing/ loans, and remittances. they are circulating saq or checks in public as a means of payment in buying and selling transactions. √ √ √ √ the forms of trade and economic transaction activities carried out at the time of the prophet have shown that banking transaction practices have been carried out for a long time, even as exemplified by himself. furthermore, this is still going on until now as the forerunner of establishing the concept of islamic banking. qardh loan transaction rasulullah saw is known as al-amin, which means trustworthy (mukhlas, 2020), so that in his day, people put great trust in him as a deposit of their wealth. in this context, the deposited property may not be used by the person entrusted. therefore, before his departure to medina, the prophet muhammad asked sayyidina ali to return the treasures deposited to their owners (muhith, 2012). unlike the messenger of allah, his friend, zubair bin al awwam, refused to carry out a system of depositing assets so that he was not willing to be entrusted. he prefers to accept the property as a loan in which, with the system of borrowing the property, the person entrusted with the property will take advantage of the property and must return it in one piece (maftuha et al., 2021). from the two transactions carried out at the time of the prophet muhammad, even by himself and his companions, the 304 ananstyasari et al. term qardh emerged. in terms of fiqh, al-qardh gives property to others to be returned without any addition to the property (budiman, 2013). the word qardh in terms means handing over the property to someone else to be used, and one day the user is obliged to return it (yaya et al., 2014). card transactions are allowed in islam (purwadi, 2014). the proof of this qardh is surah al-baqarah verse 245 (al ghany, 2015). card transactions are currently used for sharia-based economic transactions or islamic economics. a forum functions as a place for collecting and distributing funds as an embodiment of the moral character of mutual help in islam to lighten the burden of fellow muslims (yaya et al., 2014). transfer the form of sending money was also carried out by other companions of the prophet muhammad, namely by ibn abbas, who sent money to kuffah, and abdullah bin zubair. they sent money from mecca to iraq. in addition, the system of using checks has also been known since the time of the prophet. this practice is evidenced from the time of umar bin khattab when traffic and trade activities between syria and yemen were running rapidly. umar bin khattab used a handwritten check system given to his employees to collect grain at baitul mal (haron, 1996). bai al-istishna transaction if translated into arabic, the word transfer means al-hiwalah, which comes from al-tahwil, transfer or transfer (k. a. wahab, 2014). however, fiqh experts define hiwalah as a transfer of debt from the debt owner to the party who must pay the debt. so the transfer in question is the transfer of debt (za, 2017). in essence, hiwalah is defined as an agreement made by three parties that contains an agreement to transfer responsibility for payment of debts from the first party to a second party that must be paid by a third party (mustofa & sari, 2021). the transaction model is applied to the islamic banking system in ba’i alistishna. bai al-istishna is a contract of sale and purchase of goods between two parties in which the purchased goods which have journal of islamic economic laws-july, vol. 5, no. 2, 2022 305 been previously produced or provided by the manufacturer are orders from other parties, and then the goods are sold at a price and method of payment agreed upon by the buyer of the goods and the seller (sari & anshori, 2017). so that in this transaction, there are three parties involved, namely the seller, the buyer, and the financing provider, in this case, is the bank. bai al-istishna is a form of receivables coverage carried out by the islamic bank to the customer. in islamic banking, the al-istishna contract is applied in financing transactions. istishna financing is a form of financing transaction or provision of funds by a bank to pay for ordered goods ordered by customers to producers (puji lestari, 2014). ba’i al-istishna is used in project financing or investment financing (budiman, 2013). in an istishna contract, the transaction flow is that the producer receives an order for goods from the buyer. payment can be made in advance, at the delivery of goods, or deferred for a certain period using the installment payment system (puji lestari, 2014). in more detail, the financing scheme in ba’i al-istishna is described in figure 1 below. figure 1 scheme of ba’i al-istishna note: 1. buyer and seller have an istishna contract 2. the seller orders the goods and buys from the manufacturer 3. the manufacturer delivers the goods 4. the goods are handed over to the buyer 5. buyer makes payment ba’i al-salam is a sale and purchase transaction of goods where the payment is made at the beginning, but the delivery of the goods is postponed or carried out at a later time (yaya et al., 2014). al-salam contract is used to finance the purchase of an 306 ananstyasari et al. item, for example, agricultural products that take a long time to produce. the word salam comes from the word as-salaf, which means introduction. in addition, etymologically, salam means al-isti’jal, which means hastened (badriyah, 2013). in the salam contract, the payment is made at the beginning (nurhayati, 2015). ba’i al-salam is legally permissible based on surah albaqarah verse 282 which means “o you who believe that you should write it down if you do not pray in cash for a specified time. furthermore, let a writer among you write it down correctly.” ibn abbas explained the law of the salam contract, which in essence, there must be clarity of time (saprida, 2016). bukhari and muslim narrated that the messenger of allah said: “whoever wants to buy and sell salam, it must be done with a certain size, scale and time.” conditions that must be in the salam contract (umah et al., 2018), namely payment is made in advance, goods that are traded are debts to the seller, goods are delivered at the agreed time, goods must be apparent in terms of size, scale, quantity, and other characteristics, determined place and time for the handover of goods. according to badriyah (2013), the differences between ba’i al-istishna and ba’i al-salam and practices in islamic financial institutions today are described in table 2. table 2 the differences between ba’i al-istishna and ba’i alsalam type of akad/ contract fiqh concept practices in islamic financial institutions ba’i alsalam prepaid goods delivered in the future banks buy goods from producers according to customer orders cash/installment payments journal of islamic economic laws-july, vol. 5, no. 2, 2022 307 bai alistishna procurement of goods is carried out after there is an order payment is made after the goods are finished the customer orders from the bank, and the bank buys goods from the producer & sells it to the customer. the customer orders goods from the producer, the bank pays the producer in cash, and the customer pays the bank on credit. from the table above, it can be seen that the reality that occurs in islamic financial institutions today is different from what is guided by sharia law. in islamic banking practice, customers make their purchases from producers, even though the bank should sell goods for goods that have been purchased in advance from producers to customers. in this case, the bank only acts as a medium and does not carry out buying and selling transactions, so islamic banks act the same as conventional banks. in islamic banking, banks should carry out buying and selling transactions to financing institutions in ba’i al-istishna and ba’i al-salam transactions. mudharabah before being appointed as an apostle, the prophet muhammad lived life by trading with his uncle, abu talib. rasulullah saw started trading after he migrated to medina. there he managed the government and the economy of the people of medina (maftuha et al., 2021). he traded to the land of syria by bringing merchandise belonging to siti khadijah to be sold in syria. in this trade, siti khadijah is the owner of the capital or goods to be traded, while the messenger of allah acts as the person who sells the goods. in the trade agreement, the results or profits are divided into two: the owner of capital and part for the seller. this form of trade agreement is called mudharabah. mudharabah contract or agreement is an agreement that occurs between the owner of capital and the manager, where the distribution of profits and losses is divided in half based on the initial agreement that 308 ananstyasari et al. has been agreed upon (pradesyah, 2021). mudharabah is a trade agreement between two or more parties to conduct a business. in islamic banking, the bank as shahibul maal provides 100% of capital. at the same time, the customer only acts as a manager of the capital, and the distribution of profits is based on the initial agreement (sari & anshori, 2017). based on the sharia board fatwa no. 7 of 2000 concerning mudharabah financing explains that business activities on capital provided by capital providers and managed by mudharib have the following provisions: a. business activities are the exclusive right of the manager, there should be no interference from the capital provider, but the capital provider has the right to supervise. b. the financier of capital may not hinder the business manager’s business in making a profit. c. managers must not violate sharia law concerning mudharabah contracts (yaya et al., 2014). the legal basis for mudharabah is the al-qur’an surah muzamil verse 20, and the hadith nami narrated by abbas bin abdul muttalib, that : “if you want to hand over your property to the mudarabah, then the mudarib should not require the mudarib to wade through the sea and down the valley, and not buy livestock. if this is violated then mudarib must bear the risk.” in addition to the qur’an and hadith, ijma’ from the scholars allows the existence of these mudharabah transactions (anugrah & nandaningsih, 2021). the profit-sharing scheme in mudharabah is illustrated in figure 2 below: journal of islamic economic laws-july, vol. 5, no. 2, 2022 309 figure 2 profit sharing scheme in the mudharabah contract note: 1. mudharabah contract is made and agreed upon by the fund owner and fund manager. 2. it is agreed that the fund manager will manage the business/project. 3. profit-sharing and loss of responsibility. 4. profits are shared based on an agreement at the beginning. 5. the owner of the fund bears losses. musyarakah financing transactions musyarakah comes from the word syirkah which means a mixture of interaction. from the terminology side, syrikah means an attempt to make a profit (yaya et al., 2014). syirkah-mudharabah was carried out at the time of the prophet by his companions with the jews. the prophet allowed this. the transaction is following the hadith of the prophet muhammad: “do not do something forbidden unless .”allah and his messenger forbid it so that syirkah is legal (hasanudin & mubarok, 2012). musyarakah is a cooperation agreement to conduct a business in which both parties contribute capital, and there is an agreement in the sharing of profits and risks (antonio, 2001). in musyarakah financing, the islamic bank does not provide the total required capital but only part of it with the agreed amount (sari & anshori, 2017). the flow of musyarakah transactions can be seen in figure 3 below. 310 ananstyasari et al. figure 3 the flow of musyarakah transactions note: 1. the contract is executed when the customer submits a financing request to a sharia bank. 2. as an active bank partner, the customer also puts part of the capital in the musyarakah transaction. 3. both parties agree that the distribution of profits and losses that are not caused by the customer’s negligence shall be borne following the proportion of the capital submitted. however, losses caused by customer negligence are entirely borne by the customer. 4. banks and customers receive profit sharing according to the initial agreement. 5. the bank receives back the capital given to the customer. furthermore, the customer wholly owns the business (yaya et al., 2014). murabaha transactions murabaha comes from the word rabah ربح, which means profit. meanwhile, murabahah is defined as buying and selling carried out based on the cost of goods and added profit (afrida, 2016). trading with the murabaha system was standard at the time of the prophet (syariah, 2015). murabahah transactions are also journal of islamic economic laws-july, vol. 5, no. 2, 2022 311 the most common form of transactions in islamic banks. murabaha can be done with an order in advance or without an order (ismail, 2015). the legal basis for murabaha is surah an-nisa verse 29, surah al-baqarah verse 275 and 280, and surah al-maidah verse 1. in addition, the hadith of the prophet muhammad is narrated by tirmidhi and ibn majah, and ijma’. ijarah transaction ijarah comes from the word al-ajru, which means replace. according to arabic rules, ijarah is a transaction based on taking benefits with replacement using a certain amount of money (tehuayo, 2018). al-ijarah is a contract carried out regarding the transfer of rights to use or utilize goods through rental payments without any transfer of ownership (santoso & anik, 2017). ijarah in modern life is called a lease transaction. leasing in islam can be done to potential human resources or called services, and leasing to facilities (yaya et al., 2014). the rental of services is exemplified by the activity of hiring someone to help do a job, while the rental of facilities can occur on land, residences, rice fields. the sharia basis of ijarah comes from the qur’an surah at-talaq verse 6, which means: “then, if they breastfeed your children for you, give them wages.” the prophet did this saw when he hired a guide from the bani al-dail (tehuayo, 2018). the ijarah transaction scheme can be seen in figure 4 below. 312 ananstyasari et al. figure 4 ijarah scheme note: 1. the customer applies for financing for goods/services to the bank 2. the bank pays rent to the owner of the goods/services 3. the bank leases the goods/services to the customer 4. customers and use goods/services 5. the customer must pay the rent with an installment system to the bank. discussion implementation of the islamic banking system in indonesia and its relevance to the trading practices of the prophet pbuh the word bank comes from banco, which means bench (zuhirsyan & nurlinda, 2018). while the meaning of shariasharia is the laws of allah revealed through his prophets (handayani & fathoni, 2019). sharia bank is a bank that carries out banking activities using the principles of islamic law or sharia (zakaria et al., 2020). another definition says that islamic banks operate following islamic sharia principles, especially in converting (ilyas, 2018). islamic bank is a bank which in carrying out its banking activities based on the laws of allah as exemplified by the prophets of allah swt. the idea of establishing islamic banking in indonesia was first conceived in the mid-1970s where the idea was presented in a national seminar on indonesia’s relations with the middle east journal of islamic economic laws-july, vol. 5, no. 2, 2022 313 as well as an international seminar organized by the institute for social studies (lsik) and the bhinneka tunggal ikka foundation (nofinawati, 2016). in 1988 indonesian ulema and islamic leaders insisted on establishing interest and usury-free banking system. finally, in february 1990, a working team was formed to establish the first islamic bank, then bank muamalat was established as the first islamic bank in indonesia. (syahdeini., 2014). indonesian islamic banking currently carries out several banking transactions and activities, such as funding, lending and lending, and other transactions that allow banks to earn a maximum profit (kasmir, 2004). islamic banks are banking institutions that provide financial services based on the values in islamic law, namely free from interest (riba), free from speculative activities such as gambling activities (maysir), free from doubtful matters and the origin and contract are unclear (gharar), has the principle of fairness values, and is used to finance halal activities (munawir, 2005). in 1992, law no. 10 of 1992 concerns banking, so with the issuance of several provisions regarding implementation, such as the decree of the board of directors of bi and bank indonesia regulations, there began to be a legal basis for the establishment and growth of sharia banking (suhendro, 2018). qardh loan transactions in the islamic banking system must be based on two things, namely the prohibition of usury and the basis of helping to improve the welfare of people in need. the qard contract is a tabarru, lending, and borrowing system based on helping, not being burdensome, and not seeking profit. in essence, qard is a transaction of lending money to the needy without any additional fees when returning it. in islamic banking, banks usually withhold or ask for additional fees for administration, which is permissible under sharia law (hidayati et al., 2019). in implementing money transfers through islamic banks, islamic leaders have different opinions regarding the law of cross-border money transfers. dr. khadijah nabrawi said that international money transfers that crossed national borders should not be carried out because banks take advantage of the difference between purchase and selling values. the bank sells currency or 314 ananstyasari et al. foreign currency at a price and repurchases it at a different price because there is a profit calculation in that price. following the hadith of the prophet narrated by turmudzi, “the messenger of allah forbade two contracts/transactions in one transaction” (leli, 2018). apart from the difference between the selling price and the purchase price in currency values, other benefits are also obtained from administrative fees, which are prohibited and are included in usury fadhl because banks take profits that are real in terms of service products that are not real (f. wahab, 2017). however, other scholars such as muhammad ibrahim abu syadi and muhammad raw was qal’ahji allow such transactions provided that the sender does not have an account or savings in the bank so that the money to be sent is handed over to the bank in cash and the bank exchanges the money into foreign currency in the form of a check and hand over to the sender. the second provision is that the sender submits cash to the bank so that a check is issued at a bank abroad. the third is that the handover of money does not occur directly but symbolically with an online system, where when the bank has made a transfer mechanism, the transaction is recorded at the destination bank abroad, and the recipient can immediately use or spend the money (k. a. wahab, 2014). however, in reality, one of the islamic banks in indonesia is collaborating with western union on the pretext of expanding the scope of the islamic bank’s services in the aspect of digital remittances (eko, 2021). even though it is clear that there is a difference between the selling price and the purchase price against the exchange rates of other countries’ currencies in the western union transfer process, this is not allowed under sharia law. in the development of islamic banking in indonesia in developing its banking products, ba’i istishna is, in fact, more in demand by customers than ba’i asl-salam. this is because, in ba’i istishna, it is used to order goods that are not yet available or do not exist. meanwhile, ba’i al-salam is of minimal interest to the public because, in principle, ready-made or readily available goods have been widely circulated in the market. an example of a transaction that can be done using ba’i istishna is purchasing a house with a mortgage credit system (hasanah, 2018). journal of islamic economic laws-july, vol. 5, no. 2, 2022 315 meanwhile, ba’i al-salam is rarely used in islamic banking transactions. in daily life implementation, ba’i al-salam is usually carried out in buying and selling using the drop-ship system. in this system, the buyer places an order for goods from a drop shipper or intermediary and makes a cash payment. the drop shipper orders the goods to the manufacturer, and the producer sends the goods to the buyer directly (yolanda, 2018). in mudharabah transactions, which are the most significant contributor to profits in islamic banking, many things do not follow sharia law. the bank has a dual role: the bank’s status, namely as a business manager (mudharib) and an investor (sahibul maal). the bank collects funds from customers and acts as a manager/business actor. with these funds, the bank enters into a mudharabah contract with the second customer and acts as the owner of capital (mustofa & sari, 2021). majelis ulama indonesia (mui) issued fatwa no. 7/dsnmui/iv/2000 states that the islamic financial institution as the provider of funds bears all losses resulting from the mudharabah, unless the mudharib commits an intentional mistake, is negligent, or violates the agreement (dsn mui, 2000). however, in reality, the islamic bank does not want to bear any losses. in addition, financiers to islamic banks are not ready to lose. here the financiers only make capital loans to islamic banks by expecting profits without wanting to know about sharia law, so that the profits obtained by depositors of funds are usury. musyarakah financing transactions, in islamic banking in indonesia, musyarakah-based islamic bank products are usually made and carried out in multi-contracts. there are more than two contracts in one transaction (otoritas jasa keuangan, 2016). there is an increase in the price at which the contract was executed and the price at the transfer of ownership. in the case of the customer’s failure to fulfill its obligations, the bank immediately executes the goods used as collateral. this condition shows inequality in the position of ownership of goods. in addition, the bank also imposes costs incurred on customers where the costs incurred should be the burden of the same, which violates the fatwa of mui fatwa dsnno.73/ dsnmui/xi/2008. islamic banks require customers 316 ananstyasari et al. to make profit-sharing on the due date of installment payments, as is the case with conventional banks. murabahah transactions applied to islamic banks determine the selling price of goods obtained from the cost price plus the bank’s profit margin, where the selling price cannot change during the financing period (afrida, 2016). murabaha transactions are usually used in consumptive financings, such as houses, vehicles, household furniture, and productive financing, such as purchasing industrial machinery purchasing merchandise (laksmana, 2009). however, the practice carried out in islamic banks in indonesia is not as directed in sharia law. islamic banks do not act as actual sellers of goods and are not investment agents because islamic banks cannot provide a stock of goods to be traded, but rather as financiers (hakim & anwar, 2017). ijarah transactions are regulated in the fatwa issued by the national sharia council of the indonesian ulema council no. 9/dsn-mui/iv/2000 concerning ijarah financing. however, in islamic banking in indonesia, several things are burdensome to customers, as contained in articles 10 and 14 concerning customer statements and acknowledgments. meanwhile, the obligations that banks must carry out are not stated in the article, whereas in sharia law, there must be a balance of rights and obligations between the two parties. in addition, the financing that arises is also the customer’s responsibility, even though in this ijarah transaction, there are interests of both parties, all costs should be shared. conclusion the economic, trade, and banking practices currently carried out by islamic banks in indonesia have previously been exemplified by the prophet muhammad and his companions. the emergence of the islamic banking system in indonesia is based on the monotheistic factor, namely the desire of the muslim community to create an economic system based on sharia law and away from usury. however, in reality, many practices in the field deviate from what is guided by sharia law. many transactions are considered burdensome to customers and more profitable for the bank. journal of islamic economic laws-july, vol. 5, no. 2, 2022 317 references afrida, y. 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(2018). pengaruh religiusitas dan persepsi nasabah terhadap keputusan memilih bank syariah. al-amwal : jurnal ekonomi dan perbankan syari’ah, 10(1), 48. https://doi.org/10.24235/amwal. v10i1.2812 journal of islamic economic laws vol. 2, no. 1 january 2019: 88-119 88 analysis of islamic bank influence on agricultural financing sector period 2014-2016 tari lestari 1faculty of islamic studies, universitas muhammadiyah surakarta email: tharee96@gmail.com abstract one main problem that indonesia’s agricultural sector faces is limited financial acces. this research tries to analyze islamic banking influence on agricultural financing sector in indonesia. it utilizes monthly data of islamic banking statistic from january 2014 until december 2016. this study conducts ols (ordinary least squares) as its analytical method to intrepret the data analysis. the finding of this paper shows that the incentive of islamic bank indonesia certificate (sbis), third party fund, inflation, non performing financing influence agricultural financing significantly. but, interest rate is not affecting agricultural financing. this research suggests the increase in agricultural financing proportion for agriculture should be in accordance with increase in total deposit value. this finding recommends improvement of the human resources competency in agriculture sector as well as strengthening instruments of islamic financing policy. keywords: islamic bank, agriculture, financing, agricultrural sector introduction as one of the sectors that play an important role in the national economy, the agricultural sector still faces several obstacles including the lack of access to financing sources, therefore, there tari lestari 89 is a need for a financing model that is able to provide stimulus to agricultural businesses to increase their production, the majority of farmers in indonesia who only have small-scale businesses, namely the agricultural sector in general still rely on their own capital in the development of their business (beik 2013). as an agricultural country, the agricultural sector has a very strategic role in national development. the importance of the agricultural sector among other sectors is as a source of livelihood for the majority of the population in indonesia. it has also contribution to gdp, the exports, industrial raw materials and the provision of food and nutrition. the agricultural sector also proved to be able to support the national economy in the event of an economic crisis (ashari 2005). although very strategic, the agricultural sector is often faced with many problems, especially weak capital as an essential element in increasing the production and living tariffs of rural communities, the lack of capital can limit the movement of this sector. in addition, the problem of bankability and perceptions of banks that consider agriculture as a high risk industry are the two factors that cause low rates of lending and bank financing in the agricultural sector. while the weak access of small farmers to banking financial institutions is caused by non-simple procedures and requirements that must be met by farmers. on the other hand, the banks themselves are less interested in financing the agricultural sector which is considered high risk, both due to natural disturbances such as floods, droughts, pest and plant diseases, and price fluctuations (beik 2013). for this reason, it is necessary to develop appropriate and responsive strategies in managing the development of the agricultural sector so that indonesia has a strong bargaining position. agricultural journal of islamic economic laws-january, vol. 2, no. 1, 2019 90 development is directed to increase farmers’ income through increased farming productivity and value-added products, as well as agricultural product distribution. this aspect requires funding in the form of financial support in the form of working capital. agricultural financing in conventional banks is considered to be less effective because of the interest set by the government. this makes farmers as additional returns, the financing gap between the borrower and the funder where the two parties are not in full synergy, each moves itself in a different calculation because the creditor is using more monetary sector analysis while the debtor in the real sector activities. the banking sector has not provided optimal support in increasing the amount of lending and the ease of obtaining capital loans to the agricultural sector, especially small farmers. therefore an alternative source of financing is needed for the agricultural sector. one alternative that can be developed is financing through islamic banking. with the characteristics of islamic banking based on the real sector, the pattern of islamic financing for the agricultural sector is expected to be well developed (nasution 2006). in the world of banking itself consists of two forms, namely conventional and islamic banks. the conventional bank in its activities uses an interest system that is inspired by the capitalist economic system by attracting business profits mainly from credit interest which is utilized through public savings funds which are then borrowed back with additional interest, while the islamic banking principles are based on islamic law and does not recognize interest but profit sharing. the development of islamic banking in indonesia seems tari lestari 91 to be rapid, this can be seen from the data published by bank indonesia. in july 2010 the number of islamic banks reached 43 units consisting of 10 islamic commercial banks and 33 sharia business units. in addition, the number of sharia rural banks (bprs) has reached 146 units in the same period and the number of sharia banking office networks reached 1,640 offices with better growth performance of islamic banks. this is evidenced by the disbursement of financing by islamic banks that consistently continues to increase to reach 57.633 trillion to several economic sectors such as agriculture, forestry, agricultural facilities, mining, industry, business services, to social / community services (otoritas jasa keuangan 2010). tabel 1.1 islamic banking financing based on the bussiness field of the year 2014-2016 (in billion rupiah). financing sectors year 2014 2015 2016 agriculture, animal husbandry, forestry 4.965 7.950 8.531 fisheries 714 1.198 1.405 mining and quarrying 4.597 6.145 6.604 processing induyst 13.300 17.982 19.745 electricity, gas, and water 5.492 6.427 8.117 construction 11.669 11.193 14.435 wholesale and retail trade 22.732 25.993 30.319 food and beverage accomodation and provision 1.555 2.101 3.043 transportation, warehouse, communication 12.192 11.072 10.921 financial intermediaries 16.828 19.184 18.948 journal of islamic economic laws-january, vol. 2, no. 1, 2019 92 financing sectors year 2014 2015 2016 real estate, rental business and corporate services 7.643 9.365 12.797 community service, social culture, entertaintment 6.757 4.600 4.617 others 6.944 2.147 7.60 source : islamic banking statitistic (organized) table 1.1 indicates financing inequality that occurs is not solely due to the low ability of the agricultural sector to return financing, but rather due to the very low alignments in the agricultural sector and the very rigid rules of credit, especially for agribusiness farmers. the concept of profit sharing is the right scheme for the economic activities of farmers. if the orientation of islamic banks to financing the real sector businesses, it would be better if the business in the agricultural sector gets a large portion. islamic banks have a strategic role as an intermediary institution between the money market and the real economy business world, especially the agricultural sector.according to research conducted by ashari (2005), islamic financing products that can be applied to agribusiness businesses including mud} a>rabah, musha>rakah, muzara’ah, musa>qah, bay mura>ba{h} ah, bay is{t{isna’ , bay salam, and pawning (rahn). the form of financing and its financing unit can be adjusted to the needs based on the process / sub system. the economic condition that always attracts the attention of banks in channeling financing is the inflation rate, because inflation generally means an increase in the general price level of goods or commodities and services during a certain period. inflation also has a number of adverse effects on individuals, tari lestari 93 society and overall economic activities, therefore bank indonesia, which has the task of establishing and implementing monetary policy in order to support its function, bank indonesia can carry out monetary control based on islamic principles through open market operations. bank indonesia sharia certificate referred to sbis, which is a securities based on islamic principles with short-term maturity in rupiah currency issued by bank indonesia. this sbis will be an alternative for islamic banks to secure their funds. because if there is inflation, people will prefer to save their money compared to taking financing in islamic banks (dahlan 2015). in addition to financing islamic banking influenced by inflation factors and sbis bonuses, the bank’s business in raising funds greatly influences bank development. in seeking for funding sources, banks must consider factors such as the level of ease to obtain the source of funds or the costs incurred by the bank. sources of funds from the community are the main source of funds for banks. this source of funds is easy to find and available in large numbers in the community. banks only need to attract the public by providing promos or providing products that are easy to terms and conditions. the existence of credit interest rates is a position that is no less important than third party funds. when interest rates rise, demand for conventional credit will decline. the relationship between conventional banking credit and islamic banking financing is unidirectional, so the decline in conventional credit demand will reduce demand in islamic banking. the decline in islamic financing has resulted in a decline in financing of the agricultural sector. furthermore, the high npf (non performing financing) results in a decrease in financing of islamic banks and journal of islamic economic laws-january, vol. 2, no. 1, 2019 94 will also impact on agricultural financing. this research is conducted to analyze the effect of simultaneous bonus of bank indonesia sharia certificates, third party funds, inflation, non performing financing and loan interest rates on sharia bank financing in the agricultural sector in indonesia. this research tries to describe the effect of partial bonuses on bank indonesia sharia certificates, third party funds, inflation, non performing financing and loan interest rates on sharia bank financing in the agricultural sector in indonesia. this study is expected to be used as an illustration of the condition of whether an islamic bank possibly become provider of funds for the agricultural sector. this study can contribute consideration in making decisions to maximize the company’s performance in terms of financing, especially in agricultural financing. literature review definition of islamic banking the bank is a financial institution, which is an entity that functions as a financial intermediary or financial intermediary of two parties, namely the party that is over-funded and the party that is under-funded. as an important institution in the community, the bank is a financial institution whose main business provides credit and services in payment traffic and money circulation (sinungan 1993). bank is simply defined as financial institution whose business activities are collecting funds from the community and channeling the funds back to the community and providing other bank services (kasmir 2010). islamic banks are banks that are in their activities, both fund tari lestari 95 raising and in the context of channeling funds to provide and impose compensation on the basis of sharia principles, namely buying and selling and profit sharing. islamic banks are referred to as banks without interest because in raising funds do not provide interest payments, and in loans are not charged interest. islamic banks are referred to as banks without interest because in raising funds do not provide interest payments, and in loans are not charged interest (herman 2006). according to muhammad (2005) islamic banks are banks that operate without relying on interest. islamic banks or commonly referred to as interest-free banks are financial / banking institutions whose operations and products are developed based on the al-quran and sunnah. in other words, islamic banks are financial institutions whose main business provides financing and other services in payment traffic as well as circulation of money whose operations are adjusted to islamic law. islamic banks are banks that carry out their business activities based on islamic principles, namely the rules of interbank agreements with other parties (customers) based on islamic law. so the difference between the islamic banks with a conventional bank is located on the basic principle of operation that does not use interest, but use the principle of sharing, buying and selling and other principles in accordance with the islamic shari’a, because the flower is believed to contain elements of usury is forbidden (prohibited) by islam.(rivai 2007). influence of islamic banks on the agricultural financing sector in indonesia at present the national bank’s alignment with the agricultural journal of islamic economic laws-january, vol. 2, no. 1, 2019 96 sector is very low. based on bi data, national bank lending as of march 2007, only 5.4 percent of total loans amounted to 800.337 billion. furthermore, credit is dominated by the services sector by 37.21 percent, industrial sector 22.93 percent, trade 20.93 percent. therefore, the role of islamic banking is expected to drive the agricultural sector in indonesia. islamic banks are more appropriate to play a role in agriculture than conventional banks. this is based on several things. first, because philosophically, islamic banking has strong ties with the agricultural sector. farmers who have been accustomed to profit sharing systems such as maro, gaduhan and others make it easier for islamic banks to enter the heart of the agricultural sector. second, the islamic system is actually more in line with the characteristics of farmers and agriculture in indonesia compared to the interest system. in the islamic system, what is required is the ability of farmers to produce agricultural products. third, increasing bank services to the agricultural sector by expanding networks through collaboration with various microfinance institutions. fourth, developing muzaraah products as one of the instruments in the financing of the agricultural sector. role of agriculture industry agricultural agriculture sector is an industry that organizes production factors (land, minerals, capital, management, labor) to produce and market food and fiber (purwaningsih 2017) . for a country that will carry out its economic development, there are a number of choices that will certainly be adopted. there is a country that in its economic development relies on the industrial sector and then follows other sectors. there are countries that prioritize the agricultural sector than others. and there are also tari lestari 97 countries that choose a combined alternative, namely balancing between the industrial sector and the agricultural sector. in addition, in reality agriculture is indeed an important sector in the indonesian economy because up to now around 63 percent of the population is foraging in the agricultural sector (prayitno 1985). the agricultural sector can be classified into several sub-sectors, namely the food crop sub-sector, the plantation sub-sector, the livestock sub-sector and the fisheries subsector. certificate of islamic indonesia bank (sbis) bank indonesia legislation number 10/11 / pbi dated march 31, 2008 concerning bank indonesia sharia certificates. bank indonesia sharia certificates (sbis) are securities based on short-term sharia principles in rupiah currency issued by bank indonesia. third party funds (tpf) the bank’s efforts in raising funds dominantly affect the development of the bank. in finding sources of bank funds, banks must consider factors such as the level of ease in obtaining the source of funds or the costs incurred by the bank to obtain it. sources of funds from the community are the main source of funds for banks. this source of funds is easy to find and is also available in large numbers in the community and the conditions are not too difficult.banks only need to attract the public by providing promos or providing products that are easy to terms and conditions. based on bank indonesia circular no. 6/23 / dpnp dated may 31, 2004 the funds entrusted by the community to the bank can be in the form of demand deposits, savings deposits. after journal of islamic economic laws-january, vol. 2, no. 1, 2019 98 fundraising, bank wouldi redistribute these funds to the public or better known as credit (kasmir 2001).credit is the bank’s most important activity in generating profits (dendawijaya 2003). like financing theory karim (2004) stated that one source of funds that can be used for financing is own capital, so that the greater the available funding sources, the bank will be able to channel financing in the larger maximum limit, especially in the agricultural sector. inflation and islamic perspective the inflation definition is as varied as we can find in the economic literature. this diversity of definitions occurs because of the extent of the influence of inflation on various sectors of the economy. the close and broad relationship between inflation and various sectors of the economy gives rise to our differences in understanding and perception of inflation, as well as in formulating policies for the solution. however, in principle there are still some unity of view that inflation is a phenomenon and economic dilemma. inflation is a condition that indicates the weakening of purchasing power which is followed by the decreasing real value of a country’s currency. according to islamic economists, inflation is very bad for the economy because of the following four thing. first, it causes disruption to the function of money, especially to the function of savings (saving value), the function of upfront payments, and the function of unit calculations. second, as a result of the inflation burden, people must break away from money and financial assets. third, there are weakening the spirit of the community to save (the decrease in marginal propensity to save) and increasing tendency to shop, especially for non-primary and luxury goods. tari lestari 99 fourth, direct investment in unproductive things such as the accumulation of wealth in the form of land, buildings, precious metals and foreign currencies as well as sacrificing productive investments such as agriculture, industry, trade and transportation (karim 2010). relation of of inflation levels to financing inflation is a general increase in the price of goods / commodities and services continuously in a certain period. inflation can cause disruption to the savings function (value of deposits). islamic anks as one of the players in the banking finance industry are not spared from the effects of inflation. the close and broad relationship between inflation and various economic sectors gave rise to our differences in understanding and perception of inflation, as well as in formulating policies for the solution. however, in principle there are still some unity of view that inflation is a phenomenon and economic dilemma. inflation is a condition that indicates the weakening of purchasing power which is followed by the declining real value of a country’s currency (khalwaty 2000). inflation can cause a high risk of default. this risk will increase non-performing financing of islamic banking. so that when the inflation rate is high, the bank will be very careful in distributing financing. in addition, inflation can also put pressure on islamic banks in terms of raising funds from the public, rising and falling inflation will affect the level of public saving, so that it will affect the financing of islamic banks non perfoming loans in the banking business, the most profit is from financing or providing credit to the public. although financing is one of journal of islamic economic laws-january, vol. 2, no. 1, 2019 100 the sources of bank income, financing also has risks, namely the occurrence of non-performing financing such as substandard loans, doubtful financing and bad financing. non performing financing is a credit that is classified as doubtful and loss. the terms doubt and loss here refer to the bank indonesia provisions adopted by indonesian banks. whereas according to suhardjono (2002) npf (non performing financing) is a condition where the customer is unable to pay part or all of his obligations to the bank as agreed. from some of the notions of non performing financing (npf) above it can be concluded that non performing financing is a problematic financing which is categorized as loss. previous research beik (2013) found that agricultural financing is significantly affected by npf, the amount of tpf and equivalent rate of financing (erp).second, in the long term, the variables that influence agricultural financing are sbi interest rates (sbsbi), sbis bonuses, tpf amounts, equivalent rate of agricultural sector financing (erp), the value of returns received by third party funds or savings customers (erdpk) and credit interest rates (sbk). while the variables that have no significant effect on the long term are npf and inflation. dahlan (2015) stated that effect of sbis bonus levels and inflation rates on the distribution of islamic bank financing in indonesia independent variables: sbis bonuses and inflation dependent variable: islamic bank sbis bonus financing and inflation have a negative relationship to the distribution of islamic bank financing in indonesia and have a significant influence on the distribution of islamic bank financingin indonesia. tari lestari 101 research framework graph. 1 source : (beik 2013) methods research variables the definition of the research variable is something in the form of what is determined by the researcher to be studied until information is obtained about it, then drawn conclusions. in this study. independent variables are variables that influence or cause changes or the occurrence of the dependent variables (sugiyono 2004). in this study the independent variables are: bonuses of bank indonesia sharia certificate (sbis), third party funds (tpf), inflation, non performing financing (npf), and credit interest rate. dependent or dependent variables are variables that are affected or which are due to the existence of independent variables (sugiyono 2004). in this study the dependent variable is the financing of islamic banks in the agricultural sector in indonesia. journal of islamic economic laws-january, vol. 2, no. 1, 2019 102 population and sample dajan (1996) stated that the population is the whole element which has one or more of the same characteristics or characteristics. the population used in this study is a report on islamic banking statistics. the sample according to sugiyono (2004) is part of the number and characteristics possessed by the population. the sample taken in this research is a report on islamic banking statistics for three years from 2014-2016. in this study the authors used convenience sampling, namely the sample members that selected based on the ease of obtaining data to measure data collection method the data obtained in this study is secondary data derived from literature / other sources from inside and outside of islamic banking, while data collection techniques are as follows secondary data secondary data is data obtained from other parties (already available) and used for other research. the data is in the form of islamic banking statistics taken monthly from 2014-2016 published in the financial services authority, then can also be from bank indonesia publications. this paper occupies reading, citing materials relating to research from relevant sources and internet database. data analysis model to examine the influence model and the relationship of the independent variables which are more than two variables to the dependent variable, multiple linear regression method is used (ghozali, 2006). before performing multiple regression analysis, this method requires to perform a classic assumption test in order to get good results. tari lestari 103 y = a + β1sbis + β2dpk + β3inf + β4npf + β5sbk + e information : y = agricultural financing a = constant β1 β5 = parameter coefficient x1 = bonus sbis x2 = third party funds (tpf) x3 = inflation x4 = non-performing financing (npf) x5 = credit interest rate (sbk) e = disturbing variables classic assumption test 1. normality test. this normality test aims to test whether the regression model of the dependent variable and the independent variable has a normal distribution or not. a good regression model is a normal or near normal distribution with criteria if prob jarque bera> α (5%) is normally distributed. 2. multicollinearity test test multicollinearity test aims to test whether in the linear regression model there is a correlation between period t disturbing errors with confounding errors in the t-1 period (ghozali 2006). multicollinearity means that there is a strong linear relationship between independent variables with one another in the regression model. a good regression model is that there is no linear correlation / strong relationship between the independent variables. if there is a symptom of multicollinearity in the regression model, then the regression model cannot appraise precisely so that the wrong conclusions about the variables studied are obtained. journal of islamic economic laws-january, vol. 2, no. 1, 2019 104 3. autocorrelation test this test aims to test whether in a linear regression model there is a correlation between confounding errors in period t with confounding errors in the period(ghozali 2006) 4. heteroscedasticity test this test aims to test whether in the linear regression model variance inequality occurs from residual one observation to anothern observation. to test the presence or absence of heteroscedasticity can be done by using the white test which is the probi-squared compared to α (5%). if α <prob.chisquared is free from the problem of heteroscedasticity. 5. model specification linearity test this test is used to test the clrm assumptions about linearity of the model, so it is often referred to as the linearity test of the model. in this study, the ramsey reset test is known as a general specification error test, with criteria if prob (f.statistics)> α (5%) there is no linearity problem (utomo 2012). the goodness of fit test a. test f this test aims to find out whether the independent variables simultaneously or together influence the dependent variable significantly. this test uses the f test by comparing probes (f statistics) with α (5%). if α> prob (f statistic) then the independent variables simultaneously affect the dependent variable. b. t test the purpose of this test is to find out whether each independent variable significantly influences the dependent variable. this test is done by t-test or t-test, which is to tari lestari 105 compare prob (t statistics) with α (5%). if prob. (t statistic) <α then a significant or independent variable partially affects the dependent variable. determination degree test (r2) test the degree of determination (r2) measures how far the ability of the model is formed in explaining the variation of independent variables. in this study using multiple linear regression, each independent variable partially and jointly influence the dependent variable stated with r2 to state the test of the degree of determination or how much influence the bonus variable of bank indonesia sharia certificate (sbis), third party fund ( tpf), inflation, non performing financing (npf), and loan interest rates(sbk) on the variables of islamic bank financing for the agricultural sector in indonesia. the magnitude of the degree of determination is 0 to 1. the closer to 0, the smaller the effect of all independent variables on the value of the dependent variable (in other words the smaller the ability of the model to explain changes in the value of the dependent variable). whereas if the test of the degree of determination approaches 1 then it can be said that the stronger the model is in explaining the variation of the independent variables on the dependent variable (suharyadi & purwanto 2009) results and discussion the profitability development of islamic commercial banks this study utilized computer software eviews 10 as data processing tools to speed up the processing of results that can explain the variables with econometric analysis methods. the journal of islamic economic laws-january, vol. 2, no. 1, 2019 106 results and analysis of the tests that have been carried out as the table below : table 1 results of econometry model estimation islamic bank financing in the agricultural sector in indonesia year 2014-2016 agrlt = -6676.333 + 1388.459sbist + 0.023822dpkt – 322.4636inft + 8.197568npft – 382.0858sbkt + e prob = (0.0033) (0.0160) (0.0033) (0.0002) (0.3680) adj r2 = 0.820624, dwstat = 1.859638, f-stat = 33.02428, sig f-stat = 0.000000 diagnosis test = 1. normality (jarque bera test) sig(x2) = 0.318404 2. linierity (ramsey reset test) sig (f) = 0.1060 3. multicollinierity test of vif sbis =1.647279 dpk =1.608578 inf =2.416544 npf =1.325917 sbk =2.070905 test of klein sbis =0.392938 dpk =0.378333 inf =0.586186 npf = 0.245805 sbk= 0.517119 4. heterocesdacity (whitetest) sig (x2) = 0.0795 5. autocorrelation (durbin watson test) dw = 1.859638 information = significance level at α = 0.05 source : eviews 10 (data organized) tari lestari 107 1. normality test results the normality test used in this study uses the jarque-berra technique. the guideline used is if the jarque value is> compared to the value of x2 table (with α 5%) or probability <0.05 the data used is not normally distributed and vice versa, if the probability is> 0.05, the data used is normally distributed. table 1 shows that all the variables are normally distributed or it can be said that the requirements for normality can be met. this can be seen from the value of j-b in this study of 2.288866 with a probability of 0.318404. where the probability must be greater than α = 0.05. therefore, it cannot reject the null hypothesis and show that the research is normally distributed, so it can be said that the requirements for normality can be fulfilled. 2. linearity test (model specifications) this test is usually designed to test whether an explanatory variable is suitable or not to be included in an estimation model. ramsey test is used to examine whether the form is a linear or non-linear estimation model function. table 1 above illustrates the probability value is 0.1060 turns out to be greater than the error degree of 5% (0.05), meaning that there are no linearity problems. in other words, the form of the estimation model function in this study is linear. 3. multicollinearity test multicollinearity test aims to test whether there is a high or perfect correlation between independent variables or not free. a good regression model should not have correlation between independent variables. to detect the presence or absence of multicollinearity in the regression model, it can journal of islamic economic laws-january, vol. 2, no. 1, 2019 108 be seen from the value of variance inflation factor (vif) and the klein test, namely each r-squared of the independent variable compared to the overall r-squared. the cutoff value commonly used to indicate the presence of multicollinearity is that if vif <10 and each r-squared variable less than r-squared, the model would be stated to have no symptoms of multicollinearity. table 1 above shows that the overall r-squared is 0.846250. r-squared sbis bonus is 0.392938 (0.392938 <0.846250). vif value of third party funds (dpk) is 10.378333 (0.378333 < 0.846250), the vif value of inflation is 20.586186 (0.586186 < 0.846250 ), the vif value of non performing financing (npf) is .245805 (0.245805 < 0.846250). the vif value of the loan interest rate (sbk) is 0.517119 (0.517119 < 0.846250). then all variables are free from multicollinearity problems based on the vif test. . 4. heterocedasticity test heteroscedasticity test aims to test whether in the linear regression model variance inequality occurs from residual one observation to another observation. if the residual variance from one observation to another observation remains, it is called homocedasticity and if different is called heteroscedasticity. to test the presence or absence of heteroscedasticity can be done by looking at the probi squared compared to α. if α is smaller than prob-chi-squared then it is free from the problem of heteroscedasticity. based on table1 above shows that prob-chi-squared is 0.0795> 0.05, it indicates that it is free from the problem of heteroscedasticity. tari lestari 109 5. autocorrelation test autocorrelation test aims to test whether in a linear regression model there is a correlation between confounding errors in period t with confounding errors in period t-1 (previously). the durbin-watson test (d-w test) is a very popular test to test whether there is an autocorrelation problem from the estimated empirical model. following are the results of the autocorrelation test: based on table 4.1 above, the value of durbin watson is 1.859638. autocorrelation test seen from the value of durbin watson with a value between if du <d <4-du. dl and du can be obtained from the table which is assumed by the amount of data and variables that produce dl = 1.17 and du = 1.79. based on the results of the table above shows the value of durbin watson is 1.859638 (1.79 <1.859638 <2.21). this shows that there is no symptom of autocorrelation. 6. t test (partial) after carrying out the overall regression coefficient test, the next step is to calculate the regressioncoefficients individually or t test. the t test is used to determine whether or not the influence of each independent variable individually (partial) on the dependent variable is tested at a significant level of 0.05, the independent variable influences the dependent variable. the results of testing hypotheses with the t test are as follows: journal of islamic economic laws-january, vol. 2, no. 1, 2019 110 table 2 validity test of the effect of independent variables variables t sig t criteria conclusion sbis 1388.459 0.0033 < 0.05 significant dpk 0.023822 0.0160 < 0.05 significant inf -322.4636 0.0033 < 0.05 significant npf 8.197568 0.0002 < 0.05 significant sbk -382.0858 0.3680 > 0.05 not significant source : eviews 10 (data organized) a. t test of bonus variables for bank indonesia sharia certificates (sbis) the results obtained in the table 2 above, the bonus variable of bank indonesia sharia certificate (sbis) statistically shows significant results at a probability value smaller than α (0.0033 <0.05). while the coefficient variable for the bonus of bank indonesia sharia certificate (sbis) is 1388,459. it can be concluded that the bonus variable of bank indonesia sharia certificate (sbis) partially has a significant positive effect on islamic banking financing in the agricultural sector. b. t test for third party fund variables the results obtained in the table 2 above, third party fund variables statistically show significant results at a probability value smaller than α (0.0160 <0.05). while the third party fund variable coefficient is 0.023822. so it can be concluded that the variable of third party funds partially has a significant positive effect on islamic banking financing in the agricultural sector by. c. t test of the inflation variable the results obtained in the table 2 above, the inflation tari lestari 111 variable statistically shows significant results at the probability value smaller than α (0.0033 <0.05). while the inflation variable coefficient is -322.4636. it can be concluded that the inflation variable partially has a significant negative effect on islamic banking financing in the agricultural sector. d. t test for non performing financing (npf) variables the results obtained in the table 2 above, the npf variable statistically shows significant results on the probability value smaller than α (0.0002 <0.05). while the npf coefficient variable is 8.197568. it can be concluded that the npf variable partially has a significant positive effect on islamic banking financing in the agricultural sector. e. t test of the variable credit interest rate the results obtained in the table 2 above, the variable loan interest rates statistically show insignificant results at the probability value greater than α (0.3680> 0.05). while the variable interest rate coefficient is -382.0858. so it can be concluded that the inflation variable partially does not affect the islamic banking financing of the agricultural sector. 7. f test (simultaneous) calculated f test is used to test the simultaneous effect of independent variables on the next variable or to test the accuracy of the model (goodness of fit). if the independent variable has the effect simultaneously (together) on the dependent variable, the regression equation model is included in the criteria of fit or fit. conversely, if there is no simultaneous effect then it is categorized as not suitable or journal of islamic economic laws-january, vol. 2, no. 1, 2019 112 non fit. the f test is using probability (f.statistic) compared to α. if α> probability (f.statistic) then the entire independent variable affects the dependent variable. based on the processed data in table 2 above, it shows that the f test α (0.05) is greater than prob (f.statistik) which is 0.000000 (0.05> 0.000000), it can be concluded that independent variables simultaneously affect the dependent variables. 8. test adjusted r square / degree of determination the determination coefficient or r square (r2) is the amount of the independent variable contribution to the dependent variable. the higher the coefficient of determination, the higher the ability of the independent variable to explain variations in changes in the dependent variable. the amount of adjusted r-squared is 0.820624 or 82.0624%. it can be concluded that the effect of sbis bonuses, third party funds (dpk), inflation, non performing financing (npf), and loan interest rates (sbk) is 82.0624%. while the remaining 17.9376% (100% 82.0624%) is influenced by other variables that not included in this study, such as sbi interest rates, the value of returns received by third party funds and others. 9. multiple regression analysis based on the data presented in the table above in the adjusted r-squared test, it will then be analyzed to determine the effect of sbis, non performing financing (npf), inflation, third party fund (dpk) and credit interest (sbk) bonuses on financing of the agricultural sector by islamic banking in indonesia. data management results with eviews 10 from the table above are: tari lestari 113 agrl = β0 + β1sbis + β2dpk β3inf + β4npf β5sbk + e agrl = -6676,333 + 1388,459sbis + 0.023822dpk 322.4636inf + 8.197568npf 382.0858sbk + e the statistical interpretation of the regression equation model above is as follows: 1. the bonus variable value of bank indonesia sharia certificate (sbis) is 1388,459, it means that each 1 percent increase in bonus of bank indonesia sharia certificate (sbis) will cause an increase in agricultural financing about 1388,459 billion, with the note that other variables are considered constant. 2. the variable value of third party funds (tpf) is 0.023822. it means that if each increase of 1 billion third party funds (tpf) will cause an increase in agricultural financing by 0.023822 billion, with the note that other variables are considered constant. 3. if the inflation variable is -322.4636 and it means that if every 1 percent increase in inflation will cause a decrease in agricultural financing of 322.4636 billion, with the note that other variables are considered constant. 4. if the variable non performing financing (npf) is 8.197568 and it means that if every increase of 1 billion non performing financing (npf) will cause an increase in agricultural financing of 8.197568 billion, with the note that other variables are considered constant. 5. the results of the analysis stated that the credit interest rate (sbk) did not affect the financing of islamic banks in the agricultural sector. journal of islamic economic laws-january, vol. 2, no. 1, 2019 114 economic interpretation the interpretation of the results of this study is as follows: 1. the influence of sbis bonuses on islamic bank financing in the agricultural sector based on the results of the time series data estimation, it shows that the bonus of bank indonesia sharia certificate (sbis) affects the financing of islamic banks in the agricultural sector by islamic banks. the bank indonesia sharia certificate (sbis) bonus has a positive and significant effect on the financing of islamic banks in the agricultural sector in 2014 2016. this proves that the increase of sbis bonus results contributes to the increase in the allocation of funds to finance the agricultural sector. with these conditions, the right and effective innovation of agricultural sharia financing products is needed. high dependence on natural conditions makes the agricultural sector a challenge for islamic banking. this research finding is supported by previous research beik (2013). the results showed a coefficient with a positive and significant direction. 2. the influence of third party funds (tpf) on the islamic bank financing in the agricultural sector based on the estimation of time series data, it shows that third party funds (dpk) affect the financing of islamic banks in the agricultural sector. third party funds (tpf) have a positive and significant effect on the islamic bank financing in the agricultural sector 2014-2016. this means that third party funds (dpk) contribute positively to the financing of islamic banks in the agricultural sector. the greater the third party fund (dpk) collected by islamic tari lestari 115 banks, the more likely the bank will collect third party funds (tpf) for financing activities. 3. the influence of inflation on the islamic bank financing in the agricultural sector based on the estimation of time series data , it shows that inflation affects the financing of islamic banks in the agricultural sector. inflation has a negative and significant effect on the islamic bank financing in the agricultural sector in 2014 2016. this means that there is a negative relationship between the distribution of financing of islamic banks in indonesia with the inflation rate. if inflation gets higher then the financing of islamic banks in the agricultural sector tends to decline. this research is supported by previous research conducted by dahlan (2015) which showed a coefficient with a negative and significant direction. 4. the influence of non performing financing (npf) on the of islamic bank financing in the agricultural sector based on the results of the time series data, the estimation shows that non performing financing (npf) affects the financing of islamic banks in thse agricultural sector. nonperforming financing (npf) has a positive and significant effect on the financing of islamic banks in the agricultural sector in 2014 2016. this means that the increase in the number of non-performing financing (npf) will increase the amount of islamic bank funds to the public. 5. the influence of loan interest rates (sbk) on islamic bank financing in the agricultural sector journal of islamic economic laws-january, vol. 2, no. 1, 2019 116 based on the estimation of time series data, it partially shows that the loan interest rate (sbk) has a negative and insignificant effect on islamic banks financing in the agricultural sector during 2014 2016. in other word, if loan interest rate (sbk) rises or falls, the islamic bank will continue to finance the agricultural sector. conclusion in conclusion, it can be concluded that variable of indonesia sharia certificates (sbis), non performing financing (npf), inflation, third party funds, and loan interest ratestogether influence the financing of islamic banks in the agricultural sector in indonesia . bonus of bank indonesia sharia certificates, third party funds (dpk), and non performing financing (npf) have a significant positive effect on the financing of islamic banks in the agricultural sector in indonesia, which means that any increase in the those variables will increase the financing of islamic banks in the agricultural sector. inflation has a significant negative effect on the financing of islamic banks in the agricultural sector, which means that if inflation increases, the financing of the agricultural sector tends to decline. loan interest rates (sbk) has an insiginificant influence on financing in the agricultural sector, which means that if loan interest rates increase or decrease there is no effect on financing in the agricultural sector. based on the adjusted r-squared test, it can be concluded that the effect of bonuses on bank indonesia sharia certificates (sbis), non performing financing (npf), inflation, third party funds, and loan interest rates is 82.0624%, then the remaining portion tari lestari 117 17.9376% influenced by outside research model variables. the existence of islamic banks is needed by the people of indonesia, especially who has small and weak economies like in the agricultural sector. therefore financing must be considered and given to fully support the middle and small communities so they can get easy business capital access. this research encourage islamic banking practitioners to pay more attention to islamic bank financing for farmers in indonesia. in addition, the level of non performing financing (npf) which tends to increase needs to be a concern in order to increase productivity and effectiveness. reference ashari, s., 2005. prospek pembiayaan syariah untuk sektor pertanian. forum penelitian agro ekonomi, 23(2), p.132. beik, i.s., 2013. analisis faktor-faktor yang mempengaruhi pembiayaan syariah untuk sektor pertanian di indonesia. agro ekonomi, 2. dahlan, i.a.r., 2015. pengaruh tingkat bonus sbis dan tingkat inflasi terhadap penyaluran pembiayaan bank syariah di indonesia. equlibrium, 3(1), p.65. dajan, a., 1996. pengantar statisitk jilid ii, jakarta: pt. pustaka lp3es. dendawijaya, l., 2003. manajemen perbankan ed. 2., jakarta: salemba empat. ghozali, i., 2006. aplikasi analisis multivariate dengan progam spss, semarang: universitas diponegoro. herman, d., 2006. pasar finansial dan lembaga-lembaga journal of islamic economic laws-january, vol. 2, no. 1, 2019 118 finansial, jakarta: bumi aksara. karim, a., 2010. analisis fiqh dan keuangan, jakarta: raja grafindo persada. karim, a., 2004. bank islam : analisis fiqh dan keuangan, jakarta: raja grafindo persada. kasmir, 2001. bank dan lembaga keuangan lainnya, jakarta: raja grafindo persada. kasmir, 2010. dasar-dasar manajemen 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surakarta: universitas muhammadiyah surakarta. journal of islamic economic laws vol. 2, no. 1 january 2019: 1-29 1 muḍāraba fund of bank jateng syariah cabang surakarta (bjscs) according to dewan syariah national-majelis ulama indonesia (dsn-mui) dyah ayu faculty of islamic studies, universitas muhammadiyah surakarta email: adyah095@gmail.com abstract this study aims to illustrate the concept of muḍāraba fund applied by bjscs. the type of this research is descriptive and qualitative. this study describes the procedures and implementation of muḍāraba fund as well as its compliance with the fatwa of dsnmui. the employed data in this study was obtained through interviews with the finansial officer as representatives of bjscs who act as key informants. the results reveal that the concept of muḍāraba fund in bjscs has not been fully in compliance with the fatwa of dsn-mui. it is based on firtsly, fatwa of dsn-mui number (6) stating that “the sharia finansial institution as the provider of funds shall bear all losses resulting from muḍāraba unless the muḍarib (entrepreneur) makes a deliberate, negligent or counterproductive mistake.” secondly, fatwa of dsn-mui number (4c) stating that “provider shall bear all losses resulting from muḍāraba, and the entrepreneur shall not bear any harm except from consequential errors, negligence or breach of consent.” in such cases the borrower shall bear the principal repayment. however, there is one thing that can bring bjscs closer to sharia compliance, that is, that the bank does not do restructuring unilaterally. rather, the bank and the customer come and sit together to discuss what is good for them. this initiatives finally eliminates the discrepancies. although in fact we expect that the bank should be bearing all losses because the losses incurred are not the fault of the entrepreneur. key words: muḍāraba fund, bjscs and fatwa of dsn-mui. journal of islamic economic laws-january, vol. 2, no. 1, 2019 2 introduction islam provides complete rules and guidance for our life in this world. the rule consists of three things, namely aqidah, sharia, and morals which are inseparable unity. the believers should practice sharia as proof of their faith. one role of sharia is to regulate how to conduct economic activities, including religious obligation on how to conduct economic transactions according to sharia (sri nuhayati and wasilah 2013). in view of paragraf above, we can say that in this context the existence of financial institutions is needed, because it serves as an intermediary between supply unit and demand unit. it can not be denied that a country’s economy can not be separated from financial institutions because it has the cash needed to develop a country’s economy. without cash, the economy will be jammed. however, the system of these financial institutions still leaves some problems, i.e. interest issue. many people disagree with the interest system, because there are certain implications following the application of interest. due to this problem, there emerged an effort to find an alternative to get the solution, that is by offering sharia-based financial institutions (syarafuddin et al 2013). one of sharia-based financial institution is a sharia bank. according to indonesian constitution 21/2008 concerning sharia banking, sharia banking is everything that concerns sharia bank and sharia business unit covering its institutions, business activities, and processes in conducting its business activities (muhammad 2009). in conducting its business activities, sharia financial institutions, including banks, are supervised by the national sharia board (dsn). dsn serves as the supervisor of sharia bank assuring that the business activities of islamic banks are in dyah ayu 3 accordance with islamic values, including in financing activities. for example, dsn specifies a fatwa on muḍāraba fund (fatwa dsn, 2000). the fatwa of the national sharia council (dsn) with respect to muḍāraba fund, some of which are: 1) fatwa of dsn number 07 / dsn mui / iv / 2000, stating that, “lks (sharia financial institution) as the provider of funds shall bear all losses resulting from muḍāraba, unless the muḍarib (enterpreneur) makes a deliberate, negligent or counterproductive mistake. 2) the fatwa of the national sharia council number: 07 / dsn-mui / iv / 2000 on muḍāraba fund (qiraḍh), harmonious and financing terms in the fourth point explains that, “the profit of muḍāraba is the amount obtained as the excess of capital” (ichwan sam 2014). as we all know, one of the banks that provide muḍāraba fund services is bjscs. in addition to muḍāraba, some other financing services used in bjscs are: musyāraka and murabaha. however, muḍāraba transactions are often used for business capital or bmt development. however, majority of the public view that sharia banks are only a matter of label, while the national sharia council of the indonesian council of ulama (dsn-mui) as controls within the system is implemented within the sharia bank. in order to remove this image, it is necessary to have a match between muḍāraba fund applied by bjscs with muḍāraba theory which has been specified by the national sharia council fatwa of the indonesian ulema council (dsn-mui). with this as background, the research will survey those banks applying muḍāraba contracts and find out whether their implementation and performance are in compliance with the national sharia council fatwa of the indonesian council of journal of islamic economic laws-january, vol. 2, no. 1, 2019 4 ulama (dsn-mui) or not. based on the above explanation, the question being investigated would be is the muḍāraba fund in bjscs in accordance with the fatwa of the national sharia council of the indonesian ulema council (dsn-mui)? departing from the formulation of the problem, this study aims to find out the analysis of fatwa dsn-mui about muḍāraba in bjscs. literature review previous studies to begin with, we will refer to previous researches as a reference in conducting further research. there are no previous research is done in the same manner with what we would be conducting now. however, some previous research can be used as a source of reference and as a preparation ground before doing another advanced research. try subakti (2016) in his research entitled tinjauan hukum islam terhadap pelaksanaan akad pembiayaan muḍāraba di bank syariah mandiri cabang sumenep discusses the merging of muḍāraba with murabaha contract. this agreement is contrary to islamic law and it was implemented only to the muḍāraba fund at bank syariah mandiri branch of sumenep. that research is different from the research being conducted here. the research done by try subakti discusses the merging of muḍāraba contract with murabaha, while in this research we will discuss muḍāraba fund and its conformity with fatwa of dsn. however, previous research also provides benefits for us in that it gives description of the contract in islamic law. lutfiana (2015) in his research entitled analisis pelaksanaan fatwa dsn nomor: 07/dsn-mui/2000 tentang pembiayaan muḍāraba (studi di koperasi jasa keuangan syariah cemerlang dyah ayu 5 weleri) discusses the mechanism for determining margin of muḍāraba fund at cooperation for sharia finance service (kjks) weleri branch. the practice of muḍāraba fund in kjks weleri branch are inappropriate because some of that financing resemble debt contract. mudāraba financing in kjks has not been based on profit-sharing that is purely sharia, but it still uses revenue sharing principle. from this we know that there are some practices that have not been in accordance with jurisprudence. this research is almost identical to the research that we will do here. while that research focuses on the margin or profit obtained by the kjks, our current study will focus more on the conformity of muḍāraba transaction to the fatwa of dsn-mui. definition of muḍāraba contract according to the fatwa of dsn-mui, muḍāraba is a contract of cooperation between two parties where the first party (ṣhaḥib al-māl, sharia financial institution) provides all capital, while the second party (amil, muḍarib, client) acts as the manager, and the business profit is divided among them according to the agreement set forth in the contract (ichwan sam 2014). etymologically, the word muḍāraba comes from the word ḍarab. in arabic, this word is among the words that have many meanings, including: hitting (ḍharaba ahmad al-kalba); flowing (ḍaraba damuhu); swimming (ḍaraba fi-al mā’); and walking (ḍaraba fi al-arḍ). the changes that occur in the word depend on the following words and the context that make them. in the qur’an, the word muḍāraba is not mentioned clearly. the qur’an only reveals the musytaq of the word ḍarab which is repeated as much as 58 times (mujahideen, 2016). journal of islamic economic laws-january, vol. 2, no. 1, 2019 6 technically, muḍāraba is a business agreement between the owner of the fund and the fund manager to conduct the business; profit is divided on the basis of profit-sharing ratio according to the agreement of both parties, whereas in case of loss it will be borne by the owner of the fund, unless caused by misconduct, negligence, and violation by the fund manager. the muḍāraba contract is a funding based on trust, namely trust from the owner of the fund to the fund manager. in english, muḍāraba is known as silent partnership. the owner of the fund which is the investor is called beneficial ownership, and the fund manager is entrepreneur (salman, 2012). according to the scholars, muḍāraba or qiraḍh is defined as follows (suhendi, 2007): 1. according to the fuqaha, muḍāraba is a contract between two parties (persons) bear each other, one party surrenders his property to another to trade with a predetermined portion of the profits, such as a half or a third under predetermined conditions. 2. according to hanafi scholars, muḍāraba is looking at the purpose of two committed parties who are united in profit because the property is left to the other and has the services of the treasure manager. so muḍāraba is a syirkah contract in profit, one party owner of property, and the other party the service owner. 3. the malikiyya scholars argue that muḍāraba is a representative contract, in which the owner of the property issues his property to the other for trading with the prescribed payment (gold and silver). 4. imam hanabilah argues that muḍāraba is like the owner of a property surrendering his property of a certain size to a dyah ayu 7 person who trades with a share of the known gains. 5. sayyid sabiq is of the opinion that muḍāraba is a contract between two parties in which one party issues a sum of money to be traded provided that the profits are divided into agreements. 6. according to imam taqiyuddin, muḍāraba is a financial contract to be managed by trade. having known some of the notions described by the scholars above, it may be understood that muḍāraba or qiraḍh is a contract between two or more persons, where the first party provides business capital, while the other provides labor and expertise provided that profit is shared between them by agreement which they have set together. in the contract muḍāraba there is an element of syirkah or cooperation. it’s just not the cooperation of wealth with wealth or energy with energy, but between the wealth with energy. types of muḍāraba contract the dsn-mui fatwa does not explain the types of muḍāraba contracts, but generally the muḍāraba contract is divided into two types: unrestricted silent partnership (muḍāraba mutlaqah) and restricted silent partnership (muḍāraba muqayyadah). 1. muḍāraba mutlaqah in principle, this type of muḍāraba is loose in nature, in which ṣhaḥib al-māl does not specify any restrictions or conditions to muḍarib. this form of muḍāraba is called muḍāraba mutlaqah or in english known as unrestricted investment account (uria) (karim, 2004). journal of islamic economic laws-january, vol. 2, no. 1, 2019 8 as for the type of muḍāraba mutlaqah, it is a form of cooperation between ṣhaḥib al-māl and muḍarib whose scope is very wide and not limited by the specification of business type, time, and business area. in the expression of jurisprudence, it is often exemplified by the expression if ’al ma syi’ta (do as you please) (mujahidin, 2016). in muḍāraba mutlaqah, fund managers have the authority to do anything in the conduct of business for the success of muḍāraba objectives. however, if it turns out that the fund manager is negligent or fraudulent then the fund manager must be responsible for the consequences. in addition, if there is a loss that is not the negligence or fraud of the fund manager then the loss will be borne by the owner of the fund. the type of muḍāraba mutlaqah employed by sharia banks, enables customers who deposit their funds not to impose restrictions over syariah banks in using the funds they keep. islamic banks are free to design what kind of contracts to whom the financing is given, when channeling the fund, and what kind of business they should be financing. therefore, the principle of muḍāraba mutlaqah gives more flexibility for the bank (salman, 2012). 2. muḍāraba muqayyadah it is a type of muḍāraba where the owner of the fund provides restrictions to the manager concerning fund, location, manner and or object of investment or business sector. if the fund manager acts contrary to the conditions given by the fund owner, then the fund manager must be responsible. the type of muḍāraba muqayyadah employed by syariah banks, enables customers who deposit their funds in syariah banks to give certain restrictions to islamic banks in using the dyah ayu 9 funds stored. on this principle, the customer provides one or several restrictions such as what business should be financed (salman, 2012). in the practice of modern sharia banking, muḍāraba muqayyadah is divided into two, namely (mujahidin, 2016): a. muḍāraba muqayyada on balance-sheet. in this tipe of muḍāraba the flow of funds is recorded in the bank balance sheet. aside from bringing together investors and entrepreneurs, banks are also involved in the business project. profit-sharing involves three parties, namely banks, investors, and entrepreneurs. the amount of the ratio of each party depends on the agreement. b. muḍāraba muqayyadah off balance-sheet. in this type, bank only acts as arranger only and the transaction is not recorded in bank balance, but only recorded in administrative account only. profit-sharing involves only investors and entrepreneurs. the profit-sharing ratio depends on the agreement between the two parties and the bank only earns a commission from bringing the two together. pillars and conditions of muḍāraba contract 1. pillars of muḍāraba according to the shafi’iyah scholars (suhendi, 2007), the pillars of muḍāraba (qiraḍh) are six, namely: 1) the owner of the goods who handed over his goods. 2) the person who works, that is managing the goods received from the owner of the goods. 3) muḍāraba contract, done by the owner with the goods manager. 4) the principal or capital. 5) amāl, i.e. the work of treasury management to generate profits. 6) profits. journal of islamic economic laws-january, vol. 2, no. 1, 2019 10 meanwhile, according to the hanafi scholars, the pillars of muḍāraba are only the consent (from the owner of capital) and the qabul (from the merchant or the executive) (ali hasan, 2003), using a pronunciation that indicates the meaning of muḍāraba. according to majority of the scolars, there are three muḍāraba pillars: 1) āqaid, the owner of capital and manager (‘amil / muḍarib), 2) ma’qud ‘alaih, i.e. capital, labor (power) and profit. 3) ṣigt, i.e. ijab and qabul. considering some opinion regarding pillars of muḍāraba above, it can be understood that basically the factors that must exist (pillars) in the muḍāraba contract is: a. the doer (owners of capital and business executors) the parties involved in muḍāraba contract is the same as those involved in the sales contract, plus an additional component, namely the profit ratio. with regard to the first component (the parties involved), it should be clear by now. in the muḍāraba contract, there must be at least two parties. the first party acts as the owner of capital (ṣhaḥib al-māl), while the second party acts as the executing business (muḍarib or ‘amil). without these two actors, the muḍāraba contract is deemed invalid. b. the object of muḍāraba contract (capital and labor) the second pillar is a logical consequence of the actions taken by two parties. the owner of capital gives up his capital as the subject of muḍāraba, while the business actor gives up his work as the object of muḍāraba. capital can be given either in the form of money or in the form of goods equivalent to a given value of money. while the laber offered could be one’s skill, like: skill to sell a good,skill to manage and run a company, and so dyah ayu 11 forth. without these two, the muḍāraba contract will not exist the jurists actually do not allow the capital of muḍāraba in the form of goods. it must be cash money. it is because price of goods can not be estimated, and that would result in uncertainty (gharar) of muḍāraba capital (karim, 2004). however, the hanafi scholars allow it and the value of the goods must be agreed upon the moment the contract takes place. the jurists have agreed not to allow muḍāraba with debt. without a capital deposit, the provider of capital (ṣhaḥib al-māl) is considered contributive, even though the capital manager (muḍarib) has worked. the shafi’i and maliki scholars forbade it because it corrupted the legality of the contract. c. consent of both parties (ijab-qabul) the agreement of both parties is a consequence of the principle ‘an taraḍi minkum (as both please). here both parties must be willing to agree to bind themselves in the muḍāraba contract. the fund owner agrees with his role to contribute funds, while the business actor agrees with his role to contribute his labor. d. profit ratio ratio is the unique pillar in the muḍāraba contract, which is not there in the contract of sale. this ratio reflects the reward to be accepted by both muḍāraba parties. muḍarib gets rewarded for his labor, while ṣhaḥib almāl gets rewarded for capital inclusion. it is this profit ratio that will prevent disputes between the two parties regarding profit-sharing (karim, 2004). journal of islamic economic laws-january, vol. 2, no. 1, 2019 12 2. conditions for muḍāraba as for conditions of muḍāraba are as follows: 1) capital or goods delivered are in the form of cash. if the goods are in the form of gold or silver bars, gold ornaments, or other articles, the muḍāraba is void. 2) the person involved in the contract is required to do taṣharruf, therefore the contracts are invalid for small children, crazy people, and people who are inability. 3) the share of profit that will go to the manager and the owner of capital must be clear in term of its percentage, for example half, onethird, or quarter, 4) labor (al-a’māl), 5) profit. muḍāraba contract employed by sharia bank fatwa of dsn-mui does not discuss muḍāraba contract of sharia banking. however in general, the explanation of muḍāraba contracts can be summarised in what follows. the scheme discussed is a scheme that applies directly between two parties, namely ṣhaḥib al-māl who is directly connected to muḍarib. this scheme is normal scheme that can be found in the jurisprudence literature. the practice of muḍāraba is exemplified by the prophet and the companions and the muslims afterward. in this case what happens is direct financing between ṣhaḥib al-māl (as surplus unit) with muḍarib (as deficit unit). in direct financing like this, the role of bank as intermediary institutions did not exist. these classical muḍāraba have special features, namely that the mutual relation between ṣhaḥib al-māl and muḍarib is personal and direct, and is based on mutual trust (amanah). ṣhaḥib al-māl just wants to give his capital to people whose profession and character is known well. such muḍāraba contracts are inefficient and less likely to be applied by the modern bank because of the following: dyah ayu 13 a. the banking system is a group investment, where they do not ersonally met each other. so it is very unlikely that there will be a direct and personal relationship. b. nowadays, many investments require large amount of funds, so it takes tens or even hundreds of thousands of ṣhaḥib al-māl to become funders for a specific project. c. poor teaching of islamic values has made it difficult for banks to assure guarantee for their distributed capital. to overcome these problems, especially the first and second ones, the contemporary scholars devise new innovations on the muḍāraba scheme, i.e. the muḍāraba contract which involves three parties. this additional one party is played by a sharia bank as an intermediary institution that brings ṣhaḥib al-māl with muḍarib, resulting in the evolution of the concept of direct financing into indirect financing. in the scheme of indirect financing above, bank receives funds from ṣhaḥib al-māl in the form of third party funds. these funds could be in the form of savings or deposits of muḍāraba with varying periods of time. furthermore, these collected funds are re-channeled by the bank into the form of financing that generates money. the profit from this financing channeling will be shared between banks and their third party or fund owners (karim, 2004). cancellation of muḍāraba contract the explanation of this contract the muḍāraba is not found in the dsn-mui fatwa, but there are some explanations in what cases muḍāraba is being void. the explanation are as follows (suhendi 2007): journal of islamic economic laws-january, vol. 2, no. 1, 2019 14 1. one or more pillars and conditions of muḍāraba is missing. if one of the conditions muḍāraba is not fulfilled, while the capital has been held by the entrepreneur and has been traded then the entrepreneur gets some of the benefits as wages. if there is a profit then the profit is for the owner of capital. if there is a loss then the loss is the responsibility of the owner of the capital because the entrepreneur is a worker who is only entitled to receive wages and not responsible for anything except for negligence. 2. entrepreneur intentionally abandon their duties as capital managers or contrary to the purpose of the contract. in such circumstances entrepreneur is responsible if there is a loss because he is the cause of loss. 3. if the executive or owner of the capital dies or one of the owners of capital dies, muḍāraba parnership becomes void. research method the type of research used in the preparation of this paper is field research, i.e. research by collecting data directly from the activities that have been done in the research work field (supardi 2005). this current research is analysing muḍāraba fund in bjscs. this study uses qualitative descriptive approach, i.e. research that observes some objects and then explains what he observed (morissan 2012). descriptive data are in the form of words gained from people’s writing. in another words, the compiler will describe systematically and accurately about the facts about muḍāraba transaction based on fatwa of dsn-mui. the method of collecting data in this research is by interview. interview is a way of collecting data by asking questions directly by the interviewer to the respondent about the data needed, and dyah ayu 15 the respondent’s answer was recorded by tape recorder (irawan soehartono 1998). researchers will conduct interviews directly to parties involved such as managers and employees who are responsible or understand about the mechanism of muḍāraba contract in bjscs. this interview was conducted to obtain data on the management of muḍāraba contract in bjscs. documentation of data collected are in the form, documents and brochures of bjscs. the method of data analysis is done by qualitative descriptive method. it aims to describe current problem based on data about implementation of muḍāraba contract in bjscs. analysis of the data is done by recording, analyzing, and applying inductive approach. those activities are used to describe the results of research that is specific in nature. afterwards, the general conclusions are withdrawn. discussion muḍāraba in the perspective of jurisprudence is where the owner of capital (ṣhaḥib al-māl) handing his capital to the workers (muḍarib) for trading. while the trade advantage is divided according to mutual agreement (muhammad 2007). muḍarib in this case contributes his labor, time, and management of its business in accordance with the provisions written in the contract, one of them is to achieve profit that are divided between capital owners and muḍarib based on mutually agreed proportions. however, in case of any loss the bearer of it is the owner of the capital only (saeed, 2004). muḍāraba-based financing is a business contract between sharia financial institution (lks) as the owner of fund and customer as entrepreneur or fund manager. bjscs and its journal of islamic economic laws-january, vol. 2, no. 1, 2019 16 customers use a rasio of profit-sharing in its business activities. the profit or loss will be determined during the designing of contract. dsn-mui issued a fatwa regarding the implementation of muḍāraba fund to be a guide for the parties involved. muḍāraba fund as stated in the dsn-mui fatwa is the financing channeled by lks to other parties in order to finance a productive business. in this financing, the lks as ṣhaḥib al-māl (owner of the fund) will finance 100% of the needs of a project, while the entrepreneur (client) acts as muḍarib or business manager (ichsan sam, 2014). in this muḍāraba fund, there is a common goal to achieve, namely to gain profit (called profit-sharing) which is gained as a surplus of business capital. conditions of profit to be met in the revenue share, are: 1) profits must be shared for both parties and should not be enjoyed for one party only. 2) both parties shall know each others when the contract is agreed upon; shall decide proportionate rasio for profit-sharing. changes in the ratio should be based on agreement. 3) the provider of the fund shall bear all losses resulting from muḍāraba and the manager shall not be liable for any damages except as a result of deliberate misconduct, negligence or breach of agreement. analysis of financing side in muḍāraba fund, bjscs as the owner of capital channels funds to customers for productive enterprises. the business run by customer must generate profit for both parties. it can be seen from the fatwa of dsn-mui with regard to the conditions of financing in points (1), which states: “muḍāraba fund is a financing channeled by lks to other parties for a productive dyah ayu 17 business.” therefore at this point bjscs has been in accordance with dsn-mui. bjscs provides 100% funds to customers who apply for muḍāraba fund for running a business. the amount of financing is stated at the beginning of the contract and money will be provided in cash by bjscs. therefore, bjscs as ṣhaḥibal-māl is only supervising and customers as muḍarib only contribute his labor and expertise. funds provided by bjscs to customers are in accordance with the fatwa of dsn-mui in points (2) and (5). the point (2) states that, “in this financing the lks as ṣhaḥib al-māl (the owner of the fund) will finance 100% of the needs of a project, while the entrepreneur (client) acts as muḍarib or business manager.” while point (5) states “the amount of financing funds should be clearly stated in cash and not receivables.” bjscs (as ṣhaḥib al-māl) agrees with the customer (muḍarib) for the business or project undertaken. distribution of financing benefits, duration, muḍāraba repayment system is done by installments or paying respite. it can be said that in determining the period of time and refund, bjscs has complied with the fatwa of dsn-mui at point (3), stating that: “business duration, refund procedure, and profit-sharing are determined based on agreement of both parties (lks with employers).” bjscs provides funding, then hands it over to customers as muḍāraba fund and customers must honestly notify all matters relating to the results of its management. in this case bjscs refers to the principles of sharia, namely the principle of transparancy, ease, and also not off with supervision, although bjscs does not supervise directly in its management. bjscs parties provide freedom in the management of their business. journal of islamic economic laws-january, vol. 2, no. 1, 2019 18 this is what distinguishes bjscs from conventional banks. although the concept is almost the same, but both differ in terms of contracts devised and profit taking. another difference lies in its organizational structure, where a sharia supervisory board (dps) is set up to oversee bjscs products. in principle, the product must be free from elements that are not allowed by sharia. the products offered are based on the fatwa of dsn-mui in point (4) stating that “muḍarib may conduct various business which has been mutually agreed and in accordance with sharia, and lks does not participate in the management of the company or project, but has the right to coach and supervise” and on point (5a) stating that “business activities are the muḍarib’s executive rights without the funder’s intervention, but he has the right to do supervision” and point (5b) stating that “the fund provider shall not narrow the manager’s actions in such a way as to impede the achievement of the muḍāraba objective, i.e. the profit.” in muḍāraba fund in bjscs, there are times when customers experience a loss or failure in the business they are running. if the customer suffers a pure loss such as fire then the customer’s principal deposit in bjscs will be stalled as agreed at the beginning of the contract. failure of customers will also bring effect to operational activities of bjscs. if the financing is getting worse then it is said that muḍāraba fund is at stake. profit-sharing in muḍāraba fund, as carried out by bjscs, depends much on muḍarib’s business, while muḍarib income depends on the business condition and the incurring cost in the process of business realization. in this muḍāraba fund, muḍarib earns profit or profit-sharing because of their labor. ṣhaḥib al-māl gains profit-sharing because of the capital given to muḍarib and muḍarib undertakes business well and does not neglect. when dyah ayu 19 muḍarib is bankrupt and there is no profit-sharing, muḍarib is still required to restore initial capital financing even though the loss is not caused by muḍarib errors. this fact shows that the muḍāraba fund is still not based on ethics, effort, work, and responsibility that must exist in all forms of cooperation in islam. in bjscs, there is a term called “discretion”. it is a facilitation of installment payment for customers who experience business failure such as fire that is not caused by engineering or negligence muḍarib. when the business starts over, bjscs will restructure its financing. the monthly payment for installment is reduced, or the payback period is extended according to customer’s ability. if the customer is still unable to pay the financing, then the financing amount will be lowered. that is so as to lightens the financing customer’s expense. however, if the customer is still unable to pay the principal repayment, bjscs will issue a warning letter. the first warning, second warnings, and last warnings. if the customer still cannot pay, then bjscs is allowed to confiscate physical asset of customer or in other words, it was under bank supervision. the action taken by the bjscs in dealing with those problems should refer to the dsn-mui fatwa in the first part of the financing provision, point (6) which states “lks as the provider of funds shall bear all losses resulting from muḍāraba unless the muḍarib (customer) makes a deliberate, negligent or counterproductive mistake,” and in the second section on the terms and conditions of financing point (4) number (c) which states “providers bear all losses the consequences of muḍāraba and managers shall not be liable for any damages except as a result of deliberate misconduct, negligence or breach of agreement.” in such cases, the customer shall bear the principal journal of islamic economic laws-january, vol. 2, no. 1, 2019 20 installment. however, there is one thing that can bring the bjscs closer to sharia compliance, that is, that the bank does not make restructuring unilaterally. rather, the bank and the customer come and sit together to discuss what is good for them. this initiatives finally eliminates the discrepancies. although in fact we expect that the bank should be bearing all losses because the losses incurred are not the fault of the customer. basically, all islamic financial institutions are the same. each financial institution must have its own rules in serving the customer. bjscs is of macrofinance institutions because it provides considerable funding for customers. bjscs imposes rules to customers applying for muḍāraba fund to submit their land certificate. referring to the fatwa of dsn-mui, the collateral given by bjscs to the customer is in accordance with the dsn-mui fatwa in the first section of point 7, stating that: “in principle, in muḍāraba fund there is no collateral. however, in case of muḍarib is deviating, lks may request a guarantee from muḍarib or a third party. this collateral can only be disbursed if muḍarib is proven to be in violation of matters agreed upon with the contract.” bjscs analyses customers who apply for funding. the analysis will be carried out by the finance analyst with assessment and results of interview, fulfilment of requirement, collaterals and surveys. the customer will be notified regarding payment procedures as well as profit-sharing, also the agreement of both parties. profit margins have been set by the bank. the minimum percentage is 12.5%. the bank can sell more than 12.5%, depending on the customer’s ability. margin applied to each person may change, although the stipulation is the same, i.e. margin does not change and is the same as what was agreed at dyah ayu 21 the beginning of the contract until the contract reach its maturity. with regard to the profit-sharing calculation, bjscs depends on the agreement at the beginning of the contract. with regard to the funding procedure, bjscs has been in compliance with the dsn-mui fatwa. it can be seen in in points (8). the entrepreneur criteria, financing procedures, and profitsharing mechanisms are regulated by the lks by considering dsn-mui fatwa. the margin payment system in muḍāraba fund uses regular and irregular means. if the installment is irregular then the customer will pay the margin first. customer takes one year to pay margin. after one year the customer will pay the principal financing. bjscs operational activities are not charged to customers. basically, operational costs, margin payments or profitsharing, as well as administrative costs are the same. so it can be said that this is in accordance with the fatwa dsn-mui on terms of financing points (9), namely: “operational costs that are charged to muḍarib.” bjscs has never committed a violation to its customers. in its operational activities, bjscs branch is supervised by the financial service authority (ojk) and sharia supervisory board (dps) so it will be very unlikely to commit fraud to customers. if any errors or defects are of an administrative nature and are not of a financial nature, then they are not detrimental to the customer. considering the fatwa of dsn-mui, this concept has been in accordance with the dsn-mui. it can be seen in point (10), which states that: “in the case of funding (lks) not performing obligations or violating agreements, muḍarib shall be entitled to compensation or expenses incurred.” journal of islamic economic laws-january, vol. 2, no. 1, 2019 22 analysis of the pillars and terms of financing the aptness in legal action can be seen when the bjscs and the client are able to work on a muḍāraba contract. maturity and age are the benchmarks in determining muḍāraba fund. bjscs provides an age restriction on customers, which is 21 years. bjscs is a shariah financial institution overseen by syariah supervisory board, financial services authority, and simultaneously bjscs act as ṣhaḥib al-māl. customers who will apply the muḍāraba fund will be asked for a photo of their id and collateral. in this case it can be said that both parties are competent in the the matter of law. referring to the fatwa of dsn-mui, then this has been in accordance with the fatwa of dsn-mui. it was in the points (1) on the pillars and terms of financing which states that, “providers of funds (ṣhaḥib al-māl) and entrepreneur (muḍarib) must be proficient in before law.” bjscs will ask customers who apply for muḍāraba fund on the purpose of the financing. bjscs will not provide financing without knowing its purpose and usefulness. bjscs should also know how the customers’ daily lives are, whether they can be responsible or not. therefore, if bjscs accepts the muḍāraba fund request then ijab and qobul will be held. at the moment of ijab and qobul, customers will be notified information about accounts receivable, margin, and monthly installments. he will also be notified about the agreement of both parties on what date the customer must pay his installments is. referring to the fatwa of dsn-mui, the ijab and qobul made by bjscs with the customers have been in accordance with the dsn-mui fatwa. it was in point (a) on the pillars and conditions, points (a), “bid and acceptance must explicitly indicate the purpose of the contract.” the margin percentage is already determined by bjscs. dyah ayu 23 the minimum percentage is 12.5% and the bank can sell to customers more than 12.5%. this depends on the customer’s ability and his acceptance. the offer is made at the time of the contract with the same terms, i.e. the margin does not change and the same as what was agreed at the beginning of the contract. margin provisions in muḍāraba fund in bjscs are determined on the basis of mutual agreement. nominal percentage depends on the amount of financing proposed by the financing customer. referring to the fatwa of dsn-mui, then ijab and qobul in bjscs with the customer has been in accordance with the dsnmui fatwa. it was in points (b) on the terms and conditions of financing, which states that: “receipts from the offer is made at the time of contract.” when the contract takes place, bjscs will check the identity of customer and completeness of the requirements for muḍāraba fund. bjscs also takes photographs and recording during agreement of the contract for documentation purpose. the financing agreement will be made by a notary if the finances is valued more than 100 million rupiah. in implementing muḍāraba fund agreement, bjscs uses a written agreement signed by both parties. referring to the fatwa of dsn-mui, then ijab and qobul in bjscs with the customer has been in accordance with the dsn-mui fatwa. it was in points (c) on the terms and conditions of financing, which states that: “the contract should be put in writing form, by correspondence or by means of modern means of communication.” bjscs provides capital to customers. capital given to customers is in the form of money and it is given to him in cash. bjscs will provide the needed amount of capital depending on what business will be run by customers. referring to the fatwa journal of islamic economic laws-january, vol. 2, no. 1, 2019 24 of dsn-mui the ijab and qobul at bjscs with the customer have been in accordance with the dsn-mui fatwa. it was on the terms and conditions of financing in points (a), which states that “capital clearly known number and type”, and in points (b) which states that “capital may be in the form of money or goods assessed. if capital is provided in the form of an asset, then the asset must be valued at the time of the contract”, and in points (c) which states that “capital shall not be in the form of receivables and shall be paid to muḍarib, whether gradually or not, in accordance with the agreement in the contract.” profit-sharing between the customer and the bjscs has been agreed at the beginning of the contract or has been established during qobul and ijab moment. the rasio of profit-sharing later on will be the basis for dividing loss and income of customers. the revenue share may change accordingly at the earlier agreement and profit is shared proportionally to both parties. according to our point of view, the determination of profitsharing in muḍāraba fund in bjscs is in accordance with the principles of muḍāraba in islamic law. it is based on the dsnmui fatwa on the pillars and the terms of financing in point (a) which stated that: “it shall be reserved for both parties and shall not be required for one party only”, and in point (b), which states that: “the proportionate share of profits to each party shall be known and declared at the time of the agreed contract and shall be in percentage ) of the profits as agreed. changes in the ratio must be in agreement.” thus, the profits of the business will be distributed according to the proportion of equity participation of each party or in mutual agreement. the team of analysts from bjscs will analyze the customer, whether the customer who will perform the financing muḍāraba dyah ayu 25 are honest and trustworthy when doing the contract. bjscs will also disclose letters of agreement to customers regarding the rules that must be obeyed by customers. referring to the fatwa of dsn-mui, then then bjscs has been in accordance with the fatwa of dsn-mui. it was in points (5c) which states that: “the manager must not violate the sharia law in his actions relating to muḍāraba, and must comply with the customs of that activity”. analysis of several legal financing terms if the customer proposes muḍāraba fund, bjscs will conduct the analysis. muḍāraba fund is analyzed according to customer needs. if the capital is for a project, then the financing is in accordance with the value and time of the project. considering the dsn-mui fatwa on the legal provisions of financing, the bank will analyze the needs of customers, only then it can make a decision. according to the fatwa of dsn-mui, this legal provision has been in accordance with the fatwa of dsn-mui in points (1) which states that: “muḍāraba can be limited to a certain period.”, and point (2) which states that: “contracts should not be linked (mu’allaq) with an event in the future that is not necessarily the case.” in principle, bjscs does not specify any compensation. however, the customer is obliged to pay the principal installment. this financing will be given to people who are entrusted to manage funds by bjscs. considering the dsn-mui fatwa, the legal provisions in the financing has been in accordance with the fatwa of dsn-mui. it was in the third part of the legal provisions of point financing (3), namely: “basically, in muḍāraba there is no compensation because basically this contract is amanah (yad journal of islamic economic laws-january, vol. 2, no. 1, 2019 26 al-amanah), except the result of accidental mistakes, negligence, or violation of agreement.” so far, customers and bjscs have never experienced disputes. bjscs as the owner of capital and syariah financial institutions is always overseen by dps. customers as capital managers are also given agreement and monitored by bjscs. in this case, the disputes between bjscs with the customer can not be said appropriate or inappropriate. it can be seen in the dsnmui fatwa in point (4), stating that: “if either party does not fulfill the obligation or if there is a dispute between the two parties, the settlement is made through the sharia arbitration board after no agreement is reached through deliberation.” conclusion after analysis is done, it can be concluded that the concept of muḍāraba fund applied in bjscs is less appropriate and not fully in accordance with the fatwa dsn-mui. we can say that if we are to see dsn-mui fatwa in point (6) stating that, “lks as the provider of funds shall bear all losses resulting from muḍāraba, unless the muḍarib (customer) makes a deliberate,” and in point (4c), which states that: “the provider bears all losses resulting from muḍāraba, and the manager shall not bear any harm except from consequential errors, negligence or breach of agreement.” the customer must bear the principal installment. however, there is one thing that can bring the bjscs closer to sharia compliance, that is, that bank does not make restructuring unilaterally. rather, the bank and the customer come and sit together to discuss what is good for them. this initiatives finally eliminates the discrepancies. although in fact we expect that bank should be bearing all losses because the losses incurred are not the fault of the customer. dyah ayu 27 in bjscs, there is a term called “discretion”. it is a facilitation of installment payment for customers who experience business failure such as fire that is not caused by engineering or negligence muḍarib. when the business starts over, bjscs will restructure its financing. the monthly payment for installment is reduced, or the payback period is extended according to customer’s ability. if the customer is still unable to pay the financing, then the financing amount will be lowered. that is so as to lightens the financing customer’s expense. however, if the customer is still unable to pay the principal repayment, bjscs will issue a warning letter. the first warning, second warnings, and last warnings. if the customer still cannot pay, then bjscs is allowed to confiscate physical asset of customer or in other words, it was under bank supervision. however, it can be said that bjscs is in accordance with the dsn-mui fatwa because prior to the restructuring, the bank and the customer have conducted deliberation first so that the decision is not taken unilaterally. suggestion after doing this research, the writer can provide input in the form of suggestions that benefit to all parties involved in research. according to the researchers there are some suggestions that might help bjscs to run and maintain muḍāraba fund under the dsn-mui fatwa as follows: 1. bjscs is advised to refine the muḍāraba contract about the principal installment imposed to the customer, if he fails with the condition that the failure is not from the mistake of the muḍarib. bjscs must find other solutions for the issue of principal payments, although there are many difficulties and obstacles in applying it. journal of islamic economic laws-january, vol. 2, no. 1, 2019 28 2. products that are in compliance with the sharia and the fatwa of dsn-mui should be maintained and developed. 3. for the sake of bjscs advancement, the bank is always required to serve its customers well in providing services. in order to achieve that aims, the bank should do socialization, so that the community understands the principles of channeling funds held by different sharia banks. references abdullah saeed. 2004. bank islam dan bunga. yogyakarta: pustaka pelajar. akhmad mujahidin. 2016. hukum perbankan syariah, jakarta: pt raja grafindo persada. adiwarman karim. 2004. bank islam analisis fiqh dan keuangan edisi ii. jakarta: pt raja grafindo persada. fatwa dsn nomor 07/dsn mui/iv/2000 hendi suhendi. 2007. fiqh muamalah. jakarta: pt raja grafindo persada. ichwan sam (penyunting). 2014. himpunan fatwa keuangan syariah dewan syariah nasional mui. jakarta: penerbit erlangga. irawan soehartono. 1998. metode penelitian sosial: suatu teknik penelitian bidang kesejahteraan sosial dan ilmu sosial lainnya. bandung : pt. remaja rosda karya. kautsar riza salman. 2012. akuntansi perbankan syariah berbasis psak syariah.padang: akademia permata. lutfiana. 2015. analisis pelaksanaan fatwa dsn nomor: 07/ dsn-mui/iv/2000 tentang pembiayaan muḍāraba di dyah ayu 29 koperasi jasa keuangan syariah cemerlang weleri, fakultas syariah dan hukum universitas islam negeri walisongo semarang, morissan. 2012. metode penelitian survei. jakarta: kencana. muhammad ali hasan. 2003. berbagai macam transaksi dalam islam. jakarta: raja grafindo persada muhammad. 2007. model-model akad pembiayaan di bank syariah. jakarta: pt raja grafindo persada. muhammad. 2009. model-model akad pembiayaan di bank syariah. yogyakarta: uii press. supardi. 2005. metodologi penelitian ekonomi dan bisnis. yogyakarta: uii press. sri nuhayati dan wasilah. 2013. akuntansi syariah di indonesia. jakarta: selemba empat. syarafuddin dkk. 2013. studi islam 2, surakarta: lembaga pengembangan al-islam dan kemuhammadiyahan ums. tri subakti. 2016.“tinjauan hukum islam terhadap pelaksanaan akad pembiayaan muḍāraba di bank syariah mandiri cabang sumenep. skripsi program studi hukum islam konsentrasi hukum bisnis islam universitas sunan kalijaga yogyakarta. journal of islamic economic laws vol. 5, no. 2, july 2022: 263-296 263 a bibliometric analysis of zakat literature from 1964 to 2021 indri supriani1, sri iswati2, firsty izzata bella3, yunice karina t4,5 1universitas brawijaya 2universitas airlangga 3universitas airlangga 4universitas islam indonesia 5university of southampton email: indri.supriani@ub.ac.id, iswati@feb.unair.ac.id, firsty.izzata.bella19@feb.unair.ac.id, yunice.karina@uii.ac.id, y.k.tumewang@soton.ac.uk abstract this research provides a comprehensive historical and present development of zakat literature through bibliometrics analysis extracted from the scopus database using publish or perish (pop), rstudio, and vosviewer. this study confirms that the literature on zakat has significantly increased during the last fifty years (1964–2021). this research identified that zakat literature had been comprehensively discussed by researchers across the nation from six aspects of research, namely the governance of zakat institutions; zakat as a poverty eradication tool; zakat compliance in an islamic perspective; zakat as a social security scheme; the intention to pay zakat; and the distribution of zakat. this study confirms that malaysian scholars and educational institutions have demonstrated a strong research commitment to the theme of zakat. keywords: zakat literature, bibliometrics approach, co-citation analysis. mailto:indri.supriani@ub.ac.id mailto:firsty.izzata.bella19@feb.unair.ac.id mailto:yunice.karina@uii.ac.id mailto:y.k.tumewang@soton.ac.uk 264 supriani et al. introduction zakat is the third pillar of islam (abdul rahman, 2007) and is an obligation for every muslim whose assets have reached nishab (full ownership) and haul (one lunar year) to be paid annually. there are eight groups of zakat recipients (mustahik) as stated in the qur’an surah at-taubah verse 60, namely the indigent, the poor, converts, slaves, debtors, fi sabilillah, and ibn sabil. one of the functions of zakat in economic studies is to accommodate the economic and social system among muslim communities (hudaefi et al., 2021). in particular, zakat can contribute to realizing greater maslahah (public needs) when it is deposited directly to authorized institutions. on the other hand, aggregately it can also be a solution to reduce poverty levels. more than that, even during the covid-19 pandemic, zakat has an important role in several countries, including indonesia it was recorded that during the period 1964 june 2021, the discussion on zakat indexed by scopus reached 734 documents. during this period, it was noted that publications on zakat began to show an increasing trend since 2009, meaning that zakat has become an important topic to be studied by current researchers and has begun to follow the existence of other islamic financial instruments such as islamic banking, waqf, and islamic capital markets. research on zakat is still relatively less popular when compared to the topic of islamic banking, so studies in the field of zakat are important for current researchers (firmansyah et al, 2020). various bibliometric studies on zakat have been carried out by previous researchers in the journal islamic economics in indonesia that have been indexed by sinta (firmansyah et al, 2020), this research continues existing research by extending the time-span of the literature studied, and expanding the scope research on reputable journals that have been indexed by scopus. moreover, this study also provide direction on the theme of zakat research that has not been researched yet. journal of islamic economic laws-july, vol. 5, no. 2, 2022 265 literature review definition of zakat zakat is an annual deduction of specified fraction from the total amount of an individual surplus wealth declared using a specified threshold (yusuf et al., 2020). according to muneer m alshater et al. (2021) zakat also referred to on how an individual can be cleaned and purified from his wealth dirt by the payment of zakat. there is sense of empathy to the poor and the proactive behavior for public welfare, which clearly reflected by its allocation as mentioned in qs. at-taubah:60 “zakah expenditures are only for the poor and for the needy and for those employed to collect [zakah] and for bringing hearts together [for islam] and for freeing captives [or slaves] and for those in debt and for the cause of allah and for the [stranded] traveler an obligation [imposed] by allah. and allah is knowing and wise” (romdhoni, 2018). economic of zakat among worldwide issues faces by the majority of developing and underdeveloped countries is poverty. zakat can be functioned as a means of poverty alleviation, particularly by distributing productive zakat which its vision is converting mustahik to muzakki in a certain period (romdhoni, 2018). at the same time, its distribution enables zakat recipients especially the poor and the needy to have higher purchasing power and uplift their economic status, thus their life could be better and even stronger (muneer m alshater et al., 2021). methods this research adopts bibliometrics analysis to present the development of zakat literature. the bibliometric analysis enables the researcher to investigate the current performance of the previous study based on quantitative and qualitative approaches (yan et al., 2018). furthermore, (zupic & čater, 2015) declares that bibliometric analysis provides the research result regarding the most impactful institutions, countries, journals, authors and articles and clusters the most discussed topic without subjective bias. the data was collected from the scopus database that curated 266 supriani et al. on june 2021. the research strategy of this study is explained by figure 1. the main objective of this research is to provide a comprehensive historical and present development of zakat literature by addressing several research questions: 1) rq1: what is the current dynamic research trend on zakat literature? 2) rq2: which are the most influential articles on zakat based on the total citation? 3) rq3: what is the research collaboration network of indonesian researchers on islamic banking? 4) rq4: what are the prevalent themes of current research on zakat literature? 5) rq5: what are research topic recommendations in zakat that future research should focus on by researchers to fill the gaps from current existing studies? journal of islamic economic laws-july, vol. 5, no. 2, 2022 267 figure 1. research flow method diagram thus, to answer the previous mentioned research questions, this current research conducted the analysis based on several dimensions: 1) annual publication and citation trend; 2) publication activity by institutions, authors, journals, and countries; 3) co-authorship analysis to identify the research collaboration network; and 4) co-occurrence and co-citation analyses to reveal the research main-theme. 268 supriani et al. the selection of scopus as the source of data relies on the previous study, including muneer m. alshater et al. (2020), who stated that scopus encompass a more massive number of articles related to islamic economics and finance with higher quality compared to its parties such as google scholar, ebsco or proquest. moreover, the data collection is conducted by applying certain search queries (*zakat* or “zakah”) in title, abstract, and keywords. the chosen keywords are also based on prior studies on zakat literature, such as (muneer m alshater et al., 2021) and (nor paizin et al., 2021). this step yielded 734 documents before applying inclusion and exclusion criteria (see table 1) and resulted in 522 articles and conference papers sourced from journals written in the english language as the final data covering the period from 1964 – to 2021. this study uses publish or perish (pop), rstudio, and microsoft excel to portray the quantitative analysis related to publication and citation trends, which is a powerful tool for measuring the impact of journals (li & law, 2020). besides, the qualitative analysis regarding the research collaboration network and main research cluster is conducted by utilising vosviewer, as it effectively maps the data based on the topic similarity (ferreira, 2018). vosviewer software weighted the similar pattern of research topic or collaboration based on the distance between the nodes in each cluster (van eck & waltman, 2014). for instance, the shorter distance between the nodes implies a higher association between the cluster and vice versa (van eck & waltman, 2010). table 1. data inclusion and exclusion criteria indicator inclusion criterion exclusion criterion article language english. arabic, malaysia, france, german, japan, russia dan slovakia. document type article, book chapter, and conference paper. review, book, editorial, erratum, note, and short survey. source type journal and conference proceeding. book and book series. journal of islamic economic laws-july, vol. 5, no. 2, 2022 269 results and discussion general information and publication by year to answer rq1, this study examines the publication trend on zakat literature, the most contributors’ institutions, sources, and authors in publishing articles on zakat. table 2 describes the general information from the data collected in this study. table 2 confirm that this study covers 522 documents of zakat that are associated with 1397 keywords. this information also presented that zakat research has attracted massive intention of researchers that shown by the huge number of authors that publish zakat literature, 1205 authors. table 2. general information description results main information about data timespan 1964:2021 sources (journals and conference proceeding) 245 documents 522 average years from publication 6.3 average citations per documents 4.707 average citations per year per doc 0.5213 references 17543 document types article 463 conference paper 59 document contents keywords plus (id) 761 author’s keywords (de) 1397 authors authors 1205 author appearances 1460 authors of single-authored documents 117 authors of multi-authored documents 1088 authors collaboration single-authored documents 129 documents per author 0.433 270 supriani et al. description results authors collaboration authors per document 2.31 co-authors per documents 2.8 collaboration index 2.77 furthermore, the collaboration index between the author is 2.77, which indicates a high number of authors that are building research collaboration. an intense collaboration among the author, specifically across institutions and countries, significantly increases the article’s quality as it presents a comprehensive perspective (hassan et al., 2021)as represented by englishlanguage articles from the scopus database. using a bibliometric approach plus content analysis, we describe the field’s evolution and structure, including co-citation, co-authorship, and bibliographical coupling. we find that malaysia is the most relevant country, the international islamic university malaysia (iium. figure 2 shows the publication and citation trend from 1964 – to 2021. this figure shows that during the period from 1964 to 2010, the publication of zakat was relatively low, and it significantly increased in 2011, which became double compared to the previous year. figure 2. annual distribution of articles on zakat between 1964 – 2021 journal of islamic economic laws-july, vol. 5, no. 2, 2022 271 this result is also in line with the result from alshater et al. (2021), who stated that an intensive increment of zakat publication correlated with the financial crisis in 2008, and it is expected to continue higher this year after the covid-19 pandemic. in the same vein, ahmid & ondes’s (2019) declare that the global financial crisis in 2008 became the starting point for the researchers and practitioners regarding islamic finance as an alternative financial system to conventional ones due to its stability during economic downturn periods. figure 2 also reveals that the publication of zakat literature reached its highest number in 2019, which is 90 documents. whereas, the number of citations shows a high number before 2005 and slightly decrease after the period. this phenomenon implies that there is a possibility that the number of citations will multiply for several next years. publishing activity by institutions the most prolific institutions published on zakat literature are listed in table 3. 159 institutions contribute to producing the research, and university utara malaysia is on the top list with 52 documents and obtained 302 citations. in terms of the h-index, which measured the impact of publication (eggue, 2006), international islamic university malaysia has the highest h-index. table 3. most relevant institutions on zakat with minimum of 10 documents institution tp ncp tc c/p c/cp h universiti utara malaysia 52 35 302 5.81 8.63 8 universiti teknologi mara 36 21 95 2.64 4.52 6 international islamic university malaysia 35 24 270 7.71 11.25 11 universiti kebangsaan malaysia 25 16 84 3.36 5.25 6 universiti sains islam malaysia 18 11 73 4.06 6.64 5 universitas airlangga 16 7 25 1.56 3.57 3 universiti sains malaysia 15 10 48 3.20 4.80 4 university of malaya 12 9 31 2.58 3.44 3 272 supriani et al. institution tp ncp tc c/p c/cp h universitas indonesia 11 5 16 1.45 3.20 2 university teknologi malaysia 10 5 45 4.50 9.00 2 note: tp=total publication; ncp=number of cited publications; tc=total citations; c/p=average citations per publication; c/cp=average citations per cited publication; and h=h-index. this finding indicates that the institutions’ publication has a higher impact than others. moreover, based on the information from table 3, this study confirms that the universities in malaysia have become the most prolific universities conducting research in zakat, where eight out of 10 are located in malaysia. this information implies a huge opportunity for future research to collaborate with malaysian education institutes to obtain a deeper analysis regarding the zakat topic. publishing activity by sources one hundred fifty-nine journals published the 522 articles, and table 4 listed 13 of the highest contributor’s journals with a minimum of five documents. the leading journals are the imefm, followed by jiabr, with the total publication are 19 and 18, respectively. however, jiabr is presented as the most-cited journal, which passed the total citation of imefm. additionally, the middle east journal of scientific research has the highest h index, which implies that the journal has a significant impact on the development of zakat literature. in general, zakat literature was published in q3, implying that journals are categorized in the 50%-70% group. furthermore, the scope of journals covers business and management, accounting, economics, and multidisciplinary. most of the listed journals are not specifically published researchers on islamic economics studies. this result reflects a need for more journals that focus on islamic economic studies indexed by scopus; thus, the publication will be multiplied significantly. journal of islamic economic laws-july, vol. 5, no. 2, 2022 273 table 4. top publishing sources on islamic bank with minimum of five publications name of journal tp tc hi quartile international journal of islamic and middle eastern finance and management (imefm) 19 127 29 q2 journal of islamic accounting and business research (jiabr) 18 151 20 q3 international journal of innovation creativity and change 13 4 14 nr advanced science letters 10 4 27 nr iop conference series earth and environmental science 10 4 26 nr al shajarah 9 4 3 q3 global journal al thaqafah 9 45 6 q4 journal of king abdulaziz university islamic economics 9 7 9 q3 humanomics 8 80 0 ds international journal of supply chain management 8 7 17 nr middle east journal of scientific research 8 25 46 q3 opcion 8 4 18 q3 note: tp=total publication; tc=total citation; hi=h-index; nr=journal not rated; na=the information is not available; and ds=discontinued. publishing activity by authors one hundred fifty-nine researchers published their articles on zakat literature. table 5 portrays the top productive researchers. as presented in table 5, saad, r.a.j., from university utara malaysia, published the most documents (15) on zakat literature 13 of the documents were cited 61 times. saad, r.a.j. also became the most prolific author, as shown by his h-index is 5, the highest number compared to other authors. besides, an interesting fact is also pictured by the highest citation of articles from wahab, n.a. that have five documents cited 85 times, leading the author to have the highest c/p. wahab, n.a. published an article in 2011 that discussed zakat’s efficiency and governance and was already cited by 54 documents. 274 supriani et al. table 5. top publishing authors on islamic bank with minimum of five publications author affiliation tp ncp tc c/p c/cp h saad, r.a.j. universiti utara malaysia 15 13 61 4.07 4.69 5 johari, f. universiti sains islam malaysia 6 6 31 5.17 5.17 4 sawandi, n. universiti utara malaysia 6 5 17 2.83 3.4 3 abdul-jabbar, h. universiti utara malaysia 5 4 21 4.2 5.25 4 aziz, s.a. universiti utara malaysia 5 4 21 4.2 5.25 4 bin-nashwan, s.a. seiyun university 5 4 21 4.2 5.25 4 doktoralina, c.m. universitas mercu buana 5 3 9 1.8 3.0 2 ismail, a.g. universiti sains islam malaysia 5 3 18 3.6 6.0 3 shaikh, s.a. szabist dubai 5 3 6 1.2 2.0 1 wahab, n.a. universiti utara malaysia 5 5 85 17.0 17.0 4 note: tp=total publication; ncp=number of cited publications; tc=total citations; c/p=average citations per publication; c/cp=average citations per cited publication; h=h-index, and zabist dubai=shaheed zulfikar ali bhutto institute of science and technology, karachi, department of management sciences, karachi, pakistan. influential articles based on total citations rq2 is addressed by providing the most cited articles on zakat literature based on the local citation. the number of local citations indicates how many times the document has been cited inside the field’s network of papers, in this case, within the scopus database. highly cited articles are presented the most discusses topic in a certain area of study, which also becomes the indicator to describe the structure intelligence of current research development and predict the future research pattern (hassan et al., 2021)as represented by english-language articles from the scopus database. using a bibliometric approach plus content journal of islamic economic laws-july, vol. 5, no. 2, 2022 275 analysis, we describe the field’s evolution and structure, including co-citation, co-authorship, and bibliographical coupling. we find that malaysia is the most relevant country, the international islamic university malaysia (iium. table 6 informs that the article was written by hassan & syafri harahap (2010) as the most cited article which presents the accounting and auditing of corporate social responsibility (csr) report for islamic financial institution (ifis), particularly for islamic banking, to enhance their reputation globally. scott (1987) provides an examination of malay peasant opposition to the islamic zakat today and french peasant resistance to the christian tithe earlier in history. moreover, kochuyt (2009) assesses the ideal zakat type as a gift for the needed society. aribi & gao (2011) examine the impact of islam on csr and corporate social responsibility disclosure in ifis. metwally (1997) investigates the impact of applying islamic economics principles to a country’s economic system. in sum, this study found that islamic societies tend to experience numerous difficulties if they prohibit the interest rate, utilize zakat as the state’s tax, and avoid all kinds of uncertainties. based on the above result analysis, it can be concluded that the most discussed topic is the accounting standard for zakat and its impact on economic stability. table 6. most cited articles author and year article title tc (haniffa & hudaib, 2007) exploring corporate social responsibility disclosure: the case of islamic banks 218 (scott, 1987) resistance without protest and without organization: peasant opposition to the islamic zakat and the christian tithe 106 (kochuyt, 2009) god, gifts and poor people: on charity in islam 50 (aribi & gao, 2011) narrative disclosure of corporate social responsibility in islamic financial institutions 44 (metwally, 1997) economic consequences of applying islamic principles in muslim societies 41 276 supriani et al. author and year article title tc (vinnicombe, 2010) aaoifi reporting standards: measuring compliance 30 (amalina wan abdullah et al., 2013) shari’ah disclosures in malaysian and indonesian islamic banks: the shari’ah governance system 29 (ahmad basharat et al., 2002) frequency of known risk factors for stroke in poor patients admitted to lahore general hospital in 2000 26 (krafess, 2005) the influence of the muslim religion in humanitarian aid 25 (weiss, 2002) reorganising social welfare among muslims: islamic voluntarism and other forms of communal support in northern ghana 24 note: tc=total citation co-authorship analysis this study answered the rq3 (what is the research collaboration network of indonesian researchers on islamic banking?) by conducting the co-authorship analysis. the intensive research collaboration will improve the efficiency and effectiveness of research. in another line,, paltrinieri et al. (2020) emphasize that uncovering the research collaboration pattern will help the researcher conduct multi-countries, institutions, and authors. in interpreting the co-authorship analysis (visualized by vosviewer), van eck & waltman (2014) stated that the relevance of a collaboration between the node is explained by its density and size, while the distance between the nodes indicates the connection strength between the parties. co-authorship analysis: country figure 3 and table 7 present the collaboration pattern amongst the countries with a minimum of five documents that scopus-indexed journals have published. journal of islamic economic laws-july, vol. 5, no. 2, 2022 277 table 7. co-authorship: country cluster 1 – red cluster 2 – green cluster 3 – dark blue malaysia bahrain nigeria yemen pakistan india russian federation united arab emirates united states bangladesh australia cluster 4 – yellow cluster 5 – violet cluster 6 – light blue indonesia oman saudi arabia tunisia brunei darussalam united kingdom figure 3 illustrates that malaysia (red) has become the hub center of the research collaboration network, which is proven by the biggest node and has a strong association with indonesian researchers (yellow). moreover, table 7 depicts six clusters in this collaboration, which means that each country in the same cluster tends to have a strong association within the cluster. figure 3. co-authorship network map between the countries 278 supriani et al. co-authorship analysis: authors figure 4 and table 8 describe the research collaboration pattern among the author in zakat literature. co-occurrence on author keyword figure 4. co-authorship network map between the authors as presented in figure 4, saad r.a.j. (yellow) was recognized as the largest nodes, implying that saad r.a.j. has the highest linkages in building collaboration and a strong connection with saw and n. (green). furthermore, johari f. is cited as the centre in cluster violet, while wahab n.a. becomes the centre of collaboration in cluster blue. interestingly, in cluster red, all the authors tend to have the identical size of nodes, which means they tend to have a similar strength of collaboration linkages. research prevalent themes on zakat literature to answer rq4 (what are the prevalent themes of current research on zakat literature?), this study explores the conceptual structure of zakat literature by presenting the co-occurrence of author keyword and co-citation. figure 5. co-occurrence: author keywords bahoo (2020) declares that keyword analysis often used in research can be an indicator in measuring the sub-themes that dominate a research field. figure 5 and table 8 demonstrate the most used keywords by the authors in zakat literature with journal of islamic economic laws-july, vol. 5, no. 2, 2022 279 a minimum of five occurrences. based on the figure, it can be confirmed that there are seven clusters with 45 keywords. however, as seen in figure 5, light blue and orange clusters consist of 3 and 2 keywords, respectively. thus, the clusters will be excluded from this analysis as it does not present significant information. hence, it left 5 clusters with 40 author keywords. according to the author keywords presented in figure 5 and table 8, this study identified that the green cluster is discussed the governance of zakat institutions, the red cluster is associated with the distribution of zakat topics, the sub-theme of the dark blue cluster widely concerns about zakat compliance in islamic perspective, the violet cluster examined the role of zakat as a poverty eradication tool, and finally, the yellow cluster assessed zakat as a social security scheme. table 8. top five most influential author keywords (co-occurrence analysis) cluster keyword occurrence sub-theme 1 – green zakat 128 the governance of zakat institutions malaysia 37 zakat institution 13 education 8 service quality 8 social welfare 7 trust 6 welfare 6 zakat institutions 6 2 – red zakah 17 the distribution of zakat zakat distribution 9 sharia 8 zakat management 8 asnaf 7 islamic banking 7 mustahiq 6 corporate governance 5 management 4 280 supriani et al. cluster keyword occurrence sub-theme 3 – dark blue islam 46 zakat compliance in islamic perspective religion 14 governance 12 accountability 10 saudi arabia 8 compliance 6 religiosity 6 islamic bank 4 4 – violet poverty 30 zakat as a poverty eradication tool waqf 25 indonesia 20 poverty alleviation 19 bangladesh 13 zakāh 6 islamic philanthropy 4 5 – yellow islamic social finance 12 zakat as a social security scheme corporate social responsibility 10 financial performance 10 islamic banks 8 charity 6 pakistan 6 zakāt 4 co-citation analysis a scenario in which another document cites two documents simultaneously is known as co-citation (fabregat-aibar et al., 2019). co-citation, according to small (1973) and liu et al. (2015), is a tool for analyzing areas, concepts, methodologies, and important themes that are rapidly evolving in a study field. thus, this study identified the most discussed topic by providing the information in figure 6, table 9. journal of islamic economic laws-july, vol. 5, no. 2, 2022 281 figure 6. co-citation network based onrreferences figure 6 captured co-citation of articles in zakat literature and found seven clusters in the analysis, however, this study excluded the light blue cluster and orange cluster due to the scant amount of the total of articles. hence, table 9 provide the title of each article that have been co-cited. by conducting brief review based on the article’s title and abstract, this study identified several sub-themes. the governance of zakat institutions (red), zakat as a poverty eradication tool (green), zakat compliance in islamic perspective (dark blue), zakat as a social security scheme (yellow), and the intention to pay zakat (violet). 282 supriani et al. table 9. top cited references based on co-citation cluster author title sub-theme 1 – red (bidin et al., 2009) predicting compliance intention on zakah on employment income in malaysia: an application of reasoned action theory the governance of zakat institutions (krejcie & morgan, 1970) determining sample size for research activities (powelt, 2009) zakat: drawing insights for legal theory and economic policy from islamic jurisprudence (andam & osman, 2019) determinants of intention to give zakat on employment income: experience from marawi city, philippines (azman & bidin, 2015) zakat compliance intention behavior on saving (cohen, 1998) statistical power analysis for the behavioral sciences (henseler et al., 2009) the use of partial least squares path modeling in international marketing (kahf, 1999) the performance of the institution of zakah in theory and practice (al-qardawi y., 1999) fiqh al zakah: a comparative study of zakah, regulations and philosophy in the light of quran and sunnah (ammani et al., 2014) zakah on employment income in muslims majority states of nigeria: any cause for alarm? journal of islamic economic laws-july, vol. 5, no. 2, 2022 283 cluster author title sub-theme 2 – green (ahmed, 2004) role of zakat and awqaf in poverty alleviation zakat as a poverty eradication tool(kabir hassan & masrur khan, 2007) zakat, external debt and poverty reduction strategy in bangladesh (kahf, 2013) zakat: unresolved issue in the contemporary fiqh (raimi et al., 2014)but its impact is heavily felt in several muslim majority nations (mmns corporate social responsibility, waqf system and zakat system as faith-based model for poverty reduction (al-qardawi y., 1999) a comparative study of zakah, regulations and philosophy in the light of qur’an and sunnah (kahf, 2004) islamic economics: what went wrong? (kahf, 2004) role of microfinance in poverty alleviation: lessons from experiences in selected idb member countries 284 supriani et al. cluster author title sub-theme 3 – dark blue (sulaiman, 2003) the influence of riba and zakat on islamic accounting zakat compliance in islamic perspective(abu-tapanjeh, 2009) corporate governance from the islamic perspective: a comparative analysis with oecd principles (ali & hatta, 2014) zakat as a poverty reduction mechanism among the muslim community: case study of bangladesh, malaysia, and indonesia (lessy et al., 2020) philanthropic zakat for the disadvantaged: recipient perspectives from indonesia (chong & liu, 2009) islamic banking: interest-free or interest-based? (abdul rahman, 2007) pre-requisites for effective integration of zakah into mainstream islamic financial system in malaysia (maali et al., 2006) the islamic law of human conduct. the islamic principles upon which the banks claim to operate give an important role to social issues. applying these principles, we develop a benchmark set of social disclosures appropriate to islamic banks. these are then compared, using a disclosure index approach, the actual social disclosures contained in the annual reports of twenty-nine islamic banks (located in sixteen countries social reporting by islamic banks journal of islamic economic laws-july, vol. 5, no. 2, 2022 285 cluster author title sub-theme 4 – yellow (ibrahim, d., & ruziah ghazali, 2014)this paper attempts to analyse the potential of zakah fund as a source of islamic micro financing to productive zakah recipients. the analysis is divided into several parts. firstly, this paper discusses on the rationale of zakah fund as a source of micro financing to small muslim entrepreneurs. it is then followed by the feasibility study of zakah as a micro financing mechanism. thirdly, this paper shares the practicality analysis of the mechanism by sharing the experience of selangor zakah board (lembaga zakat selangor lzs zakah as an islamic microfinancing mechanism to productive zakah recipients zakat as a social security scheme (salim, 2008) challenging the secular state: the islamization of law in modern indonesia (m.u. chapra, 1992) islam and the economic challenge (auda, 2008) maqasid al-shariah a beginner’s guide (chapra, m.u., khan, s. and shaikh-ali, 2008) the islamic vision of development in the light of maqasid al-shariah (m. umer chapra, 2000) is it necessary to have islamic economics? 286 supriani et al. cluster author title sub-theme 5 – violet (sekaran, 2003) research methods for business: a skill-building approach the intention to pay zakat (ajzen, 1991)1985, 1987 the theory of planned behavior (fishbein & ajzen, 1975)developed by martin fishbein and icek ajzen (1975, 1980 belief, attitude, intention, and behavior: an introduction to theory and research (ajzen, i., & fishbein, 1980) understanding attitudes and predicting social behavior (al jaffri saad & haniffa, 2014) determinants of zakah (islamic tax) compliance behavior (kamil, 2002) gelagat kepatuhan zakat pendapatan gaji di kalangan kakitangan awam persekutuan negeri kedah based on the co-occurrence of author keywords and cocitation analysis of the document, this study discovers a robust result concerning the research’s main themes from zakat literature. however, there are small differences in the result: zakat as a social security scheme theme found in co-occurrence author keywords and the intention to pay zakat theme found in co-citation analysis. this study’s result corroborates the previous study conducted by muneer m alshater et al. (2021) who found four main themes that are mostly discussed in zakat literature, including the role of zakat in reducing poverty, zakat institution and zakat within a religious context. hence based on the previous analyses, this study identified six themes that dominated zakat publication as follows: 1. the governance of zakat institutions 2. zakat as a poverty eradication tool 3. zakat compliance in islamic perspective 4. zakat as a social security scheme 5. intention to pay zakat 6. the distribution of zakat journal of islamic economic laws-july, vol. 5, no. 2, 2022 287 future research direction rq5: what are research topic recommendations in zakat that future research should focus on by researchers to fill the gaps from current existing studies? through this study, malaysian researcher are known being dominated in zakat as the topic of study, which then followed by indonesian. this finding also supported by alshater et al. (2021), who suggest for future researcher worldwide to extend this topic in the non-majority muslim countries. from the suggestion of several studies, there are several topics need further inquiry such as the factors affecting individuals to pay zakat formally (hudaefi et al., 2021), an appropriate mechanism and administration of zakat (abdul rahman, 2007; rahman, et al., 2021), and performance measurement analysis from the view of zakat recipient (ibrahim & ruziah, 2014). in addition to that, the use of socio-economic theories can be considered by further studies as suggested by (hudaefi et al., 2021). table 10. future research direction authors suggested future studies hudaefi et al (2021) 1. to understand the trend of zakat collection during the pandemic. (mechanism) 2. critical to further develop the theory of socio-economic zakat by presenting more evidence from zakat practices worldwide. (allocation) firmansyah et al (2020) 1. the possibility of studying the zakat performed by islamic banking (performance) yusuf & yerima (2020) 1. improving by focusing on other and more databases. this will enable the exploration of details not captured in the scope of this study (data source) rahman et al (2021) 1. issues that need to be tackled to ensure that the administration of zakat is moving on the right track, (to eradicate poverty and to upgrade people’s standard) 288 supriani et al. authors suggested future studies abdul rahman (2007) 1. more research is needed to address all the above pre-requisites. 2. the federal government, state governments and other related agencies and authorities need to come together to seriously discuss the above issues despite the existing differences and historical backgrounds. 3. there is a need for a political will by the government to push the initiative to reform the institution of zakat in malaysia ibrahim & ruziah (2014) 1. proper mechanism (institution & recipient) 2. monitoring procedure by zakat institution 3. impact assessment for successful of recipient conclusion this study utilizes the bibliometrics approach to portray the current status and trend development of zakat literature published by a journal-indexed in scopus, covering the period of publication from 1964–2021. the analysis of 522 articles demonstrated that universiti utara malaysia, imefm, and saad, r. a. j have become the most institution, journal, and authors published in zakat literature, respectively. moreover, the article by haniffa & hudaib (2007) is the most cited worldwide. interestingly, this study confirmed that malaysian authors mainly dominate zakat research. thus, malaysia has become the hub of the research collaboration network, with a strong collaboration with indonesian researchers. importantly, this study reveals six themes that have been widely discussed by the researchers in zakat literature, namely, the governance of zakat institutions; zakat as a poverty eradication tool; zakat compliance in an islamic perspective; zakat as a social security scheme; the intention to pay zakat; and the distribution of zakat. hence, further research is suggested to investigate the other aspect of zakat, which requires a deeper analysis. this study has several limitations, in addition to its theoretical and practical implications. first, this only considers articles written in english sourced from the scopus database. hence, other significant studies published by non-indexed scopus journals might be excluded. thus, further research is suggested to accommodate various databases, including google scholar and isi web of science (wos). journal of islamic economic laws-july, vol. 5, no. 2, 2022 289 references abdul rahman, a. r. 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(2015). bibliometric methods in management and organization. organizational research methods, 18(3), 429–472. https://doi.org/10.1177/1094428114562629 _hlk112097556 _hlk104024393 _goback _heading=h.gjdgxs journal of islamic economic laws vol. 5, no. 2, july 2022: 216-245 216 the effectiveness of sharia economic dispute resolution between religious court and national sharia arbitration board muhammad abdul aziz1, fardan bintang agung sasongkojati2 1universitas darussalam gontor 2universitas darussalam gontor email: mabdulaziz@unida.gontor.ac.id, fbintangas@gmail.com abstract sharia economic dispute can be resolved through litigation or judicial and non-litigation or out-of-court lines. resolution disputes through religious courts always takes a long time and complicated administration, but until now is it still in high demand by justice seekers. there is dispute resolution outside the judiciary, one of which is arbitration through national sharia arbitration board (basyarnas) which can be the solution. this paper is a qualitative research study with a case was taken from religious court class 1a sleman and basyarnas representative in yogyakarta. the findings of this study provide the results dispute resolution in religious courts is more desirable because it has more executive powers than basyarnas, and also religious courts hold the absolute authority of sharia economic dispute resolution and religious courts spread throughout districts in indonesia, so religious courts are very easy to find, in contrast to basyarnas whose existence is still in every capital of several provinces in indonesia. religious courts are superior because of the quality of judges, their presence in every district in indonesia, and the culture of the people. keywords: religious court, basyarnas, dispute resolution, shariah economy. mailto:mabdulaziz@unida.gontor.ac.id journal of islamic economic laws-july, vol. 5, no. 2, 2022 217 introduction society is a human being who lives in many places and for a long time who realizes that they are a unit tied to a system of shared life, in which some rules and norms aim to regulate how its citizens behave. in people’s lives, there are many forms of interest. these interests are aligned with each other, but some are at odds with each other. if there is a difference of interest between each other, then there is a conflict of interest. this is what, in juridical terms, is called dispute (rosita, 2017). a dispute can be resolved peacefully through non-litigation channels, namely by negotiation (deliberation), mediation, arbitration, and conciliation (rosita, 2017). arbitration itself is different from mediation, although it has the same name of resolution a dispute outside the judicial channels. arbitration can only be resolved in trade, where the sharia economy is part of the trade field that must be registered to the court if it has reached an agreement. while mediation can resolve all civil cases submitted to the court, this has been stipulated in article 4 paragraph 1 perma 01 the year 2016. article 12 perma 01 the year 2016 also explains that all dispute resolution must be attempted settlement in peace or disputes through the judicial channels or outside the judicial channels. arbitration has advantages over resolution a dispute through judicial channels. therefore in the practice of actors in sharia economy, there is a tendency to choose dispute resolution through arbitration because it will be guaranteed the confidentiality of the disputes of the parties, avoiding delays due to procedural and administrative matters, can choose arbitrators who are believed to have knowledge and experience on disputed matters, legal options to resolve problems and the process and place of conduct of arbitration can be determined, the arbitral award binds the parties through direct and straightforward procedures (sanawiyah, 2013). dispute resolution through the judicial path has its advantages over dispute resolution through arbitration. dispute resolution through the judiciary is considered the right and wise choice. this is evidenced by the high trust of purbalingga society towards dispute resolution through judicial channels, the establishment 218 muhammad abdul aziz, fardan bintang agung sasongkojati of material law, and court offices covering districts and cities (sanawiyah, 2013). settlement of disputes through the path of litigation or judicial channels has been determined in law no. 48 of 2009 on the power of justice article 10, which reads “(1) courts are prohibited from refusing to examine, adjudicate, and decide a case filed on the pretext that the law does not exist or is unclear, but rather is obliged to examine and adjudicate it. (2) the provisions as referred to in paragraph (1) shall not close the effort to settle civil cases in peace” (manuasa, 2014) . the meaning of the verse, the service to get justice is a right for everyone, but there must be no distinction between the trivial and the priority. because the court is one of the settlement channels, the submission of all cases to the court resulted in disproportionate dispute resolution conditions. the principle of fast, simple, and light costs becomes critical when associated with refusing to examine cases (manuasa, 2014). this principle of fast, simple, and light cost has become article no. 48 of 2009 on the power of justice article 2 paragraph 4, which means “simple” is the examination and settlement of cases conducted efficiently and effectively. what is meant by “light cost” is the cost of the case that the community can reach. while the law provisions do not provide a time limit, “fast” must lead to the settlement process’s timing (manuasa, 2014). in law no. 21 of 2008 on perbankan syariah (islamic banks) described in article 55 paragraph 2 the parties who have promised dispute resolution other than passing the religious court can be done by the contents of the agreement. moreover, it is explained in the law that the settlement of sharia banking disputes and passing through the path of religious courts can be through several efforts, namely deliberation, banking mediation, arbitration or other arbitral institutions, or courts in the general judicial environment. the settlement of disputes in the religious judiciary will cost a lot, and a long time, it is also because those religious courts are still considered by state authorities to have coercion that is considered more potent than basyarnas which is less known by the general public (fitriana, 2017). this is not following law number 48 of 2009 on judiciary power (kekuasaan kehakiman) article 2 journal of islamic economic laws-july, vol. 5, no. 2, 2022 219 paragraph 4 because in the article described the judiciary is done simple, fast, and light costs. indonesia has provided a solution by resolution sharia economic disputes outside the judiciary or so-called non-litigation channels because dispute resolution through non-litigation channels is considered more straightforward, faster, and costs less. however, whether solving a dispute through a non-litigation path can be considered more effective than through litigation one becomes an interesting topic to discuss. therefore, this study aims to explore the effectiveness comparison of sharia economic dispute resolution between religious court and national sharia arbitration board. literature review sharia economic disputes sharia economy is a business or activity carried out by individuals, groups of people, business entities that are incorporated or not legal entities in order to meet the needs of a commercial and non-commercial nature according to sharia principles (umam, 2016), including islamic banks, islamic microfinance institutions, islamic insurance, sharia reinsurance, islamic mutual funds, islamic bonds, islamic financing, islamic pawnshops, islamic financial institution pension funds, and sharia business (hardiati, 2021). thus, a sharia economic dispute arises from the act of sharia business law, a dispute or dispute between two or more people about a right and obligation caused by a difference of understanding of an agreed agreement in a shariabased engagement (pertaminawati, 2019). alternatively, a sharia economic dispute is a dispute between two or more economic actors whose business activities are carried out according to the principles and principles of sharia economic law due to different perceptions of interest or property that can have legal consequences for both and can be given legal sanctions against either of them (muaidi, 2017). the occurrence of disputes is generally due to fraud or broken promises by the parties, or one of the parties does not do what is promised or agreed to be done (muaidi, 2017). it can then 220 muhammad abdul aziz, fardan bintang agung sasongkojati be said that the forms of disputes in islamic banks can be caused by denial or violation of the agreement reached, mainly because (saputra, 2019): 1. the bank’s failure to refund the money deposited by the customer in the wadi’ah agreement 2. the bank lowers the customer’s income ratio without prior approval, especially in the mudharabah agreement 3. the customer engages in liquor business activities prohibited by islamic sharia from islamic bank loans, qardh agreements, etc. broadly speaking, sharia economic disputes can be classified into 3, namely (ilham, 2019) : 1. disputes in the field of islamic economics between financial institutions and islamic financing institutions with their customers 2. disputes in the field of islamic economics between financial institutions and islamic financing institutions 3. disputes in the field of sharia economy between people who are muslim, which is the agreement is stated unequivocally that the business activities carried out are based on sharia principles. thus, the occurrence of sharia economic disputes is caused by (muaidi, 2017): 1. individual parties or legal entities that perform agreements or agreements with sharia principles that one of the parties performs default 2. parties who commit acts against the law resulting in the other party feeling aggrieved. the occurrence of disputes is generally caused by several factors (makarim, 2019): 1. data conflicts, some of the things behind data conflicts, including lack of information, misinformation, differences in views, differences in interpretation of data, and differences in interpretation of procedural. journal of islamic economic laws-july, vol. 5, no. 2, 2022 221 2. conflict of interest, in drafting the agreement, each party expresses its interests. the interests brought by each party cause conflict if the interests brought depart or clash with each other. in addition, the causes of conflicts of interest are the existence of feelings or acts of interest, the existence of substance interests of the parties, the existence of procedural interests, the existence of psychological interests. 3. conflict of relations, the parties who cooperate, must be able to control emotions. emotional control aims to maintain relationships between the parties. a well-maintained relationship can smooth the course of the deal. however, if the parties’ relationship is not good, let alone carrying out the agreement, reaching an agreement in a business will be challenging to achieve. poor relationships are due to strong emotions, misperception, poor communication, communication errors, or repeated negative actions. 4. structural conflict, the occurrence of structural conflict due to patterns of destructive behavior or interaction, unequal control, unequal ownership or distribution of resources, the existence of power and power, geographical location of a place, unstable psychology, or environmental factors that hinder cooperation, and little time. 5. conflict of values occurs due to differences in criteria for evaluation of opinions or behaviors, differences in views of life, ideology, or religion, and the existence of self-assessment without regard to the judgment of others. sharia economic disputes can be in the form of bankruptcy statement applications (ppp). they can also be a delay in debt payment obligations (pkpu) in the field of islamic economics, in addition, bankruptcy derivative cases (impure cases as bankruptcy cases) (ilham, 2019). settlement of sharia economic disputes in indonesia the rapid and complex growth of the sharia economy, producing diverse sharia economic products, increasing economic cooperation certainly impact the increasing vulnerability due 222 muhammad abdul aziz, fardan bintang agung sasongkojati to conflict or sharia economic disputes. conflicts caused by differences in interest will develop into disputes if the party experiencing the loss expresses dissatisfaction or concern, directly or indirectly to the party considered the cause of the loss. the law has legalized the choice of dispute resolution by the parties to the dispute, namely through litigation and non-litigation (fitri, 2019), dispute resolution through litigation is a process of resolution disputes in court. all parties to the dispute face each other to defend their rights before the court; the final result of a dispute resolution through litigation is a ruling that states a winlose solution (finanda, 2018). dispute resolution through nonlitigation is out-of-court dispute resolution, out-of-court dispute resolution is closed to the public, and the confidentiality of the parties is guaranteed, the process of healing faster and more efficiently, this out-of-court dispute resolution process avoids procedural and administrative delays as it does in public court and has a win-win solution (finanda, 2018). this out-of-court dispute resolution is called alternative dispute resolution (adr). according to basuki rekso wibowo, dispute resolution through social institutions outside the general court is based on the agreement and volunteerism of the parties to the dispute (yusna, 2015). this dispute resolution model is the resolution of disputes outside the courts based on the law, and the resolution of such disputes can be classified as high-quality settlements. this is because disputes resolved in this way will be resolved without leaving any resentment and residual hatred (yusna, 2015). law no. 30 of 1999 on arbitration and alternative dispute resolution regulates disputes outside the court through consultation, mediation, negotiation, conciliation, and expert judgment. this law does not entirely provide a detailed and clear understanding of boundaries. here will be explained a brief understanding of alternative forms of dispute resolution as follows: 1. consultation, as quoted by a. rahmad rosyadi, black’s law dictionary gives the notion that consultation is “a client-like consulting or consulting activity with his legal advisor.” (muaidi, 2017) in addition, consultation is also understood as consideration journal of islamic economic laws-july, vol. 5, no. 2, 2022 223 of the parties to an issue. consultation as an alternative dispute resolution institution in practice can take the form of hiring a consultant to be asked for his opinion to solve a problem (komarudin, 2014). in this case, consultation is not dominant but only provides legal opinions that can later be used as a reference for the parties to resolve the dispute. 2. negotiation negotiation is a process that two parties have different requests (interests) by agreeing by compromising and giving leeway (muaidi, 2017). according to joni emerson, negotiation can be interpreted as an effort to resolve the parties’ disputes without going through the judicial process to reach a mutual agreement based on harmonious and creative cooperation. negotiations allow the parties not to go directly in negotiations, namely representing their interests to each of the negotiators they have appointed to conduct competitively and mutually release or give leeway for a peaceful settlement (komarudin, 2014). 3. mediation etymologically, mediation comes from the latin mediare, which means to be in the middle because a person who is mediating (mediator) must be in the middle of the warring person (maryam, 2019). it can be described that mediation is a process of resolution the warring parties to reach a satisfactory settlement through a neutral third party (mediator) (maryam, 2019). supreme court regulation (perma) no. 1 of 2016 on mediation explains that mediation is a way of resolution disputes through the negotiation process to obtain the parties’ agreement with the help of mediators (yunita, 2021). mediation has gained more attention in indonesia in recent years, among other reasons (komarudin, 2014): a. economic factors, mediation as a dispute resolution alternative has the potential to resolve disputes more economically, both from the point of view of cost and time. b. scope factors discussed, mediation can discuss the agenda of the problem broadly, comprehensively, and flexibly. 224 muhammad abdul aziz, fardan bintang agung sasongkojati c. the factor of fostering good relations, where mediation relies on cooperative ways of settlement, is perfect for those who emphasize the importance of good relations between people, which have been ongoing and to come. 4. conciliation marwan and jimmy interpret conciliation as an attempt to bring together the parties’ wishes to reach an agreement to resolve disputes with families (komarudin, 2014). it can then be interpreted that conciliation is the creation of adjustment of opinion and resolution of a dispute with an atmosphere of friendship and without any hostility carried out in court before the trial to avoid the litigation process (muaidi, 2017). 5. expert judgment, the formulation of article 52 of law no. 30 of 1999 concerning arbitration and alternative dispute resolution stated that the parties to an agreement have the right to invoke a binding opinion of the arbitral institution on the particular legal relationship of an agreement (muaidi, 2017). this provision is essentially the implementation of the duties of the arbitral institution as stated in article 1 paragraph 8 of law no. 30 of 1999 concerning arbitration and alternative dispute resolution, which reads that the arbitral institution is the body chosen by the parties to the dispute to give a ruling on the dispute, the institution can also give a binding opinion on a particular legal relationship in the event of a dispute has not arisen (komarudin, 2014). methods this study applied qualitative method in the form of comparative law of a litigation and non litigation. in addition, this study also compared effectiveness between religious court and national sharia arbitration board. this method is useful for exploring and analysis procedures and implementation (athief & juwanti, 2020). this research is descriptive, meaning that the researcher intends to provide a clear picture systematically (waluyo, 2012), journal of islamic economic laws-july, vol. 5, no. 2, 2022 225 to the analysis of sharia economic dispute resolution, with an empirical approach, namely legal research that examines laws conceptualized as actual behavior, as an unwritten social symptom, which everyone experiences in the relationship of community life (muhaimin, 2020), in this study use interviews, observations, and documents in collecting data (sugiyono, 2020). the research subjects were conducted at the office of the national sharia arbitration board (basyarnas) representative in yogyakarta and the sleman religious court class 1a. types and sources of data used in qualitative research are data in the form of events that occur, not just visible, spoken, but data that contains the meaning behind the visible and spoken (sugiyono, 2020). the types of data with the sources used in this study are divided into two kinds of primary data sources and secondary data sources data collected by the researcher directly from the first source or object of the study is conducted that directly provides data to the data collector (sugiyono, 2020), the source of the data in this study is the results of interviews from judges, arbitrators, and plaintiffs or those representing them who directly feel the course of the judiciary in the basyarnas representative yogyakarta office and sleman religious court class 1a. the data obtained is not directly from the data collector but through other or existing documents. secondary data sources are additional sources in the form of documents, books obtained from library materials, and a relationship with research. in qualitative research, the data analysis we use is the analysis of miles and huberman model data, which is an activity in qualitative data analysis that is done interactively and continues continuously until complete so that the data is saturated. this is the stage that is done when the research is running and after all the research data is collected. activities in data analysis, among others (sugiyono, 2020): data collection, data reduction, presentation of data, conclusion withdrawal and verification 226 muhammad abdul aziz, fardan bintang agung sasongkojati results the principle of alternative dispute resolution is a system of conflict or dispute resolution that is carried out outside the ways of litigation and always prioritizes the principle of consensus deliberation (yusna, 2015). how to resolve disputes through religious courts has been regulated in civil procedure law. wirjono prodjikoro explained that civil procedure law is a series of rules that contain how people should act in front of the court and how the court must act to carry out the rules of civil law. abdul manan also explained that civil procedure law is the law that governs the procedure for filing a lawsuit with the court, how the defendant defends themselves from the plaintiff’s lawsuit, how the judges acted well before and under examination, and how the judge decides the case filed by the plaintiff and how to carry out the ruling as appropriate following applicable regulations so that the rights and obligations that have been regulated in civil law can run as they should (sufiarina, 2013). under article 54 of law no. 7 of 1989 concerning religious courts, the event law applicable to courts in the religious justice environment is a civil procedure law that applies to courts in a general judicial environment, except as specifically regulated in this law (ahmad, 2014). in every examination of sharia economic matters, judges should always be guided by the principles outlined in the law of religious justice. the principles referred to are as follows (ahmad, 2014): 1. the foundation of godhead 2. islamic personality principle 3. foundation of freedom 4. judge’s principle is passive 5. the principle of open session to the public 6. principle of equality 7. the principle of speech is charged 8. principle of flexibility 9. principle of peace journal of islamic economic laws-july, vol. 5, no. 2, 2022 227 dispute resolution can be through litigation or judicial, and non-litigation or out-of-court. table 1 shows the comparison of sharia economic dispute resolution in religious court class 1a and basyarnas yogyakarta. table 1. comparison between litigation and non-litigation of sharia economic dispute no scope litigation (religious court class 1a) non-litigation (basyarnas) 1 definition justice for people who are muslim how to resolve civil disputes outside the general court based on arbitration agreements made in writing by the parties to the dispute 2 legal standing law no. 50 of 2009 on the second amendment to law no. 7 of 1989 on religious justice law no. 30 of 1999 on arbitration and alternative dispute resolution 3 acces to location easy, because it is in the middle of a road often passed by the community and in the middle of the office center. although it is in the middle of the city, basyarnas is on a road that is rarely traversed by people. 4 scope of case marriage, inheritance, will, grant, waqf, zakat, infaq, shadaqah, and sharia economy trade, finance, industry, services 5 dispute resolution model simple lawsuit and ordinary lawsuit arbitration 6 parties plaintiff or who represents him, defendant or who represents him, witness plaintiff or who represents him, defendant or who represents him, witness 228 muhammad abdul aziz, fardan bintang agung sasongkojati no scope litigation (religious court class 1a) non-litigation (basyarnas) 7 procedure 1. pre-trial, which includes (bahri, 2022, p. 33): a. case registration b. determination of the panel of judges c. appointment of the trial clerk or substitute clerk d. determination of the trial day and summons of the parties 2. the trial stage, which includes (ahmad, 2014, p. 481): a. at the first trial, the judge tried to reconcile the two parties (muhammad, 2015, p. 67). b. if it does not work, then the judge requires both parties to first go through mediation. c. if the mediation is unsuccessful, the examination will be continued by reading the lawsuit. d. defendant’s response e. plaintiff’s answer and defedant’s answer (replik duplik) f. proving the case of sharia economics g. conclusion 3. the reading of the verdict 1. application letter registration 2. payment of trial fees 3. appointment of arbitrators 4. determination of place 5. summoning the parties 6. examination: a. at the first hearing, the arbitrator sought to reconcile the two sides. b. if it is unsuccessful, then the arbitration continues with the reading of the lawsuit letter. c. defendant’s answer d. plaintiff’s answer and defedant’s answer (replik duplik) e. proof of sharia economics f. conclusion 7. verdict 8 length of process maximum of 5 months or 150 days maximum of 6 months or 180 days after the arbitrator’s decision 9 decision result verdicts are declaratory, constitutive, kondemnator the verdict is final and binding. journal of islamic economic laws-july, vol. 5, no. 2, 2022 229 no scope litigation (religious court class 1a) non-litigation (basyarnas) 10 legal remidies appeal, cassation, and review no appeal or cassation efforts 11 strengths has executive power, and has absolute and relative power in the handling of sharia economy free from the complexity of administration, and free in choosing judges, places, even laws used in arbitration, and guaranteed confidentiality from any party. 12 weakness many disputes go to religious courts, so they have to wait in line for a long time to resolve a dispute. not the main choice because it is another option other than to settle in a religious court, and less known by the public. it can be seen from table 1 that each of the dispute resolutions from the religious court class 1a and basyarnas yogyakarta have advantages and disadvantages. the legal standing that applies the legal basis for religious courts has been renewed, while arbitration to date has not been renewed. while the harmonization of laws and regulations is needed has an essential meaning in drafting laws and regulations that are an integral part or sub-system in a country’s legal system so that the laws and regulations can be interrelated and dependent and can form a complete roundness (soegiyono, 2015). however, the scope of the case for religious courts is a weakness for them because the breadth of the scope of the case makes the whole problem of seeking justice through religious courts and slows the resolution of a dispute because it has to wait in line for the resolution of disputes in religious courts and limited courtrooms and mediation and human resources in the religious court class 1a, this is by the results of the researcher’s interview with dra. hj. syamsiah, m.h., said, “the courtroom and mediation owned by the sleman religious court class 1a are considered insufficient and unbalanced with the number of cases that enter, so it must stand in line.” although religious court rulings are declaratory, constitutive, and concussive, there are still attempts at appeal, cassation, and review. even if a dispute 230 muhammad abdul aziz, fardan bintang agung sasongkojati is decided quickly, there is still the possibility of an appeal that gives rise to a lengthy dispute resolution. discussion the event law that applies to the courts in the religious justice environment is the civil procedure law that applies to the court in the general judicial environment, and this is based on article 54 of law no. 7 of 1989 concerning religious justice, except that it has been specifically regulated in the law (ahmad, 2014). meanwhile, the scope of the authority of the religious judiciary in the field of islamic banking can be seen from the explanation of article 49 letter (i) of law no. 3 of 2006, namely; what is meant by sharia economy is an act, or business activity carried out according to sharia principles, including; islamic banks, islamic microfinance institutions, islamic insurance, islamic mutual funds, islamic bonds and islamic medium-term securities, islamic securities, islamic financing, islamic pawnshops, financial institution pension funds, and islamic businesses (ramlah, 2012). with the addition of the absolute authority of the religious court on the issue of sharia economics, a set of rules of law is needed. among the legal instruments in litigation on the implementation of the sharia economic question in the religious court, it is well-known that there are 2 measures of settlement of the sharia economic dispute, first with a simple and second with a normal event (azma, 2017). when deciding a dispute through trial or litigation comes into focus (azma, 2017): a. the case does not contain any arbitration. ascertaining the case of arbitration or not is crucial, for it is beyond the scope of absolute religious judicial authority. even before the court sought peace for the parties, it was necessary to examine whether or not the treaty raised by the parties contained arbitration of arbitration so that the judges would not have to continue the judicial process because the case did not include absolute religious judicial authority. b. carefully study the covenants on both sides. any case in the islamic economy will not be despite the disputes that will take place between the parties that make the journal of islamic economic laws-july, vol. 5, no. 2, 2022 231 agreement and the implementation of the agreement. whereas every cooperation or enterprise of any kind always has or is based on an agreement or agreement made and agreed upon by both sides. therefore, the focus of the inspection must depart from the agreement or the contract upon which the cooperation is an issue between the two sides. since it is the focus of the agreement or the contract that underlies the cooperation of both parties, then it must be the law of the agreement listed in the civil valid from 1233 to article 1864 and of course, its application must be relevant to the terms of the agreement in either the qur ‘an and as-sunnah or fatwa cleric of the field (basir, 2009). the settlement of the islamic economic dispute with the simple program has been in place under the rule of the 2019 supreme court (perma), no. 4 in 2019 on the 2015 rule of the 2015 no. 2 supreme court. the suit can be presented orally or written in print or electronic case registration (basir, 2009). the material value of the lawsuit filed is rp 500,000,000 in case of promise injury or unlawful acts. in settling the sharia economic dispute in a simple lawsuit, the judge is the lone judge. it was not included in the simple lawsuit of the matter in which the controversial settlement was done by special courts as governed in legislation or land rights disputes. in a simple lawsuit, the plaintiff and the defendant are only one unless they have the same legal interest (mukaromah, 2018). the stages of settling a simple lawsuit include the following (azma, 2017): a. registration b. check the completeness of a simple lawsuit c. appointment of judges and appointment of substitute clerks d. preliminary examination e. determination of the day of trial and summons of the parties f. trial hearings and reconciliation g. proof h. verdict 232 muhammad abdul aziz, fardan bintang agung sasongkojati the deadline for settling a simple lawsuit is 25 days from the day of the first trial. in examining a simple lawsuit, no claims for provisions, exceptions, conventions, interventions, duplications, or conclusions can be filed. if there is an objection to the decision determined, then submit an objection to the court chairman, who has the right to decide the case (mukaromah, 2018). settlement of sharia economic disputes through ordinary procedures can be done with 2 things: simple lawsuits based on perma number 4 of 2019 concerning procedures for settling simple lawsuits and ordinary lawsuits based on applicable civil procedural law except those specifically regulated in the supreme court regulations. religious courts examine, adjudicate, and decide by ordinary procedure with at least 3 judges unless the law provides otherwise. the panel of judges must comply with the provisions stipulated in the supreme court regulation (perma) number 5 of 2016 concerning the certification of sharia economic judges. the process of examining sharia economic cases can be divided into 2, which are as follows (ahmad, 2014): a. pre-trial, which includes (bahri, 2022): 1) case registration 2) determination of the panel of judges 3) appointment of the trial clerk or substitute clerk 4) determination of the trial day and summons of the parties b. the trial stage, which includes (ahmad, 2014): 1) at the first trial, the judge tried to reconcile the two parties (muhammad, 2015) 2) if it does not work, then the judge requires both parties to first go through mediation (muhammad, 2015). 3) if the mediation is unsuccessful, the examination will be continued by reading the lawsuit. 4) defendant’s response 5) plaintiff’s answer and defedant’s answer (replik duplik) 6) proving the case of sharia economics 7) conclusion 8) the reading of the verdict journal of islamic economic laws-july, vol. 5, no. 2, 2022 233 in deciding by a judge, what must be done is to (basir, 2009): a. konstatir, which means testing whether or not the events or facts proposed by the parties through evidence using valid evidence according to the law of evidence. b. qualifying, which means assessing events or facts that have been proven, including what relationships and finding the law for events that have been confirmed. this must be done in the judge’s decision in the legal considerations section. c. constituting to find the law and enforce justice in the case to be then compiled in a judge’s decision, and determine the law on the case. there are 2 usual procedural decisions in settlement of sharia economic disputes, namely (bahri, 2022): a. a decision that states that the plaintiff’s claim is granted either partially or completely. b. a decision stating that the plaintiff’s claim is rejected. with the decision of legal remedies in examining ordinary procedures, the parties can file an appeal. the parties cannot file a legal action against the sharia economic dispute decision to file a cassation or judicial review. in settlement of disputes in religious courts, the supreme court has given a time limit through circular letter number 2 of 2014, which is the settlement of disputes at the court of the first instance within 5 months at the latest. furthermore, if the time limit has been determined by the judges of the first instance court, they shall make a report to the chief justice of the first level court, a copy of which is addressed to the head of the court of appeal and the chief justice of the supreme court (ketua mahkamah agung republik indonesia, 2014). arbitration is one of how disputes are resolved outside the judiciary and is carried out by the arbitrator chosen and authorized to make decisions (soemartono, 2006). moreover, arbitration in indonesia has been stipulated in law no. 30 of 1999 concerning arbitration and alternative dispute resolution, it can be concluded from the law that there is a dispute resolution process 234 muhammad abdul aziz, fardan bintang agung sasongkojati before heading to arbitration, each plaintiff and defendant must pass a meeting directly between the two parties and this lasts for 14 days, if the dispute cannot be resolved, then the dispute is resolved through the help of an expert advisor or mediator, if within 14 days the dispute cannot be resolved with the help of an expert advisor or a mediator, then the parties may contact the arbitral institution or alternative dispute resolution institution to appoint a mediator, after the appointment of a mediator by the arbitral institution or alternative institution of dispute resolution, the mediation effort must have been started no later than 7 days after the appointment, then within 30 days an agreement must be reached in written form signed by all parties concerned , and the agreement that has been written is final and binding the parties must be registered in the district court within a maximum of 30 days after the day of signing, and the agreement must be completed by both parties after 30 days from the registration of the agreement, and if the dispute resolution efforts described above have not resulted in an agreement, then the parties may file a dispute resolution effort through an arbitration institution or ad-hoc institution. the above explanation has been written in law number 30 of 1999 on arbitration and alternative dispute resolution article 6 from paragraphs 1 to 9. with law number 30 of 1999 on arbitration and alternative dispute resolution as well as the fatwas on sharia economy issued by the national sharia council of the indonesian ulama council (dsn-mui), the national sharia arbitration board (basyarnas) as an islamic arbitration institution under the indonesian ulama council (mui) has authority in efforts to resolve business disputes or sharia trade in accordance with the rules of procedure of the national sharia arbitration board (yusna, 2015). the procedure in resolution disputes through basyarnas has a standard procedure. it must follow the procedure in good faith, and this procedure becomes standard in the proceedings. the proceedings in basyarnas still refer to the indonesian muamalat arbitration board (bamui), which was ratified and established on october 01, 1993, in jakarta. furthermore, the journal of islamic economic laws-july, vol. 5, no. 2, 2022 235 event procedure that applies in basyarnas is as follows (masse, 2017): a. application letter registration the application for arbitration proceedings begins by registering a letter of application to arbitrate to the secretary of basyarnas (siswanto, 2018). the application letter contains the full name and residence of the parties and a brief description of the sitting of the case and its demands. the application file must attach various documents, including (nugroho, 2007): 1) a copy of the agreement’s text that expressly submits authority to basyarnas to examine and decide the case. 2) letter of an agreement containing an arbitration clause, which is a provision that stipulates that the dispute arising will be resolved in basyarnas. basyarnas will examine the application letter submitted and determine whether basyarnas is authorized to examine and resolve the proposed arbitration dispute. basyarnas will declare that the application is unacceptable if the arbitration agreement and clause are deemed insufficient to be the basis of basyarnas’s authority and declare the application unacceptable as outlined in a determination issued by the chairman of basyarnas before the examination process begins. moreover, if the application is accepted, then the chairman of basyarnas immediately determines and appoints the sole arbitrator or arbitrator of the tribunal (masse, 2017). basyarnas secretariat will submit a copy of the application letter to the respondent no later than eight days after the arbitrator’s appointment or arbitrator, and the respondent shall be given no later than 30 days to answer the copy of the application letter in writing (nugroho, 2007). 236 muhammad abdul aziz, fardan bintang agung sasongkojati b. appointment of arbitrators following article 12 of law number 30 of 1999 concerning arbitration and alternative dispute resolution, an arbitrator must meet the following conditions: 1) capable of taking legal action. 2) at least 35 years old. 3) do not have a blood family relationship up to the second degree with one of the parties to the dispute. 4) have no financial or other interest in the arbitral award 5) have experience and actively master in their field for a maximum of 15 years. furthermore, for sharia arbitration, an arbitrator other than having to meet the requirements stated in law number 30 of 1999, sharia arbitrator must meet additional requirements, namely (masse, 2017): 1) muslims who obey the teachings of their religion and are not entangled in the rule of law. 2) expert in science and experienced at least ten years in their field 3) agree and accept all provisions contained in the articles of association, bylaws, and regulations of procedures in advance of the body. 4) fill out and sign the list of fields (forms) submitted by the board and willing to be sworn in. following the provisions of article 8, paragraph 2 letter f of law number 30 of 1999 concerning arbitration and alternative dispute resolution and bamui procedure rules, that the number of arbitrators must be odd at least one person and a maximum of 3 persons (undang-undang tentang arbitarse dan alternatif penyelesaian sengketa, 1999). suppose any of the plaintiffs or defendants object to the arbitrator whom the chairman of basyarnas has sent. in that case, no later than in the first examination hearing or no later than three days, the sole arbitrator or arbitrator submits the objection of the arbitration to the chairman of basyarnas by injournal of islamic economic laws-july, vol. 5, no. 2, 2022 237 cluding the reasons based on the law and no later than seven days, the chairman of basyarnas will decide the objection and decide whether the objection of the defendant or the plaintiff is accepted or rejected. if the objection is accepted, then the chairman of basyarnas, in the same determination, will appoint another arbitrator (batubara, 2020). c. inspection mechanism all inspections and proceedings are conducted in closed hearings to the public. the entire proceedings and correspondence are in indonesian. however, if one party does not understand indonesian and wants a translator, the interested party must present a translator. the right to defend its interests is granted to each party. arbitrators shall give equal treatment to the parties by adhering to the principle of equality before the law. moreover, any evidence or documents must be copied in duplicates to be provided to the arbitrator or the opposing party (masse, 2017). the proceedings are conducted at the central basyarnas office located in jakarta or basyarnas branches and representatives or elsewhere with the parties’s consent. when the examination begins, the arbitrator shall attempt to reconcile the two parties. suppose the arbitrator’s efforts in reconciling the two parties are achieved. in that case, the arbitrator will make a deed of peace and register it to the court of religion following article 13 of the supreme court regulation (perma) no. 14 of 2016 concerning procedures for settlement sharia economic matters (batubara, 2020). the process of resolution disputes outside the court or through arbitration has the purpose of avoiding delays caused by procedural and administrative proceedings in public courts. therefore the arbitration has a win-win solution (batubara, 2020). d. venue of the trial following the previous point, the proceedings are conducted at the central basyarnas office located in jakarta or basyarnas branches and representatives or elsewhere with the parties’ consent (batubara, 2020). the sole arbi238 muhammad abdul aziz, fardan bintang agung sasongkojati trator or council arbitrator may examine witnesses and may submit expert witnesses at hearings (nugroho, 2007), goods or documents relating to the disputed matter (masse, 2017). the proceedings begin with the examination process until the verdict is made in private. the nature of basyarnas confidentiality has been stipulated in article 27 of law number 30 of 1999, which reads, “all examination of disputes by arbitrators or arbitral tribunals shall be conducted in private”. each party is given the same right to prove the evidence or opinions in the proceedings (masse, 2017). the board of arbitrators, either in their own opinion or at the request of either party or both parties, may examine by hearing witness testimony and oral examination between the parties (nugroho, 2007). any evidence or document submitted by either party, then the copy must be submitted to the opposing party to respond to (batubara, 2020). the examination phase starts from responding to each other, the evidentiary, and the verdict is done at the discretion of the sole arbitrator or tribunal (masse, 2017). e. trial period the trial phase begins with the receipt of the registration application file (siswanto, 2018). upon receipt of the application file by the secretariat and after the registration fee, the inspection fee and the arbitrator’s honorarium are paid in full therefore, the chairman of basyarnas will select and send the sole arbitrator or appointed arbitrator of the board of arbitrators registered with basyarnas. however, if the inspection requires unique expertise, then the chairman of basyarnas has the right to appoint an expert in the required unique field. appointed and sorted arbitrators may not resign unless there is a compelling reason (batubara, 2020). before the proceeding begins, the sole arbitrator or council of arbitrators shall attempt to reconcile the parties. after achieving peace, a final and binding deed of peace is made. the decision of peace must be registered in the religious court following article 13 perma no. 14 of 2016 (batubajournal of islamic economic laws-july, vol. 5, no. 2, 2022 239 ra, 2020). before the verdict is handed down, the applicant may cancel his application. the costs paid will be refunded if the chairman of basyarnas has not appointed the arbitrator. if the application’s revocation is submitted after the examination begins, then the entire cost is not refunded. if the sole arbitrator or panel of arbitrators considers the examination sufficient, then the examination will be closed and will determine the day of the hearing to read the award (masse, 2017). at the latest, within 180 days, the entire examination process until the decision is read out by a single arbiter or a panel of arbiters must be completed, starting from the determination of the single arbiter or panel of arbiter (batubara, 2020). f. the nature of the verdict the determination of the arbitrator’s decision is taken on the basis of deliberation and consensus (masse, 2017), if no agreement is reached, then the verdict is based on the most votes (nugroho, 2007). the award may not be announced unless agreed upon by the parties (masse, 2017). a copy of the award signed by the arbitrator shall be provided to the parties to the dispute (batubara, 2020). basyarnas’s decision is final and binding (nugroho, 2007). no later than 30 (thirty) days from the date the award is read, the original sheet or an authentic copy of the arbitrator’s award is registered with the clerkship of the religious court (batubara, 2020). basyarnas is different from the general judiciary. basyarnas has no execution institutions. therefore, to carry out the execution, basyarnas needs to ask for help from the court, especially the religious court (nugroho, 2007). g. determination of trial costs the cost of arbitration consists of the registration fee, the examination fee, and the arbitrator’s honorarium (batubara, 2020). the amount of fees is determined by the chairman of basyarnas in a separate regulation. the cost elements include, first, the convention registration fee calculated based on the nominal amount of the claim, which is 10% of 240 muhammad abdul aziz, fardan bintang agung sasongkojati the claim’s value. second, administrative costs or convention checks are calculated based on the value of the claim. third, arbitrator fees with variations between 0.70 and up to 10 of the value of the claim. the higher the nominal value of the claim, the smaller the percentage (masse, 2017). table 2 describes the details of it. table 2: arbitration fees at the national sharia arbitration board no disputed nominal fees convention registration fee (idr) 1 500,000,000 500,000.00 2 500,000,001 1,000,000,000 1,000,000 3 more than 3,000,000,000 1,000,000 administrative costs or convention checks 1 500,000,000.00 1,000,000.00 2 500,000,001.00 1,000,000,000.00 1,500,000.00 3 1,000,000,001.00 3,000,000,000.00 2,000,000.00 4 more than 3,000,000,000.00 2,500,000.00 arbitrator fees 1 100,000,000.00 500,000,000.00 10% 2 500,000,000.00 2,000,000,000.00 8% 3 2,000,000,001.00 5,000,000,000.00 7% 4 5,000,000,001.00 7,000,000,000.00 6% 5 7,000,000,001.00 9,000,000,000.00 5% 6 9,000,000,001.00 10,000,000,000.00 4% 7 10,000,000,001.00 20,000,000,000.00 3% 8 20,000,000,001.00 40,000,000,000.00 2% 9 40,000,000,001.00 60,000,000,000.00 1,5% 10 60,000,000,001.00 80,000,000,000.00 0,9% 11 80,000,000,001.00 100,000,000,000.00 0,8% 12 more than 100,000,000,000.00 0,7% source: secretary of the national sharia arbitration board representative of yogyakarta journal of islamic economic laws-july, vol. 5, no. 2, 2022 241 from the explanation above, we can understand that using basyarnas services as a legal route in the resolution of sharia economic disputes is perceived to be relatively cheap litigation costs and faster litigation. arbitrators selected by basyarnas must be experts in their fields and active in their fields with at least 15 years of experience. the arbitrator in basyarnas must be a devout muslim, understand the field of sharia economic law and have a bachelor’s degree, and also understand islamic sharia well. basyarnas often faces dispute resolution because the parties are reluctant to attend, so that they buy time for trials. unclear addresses also make it difficult for basyarnas to send mail and search addresses (sari, 2016). by putting aside the constraints of basyarnas, arbitration is a solution in resolution sharia economic disputes effectively and efficiently. conclusion sharia economic dispute resolution through litigation is considered the right and wise choice because religious courts are in every district and are strategically so that they are easily accessible to the public and also because religious courts have executive powers. however, dispute resolution through basyarnas also has its advantages, namely disputes that are reportedly guaranteed confidentiality from any party so that the parties will feel safe and comfortable carrying out arbitration in basyarnas. dispute resolution at religious court and sleman basyarnas have their respective advantages, including deficiencies. dispute resolution in basyarnas is said to be more effective because arbitration rulings are final and binding. there is no appeal or cassation even after the verdict is read and registered with the local religious court. all data from plaintiffs and defendants are guaranteed confidentiality from outside parties. however, religious court is considered more effective than basyarnas. however, after reading the verdict, there is an appeal or cassation or even judicial review. than, the result of this research, religious court is considered good enough to maximize the existing room to minimize the buildup of existing 242 muhammad abdul aziz, fardan bintang agung sasongkojati disputes and continue to innovate optimally to realize rapid dispute resolution, simple and cheap. references ahmad. 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(2015). penyelesaian sengketa melalui peradilan dan arbitrase syariah di indonesia (2nd ed.). aswaj pressindo. journal of islamic economic laws vol. 4, no. 1 january 2021: 61-77 61 analysis of customer’s decision to choose sharia banking in surakarta sudarwati1, burhanuddin ahmad yani2 1universitas islam batik surakarta 2universitas islam batik surakarta email: sudarwatiuniba@gmail.com, burhanudinahmad.uniba@gmail.com abstract this study aims at determining the influence of the profit-sharing system, security of funds, facilities and services toward customer’s decision to choose sharia banking in surakarta. the research employs a method survey; it analyzes the customer’s decision to choose sharia banking. the researcher collects the data from the respondents through a questionnaire. the sample is taken by purposive random sampling. 100 customers come from 10 sharia banking in surakarta. to test the hypothesis, the researcher uses multiple regression analysis, t-test, f test, and determinant coefficient by using spss. the finding of the research is that there is significant influence among variable profit-sharing system (x1), the security of funds (x2), facilities (x3), and service (x4) toward customer’s decision to choose sharia banking (y). however, there is one significant influence. it is a profit-sharing system toward customer’s decision to choose sharia banking. the four variables; profit-sharing system, the security of funds, facilities, and services toward customer’s decision to choose sharia banking is 46.50%. at the same time, the rest is about 53.50 %, derived from another variable which is out of research. keywords: customer’s decision, sharia banking introduction islamic financing became one of the fastest-growing industries whose worldwide financial assets exceeded $2 trillion worldwide in 2014 (ireland, 2018). sharia banking is a bank which operates mailto:burhanudinahmad.uniba@gmail.com journal of islamic economic laws-january, vol. 4, no. 1, 2021 62 based on the principles of islamic sharia (awan & bukhari, 2011). it refers to the provision in the qur’an and hadith. since it refers to quran and hadith, it is expected that sharia banking can avoid some practices that contain riba elements and conduct the investigation business activities based on profit-sharing system and trade finance (kuncoro & suhardjono, 2002). nowadays, sharia banking is one of the banking systems, getting serious attention from the government. there is the possibility that it will become an alternative banking system in indonesia in the future since there is a significant development of sharia banking recently. people find it easy to prove many sharia banking and financial institutions based on islamic sharia. the more sharia banking, the more healthy competition. it hopefully increases the community’s service of product/service and sharia banking. besides the avoidance of bank interest (riba), one of the challenges faced by the islamic world today after the indonesian council of ulama (mui’s) fatwa that riba is illegitimate. thus, the role of sharia banking begins to get attention from economist sharia who tries to find a way to replace the riba system in conventional banking to a system which is appropriate to islamic ethic. in firming the position of sharia banking as a bank which based on islamic jurisprudence, sharia banking in its operation has to compete with conventional banking. therefore, sharia banking has to give more offer to the community. the advantages of sharia banking are profit-sharing system, safety, facilities, and services to the customers. understanding customer characteristics are crucial to the banking management since they relate to these critical factors which determine bank selection (plasinek, 1994). from the above introduction’s turning point, this study tries to research the customer’s decision to choose sharia banking in surakarta. based on the previous introduction, this research conducted research dealing with the profit-sharing system, security of funds, facilities and services in sharia banking to know the factors that influence the customer’s decision to choose sharia banking in surakarta. besides, this study also analyses the sudarwati, burhanuddin ahmad yani 63 factors that influence the customer’s decision to choose sharia banking in surakarta. hopefully, it will increase the number of customers in sharia banking in surakarta. this study is expected to determine the influence of the profit-sharing system, the security of funds, facilities and services toward the customer’s decision to choose sharia banking in surakarta. this research also aims to determine the importance of the profit-sharing system, the security of funds, facilities and services of sharia banking, which finally increase the number of customers in sharia banking in surakarta. literature review sharia banking the word bank derives from the italian word banco, which means the bench. bankers use the bench to serve customers and useful for operation a well. the term banco becomes popular and formally becomes the bank (malayu, 2002). there are several definitions of sharia banking. to mohammed, “sharia banking is a financial institution which operation is based on quran and hadith of prophet muhammad saw (muhammad, 2002). indonesia is one largest country with muslim community domination. with majority muslim country indonesia becomes a potential market for the islamic banking industry. amin & isa (2008) showed that the proportion of malaysian muslims’ awareness of islamic banking products and services were high compared to non-muslim customers. this finding is strengthened by mariyono (2013), who stated that age, gender and religion led to customers more likely to invest their money in sharia scheme. from that definition, financial institutions that run the business by providing finance and other services in the circulation of money are based on islamic sharia. according to law no. 7 the year 1992, revised with banking law no. 10 the year 1998, sharia banking is a financial institution that operates based on the profit-sharing system. sharif arbi defines sharia banking is a bank established to fulfil human need based on islamic jurisprudence (syarif, 2002). from these definitions, it can be said that sharia banking is an institution which fulfils human need based on islamic journal of islamic economic laws-january, vol. 4, no. 1, 2021 64 jurisprudence. there are many other similar definitions of sharia banking which central point is based on islamic jurisprudence in its operational. the differences are only in its business. customer in the traditional concept, customer is everyone who buys and uses that company’s products or services. in a modern concept, customer falls into two categories; internal or external customer. external customer is everyone who buys/uses the product/service of the company. in contrast, internal customers are all parties in the organization that use a part /particular department (it includes a step-by-step process in production stages). according to tjiptono (1996), the customer is the person or party with their need served. thus everyone can become a customer. customers or consumers are also dynamic subjects and strongly influenced by internal factors and external factors as well. customers’ response and action emerge from the stimulus’s perception and expectation. both customer behaviour from within him/her and outside him/her fulfils the needs and demands. the term customer in law no. 10 the year 1998 article 1, number 16 is: “those who use the bank’s services”. based on that law, customer falls into two categories. first, the depositor is customer who places their funds in banks in bank deposits based on the pact between bank and customer. second, a debtor is a customer who gets credit facilities or financing based on islamic principles or its equivalent based on the pact between customer and the bank. the dynamism of customer is seen from diverse factors. it can be simple or complex. it depends on the particular circumstances. several factors affect dynamism of customer; age, adolescent customer/student, adult customer, and elderly customer. each of those factors has a different characteristic. customer is the person or legal entity who holds an agreement to save money in a bank in the form of giro, savings and deposit. these savings are based on the pact between customer and bank. sudarwati, burhanuddin ahmad yani 65 therefore, banks or customers are not restricted to a particular group, although they only have a little money. customer’s decision several factors affect consumer to make a decision; cultural, social, personal and psychological. all of these factors influence the consumer in decision-making. before consumer’s behaviour occurs, a marketing man first has to find the consumers’ needs and demands. the research conducts to know and understand the customer’s behaviour and how the customer chooses sharia banking. yulianto & solikhah (2016) illustrated that the customers’ motivation to save their money in the bank is to invest in islamic financial instruments following islamic principles. amin & isa (2008) found that customers of islamic banking in the islamic banking industry have put the criteria of customer satisfaction towards service quality provided by their banks. meanwhile, kontot et al. (2016) revealed that sharia compliance, returns, confidence and trust, security, transparency, the flexibility of withdrawal scheme were among the determining factors that influence customers’ preferences in making decisions for customer of islamic banks. islamic religious belief and social responsibility are the two most important factors determining bank selection (al-ajmi et al., 2009). however, some recent researches revealed that religion is not only determining factor. one of them, such as selvanathan et al. (2018), proves that religion shows a negative relationship with islamic banking. furthermore, it shows that religion is not the main factor, but the risk of selecting a bank is essential. mansour et al. (2010) stated that the criterion “low services charges” is the top customers’ criteria among customer of islamic banks in the uk. methods figure 1 below depicted research method in the schematic framework. this research is described as follows: journal of islamic economic laws-january, vol. 4, no. 1, 2021 66 figure 1 research framework the object of the research is 100 respondents derived from the customers of sharia banking in surakarta. those 100 respondents come from bank mandiri syariah, bank bri syariah, bank btn syariah, bank cimb syariah, bank muamalat syariah, bank bukopin syariah, bank bni syariah, bank bca syariah, bank danamon syariah and bank panin syariah. locations of the research are described below : table 1. research locations no sharia banks address 1 bank mandiri syariah jl. slamet riyadi no. 388 purwosar,solo 2 bank bri syariah jl. slamet riyadi no.236 solo 3 bank btn syariah jl. slamet riyadi no.322 sriwedari solo 4 bank cimb syariah jl. slamet riyadi no.371 sondakan, solo 5 bank muamalat syariah jl. slamet riyadi n0.314 solo sudarwati, burhanuddin ahmad yani 67 6 bank bukopin syariah jl. slamet riyadi no. 271 solo 7 bank bni syariah jl. slamet riyadi no. 318 sriwedari solo 8 bank bca syariah jl. slamet riyadi no. 488 purwosari solo 9 bank danamon syariah jl. piere tendean no.199 nusukan solo 10 bank panin syariah jl. piere tendean nusukan banjarsari solo the researcher employs purposive sampling by giving a questionnaire to 100 respondents of sharia banking’s customer and doing direct observation in research places. this study also notes some sharia banking data, which covers the history and development of sharia banking, facilities, types, and services. data collecting technique of this research is by conducting observation in sharia banking in surakarta. it does direct observation to know the facility and services which is given to the customers. the research data collection method is by spreading a questionnaire consisting of a list of questions related to the research questions. library research deals with collecting data from the scientific journal, books, recording and other reading or literature related to the research issues. documentation is collecting method by finding variables of the research. the purpose of this method is to get the precise data of the research. data processing operation in this study conducted several steps : 1. variables of the research: y = customer’s decision as to the dependent variable. x1 = independent variable value of profit-sharing system. x2 = independent variable value of the security of funds x3 = independent variable value of facilities x4 = independent variable value of services journal of islamic economic laws-january, vol. 4, no. 1, 2021 68 2. validity test this test is useful to determine the validity of the questionnaire. the calculation of this test is by using the correlation test from each statement with the total score. the formula is as follows: note: r xy : the correlation coefficient between x and y n : the number of respondents who tested x : total score items y : the total of individual scores the test result compared to the number of criticism. this research used 5% of significant level. if the number of r is greater than the table of r value, it means the list of the statement as a means of measuring is valid and vice versa. 3. reliability test reliability test is used to determine an instrument’s reliability level (umar & husein, 2000). to test the reliability of an instrument by using alpha cronbach formula, as follows: r11 =         −      − ∑ 2 2 1 1 t b k k α α note: r11 : reliability instrumen k : list of questions σαb² : number of variant item α1² : total variant 4. classical assumption test here are some ways to test: a. normality test b. multicollinearity test c. autocorrelation test sudarwati, burhanuddin ahmad yani 69 d. heteroskidastity test 5. multiple linear regression analysis multiple regression analysis is useful to determine the significant influence of independent variables (profit-sharing system, security funds, facilities, services) overall toward dependent variable (customer’s decision) (ghozali & imam, 2003). the formula is as follows: y = a + b1 x1 + x2 + b2 b3 b4 x3 + x4 + e note: y = customer’s decision as to the dependent variable. x1 = independent variable value of profit-sharing system. x2 = independent variable value of security funds. x3 = independent variable value of facilities. x4 = independent variable value of services. 5. multiple linear regression significance test. a. test f it is useful to determine whether or not the relationship between variable x and y are significance. ftable = f (α / 2 : n – 2) fcount = note: r: correlation coefficient between independent variables and the dependent variable n: number of samples b. t-test to determine whether or not each independent variable is partially significance in influencing dependent variable. in this research, the present researcher uses significant level 0.05. table = t (α / 2 : n – 2) journal of islamic economic laws-january, vol. 4, no. 1, 2021 70 tcount = b sb note : b : regression coefficient of each variable sb : standard error of coefficient regression 6. the coefficient of determination (r2) it is used to determine the contribution of a given independent variable (x) dependent variable (y). the following is the formula of correlation of determination: 2 22112 y yxbyxb r ∑ ∑+= note: r²: multiple correlation coefficient x: independent variable y: dependent variable n: number of samples results and discussion table 1. multiple regression analysis result sources: primary data are processed, 2016 based on the results of regression from primary data which are processed using spss 15 for windows, it shows the following result: sudarwati, burhanuddin ahmad yani 71 a. multiple linear regression analysis here is the equation of linear regression analysis: y = 7.375 + 0.465 + 0.153 x1 + 0.172 x2 + 0,209x3, x4 + e note: a = 7.375 positive constanta. it means that in the profit-sharing system (x1), security funds (x2), facilities (x3), and services (x4) = 0 (none), then the customer’s decision is 7.375. b1 = 0.465 coefficient regression system is positive. it means that if the profit-sharing system (x1) has been increasing, the level of customer’s decision will be increasing, and the assumption that the other variables remain stable. b2 = 0,153 coefficient regression of security funds is positive. it means that if security funds (x2) have been increasing, the level of customer’s decision will be increasing, assuming that the other variables remain stable. b3 = 0.209 coefficient regression facility is positive. it means that if the facility (x3) has been increasing, the level of customer’s decision will be increasing, assuming that the other variables remain stable. b4 = 0.172 coefficient regression of service is positive. it means that if services (x4) have been increasing, the customer’s decision will be increasing, assuming that the other variables remain stable. b. f test f test is a calculation to determine whether the independent variables consist of variables profit-sharing system (x1), security (x2), facilities (x3), services (x4), simultaneously have a significant influence on the dependent variable. it is the customer’s decision (y) in this case. from the analysis, the result is the following table. test result of f test is as follows: journal of islamic economic laws-january, vol. 4, no. 1, 2021 72 table 2. f test result sources: primary data are processed, 2016 from the above table, the value of fcount in the first hypothesis is 22.502. while the value of f table at trust level is 95% (α = 0.05) which is 2.24 thus the value of fcount> f table, i.e. 22.502> 2.24. it makes sense that independent variables; profitsharing system (x1), security funds (x2), facilities (x3), services (x4), simultaneously give significant influence to the customer’s decision (y). besides, based on the analysis using spss 15.0, it shows that fcount is 22.502 with significance (p) is 0.000< α (0.05), it means that ho is refused and h1 is accepted, thus the resulting state that simultaneously there is a very significant influence among these variables namely profit-sharing system (x1), security funds (x2), facilities (x3), and service (x4). c. t-test based on data analysis using spss 15.0, tcount derived from each variable of the table as follows: table 3. t-test result sources: primary data are processed, 2016 sudarwati, burhanuddin ahmad yani 73 1. significance influence of profit-sharing system (x1) toward the customer’s decision (y) tcount is 3,817, which has p-value or significance 0.000. based on this analysis, it shows the value of p <(0.05) which means that ho is refused, therefore this result express that partially, there is significant influence between profit-sharing system (x1) to customer’s decision (y). 2. significance influence of security fund (x2) towards customer’s decision (y) tcount is 1,340, which has p-value or significance 0.183. based on this result, it shows that the value of p> (0.05) which means that ho is accepted, thus this result indicates that partially, there is no significant influence between the security of funds (x2) to customer’s decision (y). 3. significance influence of facility (x3) toward satisfaction (y) tcount is 1.778, which has p-value or significance 0.079. this result shows that p> (0.05) value, which means that ho is accepted. thus this result expresses that partially, there is no significant influence between facility (x3) to customer’s decision (y). 4. significance influence of services (x4) toward customer’s decision (y) tcount is 1,272, which has p-value or significance 0.206. based on this result, it shows that the value of p> (0.05) which means that ho is accepted, thus this resulting state that partially, there is no significant influence between services (x4) to customer’s decision (y). d. r² test (coefficient of determination) coefficient of determination is useful to determine the contribution of independent variables (profit-sharing system, the security of funds, facilities and services) toward the dependent variable (the customer’s decision) shown by the r². the result of the coefficient of determination calculation can be seen in the following table. journal of islamic economic laws-january, vol. 4, no. 1, 2021 74 table 4. the coefficient of determination (r2) the above table analysis shows that the coefficient of determination (adjusted r square) is 0.465 or 46.50%. it means that variable of the profit-sharing system (x1), the security of funds (x2), facilities (x3), and service (x4) give its contribution about 46.50% toward customer’s decision to choose sharia banking. while the rest shows about 53.50%, the influenced factors are out of the research variables. they are religious factors, personal factors, external factors, social factors, and psychological factors. conclusion this study concluded first that there is a very significant influence among these variables; profit-sharing system (x1), security funds (x2), facilities (x3), and service (x4). second, there is a significant influence between the profit-sharing system (x1) to the customer’s decision (y). third, there is no significant influence between the security of funds (x2) to customer’s decision (y). fourth, there is no significant influence between facility (x3) to customer’s decision (y). fifth, there is no significant influence between services (x4) to customer’s decision (y). coefficient of determination (adjusted r square) is 0.465 or 46.50%. it means that variable of the profit-sharing system (x1), the security of funds (x2), facilities (x3), and service (x4) give its contribution about 46.50% toward customer’s decision to choose sharia banking. while the rest shows about 53.50%, the influenced factors are out of the research variables. they 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(2016). the internal factors of indonesian sharia banking to predict the mudharabah deposits. review of integrative business and economics research, 5(1), 210–218. _goback _goback _hlk55084518 _hlk55084698 _hlk55085026 _goback _goback _hlk59008645 journal of islamic economic laws vol. 4, no. 1 january 2021: 45-60 45 unfolding the possibility to develop share-waqf in indonesia through the concepts, opportunities & challenges aldi khusmufa nur iman1, faridatun najiyah2, munji asshiddiqi3 1uin sunan ampel surabaya 2stei permata bojonegoro 3the university of queensland australia email: aldikhusmufa@gmail.com, najiyahfaridatun@gmail.com, munas.sidiq@gmail.com abstract indonesia is a country with the largest muslim population in the world. the potential of islamic financial instruments for the welfare of the people grows in society, one of which is cash waqf and shares. most islamic scholars allow cash and shares to be used as objects of waqf. both cash and stock endowments can be implemented into two models. cash waqf can be implemented as mutual funds or converted into other fixed assets. meanwhile, the implementation of share waqf can be done through corporate waqf and individual share waqf. individual share waqf is applied with two models, namely waqf from the profit of shares and waqf in the form of per-lot sharia shares. the purpose of this study is to determine the concepts, opportunities and challenges of share waqf in indonesia. based on the research, it was found that share waqf has a great opportunity in indonesia, considering that the majority of the population is muslim. however, the implementation of the share waqf program in indonesia in the future face various challenges that must be resolved in order for the share waqf to develop in indonesia. keywords: waqf, cash waqf, share waqf. mailto:aldikhusmufa@gmail.com mailto:najiyahfaridatun@gmail.com journal of islamic economic laws-january, vol. 4, no. 1, 2021 46 introduction from the time of the prophet to the present, waqf has experienced rapid development. waqf is donating wealth for the benefit of the people. waqf assets cannot be reduced in value, cannot be sold and cannot be inherited. allah has promised a large reward and multiple benefits for anyone who donates his wealth in the way of allah. in the last few years, the discussion about cash waqf or productive waqf has become a topic of conversation. waqf, whose object was initially limited to fixed assets such as land and buildings, began to develop based on the principle of the benefits to be distributed through waqf and to maximize the benefits felt by the recipient so that new waqf objects emerged in the form of movable objects such as cash, share endowments and waqf securities. during its development, there was the implementation of cash waqf as was done in the ottoman era meaning that cash waqf has been known for a long time and the potential for cash waqf is enormous in improving social, economic, educational services, especially in the religious field. cash waqf is relatively new in indonesia; however, this has long been studied and developed in other countries such as egypt, turkey and bangladesh (rozalinda, 2017). money as a micro payment instrument can make the payment process faster, easier, efficient, and safer (febriandika and hakimi, 2020). the introduction of other recent waqf innovations in indonesia such as sukuk waqf, stock waqf, and other waqf is currently trending, one of which is by holding seminars on campuses in collaboration with badan wakaf indonesia (bwi) as an effort to introduce these products. waqf institutions have rights and obligations that must be fulfilled (febriandika, 2020). indonesia is one of the potential sources of productive waqf, considering that this country has a predominantly muslim population composition and has a total population of 207.6 million (febriandika et al., 2020; world bank, 2019). with the implementation of zakat and waqf institutions correctly and adequately, it is expected that the difficulties and suffering of the iman et al. 47 poor can be reduced (najiyah and febriandika, 2019). besides, based on the growth of stock investors on the indonesia stock exchange (idx), as of november 28, 2019, the idx again set a new record in 2019, the number of stock investors on the idx has reached 1,089,987 sid or an increase of 27.8 per cent when compared to last year. this figure exceeds the record for achieving the number of new investors recorded in 2018 of 852,240 sid (idx, 2019). based on the background described above, the formulation of the problem taken is what are the concepts, opportunities and challenges of share waqf in indonesia? literature review share waqf waqf is a legal act of wakif to separate and/or hand over part of his property to be used forever or for a certain period following his interests for worship and/or general welfare according to sharia. waqf has a massive potential to be developed according to the needs of the times as a significant force that can drive the wheels of community welfare. however, most of the waqf laws are established based on the results ijtihad, especially in fields related to types of waqf, requirements, management aspects and allotments with the qiyas method and maslahat al-mursalah. this case occurs due to the lack of waqf laws stipulated by al-qur’an and al-hadith, so the recommendation regarding waqf is placed in the area of ijtihadi and not ta’abbudi. however, the little verses of the qur’an and the prophet’s hadiths remained the guidance of jurists (hadi, fikih muamalah kontemporer, 2017). the development of waqf from time to time is caused by the property (property) of waqf. waqf objects are the object of ijtihad because there are objects which are not moving, and there are moving objects such as money and services. the difference in the situation and condition of the fiqh scholars in understanding al-qur’an and hadith also makes the stipulation of the conditions for objects that can be donated can be different for each ulama (muzarie, 2010). waqf is an islamic charity in the form of fixed journal of islamic economic laws-january, vol. 4, no. 1, 2021 48 assets. along with the times, waqf innovation is becoming increasingly modern. the large population of indonesian muslims is very potential for the development of waqf. therefore, currently, indonesia is trying to make innovations related to waqf in order to attract the interest of modern society to like and like waqf, one of which is by introducing movable object waqf. the types of waqf assets in law number 41 concerning waqf consist of immovable objects and movable objects. movable objects are objects that cannot be consumed, such as money, precious metals, securities, vehicles, intellectual property rights, lease rights, and other movable objects under sharia provisions and statutory regulations. moreover, one of the movable objects that can be donated according to law no. 41 article 21 is shares (law no. 41 of 2004). sharia share sharia shares are stocks that do not conflict with sharia principles because shares are proof of investment from investors to companies, which then the investors will get a dividend. however, not all shares can be directly categorized as sharia shares; they must go through a screening of sharia shares by the financial services authority: a. business screening not carrying out business activities, including the following: gambling and the like, prohibited trading, ribawi financial services, trading risks that contain an element of uncertainty (gharar) and/or gambling (maisir), production and distribution of illicit goods, bad morals or harm bribery transactions. b. do not conduct transactions that are contrary to sharia principles in the capital market. c. financial screening. total interest-based debt to total assets is not more than 45% non-halal income compared to total income, not more than 10%. iman et al. 49 issuers / public companies that meet these criteria have their shares listed in the sharia securities list (des) issued by the financial services authority (pojk number 15: 2015). the indonesian capital market recognizes two types of sharia shares. that is: 1. shares declared to meet the selection criteria for sharia shares based on ojk regulation no. ii.k.1 concerning the issuance of the sharia securities list. 2. shares listed as sharia shares by the issuer or sharia public company based on ojk regulation no. 17 / pojk.04 / 2015. all sharia shares contained in the indonesian sharia capital market, whether listed on the idx or not, are included in the list of sharia securities (des) issued by the ojk periodically, every may and november (modul spm, 2018). 3. waqf shares: sharia perspective fatwa no. 80 dsn-mui / iii / 2011 also affirms the ability to trade securities but must be accompanied by full vigilance. concerning waqf through the media of shares, indonesia’s waqf law states that shares are classified as movable objects that can be donated. meanwhile, the majority of scholars, especially from the maliki, syafi’i, and hambali schools of thought allow the implementation of wakaf for moving objects. therefore, it can be concluded that the law of stock waqf is equated with the law of other movable property waqfs, which is permissible (dsn-mui, 2011). methods this research uses a qualitative approach. by using the library research method, data obtained from secondary data in the form of books, articles, and processed data from other parties or publication data such as data on the indonesian stock exchange publications, publications from financial services authorities and those related to this research. journal of islamic economic laws-january, vol. 4, no. 1, 2021 50 result & discussion share waqf model and concept in practice, the concept of share waqf is different from immovable assets such as land and building waqf. this regard affected by the form of shares cannot be utilized directly and must be fulfilled in terms of immutability. therefore, in its application, a particular model is needed, so that shares can be used as waqf assets (paksi, manzilati, & ekawaty, 2018). share waqf, according to its substance, can be categorized almost the same as cash waqf, because it is included in the definition of money as securities (majelis ulama indonesia, 2002). however, the difference is in the management model. stock waqf is categorized as one type of productive waqf derived from the management of sharia shares which are converted into waqf and used for productive or social purposes, in this case, sharia investors are actively involved in becoming waqf actors (wakaf al azhar, 2020). the indonesia stock exchange (idx) has launched two models for the application of stock waqf, namely waqf which comes from the profits of stock investors and second, waqf which makes islamic shares the object of waqf (hogan, 2016). in the application of the first model, the share investor’s profit percentage is used as a source of waqf, in other words, the proceeds from the sale of islamic shares in the form of a margin or profit cut directly. the process of cutting profits involves an exchange member institution that has a sharia online trading system (sots). then the profits that will be donated are paid to the waqf management institution (nadzir), which has previously collaborated with the sots exchange member institution. later, the waqf management institution (nadzir) will convert these profits into productive assets or social assets according to the waqf program they have, such as building mosques or schools. the following is the scheme for implementing the first model share waqf: iman et al. 51 figure 1. the first model of application of stock waqf source: hogan (2016) processed while the application of the second model, islamic shares purchased by investors are used as a source of waqf, in other words, those that are submitted for waqf are the objects of islamic shares, not from the benefits of islamic shares like the application of the first model. the mechanism is the sharia shares that want to be donated to be deposited to the investment management institution, from which the management generates profits which are then deposited to the waqf management institution. the waqf management institution (nadzir) is responsible for converting into productive assets as well as physical assets that are socially useful, in the form of mosques and schools. it is important to be underlined that the waqf manager cannot change sharia shares that have been donated without the permission of the waqf giver; this is stated in the waqf agreement or pledge. the following is a scheme for implementing the second model of stock waqf: journal of islamic economic laws-january, vol. 4, no. 1, 2021 52 figure 2. the second model of application of stock waqf the general provisions regarding share waqf, among others (hogan, 2016): a. investors who will do stock waqf can only have sharia stock accounts and transact through the sharia online trading system b. exchange members who facilitate only exchange members who have the sharia online trading system (sots) c. the object of waqf may only be shares registered in the list of sharia securities d. investors can submit sharia shares to the waqf manager (nadzir) collectively through the sots exchange member (integrated) or do it independently according to the investor’s choice. e. opportunities and challenges of stock waqf in indonesia share waqf has an ample opportunity in line with the increasing number of sharia stock investors each year (hogan, 2016) iman et al. 53 table 1. opportunities and challenges of stock waqf in indonesia opportunities challenges 1 increase in the number of investors in indonesia in the last four years (2016 to 2020) 1 lack of literacy and community participation in waqf 2 there is room for growth in the growing sharia capital market in indonesia, including: 2 there is still limited knowledge and public awareness about waqf, especially cash waqf and cash waqf a. a significant increase in the growth of investors in islamic stocks 3 the quality and quantity of human resources for waqf managers is still low, especially regarding stocks b. the dominance of islamic stocks in indonesia c. integrated sharia investment in the capital market with islamic philanthropy d. the existence of a comprehensive islamic capital market education facility involving various community networks in society e. the first capital market in the world to develop the shariah online trading system (sots) f. to be the only capital market in the world that has a particular fatwa on islamic stock transactions g. has the largest number of securities companies that develop islamic trading systems or islamic windows securities companies in the world when it comes to opportunities regarding share waqf, indonesia has enormous potential, considering that the majority of indonesia’s population is muslim with a total population of 207.6 million (world bank, 2019). meanwhile, the number of investors in indonesia has also increased, based on data from ksei (in kontan 2020). an increase in the number of indonesian capital market investors as of july 2020 recorded at pt kustodian sentral efek indonesia (ksei) reached 3.02 million investors or grew 17.8% compared to the end of 2019 which was only 2.48 journal of islamic economic laws-january, vol. 4, no. 1, 2021 54 million investors. this number increased significantly by 3.4 times compared to the number of investors in 2016, which was recorded at only 894,000 investors. of the total, 42% of them are stock investors; the rest is divided into several between mutual fund and bond investors. the opportunity to share waqf in indonesia is enormous in line with the increasing room for growth in the islamic capital market in indonesia. on september 14, 2020, the islamic capital market again won the best islamic capital market at the 2020 global islamic finance awards (gifa). the award was received virtually and broadcast live from islamabad, pakistan at the online awards ceremony (oac) of the 10th global islamic finance awards (gifa). this award is the second time the idx received an award in 2019 as the best islamic capital market, which is the highest award category in the global islamic capital market industry. besides, in previous years, the idx has received an award as the best supporting institution for islamic finance of the year 2016, 2017 & 2018 and also an award as the best emerging islamic capital market of the year 2018 (idx, 2020). based on idx data (2020), the indonesia stock exchange has succeeded in providing consistent growth and development of the islamic capital market in indonesia in the last nine years. various initiatives and development activities are carried out with stakeholders, not only efforts to improve but also to maintain compliance with sharia principles which are manifested in several achievements, including: a. the growth of sharia stock investors in the last four years has increased significantly, such as the number of islamic stock investors in indonesia has increased by 536%. as of august 2020, islamic stock investors have reached 78,199 investors or around 5.9% of the total investors in indonesian stocks. b. growing and dominating the islamic stock market in indonesia. the data shows that as of august 2020 the percentage of the total number of islamic shares is 63% of the total shares listed on the idx, the capitalization of the islamic stock market is 50%, the volume of islamic stock iman et al. 55 trading is 65%, the frequency of islamic stock trading is 68%, and the value of islamic stock trading transactions is equal to 52% of the total share trading on the idx. c. the indonesian sharia capital market has innovated and is the only one in the world that has the most comprehensive products and integrates islamic investment in the capital market with islamic philanthropy. not only has investment products; share waqf, share zakat, share alms and sukuk waqf, the indonesian sharia capital market also has waqf sukuk, which is the first waqf sukuk in the world. d. the idx continues to innovate the islamic capital market. one of them is by providing virtual educational facilities, and having an integrated literacy and inclusion activity platform called sharia investment week (siw). not only that, idx has succeeded in developing the concept of islamic capital market education by integrating and involving various community networks in society, from student communities, homemakers, professionals to preachers and pesantren (islamic boarding school) networks. e. the idx is the first stock exchange in the world to develop the shariah online trading system (sots). this platform is an online transaction system that complies with sharia principles that integrate end to end, starting from opening services for sharia stock account to exchange members providing sots, securities settlement process up to customer fund account (rdn) facility at a sharia bank. f. the indonesian sharia capital market is the only capital market in the world that has a particular fatwa related to sharia stock transactions on the stock exchange, namely the mui dsn fatwa no. securities custody at ksei, namely dsn mui fatwa no. 124 concerning application of sharia principles in the implementation of securities depository services and transaction settlement services and integrated investment infrastructure management. g. the indonesian sharia capital market has securities companies that develop the largest islamic trading system or islamic windows securities companies in the world. journal of islamic economic laws-january, vol. 4, no. 1, 2021 56 currently, there are 18 exchange members (ab) who have developed a sharia online trading system (sots), namely; pt indopremier sekuritas, pt mirae sekuritas, pt bni sekuritas, pt trimegah sekuritas, pt panin sekuritas, pt mandiri sekuritas, pt phintraco sekuritas, pt sucorinvest sekuritas, pt first asia capital sekuritas, pt mnc sekuritas, pt henan putihrai sekuritas, pt phillip sekuritas , pt rhb sekuritas, pt samuel sekuritas, pt maybank sekuritas, pt oso sekuritas indonesia, pt kresna sekuritas, and pt danareksa sekuritas. in the future implementation of the share waqf program in indonesia face various challenges that must be resolved. these challenges include the lack of literacy and community participation in waqf, based on the survey results of the waqf literacy index (ilw) as follows: figure 3. 2020 national waqf literacy index value no variable score category 1 basic understanding waqf 57.67 low 2 advance understanding of waqf 37.97 low 3 waqf literacy index 50.48 low iman et al. 57 nationally, the overall waqf literacy index score gets a score of 50.48 or is included in the low category, which consists of the basic waqf understanding literacy value of 57.67 and the advanced waqf understanding literacy value of 37.97 (badan wakaf indonesia, 2020). plus the limited knowledge and public awareness of waqf, especially cash waqf and cash waqf (komite nasional keuangan syariah, 2018). the low competence, professionalism and quantity of human resources for waqf managers has its certain challenge. therefore it is necessary to increase competence both technically and managerially for nadzir or waqf managers (komite nasional keuangan syariah, 2018). during the waqf study forum held by badan wakaf indonesia (bwi), muhammad nuh (in sharianews 2019) said that “the challenge of nadzir affairs is extraordinary, if we are currently discussing in the context of stock waqf, then the nazir must also know about shares”. bwi’s challenge as the top leader of waqf regulation is expected to be able to know about share waqf and learn about shares, besides that bwi is expected to be able to organize training or training for waqf managers (nadzir) so that nadzirs have an excellent understanding especially regarding share waqf. conclusion stock waqf has a great opportunity in indonesia, considering a large number of indonesians who are predominantly muslim and referring to the increase in the number of sharia stock investors in the islamic capital market. the indonesian sharia capital market has innovated and is the only one in the world that has the most comprehensive product and integrated islamic investment in the capital market with islamic philanthropy. however, the implementation of the share waqf program in indonesia in the future face various challenges that must be resolved with the aim that the share waqf can develop in indonesia. journal of islamic economic laws-january, vol. 4, no. 1, 2021 58 references badan wakaf indonesia. (2020). laporan hasil survey indeks literasi wakaf 2020. 1, 7–8. dsn-mui. (2011). fatwa dewan syariah nasional no. 80/dsnmui/iii/2011. retrieved from fatwa dsn-mui: https:// www.syariahsaham.com/p/fatwa-dsn-mui.html febriandika, n. r. (2020). the effect of distributive justice, procedural justice of compensation and emotional intelligence on affective commitments. jurnal ilmiah ekonomi islam, 6(1), 34-41. febriandika, n. r., & hakimi, f. (2020). analisis kesesuaian syariah electronic money pada bank penerbit uang elektronik di indonesia. an-nisbah: jurnal ekonomi syariah, 7(1), 213-249. febriandika, n. r., millatina, a. n., & herianingrum, s. (2020). customer e-loyalty of muslim millennials in indonesia: integrated model of trust, user experience and branding in e-commerce webstore. in proceedings of the 2020 11th international conference on e-education, e-business, e-management, and e-learning (pp. 369-376). hadi, a. a. 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(2019). the role of government in the zakat management: the implementation of a centralized and decentralized approach (comparative study in indonesia and malaysia). in 2018 international conference on islamic economics and business (iconies 2018). atlantis press. paksi, g. m., manzilati, a., & ekawaty, m. (2018). kajian hukum dan implementasi wakaf harta bergerak di indonesia: wakaf uang dan saham. islamiconomic: jurnal ekonomi islam, 9(2), 173–190. https://doi.org/10.32678/ijei.v9i2.94 rozalinda. (2017). fikih ekonomi syariah: prinsip dan implementasinya pada sektor keuangan syariah. jakarta: rajawali pers. sharia news. (2019). bwi ungkap tantangan wakaf saham bagi nazir. retrieved october 29, 2020, from https://sharianews. com/posts/bwi-ungkap-tantangan-wakaf-saham-bagi-nazir wakaf al azhar. (2020). wakaf saham. retrieved october 25, 2020, from http://wakafalazhar.com/ptta-portfolio/wakafjournal of islamic economic laws-january, vol. 4, no. 1, 2021 60 saham/ world bank. (2019). population, total-indonesia. retrieved october 24, 2020, from https://data.worldbank.org/ indicator/sp.pop.totl?contextual=max&locations=id _goback _goback _hlk55084518 _hlk55084698 _hlk55085026 _goback _goback _hlk59008645 journal of islamic economic laws vol. 4, no. 1 january 2021: 78-95 78 optimizing the role of zakat and wakaf in promoting national economic growth: analytic network process (anp) method approach robithoh alam islamy1, mulawarman hannase2 1universitas indonesia 2universitas indonesia email: r_alamislamy@yahoo.com, mhannase@yahoo.com abstract this study aims to determine the criteria and aspects of optimizing the role of zakat and infaq. this research’s further objective is to build a model that can be used to determine criteria and priority aspects to become input for related parties to improve the role of zakat and waqf. this study combines descriptive qualitative and quantitative research using the analytic network process (anp) method. in building models and calculations, experts are involved in producing results following conditions in the field. this study indicates that zakat and waqf have played a role in encouraging national economic growth. aspects that become alternatives in optimization are aspects of policy/legality/institutional, technical aspects of operations/databases, human resources/management aspects, aspects of auditing/control, socialization/community literacy, and cooperation aspects. the criteria used in selecting alternatives are effective criteria (collection and distribution) and efficient criteria (cheap, fast, and applicable). the anp model connects alternatives and criteria and calculates that the order of priority from the highest to the lowest is 1. policy, legality, and institutions (47.28%); 2. human resources/management aspects (13.94%), 3. socialization aspects (12.66%); 4. cooperation aspects (12.54%); 5. operational/database technical aspects (8.27%) and; 6. audit/control aspects (5.29%). keywords: zakat, waqf, economic growth, analytic network process/anp. mailto:r_alamislamy@yahoo.com mailto:mhannase@yahoo.com robithoh alam islamy, mulawarman hannase 79 introduction the welfare of people in indonesia shows that the government considers government’s economic growth more than economic welfare. indonesia’s gini ratio is still high, at 38.1% (deks bank indonesia-p3ei-fe uii, 2016). the figure exceeds the gini ratio of oic member countries, which has a value of 21%. the gini ratio, which has a value above the average of oic countries, indicates that indonesia’s income equality is still below that of the country. the high gini ratio can have unintended social, societal effects such as high crime and violence at all levels of society. such conditions will certainly be contrary to the expected goal of achieving economic welfare so that economic equality is an essential concern for the government. economic growth occurs in line with all community members’ overall economic improvement (deks bank indonesia-des-feb unair, 2016). achievement of economic growth that is evenly distributed throughout the community can be achieved with zakat provision. the vital role of zakat for economic growth in indonesia can be measured by involving zakat in measurement indicators. one way to assess the influence of zakat is to do correlation analysis. the results of the correlation analysis can show a link between economic growth and zakat. this will be a strong handle to involve zakat throughout economic activities to achieve continuous economic development (deks bank indonesia-p3ei-fe uii, 2016). islam has a focus on equitable distribution. the source of crisis or inequality is the uneven distribution of income that causes the condition of resource inequality (economy) (center for islamic economic assessment and development (p3ei) uii yogyakarta, 2014). with the equitable distribution of both property and services, a fair economic distribution mechanism will be created in the community. it is expected that inequality, poverty, and unemployment can be minimized. the application of various property provisions in islam, such as zakat, infaq, sadaqah, and waqf, functions in the community as a counterweight to economic growth (bank indonesia, 2017). this journal of islamic economic laws-january, vol. 4, no. 1, 2021 80 function is carried out so that the improvement of existing property in the community is not limited to the welfare of individuals but also provides benefits to the community as a whole to achieve mutual welfare through the step of spending some of the wealth (qs al hadid: 7; qs an-nuur: 33; qs al baqarah: 267-268). applying the basic principles expressed in islam will make the individual’s property better to improve society’s economic level. this condition certainly supports the un target in fulfilling the sustainable development goals (sdgs), aiming to maintain the balance and continuity of holistic community life in the world. the primacy of basic principles in islam, especially zakat, has not been felt to the maximum in indonesian society because of the not optimal zakat management. the cause of this minimum achievement is the zakat collecting institutions’ condition, which is also caused by a lack of public knowledge about zakat implementation. people today still have the belief that zakat is sourced in traditional forms with certain conditions clearly stated in the qur’an and hadith (hafidhuddin, 2002; majid and muhammad, 2003). moreover, huda and others (2018) stated that the provision of zakat must be stated in the rules and strict implementation of the government so that every muslim in a country carries out the provision of zakat from excess property that has reached nishab. the strict rules and implementation are expected to ensure significant zakat receipts to be used as a device that helps maintain a country’s economic stability. efforts to develop islamic social finance (isf) aimed at the realization of a prosperous society stated the importance of optimization of isf (deks bank indonesia, 2017) one of which is zakat and waqf with the consideration that: 1. sharia’s economic and financial development is essential to support the nation’s resilience and welfare. 2. islamic social finance (isf) has excellent potential to be one of the solutions. 3. isf optimization efforts are essential, including increased accountability in governance: zcp and wcp, development of various ziswaf management optimization models, and robithoh alam islamy, mulawarman hannase 81 integration of sharia commercial and social finance to expand inclusiveness. in connection with the exposure related to the above, efforts are needed to optimize the role of zakat and waqf in encouraging national economic growth through improvement in all lines, ranging from policy aspects/legality/institutional, operational, technical aspects/databases, aspects of human resources/ management, aspects of audit/control, aspects of socialization/ public literacy, and aspects of cooperation. this research is needed to know how to optimize zakat and waqf’s role in indonesia by knowing the most priority alternatives using anp. the primary purpose of the research is then detailed into several objectives. the first objective is to know the role of zakat and waqf in encouraging national economic growth. the purpose of the research is also intended to determine the aspects and criteria in the management of zakat and waqf. the next objective is to build an anp model for optimizing the role of zakat and waqf and then, based on the model. an anp calculation carries out the process to determine aspects and priority criteria for zakat and waqf. literature review zakat and waqf studies the meaning of zakat from ashshidieqy and shiddieqy (1999) is according to the language has the meaning of the nama’ (fertility), taharah (chastity), barakah (blessing). according to hafidhuddin (1998), another meaning of zakat is zaka, which means ‘holy,’ ‘good,’ ‘blessing,’ ‘growing,’ and ‘developing’ (mu’jam wasith, i:398). zakat also means tazkiyah, tathier (purifying). allah is all-knowing, all-all-important. the definition of zakat is also expressed by today’s writers such as ali (1988), an-nabhani, (1996), and nasution and others (2010). ali (1988) stated that zakat is an obligation on the property stipulated in every eligible muslim. the property is then given to certain people on the condition that nishab, haul, and level. anjournal of islamic economic laws-january, vol. 4, no. 1, 2021 82 nabhani (1996) stated that zakat is worship in islam in the form of delivering the property of a muslim whose wealth (outside of debt and needs) meets a mishap. nasution and others (2010) state that zakat is an obligation to spend a portion of the income/ property of a person who has fulfilled islamic sharia requirements to be given to social elements that have been stipulated in islamic sharia. while waqf is in a language derived from the arabic word waqafa, which means to stop, dwell (ali, 1988) according to khosyi’ah (2010), the synonym of the word waqf is habs, which means to hold. if the two things are combined, then ibn mandzur (1954: 276) mentions al-hubus wa wuqifa (detained and being waqf) (deks bank indonesia-des-feb unair, 2016). something that is withheld or stopped in the waqf sense is property. the purpose of the cessation or detention of the property is to benefit the individual and the community. the law on waqf in indonesia is contained in law no. 41 of 2004, which seeks to summarize the four great scholars’ definition. based on the law, waqf is declared as an action carried out by wakif based on the law and carried out by setting aside the assets owned to become assets used for the public or religious interests whose utilization period is whether at the agreed time interval or forever (law no. 41 of 2004). various definitions of waqf that have been described above both that have been given by the scholars of 4 sects and in law no. 41 of 2004 as a whole is a form of utilization of property of a muslim for the public interest that is justified in islamic law both within a certain period and for good. research on the impact of zakat on taxes was conducted by djatmiko (2019). the study results showed that the zakat scenario as income tax deduction has a more significant impact on the economy than if zakat is used to deduce taxable income. the impact of zakat on economic growth is also researched by setiadi (2019). the study results stated that both zakat funds and other social funds such as infaq and alms impact economic growth. robithoh alam islamy, mulawarman hannase 83 comprehensive research conducted on the problem of zakat in indonesia and sought solutions using the analytic hierarchy process approach. the research suggested that zakat collection is still low caused by 3 (three) aspects: regulatory aspects, aspects of zakat management organization, and community aspects. in the regulatory aspect, the implementation of zakat law has not been implemented into a mandatory system in the state’s financial governance. making the level of awareness and compliance of the community mandatory zakat is still lacking. in the zakat management organization (opz) aspect, problems arise related to human resources managers/amil laz. another thing that becomes a deficiency in this aspect of opz is the low synergy between stakeholders zakat both from laz institutions, mustahik, muzakki, and other related parties. the main problem in this aspect of society is the poor understanding of zakat and fikih zakat in the community, especially in people who have the potential as muzakki and distribution of zakat not through institutions directly to ashnaf. further research on low zakat collection in indonesia was conducted by ascarya and yumanita (2018). there are 3 (three) main aspects that become problems in collecting zakat, namely internal, external, and system problems. the difference between previous research and research today is expanding the scope of management problems that previously only included zakat. this study also includes waqf. analytical network process (anp) analytical network process (anp) is a qualitative method that can help search for factors that affect a system. the central concept in anp is the comparison of pairs between factors/criteria or alternatives. the scale used in the comparison can be seen in table 1. the pairing comparison can then be used in calculating the most priority criteria and alternatives in the role optimization model of zakat and waqf by using anp (ascarya, 2005). journal of islamic economic laws-january, vol. 4, no. 1, 2021 84 table 1. comparison of verbal scale and numerical scale of anp verbal scale numerical scale it is a lot more of an influence 9 8 much greater influence 7 6 greater influence 5 4 a little more influence 3 2 just as much influence 1 source: (ascarya, 2005) the solution step using anp is taken from the basic principles of anp, namely: 1. decomposition step decomposition is done by examining the problem and then simplifying the problem to be described with an anp model consisting of clusters, sub-clusters, or if necessary, using sub-clusters. in addition to the restructuring of elements, it also assessed the relationship between elements and clusters. 2. valuation step of comparative judgments the next comparison assessment is carried out using the pairwise comparison of all combinations of elements in the cluster and cluster comparison based on decomposition in the next step. 3. step hierarchical composition or synthesis of priorities. the last step of the anp is the formation of synthesis based on values and models that have been formed in the previous step. the synthetic result is an element of the priority value. methods the method used in this research is a qualitative and quantitative descriptive method using analytic network process (anp) approach in finding the solution. research using this robithoh alam islamy, mulawarman hannase 85 method requires data in primary data obtained from interviews (in-depth interviews) with experts, practitioners, and regulators. experts involved are experts who master the problems discussed, namely the optimization of zakat and waqf. after discussing the model at the first meeting, the questionnaire was conducted at the second meeting. the interview results and the filling of the questionnaire were then entered into an anp application with the respondent’s assessment variables on the problem that became the research object on a numerical scale. this research used the anp method described in several stages of research (see figure 1). the following are five stages of research that need to be done: 1. the first stage, researchers collect data through literature studies, then group the aspects to be optimized, solutions/ programs, and strategies/policies in depth. 2. the second phase, researchers compiled an anp construction model of this study, which included problems, criteria, and strategies, and compiled a pair comparison questionnaire. 3. in the third phase, researchers surveyed respondents involving regulators, academics/experts, and practitioners to fill out questionnaires and provide ratings and scales of 1-9 to each element. before filling out the questionnaire, experts were asked to review the questionnaire to equalize understanding and make the questionnaire more structured. after the questionnaire was deemed appropriate, the expert filled out the questionnaire. then the researchers did data validation and consistency tests. 4. phase four, researchers process and analyze data. furthermore, the results of the study can be analyzed and validated. 5. phase five, researchers interpret the results of existing data analysis to draw conclusions and provide recommendations to the relevant parties. journal of islamic economic laws-january, vol. 4, no. 1, 2021 86 figure 1. research stages scheme diagram results and discussion based on research on literature, it is known that things area improvement of aspects of optimization of zakat and waqf management as in figure 2. based on research, then built an anp model. the anp model optimization role of zakat and waqf was developed by determining the alternatives and criteria used in the model. in this model, alternatives are obtained from studies that produce optimization aspects in figure 2. sufficient criteria and efficiency are formulated from the study on the size of robithoh alam islamy, mulawarman hannase 87 optimization on zakat and waqf. effective and efficient criteria are then re-defined into sub-criteria detailing the size used. the alternatives and criteria obtained are then built into an anp model that has been validated by experts, namely in figure 3. figure 2. aspects of zakat and waqf optimization questionnaire result data questionnaires were developed to build an anp model of zakat, and waqf optimization aims to get a pairwise comparison between clusters, alternative clusters, and criteria clusters. the questionnaire is then given to experts to fill in the comparison value between nodes/clusters. journal of islamic economic laws-january, vol. 4, no. 1, 2021 88 figure 3. anp model optimizes the role of zakat and waqf reference experts in filling out comparison values in questionnaires using values in table 1. the results of the questionnaire by pakar can be seen in table 2. table 2. paired comparison questionnaire results no cluster/node comparative analysis score cluster /node 1. effective has bigger effect than 5 efficient 2. comparison of alternatives to sub criteria ‘fast’ policy/legality/ institutional has much bigger effect than 7 technical operations/ database policy/legality/ institutional has bigger effect than 5 human resources/ management policy/legality/ institutional has bigger effect than 5 auditing/control policy/legality/ institutional has bigger effect than 5 socialization/ community literacy policy/legality/ institutional has bigger effect than 5 cooperation robithoh alam islamy, mulawarman hannase 89 no cluster/node comparative analysis score cluster /node technical operations/ database has slightly smaller effect than 4 human resources/ management technical operations/ database has slightly smaller effect than 4 auditing/control data processing the value obtained from the questionnaire is inputted and processed in the super decisions application. the expected output of such processing is: 1. available comparisons between alternatives with between criteria. 2. available alternatives are best following the criteria set out to optimize the role of zakat and waqf. details of an anp processing using super decisions applications are grouped for each cluster. one example of processing in the comparison between criteria clusters is described with paired comparisons between effective criteria and efficient criteria. in comparison between effective and efficient clusters evaluated based on alternative clusters, sufficient criteria are more important than efficient criteria (see figure 4). the results obtained in the comparison resulted in an incontinence value of 0.000, which means that the resulting pairing comparison matrices are consistent. figure 4. comparison results of effective criteria with efficient criteria journal of islamic economic laws-january, vol. 4, no. 1, 2021 90 examples of pairing comparisons between sub-criteria and alternate clusters are exemplified in the pairing comparison between fast-efficient and alternative sub-criteria. comparing fast sub-criteria inefficient clusters and all nodes on alternate criteria can be seen in the comparison matrix in figure 5. figure 5. paired comparison results of fast-efficiency sub criteria with alternative criteria calculation of inconsistencies in the matrix can also be seen in figure 5. the result is 0.08857. this indicates that the table is consistent. each aspect’s weight value calculated to the fast subcriteria can be seen as the order of interest in all aspects. based on the calculation results obtained, the order of interest from the most important to the least important are as follows: policy, legality and institutional (0.48192), human resources and management (0.19800), socialization and cooperation (0.10230), audit and control (0.07249), and lastly operational technical aspects (0.04299). reporting research results the inserted anp inputs then generates a priority matrix containing the normalized weights of all the alternatives and criteria used on the model. the results of the data processing can be seen in figure 6. robithoh alam islamy, mulawarman hannase 91 the data processing results in figure 6 are known as alternative priorities and criteria resulting from an anp calculation. based on calculations, priority criteria are divided into 2 clusters, namely effective clusters and efficient clusters. the cluster results are compelling, the collection sub-criteria weights 0.53166, and the distribution sub-criteria has a value of 0.46834. this indicates that the collection sub-criteria has a higher weight than the distribution sub-criteria. in efficient clusters, it was obtained that fast sub-criteria weighted 0.33934, the cheap sub-criteria weighted 0.27287, and the applicable sub-criteria weighted 0.38779. this indicates that the sub-criteria with the highest priority is applicable, followed by fast sub-criteria and cheap sub-criteria. alternative clusters result in aspect weight values to be optimized listed in table 3. the table shows that alternative aspects of policy, legality, and institutional have the highest priority value to be implemented. the next aspect is human resources and management, followed by aspects of socialization and community literacy, aspects of cooperation, aspects of operational technical/database, and aspects with the least priority aspect of audit/control. figure 6. final results of anp calculation journal of islamic economic laws-january, vol. 4, no. 1, 2021 92 table 3. alternative priority value based on anp calculation priority aspects value 1 policy, legality, and institutional 0,47287 2 human resources and management 0,13943 3 socialization and community literacy 0,12665 4 cooperation 0,12539 5 operational technical and database 0,08267 6 audit and control 0,05298 total 1,00000 conclusion zakat and waqf have played a role in boosting national economic growth, namely by increasing national income, playing a role in boosting economic performance, maintaining economic activity. this role is positively correlated in suppressing social and political turmoil, increasing total investment in the economy, which is then used to finance social activities. aspects in the management of zakat and waqf are policy aspects, legality, institutional, operational technical aspects/ database, aspects of human resources/management, aspects of audit/control, aspects of socialization, and aspects of cooperation. criteria in the management of zakat and waqf are effective and efficient. effective criteria has a sub-criteria for collection and distribution. efficient criteria has a sub-criterion fast, cheap, and applicable. model analytic network process (anp) in optimizing zakat and waqf’s role has 3 clusters: 1: alternative clusters containing six alternative aspects; 2: effective criteria cluster containing two sub-criteria; 3: an efficient criteria cluster containing three subcriteria. the three clusters are connected. both criteria clusters are connected in two directions with alternate clusters. there is no relationship between the two criteria clusters in this model, which means that the model still assumes no connectedness (influence) between the two clusters. the resulting priority aspects are priority 1: policy, legality, and institutional aspects (47.28%); 2. human resources/ management aspects (13.94%), 3. socialization aspects robithoh alam islamy, mulawarman hannase 93 (12.66%); 4. aspects of cooperation (12.54%); 5. operational technical aspects/database (8.27%) and audit/control aspects (5.29%). the priority sub-criteria in the effective criteria is collection. the priority sub-criteria in efficient criteria is applicable. this research recommends that the government establish policies, legalities, and institutions related to the management of zakat and waqf, among others, by revising the law to strengthen advice for regulators to carry out the functions of regulation, supervision, guidance, and the imposition of sanctions more effectively. advice for the operator is to run the management professionally in line with zcp and wcp. for the community, to carry out the obligations of zakat and waqf recommendations with full obedience based on worship to allah swt. for academics, in order to deepen research and research related to efforts to optimize zakat and waqf. advice for government, regulators, scholars, and community leaders try to improve understanding, knowledge, and public awareness (education and literacy) related to zakat and waqf. references ali, m. d. 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(2016). pengelolaan zakat yang efektif: konsep dan praktik di beberapa negara. seri ekonomi dan keuangan syariah. departemen ekonomi dan keuangan syariah-bank indonesia. deks bank indonesia. (2017). mendorong pengembangan islamic social finance dalam rangka mewujudkan masyarakat sejahtera. djatmiko, h. (2019). re-formulation zakat system as tax reduction in indonesia. indonesian journal of islam and muslim societies, 9(1), 135–162. hafidhuddin, d. (1998). panduan praktis tentang zakat infak sedekah. gema insani. hafidhuddin, d. (2002). zakat dalam perekonomian modern. gema insani. huda, n., & and others. (2018). ekonomi makro islam: pendekatan teoritis. prenada media. huda, n., anggraini, d., ali, k. m., rini, n., & mardoni, y. (2014). solutions to indonesian zakah problems analytic hierarchy process approach. journal of islamic economics, banking, and finance, 113(3279), 1–17. khosyi’ah, s. (2010). wakaf & hibah (perspektif ulama fiqh dan perkembangannya di indonesia) (vol. 1, issue 1). cv. pustaka setia. majid, m. n., & muhammad. (2003). pemikiran ekonomi islam abu yusuf: relevansinya dengan ekonomi kekinian. pusat studi ekonomi islam (psei), sekolah tinggi ilmu syari’ah (stis). nasution, m. e., & others. (2010). pengenalan eksklusif ekonomi islam, cet. 3. jakarta: prenada media group. pusat pengkajian dan pengembangan ekonomi islam (p3ei) uii yogyakarta. (2014). ekonomi islam. pt grafindo persada. robithoh alam islamy, mulawarman hannase 95 setiadi, a. (2019). pengaruh instrumen dana sosial keislaman terhadap pertumbuhan ekonomi (studi pada lima provinsi di indonesia). universitas brawijaya. _goback _goback _hlk55084518 _hlk55084698 _hlk55085026 _goback _goback _hlk59008645 journal of islamic economic laws vol. 4, no. 2, july 2021: 1-16 1 positive effect of attitude, peer influence, and knowledge zakat on zakat compliance behavior: update in covid 19 fifi hakimi1, tika widiastuti2, muhammad ubaidillah al-mustofa2, rizqiyyah al husanaa’3 1universitas muhammadiyah lamongan 2universitas airlangga 3inceif email: fifihakimi94@gmail.com, tikawiidiastuti@gmail.com, ubaid9339902@gmail.com, rizqiyyah.qq@outlook.com abstract this study aims to analyze the influence of the components of the theory of planned behavior, which consists of positive attitude, peer influence, and zakat knowledge on the compliance behavior of paying zakat profession with the intention to pay zakat as an intervening variable update case in covid 19. this research is a quantitative study using the partial least square-structural equation modeling (pls-sem) technique. the sample used is 100 respondents based on the calculation of the slovin formula with 129 respondents of zakat profession payers (muzakki) in indonesia. empirical findings indicate that a positive attitude and zakat knowledge positively and significantly affect the intention to pay zakat. the intention to pay zakat has a significant positive effect on the compliance behavior of paying zakat profession even during covid 19. meanwhile, peer influence has no significant impact on the intention to pay zakat due to the covid 19 era. policymakers need to pay more attention to the factors that have been identified in this study as essential factors to become a reference in developing strategies to increase zakat collection. zakat is one of potential islamic social fund to eradicate poverty as impact of the covid 19 pandemic. keywords: theory planned behaviour component, intention, compliance behaviour to pay zakat on profession, covid-19. 2 hakimi et al. introduction indonesia is a muslim majority nation, with 87.2% of the total population or 209,120,000 of the population are muslims (globalreligiousfutures, 2020; febriandika, ). this shows that indonesia has a huge potential in its zakat collection. according to sudibyo (baznas, 2018), the potential for zakat collection in 2019 was estimated at idr 233.6 trillion, in which predicted to reach 3.4% of the total gdp if zakat is determined as a tax reduction (tax credit). according to indrijatiningrum (2005), the potential collection for the zakat on profession or income was idr 12.27 trillion. meanwhile, the realization of zakat collection in 2019 reached idr 5.6 trillion, of which zakat on profession or income amounted to idr 231 billion (baznas, 2019). this shows that the realization of zakat collection is still far from its great potential, especially on zakat profession. in recent months, the big potential of zakat is extremely important because of the highly needed of social fund, especially islamic social fund, on poverty to minimize the impact of covid 19. therefore, zakat as social finance plays an important role in dealing with the covid 19 pandemic . al-qardhawi (2017) states that one type of zakat that needs the attention of the muslim community is the zakat profession or income earned through personal expertise, knowledge, and skill. the potential for zakat on profession or income has not been fully accumulated, even though the potential value is significant and tends to increase every year (najiyah & febriandika, 2019). despite the amount of zakat collection that has reached rp. 2.7 trillion (baznas, 2018); many muslims individually pay zakat for their profession or income to obey their obligations in paying zakat. from this, muslim communities aware of obedience to paying zakat updating in covid 19 have impact in awarness of muzakki. this research will answer the question of whether the components of the theory planned of behavior (positive attitude, peer influence, and zakat knowledge) will trigger the behavior of muzakki in paying zakat on the profession. the importance of the theory planned behavior component is often used as a study in social psychology models. this model was first put forward journal of islamic economic laws-july, vol. 4, no. 2, 2021 3 by ajzen (1991). according to ajzen (2005), theory of planned behavior is a theory that predicts behavior that will be formed. a person’s behavior can be shaped and designed. the main determining factor of compliance behavior in this theory is intention. the intention is the essential element in accepting or rejecting someone’s behavior and as a predictor of one’s behavior (saad & haniffa, 2014; febriandika et al., 2020). researchers recognize intention as the main determining factor in compliance behavior (ajzen, 1985; qardhawi, 2009). according to ajzen (1985), the stronger a person’s intention, the higher the level of expected compliance and vice versa. in islam, especially in zakat, qardhawi (2009) observed that intention is a critical factor in determining the obedience of paying zakat. several studies showed that there is a significant effect of intention in the context of zakat compliance (farouk et al., 2018; saad et al., 2010; ummulkhayr et al., 2017). this study measures an intention to pay zakat using the composition of the theory of planned behavior (tpb), which consists of 3 things, namely attitude, subjective norm, and perceived behavioral control. each of these compositions has its component; thus, this study uses its components to measure an intention to pay zakat. the element of attitude will be presented by the positive attitude. a positive attitude is a measure of intentional behavior that will create positive outcomes; consequently, the person will form a favorable attitude towards the intention to pay zakat (saad & haniffa, 2014; farouk et al., 2018; saad et al. , 2020). the subjective norm component is described as peer influence, which is used as a measure to find out how related the influence of friends and other essential people around us is to a person’s decision to pay zakat or otherwise not to be obedient in paying zakat. this has been tested in previous research at kano (saad et al., 2020). meanwhile, the component of perceived behavioral control is described by the variable of zakat knowledge. this component is used as a measure to observe how much understanding of zakat affects a person’s intention to behave obediently in paying zakat on profession or income. this 4 hakimi et al. component has also been widely tested by previous research to predict individual compliance behavior in paying zakat (hasan & mohd-shahnaz, 2005; khamis et al., 2011; al jaffri saad & haniffa, 2014; saad et al., 2020). based on the description above, this study will examine the gap between research conducted by saad et al. (2020) and saad & haniffa (2014). this study compares the research conducted in other countries with their replications to be applied in indonesia using a population of zakat payers on the profession or income. hence, this study examines the positive effects of attitude, peer influence, and zakat knowledge on obedience to pay zakat applying an extended version of the theory of planned behavior especially in covid 19. the covid 19 pandemic started in march 2020 in indonesia, which has direct and non-direct impact to the obedience in paying zakat. the main objective of this study is to empirically test the factors that have a significant influence on obedience to pay zakat. this research is expected to increase the willingness to pay zakat at muslim communities in developing countries especially during covid 19 pandemic. literature review according to (nasution, 2017), obedience is a condition in which an individual follows orders from something deemed to have authority voluntarily or by compulsion without showing denial. in discussing zakat compliance according to islamic teachings, this is different from tax compliance because zakat is one of the mandatory islamic obligations that meets the conditions needed to achieve purity and goodness of soul (diabi, 1993). in research, zulkifli and sanep (2011) discuss the compliance of zakat more to pay zakat through official agencies or institutions. the concept of zakat obedience is about the behavior of humans (muslim communities) to make decisions (obey or disobey) to pay zakat (in official or unofficial ins institutions) which is applied to achieve satisfaction in the current life and beyond, namely al falah. this is clarified by barizah and rahim (2007) that zakat payers are expected to get back not only in the hereafter but in the hereafter as well when they comply with islamic obligations. journal of islamic economic laws-july, vol. 4, no. 2, 2021 5 submission of compliance in this study using the theory planned behavior approach. tpb is so popular among researchers because of the ability and expertise of attitude factors, subjective norms, perceived behavior control, and intention to provide explanations for understanding someone’s behavior (ajzen, 2005). therefore, it is not uncommon for previous studies to use theory as the basis for their research theory. researches using this theory have been found in various types of fields. for example, this theory has been used to study tax compliance behavior (alabede, 2012; bobek & hatfield, 2003), the behavior of bank employees’ ethical intentions (kashif et al., 2017). in the scope of zakat, research conducted by saad (2020), which also uses the theory of planned behavior by using its decomposition variables to support the relevance of this theory in order to understand the compliance behavior of paying zakat. however, this research does not only focus on intention, this study also discusses its relationship with the compliance of paying zakat behavior, especially on zakat income which has been approved by majelis ulama indonesia (mui). compliance in worship can be carried out perfectly if it has an intention, following the assertion of qardhawi (2009), a contemporary fiqh expert that in islam every worship without intention will not be rewarded by its worship by allah. in the field of zakat, several previous studies have used the intention to pay zakat (saad & haniffa, 2014; farouk et al., 2018). for example, saad and haniffa (2014), in their study of 227 active entrepreneurs in one district in malaysia, found that compliance behavior was significantly influenced by the intention to pay zakat. according to saad and haniffa (2014), the intention is the most important element for accepting or rejecting someone’s behavior, from the results of their research that the predictor of behavior is the intention to behave. individual behavioral intention is a cognitive representation of a person’s willingness to implement a given behavior (ajzen and fishbein, 1975). in tpb, an intention to do a certain behavior can be measured using three main predictors, namely attitude, subjective norm, and perceived behavioral control. in this study, attitude is defined 6 hakimi et al. as an evaluation of the attitudes of employees who have paid zakat on income. attitude constructs can be elaborated to offer greater understanding and predictive power of the constructs (idris, 2001). in line with this argument, this study describes attitudes into one measure only, namely the positive attitude of the individual. according to saad et al. (2010), positive attitudes can encourage strong intentions and vice versa, when their negative attitudes will discourage them from paying zakat. the positive attitude referred to in this study is based on the theory of planned behavior, which is closely related to the issue of faith in islam, especially in terms of the payment of zakat. this problem is in line with the views of hairunnizam, sanep, and ali (2005) which state that a positive attitude towards zakat is closely related to faith. a person’s judgment or perception shows their level of belief. positive perceptions about charity indicate high faith while negative perceptions indicate low faith (saad et al., 2010). then the decomposition of subjective norms was carried out by saad et al. (2020), which in previous studies measured subjective norms using peer influence indicators. peer information, according to saad (2019), peer can influence a person’s decision to obey zakat payments or disobey in paying zakat. in saad’s research (2019), the peer context in his research in kano plays an important role in shaping individual thinking to accept or reject a given task. in the case of zakat, likely, zakat payers who associate with colleagues who advise him to undertake religious acts will have a positive intention to pay zakat. however, the characteristics of the population in kano nigeria are different from the indonesian population in their friendly behavior, therefore this study will look at the relationship between the peer influence and the intention to pay one’s zakat. meanwhile, the decomposition of perceived behavioral control (pbc) refers to the indicator measure of zakat knowledge. where zakat knowledge is a person’s ability to know and understand the mandatory law of tithing. according to saad et al. (2020) knowledge of zakat refers to understanding the payment of zakat about the islamic principles required, which will influence a person to obey to pay zakat. many of the previous studies used the journal of islamic economic laws-july, vol. 4, no. 2, 2021 7 level of knowledge as an important variable to predict individual compliance behavior in paying zakat (khamis et al., 2011). all of this literature is structured to obtain the results of research on one’s compliance in paying zakat profession, especially during the current covid 19 pandemic. methods this research is a quantitative research that applies the partial least square-structural equation modeling (pls-sem) through the smart-pls software (ghozali, 2008). previous studies have used the pls-sem analysis method as a statistical tool for a relatively complex multivariate model (hair et al., 2014). many researchers also confirm that a plssem analysis method is an analytical tool that is flexible, credible, and has the advantage in testing the theory (henseler et al., 2014). before examining using the pls-sem approach, this study forms a conceptual framework used for the hypothesis. figure 1 is a conceptual framework for this research: figure 1. conceptual framework this study uses primary data obtained from the field research in the form of a structured questionnaire. it used a self-administered questionnaire technique, which means that the respondents filled the questionnaires themselves (malhotra, 2010). the number of respondents in the study was calculated based on the slovin formula proposed by sugiyono (2010). based on the slovin formula, the sample required for this study is a minimum of 100 respondents. the sample obtained for this research was 129 8 hakimi et al. respondents. baznas 2019 reported that the number of muzakki at a national level reach to 385,000. results and discussion figure 2 shows the outer model in this study. each variable has an average variance extracted (ave), composite reliability, and cronbach reliability above 0.5, 0.7, and 0.6, respectively (abdillah & jogiyanto, 2016). figure 2 also shows several indicators of each latent variable. the positive attitude has four indicators, while peer influence has three proxies. zakat knowledge has three indicators since one indicator is unreliable and removed from the model. the intention to pay zakat has three variables. the zakat compliance behavior variable has two indicators because one indicator is unreliable and must then be removed. figure 2. outer model the results of data processing are shown in figure 3. the inner model is used to predict the causal relationship between variables or hypothesis testing. journal of islamic economic laws-july, vol. 4, no. 2, 2021 9 figure 3. inner model the next test is a hypothesis testing with an estimated path coefficient that can be evaluated by comparing the t-statistics’s value. the measurement item used is said to be significant if the t-statistics value is higher than 1.96, and the p-value is less than 0.05 at the 5% significance level. the parameter coefficient shows the direction of influence by looking at the positive or negative effects of the original sample and the magnitude of the impact of the independent variable on the dependent variable (ghozali, 2008). the following is the path coefficient table which shows the t-statistic value. table 1. path coefficient original sample (o) sample mean (m) standard deviation (stdev) t statistics (|o/ stdev|) p values h1 : pa  ipz 0.514 0.519 0.133 3.858 0.000 h2 : pi  ipz 0.009 0.013 0.047 0.195 0.846 h3 : zk  ipz 0.365 0.363 0.140 2.602 0.010 h4 : ipz zcb 0.884 0.885 0.022 41.961 0.000 source: research result 10 hakimi et al. table 1: path coefficient concludes that h1 t-statistics value is 3.858 > 1.96, the p-value is 0.000, the original sample value is 0.514. this result indicates that a positive attitude has a significant effect on the intention to pay zakat. thus, this hypothesis is accepted. h2 t-statistic value is 0.195 < 1.96, the p-value is 0.846, the original sample value is 0.009. this result indicates that a peer influence does not affect the intention to pay zakat. thus, this hypothesis is not accepted. h3 t-statistic value is 2.602 > 1.96, the p-value is 0.010, the original sample value is 0.365. this result indicates that a zakat knowledge has a significant effect on the intention to pay zakat. thus, this hypothesis is accepted. h4 t-statistic value is 41.961 > 1.96, the p-value is 0.000, the original sample value is 0.884. this result indicates that the intention to pay zakat affects the compliance of paying zakat on profession. thus, this hypothesis is accepted. the positive attitude is based on the theory of planned behavior (tpb). the positive perception of attitude is closely related to the faith, especially in the scope of zakat, as stated by hairunnizam, sanep, and ali (2005). the positive effect of attitude on the intention to pay zakat means good behavior among muzakki, who follows the values and norms of the islamic religion in adjusting the obligation to pay zakat. with this result, it can be perceived that they have a high level of confidence and faith. the muzakki who have a positive outlook tend to have a firm intention to carry out their obligations in paying zakat, rather than the muzakki who have a negative attitude. muzakkis believe that not paying zakat is a great sin (saad et al., 2020). this indicates that zakat on profession or income is among the priority obligation to be met by muzakki. even though muzakki in this study were affected y the covid 19 pandemic, they did not ignore their obligation to pay zakat. the result goes in line with previous studies that discuss the influence of attitude on intention (al-ajam & md nor, 2015; saad & haniffa, 2014; farouk et al., 2018; saad et al., 2020). journal of islamic economic laws-july, vol. 4, no. 2, 2021 11 this significant effect indicates that the intention to pay zakat can be increased by stimulating the right attitude in supporting the payment of zakat. the better the attitude, the higher the intention to pay zakat. peer influence on intention is found in previous research (saad & haniffa, 2014; taylor & todd, 1995). when the zakat payer (muzakki) is influenced by a friend who educates and invites him to give zakat, it will cause the intention to pay zakat on the profession. peer influence can be used as a measuring tool for muzakki behavior to arouse the intention of muzakki to pay zakat on the profession. the result indicates that relatives and people around muzakki do not influence the intention of muzakki to fulfill the obligation of paying zakat on the profession. the awareness of muzakki to accomplish the obligation to spend 2.5% of the assets for eight asnaf may have caused the insignificant effect of peer influence. the results of this study are in line with saad (2020), which states that the opinion of friends or the closest person has little effect in arousing one’s intention to pay zakat. this can be an opportunity for amil zakat institutions to play a role in influencing the intention of zakat payers. the influence of comments or opinions of friends or closest people regarding amil zakat institutions does not affect the intention of muzakki in paying zakat on their profession. with this, it is hoped that zakat institutions will provide better performance to prevent wrong opinions or comments from the public. the influence of knowledge on the intention to pay zakat means that when muzakki has immense knowledge about zakat, they will have an increasing understanding of the zakat law. the increased understanding of zakat will lead to the intention to pay zakat, especially in zakat on profession. covid 19 didn’t impact to intention to pay zakat especially for muzakki that have highly understanding of zakat. knowledge is an essential factor because it can influence the intention of muzakki to distribute 2.5% of their assets to 8 asnaf, through amil bodies or institutions. the result confirmed findings of saad (2020); khamis et al. (2011); idris et al. (2012), which states that there is a significant positive 12 hakimi et al. influence between zakat knowledge on the intention to pay zakat. the higher the knowledge of muzakki on zakat on profession, the greater the intention to pay zakat on profession through the zakat institutions and bodies. therefore, knowledge of zakat plays an essential role in convincing muzakki to adhere to the islamic religion’s rules and orders. the adherence for regulations and laws of islam is a form of worship to allah swt, and obedience to the messenger of allah pbuh, as stated in the al-qur’an in surah an-nur verse 54 which means: “say, “obey allah and obey the messenger; but if you turn away then upon him is only that [duty] with which he has been charged, and upon you is that with which you have been charged. and if you obey him, you will be [rightly] guided. and there is not upon the messenger except the [responsibility for] clear notification.” (ministry of religion ri, 2016). the result of the intention to pay zakat significantlyaffect the compliance of paying zakat on profession supported by findings of bidin et al. (2009), saad et al. (2010), and saad & haniffa (2014) which state that intention to act as the biggest motivator for muzakki, especially workers who have reached nishab, to comply in paying zakat on profession. zakat institution must have new strategy to encourage muzakki. one of the strategies is that zakat institutions must distribute zakat funds fairly and evenly to all recipients (8 asnaf). by carrying out this strategy, the muzakki (employees/labour) have the desire and are motivated to obey in paying zakat on profession, because muzakki will realize that zakat funds paid to amil institutions have been distributed fairly to the asnaf. the amil zakat institution has been trying to be transparent with reports on the distribution of zakat funds so that they are distributed fairly. with the zakat distribution report, muzakki can assess the safety and justice of amil zakat institutions in their work. conclusion based on the results of the data analysis and related to covid 19 era, a positive attitude and peer influence do not significantly affect the intention to pay the zakat profession. this result rejects journal of islamic economic laws-july, vol. 4, no. 2, 2021 13 the hypothesis in the study. it means that at covid 19, zakat institution must have new strategy in potitioning peer influence. zakat knowledge has a significant positive effect on the intention to pay the zakat profession. this identifies that the increasing understanding of muzakki will further increase the intention to pay zakat on profession. intention to pay zakat also has a significant positive effect on zakat compliance behavior in paying zakat on profession. this identifies that the increasing intention to pay zakat will further increase zakat compliance behavior in paying zakat on profession. the implication of this research, seen from a theoretical perspective, reveals the existence of factors from several tpb components that can be used as a reference in the zakat study. this research is an extension study of saad & haniffa (2014) and saad et al., (2020). in this study, the tpb component is used to see a person’s zakat compliance behavior, especially on the zakat on profession, with intention as an intervening variable. this study has limitations by only using a sample of the muslim working population in indonesia and specific case in covid 19 pandemi. further research can develop other components of attitude, subjective norm, and perceived behavioral control to test zakat compliance behavior. references abdillah, w dan jogiyanto. 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(2017). determinants of zakat compliance behavior among muslims living under non-islamic governments. international journal of zakat, 2(1), 95 108. https://doi.org/10.1108/jiabr-03-2018-0036 https://doi.org/10.1108/jiabr-03-2018-0036 _goback _heading=h.gjdgxs _goback _heading=h.gjdgxs _hlk72739620 _goback _goback _goback journal of islamic economic laws vol. 4, no. 2, july 2021: 88-104 88 insurance and takaful concepts: an islamic analysis and offer in life assurance fuad muhammad zein 1, anisa rosdiana zein 2, and afiq miftahurizqi alhaq3 1institut agama islam negeri surakarta 2universitas darussalam gontor 3islamic university of madinah email: fuadmzein81@gmail.com, anisa689@gontor.ac.id, 1.392026343@stu.iu.edu.sa abstract this paper aims to provide a comparative analysis between the concept of insurance and the concept of takaful from an islamic perspective. the method used in this paper is the study of libraries, in which the author seeks to find, summarize, analyze and ultimately deduce from various authoritative data sources. insurance is a non-bank financial institution that offers protection against difficulties to the public. by paying dues or premiums that have been determined, the public has the right to make a claim that will be reimbursed by the insured party several funds that have also been determined. the insurer states to bear all risks that occur in the future. therefore, all dues paid will be covered and managed by the company. however, it turns out that attitude is detrimental. because the claim from the customer is not filed, then the customer’s money is forfeited and entirely belongs to the company. in addition, the management of funds that are unclear and even almost unknown to customers makes this insurance practice illegal because it contains gharar and usury. keyword: takaful, insurance, gharar, riba introduction in ensuring the needs of his life, every human being needs a guarantee that can protect his soul, education, property, and descendants. (demokrasi & syürå, 1829, p. 192) thus, the use of mailto:fuadmzein81@gmail.com mailto:anisa689@gontor.ac.id journal of islamic economic laws-july, vol. 4, no. 2, 2021 89 financial products is impossible to avoid at this time, both in terms of finance from the bank and non-bank financial institutions. both offer promising benefits. one of them is insurance, a non-bank financial institution that aims to make preparations in the face of possible difficulties faced by humans in life. however, in reality, insurance does not provide solutions but adds problems for its customers. as happened to the life insurance that failed to pay the policy to its customers worth rp 12.4 trillion that has been due (cnbc indonesia, 2019), make the customer unable to get the money he has paid as collateral in the face of the risks that befall him, which causes one of the parties to feel harmed. so the word insurance itself does not go as it should because there is no proper “guarantee.” this shows that insurance is not the right solution as a risk guarantor. in islam, known as takaful, where takaful is a guarantee of risk by helping, this takaful is more guaranteed against the risks. however, many studies have discussed this concept, including eja armaz hardi, who said that the concept of conventional insurance and sharia insurance has a different concept; in addition, sharia insurance also has an excellent opportunity to develop in indonesia. (eja armaz hardi, 2015: 438) then sheila and hanna analyzed the takaful operational model and determined the suitable model. according to both takaful models, operational with mudharabah in malaysia is not practical because of the inefficient nature of the distribution of the results. furthermore, netta agusti said that the uncertainty that occurs in the future to the soul and assets demand people to be more aware of the risks that could arise. the need for this makes insurance a financial necessity to minimize the risks that may occur. the risk that befalls the insurance participants, not only borne by the company but by all participants of sharia insurance, becomes one of the differentiators between sharia insurance and conventional insurance. (netta agusti, 2017: 182) some previous studies have not entirely covered insurance in depth. thus, this paper will discuss the concept of insurance and takaful and the difference between the two. 90 zein et al. literature rivew some studies discuss sharia insurance and its development, as well as research conducted by aravik (aravik, 2016, p. 47), faizin (faizin, 2020, p. 96), which discusses insurance in islamic view, then hashanah, that sharia insurance in its implementation is supervised by the national sharia council of the indonesian ulama council in addition, in its implementation sharia insurance also refers to the principle of helping (hasanah, 2001, p. 231). research on comparative insurance and sharia insurance by suryoaji and cahyono on the efficiency of conventional and sharia insurance productivity (suryoaji & cahyono, 2020, p. 1876). imani and aziza, on the comparison of the conventional insurance system and sharia insurance (imaniar mahmuda & azizah, 2019, p. 56) the results of his research stated that scholars disagree with the existence of insurance. hardi, in his research, stated that there is a difference between insurance and sharia insurance, and in indonesia, sharia insurance has a considerable opportunity (hardi, 2015, p. 438). in general, previous research only discussed the comparison between conventional insurance and sharia insurance. in contrast, this study discussed insurance and takaful and criticism between the two in minimizing risk. methods types and data sources this research is qualitative (kaelan, 2010, p. 134) by the object of this research study, this type of research is included in the literature research (library research) (zed, 2004, p. 18). first, the steps taken are by recording all findings regarding insurance and takaful in general in each research discussion obtained through literature and sources. second, combining all findings regarding the theory of insurance and takaful that occur in the field. third, analyze all the findings from various texts related to insurance and takaful. the last one is criticizing, providing critical ideas in research results on previous discourses by presenting an insurance and takaful concept. (nasution, 1988, p.18). journal of islamic economic laws-july, vol. 4, no. 2, 2021 91 results and discussion western concept 1. etimology and terminology etymological insurance is an absorption of the word assurance (dutch), or assurance/insurance (english) (“collins dictionary,” 2020, p. 1), which means a guarantee to compensate for disasters. (waite, 1980, p. 426). in merriam webster’s dictionary, the term insurance is a contract performed to guarantee a loss or danger (“merrian webster 1828,” 2020, p. 1). while in terminology, mcnamara declares insurance as a collection of deliberate losses by transferring the risk to insurance companies that agree to indemnify insurance for such losses and provide benefits to customers in the event of a disaster. (george e. rejda michael j., 2018, p. 20) this different from outreville (j. francois outreville, 1998, p. 131) and georges dionne (georges dionne, 1990, pp. 1—2), which states insurance as a contract in which one insurer pays premiums to the other party if the pristine that becomes the object of risk occurs. alternatively, it is said to be a contract of indemnification for certain risks, with payment only by the losses incurred. robert i. mehr (mehr, 2016, p. 397) and mark r.greene (greene, 2015, p. 31) stated that insurance is a tool to reduce risk by combining units that are at risk so that individual losses can be predicted collectively. thus insurance is a transfer of risk or loss reduction to the company with the merger of risky units in predicting premium payment contracts as collateral for a risk. according to experts (loubergé, 1998, p. 540), there are various objectives of risk assurance. as stated by christian gollier and burton t beam (beam, 2016, p. 5), the purpose of insurance is to cover the risk of the unexpected that will occur (gollier & scarmure, 1994, p. 2). in line with that, karl borch added in the risk guarantee; there needs to be payment of money or premiums to insurance companies (borch, 1962, p. 174). grandgirard added that risk assurance in insurance also aims to increase the number of customers. (julie grandgirard 2002: 123). different from dearboijn career (career, 2003, p. 4), risks in insurance, according to him as uncertain things about financial losses. he even said insurance also helps individuals and business owners 92 zein et al. continue their usual standard of living and operation, which also benefits society as a whole because the main benefits of insurance including loss payments, economic growth, credit support, loss prevention, and peace of mind (george e. rejda michael j., 2018, p. 5). after discussing the purpose of insurance, another insurance point is a risk. some experts explain the risk assurance in insurance carried out by insurance companies, as burton and mayer (meyer & ormiston, 1995, p. 203) said that the risk would be transferred to the company (transfer of risk) (beam, 2016, p. 5) it can be said that risk assurance in insurance is a guarantee of uncertain risks. moreover, this risk is fully transferred to the company so that customers only need to pay premiums as collateral. george stated that this uncertain risk makes insurers know the funds are forfeited (anderson & tuttle, 1996, p. 847). the participant cannot continue premium payment or withdraw before the due date (dr. nurwidiatmo, 2008, p. 71). if the contract expires and no claim occurs, then the insurance premium that has been paid is forfeited or becomes the insurance company’s profit. guarantee of risk is the main thing in insurance. however, another thing that needs to be understood is premium payments. as some researchers argue, career divides it into two types of risk: risks that occur purely because of accidents and risks that are speculative. both involve three possible outcomes: loss, no loss, and no gain (career, 2003, p. 11). george e. rejda michael j also classifies risk into several classes: pure and speculative risk, diversifiable risk and non-diversifiable risk, and enterprise risk (george e. rejda michael j., 2018, p. 4). the purpose of this classification of risk types, according to karl borch, in his paper “the utility concept applied to the theory of insurance,” insurance risk will occur after payment of premiums in advance with an amount that has been determined as the type of insurance is the same as the sale and purchase agreement (grandgirard et al., 2002, p. 123). therefore, it can be concluded, the premium payment in the insurance company will be determined after determining the type of risk to be borne by the company; this is the same as the sale contract. journal of islamic economic laws-july, vol. 4, no. 2, 2021 93 the management of insurance premiums is the right of the company. this makes the company responsible for the management of the money. e philip davis stated that the company’s insurance premium would be invested so that the policy for the investment of the company’s funds is wholly owned. (davis, 2013, p. 3) according to e philip davis, investment is a staple in the economy because it can impact finances (davis, 2005, p. 1). according to mohammed khan and pricewaterhouse coopers, even in determining investments, investments can be invested in any asset as long as it meets national insurance regulations and legislation (mohammed khan, 2008, p. 142).risk into several classes, such as pure and speculative risk, diversifiable risk and nondiversifiable risk, enterprise risk (george e. rejda michael j., 2018, p. 4) . the purpose of this classification of risk types according to karl borch, in his paper “the utility concept applied to the theory of insurance” insurance risk will occur after payment of premiums in advance with an amount that has been determined as the type of insurance is the same as the sale and purchase agreement (grandgirard et al., 2002, p. 123)many aspects of this strategy remain unknown. we investigated possible fitness costs of hyperparasitism as influenced by host size. our study was conducted with the facultative hyperparasitoid pachycrepoideus dubius ashmead (hymenoptera: pteromalidae . it can be concluded, the premium payment in the insurance company will be determined after determining the type of risk to be borne by the company, this is the same as the sale contract. the management of insurance premiums is the right of the company. this makes the company responsible for the management of the money. e philip davis stated that the insurance premium will be invested by the company, so that the policy for the investment of the company’s funds is fully owned. (davis, 2013, p. 3) investment according to e philip davis is a staple in the economy because it can have an impact in the form of financial (davis, 2005, p. 1). even in determining investments according to mohammed khan and pricewaterhouse coopers can be invested in any asset as long as it meets national insurance regulations and legislation (mohammed khan, 2008, p. 142). 94 zein et al. 2. criticism from figures and authors insurance is a guarantor in human life, making it much in demand by the public. however, some things in insurance become much debate for scholars, even many rejections of it as wahbah alzuhaili disagrees with the distribution of premium funds for investment in insurance, because the payment premium becomes the company’s mechanical property, so the company has the authority to manage the fund. as sayid sabiq in his book fiqh sunnah, the mudharabah (investment) system in insurance is forbidden (sabiq, 1020, p. 1134). another reason for the prohibition of investment in this insurance is, the company will invest the funds without the consideration of the customer; this then becomes the prohibition because the company will invest it without considering the halal and illegal business that it will invest, this is what is prohibited in islam, in addition to indecision (gharar) and riba (al-zuhaily, 1985, p. 4143). in underwriting risk in insurance, companies use the concept of transfer of risk (emmett j. vaughan therese m. vaughan, 2007, p. 2), where the company will bear all risks that befall the customer. yusuf qaradawi forbade this because guaranteeing something uncertain by paying a premium, in this case, will happen gharar, and transactions containing gharar (indecision) are prohibited in islam (alqardhawi, 1997, p. 241). even yusuf qardhawi said this is the same as buying and selling, which is forbidden. because the transaction is not goods with goods but goods with things that are not yet and uncertain (al-qardhawi, 1997, p. 243). on the other hand, several western researchers criticized the management of the insurance premium funds. among them, anderson, in his research, stated that in the payment of insurance premiums, there were many frauds and even failures in managing the premiums; one example is that with charred funds, millions and billions of money were lost from the hands of customers because they belonged to the company as a whole. according to him, this is very detrimental to customers (anderson & tuttle, 1996, p. 826) in line with anderson, george l. priest states that journal of islamic economic laws-july, vol. 4, no. 2, 2021 95 the phenomenon in insurance is more to the company’s efforts to seek profit than service to customers (priest, 1989, p. 999). from some opinions about this insurance, it can be concluded that many things are uncertain and even harm many customers with the desire of companies that take advantage more than service to customers. this indicates that insurance cannot solve problems that occur or even as an insurer for the risks. 3. positive aspects of western concept insurance is much in demand by the public. this is because insurance can help many difficulties faced by customers, as george e. rejda michael j said insurance could provide a sense of security. after all, in addition to paying premiums for life insurance (george e. rejda michael j., 2018, p. 22) also serves as a means of investing in the future. in line with that, georges (g. and the u. of dionne & montreal, 2004, p. 712) and gray s. becker (georges dionne, 1990, p. 164) insurance is also able to help reduce unexpected expenses that are usually much higher than daily or even monthly regular expenses. there is no need to pay the total cost of the losses suffered by having insurance because the insurance service provider will provide compensation. even in this case, the risk of guarantee will be borne by the company entirely, so there is no concern from the customer if he gets difficulties or disasters that occur and he becomes a new member. in addition, insurance, according to henri louberge, is a new thing and a solution that is relevant to the current state of the economy. (loubergé, 1998, p. 540) islamic concept 1. etymology and terminology insurance from an islamic perspective is called takaful. etymologically the term takaful comes from the root takafala yatakafalu takaful (al-maany, 2020, p. 1). in munjid book takaful is mean by: takafala qaum: kaffala ba’duhum ba’dh بعض) بعضهم كفل القوم: means supporting, preserving, giving (تكافل alms, providing protection and attention to one’s affairs. (lou 96 zein et al. while takaful terminology wahbah alzuhaili states it as an effort to protect each other and help several people or parties. (al-zuhaily, 1985, p. 4055) as well as yusuf qardhawi (al-qardhawi, 1997, p. 242) and said bin turkey al-khuslan (al-khulatsani, 2012, p. 189) who say takaful is social security between fellow muslims, so that both of them bear risks, the willingness to take this risk is a form of helping help. from the opinion of the ulama, it is said that takaful is an effort to help each other among members by taking mutual risks. takaful is an effort to ease the burden between parties. as the purpose of takaful, according to suharto (fasa & suharto, 2018, p. 358), is to help each other so that in islam, takaful uses the contract of cabarrus (abduh, omar, & tarmizi, 2012, p. 44), which each participant will bear the mutual risk between the parties by providing part of the funds voluntarily. in contrast to shahul hameed bin mohamed ibrahim who stated in takaful not only with cabarrus and ta l awun but also mudharabah. (shahul hameed bin mohamed ibrahim, 1975, p. 2) ahmad shukri yazid states that takaful is ta l awun and tabarru l, which means that the risk is shared collectively between participants (sharing of risk) to eliminate the element of uncertainty. (yazid, arifin, hussin, & wan daud, 2012, p. 116). the risk insurer in this takaful makes takaful different from insurance. they have seen in practice takaful using two contracts, namely cabarrus and akad mudharabah. this is a tabarru agrees that customers pay premiums willingly to help fellow members who are in trouble. at the same time, the mudharabah agreement serves as an agreement used to invest (fasa & suharto, 2018, p. 221). both contracts make takaful free from things prohibited by sharia (salman, 2014, p. 211), such as riba, gharar, and maisir, as what happens to insurance (abduh et al., 2012, p. 43). risk assessment in the sharing of risk category as a concept in the category according to yusuf qardhawi (al-qardhawi, 1997, pp. 242-244) also wahbah al-zuhaili (al-qardhawi, 1997, p. 4145), make the risks that occur to the customer will be borne jointly (agusti, 2017, p. 183). so if one of the customers is at risk, then all members of takaful will help solve it by using tabrru l. journal of islamic economic laws-july, vol. 4, no. 2, 2021 97 similarly, aspects of disbursement of funds other than tabarru l fund’s participants can invest with mudharabah agreements, and takaful only allows to make investments with the restrictions set by sharia (nurul ichsan hasan, 2014, p. 32). 2. the greater islamic concept if the concept of insurance prioritizes risk assurance by the company, then in takaful the concept of help becomes the main principle, this is because it can build concern for fellow muslims, in addition, muhammad rasyid bin ali (bin muhammad syamsi ridha, 1990, p. 320) stating the concept of helping in this takaful can form awareness of the people, keep away from evil nature and as a means of spreading good. because ahmad ibn mustofa said in our property there is the right of others (almaraghy, n.d., p. 15). this help is manifested by cabarrus’s existence, as ahmad shukri yazid stated (yazid et al., 2012, p. 116). in addition, the sharing of risk (sharing of risk) in takaful can increase the sense of concern among fellow participants, as the opinion of wahbah al-zuhaili (al-qardhawi, 1997, p. 4233). he also distinguished the implementation of contracts on takaful transactions. this makes the purpose and management of premiums precise and avoided the elements of riba, gharar, and maisir by sharia principles. in terms of investment, the funds will be used for investment by sharia, and the distribution of proceeds is determined at the beginning by the distribution of ratios, not by the amount of money to be given (nurul ichsan hasan, 2014, p. 61). this can increase the trust among fellow muslims by entrusting their wealth to be managed by others. so that the company will be trusted and responsible in its management. takaful does not even know the charred funds (anderson & tuttle, 1996, p. 847) so that the funds that have been paid and the customer quit the premium money will be returned to the customer. the primary basis of this takaful is mutual responsibility, cooperation, and mutual assistance and protection (supriyadi, 2017, p. 53). of the many advantages of this takaful, takaful is 98 zein et al. more comprehensive than insurance in risk assurance and a sense of responsibility between people. comparison of insurance and takaful concepts insurance and takaful have apparent differences. among them, from the insurance concept, an agreement between two parties with one party to bear the other party’s risk by receiving a premium in exchange for the proposed claim (j. franc; is outreville, 1998, p. 131). while the concept of takaful is a group of people who help each other, guarantee, work together to jointly issue tabarru l funds’ (alkhulatsani, 2012, p. 189). in terms of transactions and management of funds, insurance still contains gharar, maisir, and riba (al-zuhaily, 1985, p. 4134), while takaful must be clean from all gharar, maisir, and usury practices (yazid et al., 2012, p. 116). in the case of a contract, insurance uses a sale and purchase contract, gharar contract (grandgirard et al., 2002, p. 123). while in takaful, the contract used is the tabarru l contract and the mudharabah contract. (shahul hameed bin mohamed ibrahim, 1975, p. 2) apart from the contract, it is also in terms of underwriting risk, where the insurance is guaranteed by the transfer of risk where there is a transfer of risk from the insured to the insurer (g. dionne & harrington, 2017, p. 9) while in takaful with sharing of risk where there is a process of mutual risk between one participant and another participant (al-zuhaily, 1985, p. 4233). in the management of funds in insurance, there is no separation between the participant’s funds and the company’s funds, resulting in the occurrence of forfeited funds (davis, 2013, p. 3), while in takaful, there is a divider between tabarru ‘funds and company funds, so it does not recognize burnt funds (fasa & suharto, 2018, p. 221). then in investment, insurance companies are free to invest within the limits of the provisions of the law. at the same time, takaful investments are carried out by sharia principles free from riba, gharar, and maisir in the investment ( salman, 2014, p. 211). for fund ownership, in insurance, the funds collected from premium payments will belong to the company entirely, and the company is free to use and invest in journal of islamic economic laws-july, vol. 4, no. 2, 2021 99 it. (davis, 2013, p. 3). while takaful funds derived from dues or tabarru l remains owned by participants, takaful companies only as trustees in managing funds (nurul ichsan hasan, 2014, p. 32). conclusion from the discussion above, it can be concluded that insurance is very different from takaful, although both are intended for risk assurance. as in guaranteeing the risk, both have different concepts. the concept of insurance is a guarantee given by the company to the customer for a disaster or risk that has not necessarily happened to him, from the payment of a certain amount of premiums to the company. while the concept of takaful mutual guarantee efforts based on the concept of social solidarity, cooperation, and mutual indemnity of other members. in risk assurance, insurance will be charged entirely to the company or commonly called the transfer of risk, as stated by wahbah alzuhaili. in contrast, the risk is borne jointly between fellow insurance customers called sharing of risk in takaful. moreover, in determining risk, insurance divides it into several criteria, while takaful does not distinguish it. even though many cases occur related to insurance, such as george l. priest and andreson, this indicates that insurance is not a solution to guaranteeing risks compared to takaful because the concept of takaful is more comprehensive and provides more maslahah in underwriting risks. than insurance. references abduh, m., omar, m. a., & tarmizi, r. m. 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(2004). metode penelitian kepustakaan. jakarta: yayasan obor indonesia. _goback _heading=h.gjdgxs _goback _heading=h.gjdgxs _hlk72739620 _goback _goback _goback journal of islamic economic laws vol. 4, no. 2, july 2021: 67-87 67 analysis of the effect of word of mouth, religiosity and purchase decisions of alcoholic beverages with interest as a mediation variable cahyaning tiyas r university of muhammadiyah surakarta email: b300170167@student.ums.ac.id abstract this study aims to determine the effect of word of mouth, religiosity, on the decision to purchase alcoholic beverages in the residency of surakarta. this study found the factors that influence the decision to purchase alcoholic beverages in the surakarta residency. this research uses quantitative methodology to test the hypothesis. statistical tests and data processing were carried out using partial least square (smart pls 3.0). the research findings show that word of mouth has a significant and positive effect on purchasing decisions, religiosity has no effect on purchasing decisions, and word of mouth has a positive effect on purchase intention. religiosity affects buying interest. buying interest has an effect on purchase decision. keywords: word of mouth, religiosity, purchase decision, introduction in the current development of economic activity, a number of new products and services have emerged. in the era of rapid development and advancement of technology and science, competition between companies to be able to market their products and services is also getting higher. with intense competition in the business world, companies are required to have a competitive advantage in order to be able to compete with other companies in global business (foster and johansyah, 2019). marketing seeks to identify the needs and wants of target market consumers and how to satisfy them through the exchange mailto:b300170167@student.ums.ac.id 68 rofiqo et al. process while maintaining all parties and goals related to the interests of the company tampinongkol et al. (2018). according to tampinongkol et al. (2018) word of mouth is word of mouth communication that has the power as a simple form of promotion or advertisement (prasad et al., 2017). word of mouth does not require such a large cost, but can get good effectiveness (susanti & wulandari, 2021). word of mouth is very effective in increasing sales, but the product must have advantages so that consumers feel satisfied and form positive information about the product and start informing others (danisa et al., 2017; febriandika et al., 2020; syahrivar et al., 2018) the trade in alcoholic beverages is currently attracting many consumers from various circles, not only the upper economic class and the lower middle class economy, even teenagers who are fans of consuming alcoholic beverages. the circulation of alcoholic beverages in indonesia at this time is quite extensive because in almost every region in indonesia. the circulation of these drinks seems to never end because the number of alcoholic drink lovers is not small, causing the demand for alcoholic drinks to continue to occur in order to meet consumer demand. recently a lot of marketing has focused on religion and human behavior (ustaahmetoğlu, 2020; najiyah & febriandika, 2019). in various forms the use of alcohol also touches almost all classes of society, for example wine is considered a drink of the nobility and beer as a drink of the common people, even in many places alcohol is also known as a traditional drink. although alcohol has been known for thousands of years, however, only after going through a very long history, in the mid-18th century doctors in england discovered the adverse effects of alcohol on health (personal, 2017). based on the central statistics agency in figure 1, it records the distribution of alcohol use per capita throughout indonesia in 2015-2018. in 2015 the total consumption recorded throughout indonesia was 0.48 liters of pure alcohol per person aged 15 years. total unrecorded consumption is estimated at 25% of total alcohol consumption throughout indonesia. even though indonesia itself is still at the lowest point of alcohol abuse in the global health journal of islamic economic laws-july, vol. 4, no. 2, 2021 69 observatory (gho-who) data, which is recorded at less than 2.5 liters/person/capita, it must be understood that the situation of alcohol problems in indonesia is very complex. graph of alcohol use by population age 15 years is presented in figure 1. based on figure 1, alcohol was initially only used as an ingredient for making beverages, but now the use of alcohol has become more widespread, namely as a raw material for various industries such as the cosmetics, pharmaceutical, medical and cigarette industries. although the use of alcohol by the beverage industry is still dominant, in general, the national consumption of alcohol continues to increase along with the development of industries that use alcohol, this can be seen from the trend of alcohol consumption from year to year in figure 1.1, which shows an increase in alcohol consumption. alcohol consumption in the industrial world is recorded as using alcohol for the pest eradication industry, office and school equipment, rubber goods. figure 1. use of alcohol consumption by population age 15 years in the last year (liters per capita) 2015-2018 in indonesia sumber: badan pusat statistik according to the 2018 basic health research in central java. preferences describe the proportion of the type of alcohol that most drinkers are interested in. there are 2 groups based on factory and traditional ones, namely beer and wine. the type of alcohol consumed in an area is a sign that the product has a good marketing strategy. figure 2, shows the level of alcohol consumption by type. 70 rofiqo et al. figure 2 . proportion of types of alcoholic drinks drink 15 years old and over in central java province in the last 12 months from figure 2, showing the proportion of alcoholic beverages, it can be seen that the circulation of alcoholic beverages in the province of central java is still high and is needed either to be used and in demand in consumption, or used in other sectors such as the health, industrial, cosmetic and other sectors. however, from the graph it can be seen that the type of alcohol that is most in demand is alcohol which is used for consumption, so it can be concluded that the interest of the people of central java towards alcohol consumption is still high. from figure 2, obtained by basic health research, the prevalence of alcohol drinkers in the last 12 months and the last 1 month by district or city in central java province, especially the city of surakata and karanganyar district, is as follows, the percentage in surakarta city of alcohol consumption in the last 12 months was recorded 3 ,7% and in the last 1 month recorded 1.7%, while in karanganyar district alcohol consumption in the last 12 months was recorded at 1.4% and in the last 1 month recorded 0.6%, at the age of 10-14 years alcohol consumption in 12 months 0.1% in the last month and 0.1% in the last 1 month, and at the age of 15-24 years alcohol consumption in the last 12 months was 4.5% and in the last 1 month 2.3%. based on the description of the problem above, the researcher conducted a study entitled analysis of the effect of word of mouth and religiosity on the decision to purchase alcoholic beverages with interest as a mediating variable. journal of islamic economic laws-july, vol. 4, no. 2, 2021 71 literature review buying decision schiffman and kanuk in akbar and sunarti, (2018) say that purchasing decisions are the selection of two or more alternative purchasing decision choices, meaning that if someone can make a decision, there must be several alternative choices (gazzola et al., 2017). word of mouth word of mouth has great power to impact consumer buying behavior. recommendations from trusted friends, associations, and other consumers have the potential to be more trusted than from commercial sources, such as advertisements and sales people (susanti & wulandari, 2021; syahrivar et al., 2018). for the most part, word of mouth occurs naturally, consumers start by talking about a brand they use to others, this is conveyed by kloter and armstrong (2017). motivated consumers will automatically talk about a product (danisa et al., 2017). religiosity according to sahlan (2012:39) in religiosity (religiousness) is an attitude or awareness that arises based on beliefs or beliefs (astuty and umiyati, 2018; khan & kirmani, 2018; mortimer et al., 2020) someone to a religion (nora & minarti, 2016). indicators of islamic religiosity according to el-menouar and stiftung (2014) are based on indicators that have been developed by charles glock, namely belief, ritual, obedience, experience, knowledge and consequences (fauzia et al., 2018; nurhayati & hendar, 2019) buying interest based on nulufi and murwatiningsih in shahnaz and wahyono (2016) interest is a consumer who already has a positive attitude towards a product or brand, will lead to buying interest in that product or brand (abidin & triono, 2020). some of these understandings, it can be concluded that buying interest is the possibility that consumers will make purchases by seeking 72 rofiqo et al. information from various sources. consumers have an interest in a product or service but not necessarily consumers will buy the product or service. research hypothesis h1: word of mouth has a positive effect on purchasing decisions h2: religiosity has a negative effect on consumer decisions. h3: word of mouth has a positive effect on buying interest h4: religiosity has a positive effect on buying interest h5: buying interest positively affects purchase decisions h6: word of mouth positively affects purchase decisions mediated by buying interest. h7: religiosity has a negative effect on purchasing decisions mediated by buying interest. methods this research was conducted in surakarta. the time of the study was carried out in april 2021. the population in this study was 130 muslim communities aged over 17 years in karisidenan surakarta. the data collection technique used in this study is by distributing questionnaires in the form of a google form to the intended respondents to obtain accurate data. data analysis method. hypothesis testing in this study uses the structural equation model (sem) data analysis method with partial least square (pls). the implementation of pls-sem goes through two stages, the first stage is to evaluate the reliability and validity of the measurement, then the second stage is to evaluate the internal workings of the pls-sem model. results and discussion structural model testing (inner model) inner model shows the power of estimation between latent variables or constructs. in this study, the results of the path coefficient test, goodness of fit test and hypothesis testing will be explained. in the tests carried out on the inner model, the hypothesis can be accepted or rejected. journal of islamic economic laws-july, vol. 4, no. 2, 2021 73 figure 3. model inner inner model analysis has several stages before the results of the hypothesis are declared accepted or rejected, with some of these stages to ensure the model is feasible to be tested or not just to influence either directly or indirectly in this study in accordance with figure 1.4 inner model presented above. r square analysis r-square is a measure of the proportion of changes in the value of the dependent variable, which can be explained by the independent variable, to predict the quality or goodness of a model. this analysis uses a mediating variable, which means that the value of r square uses the value of r square that has been judged (r square adjusted), meaning that each additional variable will not necessarily increase the resulting research model. table 1. r square result model r square r square adjusted purchase decision 0,816 0,812 purchase intention 0,727 0,722 sumber: 2021 data collection analysis 74 rofiqo et al. the results obtained in this study indicate that in the buying interest model, an adjusted r square value of 0.722 means that the r square value > 0.7 means the research model is substantial and the contribution made to the word of mouth and religiosity variable model in explaining buying interest is 72, 2% and the remaining 28.8% is influenced by other independent variables. while in the purchasing decision model, the r square adjusted value of 0.812 means that r square > 0.7 means that this research model is also substantial and the contribution made to the word of mouth variable model, religiosity and buying interest in explaining purchasing decisions is 81.2% and the remaining 18.8% is influenced by other independent variables. goodness of fit analysis these results are to see the model produced in this study is considered feasible or not. the amount of this test is seen from the resulting q square value. table 2. q square result hasil model nilai q2 = (1 – sse/sso) purchase decision 0,649 purchase intention 0,561 sumber: 2021 data collection analysis the results of the analysis obtained above indicate that the value of q square in the buying interest model is 0.561, meaning q square > 0 so that the buying miant model on the word of mouth and religiosity variables has a relevant predictive and produces a strong model because the value of q square > 0.35. while the value of q square in the purchasing decision model is 0.649, which means q square > 0 so that the buying miant model on the word of mouth, religiosity and buying interest variables has a relevant predictive and produces a strong model because the value of q square > 0.35. journal of islamic economic laws-july, vol. 4, no. 2, 2021 75 hypothesis analysis hypothesis analysis is a test carried out to prove the hypothesis is accepted or rejected. the results of this analysis will be able to know the significant influence directly or indirectly between the independent variables on the dependent. in smart pls the results of this analysis by looking at the path coefficient and indirect effect. table 3. path analysis (direct effect) model original sample (o) t statistics (|o/ stdev|) p values purchase intention -> purchase decision 0,873 12,054 0,000 religiosity -> purchase decision 0,013 0,325 0,745 religiosity -> purchase intention -0,155 3,601 0,000 word of mouth -> purchase decision 0,040 0,493 0,623 word of mouth -> purchase intention 0,810 18,403 0,000 sumber: 2021 data collection analysis regression analysis this analysis is to see how much influence the independent variable has on the dependent. in media testing there are 2 basic regression models formed in this study, with: mb = 0,155 rel + 0,810 wom + e interpretation: 1) rel coefficient of -0.155 indicates the higher the level of consumer religiosity, the consumer’s buying interest will decrease.. 2) the wom coefficient of 0.810 indicates that the stronger word of mouth spread among consumers, the stronger their buying interest will be. 76 rofiqo et al. kp = 0,013 rel + 0,040 wom + 0,873 mb interpretation: 1. the rel coefficient of 0.013 indicates that the higher the level of consumer religiosity, the stronger consumer purchasing decisions. 2. the wom coefficient of 0.040 indicates that the stronger the word of mouth spread among consumers, the stronger the purchase decision will be. 3. the mb coefficient of 0.873 indicates that the stronger the consumer’s buying interest, the stronger the purchasing decision will be. 1. direct effect direct effect is a t-test analysis to see the direct significant effect between the independent variables on the dependent. in smart pls this analysis is tested by comparing t table and t table with a level of sig 5% is 1.96. 1. religiosity – buying interest the results of the analysis that can be disclosed are the t statistic value of 3.601 and p value of 0.000 means t statistic > t table 1.96 or p value 0.000 <0.05 then ho is rejected, meaning that religiosity has a significant effect on consumer buying interest. 2. word of mouth – buying interest the results of the analysis that can be disclosed are the t-statistical value of 318.403 and p-value 0.000 means t-statistic > t-table 1.96 or p-value 0.000 <0.05 then ho is rejected, meaning that word of mouth has a significant effect on consumer buying interest. 3. religiosity – purchase decision the results of the analysis that can be disclosed are the t statistic value of 0.325 and p value of 0.745 meaning t statistic < t table 1.96 or p value 0.745> 0.05 then ho is accepted meaning that religiosity has no significant effect on consumer purchasing decisions. journal of islamic economic laws-july, vol. 4, no. 2, 2021 77 4. word of mouth – purchase decision the results of the analysis that can be disclosed are the t-statistical value of 0.493 and p-value of 0.623, meaning t-statistic <t-table 1.96 or p-value 0.623> 0.05, then ho is accepted, meaning that religiosity has no significant effect on consumer purchasing decisions. 5. purchase intention – purchase decision the results of the analysis that can be disclosed are the t-statistical value of 12.054 and p-value 0.000, meaning t-statistic > t-table 1.96 or p-value 0.000 <0.05, then ho is rejected, meaning that consumer buying interest has a significant effect on consumer purchasing decisions. 2. indirect effect the indirect effect in this study is to analyze the indirect significant effect between the independent variables on the dependent variable by using mediating or intermediary variables. in smart pls this analysis is tested by comparing t table and t table with a level of sig 5% is 1.96. tabel 4. indirect effect model original sample (o) t statistics (|o/stdev|) p values purchase intention -> purchase decision religiosity -> purchase decision -0,135 3,221 0,001 religiosity -> purchase intention word of mouth -> purchase decision 0,707 11,115 0,000 word of mouth -> purchase intention sumber: 2021 data collection analysis the results of the analysis show that the mediating coefficient of buying interest between religiosity and purchasing decisions is -0.135 with a t statistic of 3.221 or p value of 0.001 meaning that t statistic > t table 1.96 or p value < 0.05, it can be explained that buying interest 78 rofiqo et al. mediates negatively significantly. between religiosity on purchasing decisions. the mediation coefficient of buying interest between word of mouth on purchasing decisions is 0.707 with a t statistic of 11.115 or p value 0.000 meaning that t statistics > t table 1.96 or p value < 0.05, it can be explained that buying interest mediates positively significantly between word of mouth. mouth on purchasing decisions. the influence of word of mouth on purchase decisions word of mouth has a positive and insignificant effect on purchasing decisions. this illustrates that the word of mouth that someone does will not have a strong influence on the decisions made by consumers themselves (danisa et al., 2017; prasad et al., 2017). this means that word of mouth is not able to influence consumers to decide to buy alcoholic beverage products because some consumers make purchasing decisions not because of positive stories (shahrivar et al., 2018), recommendations and invitations but because the product is seen from the side of sharia in religious orders, alcoholic beverage products are prohibited drinks and the samples taken are muslim communities who have an awareness of carrying out religious orders so that if other people talk about alcoholic products positively, they will not be affected by the decision to buy the product (susanti & wulandari, 2021). the influence of religiosity on consumer decisions the results of the answers in this study, which mostly answered strongly disagreed in religiosity, meant that high religiosity did not affect the decision of the muslim community in buying alcoholic beverages (bukhari et al., 2019). in addition, people who prioritize religion more influence their purchasing power (khan & kirmani, 2018). that is, the more religious people are, the less likely they are to follow up on new buying opportunities (astuty and umiyati, 2018) that arise during their grocery shopping journey (ustaahmetoğlu, 2020). journal of islamic economic laws-july, vol. 4, no. 2, 2021 79 the influence of word of mouth on buying interest the delivery of information by word of mouth carried out by one individual to another based on positive experiences with a product, service, or company (prasad et al., 2017). a positive experience is allegedly an experience that a person gets either directly or indirectly with the use of a product, service, or company accompanied by satisfaction or fulfillment of the individual’s expectations (syahrivar et al., 2018). so that word of mouth that occurs positively will give the impression of a positive and convincing experience to people so that this will build their buying interest well (susanti & wulandari, 2021). the influence of religiosity on buying interest religiosity is found in various aspects of life, including social and economic aspects, one of which is when choosing to consume food and drinks, namely there are rules regarding food and drinks that are allowed to be consumed and those that are not (nora & minarti, 2016). religiosity is the main consideration that causes repurchase decisions by consumers (astuty and umiyati, 2018; nurhayati & hendar, 2019) one of which in buying halal food says religiosity is the main factor that influences a muslim consumer in determining the food they want to consume ( bukhari et al., 2019; khan & kirmani, 2018; mortimer et al., 2020). the influence of buying interest on consumer decisions product purchase is a tangible form of action from consumer buying interest. when consumers have an interest in buying a product, consumers will make a decision to purchase a product through a purchasing decision process with indicators set for the purpose of buying the product. provide recommendations to others and make repeat purchases. eliza et al. (2018) states that consumer buying interest has a significant effect on purchasing decisions, meaning that the higher consumers’ buying interest in a product, the higher the purchase decision of the product. so that the coughing interest 80 rofiqo et al. will produce a strong decision in buying the product (abidin & triono, 2020). the influence of word of mouth on purchase decisions mediated by buying interest a word of mouth communication will greatly affect consumers who are interested in suggestions from people who have had experience with the product (danisa et al., 2017). in fact, someone will trust the opinions of others who have experience with a product more than the advertisements and promotional media launched by the company (syahrivar et al., 2018). with word of mouth communication (susanti & wulandari, 2021) someone will easily believe in a product that can form an interest in buying and later is expected to have an impact on purchasing decisions by consumers. the influence of religiosity on purchase decisions mediated by buying interest in economic activities, especially the purchase of a product, religiosity is also accompanied by an interest in buying goods, so that the avoidance of illicit goods is a driving force for purchasing decisions (nurrachmi and setiawan, 2020). high level of awareness in carrying out religious orders (bukhari et al., 2019; nora & minarti, 2016) religiosity is a form of practice in carrying out islamic law (mortimer et al., 2020). with the high level of religiosity that exists in the community, it will increase interest (mujaddid and nugroho, 2019; nurhayati & hendar, 2019). however, public awareness of religious orders makes the community’s religious orders become guidelines that should not be violated (astuty and umiyati, 2018) so that it will make the decline in buying interest stronger which has an impact on a strong decline in consumer purchasing decisions for alcoholic beverages. conclusion these results indicate that in terms of religiosity, producers need to find new places or strategies so that these products can journal of islamic economic laws-july, vol. 4, no. 2, 2021 81 still be sold because it is impossible for a consumer segment with high religiosity to want to buy alcoholic beverage products, meaning that the product may not be sold as a drink but as an alcoholic product to make healing wound. word of mouth, manufacturers still allow a minimum product with alcohol to be sold if the product is able to give a good impression to others, then the product will be discussed from person to person so as to increase buying interest and in the long term consumer decisions will be strong in buying beverage products. alcoholic. references abidin, z., & triono, l. d. 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(2016). pengaruh disiplin kerja, komitmen organisasi dan lingkungan kerja terhadap kinerja karyawan (study kasus bagian sortir pt. tiki) di sukoharjo. 2(1), 105–113. _goback _heading=h.gjdgxs _goback _heading=h.gjdgxs _hlk72739620 _goback _goback _goback journal of islamic economic laws vol. 4, no. 1 january 2021: 26-44 26 zakat digitalization: effectiveness of zakat management during covid-19 pandemic sri yayu ninglasari1, mumuh muhammad2 1airlangga university 2istanbul university email: sri.yayu.ninglasari19@feb.unair.ac.id, mumuh.muhammad@ogr.iu.edu.tr abstract this study aims to analyze the role of digitalization in zakat management during the covid-19 pandemic. furthermore, it also aims to analyze the strengths, weaknesses, opportunities, and threats of zakat digitization in indonesia. the method used in this research is a qualitative method with a literature study and a swot analysis approach. literature shows that using digital platforms to collect, manage, and distribute zakat is very useful, especially during the covid-19 pandemic, because it provides much convenience for its users. however, digital platforms have weaknesses and threats both for zakat institutions and for muzaki and mustahik. to overcome these threats and weaknesses, zakat institutions can make various strategies by utilizing existing strengths and opportunities. this strategy is made so that the collection and distribution of zakat funds can be appropriately optimized and have a tremendous impact on the community’s welfare, especially for the poor who are affected by covid-19. keywords: zakat digitalization; zakat management; swot; covid-19 pandemic introduction covid-19, which emerged in wuhan, china, at the end of 2019 designated as a pandemic by who on march 11, 2020, has influenced the world movement. various sectors and industries are affected (haleem et al., 2020). countries worldwide have their respective policies to control its spread, including the indonesian sri yayu ninglasari, mumuh muhammad 27 government, who chose large-scale social restrictions or lssr policy. people are encouraged to work, study, and worship at home. this policy has social and economic impacts, particularly for the middle and lower classes. in the worst-case scenario, there will be an increase in the number of poor people where the number of poor people is estimated to be 33.2 million, so that the government needs to expand its social protection program (suryahadi et al., 2020). to deal with the impact of covid-19, the indonesian government has increased the 2020 state budget allocation of rp. 405.1 trillion (kementerian keuangan, 2020). however, handling the impact has the potential to increase the national debt. for this reason, the government needs alternative sources of funding, especially those based on social issues. islamic economics and finance can play a role through islamic social, financial instruments, one of which is zakat the taking of certain assets that must be paid to those entitled to receive them under certain conditions (hafidhuddin, 2002). the zakat instrument can reduce the cost of handling the impact of covid-19, especially in meeting the basic needs of affected communities, especially the poor. indonesia has great potential in islamic social funding instruments. this is because indonesia is a country with the largest muslim population and one of the world’s most generous countries (charities aid foundation, 2019). on the other hand, indonesia has tremendous zakat potential. the results of a study on the zakat mapping potential indicator (ippz) showed that the zakat potential in indonesia in 2019 reached rp. 233.8 trillion. however, the magnitude of this potential has, in fact, not been realized optimally. the total amount of zakat collected by baznas, laz, and zakat collecting units (upz) throughout indonesia in 2018 only reached rp. 8.1 trillion or 3.46% of its potential (puskas baznas, 2020). the causes of suboptimal zakat collection funds are among others due to low public trust in zakat institutions (canggih et al., 2017; kashif et al., 2018; mustafa et al., 2013). this causes the community to give zakat directly to mustahik (zakat journal of islamic economic laws-january, vol. 4, no. 1, 2021 28 receiver) (kashif et al., 2018; owoyemi, 2020). on the other hand, there is no legal regulation that can force muslims to pay zakat (cokrohadisumarto et al., 2019). even muslims who are obliged but don’t pay zakat will not get any sanctions (najiyah & febriandika, 2019). thus, the biggest challenge to increase zakat collection is to encourage muzaki to pay zakat to the official zakat management organization (opz). moreover, along with social distancing due to covid-19, the zakat potential that has not been collected can be optimized through zakat digitization. urbach & röglinger (2019) defines digitalization as a technical process of converting analog signals into digital forms. research related to the application of financial technology has been carried out in line with digital technology development in strengthening zakat management through financial technology systems. hudaefi et al. (2019) analyze how zakat institutions respond to financial technology. santoso (2019) examined the related strategy to optimize zakat’s digitalization in poverty alleviation in the industrial revolution 4.0 era. rachman & salam (2018) analyzes related to strengthening zakat management through the financial technology system. friantoro & zaki (2018) analyzed the strengths, weaknesses, opportunities, and threats of using financial technology to collect zakat in indonesia. then yahaya & ahmad (2019) analyzed the factors that could influence the level of asnaf acceptance in adopting mobile banking to distribute zakat using the utaut model. however, research related to zakat digitalization and swot analysis in the management of zakat during the covid 19 pandemic has not been conducted. therefore, this study aims to analyze the role of digitalization in zakat management during the covid-19 pandemic. furthermore, this study aims to analyze the strengths, weaknesses, opportunities, and threats of zakat digitalization. literature review zakat concept zakat is defined as taking certain assets that must be paid to those who are entitled to receive it with certain conditions (hafidhuddin, 2002). zakat is mandatory for muslims who sri yayu ninglasari, mumuh muhammad 29 have met specific requirements, so it is obligatory or mandatory (owoyemi, 2020). thus, people who give zakat are called muzaki, and people who receive zakat are called mustahik. based on the type, zakat is divided into two types, namely zakat nafs (soul) or zakat fitrah and zakat maal (property (andiani et al., 2018). according to kuran (2020), for around 1250 years, namely, from the end of the seventh century to the mid-twentieth century, zakat is only interpreted as a form of worship of muslims. until the mid-twentieth century, the importance of paying and managing zakat funds intensified again. compared to other social fund instruments, a zakat is a form of worship with two dimensions: social and economic (rohim, 2019). therefore, zakat is an essential component in islam because it can function as an equitable income distribution tool and an islamic fiscal tool to overcome social welfare problems (andiani et al., 2018; saad & farouk, 2019). various studies have been conducted to identify the role of zakat in the social and economic fields. if implemented effectively, it will encourage wealthy people to invest their wealth, which will then increase the effectiveness of zakat management, so that it will have an impact on increasing production and productivity of the community (saad & farouk, 2019). thus, zakat plays a role in alleviating poverty (abdullah et al., 2015; abdullahi, 2019; nazri et al., 2012). then, zakat also acts as social protection (bilo & machado, 2020) and a solution to the financial crisis (ascarya, 2013). zakat digitalization concept digital-based technology is overgrowing in society because it has benefits immediately felt by its users (rohim, 2019). this digital-based is one of the results of the industrial revolution 4.0, which has brought significant changes to human life until the emergence of a digital transformation strategy innovation, commonly known as digitalization (santoso, 2019). digitalization is a technical process of converting analog signals into digital form. besides, digitalization is also a socio-technical phenomenon and the process of adopting and using digital technology in individuals, journal of islamic economic laws-january, vol. 4, no. 1, 2021 30 organizations, and broader society (urbach & röglinger, 2019). one form of digitization in the economic and financial system is financial technology (fintech). the development of fintech in indonesia has been very rapid, and its growth has contributed to efficient and effective practices in the financial sector. besides, fintech has also benefited other industries’ management, including zakat management organizations (hudaefi, zaenal, et al., 2019). the world of zakat has developed quite significantly, along with technological advances. digital technology has been used in collecting and distributing, managing, and as a means of zakat education. in the compilation aspect, in general, there are three platforms used. first, the internal platform developed by the zakat institution itself, such as applications, websites, etc. second, the external platform, which is a platform provided by opz partners to raise zis funds. third, crowdfunding platforms such as kitabisa.com (center of strategic studies – the national board of zakat, 2019). in the management aspect, zakat institutions have also carried out digitization to improve the process of good governance, level of accountability, and efficiency using the latest technology. one of the concrete steps taken by the national zakat agency (baznas) as the zakat regulator in indonesia listed in the baznas chair’s decree no.33 of 2019 is to create a blockchain technology-based zakat application called i-zakat. as for the distribution of zakat funds, digitization is used to create a mustahik identification number (nim). nim is an effort to identify the identity of a mustahik accurately (puskas baznas, 2020). methods this study uses a qualitative method with a literature study approach. the data used are secondary data sourced from scientific journals, books, related articles published in online media, official websites of zakat institutions, and other relevant literature. this research also uses swot (strength, weakness, opportunity, threats) analysis techniques. thus, this research aims to analyze the role of digitalization in the management of sri yayu ninglasari, mumuh muhammad 31 zakat during the covid 19 pandemic and analyze the strengths, weaknesses, opportunities, and threats of zakat digitalization. results and discussion the role of zakat digitalization in management of zakat during covid-19 pandemic in addition to directly impacting health, the covid-19 pandemic also has a long-term economic and social impact (world bank, 2020). there is even a consensus that the world will experience an economic recession after the pandemic. indonesia also felts its impact on the economy. one of them can be seen from the increasing number of workers being laid off. based on data from the directorate general of industrial relations development and labor social security of the ministry of manpower, workers laid off as many as 1.94 million from 114,340 companies (jayani, 2020). another economic impact is the decline in community income (world bank, 2020). a survey conducted by saiful mujani research and consulting (smrc) of 1.2 thousand respondents spread across 34 provinces in indonesia on 9-12 april 2020 reported from databoks.katadata.co.id revealed that 70% of respondents said income gross household decline due to the covid-19 pandemic. this is felt by the middle to lower classes, especially those who work in the informal sector. there will be an increase in the number of poor people in large numbers (suryahadi et al., 2020). to overcome these various impacts, the government has made specific policies. the national zakat board (baznas) is no exception as a zakat regulator in indonesia, which issues policy briefs. this is because zakat funds can be a solution to the cost of handling the impact of covid-19 (kidwai, 2020). zakat institutions are required to collaborate with world zakat forum (wzf) to advocate the role of global zakat in facing the vulnerability of wzf member countries’ economic performance due to covid-19 (anshory et al., 2020). on the other hand, kidwai (2020) stated that zakat would not be affected by the crisis due to journal of islamic economic laws-january, vol. 4, no. 1, 2021 32 covid-19 because zakat is calculated as a percentage of net worth for one year. likewise, the results of studies that reveal that the combination of zakat and qardul hasan can be an extraordinary combination to counteract the adverse effects of covid-19 (haider et al., 2020). zakat is an important instrument that can reduce the gap between rich and poor, alleviate poverty, and contribute to the national economy. even in its history, zakat has become a handy tool to reduce poverty, as was the case during the caliphs’ reign, especially umar bin khattab and umar bin abdul aziz (al haq & abd. wahab, 2017). therefore, zakat is categorized as one of the most vital redistributive instruments (abdullahi, 2019; andiani et al., 2018; saad & farouk, 2019). zakat funds are also part of many countries’ social protection systems (bilo & machado, 2020). especially during covid-19 pandemic, it can be used as a momentum to optimize zakat’s role, especially digital zakat. santoso (2019) stated that information management technology based on digitization technology could help the process of zakat management and support modernization and innovation. the digitalization of zakat can be optimized in the collection, management, and distribution of zakat funds during the covid-19 pandemic where it is possible to provide services to muzaki and mustahik without direct face to face interaction, moreover, because of social distancing policies that limit the space for people. the practice of zakat management, especially the collection of zakat, infaq, and alms (zis) funds, has involved financial technology (fintech) companies that are increasingly mushrooming (hudaefi, 2020). for example, currently, baznas and other zakat institutions collaborate with fintech companies to collect zis funds (puskas baznas, 2020). the collaborative partners of baznas in collecting zis online can be seen in table 1 (hudaefi, zaenal, et al., 2019). the zakat collection digitally is considered very useful, especially in the current pandemic conditions. reporting from republika.co.id, digital zakat experienced significant growth, as did the receipt of digital zakat at baznas increased 35 percent. also, the collection of zakat on sri yayu ninglasari, mumuh muhammad 33 the gopay platform has increased, and on the linkaja platform has doubled. table 1. fintech company and allied collaborating with zakat management organization (opz) for ziswaf collection no digital media types fintech name 1 application kitabisa.com, gopay, ovo, linkaja, tcash, kaskus, invisee, lenna, mcash, wisata muslim, asuransi jasindo syariah, muzaki corner, jenius, zakat app. 2 electronic commerce (e-commerce) elevenia.co.id, blibli.com, shopee.co.id, tokopedia.com, lazada.com, mataharimall. com, jd.id, bukalapak.com 3 social media oy indonesia, line (zaki). 4 online payment channel internet banking, sms banking, mobile banking, edc, e-cash mandiri, doku wallet, e-pay bri, virtual account, t-cash, paypal. source: (hudaefi, zaenal, et al., 2019; puskas baznas, 2020) processed there have been many studies related to technology acceptance by users on the zakat payment platform. this study indicates that people have started to receive zakat payments based on digital (farabi, 2016; yahaya & ahmad, 2019). this is because these platforms can be easily accessed by muzaki via laptops and smartphones whenever and wherever. indirectly, the digitization of zakat can increase public confidence in zakat institutions. muzaki can easily find out where his zakat is distributed. this is important because one of the causes of the low collection of zakat in indonesia and other countries is the lack of public trust in zakat managers (m. ahmad, 2019; kashif et al., 2018). with the various facilities offered by digital zakat, it is hoped that the public will be increasingly moved to pay their zakat to zakat institutions, especially during this pandemic, where people must work together and take part in efforts to reduce the impact of covid-19. as for the management and distribution, zakat institutions can utilize the idea of the blockchain. thus, zakat institutions can have complete muzaki and mustahik data to compile their distribution program. every incoming and outgoing journal of islamic economic laws-january, vol. 4, no. 1, 2021 34 transaction will be recorded and stored in digital storage so that transparent zakat management and distribution can be formed. then, the zakat funds will be appropriately monitored, and can be known whether the distribution of zakat is right on target or not (farooq et al., 2020; puskas baznas, 2020). optimization of zakat through the collection and distribution of zakat through digitization can increase its management’s effectiveness and efficiency, especially during the covid-19 pandemic. however, zakat institutions must face challenges that must be faced, especially zakat regulators, namely baznas, in creating a digital national zakat ecosystem. the trick is to form a digital platform that can be a media liaison between muzaki, amil, mustahik, and all zakat services in one national-scale application. from an institutional standpoint, opz can include its program to attract muzaki to tithe through its institutions. furthermore, muzaki can distribute his zakat to an institution that suits his preference. besides that, those who fulfill the requirements can register themselves and state their needs. thus all reports on the collection and distribution of zakat can be presented in real-time on one such platform (juwaini & amiral, 2020). swot analysis of zakat digitalization during covid-19 pandemic swot analysis is used to measure the strategy of zakat institutions in managing zakat funds through digitalization during the covid-19 pandemic based on strengths, weaknesses, opportunities, and threats that exist (friantoro & zaki, 2018; santoso, 2019)weaknesses, opportunities and threats. strengths the development of zakat digitization has excellent potential to facilitate zakat payment services at zakat institutions. this is the advantage of digitizing zakat, mostly because of the largescale social restriction policy. thus, muzaki does not have to pay zakat by coming to the zakat institution’s office but can pay zakat online directly. ma’fiyah et al. (2018) stated that the presence of websites and applications that are easily accessed is one reason sri yayu ninglasari, mumuh muhammad 35 why muzaki is interested in paying zakat. besides, information related to the program and distribution of zakat funds can also be done digitally through social media or other platforms (lubis & latifah, 2019). in general, zakat digitalization has the following strengths. first, it makes it easy for muzaki to pay zakat anytime and anywhere (citta et al., 2019). muzaki can easily access digital platforms via smartphones and personal computers. so, it can increase people’s interest to pay zakat (utami, 2019). second, transaction costs are cheaper than paying direct zakat, which requires transportation costs (zaimah, 2017). third, reach people in remote areas with the data blockchain and increase zakat literacy for the community (citta et al., 2019; rachman & salam, 2018). fourth, maximize the zakat institution’s transparency and accountability through technology media to achieve good corporate governance. fifth, the real-time system of zakat payment and the accuracy of zakat calculation must be paid (friantoro & zaki, 2018). weaknessess the digitalization of zakat does not only have strengths but also weaknesses. r. a. r. ahmad et al. (2015) revealed that even though there was digitalization, there were still many people who directly paid their zakat to the institution. some disadvantages of zakat digitalization are as follows. first, it requires an internet connection supporting both the speed of access and a stable server (citta et al., 2019). second, public knowledge related to fintech and mastery in technology and information is relatively low, especially in remote areas (santoso, 2019). third, human resources (amil) are less competent in using the latest technology (susilowati & setyorini, 2018). fourth, there is an imbalance in accessing financial technology services because information technology infrastructure has not been distributed evenly throughout indonesia (friantoro & zaki, 2018). fifth, the lack of public confidence in the use of financial technology in collecting zakat. this is due to the rise of cybercrimes such as hacking of social media accounts connected to mobile banking journal of islamic economic laws-january, vol. 4, no. 1, 2021 36 applications, which are increasingly common during the covid-19 pandemic. opportunities covid-19 pandemic is the right moment to optimize digital channels’ use to raise zakat funds, mostly because the use of digital services increased quite significantly during this pandemic, especially in millennials. the millennial generation of indonesia has its opportunity for opz to realize the potential of zis from their circles (puskas baznas, 2020). the digitalization of zakat has the following opportunities. first, the high use of the internet and digital financial services and the rapid development of information technology (friantoro & zaki, 2018). along with the development of technology, paying zakat digitally will become a trend in the future because it is felt to be effective and efficient, not just during a pandemic like today. second, the appeal of the ministry of religious affairs and mui to pay zakat digitally or online to reduce the crowd. in addition to helping to reduce the potential for lower distribution, it also opens up great opportunities to explore more potential zakat from the wider community (rachman & salam, 2018). threats the use of technology and information makes the management of zakat more effective, but on the other hand, it contains various threats. hudaefi, saoqi, et al. (2019) stated that digital channels in managing zakat have several risks, such as the risk of failure of zakat fund transfer, failure of sharia compliance, and technology and information risk. furthermore, the ease of accessing information and paying zakat online can be misused by irresponsible people by committing cyber crimes (friantoro & zaki, 2018; santoso, 2019)weaknesses, opportunities and threats. cybercrimes such as hacking through viruses (malware) are a significant threat in digital technology use. even according citta et al. (2019), the closer the relationship of technology with financial services, the greater the threat. moreover, the zakat institution is an institution that manages the funds of the people sri yayu ninglasari, mumuh muhammad 37 who must always maintain public trust. another threat is that it can shift the human resources’ role in the management of zakat (utami, 2019). for this reason, these threats must be anticipated in advance by the zakat institution. based on the explanation above, it can be seen that digital platforms and fintech are needed to manage zakat, especially during the covid-19 pandemic. the power and opportunities of zakat digitalization can be used by zakat institutions to collect zakat funds. then weaknesses and threats can be minimized by making specific strategies. the strategies that can be carried out by opz in managing zakat funds through digitalization based on swot analysis can be seen in table 2. table 2. zakat institutions strategies in managing zakat digitally internal external strengths easy access to the digital platform, can reach muzaki far from zakat institutions, lower transaction costs, transparency and accountability of the opz, and real-time transaction systems as well as the accuracy of zakat calculations. weaknesses internet connection problems, low knowledge and skills of the community in the field of information technology, amil (hr) are less competent, inequality of information technology infrastructure, and lack of public trust. opportunities the high use of the internet, rapidly developing financial technology, appeals to pay zakat online. so strategy optimize promotion through online media, strengthen and collaborate with more fintech companies, develop national scale digital zakat platforms, make short, medium, and long term planning, and update zakat applications by adding various attractive features. wo strategy socializing the digital zakat movement and educating the public on using financial technology, promoting fintech as a safe facility for collecting zakat funds, developing a national scale digital zakat ecosystem, and holding regular training for amil so that they are proficient in mastering information technology. journal of islamic economic laws-january, vol. 4, no. 1, 2021 38 threats cybercrime through hacking, viruses (malware) and others, and can shift the role of hr in managing zakat. st strategy it is encouraging innovation in zakat management based on digital technology by providing easy access, developing a secure zakat payment system, promoting safe digital zakat payment procedures to the broader community, and improving the quality of products and services optimal. wt strategy propose to the government to improve and build adequate internet network infrastructure in all indonesia regions and develop strict policies and regulations to support transparency, credibility, and accountability to increase public trust in zakat institutions. conclusion zakat management is beneficial through digital platforms during the covid-19 pandemic, where there are suggestions for social distancing. the potential of zakat that has not been collected can be optimized through the digitization of zakat. zakat institutions can collaborate with more financial technology (fintech) companies to raise zakat funds. the convenience offered in paying zakat digitally and the rapid development of financial technology becomes a great strength and opportunity. on the other hand, the community’s insufficient knowledge and skills in information technology and the rise of cybercrime are both weaknesses and threats from zakat digitalization. the swot analysis used in this study is expected to be beneficial for zakat institutions to develop zakat management plans and strategies during the covid-19 pandemic by improving the management of zakat digitization systems. so that the affected communities, especially the poor, can be helped. this research has limited methods and approaches. therefore, further research can develop questionnaire methods, interviews, and analysis tools used, such as anp, ahp, and others. references abdullah, n., derus, a. m., & al-malkawi, h. a. n. 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(2017). wakaf dengan pemanfaatan e-commerce di indonesia the progressive analysis of e-commerce utilization based of waqf fundraising scheme in indonesia. anil islam, 10(2), 285–316. _goback _goback _hlk55084518 _hlk55084698 _hlk55085026 _goback _goback _hlk59008645 journal of islamic economic laws vol. 5, no. 1 january 2022: 159-176 159 the impact of halal label in halal food buying decisions afifah nur millatina1, fifi hakimi2, risanda alirastra budiantoro3, muhammad rizky arifandi4 1universitas muhammadiyah malang 2universitas muhammadiyah lamongan 3universitas dian nuswantoro 4durham university email: afifahmillatina@umm.ac.id, fifihakimi94@gmail.com, risanda.abe@gmail.com, rizkyarifandi16@gmail.com abstract the current development of the halal industry has experienced a very significant increase to attract the attention of various groups. trend indicators from the halal business can be seen in seven industrial sectors that continue to show an increase, including islamic financial services, halal food and beverages, halal tourism, fashion, halal media and recreation, and halal pharmaceuticals and cosmetics. this study aims to raise the importance of awareness of halal label on halal food and beverages in indonesia. the quantitative research method used in this research is to apply partial least square-structural equation modeling (pls-sem) through smart-pls software. the sample of this research is 100, with the sampling technique used being non-probability sampling with the purposive sampling method. the results of this study are the significant influence of the halal label variable on purchase intention, purchase intention on buying decision, and the halal label variable on buying decision on halal food products in indonesia. alternatively, on product packaging, awareness of halal indonesian society has begun to increase and make halal a lifestyle. keywords: halal label; purchase intention; buying decision; halal food; sem. mailto:afifahmillatina@umm.ac.id mailto:fifihakimi94@gmail.com mailto:risanda.abe@gmail.com mailto:rizkyarifandi16@gmail.com 160 millatina et al. introduction the current development of the halal industry has experienced a very significant increase to attract the attention of various groups. according to data from the global islamic economic report 2017/2018 (reuters, 2018), trend indicators from the halal business can be seen in seven industrial sectors, that continues to increase, including islamic financial services, halal food and beverages, halal tourism, fashion, media, halal pharmacy and cosmetics and recreation. in each of its products, the entire sector carries the concept of halal. it will be to optimise the development of the islamic economy. the islamic financial services sector and halal food and beverage are the highest sectors compared to other sectors. the value of muslim food and beverage spending in the world’s halal sector reached $1.24 trillion in 2016 and is predicted to rise to $1.93 trillion by 2022. several factors are factors in the growth of the global muslim market, namely the demographics of the muslim market, which is young and large in number. the rapid economic growth of muslim-majority countries that uphold islamic values can encourage the growth of islamic businesses and lifestyles. in addition to the increasing growth of the islamic market, there is a growth in trade transactions between oic (organization of islamic cooperation) countries, the participation of multinational companies, technology, and connectivity/connectivity between countries (andriani, 2015). it is proven in the volume of data on millennial generation interactions in several countries and several sectors in table 1 below: table 1. millennial generation interaction volume by country and sector top 15 countries gie indicator score halal food islamic finance halal travel modest fashion halal media and recreation halal pharmaceuticals and cosmetics malaysia 127 81 173 92 33 51 96 uae 89 91 83 97 106 109 104 bahrain 65 45 86 20 19 44 45 saudi arabia 54 48 64 34 16 33 47 161 journal of islamic economic laws-january, vol. 5, no. 1, 2022 top 15 countries gie indicator score halal food islamic finance halal travel modest fashion halal media and recreation halal pharmaceuticals and cosmetics oman 51 62 52 28 25 28 43 jordan 49 60 49 35 23 25 58 qatar 49 49 55 27 12 63 35 pakistan 49 58 53 15 22 9 58 kuwait 46 42 57 12 12 30 34 indonesia 45 48 46 65 34 16 44 brunei 45 58 43 26 12 37 57 sudan 37 55 34 29 8 11 21 iran 34 36 37 19 11 22 37 bangladesh 32 35 33 19 28 7 34 turkey 31 44 21 71 32 25 41 source: (reuters, 2018) according to thomson reuters 2018 data, it shows that indonesia is included in the top 15 countries as a destination and interaction for millennials from several countries in the world and several islamic economic sectors. table 1 shows that the indonesian state’s halal food occupies the tenth position, so this is a potential for indonesia to improve and provide services and products needed for the community, especially muslims who want to consume halal food. the halal food and beverage products market grows and develops rapidly in a rapidly changing environment. as one of the countries included in the interaction volume of the millennial generation, the halal industry, especially halal food and beverages, needs to proactively develop strategies to engage and attract this segment to achieve what the community wants, especially for muslims. food and drink are a primary need for society for its survival. consuming halal food is an obligation for muslims to maintain the food standards offered by food providers (khalek, 2014). in islamic teachings, something consumed from halal food or drink is recommended to be consumed. in arabic, halal means allowed or permitted (mohd ismail, 2015). (ambali & bakar, 2014) explain that islamic law places restrictions on non-halal foods, including pork, blood, animals that die from being beaten, and animals that live in two realms fanged disgusting animals, hoofed 162 millatina et al. animals. according to the mui fatwa, sharp, intoxicating drinks and food mixed with unclean (2009). halal industrial products, whether food, beverages, medicines, cosmetics, even muslim-friendly tourism or halal tourism, are currently a hot topic globally. the indonesian state achieved the popular term halal food industry as the largest halal food producer globally (karim, 2015). halal products will refer to products that meet islamic law. meanwhile, the label is a significant factor in marketing a product. the labels include brands, iso logos, information about the goodness of a product, composition, and halal labels. the halal logo represents measuring quality and fulfilling religiosity (aziz & chok, 2013). for muslims, the rules of halal and haram are essential things. halal means anything allowed to be used, and haram is not allowed to be used. considering the number of this islamic market segment, it is one of the largest markets in the world, as reported by the print and online media republika, which amounts to around 1.8 billion, making this market an attractive market for local marketers international. halal industrial products, whether food, beverages, medicines, cosmetics, even muslim-friendly tourism or halal tourism, are currently a hot topic in the world. this halal regulation can be an effective marketing campaign for business people targeting this segment. so, halal labelling on every product in circulation has become a must. not only is halal labelling a must in products, but halal certificates are also an essential factor in every halal product. halal certification guarantees safety for the muslim community to consume a product. this halal certification can be proven by including the halal logo on the product packaging (aziz & chok, 2013). (kotler & armstrong, 2016) define purchasing decisions as part of consumer behavior, which is the study of how individuals, groups, and organisations choose, buy, use, and how goods, services, ideas, or experiences satisfy consumer needs and wants. (sumarwan, 2011) states that purchasing decisions are how consumers decide. which choices to choose, what to buy, when to buy, where to buy, and how to pay for it. one of the steps taken to determine consumer wants and 163 journal of islamic economic laws-january, vol. 5, no. 1, 2022 needs is to examine consumer behavior. furthermore, according to (schiffman & kanuk, 2015:228), the notion of buying interest is: “a model of a person’s attitude towards objects of goods that is very suitable in measuring attitudes towards certain groups of products, services or brands”. academics have widely carried out research related to purchasing decisions for halal food products in the field of online marketing (bellini, cardinali, & grandi, 2017); (chan, cheung, & lee, 2017); (liao, to, wong, palvia, & kakhki, 2016); (pappas, 2016); (qalati et al., 2019); (simarmata, rs, keke, & panjaitan, 2019) and offline marketing (kumar & ghodeswar, 2015); (zhou & gu, 2015). based on the phenomenon of the increasing halal lifestyle and the increasing potential of the halal industry. therefore, it is time for researchers to examine the factors and efforts that must influence muslim consumers’ purchase intention and purchasing decisions for halal products. in more detail and depth, the results can strengthen indonesia’s position in the halal product market. this study was conducted to know the effect of halal labels on purchase intentions, purchase intentions on buying decisions, and the effect of halal labels on purchasing decisions of halal food products in indonesia. literature review label the problem of labels is included in the scope of marketing science. because the label plays a vital role in the marketing strategy. the labels can carry only the brand name or a large amount of information related to the product (kotler, keller, & amstrong, 2009). labels are usually made of paper, laminated paper, or plastic film with or without additional adhesive. labels can cover the entire package or only locally, can be cut in various shapes to suit the shape of the packaging (klimchuk and krasovec, 2007). according to (kotler, keller, & amstrong, 2009), labels have the following functions: 1. identifier, as the identity of the product identifier. 2. rating, can indicate the product class in peach products labelled a, b, or c. 164 millatina et al. 3. explanation, to explain the manufacturer, production location, production time, product composition, and how to use the product. 4. promotion, through attractive graphics. (boone and kurtz, 2010) state that a label can carry a brand name or symbol, the name and address of the manufacturer that produces it, information about the composition and size of the product, and the recommended way of use. correct labeling can play a vital role in attracting consumers’ attention and encouraging them to buy. halal label qardhawi (ath-thawil, 2016) defines halal as all permitted things that do not contain transactions prohibited by sharia and have been legitimised by sharia to carry out the case. in-law number 33 of 2014 concerning halal product guarantees, it is explained that halal products have been declared halal by islamic law. government regulation number 69 of 1999 show that food labels are any information regarding food in the form of pictures, writings, a combination of both. alternatively, other forms that are attached to food, inserted into, affixed to, or are part of food packaging, which from now on referred to in government regulations as labels. meanwhile, law number 33 of 2014 concerning halal product guarantee states that what is meant by a halal label is a sign of the halal of a product. according to government regulation number 69 of 1999, the indicators of halal labelling are (klimchuk, and krasovec, 2007): 1. image: is the result of imitation in shapes or patterns (animals, people, plants) made with writing utensils. 2. writing: is the result of writing which is expected to be read. 3. combination of images and writings: a combination of the results of images and writings made into one part. 4. sticking to the packaging can be interpreted as something attached (intentionally or unintentionally) to the packaging (protecting a product). 165 journal of islamic economic laws-january, vol. 5, no. 1, 2022 purchase intention ajzen’s theory of planned behavior (tpb) is used to measure purchase intention (ajzen, 1991). purchase intention is something related to consumer’s plan to buy certain products and how many product units are needed in a certain period, so it can also be said that purchase intention is a consumer mental statement that reflects the plan to purchase several products (barata, 2007). in addition, according to (assael, 2001), purchase intention is the tendency of consumers to buy something or take action related to buying and is measured by the level of possibility of consumers to buy. measured by statements of wanting to buy or not buy, will buy-not going to buy, will buy again-will not buy again. attitude is a relatively consistent evaluation and the tendency of a person to react to an attitude object. two things can affect the formation of attitudes: behavior beliefs or positive or negative assessments that a person has of behavior and evaluation of behavioral beliefs, which are positive or negative evaluations of the consequences of behavior that will be accepted. research by (bashir, et al., 2019) shows a significant positive relationship between attitudes and intentions to buy halal products. furthermore, (bashir et al., 2019) state that consumers with a high positive attitude will have a higher intention of buying halal products. buying decision according to (kotler & keller 2007), in the evaluation stage, consumers form preferences for brands in the choice set. consumers can also form an intention to buy the most preferred brand. according to (suryani, 2008), the decision to purchase goods or services often involves two or more parties. generally, there are five roles involved. the five roles include: 1. the initiator, is the person who first suggested buying an item/service. 2. influencers, are the person who has views or advice that influence purchasing decisions. 3. the decision-maker (decider), is the person who determines the purchase decision. 166 millatina et al. 4. buyers, are the person people who make actual purchases. 5. users, are the person who consume and use the goods/ services purchased. (thamrin & tantri, 2013) state that there are roles in purchasing decisions, namely: the originator of the idea, namely the person who first proposes to buy other products or services, the influencer, namely the person who views or has his opinion. the decision-maker, namely the person who decides on each component in the purchase decision, the buyer, namely the person who makes the actual purchase, and the user, namely the person who consumes the product. purchase decisions are not only made by researchers in marketing, and it turns out that there has been research in psychology, especially emotional buying (homburg, klarmann, & schmitt, 2010). psychological research has shown that creating emotional bonds with buyers can increase the value of a company’s products. five dimensions of the buying process (information, utilisation, influence, purchase, and intention to share) to address some relevant issues regarding the decision-making process (icoz, kutuk, & icoz, 2018). figure 1. thinking framework h1: halal label affects purchase intention h2: purchase intention affects buying decision h3: halal label affects the buying decision 167 journal of islamic economic laws-january, vol. 5, no. 1, 2022 methods this study uses primary data and secondary data collected to support this research. primary data was obtained by sharing google form links to social media and chat applications. secondary data was obtained from books, journals, and the internet. sample selection was made by the purposive sampling technique, where the researcher gave specific criteria in sampling. the characteristics used in this study: 1) the respondents are muslim. 2) respondents are consumers who have bought or consumed halal products at least once. the total number of research samples was set at 100 respondents. this study measures the effect of the variable halal label and purchase intention on buying decisions. this study uses quantitative research to apply variant-based sem, namely partial least square-structural equation modeling (pls-sem) using smart-pls software (ghozali, 2008). previous studies have used the pls-sem analysis method as a statistical tool as a relatively complex multivariate model (hair et al., 2017). previous researchers confirmed that a pls-sem analysis method is an analytical tool that is flexible, credible, and has advantages in testing theory (henseler, ringle, & sarstedt, 2015). the operational variables in this study are: (1) exogenous variable or independent variable halal label as an exogenous variable (x1); (2) second exogenous variable is purchase intention (x2); (3) the endogenous variable or dependent variable is buying decision. results and discussion according to the number of respondents collected, there are 100 (one hundred) respondents who meet the criteria previously determined and are eligible for analysis. the descriptive analysis is divided by gender, age, domicile, and occupation. the majority of respondents according to gender are more female than male. if according to age the majority of respondents are from 15-35 years old. most respondents according to domicile are from east java, besides that, most respondents by occupation are student (table 2). 168 millatina et al. table 2. demographics of respondents description percentage gender male 39 female 61 age 15-20 49 26-35 41 36-45 4 46-55 2 >55 4 domicile jawa barat 16 dki jakarta 4 jawa tengah 6 diy 2 jawa timur 47 sumatera 5 kalimantan 13 sulawesi 3 ntb 2 ntt 1 bali 1 work student 46 private employees 21 government employees 6 bumn employee 1 entrepreneur 6 housewife 10 teacher 3 lecturer 3 etc. 4 source: data processed 2021 the results in figure 2 show the outer model in this study. each variable has average variance extracted (ave), composite 169 journal of islamic economic laws-january, vol. 5, no. 1, 2022 reliability, and cronbach reliability, each above 0.5; 0.7; and 0.6 (abdillah & jogiyanto, 2016). figure 3 also shows some indicators of each latent variable. halal label has five indicators, then purchase intention has six indicators, and buying decision has four indicators because one indicator is unreliable. figure 2. outer model source: data processed 2021 *information: lh: halal label ph: purchase intention kb: buying decision figure 3. inner model source: data processed 2021 the results of data processing are shown in figure 3. the inner model predicts causal relationships between variables or hypothesis testing. the next test is hypothesis testing with an estimated path coefficient which can be evaluated by comparing the t-statistics value. the measurement indicator used is significant if the t-statistic value is greater than 1.96. then the 170 millatina et al. p-value is smaller than the value of 0.05 at a significant level of 5%. the parameter coefficient explains the direction of influence by looking at the positive or negative effect of the original sample and the magnitude of the influence of the independent variable on the dependent variable (ghozali, 2008). the following is a path coefficient table showing the t-statistic values: tabel 3. path coefficient source: data processed 2021 table 3: path coefficient explains that h1: halal label significantly affects purchase intention. the t-statistic value is 5.247 > 1.96, the p-value is 0.000, the original sample value is 0.501. these results indicate that the halal label significantly affects purchase intention. so, this hypothesis is accepted. the results of this study have a significant effect on halal labels to purchase intention for halal food products. previous research (fadlullah, soetjipto, & rahayu, 2021) stated halal labels’ positive and significant effect on the interest buying variable. it is also by (ajzen, 1991) statement that someone who has a positive attitude will perform positive behavior. elseidi’s research (2018) also shows that muslim consumers who have a more positive attitude have a greater intention to buy halal food products. it can be seen from arab muslim consumers in the uk who are aware of and have a strong and positive attitude towards halal-labeled products in british supermarkets. it has a positive effect on their intention to buy these halal products. this attitude is also influenced by their perception of product safety and health (elseidi, 2018). most people believe in halal products from the seller’s words or halal labels made by food product companies. consumer 171 journal of islamic economic laws-january, vol. 5, no. 1, 2022 behavior is currently very aware of halal, one of which is when choosing the product want to buy, by paying attention to the label on the packaged product. consumers can pay attention to product labels from the side of the halal label but also look at the time limit for eating and its composition. in addition to being halal, there is one side that they are looking for, namely toyyib (good for consumption). the general halal approach in the marketing process can also neutralise the negative image of muslim consumers towards a product (salehudin, 2013). thus, the resulting halal food products must have a halal label to ensure halal. in addition, food safety and health reasons are also a reason for choosing halal food. h2: purchase intention has a significant effect on buying decisions. the t-statistic value is 10.070 > 1.96, the p-value is 0.000, the original sample value is 0.697. these results indicate that purchase intention has a significant effect on buying decisions. so, this hypothesis is accepted. the analysis results of purchase intentions on buying decisions have a positive and significant relationship with halal food products. it is supported by research conducted by (rahmaningtyas, hartono, & suryantini, 2017) that purchase intention has a major influence on purchasing decisions. intention to buy is the possibility that consumers will make purchases in the future. consumers do not decide to buy, but sometimes they have the intention to make a transaction. purchase intention has a big influence on buying decisions. it means that someone who has the intention to buy local food products will consider all factors when they want to buy products. it will help the company make a good product sales strategy, especially in the halal industry. h3: halal label has a significant effect on buying decisions. the t-statistic value is 3.320 > 1.96, the p-value is 0.000, the original sample value is 0.266. these results indicate that the halal label significantly affects buying decisions. so, this hypothesis is accepted. the analysis results show a significant influence of the halal label variable on the buying decision. halal labeling influences purchasing decisions. 172 millatina et al. according to (hawa, 2007), the halal label on product packaging circulating in indonesia is a logo composed of arabic letters that form the word halal, which relates to purchasing decisions. pepper et al. (2009) stated that consumers are more likely to buy food labeled halal because of the positive attitude that muslim consumers have based on their positive and strong beliefs. so, it can be concluded that a product is essential with a halal label. a halal label will increase consumer purchasing decisions to buy a product, especially with halal products. conclusion this study aims to raise the importance of awareness of halal label on halal food and baverages in indonesia. the results of this study can be concluded that there is an influence of the halal label variable on purchase intention. there is a significant influence on the buying decision variable in the purchase intention variable. the last one states the influence of the halal label variable on the buying decision variable in halal food products. an opportunity for entrepreneurs and business people to provide more halal labels in products or product packaging. awareness of halal indonesian people has increased and made halal a lifestyle. references a. thamrin, & f. t. 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(2015). the effect of different price presentations on consumer impulse buying behavior: the role of anticipated regret. american journal of industrial and business management, 05(01), 27–36. https://doi. org/10.4236/ajibm.2015.51004 journal of islamic economic laws vol. 4, no. 2, july 2021: 42-66 42 reputation, transparency, trust and waqif’s perception on nadzir’s professional towards intention to act waqf: empirical study in pondok modern darussalam gontor (pmdg) azidni rofiqo1, mohammad muslih1, diyan novita sari2 1university of darussalam gontor 2universitas negeri yogyakarta email: rofiqozidni@gmail.com, muhd.muslih@gmail.com, diyanns4@gmail.com abstract this study aims to explore the reputation, transparency, trust, waqif perception of nadzir’s professionalism, and the intention to pay waqf in gontor institution. this study based on the theory of planned behavior (tpb) which examines the effect of reputation, transparency, trust toward waqif perception of nadzir’s professionalism and intention to pay waqf. the approach this study is a quantitative approach with structural equation modeling-partial least square (sem-pls) measurements. the number of respondents 200 alumni of the pondok modern darussalam gontor. the findings in this study indicate that reputation, transparency, trust have a significant positive effect on the intention to pay waqf at pondok modern darussalam gontor with the waqif’s perception of nadzir’s professionalism as mediating effect. other findings indicate that trust as moderating effect between reputation and waqif perception of nadzir’s professional. keywords: gontor, waqf, nadzir professional, trust, tpb. introduction waqf has developed into a thriving socio-economic institution in the middle east, north africa and asia for nearly half a millennium (abdullah, 2019). the study of waqf is currently developing rapidly from various aspects such as the mailto:rofiqozidni@gmail.com journal of islamic economic laws-july, vol. 4, no. 2, 2021 43 management of waqf, the economy of waqf, etc. (sukmana, 2020) stated that the keywords awaqaf, waqf and islamic endowment fund that appeared on international indexed article search engines for the 2010-2019 period were 10,515 articles. in addition, the waqf movement is also growing rapidly in various parts of the world, for example in indonesia, the cash waqf linked sukuk was initiated by the indonesian waqf board (bwi, 2021). waqf is an islamic treasure that can be used as an instrument of poverty alleviation and wealth distribution and can be used as a source of wealth for muslims (razak, 2020). the potential for waqf in indonesia is very large, the president of the republic of indonesia stated that the potential for waqf in indonesia reaches 2,000 trillion rupiah, and the potential for cash waqf is up to 188 trillion rupiah, which means that the waqf assets are beneficial for the social welfare of the community (laucereno, 2021). however, in the management of waqf assets in indonesia there are still obstacles, the biggest obstacle is that the majority of waqf assets are passive, meaning that these waqf assets have not been managed productively. according (muntaqo, 2015), the majority of muslims in indonesia view waqf only for passive religious interests and not for the social welfare of society. in addition, the problem of waqf practice is often carried out in a conventional manner which in practice is prone to conflicts of interest, sometimes even ending up in court due to a dispute over waqf assets. this condition is exacerbated by rampant indications that point to irregular practices in the management of waqf assets, and not a few waqf assets are lost and become the property of nadzir (riyanto, 2018). to secure waqf assets from interference by irresponsible parties, professional waqf nadzir is needed (rosadi, effendi, & busro, 2018). thus, if it is carried out with good and correct management, it will produce great benefits for the interests of the ummah. waqf management which is currently carried out by some parties seems closed and unprofessional must be abandoned, open management must be carried out with the principles of transparency and accountability and professionalism (baharuddin & iman, 2018). because the implementation of waqf contains the value of worship to allah 44 rofiqo et al. swt, its implementation cannot be separated from the demands outlined by the prophet muhammad saw, namely creating good management so that it can bring the greatest benefit for the benefit of the wider community (manan et al., 2013: 376). according to (çizakça, 1995) historical evidence shows that a very attractive potential lies in cash waqf. the waqf system has become empirical evidence of the economic success of the ummah in the heyday of islam. the modernization of the waqf system has succeeded in significantly reducing government spending, including streamlining the state sector and eliminating usury. furthermore (shukor et al., 2019) explained that cash waqf has played an important role in increasing government cash and improving the socio-economic conditions of muslims. in addition, cash waqf funds have a very large potential and role in helping universities to help finance their students and the institution itself (osman, mohammed, & amin, 2013). (shukor et al., 2019) explored the participation of muslims in cash waqf, finding that muslims view waqf as part of shodaqoh in which they believe that they will be rewarded in the afterlife. although the research respondents revealed that they were satisfied with the waqf and intend to give the waqf at a later date, they felt insecure about the distribution of waqf funds, due to the lack of transparency in the management of waqf by their nadzir. in addition, the reputation of the waqf institution is also very important to be considered by prospective waqf. waqf candidates will look at the track record of the waqf management institution before committing to waqf, so transparency and reputation are important things for nadzir professionals to pay attention. pondok modern darussalam gontor is one of the waqf institutions that has been endowed by its founder in 1951 to coincide with the quarter century anniversary of the age of pondok modern darussalam gontor. to provide legal provisions, the founder pledged waqf in 1958 by signing the waqf charter (fasa, rofiqo, & oktarina, 2016). according the center for study of riligion and culture (csrc) uin syarif hidayatullah jakarta stated that the pondok modern darussalam gontor (pmdg) was successful in developing its productive waqf. thus pmdg can journal of islamic economic laws-july, vol. 4, no. 2, 2021 45 be a role model for waqf-based educational institutions (huda, 2014). pondok modern darussalam gontor manages waqf with trustworthy, transparent and professional principles so that the name pmdg is known at home and abroad. with the problems in the introduction, this study aims to statistically examine the role of reputation, transparency to professionalism of nadzir and trust as moderating variables in the study of waqif’s intentions. literature review waqf waqf is lafadz waqf (prevention), tahbiz (addition), tasbil (donation of fi sabilillah), have the same meaning. etymologically, waqf means holding something to do, spending “(waqoftu kadza) i hold it” (sabiq, 1988). meanwhile, in terminology, abu hanifah in fathul qodir’s book, “is holding back property from the ownership authority of the person who donates and donates the benefits of the waqf assets for maslahah (wahid, 2009:37-40). jumhurul ulama’ argues that waqf is holding assets that can be used while the goods are still intact, by completely stopping the control of these items from the person who donates them and others, for the management of these items for the purpose of mashlahah in order to get closer to allah swt (zuhaili, 2006:271). the maliki school of thought says that waqf is the owner of the property making the result of the property he owns even though the ownership is by renting or making income from the property (zuhaili, 2006: 272). jumhur ulama’ argues that the pillars of waqf are sighat, waqif, mauquf alaih and nadzir. as for qobul from the hanafiyah circle, it is not part of the pillar of waqf. meanwhile, among malikiyah and syafiiyah circles, and some hanabilah qobul are harmonious, if the waqf is for a certain person and he has the right. if not, then a guardian is required to accept it (zuhaili, 2006: 273). theory of planned behaviour this study investigates the role of reputation and transparency of nadzir in determining people’s intention to do waqf in the 46 rofiqo et al. gontor institution. in islam, intention is an important element in determining one’s actions. a sincere intention makes converting acts into acts of worship. thus, good intentions will have an impact on efforts for waqf and will create sustainable wealth for future generations. from umar bin al-khattab, muhammad, pubh said: “this study investigates the role of reputation and transparency of waqf nadzir in determining people’s intention to do waqf in the gontor institution. in islam, intention is an important element in determining one’s actions. a sincere intention makes converting acts into acts of worship. thus, good intentions will have an impact on efforts for waqf and will create sustainable wealth for future generations. umar bin al-khattab, who said: “actions are dependent upon their intentions and every person will get the reward according to what he intended for” (hr bukhari, no.1). the theory of planned behavior is a theory which states that the intention as factors that affect a person’s behavior (ajzen, 1991)1985, 1987. ajzen defines intention as the main actor to actualize behavior. meanwhile, intention is influenced by three factors, namely attitudes towards behavior, subjective norms and behavior control. (shukor et al., 2019: niswah et al., 2019) using tpb to explain the behavior of donors in donating assets for zakat, the findings of his research suggest that it supports the tpb model and states that attitude is one of the important predictors of intention to donate. thus, the tpb will be useful to confirm these findings in the context of waqf at gontor institution. reputation reputation is defined as people’s perceptions of organizational honesty and concern for stakeholders (doney & cannon, 1997). the reputation of the organization is important because it signals a new potential customer that will contribute to a long-term relationship with the customer (shukor et al., 2019) reputation has positive effect on intention (yoon, guffey, & kijewski, 1993). in philanthropic organizations, reputation is very important for the organization to convince waqif’s candidates for waqf in the journal of islamic economic laws-july, vol. 4, no. 2, 2021 47 organization (bennett & gabriel, 2003; shukor, anwar, aziz, & sabri, 2017). several studies suggest that reputation has positive effect on intentions. positive reputation positively influences a person’s intention to behave (doney & cannon, 1997; ganesan, 1994; shukor et al., 2019). furthermore (shukor et al., 2017) that a good reputation affects the initiation of a relationship and the continuation of an established relationship (anderson, lodish, & weitz, 1987). therefore, waqf organizations need a reputation to stimulate the intentions of prospective waqf and other stakeholders (bennett & gabriel, 2003). in line with previous studies, this study hypothesizes that: h1 = reputation has positive significant effect on waqif perception on nadzir’s professionalism. transparency transparency is built on the freedom to obtain information needed by stakeholders and the public. transparency means that the report is prepared honestly and can be accessed by the public (jayanto & munawaroh, 2019)(jayanto & munawaroh, 2019). transparency is defined as the availability of information within the organization that enables external parties to monitor the internal performance of the organization (grimmelikhuijsen & meijer, 2014). transparency seen from its object includes (1) transparency of the decision-making process, (2) transparency of policy content, and (3) transparency of results. this study focuses on proactive disclosure of policy results. various theories have concluded that the quality of information is an important part of transparency. there are at least three points, namely (1) transparency of information, (2) clarity of information, (3) accuracy of information (schnackenberg & tomlinson, 2016) (schnackenberg & tomlinson, 2016). transparency is the responsibility of the manager of waqf assets to allah swt and other stakeholders related to the freedom of access to information in the management of waqf assets. if the institution is able to provide accountable and transparent reporting, it can be ensured that the community will be more satisfied 48 rofiqo et al. and more confident in providing waqf assets through the waqf management institution and increase the interest in waqf in the provision of waqf assets (jayanto & munawaroh, 2019). studied (ahmad & rusdianto, 2020)previous studies have still been silent on exploring the intention of cash waqf in the context of baitul maal wat tamwil (bmt stated that transparency has a significant positive effect on the mandate of waqif and the intention to donate money through islamic microfinance institutions. (farwell, shier, & handy, 2019) stated that transparency has a positive effect on trust in non-profit institutions. in this research, the basic argument is that transparency will give birth to the public perception that waqif perception of nadzir’s professionalism has affect on intention to pay waqf. h2 = transparency has positive significant affect on waqif perception on nadzir’s professionalism. trust research on belief is widely used in various fields of study such as psychology, sociology, economics, management, marketing, philanthropy, etc (bennur & jin, 2017; zaidun, muda, & hashim, 2020). trust has been seen as an essential element for organizational success (ben sedrine, bouderbala, & hamdi, 2020). trust is a condition when one of the parties involved in a relationship believes in reliability, honesty integrity, and cooperative behavior based on shared values (morgan & hunt, 1994). trust will create a sense of security and reduce the perception of risk in a relationship (bennett & gabriel, 2003). the result of trust is a strong belief that trustworthy parties are reliable and have high integrity, which is related to qualities such as consistency, competence, honesty, fairness, responsibility, mutual cooperation, and generosity (dwyer, schurr, & oh, 1987). previous studies have referred to trust as moderating variabel such as (jiang & probst, 2019) which states that trust moderating effect negatively between job insecurity and work satisfaction. the findings of studies that have been conducted by (chahal & rani, 2017) stated that trust moderating effect positively between social media, brand engagement and brand equity. (ben sedrine journal of islamic economic laws-july, vol. 4, no. 2, 2021 49 et al., 2020) found that trust moderating effect between distributed leadership (quality support function, quality of supervision function, participation in decision making, cooperation within the team) and organizational commitment. trust is the basis for the formation of commitment in organization and knowledge, it can be used as a moderating variable between transparency, reputation and waqif perception on nadzir’s professionalism. based on previous studies we has hypothesis h3 = trust positive significant effect on waqif perception on nadzir’s professionalism. h4a = trust as moderating effect relationships between transparency and waqif’s perception on nadzir’s professional. h4b = trust as moderating effect relationships between transparency and waqif’s perception on nadzir’s professional. waqif perception on nadzir’s professionalism. perception is the process of presenting individual meanings to their environment. based on this perception, it can be used as a basis for making decisions to record the waqf assets that are managed to be productive (zulkifli & ali, 2019). professional is a person’s dedication to his job / profession by using the knowledge he has by always adhering to work standards, maintaining the continuity of the future of his profession and trying to always maintain the pride of his profession (mediatrix et al., 2017). the characteristics of professional nazhir namely (baharuddin & iman, 2018): first, have specific skills to be able to do a good job. this expertise is usually acquired from education, training, and experience gained over a period of time. this knowledge, expertise and skills enable professional people to identify problems correctly and precisely. with this knowledge and skills, it is possible for a professional to carry out his duties with a high level of success with good quality. second, high moral commitment. for the social service profession, moral commitment is stated in the form of a professional code of ethics. this ethic is a rule that must be followed in carrying out work. this professional code of ethics is intended to protect the public 50 rofiqo et al. from loss and negligence, whether intentional or not, and is intended to protect the profession from bad behavior. third, professional people, usually live from the profession they do. he is paid a decent salary as a consequence of the exertion of all energy, mind, expertise, and skills. fourth, community service, there is a moral commitment contained in a professional code of ethics in which people who carry out a profession prioritize the interests of society rather than their own interests. fifth, legalization, licensing. for a profession that concerns the interests of the public and is related to human values, then that profession must be a legal and permissible profession. several previous studies revealed an indication of a relationship between people’s perceptions of nazdir’s professionalism in managing waqf assets and people’s intention to do waqf, such as (basri & maryanti, 2020) which states that nadzir who manages waqf assets professionally will improve the performance of productive waqf in jambi. studie’s (johari et al., 2014) stated that the professionalism of nadzir will have an impact on the intention to repeat waqf. studie’s (valeau, paille, dubrulle, & guenin, 2021) stated that professionals have a significant positive effect on organizational commitment. (samsudin, abdullah, & osman, 2020) found that professionalism has a positive and significant effect on decision making. from this previous research hypothesized that: h5 = waqif’s perception on nadzir’s professional has positive signifigant affect on intention to act waqf. conceptual framework in order to measure the intention to act waqf, there are four main variables used mainly; reputation, transparancy, trust and waqif’s perception on nadzir’s professiona. this research paper we use conceptual framework as below: journal of islamic economic laws-july, vol. 4, no. 2, 2021 51 reputation trust transparency waqif’s perception of professional nadzir intention to act waqf h1 h2 h 4a h 4b h5 h 3 figure 1. research model source: authors methods data the data used in this research is the primary with quationer collection technique 1-5 (disagree-agree). sampling technique using purposive sample, namely alumni of pondok modern darussalam gontor with total respondent 200 alumni (hair et al., 2014). table 1. respondent profile variables descriptions percentage(%) gender male 51% female 49% marital status single 67% merit 33% age <20 year 20% 21-30 year 68% 31-40 year 11% >40 year 1% education senior hight school 22% bachelor 78% 52 rofiqo et al. variables descriptions percentage(%) island java 78% kalimantan 5% sumatera 11% others 6% monthly income idr < 2.000.000 69% idr 2.000.0015.000.000 25% idr 5.000.00110.000.000 4% idr 10.000.00120.000.000 3% this study involved 200 respondents from waqif to gontor institution. table 1 presents the respondents’ profile and economic characteristics on gender, marital status, age, education, island, and monthly income. model development methodology in this research is path modelling with 5 variable and 5 hypotysis. the data collect from the waqif of gontor institution. this research used 6 months to search the data and analyzing. this research used the model formulation bellow: waqif’s perception on nadzir’s professional = a1 + β1 rep1 x trust3 + β2, rep2 x trust3 + β3 trust3 + e intention to act waqf : a2 + β4 prof4 + e research design the researchers use the quantitative with path modelling because first, the population in this research is very widespread. secondly, the study intends to test the hypothesis. the third researchers want to get accurate data, based on empirical and measurable phenomena. fourth, the study is about to test the journal of islamic economic laws-july, vol. 4, no. 2, 2021 53 validity of knowledge. this research was conducted using a quantitative approach with partial least square structural equation modeling (sempls). it is acceptable if an individual item outer loading is greater than 0.70, composite reliability exceeds 0.70, and ave exceed 0.50. this research used three measures to assess the discriminant validity: fornell-larcker criterion, cross-loadings ratio of correlations criterion (hair, black, babin, & anderson, 2014). results and discussion validity and reliability the result of measurement model summary by outer loading, cronbach’s alpha, rho_a, composite reliability, and average variance extracted (ave), r2 and q2. the result can be shown in the table: tabel 2. validity, reliability r2 and q2 construct items outer loading cronbach alpha rho_a ca ave intention to waqf int1 0,92 0,84 0,87 0,91 0,76int2 0,88 int3 0,82 waqif ’s perception of nadzir professional proff2 0,86 0,87 0,87 0,91 0,71 proff3 0,86 proff4 0,85 proff5 0,82 reputation rep1 0,76 0,81 0,82 0,87 0,63 rep2 0,84 rep3 0,82 rep4 0,76 transparancy trans1 0,77 0,73 0,75 0,83 0,55 trans2 0,72 trans3 0,79 trans4 0,7 54 rofiqo et al. construct items outer loading cronbach alpha rho_a ca ave trust trust1 0,9 0,89 0,89 0,93 0,82trust2 0,93 trust3 0,9 reputation * trust moder1 1,58 1,00 1,00 1,00 1,00 transparency * trust moder2 1,48 1,00 1,00 1,00 1,00 *the results of r2 for intention to waqf is 0,16 and for waqif’s perception of nadzir professional is 0,66 ** the results of q2 for intention to waqf is 0,12 and for waqif’s perception of nadzir professional is 0,43. the constructs is confirmed as the results of cronbach’s alpha above 0.7 (nunnally, 1978; peterson, 1994)psychiatrists, and kindred professionals, in this chapter it will be assumed that the reader is already familiar with fundamental issues relating to behavioral measurement and, consequently, that there will be no need to discuss low-level principles. rather, the discussion will center on controversial issues that are of immediate importance to the professional clinician or researcher in the behavioral sciences. whereas the examples chosen for this chapter to illustrate principles of measurement are particularly applicable to clinical diagnosis, the principles are quite general to empirical science. because some methods of statistical and mathematical analysis are intimately related to the development and use of measurement methods, critical comments will be made about some prominent approaches to statistical analysis, but details regarding their applications will be left to referenced sources rather than be discussed in detail here. (any reader who is not already familiar with fundamental principles of psychometric theory and analysis, or would like a refresher course in that regard, might want to consult my book psychometric theory, 1978.. rho_a confirmed that the result above 0,7. composite reliability values confirm the high level of reliability and internal consistency of all the journal of islamic economic laws-july, vol. 4, no. 2, 2021 55 constructs as the outer loading for all the items were higher than the threshold value of 0.6. the average variace extracted (ave) result greater than the threshold value of 0.5, so the convergent validity for all the constructs is proved (hair et al., 2014). adjusted r square value is the coefficient of determination in endogenous construct. according to (hair et al., 2014), the category of adjusted r square values was divided into three, strong (0.67), moderate (0.33) and weak (0.19). based on the table above, it can be concluded that intention has a intention to waqf adjusted r square value of 0,162 and waqif’s perception of nadzir professional r square value of 0,663. meaning that the intention variable as an endogenous variable can be explained by its exogenous latent variables: intention to waqf 16,2% and the remaining 83,8% explained by other variables outside the research. waqif’s perception of nadzir professional has a value 66,3% explain by reputation and transparency and 33,7% explained by others variable outside this research. based on (chin, 2010) the resulting q2 values larger than 0 indicate that the exogenous constructs have predictive relevance for the endogeneous construct under cinsideration. predictive relevance q2 0.02 that the small predictive relevance, 0.15 medium, and 0.35 large. the result q2 of intention to waqf has 0,115 and waqif’s perception of nadzir professional 0,428. that explain the intention to waqf medium and the waqif’s perception of nadzir professional large. fornell lacker criterio the fornell lacker criterio is a second approach to assessing discriminant validity that compares the square root of the ave value with the correlation of latent variables. in particular, the square root of each ave construct must be greater than the highest correlation with the other constructs (fornell & larcker, 1981). the fornell & lacker criterio values obtained from the smart pls 3.2 application are below: 56 rofiqo et al. tabel 3. fornell lacker criterio variables intent mod eff 1 mod eff 2 rep transp trust prof int 0,873 mod eff 1 -0,263 1 mod eff 2 -0,231 0,806 1 rep 0,287 -0,583 -0,504 0,794 transp 0,482 -0,47 -0,467 0,464 0,742 trust 0,324 -0,708 -0,768 0,602 0,619 0,907 prof 0,403 -0,425 -0,526 0,563 0,703 0,706 0,844 from the data above, it can be seen that each square root of each ave construct is greater than the highest correlation with other constructs, so the data is valid. hypothesis test hypothesis testing in this study can be seen in figures 2 and 3 and table 4 which assess the direct effect by calculating the path coefficient value from the t-statistic and p-value. the bootstrap results from the smart pls 3.2 application can be shaw as follows: figure2. pls algorithm source: data processed by smart pls 3.2. journal of islamic economic laws-july, vol. 4, no. 2, 2021 57 figure3. pls bootstrapping source: data processed by smart pls 3.2. table 4. path coefficents path hyp path coeff t stat p-val decision reputation -> waqif perception of nadzir’s professional h1 0,229 3,038 0,003 accepted transparency -> waqif perception of nadzir’s professional h2 0,418 4,044 0,000 accepted trust -> waqif perception of nadzir’s professional h3 0,423 4,340 0,000 accepted reputation*trust -> waqif perception of nadzir’s professional h4a 0,209 3,178 0,002 accepted transparency*trust -> waqif perception of nadzir’s professional h4b -0,106 1,294 0,196 rejected waqif perception of nadzir’s professional -> intention to waqf h5 0,403 6,390 0,000 accepted source: data processed by smart pls 3.2 58 rofiqo et al. from table 4 can be explained that h1 reputation has a significant positive effect on waqif’s perception on nadzir’s professional (β = 0.229, p-value 0.003 <0.05), transparency has a significant positive effect on waqif’s perception on nadzir’s professional (β = 0.418, p-value 0,000 < 0.05), trust has a significant positive effect on waqif’s perception on nadzir’s professional (β = 0.423, p-value 0.000 <0.05), and waqif’s perception on nadzir’s professional has a significant positive effect on intention to act waqf (β = 0.403, p-value 0.000 <0.05). the moderating effect value can be seen in the table above with the results of trust moderating positively the significance between reputation and wakif perceptions of nadzir’s professionalism (β = 0.209, p-value 0.002 <0.05), trust does not moderate between transparency and wakif perception. nadzir’s professionalism (β = -0.106, p-value 0.196> 0.05). trust as a moderating effect (trust-1, trust at mean and trust +1) can be seen in the figure 4. figure 4. moderating affect reputation*trust source: data processed by smart pls 3.2. journal of islamic economic laws-july, vol. 4, no. 2, 2021 59 figure 5. moderating affect transparency*trust source: data processed by smart pls 3.2. the reputation of the waqf management institution is very much needed to continue to increase the intention of the community in that institution. the darussalam gontor modern islamic boarding school, which was donated to the people on 12 oct 1958, has been recognized by the people of indonesia and asia as a modern pesantren system and its waqf assets are growing rapidly. the reputation of the pondok modern darussalam gontor can be seen from the prospective students who register every year, namely no less than 7,000 applicants who come from various regions and countries (zahrulmuslimin, 2020). reputation is needed to support public perceptions of the professional management of waqf assets which in turn will affect the intention to have waqf in the institution. this finding is in accordance with research conducted by (shukor et al., 2019) which states that reputation has a positive effect on people’s trust and intention to have waqf in the institution. waqf management assets with transparency is needed by managers in waqf institutions, because transparency has a positive impact on the perceptions of professional waqf waqf nadzir. the management of waqf assets at the pondok modern darussalam gontor. is reported to the public, one of which is the warta dunia pondok modern darussalam gontor which is published every 60 rofiqo et al. year. in addition, reports also submitted to the badan wakaf pondok modern darussalam gontor (fasa et al., 2016). this research is in accordance with the research that has been conducted by (ahmad & rusdianto, 2020; jayanto & munawaroh, 2019) financial statement transparency, accountability, religiosity, and trust on interest in paying zakat of profession. the population of this study was muzaki who paid zakat at baznas and laz pati regency. the sampling technique used in this study was purposive sampling technique, which was obtained by 73 respondents. the data analysis technique used in this research was structural equation modelling (sem states that transparency is important for waqf asset management institutions and will affect on waqif’s perception on nadzir’s professional. trust also has a significant positive effect on the perception of waqf towards nadzir professionals in managing waqf assets, trust is one of the key variables in waqf institutions. waqf institutions that are trustworthy in managing their assets will increase satisfaction and the intention to continue to have waqf in the institution. in addition, trust is a moderating variable between reputation and waqif’s perception on nadzir’s professional. at pondok modern darussalam gontor, waqif belief in nadzir professionalism in managing waqf assets is the key to the success of pondok modern darussalam gontor. this is proven by the leadership of the darussalam islamic boarding school who always involves students and their assistants in managing waqf assets with the principle of trust (huda, 2014)the paper argues expands not only in economic terms but also in academic, theological as well as intellectual realm. even against the onslaught of modernity, pesantren has been independent in the sense that it has not fallen prey to the negative impacts of modernity, if any. this paper discusses this as well as the strategy of pesantren in dealing with modernity particularly by referring to the experience of two great pesantrens, namely tebuireng and gontor. the paper keeps in mind that it is the values of the two pesantrens that kept them intact from the influence of modernity. it investigates therefore the nature and kind of these values as well the extent to which the two pesantrens are attached to them. one of the values that journal of islamic economic laws-july, vol. 4, no. 2, 2021 61 the paper is interested in is the notion of charity (<em>sadaqah</ em>. the findings further show that the perception of waqf towards nadzir’s professionalism has a significant positive effect on the intention of waqf at pondok modern darussalam gontor. this finding is in line with research conducted by (basri & maryanti, 2020; johari et al., 2014; samsudin et al., 2020). furthermore, these findings can be generalized to waqf institutions in indonesia, where the management of waqf must be trustworthy, transparent, and professional in order to continue to increase the waqf assets that are managed through the community’s intention to do waqf. conclusion this study shows that reputation, transparency and trust have a positive significantly affect toward waqif’s perception on nadzir’s professional. in addition, trust moderated between reputation and waqif’s perception on nadzir’s professional. waqif’s perception on nadzir’s professional positive significantly affect toward intention to act 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(2006). fiqih islam wa adillatuhu (1, ed.). beirut lebanon: darul fikr. zulkifli, & ali, r. f. (2019). persepsi nazhir di kecamatan sukajadi kota pekanbaru terhadap wakaf produktif. jurnal tabarru’: islamic banking and finance, 2(november). _goback _heading=h.gjdgxs _goback _heading=h.gjdgxs _hlk72739620 _goback _goback _goback journal of islamic economic laws vol. 5, no. 1 january 2022: 38-60 38 the effect of covid-19 and sectoral financing on islamic bank profitability in indonesia mohammad zen nasrudin fajri1, adamu abu bakar muhammad2, khoirul umam3, lila prisilia putri4, mohammad ali ramadhan5 1faculty of economic and management, universitas darussalam gontor 2faculty of humanities, federal university of kashere 3faculty of economic and management, universitas darussalam gontor 4postgraduate program, universitas darussalam gontor 5faculty of economic and management, universitas darussalam gontor email: mzennasrudin@unida.gontor.ac.id, abubakaradamu1980@gmail.com. khoirul.umam@unida.gontor. ac.id, lilapriscilia698@gmail.com, moh.aliramadhan10@mhs. unida.gontor.ac.id abstract covid-19 pandemic has created a new economic crisis worldwide. islamic bank which was reportedly resilient against the financial crisis is expected to be stable in this period. apart from that, islamic bank in indonesia has channeled financing fund to various business sectors with different portions leading to a question whether they have different impact on islamic bank’s profitability. this paper aims to discover the impact of covid-19 pandemic and financing to business sectors on islamic bank profitability in indonesia. an ardl approach is employed for analysis. the result of the study shows that covid-19 pandemic has a negative relationship with islamic bank profitability in the long-run. furthermore, financing to transportation, warehousing and communication sectors is associated with higher profitability in the short-run. on the other hand, financing to wholesale and mailto:abubakaradamu1980@gmail.com 39 journal of islamic economic laws-january, vol. 5, no. 1, 2022 retail trade sectors hurt islamic bank profitability. based on this result, it is suggested that government impose some measures in stabilizing islamic bank’s performance during covid-19 pandemic. in addition, islamic banks are expected to make adjustment on financing to business sectors ratio accordingly in order to maintain the profitability of islamic bank. keywords: covid-19, profitability, business sector, ardl introduction the outbreak of covid-19 pandemic has caused a lot of issues in this world particularly in economic aspect. such an issue might become worse in the case of developing countries, including indonesia. mckibbin & fernando (2020) predicted through their research that indonesia was expected to experience a decline in economic growth over this period due to the implementation of mobility-restriction policy. in this case, banking could be one of the affected sectors as people withdraw their money for their needs during economic crisis caused by such a pandemic and therefore public confidence on bank would possibly decrease (sapienza & zingales, 2012). as a response to this issue, the monetary regulator of indonesia initiated some attempts to mitigate the risk of this pandemic in maintaining the stability of banking system, either conventional or islamic banking. although islamic banking had a good record of stability over several kinds of economic crisis, a proper preparation in facing this issue should also be conducted since the current crisis is a mixture of crisis in health, social and economic aspects (omar, 2020). furthermore, it was predicted that the economic crisis during the pandemic would be more severe than the 2008 financial crisis as some particular sectors would be adversely affected leading to a worse economic recession in the near future (imf, 2020). in countering this issue, nugroho et al. (2020) viewed that the decline in islamic banking performance can be mitigated by strengthening liquidity, improving cost efficiency, and shifting to business sectors not affected by covid-19 pandemic. 40 fajri et al. the stability of islamic banking is essential in economy for its contribution to the real sector financing which is important for small business development (ascarya & yumanita, 2005). on the other hand, channelling fund through such a financing could generate profit for islamic bank even though it is risky enough (afkar, 2017). it is recorded by financial service authority (ojk) that in the last decade, finance to deposit ratio (fdr) of indonesian islamic banking hit around 75% on average. in simple way, it can be seen that financing is important in determining the profit of islamic banking. the more the fund is channelled to finance business sectors, the more the profit can be generated. there are various business sectors that become the target of islamic banking for finance program. the capacity of islamic banking to set a proper portion of fund every business sector would be financed can affect the profit that would be generated. ojk (2020) recorded that at the end of 2020, the highest shares of fund were targeted to wholesale and retail trade, construction, processing industry, agriculture, hunting and forestry at 12.45%, 11.75%, 8.74% and 4.87% respectively. this data raises a question whether the shares of fund for financing business sectors have different impact on islamic banking profitability. there has been a number of researches conducted regarding the effect of finance on islamic banking profitability in indonesia (fadrul & asyari, 2018; handayani et al., 2019; izhar & asutay, 2007), however they used fdr in general without separating it according to the business sectors. meanwhile, these studies were conducted before the covid-19 period. on the other hand, there are only limited studies related to determinant of islamic banking profitability during covid-19 period (sutrisno et al., 2020; wahyudi et al., 2021) but there has not been study covering the pre and post pandemic period by including covid-19 as one of its determinants. this study focuses on estimating the effect of fdr for each business sector and covid-19 on the profitability of islamic banking in indonesia. the objective of this study aims to reveal how the covid-19 pandemic influences the profitability of islamic banking in indonesia. furthermore, this study is also aimed to discover how 41 journal of islamic economic laws-january, vol. 5, no. 1, 2022 financing to business sectors affect the islamic bank profitability. the research on this topic is important in order to know whether financing for different business sectors can support the profitability of islamic bank in indonesia. the result of the study can become the basis for decision maker to channel the fund to business sectors which generate better profit for islamic bank. this paper starts with the explanation of the theoretical background on islamic bank durability during crisis and several previous empirical studies related to islamic bank profitability. following that, specification of data, development of the model and research method used in this paper is elaborated. afterward there is display of the results of data estimation and robustness check along with the analysis. the paper then ends with the conclusion of the study and some recommendations for government and islamic banking in indonesia. literature review theoretical background the covid-19 pandemic is considered as a shock in financial market that leads to financial crisis either at global or domestic level. bank is one of the affected financial institutions in this period and is likely to face a huge risk in terms of liquidity insurance. in such a crisis, a lot of people massively withdraw money from the bank while default-payment cases increase (goodell, 2020) as a consequence of business closures, mobility restrictions and decrease in demand for goods and services during pandemic. in addition, decision for financing program will be hold due to low consumption trend in society and increase in financing cost as a result of reduction in deposit in bank (elnahass et al., 2021). however, such negative impacts of pandemic on the bank can be mitigated depending on the reactions of regulatory and policy makers in countering the vulnerability of the bank (beck, 2020). islamic bank is viewed as one of financial institutions that have resistance on economic crisis caused by pandemic. hassan et al. (2020) stated that covid-19 pandemic is expected to have minor or even no impact on islamic finance because it uses 42 fajri et al. interest-free contract in their products and avoids toxic assets like future, option and swap. this view is supported by allais who urged structural reform for global financial institutions to overcome economic crisis by adjusting interest rate to zero percent. according to chapra (2011), the credit risk in conventional banking is borne by them while the investors are guaranteed with predetermined return of interest rate for their investment. unlike the conventional bank, islamic bank shares both profit and loss with the investors by benchmarking return for them on banking performance without predetermination. through this system, islamic bank would likely to gain smaller profit than conventional banking but it is more resilient to shock such as financial crisis. previous studies there have been many researches done in investigating the determinant of islamic banking profitability. almonifi et al., (2021) investigated the effect of covid-19 pandemic on the performance of al rajhi bank in kingdom of saudi arabia through review of financial statements and evaluation of financial ratios. it was discovered from the result that covid-19 pandemic had a low impact on islamic bank in saudi arabia, especially al rajhi bank and they were able to quickly adapt to economic and financial shock. sutrisno et al., (2020) employed independent sample t-test to analyse the effect of bank-specific variables on islamic bank profitability before and during covid-19 outbreak. the result of the study shows that covid-19 had no impact on car, npf and roa. in reverse, fdr, return on equity (roe) and net operating margin (nom) were negatively affected whereby it then may lead to lower profitability. wahyudi et al., (2021) investigated 11 islamic bank in indonesia using their first quarterly report in 2020 and multiple linear regression analysis. in their study, it was discovered that car and bopo have significant impact on roa while npf and fdr are not significant. ben khediri et al. (2009) conducted a study on selected middle east and north africa (mena) countries between 1999 43 journal of islamic economic laws-january, vol. 5, no. 1, 2022 and 2006. in determining islamic banking profitability, they included country-specific variables and bank-specific variables in estimation and found that management efficiency, capitalisation, inflation, economic growth and bank concentration have positive impact on profitability. in addition, good socio-economic conditions and legal system in those countries lead to better profitability for the islamic banking. in analysing the same region with different time period 19942012, zarrouk et al. (2016) utilized generalized method of moments estimators and found that asset quality, capitalization level and cost-effectiveness of bank have significantly positive impact on islamic banking profitability. regarding the macroeconomic variables, islamic banking profitability is negatively affected by inflation and positively influenced by economic growth and investment. in their conclusion, several determinants of islamic bank profitability are similar to the determinants of profitability in conventional banks. izhar & asutay (2007) analysed the profitability of bank muamalat indonesia between 1996 and 2001 by employing regression analysis and including internal and external factors. in his research, it is found that financing activities significantly affect the profitability of bank muamalat indonesia as 1% increase in financing activities contribute to 18% increase in return on asset (roa) while service activities are the otherwise. in terms of external factor, inflation is positively related to the profitability of the islamic bank. ali et.al (2011) included macroeconomic variables and bank specific variables in estimating the profitability of islamic commercial bank in pakistan during the period 2006-2009. based on the result of the study, it was found that good economic environment and efficient asset management significantly influence profitability. on the other hand, capitalization and high credit risk contributes to the fall of profitability. to sum up, high profit in islamic bank can be gained by highly efficient operating. tumewang et al. (2019) examined profitability of islamic bank in indonesia from 2012 to 2015 using macroeconomic variables. the result of the study shows that inflation and exchange 44 fajri et al. rate give no impact on islamic bank’s profitability. however, interest rate negatively influences profitability which implies that determination of profit sharing ratio or margin should be taking into account the interest rate so that the partners continue to use islamic bank’s products. (handayani et al., 2019) uncovered that in 13 islamic banks in indonesia between 2012 and 2018, capital adequacy ratio (car) and operational cost to operational revenue ratio (bopo) significantly influence profitability. meanwhile, financing to deposit ratio (fdr), non-performing finance (npf), deposit and inflation are not significant. this study was conducted using multiple linear regression analysis. it can be seen that the existing literature mostly discuss determinant of islamic bank profitability using bank intrinsic variable and macroeconomic variables. this study is the first to use financing to various business sectors as variables. in addition, this study uses the covid-19 as independent variable unlike the past studies that analyse the effect by comparing the data before and after the covid-19. methods this study uses monthly time-series dataset of islamic bank in indonesia from january 2015 to june 2021 obtained from financial services authority (ojk). meanwhile, the macroeconomic indicators are taken from bank indonesia and bureau for statistic centre (bps). there are a total of 78 observations that will be used for analysis. this time period is used to cover the covid-19 crisis arising since march 2020 in indonesia and to be the basis of our estimation to discover the effect in short-run and long run. the model used in this study is developed from izhar & asutay (2007) where return on asset (roa) is used as dependent variable. independent variables consist of macroeconomic variables and bank-specific variables. the macroeconomic variables are covid-19 pandemic (covid), inflation (inf) and interest rate (ir) and the bank-specific variables are npf and fdr for 6 business sectors; 1) mining and quarrying (fdrmqu) 2) 45 journal of islamic economic laws-january, vol. 5, no. 1, 2022 processing industry (fdrprind) 3) construction (fdrcons) 4) wholesale and retail trade (fdrwsrt) 5) transportation, warehousing and communications (fdrtrwcom) 6) financial intermediaries (fdrfini). roa stands for return on asset (roa) which resembles the profitability of bank. covid is a dummy variable for the time period since covid-19 stroke. inf is inflation measured by consumer index price (cpi) in indonesia. ir represents interest rate imposed by central bank as the authority in monetary system. npf is percentage of total non-performing finance of total deposit. meanwhile, the rest of the variables are percentage of financing channeled to the mentioned business sectors over the total deposit in islamic bank. ∆ indicates that the variables are transformed into first-different form while ln is the symbol of log transformation. the covid-19 is expected to be positive or may be insignificant due to the superiority of profit and loss sharing in islamic bank. on the other hand, it can be also negative as there are 46 fajri et al. more possibility of default payment case as mobility is restricted. inflation in this case is expected to be negative since the higher cost of goods entails people to spend more amount of money than to save it, and therefore the fund channeled for financing become less. the default payment cases will lead to lower profitability, however, the loss suffered by the bank can be minimized as it employ profit and loss sharing system. eventually, the financing activities are expected to be associated with higher profitability whereby the more fund channeled to financing the more profit can be generated. in this study, autoregressive distributed lag (ardl) analysis is employed due to its effectiveness compared to likelihood-based approach initiated by engle & granger (1987) and johansen & exogeneity (1991). there is no need for definition of integration order of the series because the test can be conducted even though they are purely or fractionally integrated. apart from that, this method can avoid the issues related to endogeneity and the ability of engle & granger (1987) methods to conduct a hypotheses test in the long-run. the issues of autocorrelation and endogeneity can be corrected through this model provided that appropriate lags are used (pesaran et al., 1999). the other advantages of ardl are the ability to utilize small sample properties for analysis (halicioglu, 2007) and the ability to estimate the short and longrun simultaneously. there are diverse methods in the literature that were used to investigate the long-run relationship between variables in the model like the cointegration tests of engle and granger (eg) and johansen and juselius (jj). however, the ardl technique has some econometric estimation advantages over both techniques (pesaran et al., 2001). the analysis in this study starts by conducting a unit-root test using the augmented dickey-fuller (adf) (dickey & fuller, 1979) test to show the stationarity of all variables in the model. following that, ardl bounds test is applied to investigate cointegration among the variables in terms of their correlation in the long-run and short-run. finally, in testing the stability of all variables employed in this study, cusum test is then conducted. 47 journal of islamic economic laws-january, vol. 5, no. 1, 2022 results descriptive statistics table 1 shows descriptive statistics of the data used in this study. it can be seen from the table that the profitability of islamic banking in indonesia as represented by roa ranges between 0.16 percent and 2.44 percent during the studied period with 1.24 percent on average. as dummy variable, covid-19 ranges between 0 and 1 with 0.21 on average. the average value of inflation is 123.65 ranging between 104.33 and 139.07 of values, while the average value of interest rate is 5.36 percent with values ranging between 3.5 percent and 7.75 percent. the value of non-performing finance ranges between 3.13 percent and 6.17 percent. the average values of fdr for business sectors: mining and quarry; processing industry; construction; wholesale and retail trade; transportation, warehousing, and communication; financial industry are 2.6 percent, 9.32 percent, 8.92 percent, 13.71 percent, 4.78 percent and 7.96 percent respectively. among those business sectors, the highest fdr value is fdr for wholesale and retail trade at 16.07 percent. on the other hand, mining and quarry sector has the lowest value of fdr at 1.61 percent. table 1. descriptive statistics variables mean median maximum minimum roa (%) 1.24 1.23 2.44 0.16 inf (%) 123.65 125.5 139.07 104.33 ir (%) 5.36 5 7.75 3.5 npf (%) 4.29 4.44 6.17 3.13 fdrmqu (%) 2.6 2.64 3.68 1.61 fdrprind (%) 9.32 9.38 10.34 8.07 fdrcons (%) 8.92 9.17 11.77 5.96 fdrwsrt (%) 13.71 13.46 16.07 12.1 fdrtrwcom (%) 4.78 4.07 8.6 3.31 fdrfini (%) 7.96 7.61 11.44 4.3 source: author’s elaboration 48 fajri et al. figure 1 displays the comparison between roa, bi rate and npf during the study period. it can be seen from this figure that from january 2015 to june 2021, bi rate and npf moved downward while the trend of roa movement is upward. overall based on this trend, it can be inferred that the fall in interest rate and non-performing finance was associated with the rise in islamic bank’s profitability in indonesia. source: author’s elaboration meanwhile, figure 2 shows the comparison between fdr among different business sector. it can be seen that the trend of fdrmqu, fdrwsrt and fdrtrwcom is downward. this implies that increase in fdrs in mining and quarry sector, financial industry sector and transportation, warehousing and communication sector were associated with the increase in islamic bank profitability. on the other hand, the increase in 49 journal of islamic economic laws-january, vol. 5, no. 1, 2022 islamic bank profitability was associated with the increase in fdr in construction sector as displayed by an upward trend of fdrcons. fdr in processing industry sector and mining and quarry remained stable over the period of study. source: author’s elaboration unit root test and cointegration test table 2 shows the result of stationary test using adf. it shows the t-value of adf test for each variable in the model. it can be seen from the result of the test that all variables are not stationary. therefore, all variables are transformed into first-difference level 50 fajri et al. form and retest them. the result of the test shows that all variables are stationary at 1 percent level of significance. hence, the ardl method to co-integration is used since all variables are integrated in difference stationary i (1). table 2. stationary test variable at level 1st difference form lnroa -0.972 -6.746 * lncovid -0.477 -6.124 * lninf -1.145 -6.082 * lnir -1.151 -6.086 * lnnpf -1.419 -9.812 * lnfdrmqu -0.337 -7.293 * lnfdrprind -1.309 -5.878 * lnfdrcons -0.804 -4.892 * lnfdrwsrt -0.667 -6.927 * lnfdrtrwcom -1.573 -7.251 * lnfdrfini 0.167 -4.942 * note: * shows significance at 1% level after conducting stationary test, there is a need to do lag order selection in order to find an appropriate optimum lag for the model which implies sequential interrelationship in error terms. in addition, lag order selection is necessary to deal with the problem of parameterization (pesaran, et al., 2001). based on the result showed in table 3, it can be inferred that the optimal lag length is three according to ll, eigenvalue, sbic, hqic and aic. after conducting stationary test, there is a need to do lag order selection in order to find an appropriate optimum lag for the model which implies sequential interrelationship in error terms. in addition, lag order selection is necessary to deal with the problem of parameterization (pesaran, et al., 2001). based on the result showed in table 3, it can be inferred that the optimal lag length is three according to ll, eigenvalue, sbic, hqic and aic. 51 journal of islamic economic laws-january, vol. 5, no. 1, 2022 table 3. lag order selection criteria lag ll eigen value sbic hqic aic 0 343.14506 -1.508333 -3.938626 -5.556449 1 526.55544 0.99199 -5.138272* -7.955202 -9.830406 2 561.4971 0.60129 -4.975106 -8.141851 -10.24992 3 587.95549 0.50156 -4.702663 -8.1824* -10.49883 4 608.52124 0.41795 -4.389117 -8.145024 -10.6453 5 621.59216 0.29105 -3.992305 -7.987559 -10.64716 note: * shows lag order chosen by the criterion regarding the co-integration test, the ardl bound test is employed to uncover the integration among variables in the model. the result of the test in table 4 shows that the calculated f-statistic value is 4.206 which is higher than upper-bound critical value at the level of 1 per cent level. this indicates the existence of con-integrating relationship between all variables in the model. table 4. ardl bound test result significance i(0) bound i(1) bound 10% 1.83 2.94 5% 2.06 3.24 2.50% 2.28 3.5 1% 2.54 3.86 f-statistic 4.206 estimation result the results of analysis are grouped into two, namely longrun and short-run. the result of estimation in the short-run is displayed in table 5. it can be seen that financing to transportation, warehousing and communication is the only variable significant at 5 per cent in the short-run with positive sign. this means that financing to this business sector will give a better profitability to islamic bank in the short run. on the other hand, the remaining variables are not significant in the short run. the coefficient of the lagged error-correction term (−0.6202) is significant at the 1 per cent level of significance. this indicates that there is a long-run 52 fajri et al. relationship between the variable with the return on asset (roa). it also shows the existence of digression from the equilibrium level of roa in the current period will be made up of 62.02 per cent in the coming period to resort to the equilibrium. table 5. result of estimation in short-run variable coefficient std. error t. value p-value dln(ir) -0.0363 0.1085 -0.33 0.739 dln(npf) -0.0953 0.1097 -0.87 0.389 dln(npf (-1)) 0.0632 0.0902 0.7 0.486 dln(npf (-2)) 0.0309 0.0789 0.39 0.697 dln(fdrprind) -0.0883 0.0893 -0.99 0.327 dln(fdrwsrt) 0.115 0.072 1.6 0.116 dln(fdrtrwcom) 0.2806 0.1199 2.34 0.023 dln(fdrtrwcom (-1)) -0.0055 0.096 -0.06 0.954 dln(fdrtrwcom (-2)) 0.1494 0.0899 1.66 0.102 note: * , ** and *** show siginficant at 1%, 5% and 10% level respectively however, table 6 shows the long run estimation result of ardl test. the result demonstrates that probability value of covid is 0.09 meaning that the covid-19 pandemic significantly affects roa at 10 per cent level of significance. inf has 0.00 p-value which implies that roa is significantly affected by inflation at one percent level of significance. furthermore, the p-value of fdrwsrt is 0.041 which means that financing to wholesale and retail trade significantly influences roa at 5 per cent level of significance. unlike the former variables, the rest of variables are not significant in affecting roa. 53 journal of islamic economic laws-january, vol. 5, no. 1, 2022 table 6. result of estimation in long-run variable coefficient std. error t. value p-value covid -0.4624078 0.267482 -1.73 0.09 dln(inf) -3.792912 0.8236962 -4.6 0.00 dln(ir) 0.1020645 0.0845747 1.21 0.233 dln(npf) -0.2231185 0.159618 -1.4 0.168 dln(fdrprind) 0.214606 0.1572336 1.36 0.178 dln(fdrwsrt) -0.3079441 0.147459 -2.09 0.041 dln(fdrtrwcom) -0.1064465 0.1064915 -1.00 0.322 dln(fdrfini) -0.0907288 0.101316 -0.9 0.374 dln(fdrmqu) 0.0321622 0.1964743 0.16 0.871 dln(fdrcons) -0.0800102 0.064592 -1.24 0.221 note: * , ** and *** show siginficant at 1%, 5% and 10% level of significant respectively robustness check in this section, the diagnostic test is conducted and the result can be seen in table 7. in term of autocorrelation, the probability value resulted from breusch-godfrey lm test is 0.7832 implying that there is no autocorrelation in the model. aside from that, probability value for the heteroscedasticity test is 0.2927 indicating that the model is homoscedastic. table 7. diagnostic tests breusch-godfrey lm test for autocorrelation chi-squared 1.075 probability 0.7832 breusch-godfrey lm test for autocorrelation chi-squared 69.67 probability 0.2927 54 fajri et al. c u s u m s qu ar ed time cusum squared 2016m1 2021m6 0 1 figure 3. cusumq test for stability following the diagnostic test, cusumsq test is employed in analyzing the steadiness of longand short-run parameters. based on the result as seen in figure 3, the cusumsq plots are between critical boundaries which indicate stability of the long and short-run parameters influencing the profitability of islamic bank. therefore, it can be concluded that the model is steady and appropriate. discussion in the short-run, financing to transportation, warehousing and communication significantly affects profitability of islamic bank in indonesia. the result displayed in table 5 shows in that 1 per cent increase in financing to this sector is associated with 0.2806 per cent increase in islamic bank profitability. this result support izhar & asutay (2007) finding of the positive impact of financing activities on islamic bank profitability. apart from that, the determination of particular business sector for financing is important to improve the islamic bank profitability 55 journal of islamic economic laws-january, vol. 5, no. 1, 2022 as transportation; warehousing and communication are effective compared to other business sectors. the coefficient of covid-19 pandemic is significant at 10 per cent level of significance in the long run. it is estimated that the existence of covid-19 pandemic lead to lower profitability of islamic bank by 0.46 per cent. such an impact is low as compared to the other variables which have greater value. this result supports almonifi et al. (2021) who discovered negatively minimum impact of covid-19 on islamic bank in saudi arabia. such a low impact is caused by the nature of islamic bank which is based on interest-free system and avoiding toxic asset that hugely influence the performance of mainstream bank in the middle of crisis hassan et al., (2020). the existence of profit and loss sharing (pls) system in the islamic bank also minimizes the effect suffered by the islamic bank as the return for investors are determined by the profit gained (chapra, 2011). in addition, the coefficient of inflation is significant at 1 per cent level of significance. the estimation result in table 6 demonstrates that when inflation rises by 1 per cent, return on asset of the islamic bank declines by 3.79 per cent. this result is in line with the study conducted by zarrouk et al. (2016). such an impact may be explained due to lacking for anticipation against inflation which entails difficulty for islamic bank to make adjustment on the profit rate according to the inflation and therefore cost rises faster than revenue reducing profitability. staikouras and wood (2003) viewed that inflation may have direct impacts on bank profitability like for example an increase in labor price, and indirect impacts like for instance changes in interest rates and asset prices. there is no impact of interest rate on islamic bank profitability. this result contradicts with study conducted by tumewang et al., (2019) who found a negative significant relationship between them. the absent effect of interest rate on islamic bank profitability may be explained by the prohibition of interest rate in islam which is categorized as riba. in this case, the changes in interest rate may not affect the decision of muslims 56 fajri et al. to save their money in islamic bank and therefore creating the stability of its performance. in terms of bank-specific variables, not performing finance has no impact on profitability. this result supports studies conducted by handayani et al. (2019 and wahyudi et al. (2021). it can be explained that such an issue in islamic bank may be minimized due to profit and loss sharing system that raise fairness between the bank and the customers. apart from npf, financing to deposit ratio (fdr) to business sector shows different results in the long-run. fdr in wholesale and retail trade is the only variable significant to profitability. this result strengthen studies conducted by handayani et al. (2019) and wahyudi et al. (2021) that uncover no relationship between fdr and the profitability. it may be explained by the work of pls system which entails minimum profit generated from financing ratio for islamic bank. conclusion the result of the study shows that covid-19 pandemic has a negatively relationship with islamic bank profitability in the long-run. the effect is relatively low due to the application of interest-free system, avoiding toxic asset and the fairness in the pls system. furthermore, financing to transportation, warehousing and communication sectors is associated with higher profitability in the short-run. on the other hand, financing to wholesale and retail trade sectors hurt islamic bank profitability. the rest of financing to business sectors has no impact on the profitability of islamic bank either in short-run or long-run. this gives an insight that determination of financing ratio channeled to business sector is important to improve profitability. inflation has significant impact on profitability in the long-run while interest rate and non performing finance are not significant both in the long-run and short-run. it is recommended to regulator to implement some measures to keep the stability of islamic bank during covid-19 period. in addition, islamic banks are expected to make adjustment on 57 journal of islamic economic laws-january, vol. 5, no. 1, 2022 financing to business sectors ratio accordingly in order to maintain the profitability of islamic bank. writing an academic article is a challening, but very fulfilling, endeavor. hopefully the guidelines presented here will enable you to write your first academic article with relative ease. students, however, often underestimate the time required to produce a “poished” first effort. you cannot write a proper research article in a weeekend or even in aweek. it is, therefore, extremely important to allow yourself enough time –at least three to four weeks—to work on the successive draft. references afkar, t. 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(2016). is islamic bank profitability driven by same forces as conventional banks? international journal of islamic and middle eastern finance and management, 9(1), 46–66. https://doi. org/10.1108/imefm-12-2014-0120 journal of islamic economic laws vol. 4, no. 2, july 2021: 17-41 17 marketing ethics at islamic banks: principles and practices m. qoshid al hadi1, eko nur cahyo2, iman setya budi1 1university of islam kalimantan mab 2coventry university, uk email: mqoshidalhadi@uniska-bjm.ac.id, ekonuralmalowy@ gmail.com, aymannoordin@gmail.com abstract this article highlights the principles and implementation of islamic banking marketing ethics. ethics based on sharia principles are an essential differentiator from their competitors. it begins from the 4 p’s marketing mix framework, namely product, price, promotion, and place. this article is qualitative descriptive research using literature review. this article employs secondary data from 11 articles. the data that has been collected then analyzed with descriptive information. therefore, through 4 p’s marketing mix lens, this article finds a lack of ethical marketing practices in islamic banking from the ethical ideals espoused in the literature. this study analyzes the ethical marketing practices of islamic banks which can be used as an evaluation of policies in the islamic financial industry. keywords: marketing mix, islamic banks, marketing ethics, marketing practice. introduction amid the collapses and bail-outs of 2008, islamic banking has received sharp scrutiny for its ability to withstand the shocks of the crisis (schottmann, 2014). islamic finance development indicator, (2020) reports that annual growth of islamic banking assets in 2019 reported 14%. meanwhile, the share of islamic banking as a percentage of total banking in gcc countries increased from 31% in 2008 or after the crisis to 45% in 2017. the islamic banking sector has grown at an annual rate of around 18 hadi et al. 17% during 2009-2013, which includes the period of the post2008 global crisis (elmawazini et al., 2020). academics consider islamic banks’ development to be potential and have a bright future because islamic banks offer a different value than the previous bank (conventional) (musa et al., 2020). some argue that the different values presented by islamic banking are a moral alternative based on upholding the values of justice, equity and welfare (mansour et al., 2015). for this reason, islamic banking is required to have a sharia board to ensures all activities comply with the rules of sharia law and ethics (hamza, 2013). because these ethical values are expected to observe the prohibition of usury, uncertainty and gambling. this ethical value also wants to tie between financial transactions and activities in the real economy. (nienhaus, 2011). although islamic banking relies heavily on the loyalty of their customers (fianto et al., 2020), they have not been able to emphasize the unique quality of the services they provide (wilson, 2002). sonko (2020) found the most of his respondents believe that the agib bank in gambia was not sharia-compliant. although it cannot be generalized, islamic banks often promote themselves as an ethical financial services that have not been able to explain explicitly what is meant by ethics (wilson, 2002). the word ethics is used as a label and equated with islam but there has been no serious attempt to link what is ethical with financial activity. due to the presence of islamic banks with their unique ethical values along with banking rules in general, this ultimately makes this bank difficult and islamic banks need a more accurate explanation for customer satisfaction (mansour et al., 2015) the agenda for maintaining customer satisfaction in the banking industry continues to be intensified by improving relationships with customers and building their trust with bank employees (ozatac et al., 2016). previous studies have done islamic banking to strengthen their existence. such as intensifying knowledge to leads the use of intellectual capital. because the task of a bank relies on creativity, offering sophisticated edge products and providing exceptional service to customers (ur rehman et al., 2021). attempt to meet customer satisfaction are journal of islamic economic laws-july, vol. 4, no. 2, 2021 19 also executed by islamic banks through internal marketing which is proven through research by bruin et al., (2020) that internal promotion, internal process and internal propose are enablers of employee’s perceived ability to deliver service quality in the islamic banking. in order to transmit the values of islamic banks to the community, the role of marketing becomes vital. the vital nature of the marketing concept as the idea of creating value for customers, companies and society has the potential to be undermined by the realities of market practice. because every marketing activity is driven by certain individuals or groups and the motives, intentions, goals, capabilities and culture of the entity are very different. the risk can be detrimental to all existing stakeholders (wozniczka, 2016). for this reason, this article tries to capture published research about ethical marketing in order to evaluate the performance of islamic banking in building its existence through fundamental marketing mix (product, price, place and promotion). islamic banking as a new financial institution must be able to compete and adapt to the global business environment. as a financial institution that carries moral ideas in every activity, islamic banking requires human resources, rules and an environment that can substantially support innovation. to bridge the gap, the present study proposed to analyses the marketing ethics in islamic banking. the analysis will now review marketing ethics from the existing literatures. the study’s design focused on answering the following research question: how has the ethical ideal adopted by the islamic marketing ethics literature sufficiently reflected in islamic bank marketing practices? literature review history of the development marketing ethics the history of marketing ethics began when concerns surfaced about antitrust and consumer protection in the early 20th century. at that time, several studies from books and scientific journals discussed fair service to seller’s principles. the studies developed into a book about marketing ethics, in which there is an ethics of bargaining and fair pricing. since then (the 1950s), 20 hadi et al. many scholars have commenced to focus on healthy and fair trade studies, antitrust, pricing, advertising, or promotion (caner & banu, 2014). in the 1960s, ecological problems such as pollution and waste spread in major u.s. cities. the problem was caused by a culture of consumerism that plagued americans at the time. finally, in 1962, the united states president, john f. kennedy, declared a special message to protect consumers. four consumer rights must be fulfilled; the right to security, the right to information, the right to vote, and the right to be listened to. furthermore, caner & banu (2014) mentioned that in the 1970s, research in the field of ethics was significantly conducted by researchers such as carroll (1975), bowman (1976), farrell and weaver (1978). these studies generate new insights into organizational relationships in terms of the ethics and behavior of marketing managers. this empirical research provides the foundation of a framework that explains ethical policymaking in marketing organizations. in 1989, research conducted by hunt, wood and chonko concluded that efficiency, productivity and success were at the core of the overall discipline, and marketing dimension. however, companies that promote high ethical values in the organization can find themselves richer in terms of loyalty than other companies that ignore ethical values. even culturally different companies can survive in a highly competitive international arena if they uphold solid ethical values (hunt et al., 1989). in 1993, marketing studies’ development came in on the implications for a marketer who expects a more relational transaction to apply ethical values in decision-making. building trust and developing solid responsibilities and commitments seem to be an important exchange dimension for the company (gundlach & murphy, 1993). based on research on the history of marketing developments, many studies have been done over the last 20 years. several books on the theme of marketing relationships have been published in europe, such as hougaard in 2004 entitled strategic relationship marketing and buttle in 2004 on customer journal of islamic economic laws-july, vol. 4, no. 2, 2021 21 relationship management: concepts and tools. likewise, in north america, like barnes in 2001, who published secrets of customer relationship management: it’s all about how you make them feel. according to murphy et al., there has been a significant paradigm change in marketing because of the many studies on marketing. that change leads to explicit aspects no longer implicit (murphy et al., 2007). in the last 20 years, other studies also have recognized that positive research is more dominant than normative. this means that researchers develop theories and mottos that seek to describe, explain and predict ethical phenomenon such as ethical judgment, intention, behavior, and various problems. most positive studies use scenarios to explore reactions from the subject’s behavior to situations that have been designed or predetermined by researchers to determine the ethics or behavior that will occur (chonko & hunt, 2000). from this, the author realizes that sharia marketing ethics is running in the same pattern, which is a pattern that has been passed by conventional marketing ethics. the author will continue to focus on the ethics of islamic bank marketing that will be the purpose of this article written. islamic bank marketing ethics beekun (1997) defines ethics as a set of moral principles that distinguish between right and wrong. ethics is a normative area because it regulates what to do and what not to do. the term ethics is very similar to khuluq contained in the quran. al quran also uses other terms to describe goodness: al khayr, al birr, al qist, al ‘adl, al haqq, al ma’ruf, and taqwa. the islamic approach to business ethics has been governed by the quran and sunnah. even saeed et al. (2001), judging it is absolute. since then, islamic practices, including marketing, have been based on divinity and faith. islam does not separate worldly and spiritual affairs. sometimes these two things often occur in the conflict in a western perspective based on the principle of maximizing profit. this is in contrast to islam, which emphasizes the maximizing of values. 22 hadi et al. according to saeed et al. (2001), the value that islam offers in marketing ethics is justice. many muslim scholars analyze justice in marketing by categorizing it as fair play and just dealing. kamla & rammal (2013) concluded in their theoretical analysis that social justice is a core value in sharia and islamic teachings. islamic financial and economic literature is widely recognized as dominated by ideas that advocate islamic finance’s role should shape broader social goals and is intended to address the injustices and inequalities created by the capitalist system. islamic marketing ethics based on maximizing value requires empathy for others as a reflection of nature and god. empathy will be reflected in the refrain from transactions that harm others and avoid unethical marketing practices (hamid & zubair, 2019). of the many illegal practices, the basic principles that lead to islamic banking financial transactions are maisir (gambling), gharar (uncertain information), and riba (bank interest) (rashid & hassan, 2014). all of these practices have the potential to harm one of the transacting parties. kamarulzaman & madun (2013) emphasized the importance of islamic banks should understand their customers’ expectations. it is an imperative strategy for islamic bankings to know the value and quality that customers expect from the bank. then rashid & hassan (2014) added that islamic banks’ attractiveness is their commitment to emphasize profit and loss sharing contracts and development of social activities in the form of zakat, infaq, shodaqoh and qordul hasan. many scholars believe that islamic finance will grow by considering the future of the world’s more prosperous muslim countries. as well as the prospects of the financial industry’s challenges, islamic banks can reconcile the discrepancies between the theology and modern portfolio theory (khaki & sangmi, 2012). according to dasuki and abdullah, cited by riaz (2016), the islamic bank system has united between promotional ethics and social responsibility. because, in fact, the bank is a business based on ethics and trust. therefore, the public pawn its responsibility to the bank managers to regulate their interests legally and ethically. journal of islamic economic laws-july, vol. 4, no. 2, 2021 23 in islamic banking, ethics is a fundamental identity because it is based on business partnerships, and the condition is above the relationship of just customers and banks. that ethical identity also includes adherence to sharia (rashid & hassan, 2014). previous studies have also discussed marketing ethics from an islamic perspective applied in the banking industry (beekun & badawi, 2005). furthermore, a study highlights that the new model in islamic marketing ethics is the character of value maximization instead of profit maximization carried out by conventional marketing (abbas et al., 2019). the author believes that islamic marketing ethics that apply value maximization are relevant to the financial industry, whose base is a belief institution. however, in the study of islamic bank marketing ethics, the author obtained limited conceptual studies and the early era of conventional marketing ethics studies. the study of sharia bank marketing ethics is generally still implicit and normative. however, the authors felt that this study was part of conceptual maturation that would be the foundation of further research. illegal practice in marketing previous research has shown there are many cases of unethical marketing. the practice is manifested in the form of false advertising, forced selling, unsafe or harmful products, deceptive or dubious prices, deceptive communications, bribery, deceptive distribution, and the promotion of materialism. this can be analyzed through the approach of the marketing mix (riaz, 2016). in the comments to the ethics and marketing management article, chonko & hunt (2000) concluded that many marketers face bribery problems. there are five issues considered the most difficult issues: fairness, honesty, pricing strategies, product strategies, and personal decisions. the main ethical conflict faced by marketers is balancing the company’s demand and buyer’s needs. marketer managers sense many opportunities within the company to commit unethical acts. baumhart, cited by chonko & hunt (2000), mentions the results of five ethical testing issues that many practitioners want 24 hadi et al. to eliminate including as follows (1) gifts, gratuities, bribes, and women’s calls; (2) unfair price and price discrimination; (3) dishonest promotion; (4) deceive customers; (5) price collusion. while the findings of chonko and hunt (1989) there are 10 most suited ethicssuch as (1) bribery, (2) fairness, (3) honesty, (4) price, (5) product, (6) personnel/personal, (7) confidentiality, (8) data manipulation, (9) advertising, (10) shopping. such misconduct activities can directly harm consumers. dishonesty can cause long-term negative effects, including distrust and suspicion of any marketing activity. here is a table of unethical practices based on their work area: table 1. unethical practices in marketing scope unethical practices product • offering products that are prohibited and dangerous • brand abuse practices • package abuse practices • fake products • arbitrary product deletion • change product quality and size to keep it at the same level pricing • expensive and unreasonable prices • predatory prices that force other products to leave the market • set prices high • price collusion • offer different prices with different buyers sales and service • pressuring targeted marketers • unfair treatment of buyers/customers • corrupt pricing policies • marketers deceptive practices • marketers who do not keep promises • not responsive to buyer/customer complaints journal of islamic economic laws-july, vol. 4, no. 2, 2021 25 scope unethical practices buyer management and database • different treatment of buyers • misuse of information • the invasion of privacy of the information the buyer/customer • collecting and selling buyer/customer data without the buyer’s /customer’s knowledge • bind buyers/customers to contracts and confuse them • raising or adding hidden fees • failing to provide information security m a r k e t i n g communications • deceptive advertising • advertising interruptions • indifferent or ignorant of promotions • made-up and exaggerated claims • omitting information on products • promoting products with bribes • using advertising messages that contain provocation, violence and sex. • insulting feelings of religion and state • stereotyping minorities and gender online marketing • manipulate buyers/customers • contacting people without their consent and spamming • interference with online advertising • promote and sell banned products online • manipulating social media in source: adapted from (wozniczka, 2016) methods this article is qualitative research using review literature. literature review is important to find out the purpose and contribution of the conducted research published on articles. generally, palmatier et al., (2018) stated that the objectives of the review were 1) solving ambiguity of definitions and making an outline of the topics discussed, 2) providing an integrated and synthesized picture of the current state of knowledge, 3) identifying inconsistencies the previous results and potential 26 hadi et al. explanations, 4) evaluating existing methodological approaches and unique insights, 5) developing a conceptual framework to reconcile and expand on previous research, 6) describing research insights, existing gaps, and future research directions. in this case, the authors used the integrative review introduced by snyder (2019). the integrative review is a research method by collecting relevant previous research by explaining the identification process and critically assessing these researches. what distinguishes it from systematic review is that integrative reviews have different objectives, including to assess, criticize and synthesize literature with research topics that allow for a new framework or perspective. however, the authors have limitations in the number of relevant articles. so, authors had used several variations in the search keywords for the article. the authors suppose that there are not many studies that focus on the marketing mix in islamic banking, so it is difficult to find articles that are worth re-viewing. furthermore, the authors followed the three-step approach suggested by the researcher (snyder, 2019). first, designing a review, the design review that authors adopt an integrative review which aims to conclude or evaluate a large field, namely product, price, promotion and place (marketing mix). here the authors use the term “islamic bank marketing mix” via google scholar, we find 17,400 results from 2011 to 2021. however, not all of these articles are relevant to our research objectives and the limitation of time, the authors completed the research on 11 articles. the second step is after determining the objectives and keywords, the authors start to sort out the relevant articles to be classified into sub product, price, promotion and place. the results are articles about products that we can review from (abbas et al., 2019; kamarulzaman & madun, 2013; rahayu et al., 2020; riaz, 2016) furthermore related to the price of relevant articles that we can review, (e. r. ahmed et al., 2018; rahayu et al., 2020; rama, 2020). then in the sub-promotion the relevant articles that we can review are (s. ahmed & rahman, 2015; kader et al., 2015; naeem, 2019). finally, the places in marketing mix, we review from (alquradaghi, 2013; kader et al., 2015; naeem, 2019; riaz, journal of islamic economic laws-july, vol. 4, no. 2, 2021 27 2016). from 11 articles that we reviewed, there were 9 articles indexed by scopus, 1 indexed by wos and the last one was accredited by the international press registry (usa). therefore, we believe in the quality of the articles we select. the third step is analysis. the authors analyzed the articles one by one by concluding and assessing the issues relevant to our research. figure 1 provides summary of three steps mentioned that explain analysis process. the last is writing a review with a 4 p marketing mix structure. table 2 provides articles used to reviewing. figure 1. analysis process 28 hadi et al. table 2. articles used in the process of reviewing sub author title journal product (abbas et al., 2019) the role of islamic marketing ethics towards customer satisfaction journal of islamic marketing (kamarulzaman & madun, 2013) marketing islamic banking products: malaysian perspective. business strategy series (rahayu et al., 2020) migration (hijra) to islamic bank based on push-pullmooring theory : a services marketing mix perspective journal of islamic marketing (riaz, 2016) islamic marketing ethics and the marketing practices of islamic banks isra international journal of islamic finance price (e. r. ahmed et al., 2018) proposed the pricing model as an alternative islamic benchmark benchmarking (rahayu et al., 2020) migration (hijra) to islamic bank based on push-pullmooring theory : a services marketing mix perspective journal of islamic marketing journal of islamic economic laws-july, vol. 4, no. 2, 2021 29 sub author title journal (s. ahmed & rahman, 2015) strategic pricing by islamic banks and the impact on customer satisfaction and behavioral intention journal of islamic accounting and business research promotion (s. ahmed & rahman, 2015) the effects of marketing mix on consumer satisfaction: a literature review from islamic perspectives turkish journal of islamic economics (kader et al., 2015)its returns and its physical image. analysis of variance (anova why this bank ? : understanding customers’ preference for an islamic bank in a competitive market journal of islamic economics banking and finance (naeem, 2019) understanding the role of social networking platforms in addressing the challenges of islamic banks journal of management development place (alquradaghi, 2013) the 7 ps` in the websites of qatari banks journal of management and science (kader et al., 2015) why this bank ? : understanding customers’ preference for an islamic bank in a competitive market journal of islamic economics banking and finance 30 hadi et al. sub author title journal (naeem, 2019) understanding the role of social networking platforms in addressing the challenges of islamic banks journal of management development (riaz, 2016) islamic marketing ethics and the marketing practices of islamic banks isra international journal of islamic finance results and discussion each company has its own favorite marketing mix. some apply 4 ps, 7 ps and others 10 ps. the first time the 4 ps concept in the marketing mix was introduced by rasmussen then developed by kotler. the marketing mix with the 4 ps is a basic concept that was only introduced in the 1960s. after that it was converted into a field of research and theoretical foundation building (thabit & raewf, 2018)price, place or distribution, and promotion. following the development 4 ps today that has evolved into 10 ps (product, price, place, promotion, people, process, physical evidence, packaging, partnerships, and policies). 10 ps was setted by lim, (2020) to meet customer needs and serve competitiveness for successful marketing penetration. by considering the depth of understanding, details and time in research, this article will take the fundamental part of marketing, namely 4 ps. 1. product a service product consists of all the intangible and tangible offered and adds value to the customer. in the context of islamic banking, knowledge of muslim interest in islamic banks is essential. they will be interested if islamic banks’ services and profits are the same as their competitors as conventional banks. judging from the product aspect, previous research has shown that customers feel islamic banking products and journal of islamic economic laws-july, vol. 4, no. 2, 2021 31 services should be under sharia principles. similarly, islamic banks’ ability to convince customers that the institution has fully adhered to sharia principles. that will prevent customers from moving to their competitors’ banks (rahayu et al., 2020). al ukhuwa, cited by abbas et al. (2019), mentions five business ethics principles under products. first, the product is not an illegal item that can damage one’s mind or make a fool. second, the product must have the assets behind it. third, the product must be something that can be handed over. otherwise, the product is considered invalid or valid. fourth, additional charge features are allowed if the product undergoes changes or additions. fifth, all parties are responsible for fulfilling their obligations in good faith and whatever is done must be based on islamic principles of justice, equality and fairness. kamarulzaman & madun (2013) found that islamic bank products in malaysia are still difficult to be known or familirized by the community. the product information to the customers needs to be disclosed so that they can validate and assess the product themselves. the first facility used is an islamic bank web that can provide useful product information and help customer satisfaction. second, some cases where the vanguard of islamic banks are not very knowledgeable about islamic bank products. as a result, they failed to market them effectively. third, there are conventional banks that operate sharia banks in one window. this means that the same resources serve two very different products. therefore, the banks should possess the skilled resources. in the previous research, two aspects of the product criticized by riaz (2016) are related to the advantages with costplus methods in product development and dependence of islamic banks in repackaged conventional bank products to be adjusted to sharia principles. this study’s results are interesting because almost 80% of sharia banks’ financial transactions are based on debt contracts, while equitybased financing only covers 20% of all transactions. this 32 hadi et al. happens because islamic banks repackage conventional bank products so that the mindset of maximizing profit rather than benefit is also attached to islamic banks. meanwhile, short-term debt amounts to more than the long term. if it is viewed from the purpose of debt or financing, the short term is more consumptive than the long-term purpose is generally for the investment or the development. therefore, from the financing structure, sharia banks are considered still stuck in profit-oriented instead of benefit. 2. price from a customer perspective, zeithmal in rama (2020) argues that price is a “give” component, not a “get/receive” component. the price component is divided into two, namely perceived price and objective price. the objective price is the product or service’s actual price, while the perceived price is the price encoded by the customer. in the banking industry, prices are complex and heterogeneous. banks charge fees for services and use interest charges on loans and pay certain types of accounts. the service industry’s price categories include prices, tariffs, fees, fees, surcharges, service fees, penalties, quotes, coupons, or price promotions. empirical findings by rama, (2020) revealed that customers experienced greater price expectations in the decision making process. the amount and complexity of price expectations depend primarily on customer interest, especially price transparency, relative price, and price-quality ratio. islamic banking customers in indonesia are highly aware of price transparency, have “relative thinking” to price differences, and put price-quality ratios in their assessments. conceptually, however, there is a difference between conventional banks and islamic banks, including price. in islamic banks, the practice of usury or bank interest is strictly prohibited in the quran. therefore the bank’s interest mechanism is transferred into sharia-compliant financing modes with different incentives to fund providers and their users. journal of islamic economic laws-july, vol. 4, no. 2, 2021 33 over the last three decades, research has consistently shown that prices at islamic banks are higher than conventional banks. for example, the cost of a mortgage in an islamic bank is prohibitive and is considered exploitation on behalf of sharia. the main reason revealed by riaz (2016) on why islamic bank prices are higher is the cost of “sharia” premiums. with the sharia label, customers are promised to avoid transactions that are prohibited. to get the sharia label, there is an additional fee charged to the bank’s operations, namely the salaries of several sharia professionals who are experts in the field of islamic financial law (riaz, 2016). meanwhile, according to rahayu’s research, many muslim consumers will be interested in switching to islamic banks if they offer high profits, low perceived costs, perceived benefits, and low service costs. ironically muslim customers have not tended to switch to islamic banks because of the offer of lower returns than conventional banks. also, prospective customers are worried that the distribution of profits and losses in islamic banks will negatively affect their financial investments. therefore, according to rahayu, the factors that drive conventional banks low and the pull factor from sharia banks are also low. so muslim customers are less likely to turn to sharia banks (rahayu et al., 2020). this research reinforces previous findings that islamic bank customers in indonesia are very concerned with the price difference. in order to compete, islamic banks need to be a focus on the price. in addition to higher pricing issues, pricing in islamic banks has adopted conventional pricing such as blr, klibor, cofi, libor, etc. the determination will affect the cost of fundraising, which will consequently affect investment income. according to ahmed et al. (2018), islamic banks should have their own islamic pricing benchmark (ipb), the benchmark to determine the capital cost, because conventional benchmarks have been relying on interest rates that are very contrary to the islamic economic system (ahmed et al., 2018). 34 hadi et al. 3. promotion promotion is one of the 4p marketing mixes. the promotion covers various tools such as advertising, personal sales, direct marketing, public relations, etc. promotion refers to a series of activities that communicate the benefits of a product, service, or brand to persuade a target customer to buy it (ahmed & rahman, 2015). furthermore, promotion is considered one of the ways used to spread and increase market share. islamic banks must adopt new competitive and innovative promotions to win the market as customer demand increases and sustainable competitive growth. studies from muhammad et al. (2019) show that uae consumer attitudes towards islamic banking products are strongly influenced by active sales engagement and representative use of social media in promotional activities implemented by sharia banks based in the uae (muhammad et al., 2019). in the context of islamic banking in malaysia, a study conducted by kader et al. (2015)its returns and its physical image. analysis of variance (anova shows that religious motivation is a very significant consideration for customers to make a decision. when there are many choices of banks that are subject to sharia, service satisfaction, attractive fees, and the provision of a good bank atmosphere will be the customer’s choice. therefore, islamic banks need to promote that banks operate under sharia principles and increase the services, costs, or benefits received by customers and a good atmosphere or place for customers. because the place will represent the reputation of sharia banks themselves (kader et al., 2015)its returns and its physical image. analysis of variance (anova. 4. place the place is a delivery and distribution center that connects customers and sellers. the place is an integral part of the exchange of services or the promotion for the final value of the marketing process delivered. in the context of financial services, islamic bank branches are considered places or journal of islamic economic laws-july, vol. 4, no. 2, 2021 35 distribution channels. so in this article, the author will see the islamic bank branch to contextualize this marketing mix. previous research has identified the problem of access for the community is the place. the quantity of islamic bank branches is considered inadequate for customers, so that access to islamic banks becomes difficult. for example, the uk has one islamic bank, namely al rayan, with ten branches and a muslim population of 2.7 million people (riaz, 2016). as a solution to low access to islamic banks, other research recommends that islamic banks implement online strategies. the internet banking system does not require physical existence. its existence can be accessed without any time and place restrictions. however, the key to success in providing services such as automatic teller machines (atms) depends on branch location factors, such as population characteristics, commercial, the proximity of other commercial outlets (alquradaghi, 2013). other research conducted by selamat et al., cited by kader et al. (2015), revealed that bank customers in malaysia emphasize fast and efficient service, bank reputation, image, and confidentiality as the top priority of choosing a bank. therefore, islamic banks must reflect the values of effectiveness, efficiency, security, and comfort in their places. if the place is a distribution channel that brings together customers and sellers/organizations, then the social networking platform can also be used as a marketing mix representing the place in this article. previous research on social networks in islamic banks’ marketing has proven that islamic banks have been using traditional marketing tools more often. so islamic banks lag in adopting the latest information exchange technology compared to conventional banking systems (naeem, 2019). naeem (2019) recommends that it is necessary for it professionals who can provide solutions for customers to access and also islam bank safety. more than that, it professionals can collaborate with the marketing department to improve the community’s islamic 36 hadi et al. bank brand through text, audio, and video. conclusion in terms, ethics is a set of moral principles that distinguish between right and wrong. in islam, business ethics is absolute that has been regulated in the qur’an and sunnah. the theory of islamic bank marketing ethics in islamic principles plays an important role in bridging the gap between normative and descriptive things because it can project the strength of these two theories. furthermore, by carrying out islamic principles in their operations, islamic banks actively gain sympathy from muslims and non-muslims. it is also able to survive during the crisis conditions. in the context of the 4 p frameworks (product, price, place, and promotion) or marketing mix, this article found that there are still shortcomings in islamic bank marketing’s ethical practice in its operations. in the literature on products, generally, financing products are still dominated by debt receivables. ideally, the financing product is in the form of profit-share contracts. furthermore, the literature on price has two important issues that can be found: islamic bank prices are more expensive than conventional and islamic bank adoption practices towards conventional bank pricing such as blr, klibor, cofi and libor. the benchmark still relies on interest rates that are contrary to islamic economic principles. then the promotion literature found that islamic banks still use religious sentiment in attracting the public’s attention. in fact, islamic banks have reliable performance and a reputation for conducting promotions. lastly, this article found that islamic banks cannot reach or provide easy access services to their customers about place literature. similarly, the lack of it utilization should be a solution to the limitations of the place owned by islamic banks. this conclusion can be seen as constructive criticism in the viewpoint of a limited marketing mix, especially in the amount of literature. similarly, the findings that islamic bank marketing ethics can still be refined in a better direction. thus, this study’s results may not describe the overall issue of ethical awareness journal of islamic economic laws-july, vol. 4, no. 2, 2021 37 within islamic banks that should cover the other side of attention. there are still opportunities for further studies related to marketing ethics in islamic banks that include literature and other marketing mix elements. references abbas, a., nisar, q. a., mahmood, m. a. h., chenini, a., & zubair, a. 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(2016). the ethical dilemmas in marketing-the positive idea and its desirable and undesirable consequences. oeconomia, 15(4), 195–207. _goback _heading=h.gjdgxs _goback _heading=h.gjdgxs _hlk72739620 _goback _goback _goback journal of islamic economic laws vol. 5, no. 1 january 2022: 139-158 139 building a synergy between the halal industry and the green industry in the maqāṣid al-shari’ah review as the basis of islamic economics achmad fageh1 1syariah economic magister, sunan ampel state islamic university achmadfageh@gmail.com abstract industrial estates are usually reflected in the existence of a sure standardization. the halal industry gave birth to halal supply chain management, starting with halal standards procurement, manufacturing, distribution, and logistics. the green industrial area was first born by prioritizing environmental sustainability: efficiency using renewable energy, environmentally friendly substitute raw materials, and waste treatment. so far, there has not been continuity seen in the policy, the concept of maqāṣid al-syari’ah as the basis of islamic economics, which prioritizes licit and suitable goods, has not been used as a foundation to synergize the goodness of each industrial area. the method used is the library research method or literature method. the author uses the library research method to get data from reading and reviewing books, scientific articles, journals, and thesis related to the author’s title. this research offers a concept of halal and environmental sustainability, which is reflected in the following industry supply chains. (1). procurement of goods in a halal manner with environmentally friendly product raw materials criteria. (2). manufacturing process by prioritizing the use of renewable energy. (3). processing of waste products (gas, liquid and solid) to not damage the surrounding environment. (4). halal logistics and distribution. so that what is contained in maqāṣid al-syari’ah can be implemented in this new concept. keywords: halal industry; green industry; maqāṣid al-syari’ah; halal supply chain; green industry supply chain. 140 achmad fageh introduction all activities related to fulfilling physical desires are regulated like activities in the economy. however, there are limitations in islam so that these activities can provide benefits and there is no harm to the body, including our minds. all of that in islam is known as halal. (sulistiani, 2018) green industry emerges and is well implemented from the halal business. the concept of the green industry regulates productivity and adequacy in the efficient use of resources to adapt to technological advances with the times. maintain natural capacity and provide natural preservation to keep it awake. following the standards that have been set to protect natural ecosystems. this has been stated in the “law republic of indonesia number 3 of 2014” concerning the green industry (undang-undang. no 3, 2014) the author considers that the urgency of implementing the green industry is to maintain the preservation of nature following the ordinance of god the progress of the halal industry focuses on planning needs that are currently occurring by putting forward five perspectives—specifically, the central part of the policy regarding the implementation of halal product guarantee (jph). there has been no confirmation and normalization of halal goods, and there are no guidelines for the—increase in halal business. in addition, the next point of view, especially human resources (sdm), consists of many manufacturers who do not focus on halal goods and still need information about halal goods for independent business entertainers. the third part of the framework is no adequate foundation, especially the lack of coordination from the organization that handles the framework. the fourth part is not yet about socialization, counseling, and training for msme players related to products with halal certification. the last part is that many food business actors still rely on imports. the problem is that the halalness of imported goods is not yet known. (waharini & purwantini, 2018) islamic finance depends on the prevailing rules according to islamic principles. in making it happen, experts recommend the 141 journal of islamic economic laws-january, vol. 5, no. 1, 2022 proposal of jurisprudence as the main component to live according to halal and suitable for all aspects. maqāṣid al-syari’ah combines three main classifications in essential management, specifically primary, secondary, and tertiary. meanwhile, according to alsyatibi, the explicit purpose of this basic rule is to obtain goodness for all. the five components in this maqāṣid al-syari’ah are take care of religion, take care of soul, take care of mind, take care of property, and take care of offspring (rohmati et al., 2018). the industry’s joint efforts can produce a framework that can support one another, and financial specialists can transfer remote assets to other halal businesses—finally, part of the industry. unfortunately, as the largest muslim country in the world from the number of followers of islam, indonesia is not a country with islamic economic activities. this is indicated by the minimum number of halal products registered or obtaining a halal certificate. indonesia is still far behind compared to malaysia, whose muslim population is far below indonesia. the government is expected to continue to boost the halal industry sector by providing supportive guidelines and policies. (waharini & purwantini, 2018) al-qur’an in surah al-baqarah verse 168 (departement of religion ri, 2020) also clarifies how good should be for us “o you! eat halal and good (food)”. it is explained that halal and suitable are like not haram, have sound effects on the body, and damage the mind so that it is beneficial for the community and maintenance as a whole. so that analysts believe that the green industry concept can synergize with the halal industry to support its goodness. indonesia, as the country with the most significant muslim majority in the world, has a role in realizing concepts and policies that give birth to the synergy of the green industry with the implementation of maqāṣid al-syari’ah instruments. this research focuses on issues concerning which include the following: 1) halal industry concept, 2) green industry concept, 3) government policy on these two industrial concepts. these three things are used as a subject of discussion following the maqāṣid al-syari’ah, the basis of islamic economics 142 achmad fageh literature review legal standards are an essential focus in the investigation of islamic law. as a result of the significance of maqāṣid alsharī’ah, the legitimate scholars made it what we know. the primary meaning of maqāṣid al-syari’ah is to gain profit and stay away from ourselves damage. the virtue of islamic law is more beneficial for all of us. allah swt has provided standards of various goodness that benefit humans. allah swt does not make laws, just like guidelines are made for specific reasons. ibn qayyim al-jauziyah. (khan, 2014) revealed that any difficulty deviating from justice, goodness, and insight is undoubtedly not god’s arrangement. the motivation of sharia is to serve everyone and their existence after death. so the quality of life has been widely discussed in islamic law covering fairness for the people, virtue, and what brings benefits. this brief explanation will fundamentally advance the formation of islamic finance and maqāṣid al-syari’ah. matters considered significant in this focus include clarifying the essential standards of islamic finance matters and the rules that underlie the improvement of maqāṣid al-syari’ah as a reason to build laws for the difficulties used to recognize goodness avoid disagreement. epistemologically, maqāṣid al-syari’ah is a plural word composed of maqsod, qashd, maqashid, or qushud, namely the inference of the verb qasoda-yaqshudu. different implications include objective, central, fair, and not for a subject. beyond the breaking point, the straight path is on the middle axis between abundance and insufficiency. while sharia etymologically implies can be interpreted as a way to a water source orمصدر مياه الشرب a way to a source of life. the arabs used this word to go to the eternal and clear path of getting visible drinking water. (rohmati et al., 2018). furthermore, the sharia implies an approach to imam syathibi argued that goodness which is in nature to help everything in our life, is needed to provide concessions and reduce the emergence of new problems. the advantage of excellence is to carry out different movements according to custom and avoid reprehensible actions contrary to sound judgment. this advantage is ethical honesty (ali, 2016). 143 journal of islamic economic laws-january, vol. 5, no. 1, 2022 in the case of sharia planning to preserve profits, it is quite possible to assume that sharia means preventing and eliminating losses. this standard is underlined in the hadith “don’t do anything dangerous and accept the act of danger” ال ضرر و ال ضرار. the hadith is hadith âhâd. maqāṣid al-syari’ah is part of islamic tasawur (islamic world view), which means that tasawur is a perspective, image, or mental character of everything that depends on the quality of islam. the maqāṣid al-syari’ah has also guided the halal industry in indonesia. the halal industry development is expected to be a new solution for consumers. in this case, the muslim community is maintained in all directions. daily needs can be fulfilled with clarity of law and consistently for profit, with all considerations. maqāṣid al-syari’ah as the basic foundation of islamic economics maqāṣid al-syari’ah in this case, limits itself to five basic aspects namely, preservation of religion, preservation of soul, preservation of mind, preservation of property, and preservation of offspring. the five bases contained in the maqāṣid al-syari’ah have goodness levels, virtues, and levels, namely: 1. primary is a necessity of life with a priority scale, and if it is not hurried, it will result in damage. 2. secondary, is a secondary need, which does not need to be hastened but sufficiently in use 3. tertiary, is a tertiary need and only a complement the sharia’s goodness rules have a limit that needs to be met. there is a link between public benefits and a connection with the law. while there are also limitations in the goodness, namely: 1. goodness is a unity of the five points in the maqāṣid alsyari’ah 2. stay guided by the koran and hadith. 3. put forward goodness which is more important the situation of humans on this planet is that of a caliph. this idea cannot be found in any other lesson than islam. nobility 144 achmad fageh concerning the progress of a nation underlined the situation of man (caliph) on earth. quraish shihab explains and analyzes the importance of khalifah, meaning “who replaces” or “who comes after who precedes.” this focuses on who will replace allah or the leader on earth. of course, this also caused people to acknowledge god’s condition. with this satisfaction, allah plans to give human trials as a form of attention. some interpret it as a substitute for animals in becoming leaders on earth (sulistiani, 2018) industrial estate the industry is a monetary action that measures raw merchandise, raw materials, products, or goods that are still halffinished and then developed into goods with added value, as stated by (sadono sukirno, 2013). based on the national industrial zoning committee (nizc), industrial estates are defined as the gathering of various types of industry in an area with various factory support facilities is accommodated and supervised by industrial mechanisms, either from the private sector or the government, directly managing different mechanical exercises. characterizes modern zones as areas or zones with a mix of offices, consisting of automated factories, business premises, and other foundations, such as social and public offices. the advancement of the current domain is proposed so that a single administrative unit can control the effects and advantages of mechanical existence to carry out its duties effectively. however, limited characteristics convey distinct effects because automated cycles are resolved in a “nothing new” manner to empower public authorities and businesspeople to devise ideas that synergize financial development with constrained standard assets and natural security measures. halal industry halal in language, as indicated in certain conclusions, comes from the root word ,الحل which has the meaning (اإلباحة) which means something permissible. as noted in the sharia. al-jurjāni’s composition, “halal” (الحل) or “open” (الفتح) which are words, implied by any means which cannot be penalized for their use or 145 journal of islamic economic laws-january, vol. 5, no. 1, 2022 demonstrations which are freed by law to resolve. (حالل) suggests being separated or released (طلقا) explains that halal is something that can be done, there is no prohibition in islamic law, and those who do it do not get sin from allah swt. meanwhile, a halal item is an item that has been processed first, and the raw material has met the criteria described by the sharia. it does not contain any criminal elements (yeni rohaeni & ahmad hidayat sutawijaya, 2020). the meaning of the word halal can be concluded as something that can be done according to the sharia, and if it is related to food, then it can be consumed, and if the goods can be used increasing government assistance to society, both the handling of raw materials and creating a different point can be a financial item permitted by sharia, regardless of whether during production, business, use, performance, or progress is that spent is not a consequence of transaction gymnastics. blocked a halal shop chain, the board controls the supply of raw materials for manufacturing, handling, display, progress, and ready-to-burn goods following halal principles. in general, there are four basic exercises in the halal production network, namely: 1. halal (procurement), the acquisition of halal goods is a way of obtaining halal raw materials, consisting of inclusion in exercises that emphasize maintaining halal respect throughout the store chain. the halal assessment of raw materials is not only based on halal material, but the source and installation framework are also halal. 2. halal manufacturing (processing), halal handling converts raw materials into goods according to the methodology according to halal guidelines. the treatment cycle is the stage most at risk of causing non-halalness. in line with that, it is essential to strengthening the use of the sharia framework in the internal preparation organization. 3. halal distribution, halal appropriation consists of bundling and holding of halal goods. whether it is an ingredient, the leading trademark in bundling must be lawful and acceptable. 4. halal logistics, coordination includes arranging, ensuring, and differentiating goods and materials. the predicate of 146 achmad fageh halal is not only for the goods, but the size of distribution and presentation is also remembered for the halal goods inventory network. (ab. talib et al., 2015) muhammad abdul mannan in “islamic economics: theory and practice” “the problem of islamic finance is sociology contemplates the monetary problems of society which are infused with islamic qualities” (the aspect of sociology examines individual financial problems are saturated of islamic qualities). as for the standards in islamic economics, in particular (menita, 2017): 1. the principle of faith 2. principles of justice 3. guidelines for prophethood 4. standard government 5. rules result the capability of the halal industry in this world is extraordinary. based on the 2016/2017 global islamic economy report, the estimated muslim dietary use and lifestyle area on the halal planet has been $ 1.9 trillion since 2015 and continues to increase to $ 3 trillion in 2021. this economic opportunity also drags countries with minority muslims and competes to face the capabilities of sharia business. “the world islamic economy report” in 2016/2017 malaysia is at the top followed by the uae, then bahrain, which is separated at the highest level as the most developed country in the halal business on the planet (rasyid, 2017). so far, the halal industry in indonesia is also stated in law number 33 of 2014 concerning halal product guarantee (jph), namely: 1. food and drink. 2. treatment 3. beauty agent 4. compound items. 5. natural stuff 6. hereditary design items 7. valuable merchandise. 147 journal of islamic economic laws-january, vol. 5, no. 1, 2022 green industry since the 1972 stockholm meeting, nature activists have begun to forcibly lobby for adjustments to the context of changing events, particularly by consolidating ecological angles into a whole pattern of remedial exercises. the stockholm conference seeks to include all the legislatures on the planet during the time spent assessing and regulating nature, joining the feelings and concerns of the created and agricultural nations, advancing the public interest, and advancing reform by ecological reflection. one of the implementations of ecologically solid improvements must be made possible through a green industry program. sustainable use of green business will help increase productivity, benefits, and intensity in world markets. (al-ghdabi et al., 2019) green supply chain management with five practices (cooperation with customer, green purchasing, green manufacturing, green design, green distribution from one perspective, a methodology that applies standards of effectiveness and anticipation of pollution will have the option to reduce the cost of creation while also fulfilling ecological interests. despite this, the unscripted tv drama that assists in running a green business from organizations in indonesia is not enough. furthermore, concrete evidence of the components of the organizational hierarchy that play a role in determining the implementation of natural administration, especially the use of green business in indonesia, also needs to be examined to contribute to the different meetings. natural strategic management (esm) is an administrative instrument to realize the green industry concept approach at the provincial level. the basic standards and systems adopted in green business are as follows:(atmawinata et al., 2011) a. limiting the use of raw materials, water, energy, and raw materials that are ecologically unpleasant (hazardous and risky) is the same as restricting the development of waste at its source to prevent or potentially reduce the frequency of pollution, natural damage, and harm to people. 148 achmad fageh a. ongoing changes and utilization design apply to both the cycle and the item being created, so it’s essential to look closely at the life cycle investigation of the thing. b. changes in views, mentality, and behavior of each related meeting, including public authorities, communities, and business networks, are enforced by shared responsibility and are also encapsulated in the green business implementation strategy. c. it is implementing innovative naturally benevolent, administrative frameworks that bear in mind standard working methodologies to deal with regulatory prerequisites. d. the implementation of green industry programs must be based on vigilance so that independent guidelines are needed that do not depend on government guidelines or regulations. affirmative nature of humans and the environment humans are equipped with minds and feelings, and humans have the mandate as khalifah on earth to stay away from the destruction of nature. the meaning of caliph does not mean to destroy and shed blood, as the angel claims, but to build a peaceful, prosperous, and just (masruri., 2014). allah swt. knowing the potential possessed by humans so that they prioritize it from angels, who are god’s creatures who always carry out whatever is ordered in the qur’an to stay away from evil. the angels never denied allah. when allah informed us, that humans would be made caliphs on earth, they questioned allah. this point is clearly illustrated in the holy quran. “remember when your lord said to the angels: ‘verily i want to make a caliph on earth.’ praise you and sanctify you? “god said:” verily, i know what you do not know. “ (surah al-baqarah 2: 30). at the same time, the above verse is an order for us to preserve and prosper the earth on which it is a foothold in wise ways and does not damage the environment. for example, by carrying out 149 journal of islamic economic laws-january, vol. 5, no. 1, 2022 agricultural, plantation, fishery activities. allah swt. expressly prohibits all forms of destruction of this universe. “it appears that the damage on land and at sea is caused by the actions of human hands so that allah will feel for them a part of (the result) of their actions so that they will return (to the right path)” (surah al-rum 30: 41). (departement of religion ri, 2020) damage to the ecosystem is artificial. human nature that is always greedy, oppressive, and so on is the ugly side of a human creature. in the view of humanism, environmental damage and imbalance occur due to humans putting their egos first and wanting to control everything (rosowulan, 2019). and indeed, allah has pinned two contradictory traits in humans. both of them will always fight to dominate humans. therefore, according to islamic law, for domination to be won by good character, it must continually be honed with divine wisdom and spiritual values . methods this research is a qualitative research type of library research—sources of data and research results in descriptions or words. it is used to explain building synergies between the green and halal industries. the method analysis used is descriptive (sugiyono, 2017). its relationship with the phenomenon being analyzed. then the data is analyzed to explain building a synergy between the halal industry and the green industry in the maqāṣid al-syari’ah review as the basis of islamic economics. this study uses library documentation or collected reading data sources. after that, the data were analyzed using data analysis techniques, namely, content analysis, inductive analysis, and analytical descriptions. the researcher chooses the data source directly related to the research. sources of data through accredited journals aim to make the data more accurate and more excellent weight value. other data is also through reading book sources and written rules of policymakers with the aim of the research, namely, to build synergies between the halal industry and the 150 achmad fageh green industry in terms of maqāṣid al-syari’ah as a foundation in sharia economics. library data in this study is divided into primary data and secondary data. primary data consists of reading books and written government regulations as the direct reference, namely: a. grounding islamic law through maqāṣid al-syari’ah by jasser auda. b. minister of industry regulation no. 39 of 2018 concerning “green industry certification procedures” c. minister of industry regulation no. 41 of 2017 regarding “green industry certification bodies” d. law no. 33 of 2014 concerning “halal product guarantee” e. government regulation no. 31 of 2019 concerning “halal product guarantee” f. minister of industry regulation no. 17 of 2020 concerning “procedures for obtaining a certificate in the context of establishing a halal industrial zone” g. industry law no. 03 of 2014 h. module “deepening study of industrial structure through efficiency and effectiveness in the implementation of the green industry of the ministry of industry” in 2012. secondary data, which is complementary related to primary sources, namely research journals and research related to the aspects under study, review of documents to support the results of the analysis, here are some articles from accredited journal sources: a. maqāṣid al-sharī’ah as the basic foundation of islamic economics” researched by rachmasari anggraini, dani rohmat, tika widiastuti in 2018 b. the halal food industry development model in indonesia researched by faqiatul mariya waharini and anissa hakim purwantini in 2018 c. analysis of maqāṣid al-syari’ah in the development of halal industry law in indonesia by siska lis sulistiani in 2018 151 journal of islamic economic laws-january, vol. 5, no. 1, 2022 d. environmental strategic management for green industrial zones by m. harun alrasyid in 2016. e. formulation of sme management improvement strategies towards a green industry case study on four smes in surabaya” by ferry suzantho and wahyono hadi in 2019. results the absence of a government policy on sustainability between the concepts of industrial estates, in this case, the green industry concept, was implemented first. the idea of a massive halal industrial area has been planned recently in various regions in indonesia. the halal industry emphasizes the halalan thayiban aspect, which means halal and suitable, while the green industrial area emphasizes environmental elements. so here is the need for continuity between pre-existing concepts, namely green industrial areas that emphasize environmental aspects more than halal industrial areas. of course, with the intention that goodness and welfare are achieved for muslims. so that what we understand in maqāṣid al-syari’ah in applying islamic economics can be completed in this case limiting to five bases as described in the literature review above. this research is more emphasized to bring good things in the green industry, namely musty environmental sustainability and natural preservation. it is also applied to halal industry, such as what is contained in the understanding of maqāṣid alsyari’ah. so that is being able to produce new knowledge for the government as policymakers and business actors in preparing all aspects of it and the muslim community general. they are the users and targets of the policy. it is hoped that later it will produce a perfect policy following the maqāṣid al-syari’ah concept as the foundation of islamic economics. new supply chain result of synergy for the halal industry so far, the basis for implementing the green industry is the 2014 chapter 1 article 1 paragraph 3 states, “green industry is an industry which in its production process prioritizes efficiency and effectiveness in the use of resources in a sustainable manner so 152 achmad fageh that it can harmonize industrial development with sustainability. environmental function and can benefit the community “. then there are the derivative rules, namely. regulation of the minister of industry no. 41 of 2017 concerning “green certification bodies” then continued no. 39 of 2018 concerning “green industry certification procedures.” the halal industry itself is based on law number 33 of 2014 concerning “guaranteed halal products” chapter 1, article 1, paragraph 1, “products are goods and services related to food, beverages, medicines, cosmetics, chemical products, biological products, engineering products. genetics, as well as used goods that are used, used, or utilized by the community”. then there are derivative regulations in government regulation no. 31 of 2019. it contains more details of rules is related to technical implementation in the field. the halal industry is regulated in the minister of industry regulation no. 17 of 2020 concerning “how to obtain a certificate in the context of establishing a halal industrial zone” the latest regulation in the draft employment copyright law, related to obtaining a halal certificate in article 29 paragraph (3), has changed in the period for checking and filing for certification is now trimmed to a span of one working day, and article 48 regulates the guarantee of halal products. there are several related bodies regarding the authorized institutions, namely the halal product guarantee agency (bpjph), halal auditors, and halal inspection agencies. meanwhile, the mui is the one who gives the fatwa after all the processes have been carried out a new supply chain can be a solution to achieve broader benefits, such as what is described in the literature review in the supply chain or supply chain, which can be synergized as follows 1. procurement of goods in a halal manner with the criteria of goods or substitute goods that are environmentally friendly 2. manufacturing process by prioritizing energy efficiency and the use of renewable energy 3. management of waste products or waste (gas, liquid and solid) so as not to damage the surrounding environment 4. halal logistics and distribution. 153 journal of islamic economic laws-january, vol. 5, no. 1, 2022 discussion the business potential of the halal industry in the world is enormous. this sat various countries, both muslim and nonmuslim countries, are vying to work on the business potential of shariah. based on the global islamic economy report 2016/2017, the value of muslim food and lifestyle sector expenditure in the world halal sector reached us $ 3 by 2021. the global islamic economic report 2016/2017 ranked malaysia, the united arab emirates, and bahrain in the top ranks as the most developed countries in the halal industry globally. malaysia ranks first due to its strong performance in the islamic finance sector with many assets, an advanced government, full support, and the highest awareness value. although malaysia’s ranking in 206 decreased slightly in the halal food indicator, which is in the fifth position, it is ranked second in the halal travel and halal pharmaceuticals and cosmetics hands. this reflects a strong tourism sector and certification of advanced halal products. malaysia is considered worthy of ranking first in the world halal industry based on the above criteria. (sulistiani, 2018). in the global islamic economic report, 2016/2017, indonesia occupied the 10th position, far behind malaysia, which was first. from various indicators, indonesia is considered vital in halal travel, where the government plays an active role in promoting it. dunia. (nasar :2017). the scope in the halal industry in indonesia based on law no. 33 of 2014 on halal product guarantee, is: a. food and drink b. drugs c. cosmetics d. chemical products e. biological products f. genetically engineered products, g. used goods used, used, or used by the community. in addition, other aspects of the wider halal industry also include halal tourism, known as sharia tourism, which provides for tourist attractions or hospitality. the legal basis of 154 achmad fageh halal tourism activities is based on law (uu) 10 year 2009 on tourism. previously the government had issued technical rules on halal tourism support facilities in regulation of the minister of tourism and creative economy no. 2 year 2014 on guidelines for implementing sharia hotel business. the ordinance establishes two categories, namely sharia hotel hilal i and sharia hotel hilal ii. in its formulation, the government was assisted by the national sharia council (dsn). however, the rule was finally revoked with the minister of tourism regulation no. 11 year 2016 because it received a mixed reaction from industry circles. then, in 2016, the indonesian sharia council of the indonesian ulema council (dsn-mui) issued fatwa no. 108/dsnmui/x/2016 on guidelines for the implementation of tourism based on shariah. aspects of tourism arranged include hotels, spa, sauna, massage, attractions, and travel agencies. however, the fatwa will not be influential if it is not posted in tourism minister regulations. analysis of maqāṣid al-syari’ah in the development of halal industry synergy scholars assert that islamic law was created to realize the benefit of humans in this world and hereafter. there are primary, secondary and some are tertiary, as stated by imam al-ghazalī and al-syāthibī. according to imam al-syāthibī, the task of sharia is oriented towards the goals of humanity consisting of primary, secondary and tertiary. primer means something that must be there to realize the benefit of religion and the world. if something is lost, the human use will be challenging to discover, even causing damage, chaos, and destruction (ali: 2016). on the other hand, happiness and pleasure will disappear, and actual losses will arise. to help get the two things you need most. first, something that can maintain and strengthen the foundations and rules of sharia and is the central aspect to become the existence of sharia. second, something that can prevent direct or indirect violators of sharia and is an aspect to avoid the extinction of sharia. imam al-qarāfī added a sixth component, namely honor, often as self-esteem. therefore, sharia prohibits slander or accuses adultery 155 journal of islamic economic laws-january, vol. 5, no. 1, 2022 speaks of the disgrace of others. according to imam al-syāthibī, secondary benefit is everything necessary to provide leeway and reduce the usual difficulties of achieving the goal. the advantage of who benefits from virtue is another act that lowers custom and is far from an act of disgrace opposed by common sense. this good is moral superiority. (ali: 2016). maqāṣid al-syari’ah is part of the islamic worldview, which means a way of view, image, or mental attitude towards everything based on islamic values. an understanding of a matter that includes aspects of tawhid against allah as creator and man as servant and caliph of allah awakened from the shreds of evidence of reason and proof of the holy qur’an (mohd. shukri, 2010). maqāṣid al-syari’ah covers various aspects introduced by asy-syatibi through five principal, includes maintaining religion, life, mind, descendants, and property. however, the maqāṣid al-syari’ah should continue to develop following the challenges of its time to meet the human needs of every technological development or the human condition that is innovative and dynamic. the halal industry development in indonesia is inseparable from three essential aspects, namely, aspects of production, distribution, and consumption. hence, it has significant implications for the production process, production, products, distribution, and selection in parts of public consumption. in addition, these three aspects are accompanied by the use increasingly sophisticated and innovative technology, so that it needs to be controlled by a rule, in this case, islamic law within the framework of maqāṣid al-syari’ah. the aspects of production that include the concept and safety of workers in the halal industry can be understood as follows: 1. the foundation of the foundation in the halal industry that is applied is the foundation of tawhid, highlighting worldly benefits, and the afterlife becomes part of the balancing act. aspects of human safety, nature in the activity of production in producing halal products -thayiban becomes part of the concentration of halal industry in the framework of maqāṣid al-syari’ah. 156 achmad fageh 2. in the aspect of goals in the halal, not industry only focuses on maximal luck. still, in addition to benefits, some responsibilities must be considered in the process or results. to prevent and reject all the hopes and good for humans and in the near becomes the priority. in the parts wage workers following the efforts made in their work, even the appropriate wages are within the framework of maqāṣid al-syari’ah to be given before the sweat of the dry worker who relies on the prevalence in hiring. in addition, material value also developed the concept of blessings in the halal industry business conclusion so far, there are four essential activities in the halal supply chain: halal procurement of goods, halal processing, halal distribution, and halal logistics. the green industry itself means environmental sustainability, efficiency in using resources such as materials for a product or environmentally friendly substitutes, water, electricity, and others in the different production processes. more importantly, the waste produced must be treated first if the waste is dangerous. for the environment so that the impact does not damage nature, namely the plant ecosystem, which is also directly related to the animal habitat of industrial areas and must also pay attention to the surrounding environment by including plants around the factory to neutralize the pollution produced the concept of maqāṣid al-syari’ah as the foundation of islamic economics that prioritizes election delicious can be reflected and perfected by combining the two ideas of the halal and green industry. so, what is aspired in islamic economic practice can be achieved, halal and sustainability are maintained so that this research can input the taker’s policy. references ab talib, m. s., hamid, a. b. a., & zulfakar, m. h. 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(2017). metode penelitian pendidikan pendekatan kuantitatif, kualitatif, dan r&d. cv. alfabeta. sulistiani, s. l. (2018). analisis maqāṣid al-syari’ah dalam pengembangan hukum industri halal ل ل ح ضر ۡ ِ ا م ِ م او ك سا لنٱ ا ه ي أ ي و ه نِ إ نِ و ط خ او عِ ب ت ت ل و ا بِ ي طۚ ِ ط ي شٱل .ۡ ت ِ ء و ر م أ ي ا م ن ِ إ ٨٦1 ين ِ ب م و د ع م ك ل ل ع ت. 3, 19–79 uu. no 3. (2014). undang-undang no 3 tahun 2014 tentang perindustrian. in cell. waharini, f. m., & purwantini, a. h. (2018). model pengembangan industri halal food di indonesia. muqtasid: jurnal ekonomi dan perbankan syariah, 9(1), 1. https://doi.org/10.18326/ muqtasid.v9i1.1-13 yeni rohaeni, & ahmad hidayat sutawijaya. (2020). pengembangan model konseptual manajemen rantai pasok halal studi kasus indonesia. j@ti undip : jurnal teknik industri, 15(3), 177–188. journal of islamic economic laws vol. 5, no. 1 january 2022: 116-138 116 islamic insurance in indonesia: opportunities and challenges on developing the industry faricha maf’ula1, denizar abdurrahman mi’raj2 11faculty of economics and business, universitas muhammadiyah lamongan email: faricha_mafula@umla.ac.id 2faculty of islamic economics and finance, sakarya university turkey email: denizar.miraj@ogr.sakarya.edu.tr abstract islamic insurance is a minor industry compared with other islamic financial institutions in indonesia. however, it has enormous potential to grow together with its challenges. this study aims to analyze the opportunities and challenges of the islamic insurance industry in indonesia. this research uses a qualitative methodology to describe the nature of reality. the result summarizes that the possibilities are: domino effect from halal value chain and other development of government-owned enterprises; digitalization in islamic finance; and potential market of micro takaful. the challenges are needing a set regulatory framework as a catalyst to force supply and demand; market penetration is low, issues of islamization insurance and the inadequate development of islamic insurance products, limited retakaful company and qard hassan fund issue in retakaful. keywords: challenges, islamic insurance, sharia insurance, takaful, opportunities introduction islamic insurance has developed in indonesia for more than two decades. the birth of pt asuransi takaful indonesia is the mark of islamic insurance in indonesia. pt asuransi takaful keluarga mailto:mafula@umla. 117 journal of islamic economic laws-january, vol. 5, no. 1, 2022 was established on august 25, 1994 and was inaugurated through the decree of the minister of finance number kep385/kmk.017/1994 (ajib, 2019). the establishment was in line with the emergence of islamic finance in the 90s and the successful establishment of the first islamic bank, bank muamalat indonesia, in 1992. insurance itself has existed in indonesia since the colonial period. islamic insurance, also known as takaful, is insurance with islamic principles. islamic insurance is mutual agreement and focuses on the value of solidarity and common benefits among society (hassan, 2019). table 1. the growth of islamic insurance industries 2015-2021 description 2015 2016 2017 2018 2019 2020 oct2021 full-fledged life insurance 5 6 7 7 7 7 7 general insurance 3 4 5 5 5 5 6 reinsurance 0 1 1 1 1 1 1 islamic window life insurance 19 21 23 23 23 23 23 general insurance 24 24 25 24 24 21 20 reinsurance 3 2 2 2 2 3 3 source: (indonesia financial services authority, 2019; indonesia financial services authority, 2021) the growth of islamic insurance has been significant and relatively stable since its establishment in 1994. it can be seen from the number of islamic insurance operators, as shown in table 1. as of october 2020, there are seven full-fledged islamic life insurance operators and twenty-three islamic life insurance windows operators. while for islamic general insurance, there are six full-fledged islamic insurance operators and twenty islamic insurance windows operators. in terms of operational, the islamic insurance operators are supported by three islamic reinsurance companies that insist on one full-fledged and two islamic window reinsurance. the composition of general insurance and life insurance are almost the same. neither general insurance nor life insurance is dominating. 118 faricha maf ’ula, denizar abdurrahman mi’raj the global islamic insurance market is projected to grow at a compounded annual growth rate (cagr) around 11 percentage during the forecast period of 2021-2026 (imarc group, 2021). meanwhile, in indonesia, by 2020, the market share of islamic insurance toward non-bank financial institution (nbfi) is only 3.5 percentage, whereas nbfi’s market share is 4.61 percentage contribute toward national (indonesia financial services authority, 2021). islamic insurance does not provide significant growth to the islamic finance industry even globally. the primary market of the islamic finance industry is banking, sukuk, islamic insurance, and islamic funds. among all the markets, banking and sukuk are the two main markets. based on the indonesia sharia financial development report 2020 (indonesia financial services authority, 2021), the total asset of islamic insurance is 44.44 trillion rupiah. this number is minor compared with other islamic finance industries. the total asset of full-fledged islamic banks is 397.07 trillion rupiah; the total asset of islamic window bank is 196.88 trillion rupiah; the government sukuk (islamic bond) is 971.50 trillion rupiah, and islamic mutual fund is 74.37 trillion rupiah. however, the islamic insurance industry still has enormous potential for further enhancements. indonesia has a large population and the largest muslim population, but assets are still low. on the other hand, several challenges are facing the islamic insurance industry to grow bigger and compete, both with conventional insurance and other islamic finance industries. maksum (2011) mentioned that the main challenges faced by islamic insurance in indonesia are regulations that do not specifically address islamic insurance activities and lack understanding of the concept of islamic insurance by regulators, companies, and the sharia supervisory board. this research was conducted before act number 40 of 2014, so data is no longer updated. some issues have already been solved by act number 40 of 2014. then, this research is extended version by counting act number 40 of 2014. dikko (2014) highlights that although there are some questions about shariah compliance in terms of 119 journal of islamic economic laws-january, vol. 5, no. 1, 2022 framework and operation, islamic insurance is still an alternative for muslims rather than conventional insurance. however, it did not mention the area of the study—meanwhile, this study focuses on applying for islamic insurance in indonesia. hassan (2019) also analyzed the takaful mechanism and development progression of its procedures. it is essential to face challenges in islamic insurance. then, husin (2019) deliberates the challenges of the islamic insurance business in malaysia; lacking awareness, low penetration rate, inadequate technology capabilities, and shortage of talent. the area of the research is different—the result of this research is a comparative study between indonesia and malaysia. later, al arif & firmansyah (2021) researched islamic insurance regarding a relationship between market structure and profitability in the indonesian islamic insurance industry. it indicates that the more concentrated the industry, the higher the level of profitability. it means that the industry is not in perfect market competition. the high concentration of the industry shows that the number of operators is lower than the number of buyers. it indicates there is room for opportunities. however, based on act no.40 of 2014, article 87, the government encourages the islamic insurance or reinsurance windows business to spin-off from their parent company. this statement implies that the operators might be a merger or have closed their business. therefore, the challenge is that islamic insurance operators will be reduced. besides that, there are some researches that analyze the challenges and opportunities in islamic insurance in indonesia (efendi, 2016; jannah & nugroho, 2019; ramadhani, 2015), but the discussion is not well-defined and only enhances the concept of islamic insurance. the issues of this study are regulatory framework, market penetration, product development, digitalization issues, retakaful, micro-takaful and impact other islamic finance instruments toward the islamic insurance industry. therefore, this study aims to analyze the opportunities and challenges of the islamic insurance industry in indonesia. for the public, this research as insights and literacy of takaful as protection instrument to achieving long-term sustainability financial 120 faricha maf ’ula, denizar abdurrahman mi’raj protection. then, this research would help the policymakers to strengthen the regulatory framework for islamic insurance. it will also help islamic insurance operators comprehend challenges and improvements to develop strategies to promote islamic insurance in indonesia. literature review definition of islamic insurance islamic insurance is also known as takaful. takaful is generated from the root of the word kafl, that means guarantee or responsibility and technically means cooperative insurance against a well-defined expected loss affecting one’s life, property, or other possession of value (billah, ghlamallah, & alexakis, 2019). takaful is derived from arabic word that means guaranteeing each other, meaning that contract parties are support each other when any of the suffers a loss (bekkin, 2007). the takaful insurance focuses on the value of solifromty and common benefits among others (hassan, 2019). the takaful model is derived from the concept of taawun that means helping each other or mutual assistance; the risk being borne among the participants (abdullah, 2012). according to the fatwa of the national sharia council (dsn) of the indonesian ulema council (mui), islamic insurance comes from the words ta’min, takaful, or tadhamun, which means an effort to protect and help each other between several parties through investment in the form of assets and or tabarru’ that provide a pattern of returns to face certain risks through a contract (engagement) that is under sharia compliance. a contract that is used means one that does not contain gharar (fraud), maysir (gambling), usury, zhulm (persecution), risywah (bribery), haram (illicit) goods and immorality. based on act number 40 of 2014, defining islamic insurance as a collection of agreements consisting of the agreement between the islamic insurance company and policyholders and the agreement between the policyholders in managing contributions based on sharia principles to help and protect each other in two ways. first, providing reimbursement of policyholders due to 121 journal of islamic economic laws-january, vol. 5, no. 1, 2022 losses, damages, costs incurred, loss of profits, or legal liability to third parties that participants or policyholders may suffer due to the occurrence of an uncertain event. second, providing payments based on the participant’s death or payments based on the participant’s life with benefits whose amount has been determined and or based on the results of fund management. validity of islamic insurance the concept of insurance is consist of risk management and protection. insurance companies provide protection against financial loss caused by defined unexpected event. therefore, the main activity in insurance is transfer of risk from policyholder to insurance company. however, kassim (2012) highlights the main differences between conventional insurance and islamic insurance. first, there is no transfer of risk between policyholders and company. the insurance risk is shared between policyholders. second, the parties is attach under islamic contract (akad) such as wakala (agency) or mudharabah (partnership). third, shariah advisory board must accept the process, including issue a fatwa regarding the operational. fourth, the business must sharia compliance through annual sharia review or sharia audit. fatwa of dsn-mui number 21/dsn-mui/x/2001 remarks about the agreement in islamic insurance: first, the contract that is bidding policyholders and operator are tijarah and tabarru’ ; second, what is meant by tijarah contract is mudharabah, and tabarru’ is hibah (grant). furthermore, the financial contribution paid by the policyholder will classify into two funds: one is an investment fund according to the principles of mudharabah (profit and loss sharing), while the other is pooled according to the principles of tabarru’ . the implication of mudharabah is islamic insurance acts as mudharib (manager) that contributes its work and policyholders acts as shahibul maal (owner of the fund) that contributes its capital (husin, 2019; bekkin, 2007). in a mudharabah models of takaful, amounts paid by the participants and the investment incomes are used to pay the claim, reinsurance cost and other claims-related expenses from the general insurance fund (puspitasari, 2015). meanwhile, tabarru’ is a paid 122 faricha maf ’ula, denizar abdurrahman mi’raj contribution in favor of helping other participants who suffer loss (billah, ghlamallah, & alexakis, 2019). tabarru’ is essential in islamic insurance because it promotes joint guarantees by supporting other beneficiaries. besides that, there are supporting contract that is binding in islamic insurance. first, wakalah is a management contract where the policyholders give the authority to an operator to manage the fund on their behalf as wakil (agent) (dikko, 2014; husin, 2019). in indonesia, the model reform as wakalah bil ujrah, an agency relationship with providing fee (ujrah) (puspitasari, 2015). fatwa on the application wakalah bil ujrah stated in the dsnmui fatwa number 52/dsn-mui/iii/2006. second, mudharabah musharakah, as mentioned on ojk regulation number 69 / pojk.05/2016, is a tijarah contract that authorizes the islamic insurance operator as mudharib (fund manager) to manage the tabarru’ fund investment and or investment fund and combined with the operator’s assets, in exchange for profit sharing (ratio) the amount of which is determined in advance. overview of islamic insurance industry in indonesia the islamic insurance industry in indonesia comprises life insurance, general insurance, and reinsurance. as of october 2021, as seen in table 1, the total number of companies in the islamic insurance industry is fifty-nine. the number of islamic life insurance is thirty; islamic general insurance is twenty-six, and islamic reinsurance is three. in 2020, indonesia’s islamic financial assets growing by 22.71 percentage (year-on-year) to 1,801.40 trillion rupiah from the previous year of 1,468.07 trillion rupiah (indonesia financial services authority, 2021). however, in the islamic insurance industry, total assets decreased by 2.23 percentage (y-o-y) from 45.80 trillion rupiah to 44.44 trillion rupiah, as seen in table 2. industry’s assets influenced by the growth of the company’s contribution and investment development. the decline in assets in 2020 was affected by a 6.29 percent decline in investment. before 2020, the growing number of assets in the islamic insurance industry increased every year. similarly, the number of investments steadily increased year by 123 journal of islamic economic laws-january, vol. 5, no. 1, 2022 year since 2015. but, the investment number dropped in 2020 because of the covid-19 pandemic. it, directly and indirectly, contributed to financial industry performance in general. in the islamic insurance cases, the islamic insurance investment portfolio is dominated by investment in the capital market. therefore, a decline in the performance of the capital market affected the performance of islamic insurance investment. on the other hand, the total gross contribution increased by 3.84 percentage in 2020. the total gross contribution is expanding every year from 2015 until 2020. table 2. assest, investments, and gross contribution of islamic insurance in indonesia 2015-2020 in trillion rupiah description 2015 2016 2017 2018 2019 2020 assets 26.69 33.12 40.53 41.60 45.80 44.44 investment 23.11 28.55 35.44 36.97 39.89 37.39 gross contribution 10.23 12.31 13.74 15.41 16.75 17.35 souce: (indonesia financial services authority, 2019; indonesia financial services authority, 2021) methods this research uses a qualitative methodology. a qualitative methodology describes phenomena and objects in the narrative (anggito & setiawan, 2018). the qualitative methodology is not experimental research and emphasizes the nature of reality together with its situational obstruction (denzin & lincoln, 2011). because of that, it is suitable for this research. this research is an exploratory study to identify challenges and opportunities in islamic insurance through a regulatory framework, market penetration, product development, digitalization issues, retakaful, micro-takaful, and impact other islamic finance instruments toward the islamic insurance industry. the data was collected from financial service authority (ojk), the indonesian ulema council (mui) guideline, and related theme scientific journal publications. then the data were analyzed using a narrative technique. the narrative approach helps to present all the data into a complete story. a narrative analysis focuses on how an idea 124 faricha maf ’ula, denizar abdurrahman mi’raj or story is transmitted to all relevant sections (ramdhan, 2021). results and discussion opportunities in islamic insurance industry based on the financial highlights sharia insurance november 2021 states that the asset increases (year on year) 1.32 percent, gross contribution increases (year on year) 38.47 percent, penetration slightly increases (year on year) by 0.031 percent, and density increases (year on year) 37.14 percentage (financial services authority, 2021). regarding similar data, the number of penetration as november 2021 is 0,14 percent, and the population is 274 million. it meant that the number of penetration compared with the population of indonesia is only 383,500. analyzing those data, the number of penetration is low. however, it indicates the potential to grow. there are several reasons why sharia insurance can be more developed in indonesia, as outlined below. domino effect from halal value chain and other state-owned enterprise islamic insurance can carry the momentum of developing the halal value chain. halal value chain (hvc) applies the halal concept in the integrated industry, starting from input, production, distribution, marketing, and consumption (antonio, rusydiana, laila, hidayat, & and marlina, 2020). the scope of halal product development includes food and beverage products, tourism, fashion, cosmetics and pharmaceuticals, recreational media, new and renewable energy. through hcv, the government wants to build an ecosystem that supports the development of islamic finance through the collaboration of financial and non-financial industries. islamic insurance taking roles through halal products or islamic financial instruments. first, the islamic insurance scheme supports the export and import of halal food, halal fashion, and halal pharmacy and cosmetics. second, developing and implementing a islamic insurance scheme for commercial travel. third, islamic insurance can be a distribution channel and commercialization of the islamic capital market value chain. fourth, coming from sukuk 125 journal of islamic economic laws-january, vol. 5, no. 1, 2022 and the government project that uses islamic finance instruments. the collateral for underlying assets in the issuance of sukuk or infrastructure projects can use islamic insurance. lastly, islamic insurance as distribution channel and commercialization from a new islamic government-owned bank. on february 1st, 2021 government legitimated a three-way merger of the islamic subsidiaries of state-owned banks called bank syariah indonesia (bsi). bsi is the merger between bni syariah, bri syariah, and bank syariah mandiri (bsm), based on the ojk permit number: sr-3/pb.1/2021. the positive effect of this merger can increase islamic financial literacy. bsi is supported by significant capital and resources. bsi also strengthens islamic finance position and market share. similarly, there is potential for islamic insurance from developing other state-owned enterprises. the government’s islamic economic masterplan 2019-2024 (ministry of national development planning, 2018) also mentions that one of the firm plans to boost the demand for islamic insurance is offering stateowned enterprises’ employees to use islamic insurance options for their insurance cover. islamic insurance can also collaborate with the people’s housing savings (tapera), pension fund. and social health insurance administration body (bpjs). tapera is a government program to help indonesians own or buy houses at affordable prices. meanwhile, bpjs and pension fund is currently not supported by islamic contracts. lastly, islamic insurance can support hajj fund management agency (bpkh) as a distribution channel and protection. digitalization in islamic insurance digitalization in islamic insurance can support efficiency within the company. some of the digitalization applications are digitalization in distribution channels, digital payments, digital marketplaces, and other digital initiatives. adapting financial technology makes insurance operational costs will be more efficient. currently, insurance marketing in four ways, based on the ojk circular letter number 19/seojk.05/2020, states that: direct marketing; insurance agent; bancassurance; and business 126 faricha maf ’ula, denizar abdurrahman mi’raj entities other than banks. digitalization makes it more leisurely for customers to access products without coming directly to insurance offices, agents, banks, or other financial institutions. customer easily opening a islamic insurance polis through application, or doing consultation through tele-consultation operators can collaborate with electronic wallet companies and commerce service companies for payment distribution and product offering. another marketing digitalization is implementing big data as a customer search technique. operators use big data to reach more consumers. using big data, an operator can reach new potential customers according to a specific area, needs, segmentation, and target market. increasing digitalization in islamic finance can be the momentum of the islamic insurance industry to sell more efficient and effective products to the market. the pandemic has also been a positive side to boosting financial technology (fintech). it helps speed up the islamic financial institution (ifi) to develop its products via digital platforms. digital-based financial institutions have become much more popular during the pandemic. by implementing digitalization, islamic insurance can target the young generations. as husin (2019) mentioned, investing in adequate technology can reach more types of customers. the implementation of digitalization in islamic insurance has been practiced in program kitabisa saling jaga sesama through crowdfunding management by the kitabisa application (aisy, 2021). optimalization of islamic micro insurance creating the islamic micro insurance that aligns with the spirit of islamic finance that supports all the communities. for consumers who have small incomes or live in small cities and rural areas, insurers can offer islamic microinsurance (micro takaful) products with small contributions. microtakaful can offer fisherman, plantation, agriculture, or particular unit link insurance for low-income communities. some microinsurance products have been developed, such as insurance for fisherman, rice farm insurance (autp-ausransi usaha tani padi), beef cattle 127 journal of islamic economic laws-january, vol. 5, no. 1, 2022 insurance (auts-ausransi usaha ternak sapi), and some pilot projects were established with world bank, ojk, and indonesia insurance association. microtakaful has also been offered in the form of life insurance and general insurance. some of its products include personal accident insurance and inpatient insurance. the concept of brotherhood will attract the people outside the urban area who mostly have high solidarity. notably, the concept of micro takaful designs to help the poor to hedge the risk from unexpected economic suffering such as failure in harvesting, illhealth, death, or other unexpected events. then, the micro takaful contributes to reducing poverty, hedging the risk, and improving the health status of the poor. the islamic insurance company needs to commit and contribute actively to develop the microinsurance market. islamic insurance can cooperate with micro-financial institutions such as baitul maal wa tamil (bmt), cooperative, islamic rural bank (bprsbank perkreditan rakyat syariah), or small media enterprises. a simple and cheap concept is a concept that must be emphasized in micro-takaful. searching how other country. challenges in islamic insurance industry despite all of the opportunities mention above about how islamic insurance growing bigger, there are the challenges that faces indonesia islamic insurance industry as outlined below. issues in regulatory framework the regulatory framework is essential both for insurance companies and the policyholder. the primary objective of the regulation is the safety and soundness of insurance companies and policyholders. from the government’s perspective, the regulation’s function is a government control instrument. the lack of government regulation raises the problem. as happened in bangladesh, there are numerous operational problems in islamic life insurance because of a lack of government rule (khan, rahman, yusoff, & noordin, 2018). regulations that specifically regulate insurance businesses with sharia principles were only enacted 16 years later through 128 faricha maf ’ula, denizar abdurrahman mi’raj regulation of the minister of finance (pmk) number 18/ pmk.010/2010 concerning the implementation of basic principles for an insurance business and reinsurance business with sharia principles. the objective of this pmk is to fulfill islamic principles and legal certainty in implementing insurance and reinsurance businesses with sharia principles. in form of institutional framework, before early 2013, the insurance sector was regulated by bapepam-lk (badan pengawas pasar modal dan lembaga keuangan – capital market and financial institutions supervisory agency). the new authority, indonesia financial services authority (ojk), took over the responsibilities of financial institutions. since then, ojk and the ministry of finance have been more proactive and producing a more significant number of guidelines and policies. the legal aspect and infrastructure on insurance has been regulated after act number 40 of 2014 and followed by government regulation, ojk regulation, ministry of finance regulation, and ojk circular letters. all the regulations encounter company framework, corporate governance, financial soundness, operational and administrative issues. this act introduced some significant changes to the industry and regulations of islamic insurance. before that, there was no particular act for islamic insurance under act number 2 of 1992. besides that, there are guidelines from fatwa of the national sharia board of indonesia ulama council (dsn-mui). however, the fatwa of dsn-mui does not have legal force because it is not part of the indonesia law framework however, indonesia still needs a specific act to regulate islamic insurance. act number 40 of 2014 is the act that covers both conventional and islamic insurance. indonesia does not have enacted specific laws governing the islamic insurance industry. the specific law need to focus on solvency, solvability, and cash flow. muneeza & hassan (2014) mentioned that there is a need to establish a specific islamic corporate governance code for islamic financial institution. regulatory framework is proven as one of the keys behind the positive growth of islamic insurance in malaysia under takaful operational framework, risk-based 129 journal of islamic economic laws-january, vol. 5, no. 1, 2022 capital for takaful (rbct), and islamic financial service act (ifsa) 2013 (husin, 2019). ifsa 2013 is a comprehensive islamic finance regulatory framework that covers six sectors of the industry: accounting, islamic banking, sharia governance, takaful, sukuk, and islamic funds. in indonesia, there is no solely act about islamic insurance. some of the existing policies should be upgraded into the act, such as issues about qardh funds on ojk regulation number 72 of 2016. act number 40 of 2014 did not provide the requirement of qardh funds, whereas the qardh fund is an essential element of islamic insurance. the rules regarding qardh have just been mentioned in the minister of finance regulation (pmk) number 18/pmk.010/2010. in addition, act number 40 of 2014 did not clearly state the separation of takaful fund and shareholder fund or investment fund and tabarru’ fund. although it stated that the funds are different funds and different uses. another significant highlight about islamic insurance from the act no.40 of 2014 is article 87. the government encourages the islamic insurance or reinsurance windows business to spinoff from their parent company. in january 2020, the government issued government regulation number 3 of 2020, amending government regulation number 14 of 2020 on the foreign shareholding rule to allow spin-off takaful windows exemption from the statutory 80% foreign ownership limit. it is a relaxation regulation to help islamic window insurance spin-off from their parent’s company to comply with act number 40 of 2014. however, the spin-off process requires a lot of capital support, human resources, infrastructure, tax, and increased minimum capital requirement. on the other hand, managing islamic insurance windows is challenging. there are many challenges faced by islamic insurance windows, namely misperceptions in sharia compliance; limited investment activities; the possibility of the company making investments that contain maysir, gharar, usury, haram; confusion in implementing branding and marketing; lack of staff understanding of islamic finance principles; reinsurance activities are carried out at conventional reinsurance companies (alshammari, altarturi, & alokla, 2021). 130 faricha maf ’ula, denizar abdurrahman mi’raj market penetration is low the biggest challenge on islamic insurance is low market penetration. as seen in table 3, the average penetration number is only 0.103 percent. the number of populations, especially the muslim population, is significant; however, the penetration number never reaches even 0.5 percent. the lack of public awareness is one of the most critical challenges which makes low penetration rate. even though the industry has provided various products and support from the government, the public does not fully understand the concepts and practices of islamic insurance. in 2019, the literacy rate of the sharia insurance industry was 3.99 percent, much lower than the conventional insurance industry literacy rate of 18.64 (financial services authority, 2019). while, the islamic financial literacy index is 8.93 percent. a clear understanding of sharia compliance in islamic insurance products as the product literacy will enrich the customer awareness as an essential marketing strategy (khan, rashid, yaqub, & abbas, 2020). table 3. gdp, populution, and penetration islamic insurance industry in october 2020-october 2021 gdp population (in million) penetration october 2020 12,783 271 0.107% november 2020 14,062 271 0.109% december 2020 15,434 271 0.112% january 2021 1,286 274 0.145% february 2021 2,572 274 0.138% march 2021 3,859 274 0.151% april 2021 5,145 274 0.150% may 2021 6,617 274 0.145% june 2021 8,146 274 0.142% july 2021 9,504 274 0.141% august 2021 10,862 274 0.139% september 2021 12,472 274 0.135% october 2021 13,858 274 0,137% source: financial services authority (2021) 131 journal of islamic economic laws-january, vol. 5, no. 1, 2022 generally, the demand for islamic finance needs to escalate. improving public literacy is the key. activities to increase financial literacy can be through education, socialization, and promotion. the next step in increasing the demand for islamic insurance by increasing the capacity of insurance companies. several strategies can be implemented are efficiency through service digitization, product differentiation to reach diverse customer segments, providing excellent service, capital strengthening, and emphasizing the values of the sharia proposition as a selling point. issues in islamic insurance product the basis of the agreement of islamic insurance product is the unique value proposition and making islamic insurance different from the conventional. the basis of agreement in islamic insurance is to guarantee each other against loss, mutual help, and brotherhood. the implication from this concept can be seen from tabarru’ fund and surplus sharing among the policyholders. tabarru’ fund is a collection of funds derived from the contribution of policyholders, which are used to cover policyholders’ claims. tabarru’ fund is showing mutual help as encouraged in islam. different from conventional insurance, islamic insurance operators can not withdraw these funds. in indonesia, tabarru’ funds are invested like an investment fund, and the profit will be distributed to the policyholders. secondly, the investment does not invest in the transaction or instrument related to riba, maysir, gharar, and other haram things. the surplus from the investment will be distributed based on a specific contract among the policyholders and operator as the fund manager is also alongside with spirit of mutual help. the insurance company does not own any policyholder’s funds, and the insurance company will act as the fund manager, including the contribution fund. therefore, the contribution fund (premium) is not imposed with any tax and is not included as taxable goods. the tax will be imposed on dividends on investment funds as stipulated in the act of income tax number 36 of 2008. the amount depends on the subject of the policyholder, whether personal or institution. 132 faricha maf ’ula, denizar abdurrahman mi’raj another issue regarding the product development is that many people criticize islamic insurance products resembling and islamization conventional insurance (dikko,2014; efendi, 2016). the idea may be the same, but the concepts and practices are primarily different. islamic insurance provides the insurance regarding the islamic laws. they provide suitable needs to the muslim and non-muslim consumers at once. therefore, product innovation is important to appeal the community to buy islamic insurance product; then it will expand the islamic insurance market (nugraheni & muhammad, 2020). islamic insurance operators need to develop a suitable product for various types of customers. development of product is based on observing consumer and the market analysis. in addition, the sharia values proposition must emerge in all operational and non-operational aspects of the islamic insurance company. islamic insurance needs to give excellent services, competitive prices and benefits, and other features to compete with conventional insurance. efendi (2016) also highlights that the strategies for product development understand the type of consumer, rationalist neither idealist nor emotionalist, observe the existing market pattern, and provide service excellence. the islamic values is important, but understanding the needs of consumer and finding a suitable product is the fundamental function of financial institution. issues in retakaful act number 14 of 2020 define islamic reinsurance business as a management business risks based on islamic principles on risks that faced by islamic insurance companies, companies sharia guarantee, or sharia reinsurance company. the core activities of islamic reinsurance or retakaful have the same basic concept as islamic insurance, namely carrying the concept of risk-sharing instead of risk transferring. retakaful is a development of the islamic insurance industry, which has the same goals as sharia insurance, where one party acts as the insurer that may befall the insured (insured/policyholder). the insurer in the context of islamic reinsurance is a retakaful company, while the insured is an islamic insurance company. the benefits from retakaful are 133 journal of islamic economic laws-january, vol. 5, no. 1, 2022 risk spreading, capacity boosting, income smoothing, financial stability, protection against catastrophic losses, underwriting assistance, stabilization of insurance portfolio, and to protect its margin of solvency and allowing for better underwriting flexibility and capacity (ahmad, mahbob, & ayub, 2016; hasan, 2011). in indonesia, the number of retakaful company is limited. it is because the industry is still insignificant. there is only one full-fledged retakaful company called pt reasuransi syariah indonesia and three retakaful windows, namely pt reasuransi internasional indonesia, pt reasuransi nasional indonesia, and pt maskapai reasuransi indonesia tbk. the retakaful windows have the risk of mixing investment with their parent company. therefore, the role of the underlying contract (akad) is essential. besides that, there are other issues in retakaful, as yusuf (2011) mentioned: provision and ownership of qard hasan fund, the distribution of underwriting surplus, enterprise risk management (erm) guidelines for a different type of underlying contract. hasan (2011) clarifies that the qard hassan can own either participants or retakaful company. if the qard hasan contract is concluded from the day the fund is created, then it belongs to participant and any return is accounted for retakaful fund. if the fund creates in the name of islamic insurance company and no qard hasan contract has been concluded yet, and only a promise will be given in case of deficit, then the qard hasan fund will be used to rectify in common retakaful fund to protect its solvency. the owner of this fund is retakaful company. conclusion the islamic insurance industry is minor compared with islamic banking. however, it has enormous potential for enhancements. developing islamic insurance requires commitments and supports from all stakeholders, such as the government, insurance industry, supporting industry, and public. three opportunities advantage the islamic insurance industry: domino effect from halal value chain and other development of government-owned enterprises; digitalization in islamic finance; and potential market of micro takaful. on the other hand, several 134 faricha maf ’ula, denizar abdurrahman mi’raj challenges are needed to tackle. first, the issues in the regulatory framework. islamic insurance needs a comprehensive regulatory framework, including regulations and guidelines as the catalyst to force supply and demand within the industry. second, market penetration is low. third, the issue of islamization of conventional insurance products and the low development of islamic insurance products. the sharia values are essential, but understanding the needs of the consumer and finding a suitable product is the fundamental function of a financial institution. fourth, limited numbers of full-fledged retakul dan issues on qardh hasan fund. developing islamic insurance requires commitments and supports from all stakeholders, such as the government, insurance industry, financial industry, non-financial industry, and public, practiononer. references abdullah, s. 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(2011). revisiting and redefining the concept of retakaful and the viability of its model in malaysian takaful industry. business & management quarterly review, 2(4), 20-32. dipetik december 20, 2021, dari https://ir.uitm.edu.my/id/eprint/5856/1/aj_rosmi%20 yuhasni%20mohamed%20yusuf%20bmqr%20 11%201.pdf journal of islamic economic laws vol. 4, no. 1 january 2021: 1-25 1 characteristics of moslem families economy based on maqashid sharia perspective faris shalahuddin zakiy1*, ahmad muhtadi ridwan2, achmad sani supriyanto3 1uin walisongo semarang 2faculty of economics and business, uin maulana malik ibrahim malang 3uin maulana malik ibrahim malang email: farisshalahuddinzakiy@walisongo.ac.id, read_one_feuinmlg@yahoo.co.id achmad_sani72@yahoo.com abstract modern lifestyle has interfered principles of moslem families. this era tries to define attitude, wealth value, and social position of individuals in society. it might become a doctrine, patent product, challenge or threat. the objective of this research is to elaborate the islamic characteristics within the economy of moslem families and also implementation of maqashid sharia in the economy of moslem families. this research exerts case-study, by determining selected informants from the community of moslem small entrepreneurs in malang. the findings show that the moslem families consider faith (iman) as basic foundation of economy. they also hold on to character perfection that is based on akhlaqul karimah, lawfulness and wholesomeness, priority scale as expenditure reference, moderation as absolute standardization and responsibility of woman’s wealth proprietary. internalization of islamic economy principles in the moslem families economy includes the statement that working as a form of ikhtiar and worship, expenditure as material and spiritual distribution of wealth, savings as urgent post in the future, and wealth as instrument to serve to allah. finally, it is important to regard maqashid sharia as a standard of muslim action in economy. keyword: characteristics, islamic economics rules, moslem families economy, maqashid sharia journal of islamic economic laws-january, vol. 4, no. 1, 2021 2 introduction rampant modern lifestyle in indonesia has been started from history of economic globalization and capitalism which is indicated by the hegemony of food, fun, fashion, and thought (mustofa, 2008). this hegemony is verified by the presence of modern shopping center, freelance industry, fashion industry, beauty industry, gossip industry, real estate, luxury goods advertisement, import brand-minded, fast food, hand phone, and some sort of lifestyle showed in advertisement industry and television (hendrariningrum, et al, 2008). this era defines attitude, riches value, and social position of each individual in society (chaney, 2004). it might even be a doctrine, patent product, challenge and at the worst threat to the moslem families (mustofa, 2008). modern age is also an era of changing value on the society coming from the western culture, and then affects to the imbalance between this ideology and religion ideology. the culture of individualism, consumerism, hedonism, and materialism as part of western ideology (mustofa, 2008) which are based on the prideful and luxurious life, prestige, show off consumption, and profit oriented aim to shift character and economic principle on the economy of moslem families (alfitri, 2007). having good character and principles on the economy of moslem families is actually not enough to cope with the impact of nowadays modern lifestyle. it needs more effort on internalization of divinely doctrine into the character and economic principles. this statement is in line with syahatah. he asserted that the economy of moslem family means economic principles and rules which applied in the scope of family that are based on qur’an, hadits, scholars’ opinion, and islamic studies related to the economy in order to implement maqashid sharia and comply with material and spiritual need of family which is certainly on proportional scale (syahatah, 1998). moslem families might have several different professions, and yet have single uniqueness in business world. this is called entrepreneur. a successful businessman is indicated by the zakiy et al. 3 luxurious lifestyle, glamour, excessive pretension and ambition towards riches and luxuries. even more, some scholars regard the business world as the biggest world affair which would deliver bad impact for human to be always busy with their affairs and then neglect to remember allah. malang is one of cities that the researcher wants to highlight in this research discussion, since this city has been a metropolitan city with so many modern shopping centers in town and modern lifestyle of society. it indicates that the effect of lifestyle modernization is quite significant to the economy of moslem families. this research aims to examine and to clarify in depth the economy of moslem families on the small moslem entrepreneurship of malang which covers to the characteristics and principles of islamic economy and realization of maqashid sharia principle in the economy of moslem families to cope with the era of modern lifestyle. literature review economy of moslem families economy of moslem familes is a principle and rule of family economy which is based on islamic norms. the norms aim to fulfill both spiritual and physical need of the family member (syahatah, 1998). this definition implies several indicators for the economy of moslem family: 1) the economy of moslem family is considered as collection of principle and rule that are based on the islamic norms from qur’an, hadits, and scholars’ opinion. 2) the system of islamic economy for the family is part of islamic economy system in the state. 3) the economic system of moslem families includes characters, incomes, expenditures, savings, and ownership, which have purpose to realize the sharia principles to the family member (syahatah, 1998). characteristics of moslem families’ economy to keep balance between the spiritual and material need, it needs a number of characteristics below within the economy of moslem families: journal of islamic economic laws-january, vol. 4, no. 1, 2021 4 value of faith (iman) value of iman is regarded as a base of moslem families’ economy. then, it is a must to the member of family to maintain the family income and expenditure from the matters that are banned in sharia principles. moreover, the moslem families should regard the wealth as medium of worshiping allah. it is written in the qur’an (qs. al-hadid: 7 dan qs. an-nahl: 71) and hadits which asserted that on the jugdgement day, man would be asked about four questions; the question of wealth ownership, from where the wealth is obtained and to whom the wealth is given (narrated by tirmidzi). value of character (akhlaq) value of akhlaq refers to trusteeship, honesty, contentment, and patient. they are the main characters needed in the economy of moslem families. one hadits said that for the family with faith and good character, allah will shower them with prosperities and blessings (narrated by bukhari and muslim). it is in line with firman allah (qs. at-taubah: 119 dan qs. an-nisa: 58). value of lawfulness and wholesomeness income and expenditure of a family must be clear from every badness and illicit in life of moslem. as it has been written in qs. an-nahl: 114, qs. al-baqarah: 172, qs. al-baqarah 173 dan qs. al-maidah: 90. priority scale scale of priority is allocated for expenditure, investment, and production. it is good to give priority to the important and essential needs of family, then hajiyat and tahsiniyat needs. this priority scale is allocated to realize the principle of maqashid sharia, which means to take care of religion, soul, mind, wealth, and generation. balance to have a balanced income and expenditure aims to stabilize the balance of family’s budget. however, this balance does not zakiy et al. 5 mean to be too economical, which seems to be stingy and miserly. this balance should be proportional and be able to fulfill the spiritual and material needs of family. this statement is explained in the qur’an (qs. al-furqon: 67 dan qs. al-qashas: 77) and hadits that human should eat and dress up on their own course, but do not be over (narrated by bukhari and muslim). the other hadits said that allah will shower the blessings to the human who work in lawful manners, spend money in thrift, and save money for the hardest time (narrated by bukhari and muslim). value of responsibility and honor to the wealth ownership islamic principles teach human to honor and own the responsibility especially for the man to work and earn money, and also to honor wealth ownership and woman. every man and woman has each right over this matter as it has determined in qs. an-nisa: 32 dan qs. an-nisa 34. principles of islamic economy on the economy of moslem families principle of to make effort and work according to ibn khaldun, income refers to the value of work. the meaning of income differs from the term blessing. human works in order to earn money. if this income delivers profit to fulfill the needs, then this income is called blessing (khaldun, 2013). income means the result of doing work and effort. independent work means every activity that is dynamic and has purpose to comply with the spiritual and physical needs (aziz, 2013). therefore, to work is an obligation that mentioned in islam. in islamic principles, work motivation is not only based on will to earn money, but also activity of worship, economic aspect, and delivering profit for other human (diana, 2011). islam has regulated human to work and earn money. as for, the rules that are obliged for the moslem families to work and make effort, they are (syahatah, 1998): 1) to work is man’s duty, 2) wife has the right to work under certain circumstances (upon the boundaries determined by sharia) to help the family economy, journal of islamic economic laws-january, vol. 4, no. 1, 2021 6 3) to keep balance between work and family rights, 4) to earn lawful money and have kind of lawful profession and work, also to work in lawful manners. principle of expenditure from the consumption manner proposed by salman alfarisi, it is concluded that the sort expenditure that is obliged to the moslem families are: 1) to expend consumption to fulfill the family needs, either material or spiritual needs. 2) to expend donation for goodness as realization of social function of wealth, this donation is mandatory (zakat) and voluntarily (infaq, shadaqoh, and other forms of donation). 3) to expend investment to develop wealth to the profitable business sectors, indeed in lawful manners (djalaluddin, 2018). principle of saving other than to expend consumption, donation and investment, islam also encourages moslem families to save money. there are verses that banned the practice of excessive expenditure (qs. al-isra 26-27 dan 29). these two verses become the base argumentation over this principle. independent saving means to save some fund to be utilized in the future which come from the rest of income and expenditure (djalaluddin, 2018). principle of ownership ownership is significant to be considered as it could encourage and boost the work motivation and productivity to live prosperously; even it becomes a base of transaction. by the ownership, the families are able to have consumption, investment, production, and distribution. in islamic view, wealth is tentative goods. therefore, the moslem families regard the ownership as a instrument to boost the spirit of worship to allah. definitely, the wealth is utilized in good things (syahatah, 1998). then, it is also important to separate the wealth ownership of husband and wife. islam gives right to the woman as ownership right, entrepreneurial right, and hereditary right. for this, the man is prohibited to take over the wife’s wealth, except it is used in good zakiy et al. 7 deeds. the inheritance is one of ownership source. the inheritance is asserted to be ownership transfer from one generation to the next one (syahatah, 1998). maqashid sharia maqashid sharia comprises of two words, maqashid and sharia. the term of maqashid comes from the plural form of the word maqsud which means purpose and intention. terminologically, the term of sharia means a path to spring. this path head to the spring that means that this path would heald human to the principal base of life (shidiq, 2009). maqashid sharia refers to comply with the human needs by the manner of realizing common good and avoiding harm from the human. generally, common good is able to achieve in two manners (syarifuddin, 2008): 1). to realize benefit, good deed, and prosperity to the human, it is called as the term of jalb al-manafi’. this benefit could either feel about directly or indirectly in the future. 2) to avoid or prevent damage and bad deed, which is called as dar’u al-mafasid. as for, to put the standardization to determine whether this deed categorized as common good or harm is basic needs for human being life (muslimin, 2012). religion preservation in this matter, the primary, secondary, and tertiary need of moslem families that have to be complied with is to take care of religion, association, and moral. all aspects of economic activity in family, like to earn money, to expend family’s need, to do investment, to save money and have ownership should be based on the doctrine of ilahiyah, lawfulness and wholesomeness, and to prevent the families from illicit and doubtful things (hafidhuddin, 2007). soul preservation to maintain the existence of families’ viability, there are number of needs that should be fulfilled by the families from the aspect of dharuriyat, hajiyat, and tahsiniyat needs. from the dharuriyat aspect, family should fulfill the need of clothing, house, journal of islamic economic laws-january, vol. 4, no. 1, 2021 8 food, and health facilities. from the hajiyat aspect, the family should fulfill the need of vehicle, communication equipment, and household ware as stove, refrigerator, and other equipments. last, from the tahsiniyat aspect, if the family is living in prosperity, they should consider taking care of unproductive or old parents and ex-wife who has been divorced while she is pregnant, or if it is necessary to decorate the house living and buy some accessories (syahatah, 1998). intelligence preservation a good family should be able to fulfill the needs of family member. from the aspect of dharuriyat, the family should comply with the need of education particularly for the children. this need is important to produce smart, strong, and pious generation (hafidhuddin, 2007). wealth preservation there are some needs that should be complied with the family. from the aspect of dharuriyat, the family is obliged to allot some amounts of wealth to pay zakat, infaq, shadaqah, and wakaf. then, if the surplus is still existed in the families’ economy, this wealth had better save and make investment in order to be well distributed to the real and profitable sector of business. the inheritance might also be allotted as it is mentioned in sharia, that the wealth had better distribute and manage in lawful business. from the aspect of hajiyat, the family is banned to do things that are illicit, like riba, gharar, risywah, corruption, bribe, thieving, and many others (sahroni & karim, 2015). lineage preservation marriage is a need for adult in a family, and then this need is categorized into dharuriyat. to fulfill this need the families do not only teach the children about the islamic association, but also to prepare the children’s future related to the marriage fund (syahatah, 1998). zakiy et al. 9 methods this research is categorized into case-study research. the case is the surrounding phenomena of moslem families in the highlight of economy aspect. the researcher exerts informants from the small moslem entrepreneurs in malang under the criteria of small entrepreneurship asserted in acts 20 of 2008 which mentioned that the small entrepreneur who has assets more than fifty millions up to five hundred millions and turnover more than three hundred million up to two point five billions. those small entrepreneurs should be islam and the business are managed and operated according to sharia rules. the researcher collects the data through in-depth interviews, direct observations, and documentations. through those techniques of data collection, the researcher focuses to examine and investigate the phenomena of small moslem entrepreneurs including the characters and principles of islamic economy. from these techniques, the researcher finds some concept development that is appropriate to the local wisdom, particularly malang for the moslem families which is in accordance with sharia principles. this research aims to solve the severity of modern lifestyle era which tends to set aside the characters and economic principles of moslem families from the original principles that have been determined in islam. result and discussion generally, the small moslem entrepreneurs in malang are gathered in several communities as kpmi (komunitas pengusaha muslim indonesia), iibf (indonesian islamic business forum), jpmi (jaringan pengusaha muslim indonesia), tda (tangan di atas), mtr (masyarakat tanpa riba), sbc (sukses berkah community), gbc (grounded business community) and many other communities. from the observation result, here are eight informants that have been interviewed, and the data will be shown in the table below: journal of islamic economic laws-january, vol. 4, no. 1, 2021 10 table 1. profil of informant no item n percentage 1 sort of business culinary service commerce 3 4 1 37,5% 50% 12,5% 2 age below 25 years old 25-35 years old 35-50 years old 0 7 1 0% 87,5% 12,5% 3 sex male female 8 0 100% 0% 4 martial status married single 8 0 100% 0% 5 number of children 0 1 2 3 < 3 1 1 2 2 2 12,5% 12,5% 25% 25% 25% 6 education diploma undergraduate mater degree doctoral degree 3 5 0 0 37,5% 62,5% 0% 0% 7 omzet 500 million – 1 billion 1 billion – 2,5 billion 5 3 62,5% 37,5% source: processed data (2018) building spiritual values from the economic characteristics of moslem families iman as principal foundation of economy the spiritual values seem to fade recently in the economic characteristics of moslem families. then, it is absolute to build those values, since actually the economy of moslem families must be based on the islamic principles to pursue and realize maqashid sharia practice. fundamentally, iman becomes a self shield for the economy of moslem families. the moslem families zakiy et al. 11 should take care and improve their iman by any effort to keep consistent in worship. the worships are not only restricted solely to the owners who are the patriarch in their families, but also the owners should be able to influence and invite the employees to be able to realize that kind of worship as they have been tried to their own families. to maintan iman, man should also pay attention to the source of their income and expenditure from the things that are illicit. the moslem families as small moslem entrepreneurs do consider to this point. within the business management, they watch over the kind of business, selling goods, and raw materials. for instance, the small moslem entrepreneur who focused on culinary business, they surely paid attention to the lawful food compositions, cooking and production process, and serving manner. the small moslem entrepreneurs who are focused on chicken butchering and aqiqah, they considered to the way of lawful butchering of chicken and lamb according to the sharia in order to watch over the lawful and good quality of meat. the small moslem entrepreneurs who are in service sector, they would not serve pre-wedding clients except families, photography class, and profile company, the moslem families do avoid to expend some funds that are prohibited in islam like to help the strange funds that seemed as doubtful, except to expend some funds for the purpose of shadaqah to orphan children, poor families, mosque building and many other forms of funds that might bring good benefit to other human. in short, the moslem families prevent their selves from the activity of riba that mostly emerged in this modern era. moslem families regard that to honor the wealth they owned in lawful ways is a form of iman. the moslem families believe that the wealth is entrusted good, challenge, medium of worship, and instrument of dakwah. entrusted good means that the wealth is tentative thing in this world and it would not be carried with us until akhirat. challenge means that the way moslem families honor and manage the wealth, it indicates how good or bad they are. the wealth could be useful for not only the family member but also to the other human. therefore, the wealth could be medium of worship and instrument of dakwah. as many as journal of islamic economic laws-january, vol. 4, no. 1, 2021 12 moslem families have much prosperity, the level of their iman ought to be higher. it means that they should be able to keep good heart, take care of self, have good character, improve worship and offer more shadaqah. character perfection is based on akhlaqul karimah to have good character transforms the economy of moslem families to be perfect. by having good character, it would create harmony within the moslem families, relation with the employees, customers, suppliers, investors, and other human beings. the moslem families should have these characters: honesty, appreciation, professionalism, discipline, time appreciation, respectful, trusteeship, brotherhood, agreement, and contentment lawful and wholesomeness as vital and absolute point for moslem families, the term of lawful means to prevent everything that seems to be illicit and doubtful like transaction of usury, improper butchering manner, pre-wedding service, and illicit or doubtful raw materials consumption. the term of wholesomeness means to prevent the ways that are banned in islamic principles. besides, the moslem families also should consider to the aspect of food consumption. it should be lawful and self-cooking if it is necessary, to minimize and avoid fast-food consumption, and prefer to by foods to the moslem groceries and restaurants. lawful and wholesomeness is important point to the economy of moslem families, since lawful and wholesomeness is absolute and obligatory for the moslem. the purpose is to pursue the blessings of life from allah ta’ala. to be blessed means to have comfortable and happy life in the world and the day hereafter. the blessing from allah is not only dedicated for individuals, but it is also useful for the family of employees, customers, suppliers, and other involved human beings. moreover, lawful has good impact to the whole aspects of life as family’s harmony, blessed wealth, generation and surrounding society. lawful is not only measured from how the moslem families get and produce that wealth, but also how the quality of that wealth is produced and could be distributed for the benefits of other human being. zakiy et al. 13 scale of priority as an expenditure reference to set priority in expenditure is important in order to manage the economy of moslem family. the scale of priority is divided into three significant things, they are: essentials, complementaries and embellishment. the moslem families should firstly prefer to the essential needs before coming to the other needs, since to fulfill this need is influential to the existence of life. moreover, to fulfill this dharuriyat need is also based on the aspect of what moslem families need, it is not on what they want. first, the moslem families should fulfill essential needs as clothing, house, food, money for both the wife and children, toy for children, gift for wife, electronic tools, and many other. this level of need priority is relative, which means that each moslem family has their own ways to manage, but commonly they are as mentioned in previous explanation. this priority scale might be different because each moslem family has different level of economy and different stage of need compliance. moderation as absolute standardization in this matter, balance means to balance between the income and expenditure and to prevent excessiveness, but it does not mean to be stingy and too thrifty. this balance means to buy consumptive goods without having any debt, instead to put some savings. it indicates that the moslem families are able to be thrifty. to be thrifty and economical does not mean to buy goods based on what the moslem families want, but to manage expenditure that are based on the need of families. moreover, it also means to do not expend or buy goods excessively. sometimes, it is allowed to buy some goods that they want as long as if it is necessary and does not tend to waste much fund. however, to be thrifty is also based on the condition and situation of individual. if he owns much money and wants to buy branded cloth, it is permitted as long as the clothing expenditure is based on the need. the other example, if he intends to buy a car of high brand like civic, pajero sport, and fortuner under the condition that he really needs this kind of car because of having high class clients of corporate, while actually buying the car of journal of islamic economic laws-january, vol. 4, no. 1, 2021 14 aavanza brand is enough. this kind of condition is sometimes permitted. the moslem families interpret the thrift does not mean to decrease the need, and if it possible to have some rest of money after the primary needs are completed, it is good to give charity to the poor, orphan, and to contribute in building the mosque and other social activities. man’s responsibility is to earn money and honor the wealth ownership of woman man as a husband is responsible to earn money and create good living. the husband who makes effort in earning money is one form of his ikhtiar to make living of his family, including his wife, children, and parent. this ikhtiar also means as a form of worship. from the money he earned from work, there are some rights of his wife, children, and parent to be shared and fulfilled. then, it is obligatory to the husband to give their provision every month. when the husband gets some amount of inheritance, he should give the right of his wife and children. inversely, if the wife is working, then the money she gets from work is absolutely for her. it is also happened when she gets some amount of inheritance; the husband is prohibited to take over the right of her wealth. however, the wealth ownership might be used in good and prospective ways like buying some assets (house, car, motorcycle, etc) under the communication and agreement between the husband and wife. those are the form of how islam honors the wealth ownership of woman. each man and woman deserves to have each right. internalization of islamic economy principles in the economy of moslem families the transition from traditional era to modern era affected to some temptations and challenges from every aspect of life that is able to alter the economy of moslem families seems to be conventional individualism, materialism, and consumerism. therefore, it requires the internalization of islamic economy principles in the economy of moslem families to be able realize the practice of maqashid sharia. zakiy et al. 15 to work is a form of ikhtiar and worship from the result of working and running business, the moslem families acquire amount of money. indeed, this money is regarded as blessing for the moslem families, but not all blessings are in the form of money. they utilize this income of money to useful things for their families and to help other human being. they define the blessing in wider meaning. it can be in the form of health, family’s harmony, pious children, solid team or colleague, nice friend, time, intelligence, and so on. to work is a form of ikhtiar for the husband to earn money and fulfill the family’s need. therefore, working becomes an obligation and worship for the moslem especially man to acquire the blessing from allah. besides, working also aims to fulfill the principal needs or economic need of family. it is also beneficial for other human being to help or open up job opportunities to the society to help them to earn money for families. working has its principles that have been regulated in the moslem families. one of them is that working is an obligatory for the husband as his effort and ikhtiar to fulfill the needs of family. whereas, the wife has obligation to take care of households, to raise and take care of children, to keep the husband’s honor, and also to be a first school for the children to learn every part of life aspects. this concept is in line with the theory which asserted that to earn money is an obligatory for the husband or patriarch of family, while to take care of household matters is an obligatory for the wife. relating to this matter, the wife is permitted to work under certain circumstances and limitations. it is sunnah and permitted if the family is needed additional fund for family’s need. by the condition that the wife must not leave the main duty of wife to manage and take care of everything related to the household. moreover, the job should be appropriate to the woman’s passion and feminism, have permission from the husband, do not gather in non-muhrim colleagues, do not show her beauty and rich, and work in the case of need situation. as fundamentally, to work is a duty for the husband in order to fulfill the need of family, wife, and children. despite, the role of husband is quite significant in the family except his duty to work outside. the husband should be journal of islamic economic laws-january, vol. 4, no. 1, 2021 16 able to manage the time between working and having quality time with family. since, the role of husband existence could be positive effect to the family’s life in the future. this second duty aims to build harmony between the husband and wife, to be role figure for the wife and children, to teach religious education to the children, to share positive values to the children, and many others. further, it is good to take care of the unproductive and old parents as our devotion to every kindness that the parents have given and raised us. to respect and take care of the parents could open another door of blessing to the family. to work is one of professions which allah has promised for the human to open up the nine doors of blessing. indeed, the work should be in lawful and good manners according to the islamic principles. for example, the photography service should not serve pre-wedding, doubtful photo sessions or sexy model customers, culinary businessman should observe the food composition, material, process, and serving. expenditure as wealth distribution in material and spiritual the wealth that are produced from work should be useful for the family to fulfill the basic needs on the material and spiritual scale. generally, moslem families divide the expenditure into three parts, they are consumption, donation, and investment. the expenditure itself has the principles to apply to the economy of moslem families. consumption standardization from the result of work and business, the income would be used to fulfill the need of moslem families. to fulfill the need of family, wife, and children is an obligation of husband based on the income he could obtain from work. if it still lacks of principal needs, the wife and children ought to give motivation and encourage the husband, and also to pray to allah to shower them with unstoppable blessing. the rest money could be used to take care of the unproductive old parents, since they have already too old to work and earn money for life. this is counted as wajib for the son to take care of the need of his parent as long as he is able to cope with the financial matters. to take care of the parents zakiy et al. 17 is a form of devotion which could open up wider opportunity of blessing. wife is allowed to work under certain circumstances and limitations in the purpose of helping the economy of family to fulfill the primary needs. however, it is sunnah and only considered as an additional income in the family. the wife should be able to manage the financial budget in family’s need and amanah to carry out her duty as housewife. the husband might give some advices and suggestions to help the wife considering and deciding the expenditure budget of family’s principal needs. to buy the family’s need should be adjusted to the list of need. the expenditure of family’s need should be adjusted to the things what they really need and not to what they want. this basic idea is good to remember to maintain the balance between the income and expenditure in the economy of moslem families. if the member of family wants to buy something which is not really urgent and vital, then, it is better to save the money patiently. if the need is really urgent, he could borrow some amount of money to the family member, take some money from the savings, trade some assets, or take some credits to the institution of sharia banking. this extra expenditure is adjusted to the condition of family and considered as the last alternative. it is safer to buy goods in cash. if it is needed, the debt is should not be used to the consumptive goods, but to use it for the productive activity of business. this strategy could balance the income and expenditure. to make sure that the income of moslem family is obtained from lawful manners is important. the moslem families should prevent their selves from illicit and doubtful, for instance the food they are consuming every day should not contain pork and other illicit or doubtful compositions. also, the moslem families ought to avoid being show off and prestige in the expenditure of food consumption. they should minimize and avoid buying fast-food or decrease to buy foods which are produced by nonmoslem, particularly when it is still uncertified as lawful foods. lawfulness and wholesomeness would have impact to the health of family, while illicit foods in vice versa. journal of islamic economic laws-january, vol. 4, no. 1, 2021 18 it is significant to firstly put priority on the essential needs before coming to the complementary needs and tahsiniyat. the moslem families should distinguish between the need and want. they have to fulfill the essential need such as clothing, house living, food, need of wife and children, need of parents, charity, employee’s salary, educational fund and other monthly needs in family. if the moslem families already fulfilled the essential needs, they might fulfill the other needs like family’s vacation, children’s toy, wife’s gift, electronic tools, etc. the priority level of this need is relative, which means that each family has their own way to manage this need expenditure. the level of dissimilarity is based on the fact that each family has different level of economy and different stage of need. to manage the expenditure should be plain. the plain does not mean to be miserable, but to manage the expenditure as it is needed for the family. the plain need here does not mean to avoid buying the branded goods, but firstly to consider the situation and condition. moreover, buying the branded goods is for the purpose of family’s need. it is not allowed buy them in order to show off the prestige, lifestyle, and the wealth. the moslem families buy the goods in accordance with the functions, benefits, and maslahah, since to be too over and extravagant in the expenditure tends to be mubazdir, meaningless, and wasting money. they also should be thrifty and economical as long as the principal need of family is fulfilled and know how to benefit the wealth in good things for other human beings. donation as a realization of social wealth principle donation transformed to be an obligatory and need of family. the moslem families agree that some of their wealth are belonged to other human being. due to the fact that they regard and motivate their selves that to give shadaqah would shows them with more blessing, tranquility, and benefit to human interest. shadaqah does not only refer to money, but also to give some useful goods for the other human interest. zakat, infaq, and shadaqah are means to minimize and omit the discrepancy between the rich and poor human being, in order to build harmony in society. zakiy et al. 19 if the wealth has reached to nisab, it is a must for the moslem families to give zakat from the income about 2,5%. if the amount of wealth does not reach this percentage, it is called shadaqah and infaq. the moslem families target the donation in approximately 2,5%, 5%,10%, up to 20%. commonly, the donation is given in every month and distributed to the organization of zakat, to donate mosque building, or orphanage for the orphan and poor people. they are also able to give shadaqah by lending their assets like to donate the car to be utilized in the need and interest of dakwah and other islamic activities. investment as wealth enrichment the moslem families needs to know the importance of investment, since islam prohibited the wealth ownership which remain to be unproductive and undeveloped. the investment is useful in both long and short-term necessity. the investment is classified in several forms: 1) the investment of assets purchase is able to improve the business. 2) the investment of gold and land ownership. 3) the investment in business capital sharing. 4) the investment of agriculture capital sharing. 5) the investment of building a cottage for guests in islamic boarding school. 6) the investment of science. further, it is also important to consider lawful and illicit in every aspect of doing investment. savings as urgent post of future the good moslem families should set aside a portion of wealth to be saved and used in the future needs. the savings is divided into two urgent posts, business post and family post. it aims to capitalize the business in long term by restraining the profit, and then it could be useful for the future or urgent needs of family as fund of health, disaster, qurban savings, asset purchase savings, and future funds of education or marriage for children. wealth ownership as instrument of worship to allah ownership could be represented through its meaning of wealth. by the wealth ownership, the moslem families are able to do activities of consumption, distribution, production, and journal of islamic economic laws-january, vol. 4, no. 1, 2021 20 investment. the hardest activity of ownership is the activity of distribution. this matter is regarded as the real ownership of wealth, which means how the moslem families could distribute the wealth they owned to contribute and give benefit to the human interest. from this activity, the wealth ownership becomes a medium for the moslem families to devote and worship to allah. to note that the wealth is temporary goods and it is better to make it an instrument for the owner to help interests of dakwah. it is a form of devotion from the moslem families to make use their wealth more beneficial to other human being. furthermore, the wealth ownership is represented through separation between the property right of man and woman. if the woman is working, then the property is absolutely belonged to her. the man is obliged to work, and the property is not only belonged to him, but also belonged to the family members to fulfill the needs of them. nowadays, to merger the property between the husband and wife is fair in the condition of both of them have already communicated and well considered to this idea. according to islamic principle, this merger is allowed as a form of trusteeship, amanah and love between the husband and wife. the inheritance might also be the source of property ownership for moslem families in the form of house. maqashid sharia as the measure of moslem families economy in the era of modern lifestyle in accordance with the economy of moslem families, they should be able to fulfill the need by realizing common good and prevent from harm. then, the principle of maqashid sharia would be guidance and standardization to maintain the economic activity of moslem families in sharia principles and to implement kulliyat al-khamsah. to protect religion to protect religion, the moslem families should maintain their worship. this realization is a form of consequence from the moslem to protect the religion and faith. moreover, it is not zakiy et al. 21 simply as an individual practice to protect the religion, but also to invite and keep the practice of worship to the family members and employees. every activity should be based on the principles of al-qur’an and hadits. worship could build the moslem families’ character to be good character human being with iman, muamalah, and akhlaq. moreover, the moslem families should observe lawful and illicit in every aspect of life and prevent the family from illicit and doubtful things. this could be reflected from the profession, sort of business, selling goods, process and production, and income of the moslem families. further, to consume lawful foods and avoid fast-food and other doubtful foods, also to prevent consumption from uncertified restaurant as they are lawful according to mui. besides, within the investment, they should observe lawful and illicit to prevent from usurious transaction, clear agreements between collaboration parties of moslem. to protect soul soul protection is represented from how the moslem families fulfill the principal need of family, since this matter refers to their existence of life. if the principal needs are not fulfilled, it would cause threat, breakage, and trouble in the existence of life. regarded to this impact, the moslem families must set priority on need. the wealth should be utilized in useful things for the moslem families. the moslem families should firstly put priority on the essential needs comprising of the need of clothing, house living, food, need of wife and children, need of parents, zakat and shadaqah, employee’s salary, educational fund and other monthly needs in family. if the moslem families already fulfilled the need of dharuriyat, they might fulfill the other needs like family’s vacation, children’s toy, wife’s gift, electronic tools, etc. the priority level of this need is relative, which means that each family has their own way to manage this need expenditure. the level dissimilarity is based on the fact that each family has different level of economy and different stage of need. journal of islamic economic laws-january, vol. 4, no. 1, 2021 22 to protect intelligence to realize the intelligence protection in the economy of moslem families, they should prepare for the educational fund of children. they should prepare and teach the children to be the future generation of rabbani. therefore, the need of educational fund becomes important for the moslem families. moreover, they should look for the islamic school which is able to guide and teach the children spiritually and scientifically. above of all, the role of parent is quietly vital to be their children’s first school in the home. the knowledge and science would build and characterize the children to have a good intelligence and moral. therefore, it is important to make sure that the children acquire sharia doctrines in the school. besides, it is also significant for the parent to upgrade both scientific and islamic knowledge. this strategy aims to prevent the moslem families from the thought and concept which is out from the principles of ilahiyah in al-qur’an and hadits. to pursue this aim, the moslem families could live in the islamic environment, associate with good people, move from the evil environment, be active to pray together in mosque, and many other ways. if the moslem families have status as the owner of business, they should invite the employee to pray and worship, and also to upgrade their knowledge through some routine recitations of dakwah. to protect wealth the moslem families who work in business and entrepreneurship are promised to have one of nine doors of blessing from allah. from every sort of business, the moslem families should observe their property source, consumption, and distribution in lawful and prevent them from illicit things. this concept is absolutely for the good moslem families. for the moslem families, the term of lawful means to prevent everything that seems to be illicit and doubtful like utilizing doubtful raw materials and compositions, improper butchering manner, and pre-wedding service. moreover, to purify and make use of the property, the moslem families should distribute some of their income about 2,5% to 20% to the mustahiq of zakat. also, it is good zakiy et al. 23 to invest the property in productive and prospective business as long as the business is utilized and distributed in lawful manners, like the investment of gold, land, capital sharing of business and agriculture. to protect generation to protect the generation of moslem families, they should realize and make some saving posts for their children’s future need, marriage funds. actually, this post of saving is not only used as this single purpose, but also to cover the post of disaster, education, urgent needs, qurban, and infaq. besides, to make some savings post, the moslem families could also fulfill those needs through the result of investment, since the investment is always improving and particularly beneficial to the long-term period of time. conclusion modern lifestyle has great impact to the economy of moslem families. to come over this situation, the moslem families should hold the sharia principles as mentioned in al-qur’an and hadits. this kind of economy could deliver positive impact, peacefulness, and harmony within the moslem families. besides, to realize the happier life, the moslem families could help the human interest and improve the prosperity of society. to build good economy, the moslem families should realize the economy according to the characteristics and principles of islamic economy. the characteristics of moslem families economy comprise of iman as basic foundation of economy, character perfection of akhlaqul karimah, lawfulness and wholesomeness which are vital and absolute thing to consider, scale of priority as the expenditure reference, moderation as absolute standardization, man’s responsibility to fulfill the need of family, and wealth honor of woman’s ownership. the internalization of islamic economy principles in the economy of moslem families covers the concept that to work is a form of worship and ikhtiar, to expend as a form of wealth distribution materially and spiritually, to save money for the future urgent posts, and to regard the wealth as an instrument journal of islamic economic laws-january, vol. 4, no. 1, 2021 24 to devote to allah. as for, the principles of islamic economy in the economy of moslem families covers the idea that to work is a form of ikhtiar and worship, to expend as a form of wealth distribution in either material or spiritual, to save money for the future urgent posts, and to value the wealth as an instrument to devote to allah. above all, to realize the practices of maqashid sharia, the moslem families should protect the religion as their consistency of worship and to protect their income and expenditure from illicit and doubtful, protect the soul and fulfill the principal need of family, protect the intelligence by saving some funds for education and upgrading islamic knowledge and view, protect the generation by saving some funds for future needs, for instance marriage, 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(2009).teori maqashid sharia dalam hukum islam. sultan agung, 44 (10). _goback _goback _hlk55084518 _hlk55084698 _hlk55085026 _goback _goback _hlk59008645 journal of islamic economic laws vol. 5, no. 1 january 2022: 84-115 84 adoption of extended theory of planned behavior to halal food purchasing decision amidst covid-19 pandemic fuad hasyim1 1faculty of islamic economics and business, uin raden mas said surakarta email: fuad.hasyim@iain-surakarta.ac.id abstract the covid-19 pandemic has caused significant changes in people’s lives. one of them is the issue of non-halal food, which is suspected to be the initial cause of the covid-19 transmission from animals to humans. this assumption is then indicated to impact changes in people’s consumption patterns. this study aims to see whether there has been a change in halal food consumption patterns as measured by purchasing decisions during the covid-19 pandemic. the sample in this study is the people in soloraya residency. sampling technique using random sampling method with the distribution of e-questionnaire. the quantitative research method is carried out using the extended tpb approach and processed with the structural equation modeling (sem). the results show that all constructs, namely attitude, subjective norms, perceived behavioral control, religiosity, and descriptive norms, affect the intention of a halal food purchasing decision. by using a covid-19 pandemic condition as a dummy variable, the results obtained are differences in halal food purchasing decisions before and during a covid-19 pandemic. this study found a pattern of changes in people’s consumption during the covid-19 pandemic, where there was a tendency for people to choose halal food because it was more hygienic, healthy, and blessed. keywords: halal, food, pandemic, tpb mailto:fuad.hasyim@iain-surakarta.ac.id 85 journal of islamic economic laws-january, vol. 5, no. 1, 2022 introduction islam pays excellent attention to the patterns and lifestyles of its people. one of them is to provide several rules and restrictions regarding food ingredients that humans will consume. more specifically, islam gives the terms for foodstuffs in the form of halal, haram, and syubhat (doubtful) (gifr, 2015; khairi et al., 2012)consumer confidence (7 items. labeling these foods is based on the source, cleanliness, processing, and disposal methods. the term halal refers to foodstuffs that are allowed to be done, used, or cultivated and are free from various things that are harmful or prohibited. on the contrary, the term haram is used for foodstuffs banned from being abused or used either because of its substance or how to get it. the argument regarding halal food is stated in qs al baqarah 168 while avoiding haram food in qs al-maidah 3, qs al-maidah 88, qs an-nahl 115, qs al-baqarah 145, and al-an’am 145. halal consumption is an essential part of their lives that should concern muslims. consuming halal products is a commandment of allah and a form of the muslim faith. the existence of a halal consumption order encourages muslims to buy halal products. referring to the global islamic report data in 2020/2021, indonesia was ranked first in the muslim food expenditure. muslim consumer spending on food rose 3.1% in 2019 to 1.17 trillion dollars from 1.13 trillion dollars in 2018. the covid-19 crisis is not expected to significantly drop in muslim spending for 2020, with a 0.2% decline forecast. a cagr of 3.5% is forecast between 2019 and 2024, with muslim expenditures expected to reach $1.38 trillion in 2024 (rafi-uddin et al., 2020). this fantastic figure strengthens the domestic halal culinary market’s potential as a widely accepted lifestyle by the public. this data shows the vast potential of the halal market in indonesia. these numbers prove that the indonesian people are a halal food market and a producer. 86 fuad hasyim source: bedford (2022) figure 1. index score of the leading halal food markets worldwide in 2020 the covid-19 pandemic raises several multidimensional problems, not only a health crisis but also threatening world food stability (bella, 2020). although many industrial sectors have been affected by covid-19, the halal industry has not had much impact, some have tended to increase, and some have experienced a slight decline. the 2020 sharia economic and financial report (leksi) revealed that the export performance of indonesian halal foodstuffs continued during the covid-19 pandemic. indonesia’s halal food exports in 2020 grew by 38.02 percent. exports of halal foodstuffs reached a value of us $ 34.16 billion, an increase of 14.55 percent from 2019. meanwhile, imports of halal foodstuffs fell 2.28 percent to the us $ 16.97 billion in 2020. the most significant contributor to halal foodstuffs 2020 is animal and vegetable fats and palm oil. the export value of these commodities was us $ 19.77 billion, with a 57.86 percent share of the total exports of halal foodstuffs (saputra, 2021). 87 journal of islamic economic laws-january, vol. 5, no. 1, 2022 source: rafi-uddin et al. (2020) figure 2. top 5 exporter-importer country 2019 the high consumption need for halal products encourages high demand, so the incentive to produce halal increases. actively, halal producers can promote the halal market by understanding the buying behavior of muslims as their primary target market. one way of predicting purchasing behavior is by examining consumer buying interest. purchasing intention is a plan to buy certain goods or services in the future (warshaw & davis, 1985). it’s a concept that indicates producers about actual purchases (morwitz, 2014). empirical studies rooted in social psychology theory and consumer behavior prove that interest, in general, is a good predictor of subsequent behavior (alam & mohamed, 2011; morwitz, 2014). in turn, it is hoped that buying intention will lead to actual purchasing decisions. in the decision-making process in general, a consumer will try to find information about how to make the right purchase decision. nowadays, consumers are critical in finding and digging up information about the products. in islam, to fulfill his needs, a muslim must always be in line with the qur’an and sunnah. in terms of quality, every muslim must pay attention to whether a product is halal or not and blessed (thayyib). a better understanding of religion makes muslims more selective in choosing the products they consume. the muslim community’s unwillingness to consume haram products will increase their 88 fuad hasyim involvement in product selection. thus, there will be products selected for consumption and put aside due to the selection process. the selection process itself will make halal its main parameter. moreover, the spread of rumors that covid-19 is a virus transmitted by bats has made halal a global trend for hygienic food alternatives and fulfills thayyib elements for consumption. this emphasizes that wild animals, najis and unclean animals are scientifically unfit for consumption in islamic teachings. however, many markets in indonesia still provide non-halal meat to be traded as raw material for food, such as in tomohon and solo. table 1. pig farming population in central java 2018-2019 no regency pig population number (in thousand) 2018 2019 1 karanganyar 51.79 52.31 2 semarang 15.85 15.85 3 sukoharjo 13.41 16.33 4 wonogiri 9.36 9.72 5 boyolali 6.52 6.77 6 batang 5.85 5.88 7 pemalang 3.76 3.76 8 sragen 3.67 3.92 9 banyumas 3.17 3.33 10 purbalingga 1.76 1.76 11 cilacap 1.7 1.7 12 klaten 1.22 1.21 source: bps provinsi jawa tengah (2020) for example, in the soloraya residency, information was obtained that karanganyar regency is the largest center for pork and alcohol (ciu) farming in central java. based on the bps central java province 2020 data, information is obtained from the districts within the scope of soloraya residency, including 89 journal of islamic economic laws-january, vol. 5, no. 1, 2022 karanganyar, sukoharjo, wonogiri, and boyolali sragen and klaten districts are the 12 districts with the largest pig breeding population in central java. therefore, it is not uncommon for many non-halals culinary to be bought and sold. not only pork, but there are also dog meat, frogs (swike), and other non-halal foods. some minority local people, consuming these foods is natural, with reasons of curiosity, medicine, or to think of it as ordinary food (ihsan et al., 2020; wicaksono, 2019). this research then draws a common thread to analyze whether, during the covid-19 pandemic, there has been a change in the halal lifestyle, especially in choosing food products, which impacts purchasing intention and the decision to buy halal food products in the soloraya region. the mindset influences this that non-halal food can interfere with public health by triggering covid-19 pandemics and individual health, such as the bat rumor in the previous explanation. previous empirical studies stated that various things influence the buying interest of a person or group of people for a product, both internal and external. this interest will then lead to purchasing decisions. theory of planned behavior (tpb) was developed to see individual behavior patterns in acting (ajzen, 1985, 1991; hill et al., 1977)1985, 1987. then this theory was developed into extended tpb to explain determination outside the model in explaining interests and taking decision-making actions (shalender & sharma, 2021)india is under intense pressure to reduce its energy requirements and greenhouse emissions. electric vehicles (evs. this theory was then used to see whether, during a covid-19 pandemic, people in soloraya residency experienced a pattern of changing food habits. original tpb shows attitude as a self-factor in influencing purchase action. meanwhile, subjective norms are external influences from other people that influence the buying action. perceived behavior control measures a person’s belief about how simple or complex it is to act, namely when buying halal food. extended here adds a factor of religiosity and descriptive norms as an extension of the psychological approach. religiosity shows whether an increased understanding of religion will raise 90 fuad hasyim awareness of halal consumption. while the descriptive norm is used to see daily habits carried out, in the context of the study, the consumption of non-halal food is typical in the soloraya area. the extended tpb approach makes a difference from previous research, which was confronted with the condition of the consumption behavior of the soloraya people in recent times. in addition, the focus of this study is to see whether there is a change in consumption patterns after a covid-19 pandemic occurs. literature review theory of reasoned action (tra) was developed by ajzen and named theory of planned behavior (tpb) (ajzen, 1991)1985, 1987. tpb is described as a construct that complements tra. ajzen says the tpb has been widely accepted as a tool for analyzing the difference between attitude and intention as well as intention and behavior. in this regard, attempts to use tpb to explain halal food purchasing decisions can help overcome some of the limitations of previous research and provide a means of understanding the observed gaps between attitudes and behaviors (khairi et al., 2012)consumer confidence (7 items. tpb explains that individual behavior arises because the individual intends to behave, and several internal and external factors cause the individual’s preference. according to kotler et al. (2012), the target individual has a high probability of adopting a behavior if the individual has a positive attitude towards the behavior. then this attitude gets approval from other individuals who are close and related to the behavior and believe that the behavior can be done well. individual attitudes towards behavior include beliefs about a behavior, evaluation of behavioral outcomes, subjective norms, normative beliefs, and motivation to comply. 91 journal of islamic economic laws-january, vol. 5, no. 1, 2022 figure 3. theory of planned behavior construct source: ajzen (1991)1985, 1987 tpb explained that an individual’s intention to behave is determined by attitude toward the behavior, subjective norms, and perceived behavioral control. fishbein and ajzen in thompson et al. (1991)however, having access to the technology by no means ensures it will be used or used effectively. to help us gain a better understanding of factors that influence the use of personal computers, researchers have recently adapted the theory of reasoned action proposed by fishbein and azjen (1975 define attitude as the number of affections (feelings) that a person feels to accept or reject an object or behavior and is measured by a procedure that places the individual on a two-pole evaluative scale, for example, good or bad, agree or reject, and others. according to sapingi et al. (2011), attitude toward the behavior is a person’s judgment when seeing or knowing a behavior that is being carried out. someone will assess someone’s behavior. the assessment can be in the form of a positive or negative evaluation. ajzen and fishbein in hill et al. (1977)developed by martin fishbein and icek ajzen (1975, 1980 explain in the context of attitude toward the behavior, salient beliefs connect behavior to achieve valuable results, either positive or negative. attitude toward the behavior that he considers positive is what individuals will choose to behave in his life. according to ajzen (1991)1985, 1987, what is meant by subjective norms are environmental conditions of individuals who accept or do not accept the behavior displayed. so that someone will show acceptable behavior to the person or the environment around the individual, an individual will avoid showing a behavior 92 fuad hasyim if the surrounding environment does not support the behavior. thompson et al. (1991)however, having access to the technology by no means ensures it will be used or used effectively. to help us gain a better understanding of factors that influence the use of personal computers, researchers have recently adapted the theory of reasoned action proposed by fishbein and azjen (1975 stated that subjective norms are individuals who will perform certain behaviors if they can be accepted by people considered necessary in their lives and accept what they will do. thus, normative beliefs result in an awareness of the pressures of the social environment or subjective norms. according to jogiyanto (2008), subjective norms are a person’s perception or view of the beliefs of others that will affect the intention to perform or not to serve the behavior under consideration. the direct influence of subjective norms on intentions is that people may choose to perform a behavior, even though they do not like the behavior or its consequences (brown & venkatesh, 2005). perceived behavioral control is defined by ajzen (1991) as perceived ease or difficulty in performing a behavior. perception of behavioral control is how a person understands that his behavior results from control. according to ajzen (1991)1985, 1987, stating behavior control is an individual’s skill in reading the situation himself and his environment. in addition, the ability to control and manage behavioral factors according to problems and conditions to control behavior, tendencies to attract attention, desire to change behavior to suit others, please others. this statement can be stated that perceptions of behavioral control are shown to people’s perceptions of the ease or difficulty of showing attitudes of interest. so, someone will have the intention to carry out behavior when they have the perception that the behavior is easy to show or do because there are things that support the behavior. 93 journal of islamic economic laws-january, vol. 5, no. 1, 2022 figure 4. modification of extended theory of planned behavior construct source: figure processed (2021) in the modified construct of extended tpb, religiosity and descriptive norms were added. religiosity, in religious studies, is often distinguished between religion and religiosity. ghozali (2002) stated that religion is a standardized system that fundamentally becomes a binding norm in everyday life and guides some ideal concepts. religious teachings that have been understood can be a driving force for individual life as a reference in interacting with god, fellow humans, and the natural surroundings. meanwhile, religiosity is the quality of one’s appreciation and life attitude based on the religious values that they believe in. so it places more emphasis on noble spiritual matters and tends to turn away from religious formalism (ghozali, 2002). religiosity in islam occurs when a person performs ritual worship and other daily activities. religion is manifested in various aspects of human life. religion influences attitudes because faith lays the foundation for moral concepts in individuals (bearon & koenig, 1990; ellis, 1980). according to glock and stark in paulikechukwu & clara (2015), there are five dimensions of religiosity, namely belief (the ideological dimension and religious belief), worship or spiritual practice (the ritualistic dimension and religious practice), appreciation (the experiential dimension and religious feeling), practice (the consequential dimension 94 fuad hasyim and religious effect), and religious knowledge (the intellectual dimension and religious knowledge). descriptive norms attempt to assess actions based on good and bad terms or models that grow in life together in society. descriptive norms place existing habits in society as ethical references. included in descriptive ethics are positions regarding good and evil, the norms of decency that have been applied, and the moral ideals adopted by certain nations, whether there is acceptance and how they are processed. this means that the descriptive norm speaks of the facts regarding human values and behavior related to the cultural situation and reality. it can be concluded that the truth in the appreciation of values or without importance in society is associated with certain conditions that allow humans to act ethically. according to katt soff’s opinion in shalender & sharma (2021), the descriptive norm is concluded as a form of implementation of actions and behaviors applied to every human being, which is the basis of social life between humans within the scope of the community environment. this study uses the extended tpb to measure the level of muslim halal food purchasing decisions. based on empirical research, it is found that, in general, the construct of the tpb variable affects buying interest and purchasing decisions. empirically attitude is an individual’s encouragement to form intentions. the greater the self-motivation in studying the good and bad aspects of halal food products, the more significant the portion of knowledge will increase the decision to buy halal food (aziz et al., 2015; hasyim, 2018; khairi et al., 2012; osman et al., 2019; sapingi et al., 2011; simamora & djamaludin, 2020; wong et al., 2018)with the objective of distributing wealth to the less fortunate muslim community and would therefore be able to eradicate poverty among members of the ummah. studies on zakah have successfully caught the attention of scholars to discuss various areas especially in collection and disbursement system of zakah funds. recently, efforts to educate and attract muslim community to pay zakah by zakah institutions and government have been evolved. however totals collection of zakah funds are still far behind as compared to collection of tax by the inland 95 journal of islamic economic laws-january, vol. 5, no. 1, 2022 revenue department. the highest contribution of zakah collection in malaysia is mainly from zakah on employment income. however little has been said about the intention to pay zakah on employment income among academics. hence, the study intends to reveal the factor contributing to the intention to pay zakah among academics both in private and public institutions. using theory of planned behavior (tpb. external influences also have this effect. if the more intense the behavior of other people is used as a reference for behavior, the greater the incentive to purchase halal food (khairi et al., 2012; latiff et al., 2016; wong et al., 2018)consumer confidence (7 items. perceived behavioral control represents that the ease of obtaining halal food also encourages individuals to make halal food purchase decisions (alam & mohamed, 2011; hasyim, 2019; hasyim & nurohman, 2021; khairi et al., 2012)ajzen’s theory of planned behavior is used as a theoretical framework with the aim of extending prior research examining halal food purchasing behavior in malaysia. design/methodology/approach – data are collected through selfadministered questionnaires. this paper uses multiple regression analysis to identify the factors affecting halal food purchasing behavior of malaysian consumers. findings – the multiple regression analysis results indicate that all factors have positive and significant influence on halal food purchasing intention. research limitations/implications – like other empirical studies, this study is not without its limitations. the sample size itself is relatively small. the study can be strengthened by increasing the sample size and including participants in other geographical areas. this study also considered only three antecedents of halal food purchasing among consumers in malaysia. as malaysia is actually trying to play for a bigger role in the halal industry, more research is needed to identify and address problematic aspects of consumption of halal food. potential correlations between some of the independent variables (e.g. trust, moral obligation, habit, and self-identity. in addition to the primary constructs of tpb, extended here adds religiosity and descriptive norms as determining factors for purchasing decisions on halal food. several empirical studies 96 fuad hasyim show that the higher the understanding and practice of religion, the higher the preference for buying haram food and avoiding halal food. likewise, with descriptive norms, if people begin to realize that non-halal food will have harmful consequences, it will impact shifting models, which will reduce the consumption of non-halal food (shalender & sharma, 2021)india is under intense pressure to reduce its energy requirements and greenhouse emissions. electric vehicles (evs. the impact of lowering nonhalal consumption, in the aggregate, will facilitate the purchase of non-halal food and increase the consumption of halal food. in addition, this study also uses covid-19 pandemic conditions as a control variable to determine whether there is a change in halal food consumption pattern in the soloraya residency. h1: attitude affects the intention and purchasing decision h2: subjective norms affect the intention and purchasing decision h3: perceived behavioral control effects to the intention and purchasing decision h4: religiosity affects the intention and purchasing decision h5: descriptive norms affect the intention and purchasing decision h6: there are differences in the consumption pattern of halal food during the covid-19 pandemic methods this research is quantitative research using primary data. the sampling technique used was quota sampling by taking samples from all districts belonging to the residency of soloraya. the districts in soloraya include sragen, karanganyar, sukoharjo, wonogiri, boyolali, klaten and surakarta city. at the same time, the distribution of the questionnaire uses a random sampling method with an online questionnaire (e-questionnaire). data analysis using structural equation modeling (sem). the minimum number of samples that must be taken follows the slovin formula (sugiyono, 2017): 97 journal of islamic economic laws-january, vol. 5, no. 1, 2022 99, 97 rounded to 100 sample description n : sample n : population 1 : constant e : error margin (10%) sem is a statistical tool used to solve multilevel models simultaneously that cannot be solved by linear regression equations. sem can also be thought of as a regression analysis and factor analysis combination. sem can be used to solve equation models with more than one dependent variable and also recursive effects. sem is based on covariance analysis so that it provides a more accurate covariance matrix than linear regression analysis (ghozali, i., & latan, 2015). this study’s exogenous constructs include attitudes, subjective norms, perceived behavioral control, religiosity, and descriptive norms. in contrast, the endogenous constructs are purchase intentions and purchase decisions. the pls-sem model measurement is divided into measurements of the outer and inner models. the first measurement on the outer model is the reflective measurement. the measurement model was assessed using reliability and validity. for reliability, cronbach alpha can be used. this value reflects the reliability of all indicators in the model. the minimum value is 0.6, while ideally, it is 0.8 or 0.9. in addition to cronbach alpha, the value of cρ (composite reliability) is also used, interpreted as cronbach alpha. each latent variable must explain the variance of each indicator at least 50%. therefore, the absolute correlation between the latent variables and their indicators must be > 0.7 (the total value of the standard external load or commonly called external load). the reflective indicator should be omitted from the 98 fuad hasyim measurement model if it has an outside average load value below 0.4 (ghozali, i., & latan, 2015; latan & noonan, 2017). there are two types of validity in pls-sem: convergent validity and discriminant validity. convergent validity means that a set of indicators represents one latent variable and the underlying latent variable. this representation can be shown through unidimensionality which can be expressed using the average variance extracted (ave). minimum ave value of 0.5. this value describes sufficient convergent validity, which means that one latent variable can explain more than half of the indicator variance on average. in contrast, discriminant validity is an additional concept which means that two conceptually different concepts must show adequate differentiation. the point is that the combined set of indicators is not expected to be unidimensional (ghozali, i., & latan, 2015; latan & noonan, 2017). inner model or inner measurement is also known as a structural model. the structural model is a model that relates latent variables. the model describes the relationship between latent and manifest variables (indicators). there are two types of models in the outer model: the formative indicator and the reflexive indicator models. the reflexive model occurs when the latent variable influences the manifest variable. in contrast, the formative model assumes that the manifest variable affects the latent variable with causality flowing from the manifest variable to the latent variable. evaluation of the structural model on sem with pls is done by performing the r-squared (r2) test and the significance test through path coefficient estimation. the r-squared (r2) value measures how much influence certain independent latent variables have on the latent dependent variable. according to ghozali, a good r2 result is worth more than 0.67(ghozali, i., & latan, 2015; ghozali, 2013). the significance test of the sem model with pls aims to determine the effect of exogenous variables on endogenous variables. hypothesis testing using the sem pls method is carried out by bootstrapping. the significance test in explaining the hypothesis whether the value of the t count > t table or sig. < 0,05 99 journal of islamic economic laws-january, vol. 5, no. 1, 2022 (α: 5%) from the construct. if this assumption is fulfilled, there is a significant effect between the exogenous and endogenous constructs. results respondents who successfully obtained in the study amounted to 100 people with various backgrounds. the descriptive statistics are presented in the following table: table 2. respondent demographics categories information amount (respondent) district origin sragen karanganyar sukoharjo boyolali klaten wonogiri surakarta city 12 14 20 17 15 13 9 education no school elementary junior high senior high undergraduate postgraduate 4 12 31 23 26 4 occupation student pns/ tni/ polri entrepreneur others 34 13 24 29 boarding school yes no 24 76 source: data processed (2021) the inner model test is used to see the construct validity of the exogenous and endogenous variables. this test is carried out by looking at the loading factor value. if the value exceeds 0.5, the model is valid (ghozali, i., & latan, 2015). based on the picture below, the results show that the value of all loading factors is greater than 0.5 so that the evaluation of the inner model can be continued for the next stage. 100 fuad hasyim source: data processed (2021) figure 5. outer loading the structural model is a model that explains how constructs interact between latent variables. specific hypotheses or assumptions underpin the relationship between constructs. this study’s factors affecting intention are attitude, subjective norms, perceived behavioral control, religiosity, and descriptive norms. the intention variable then acts as a mediator between the purchasing decision. meanwhile, the dummy here serves as a control for whether there is a change in the consumption of halal food during the covid-19 pandemic. measurement of the external model can be done by testing cronbach’s alpha, composite reliability, convergent validity, and discriminant validity. the results of data processing are presented as follows: 101 journal of islamic economic laws-january, vol. 5, no. 1, 2022 table 3. reliability calculation result information variables value conclusion cronbach’s alpha attitude subjective norms p. behavioral control religiosity descriptive norms intention purchasing decision 0,934 0,905 0,915 0,882 0,889 0,818 0,881 reliable reliable reliable reliable reliable reliable reliable composite reliability attitude subjective norms p. behavioral control religiosity descriptive norms intention purchasing decision 0,953 0,930 0,941 0,920 0,924 0,881 0,877 reliable reliable reliable reliable reliable reliable reliable source: data processed (2021) table 4. validity calculation result (convergent) information variables value conclusion convergent validity (ave) attitude subjective norms p. behavioral control religiosity descriptive norms intention purchasing decision 0,834 0,726 0,800 0,742 0,752 0,650 0,642 valid valid valid valid valid valid valid source: data processed (2021) table 5. validity calculation result (discriminant) att desn int pbc purdec rel subn att 0.913 desn 0.825 0.867 int 0.747 0.765 0.806 pbc 0.739 0.745 0.803 0.894 purdec 0.743 0.762 0.794 0.797 0.801 rel 0.829 0.797 0.761 0.741 0.758 0.861 subn 0.825 0.788 0.792 0.759 0.793 0.787 0.852 source: data processed (2021) 102 fuad hasyim based on the above test, information is obtained that the cronbach alpha and composite reliability values are above 0.7. thus, it can be concluded that the measurement model of all variables has good reliability. the measurement model was also tested for convergent validity by looking at the ave output value. the ave value in the calculation results above shows a value of more than 0.5. therefore, it can be concluded that the model has good convergent validity. based on the output results above, the result is that the intrinsic correlation value (r) is higher than the correlation between variables, so it can be concluded that the model has good discriminant validity. table 6. multicollinearity calculation result model collinearity statistics tolerance vif 1 (constant) att .268 3.725 subn .117 8.579 pbc .307 3.260 rel .085 9.800 desn .201 4.271 int .272 3.681 a. dependent variable: purdec source: data processed (2021) a multicollinearity test is carried out to ascertain whether intercorrelation or collinearity between independent variables in a regression model. intercorrelation is a linear relationship or a strong relationship between one independent variable or predictor variable with other predictor variables in a regression model. the value can see the intercorrelation of the correlation coefficient between the independent variables, the value of vif, and tolerance. if the vif value is less than 10 and or the tolerance value is more than 0.01, it can be concluded firmly that there is no multicollinearity problem. based on the processing data above, it is known that the vif value is less than 10, while the tolerance 103 journal of islamic economic laws-january, vol. 5, no. 1, 2022 value is more than 0.01, so it can be concluded that in this study, there is no multicollinearity problem. table 7. path coefficient and adjusted r2 original sample t statistic p-value att > int 0,175 2,078 0,027 subn > int 0,943 3,404 0,001 pbc > int 0,393 4,915 0,000 rel > int 0,072 2,110 0,012 desn > int -0,661 2,997 0,000 int > purdec 0,991 60,817 0,000 dummy > purdec 0,022 2,554 0,000 adj r2 dec 0,781 28,207 0,000 int 0,632 18,840 0,000 source: data processed based on the calculation table above, all endogenous variables affect exogenous variables. this can be seen from the p-value, which is below 0.05. likewise, the dummy covid-19 pandemic has a significance value of 0.000, so according to this calculation, it shows that there is a difference in the pattern of consumption of halal food between before and during the covid-19 pandemic. then, the adjusted r2 value is also convincing, where all construct variables in the model affect the intention to buy food by 63.2% and against to purchasing decision by 78.1%. the rest is the influence of other variables not included in the model. discussion this study found that attitudes (att) have a significant effect on purchasing intention so that indirectly it will also influence individual purchasing decisions for halal food. based on the calculation above, it is known that the relationship between attitude on intention is significantly positive. this is evidenced by the constant value of 0.175 (positive) and sig. < (α: 0.05) which 104 fuad hasyim is 0.027. this indicates that the increasing number of muslim community reference information related to the impact of nonhalal food will increase the confidence of the muslim community only to consume halal food because it is proven to be better in terms of hygiene and health. then the direct influence between intentions on purchasing decisions based on the above calculations is known to have a significant positive value. this is evidenced by the constant value of 0.991 (positive) and sig. < (α: 0.05) which is. 0.000. this means that a person’s increasing desire to consume halal food will increase the decision to buy halal food. this study found that during the covid-19 pandemic, there was an encouragement in the community to learn and find out more about the impact of non-halal food. this condition allows individuals (the muslim minority who consume non-halal food) to start selectively choosing food to shift their consumption to halal food gradually. while most muslim communities are devout, it strengthens the belief that halal food is the best (thayyib). the impact is an increase in the purchase of halal products in line with the rise in decisions to buy halal food (hakimi et al., 2021; hasyim, 2018, 2019; osman et al., 2019; shalender & sharma, 2021)innovation is created to provide benefits and convenience for human life. to address this issue, the present study sheds some light on public acceptance toward the use of an online financing application namely p2p lending. drawing on technology acceptance model (tam. another fact found was that external influence, a form of the subjective norm (subn), also affects purchasing intention and purchasing decision of halal food. based on the calculation above, it is known that the relationship between subjective norm on intention is significantly positive. this is evidenced by the constant value of 0.943 (positive) and sig. < (α: 0.05) which is 0.001. this indicates that the greater the influence of the surrounding environment on persuasion to consume halal food will strengthen the muslim community’s intention to consume halal food (tairas & destiana, 2021; vizano et al., 2021). this is like being a character of indonesian people where they pay close 105 journal of islamic economic laws-january, vol. 5, no. 1, 2022 attention to the views and words of those who influence and are around them (tairas & destiana, 2021). in line with the influence of attitude, if there is a change in people’s consumption patterns, it will impact individuals in consuming halal food. measurably, this can be seen from the increase in halal food purchasing decisions (anggraeni, 2021). in addition, this is evidenced by a decrease in the number of sales and purchases of non-halal pork in soloraya during the covid-19 pandemic (husna, 2020; kartyadi, 2021; sholikah, 2020). this study found that perceived behavioral control (pbc) has a significant effect on purchasing intention so that indirectly it will also influence individual purchasing decisions for halal food. based on the calculation above, it is known that the relationship between perceived behavioral control on intention is significantly positive. this is evidenced by the constant value of 0.393 (positive) and sig. < (α: 0.05) which is 0.000. this indicates that it is increasingly difficult to access non-halal food. on the other hand, the more available variants of halal food will encourage the intention to buy halal food. the convenience, which is part of the perceived behavioral control (pbc), found that during the covid-19 pandemic, there was a reduction in the stock of non-halal food. this study found, in centers for producing alcohol, which initially a tiny portion of industrial products was used as raw material for liquor, during the covid-19 pandemic, the focus was on meeting the need for medical alcohol in the manufacture of hand sanitizers. therefore, the less easy it is to get non-halal food/drinks, the lower the purchasing decision. this has an impact on the increasing consumption of halal food/drinks as a substitute item (alam & mohamed, 2011; aziz et al., 2015; khairi et al., 2012; latiff et al., 2016; osman et al., 2019; rahmatika & fajar, 2019; shalender & sharma, 2021). another finding is that general religiosity (rel) increases during a covid-19 pandemic. at the same time, descriptive norms (desn) decrease during a covid-19 pandemic. based on the calculation above, it is known that the relationship between religiosity on intention is significantly positive. this is evidenced 106 fuad hasyim by the constant value of 0.072 (positive) and sig. < (α: 0.05) which is 0.012. while the effect of descriptive norms on intention is significantly negative, this is evidenced by the constant value of -0.661 (positive) and sig. < (α: 0.05) which is 0.000. this means that a person’s spiritual awareness (rel) has increased, as seen from the increasingly better worship and religious practice patterns. the divine expression is manifested by helping each other, giving, maintaining, and obeying government regulations (ulil ‘amri). this awareness impacts preference for halal food as a form of obedience (aniqoh & hanastiana, 2020; latiff et al., 2016; peristiwo, 2019; rahayu, 2021). descriptive norms (desn) attempt to assess actions based on good and bad terms or models that grow in life together in society. descriptive norms place existing habits in society as ethical references. the findings of this study indicate that islamic teachings that forbid non-halal food are not only sourced from religious legal texts. but it also fulfills the scientific principle that halal food has better hygiene and health. the findings of this study indicate that islamic teachings that forbid non-halal food are not only sourced from religious legal texts. but it also fulfills the scientific principle that halal food has better hygiene and health. although there is a muslim minority in soloraya who consume non-halal food as medicine, this habit is generally starting to be abandoned with more scientific-based health education. moreover, consumption such as pork, blood, and liquor (khamr) has been scientifically proven to impact health (syukriya & faridah, 2019) negatively. pigs, for example, are disease-carrying animals or hosts for parasites. some of the parasites found in pigs include taenia solium, which causes taeniasis, namely disorders of the brain, liver, spinal cord, and lungs (gomez-puerta et al., 2018); trichinella spiralis can infect muscles, respiratory problems, swallowing disorders, enlarged lymph glands, inflammation of the brain (encephalitis) and inflammation of the lining of the brain (meningitis) (astuti & widiastuti, 2009); fasciolopsis buski can cause indigestion, diarrhea, and swelling of the body (sadarao et al., 2011); and 107 journal of islamic economic laws-january, vol. 5, no. 1, 2022 clonorchiasis sinensis is a trematode in the liver that causes clonorchiasis (tang et al., 2016). based on the data above, the significance value of the dummy is 0.000. it can be concluded statistically that there has been a change in the consumption pattern of halal food during the covid-19 pandemic. based on empirical research, it is found that there is a change of 0.022 units for every 1 unit increase in the decision to buy halal food. facts show that during the covid-19 pandemic, the demand for halal food has increased (prasidya, 2020; setyono, 2021). this finding is also in line with pujiyono (2020), where people are increasingly aware of the importance of the halal and thayyib consumption lifestyle during the covid-19 pandemic. the substance of maqashid sharia is maslahah (goodness), where during covid-19 pandemic life protection (hifz al-nafs) is a priority. one of the ways to protect this life is by consuming foods that support health and are also halal. in addition, the increase in the purchase of halal products such as halal food is also motivated by the government’s priority in the national economic recovery program due to the covid-19 pandemic. the minister of finance sri mulyani stated that the halal industry is one of the activities that must be accelerated during the covid-19 pandemic. the halal industry, especially food and beverage, pharmaceuticals, and cosmetics, is the backbone that still has high activity during the covid-19 condition (putra, 2021). furthermore, vice president ma’ruf amin said the halal product industry could develop during the covid-19 pandemic. the public considers health and hygiene in choosing products (yuniartha, 2020). conclusion the existence of the covid-19 pandemic has created several multidimensional problems, not only giving rise to economic and health crises but also threatening food stability. even though almost all aspects of the economy are affected, on other hand, the halal food industry in indonesia is still showing progress. at the beginning of the covid-19 case, several rumors said that 108 fuad hasyim this virus was transmitted from bats in china’s wuhan market. therefore, some people in indonesia respond that halal food reflects the value of health, cleanliness, and blessings. therefore, this study examines whether, during a covid-19 pandemic, new habit patterns are formed to be more careful in consuming food. whether halal is one of the essential factors in determining people’s buying decisions, especially in the soloraya area. the research results found that attitudes that represent internal influences and subjective norms as representations of external factors influence individuals in shaping their consumption patterns of halal food. in addition, perceived behavioral control, which represents convenience, also impacts purchasing decisions for halal food. this can be seen from the non-halal food/ drink, which is only limited to non-muslim consumption, so the alternative for muslims is halal food which is relatively abundant and easy to obtain. in addition, during the covid-19 pandemic, the level of religious practice reflected in religiosity has also increased. this is shown by the culture of helping one another alleviate the burden of the covid-19 pandemic and a good understanding of religion, impacting halal consumption patterns. meanwhile, descriptive norms show that the natural food that muslims should consume is halal. besides being guaranteed its goodness, it also contains blessings. in general, it can be concluded that there 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(2020). pandemi corona dinilai jadi peluang bagi industri produk halal, kenapa? kontan.co.id. https:// nasional.kontan.co.id/news/pandemi-corona-dinilai-jadipeluang-bagi-industri-produk-halal-kenapa-1 journal of islamic economic laws vol. 4, no. 2, july 2021: 105-136 105 influence of service quality dimensions of islamic banks on customer satisfaction and their impact on customer loyalty afifah1, nurul alfiah kurniawati2 1airlangga university 2university of edinburgh email: afifah-2019@feb.unair.ac.id, nurulalfiahkurniawati@ gmail.com abstract strengthening islamic banking funding is one of particular strategies in the indonesian islamic banking master plan for 2019-2024, as one of their expected outputs is to increase market share and customer satisfaction of islamic banks. this study aims to identify influence of service quality dimensions on customer satisfaction and their impacts on customer loyalty in islamic banks in indonesia. this study used a quantitative approach. its data were collected by an online questionnaire with five likert scales randomly given to 136 customers from several islamic banks who had direct transactions at the islamic banks. the sampling technique of this study used a purposive sampling technique, and its analysis technique used structural equation modeling based on partial least square (sem-pls). the findings of this paper indicate that the dimensions of both compliance and responsiveness have significant influence on customer satisfaction and customer loyalty. meanwhile, assurance, reliability, and empathy dimensions have no significant impacts on customer satisfaction and customer loyalty. tangible dimension has significant influence on customer satisfaction but has no significant influence on customer loyalty. customer satisfaction has a significant impact on customer loyalty. keywords: islamic bank, carter model, customer satisfaction, customer loyalty mailto:nurulalfiahkurniawati@gmail.com mailto:nurulalfiahkurniawati@gmail.com 106 afifah, nurul alfiah kurniawati introduction in the last ten years, islamic banking in indonesia has experienced proper growth, but this is not accompanied by its market share, as this has still reached 6.18% of the total banking market share in general until june 2020. wahyuningsih (2014) explains that basically profits of a bank are entirely come from their customers, so this indicates that banking institutions will focus on how to get a larger number of customers to increase their market share. as a bank is a company that offers services to consumers, one of ways of to increase the number of its consumers or customers is to provide better service quality to provide satisfaction for customers until they will ultimately be loyal to the bank. ratnasari, r.t., et al (2020) states that improving service quality is very important for a company in gaining a competitive advantage. investment to improve service quality will also lead to increasing profitability and market share (rust, r.t. and zahorik, a.j., 1993). in addition, in service industries around the world, discussions of service quality remain important as a business strives to maintain a comparative advantage in its market. banking financial institutions as one of financial services that compete in generally similar product market consider service quality as a main competitive weapon (stafford, m.r., 1996), and they also may increase customer trust through mediation of customer satisfaction (misbach, i. and hadiwidjojo, d., 2013). in a context of islamic banking, scale measurements on service quality that has been conducted and widely applied by previous researchers is a carter model. this model is a development of a servqual model (parasuraman, a., et al, 1998) that cannot be measured based on social and cultural aspects. cronin dan taylor (1992) criticize that the servqual model consisting of assurance, reliability, tangible, empathy, and responsiveness dimensions do not fully address religious compliance. therefore, othman dan owen (2001) develop the carter model by adding a new dimension to the servqual model. one of the added dimensions is about consumer attitudes towards religious beliefs that can influence their decision to buy a product or service. this journal of islamic economic laws-july, vol. 4, no. 2, 2021 107 dimension is compliance referring to obey on a business entity or product based on religious principles. thus, in the carter model there are six dimensions; the are compliance, assurance, reliability, tangible, empathy, and responsiveness. this differs from the servqual model only in the compliance dimension, especially compliance in upholding islamic religious principles in its operations. the compliance dimension is a unique characteristic tried to be measured by the carter model. the compliance is an interesting issue to discuss because this dimension proves not to be an absolute factor that encourages customers in several countries with muslim majority populations to be satisfied when using islamic banking services. the compliance is considered as the most substantial factor by islamic banking customers in kuwait (othman, a.q. and owen, l., 2001), malaysia (shafie, s., et al, 2004) and indonesia (ciptono and sofiyanti, 2007; ramdhani et al., 2011). however, these findings still can be debated because other results report that reliability dimension is the most influential service quality dimension in malaysia (amin dan isa, 2008; osman et al., 2009) and responsiveness dimension is the most influential in indonesia (misbach, i. and hadiwidjojo, d., 2013). in saudi arabia, as the largest center of islamic civilization in the world, the compliance dimension is a factor that has very low influence on customer satisfaction in using islamic banking services (loone., aldawood., and bhat, 2017). meanwhile in other countries such as pakistan, england, united arab emirates (rehman, k-u. and khattak, n., 2010) and bahrain (janahi, m.a. and almubarak, m., 2015), assurance dimension is the most influential to encourage customer satisfaction on islamic banking services. these different results of the studies regarding the service quality dimensions in several countries are reasonable because each country has different historical and cultural backgrounds. however, the results of several studies in malaysia and indonesia show inconsistent results. based on the discussions above, the author aims to study further about the influence of the service quality dimensions of islamic banks on customer satisfaction and their impacts on 108 afifah, nurul alfiah kurniawati customer loyalty. this study is to contribute to improve service quality for customer satisfaction and to create customer loyalty on islamic banking financial institutions in indonesia, so that the market share of islamic banks will continue to increase. literature review service quality dimensions zeithaml, et al (1996) define service as acts, processes, and provided performances that are co-produced or co-created by a particular entity/person. in other words, service is an act or performance, conducted by a party and offered to the other parties, which is essentially intangible and does not contribute to ownership. then quality, according to cullen and hollingum (1987), is a condition like what a product says. in a sense, the product is good and appropriate to what is offered. service quality is used as a measurement of how good the level of service is in accordance to customer expectations. lewis and booms (1983) also express that the service quality can be realized by fulfilling customer needs and desires and accuracy of its delivery to keep balance with customer expectations. febriandika n.r., et al (2020) said that customer loyalty can be built by improving the customer experience. one of customer experience is service quality. islamic banking is different from conventional banking, especially in three important aspects: no extra interest income (riba), no interest rates, and islamic principles as a practice in every economic activity (ebrahimi, m.r. and moghadam, a.h., 2012). therefore, othman and owen develop (2001) the carter model to define and measure the service quality in islamic banking. this is because the servqual model is considered inappropriate to be applied in islamic banking because there is a compliance dimension that must be upheld by islamic banking as its economic activities are applied based on islamic principles. therefore, if the servqual model only have five dimensions, the carter model developed by othman and owen add one dimension, the compliance (islamic compliance). thus, the carter model consists of six dimensions to measure the service quality. the six dimensions are in the following: journal of islamic economic laws-july, vol. 4, no. 2, 2021 109 1. compliance is ability to follow islamic principles applied in islamic banking operations (othman, a.q. and owen, l., 2001). this means that all products or services developed and offered by islamic banks must follow islamic law. in addition, all business transactions must use a revenue sharing system and prohibit interest on funding and loans. ullah asserts (2014) that some islamic banks cannot follow the islamic law comprehensively because of systemic factors such as economic system, government regulations, and lack of research and development. however, amin and isa (2008) insist that islamic banks should always improve relationships based on customer trust regarding islamic compliance principles. in previous empirical studies, compliance was considered as one of the most significant determinants of service quality in islamic banking (othman and owen, 2001; and osman, et al, 2009). 2. assurance is knowledge and politeness of islamic banking employees as well as their communication skills to provide trust and conviction to customers (othman, a.q. and owen, l., 2001). therefore, excellent service quality requires islamic bank employees who are polite, skilled and competent, and it also requires them to work and provide solutions of financial problems experienced by customers (janahi, m.a. and almubarak, m., 2015). the assurance becomes an important dimension of service quality to satisfy the islamic banking customers (janahi and almubarak, 2015; and khamis, et al, 2008). 3. reliability is ability to provide services which are suitably promised, reliable, accurate, and trustworthy by customers (othman, a.q. and owen, l., 2001). the reliability can make islamic banks more efficient and create a higher level of customer satisfaction (janahi, m.a. and almubarak, m., 2015). some studies also found that reliability is the most influential dimension experienced by islamic banking customers (amin and isa, 2008; osman et al, 2009; and zaim, et al, 2010). 110 afifah, nurul alfiah kurniawati 4. tangible is physical evidence associated with the existence or appearance of physical facilities, equipment, personnel, and communication materials (othman, a.q. and owen, l., 2001). tangible is physical appearance, equipment, personnel, and communication materials, and it can also be related to a company’s ability to show its existence to external parties (lupiyoadi, 2001). janahi and almubarak (2015) argues that tangible includes convenience of location, design of physical facilities, materials, and uses of communication equipment. according to qureshi et al. (2012), service quality can work well in islamic banking when supported by tangibility elements. tangible is an important aspect of islamic banking that can lead to customer satisfaction (zaim, h., et al, 2010). 5. empathy is a care, an individual’s care of an islamic bank to its customers (othman, a.q. and owen, l., 2001). this dimension is a profile of islamic bank employees who can offer special attention to customers. empathy has proven to be a very important dimension of service quality in islamic banking which can ultimately produce customer satisfaction (qureshi et al., 2012; othman and owen, 2001; osman et al, 2009). 6. responsiveness is ability to help customers and provide services quickly and provide clear information (lupiyoadi, 2001). responsiveness produces a willingness to help customers and provide fast services (othman, a.q. and owen, l., 2001). janahi and almubarak (2015) convey that fast and efficient frontliner staff and availability of bank branches and atms are good examples of responsiveness. responsiveness is an essential dimension that must be considered by islamic banks to increase levels of customer satisfaction (misbach, i. and hadiwidjojo, d., 2013). the six dimensions of the carter model is an extension of the parasuman’s servqual model (parasuraman et al., 1988). however, because the model has no dimension that measures levels of compliance related to islamic principles, othman and owen (2001) develop a carter model to measure the service journal of islamic economic laws-july, vol. 4, no. 2, 2021 111 quality of islamic banking. this paper will test how quality dimensions of carter model influence customer satisfaction and loyalty of islamic banking. customer satisfaction in the traditional concept, customer is everyone who buys and uses that company’s products or services. in a modern concept, customer falls into two categories; internal or external customer (sudarwati., and yani, b.a., 2021). customer satisfaction is one of the most important strategic elements in any organization. this is because any business relies on customers as a major source of income (rehman, k-u. and khattak, n., 2010). customer satisfaction is one of the important factors of a company’s success. to achieve high customer satisfaction, a company must understand when and how they satisfy their customers by their products and services (syauqi) m., ratnasari. r.t., herianingrum. s., 2018). modern marketing believes that business survival depends on ability to fulfill customer needs and satisfaction. it is assumed that customer satisfaction attracts loyalty and retention of customers; therefore, it will increase profitability (okumus, h.s. and genc, e.g., 2013). financial institutions focus on improving customer satisfaction to achieve their goals by improving their service quality and products (ahmed, a. and rehaman, k-u., 2010). customer satisfaction is very important for banks or companies as a famous slogan always says that customers are a king who needs to be served as best as possible (kashmir, 2004). kotler (2005) defines that satisfaction is a person’s feeling of pleasure or disappointment derived from a comparison between his/her impression on performance and results of a product and his/her expectations. meanwhile, tjiptono (2005) mentions that customer or consumer satisfaction is an evaluation of buyers when a chosen alternative is at least same or above customer expectations; while, dissatisfaction occurs when the results do not fulfill the expectations. however, achieving customer satisfaction is not easy. being a subjective evaluation, customer satisfaction is a main challenge for a company in understanding, achieving, and 112 afifah, nurul alfiah kurniawati maintaining satisfaction among its customers (ratnasari. r.t., gunawan. s., and mawardi. i., 2020). in a disconfirmation paradigm, customer satisfaction is understood as an emotional reaction or a customer feeling to different assessments between performance and expectations (oliver, 1980) in (ratnasari. r.t., gunawan. s., and mawardi. i., 2020). particularly, the disconfirmation can be positive if a product exceeds expectations as a consumer will be happy, or the disconfirmation can be negative if it is not in accordance to expectations as a consumer will be dissatisfied; if it fulfils the expectations, the consumer will be satisfied (kotler, p., 2005). on a positive side, satisfied consumers will become loyal and will make buybacks, or the satisfied consumers will promote mouth to mouth (schiffman. l. dan l, kanuk., 2008). in this paper the author examines how quality service influences customer satisfaction and how customer satisfaction influences customer loyalty. indicators of customer satisfaction used in this study refers to a theory of geyskenz et al. (1999), especially economic satisfaction (including satisfaction with a concept of revenue sharing, administrative costs, product costs, etc.) and noneconomic satisfaction (including satisfaction with an existing system in islamic banks, islamic bank products, and provided facilities). customer loyalty the concept of customer loyalty in the service industry is considered as an important point in marketing literatures (caceres, r.c. and paparoidamis, n.g., 2007). customer loyalty is company’s ability to continually win protection from certain customers over other competitors. it is a sustainable process that does not end with satisfaction of customer needs, but this continues with establishment of long-term recurring purchasing relationships with customers respecting to a particular brand (tweneboah-koduah, e. and farley, y.d., 2015). lam, et al. (2004) explain that customer loyalty is a recurring protection and a recommendation of a service provider to other customers. in recent years, customer loyalty to bank services has become a journal of islamic economic laws-july, vol. 4, no. 2, 2021 113 focal point for marketing teams and researchers. this is because bank’s ability to attract and maintain customers in a long term is strongly linked to their profitability (keisidou, e., et al., 2013). therefore, banks need to implement a customer loyalty program. following existing literatures, ganiyu et al. (2012) reveal that customer loyalty is demonstrated by buying back products despite existing attractive competitive alternatives that may encourage the customers to try competitor products, supporting and promoting company’s goods or services to others, and providing feedback related to a company’s performance. the most important benefit of having loyal customers is that it allows a business to save some various expenses, as attracting new customers is more expensive than retaining existing customers (dick, a.s. and basu, k., 1994). in addition, customer loyalty is considered to contribute to increasing revenue (hennig-thurau, t., et, al., 2002), as loyal customers will purchase more of their main goods, services, brands (chaudhuri, a. and holbrook, m.b., 2001), and other variations of goods or services (shoemaker, s. and lewis, r.c., 1999). estiri et al. (estiri, et al., 2011) state that customer satisfaction and service quality are very significant for marketing theory and practice, and they are considered as key predictors of customer loyalty. these findings are in line with a study of ofori et al. (2017) illustrating that service quality is a very important determinant of trust and satisfaction that will eventually impact on customer loyalty. loyalty indicators used in this study refer to theories of kyle et al. (2010), zeithaml et al. (1996), and kotler (2005), especially repurchase intention (repurchase of services or products), word of mouth (recommending to others), and retention (strong commitment to provided products or services). relationships between variables 1. service quality dimensions and customer satisfaction service quality and customer satisfaction are interrelated concepts (hossein, v. and sahel, f., 2013). however, factors that influence customer satisfaction based on provided service quality may vary in some countries (giese, j.l. and cote, j.a., 2002). some studies have found a positive relationship between 114 afifah, nurul alfiah kurniawati service quality provided by banks and customer satisfaction (slacket et al., 2020; khamis and abrashid., 2018). khamis and abrashid (2018) also demonstrate that service quality plays an important role in customer satisfaction. as a result, company can increase its market share by improving it service quality. othman and owen (2001), as well as osman, et al. (2009) found a significant positive relationship between service quality dimensions (especially, compliance) and customer satisfaction. h1: compliance significantly influences customer satisfaction assurance is knowledge and politeness of employees and ability of a company and its employees to inspire trust and conviction (ratnasari. r.t., and aksa. m.h., 2011). furthermore, famiyeh, s., et al. showed (2017) that assurance has no positive and significant influence on customer satisfaction. meanwhile akhtar, m.n. et al. (2011) osman, et al., (2009), and khamis, et al. (2018) found a significant positive relationship between assurance and satisfaction. h2: assurance significantly influences customer satisfaction some studies have pointed out that there is a significant positive relationship between reliability and customer satisfaction (famiyeh, s., et al., 2017; othman and owen, 2001; khamis and abrashid, 2018). h3: reliability significantly influences customer satisfaction zaim, et al. (2010) argues that tangible dimension is an important factor that influences customer satisfaction. famiyeh, s., et al. (2017) also indicates that there is a significant positive relationship between the tangible dimension and customer satisfaction. h4: tangible significantly influences customer satisfaction khamis, et al., (2018), famiyeh, s., et al., (2017), and osman, et al., (2009) found a significant positive relationship between empathy dimension and customer satisfaction. zaim, journal of islamic economic laws-july, vol. 4, no. 2, 2021 115 et al. (2010) also expresses that empathy dimension is the most influential service quality for customer satisfaction. h5: empathy significantly influences customer satisfaction several studies found a significant positive relationship between responsiveness and customer satisfaction (othman and owen, 2001; osman, et al, 2009; akhtar, m.n., 2011; khamis and abrashid, 2018). meanwhile, famiyeh, s., et al (2017) states that responsiveness does not have a positive and significant influence on customer satisfaction. h6: responsiveness significantly influences customer satisfaction 2. service quality dimensions and customer loyalty customer loyalty is suggested to consist of two different dimensions, loyalty attitude (willingness to recommend service to others) and loyalty behavior (repeat purchase) (kyle, g., et al, 2010), and it is an output of a positive service experience (zeithaml, v.a., et al, 1996). some scholars argue that service quality leads to customer loyalty (dick and basu, 1994; ladhari, 2009) and positively influences customer loyalty in both repurchase dimension and word of mouth (slack et al., 2020; asnawi et al., 2019). also, it negatively relates to customer disloyalty (kelley et al., 1993). next, parasuraman et al. (1998) convey that service quality plays an important role to increase customer loyalty. amin (2013) indicates a direct and very significant relationship between service quality and customer loyalty. dandis and wright (2020) as well as fauzi and suryani (2018) conclude that compliance has a positive and significant influence on customer loyalty. h7: compliance significantly influences customer loyalty slack, et al. (2020) state that assurance has no significant influence on customer loyalty. meanwhile, ren and lam (2016) indicates a positive and significant relationship between assurance and customer loyalty. h8: assurance significantly influences customer loyalty 116 afifah, nurul alfiah kurniawati murray and howat, (2002) mention that reliability is the most important dimension of service quality on customer loyalty. ren and lam (2016) then also show a positive and significant relationship between reliability and customer loyalty. otherwise, slack, et al. (2020) argues that reliability has no significant influence on customer loyalty. h9: reliability significantly influences customer loyalty lee et al. (2010) suggest that tangible is the most important dimension of service quality in predicting customer loyalty. bloemer et al. (1999) also state that tangible can positively influence customer loyalty. h10: tangible significantly influences customer loyalty ioannis and lymperopoulos (2009) found a positive influence between empathy and customer loyalty. similarly, slack, et al. (2020) indicate that empathy has a positive and significant influence on customer loyalty. h11: empathy significantly influences customer loyalty bloemer et al. (1999) and slack, et al. (2020) argue that responsiveness positively and significantly influences customer loyalty. h12: responsiveness significantly influences customer loyalty 3. customer satisfaction and customer loyalty some scholars argue that customer satisfaction can lead to loyalty (slack et al., 2020, casidy and wymer, 2015; kasiri et al., 2017). there is a positive relationship between customer satisfaction and repurchase (kasiri, et al, 2017), and also there is a positive relationship between customer satisfaction and word of mouth promotion (kasiri et al., 2017; pedragosa and correia, 2009). in addition, chen and wang (2009) point out that satisfied customers are more likely to be loyal customers, buy back, give a positive word of mouth, and reduce their price sensitivity. slack, et al. (2020) demonstrate that there is a positive relationship between customer satisfaction and loyalty; the higher the satisfaction is journal of islamic economic laws-july, vol. 4, no. 2, 2021 117 experienced, the more it influences customer loyalty. omoregie et al. (2018) also state that customer satisfaction has the most significant influence on customer loyalty. h13: customer satisfaction significantly influences customer loyalty methods a method used in this study was an explorative quantitative approach. a measurement method of this study used questionnaires as a tool to determine the influence among variables in this study. respondents in this study were people who had islamic bank accounts and had conducted transactions directly at the banks. the methods in this study were conducted in two steps. the first step is testing the questionnaire material. at this step, the questionnaires were distributed to 50 respondents to test whether each question in the questionnaires has been understood or confusing. in the second step, the distribution of questionnaires was continued on 80 respondents who met the criteria as mentioned above. figure 1 conceptual model thus, the respondents in this study were 136 respondents. furthermore, a sampling was conducted by using a non-probability sampling technique with a purposive sampling, a sampling 118 afifah, nurul alfiah kurniawati with special considerations to obtain more representative data (sugiyono, 2009). then, an analysis technique in this study applied structural equation modeling based on partial least square (sem-pls), a model of structural equations based on components or variants (ghozali, i. latan, h., 2012). this analysis technique was also conducted in two steps. the first was conducting a measurement model test to determine validity and reliability of constructs of each indicator. the second was conducting a structural model test to determine the influence among the variables. results and discussion sem-pls is an analysis method not based on many assumptions, but this structural equation model is based on components or variants (ghozali, i. latan, h., 2012). the sempls is used to confirm a theory and explain relationships among latent variables. sem-pls processing by using smart-pls is performed in two steps. the first step is conducting a measurement model test to test validity and reliability of the constructs of each indicator. then in the second stage, conducting a structural model test is to determine whether influence among the latent variables occur or not. measurement model assessment the measurement models are evaluated based on the reliability and validity of the measurement instruments. reliability is assessed by using cronbach’s alpha and composite reliability. henseler et al. (2009) recommend that cronbach’s alpha reliability and composite reliability values can be considered reliable if they are above 0.7. the table below indicates that all constructs are reliable because values of cronbach’s alpha and composite reliability are above 0.7. furthermore, the validity measurement is assessed by using average variance extracted (ave). henseler, et al. (2009) suggest that an instrument can be valid if the ave of each instrument in the model is above 0.5. the table below demonstrates that all constructs are valid. this is indicated by ave values above 0.5. journal of islamic economic laws-july, vol. 4, no. 2, 2021 119 table 1. results of reliability and validity tests constructs cronbach’s alpha rho_a composite reliability average variance extracted (ave) insurance 0.880 0.885 0.917 0.735 compliance 0.747 0.752 0.840 0.569 customer loyalty 0.940 0.944 0.950 0.678 customer satisfaction 0.931 0.940 0.944 0.708 empathy 0.903 0.912 0.933 0.776 reliability 0.850 0.850 0.899 0.690 responsiveness 0.953 0.953 0.966 0.876 tangible 0.820 0.822 0.882 0.651 structural model assessment 1. hypothesis testing below is estimated values of each relationship among the research variables. based on the table, the results of hypothesis tests can be interpreted as follows: • the estimated coefficient value between compliance and customer satisfaction is 0.259. the coefficient value indicates that there is a positive relationship between compliance and customer satisfaction. the higher the compliance level, the higher the level of customer satisfaction. then, vice versa, the lower the compliance level, the lower the level of customer satisfaction. based on t value, the significance value is 0.005 (p < 0.05) so, there is a significant influence between compliance and customer satisfaction. • the coefficient value of assurance of customer satisfaction is 0.044. the coefficient value indicates a positive relationship between assurance and customer satisfaction. the higher the assurance level, the higher the level of customer satisfaction. then, vice versa, the lower the assurance level, the lower the level of customer satisfaction. based on t value of 0.642 (p > 120 afifah, nurul alfiah kurniawati 0.05), there is no significant influence between assurance on customer satisfaction. table 2. estimated variable coefficient values hypothesis relationship original sample (o) statistic t (o/ stdev) value p hypothesis accept compliance → customer satisfaction 0.259 2.857 0.004 accepted assurance → customer satisfaction 0.044 0.463 0.644 rejected reliability → customer satisfaction 0.047 0.403 0.687 rejected tangible → customer satisfaction 0.250 2.918 0.004 accepted empathy → customer satisfaction -0.023 0.200 0.842 rejected responsiveness → customer satisfaction 0.358 2.468 0.014 accepted compliance → customer loyalty 0.224 2.283 0.023 accepted assurance → customer loyalty 0.016 0.170 0.865 rejected reliability → customer loyalty -0.075 0.750 0.454 rejected journal of islamic economic laws-july, vol. 4, no. 2, 2021 121 hypothesis relationship original sample (o) statistic t (o/ stdev) value p hypothesis accept tangible → customer loyalty 0.099 1.029 0.304 rejected empathy → customer loyalty -0.023 1.189 0.235 rejected responsiveness → customer loyalty 0.524 4.252 0.000 accepted customer satisfaction → customer loyalty 0.289 3.069 0.002 accepted • based on the estimated coefficient value by 0.047, there is a positive relationship between reliability and customer satisfaction. the higher the reliability level, the higher the customer satisfaction level. then, vice versa, the lower the reliability level, the lower the customer satisfaction level. based on t value of 0.666 (p > 0.05), there is no significant influence between reliability and customer satisfaction. • the tangible coefficient value of customer satisfaction is 0.250. the value shows a positive relationship between tangible and customer satisfaction. the higher the tangible level, the higher the level of customer satisfaction. then, vice versa, the lower the tangible level, the lower the level of customer satisfaction. based on t value of 0.005 (p < 0.05), there is a significant influence between tangible and customer satisfaction. • the estimated coefficient value of empathy and customer satisfaction is -0.023. the coefficient value indicates that there is a negative relationship between empathy and customer satisfaction. thus, the higher the empathy level, the 122 afifah, nurul alfiah kurniawati lower the customer satisfaction level. then, vice versa, the lower the empathy level, the higher the customer satisfaction level. based on t value, its significance value is 0.840 (p > 0.05) so, there is no significant influence between empathy and customer satisfaction. • a value of responsiveness coefficient of customer satisfaction is 0.358. the coefficient value indicates a positive relationship between responsiveness and customer satisfaction. the higher the responsiveness level, the higher the customer satisfaction level. then, vice versa, the lower the responsiveness level, the lower the customer satisfaction level. based on t value of 0.009 (p < 0.05) so, there is a significant influence between responsiveness and customer satisfaction. • based on estimated coefficient value of 0.224, there is a positive relationship between compliance and customer loyalty. the higher the compliance level, the higher the customer loyalty level. then, vice versa, the lower the compliance level, the lower the customer loyalty level. based on t value of 0.045 (p < 0.05) so, there is a significant influence between compliance and customer loyalty. • assurance coefficient value of customer loyalty is 0.016. the coefficient value indicates a positive relationship between assurance and customer loyalty. the higher the assurance level, the higher the customer loyalty level. then, vice versa, the lower the assurance level, the lower the customer loyalty level. based on t value of 0.860 (p > 0.05) so, there is no significant influence between assurance and customer loyalty. • based on estimated coefficient of -0.075, there is a negative relationship between reliability and customer loyalty. thus, the higher the reliability level, the lower the customer loyalty level. then, vice versa, the lower the reliability level, the higher the customer loyalty level. based on t value of 0.481 (p > 0.05) so, there is no significant influence between reliability and customer loyalty. • tangible coefficient value of customer loyalty is 0.099. the value shows a positive relationship between tangible and journal of islamic economic laws-july, vol. 4, no. 2, 2021 123 customer loyalty. the higher the tangible level, the higher the customer loyalty level. then, vice versa, the lower the tangible level, the lower the customer loyalty level. based on t value of 0.260 (p > 0.05) so, there is no significant influence between tangible and customer loyalty. • the estimated coefficient value of empathy and customer loyalty is -0.153. the coefficient value indicates that there is a negative relationship between empathy and customer loyalty. thus, the higher the empathy level, the lower the customer loyalty level. then, vice versa, the lower the empathy level, the higher the customer loyalty level. based on t value, the significance value is 0.249 (p > 0.05) so, there is no significant influence between empathy and customer loyalty. • the responsiveness coefficient value of customer loyalty is 0.524. the coefficient value indicates a positive relationship between responsiveness and customer loyalty. the higher the responsiveness level, the higher the customer loyalty level. then, vice versa, the lower the responsiveness level, the lower the customer loyalty level. based on t value of 0.000 (p < 0.05) so, there is a significant influence between responsiveness and customer loyalty. • estimated coefficient value of customer satisfaction and customer loyalty is 0.289. the coefficient value shows that there is a positive relationship between customer satisfaction and customer loyalty. the higher the customer satisfaction level, the higher the customer loyalty level. then, vice versa, the lower the customer satisfaction level, the lower the customer loyalty level. based on t value, the significance value is 0.001 (p < 0.05) so, there is a significant influence between customer satisfaction and customer loyalty. results of sem test demonstrate that compliance is a service quality dimension that mostly influence customer satisfaction after tangible dimension. therefore, this supports the statement on h1 stating that there is a significant influence of compliance on customer satisfaction. in addition, the findings of this study also 124 afifah, nurul alfiah kurniawati show that there is a positive relationship between compliance and customer satisfaction. this fact implies that in service satisfaction islamic bank customers in indonesia still consider the bank’s compliance on islamic principles in its operations. these results are in line with a study of othman and owen (2001) and a study of osman, et al. (2009) indicating that there is a positive relationship and a significant influence between compliance and customer satisfaction. islamic compliance is one of the most significant dimensions that contribute to the level of muslim customer satisfaction in islamic banks in tanzania and (khamis, f.m., and abrashid, r., 2018) indonesia (asnawi, n., sukoco, b.m. and fanani, m.a., 2018). khamis and abrashid (2018) also state that compliance on islamic principles is a determinant for customers in choosing islamic banks. other findings show that there is a positive relationship between assurance, reliability and customer satisfaction, except empathy dimension with a negative relationship. however, these three dimensions have no significant influence on customer satisfaction. thus, statements on h2, h3, and h5 are rejected. these statements convey that assurance, reliability, and empathy is not determinants of customer satisfaction of islamic banks in indonesia. the results of this study are different from a study of amin and isa (2008) finding that reliability is the most influential dimension in malaysian islamic banks, but these are in line with a study of famiyeh, s., et al. (2017) arguing that assurance has no significant influence on customer satisfaction and there is a positive relationship between reliability and customer satisfaction. in addition, suherman (2018) also asserts that empathy has no significant influence on customer satisfaction. according to him, customer satisfaction of bas kc banda aceh is not influenced by empathy principles that has been applied but influenced by other factors such as qualified products, competitive price, or convenience experienced by customers. in line with h1, tangible and responsiveness become the most influential dimension for customer satisfaction. in addition, there is a positive and significant relationship between the two journal of islamic economic laws-july, vol. 4, no. 2, 2021 125 dimensions and customer satisfaction. this relationship is supported by statements on h4 and h6, as h4 states that tangible dimension has a significant influence on customer satisfaction with an original sample value of 0.250 and h6 states that responsiveness dimension has a significant influence on customer satisfaction with an original sample value of 0.358. these findings demonstrate that physical appearance, facilities, ability to help customers, fast service, and clear information are determinants of customer satisfaction of islamic banks in indonesia. zaim, et al. (2010) note that tangible dimension is an important factor that influence customer satisfaction. famiyeh,s., et al. (2017) also demonstrate that there is a significant positive relationship between tangible and customer satisfaction. in addition, the results of this study are also in line with some previous studies that also found a positive and significant relationship between responsiveness and customer satisfaction (othman and owen, 2001; osman, et al, 2009; akhtar, m.n., 2011; khamis and abrashid, 2018). the responsiveness is also considered as the most significant indicator influencing customer satisfaction at libyan islamic banks (khafafa, a.j. and shafii, z., 2013). although tangible becomes the most influential dimension on customer satisfaction, but it has no significant influence on customer loyalty. in the carter model, dimensions that have positive and significant influence on customer loyalty are compliance and responsiveness. this is approved by statements on h7 and h12, as h7 states that compliance has a significant influence on customer loyalty and h12 states that responsiveness has a significant influence on customer loyalty. results of this study are in accordance to studies by souidena and rani (2015) and by lee and ullah (2011) finding that religiosity is an important predictor for consumers to do repurchase decisions in islamic banks. similarly, these results strengthen a premise that religious commitment plays an important role to improve brand loyalty attitudes (siala, 2013). in addition, misbach and hadiwidjojo (2013) also show that responsiveness of islamic bank services is the strongest attraction for islamic bank customers in indonesia. 126 afifah, nurul alfiah kurniawati responsiveness is also considered as one of main dimensions of the carter model experienced by islamic bank customers (fauzi, a.a., and suryani, t., 2018). furthermore, assurance, such as customer trust to save in islamic banks, customer conviction on employee behavior, security experience when transacting, and service consistency of islamic banks, is importantly needed to build a positive impression of customers to islamic banks, but it has no significant influence on customer loyalty. in line with a study by slack, et al. (2020) arguing that assurance has no significant influence on customer loyalty, tangible such as facilities and physical appearance remains important to build a positive customer impression on islamic bank to increase customer loyalty although it does not have a significant influence. this is in line a study by dandis and wright (2020) stating that tangible has no significant influence on attitudinal loyalty. reliability and empathy, such as islamic bank reliability to fulfill promises, problem solving, employee’s reliability to work, convenient service hours, and attention and patience of employees in serving customers, may not create a positive impression and not be a consideration for customers to become loyal customers in the bank. these findings are supported by a study of slack, et al. (2020) showing that reliability has no significant influence on customer loyalty. lone, et al. (2017) suggest that empathy needs to be considered by islamic banks although it has no significant influence on customer satisfaction. these statements are supported by rejected statements on h8, h9, 10, and h11. similarly, the results of this study demonstrate that customer satisfaction as an intervening variable has a very significant positive influence on customer loyalty. this is evidenced by accepted statement on h13 stating that customer satisfaction has a significant influence on customer loyalty with a statistical t value of 3,069 and p value of 0.002. these results are supported by some scholars who argue that customer satisfaction leads to loyalty (slack et al., 2020, casidy and wymer, 2015; kasiri et al., 2017) as the higher the satisfaction experienced by customers will influence customer loyalty (slack, n., singh, g., and sharma, journal of islamic economic laws-july, vol. 4, no. 2, 2021 127 s., 2020). chen and wang (2009) also indicate that satisfied customers are more likely to be loyal, buy back, give a positive word of mouth, and reduce their price sensitivity. the statement is also supported by omoregie et al. (2018) arguing that customer satisfaction has the most significant influence on customer loyalty. islamic bank as one of financial services competing in markets of similar products, service quality is a main competitive weapon (stafford, m.r., 1996) and a way to improve customer conviction through mediation of customer satisfaction (misbach, i. and hadiwidjojo, d., 2013). in addition, one of specific strategies in the master plan of islamic banking in indonesia 2019-2024 is strengthening of islamic banking funding; one of its expected outputs is to increase customer satisfaction and to increase customers of islamic banks. therefore, all hypotheses in this current study are suggested to be a reference for islamic bank practitioners to realize these expectations. however, this study has limited data as its respondents only consist of 136 respondents, a very small number to represent all islamic bank customers in indonesia. this is because this study was conducted within a certain limited time. conclusion these results of this study show that the carter model is reliable and valid to test service quality of indonesian islamic banking. tangible becomes a main factor of customer satisfaction to islamic banks, followed by compliance and responsiveness dimension. meanwhile, assurance and reliability dimensions have positive relationships to customer satisfaction. however, assurance, reliability, and empathy dimensions have no significant influence. the results demonstrate that only compliance and responsiveness dimensions that have strong influence on customer loyalty in the carter model. meanwhile assurance, tangible, and reliability dimensions have no significant influence. the results also confirm that customer satisfaction has a significant influence on customer loyalty. there is a very significant relationship between customer satisfaction and customer loyalty in islamic 128 afifah, nurul alfiah kurniawati banking of indonesia as customer loyalty will increase more significantly if islamic banks can increase customer satisfaction. nevertheless, factors that influence customer satisfaction and loyalty based on service quality may be different in each country (giese, j.l. and cote, j.a., 2002). according to giese, et al., this is reasonable because of different cultures existing in each country. references ahmed, a. and rehaman, k-u. 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(1996). the behavioural consequences of service quality. journal of marketing, 31-46. _goback _heading=h.gjdgxs _goback _heading=h.gjdgxs _hlk72739620 _goback _goback _goback journal of islamic economic laws vol. 5, no. 1 january 2022: 1-37 1 analysis of amil zakat institutions financial performance prior and during covid-19 faris shalahuddin zakiy1*, eqi suciati2, najim nur fauziah3 1universitas islam negeri walisongo semarang, 2universitas islam negeri walisongo semarang, 3institute of islamic banking and finance, international islamic university malaysia, email: farisshalahuddinzakiy@walisongo.ac.id, eqisuciati99.es@ gmail.com, najimnurfauziah@yahoo.co.id abstract this study aims to measure the performance of amil zakat institutions using activity ratios, efficiency ratios, amil fund ratios, liquidity ratios, and growth ratios before and during covid-19. besides, this paper also explores the extent of the impact of covid-19 on the performance of amil zakat institutions. this paper is a qualitative research study with a case study approach in lazismu of the central java region. the case was taken from lazismu financial statements in 2019 and 2020. the financial statements are measured and reviewed using ratios to describe in-depth financial performance. the findings of this study provide the results of calculations of the five ratios, including activity ratios, efficiency ratios, amil funds ratios, liquidity ratios and growth ratios. it shows good performance, efficiency, and a significant increase. the overall performance of the lazismu central java region is stable and tends to increase during covid-19, and its performance does not differ much before covid-19. keywords: financial performance, financial ratio, amil zakat institutions. introduction covid-19, which was discovered in china, began as a global health issue and turned into an economic crisis in indonesia mailto:farisshalahuddinzakiy@walisongo.ac.id mailto:eqisuciati99.es@gmail.com mailto:eqisuciati99.es@gmail.com mailto:najimnurfauziah@yahoo.co.id 2 zakiy et al. (nasution et al., 2020). this pandemic emergency also affects the careers derailed and increases the number of individuals who have lost their jobs (yamali & putri, 2020). on top of that, saputra (2020) mentioned that zakat could play practical tools for society to respond to the pandemic crisis. similarly, amanda et al. (2021) research confirmed that zakat could be a viable solution to overcome covid-19. this view is also supported by kadir et al. (2020) concluded that the use of zakat funds for handling covid-19 was following sharia and maqashid rules. in practice, this role is held by the amil zakat institution, which has received legality from the government to collect and distribute zakat funds to people in need, especially people who prevent covid-19. the amil zakat institution is one of the spearheads of institutions that contribute and assist the state in alleviating poverty, particularly in this current covid-19 condition (sawmar & mohammed, 2021). further, it has been shown that the number of zakat management organizations (indonesia: organisasi pengelola zakat, abbreviated: opz) in indonesia reached up to 608 in total. besides, the yearly trend of the potential of zakat in indonesia always increases by an average of 20%. it has been reported that the zakat collection trend in lazismu, central java, has increased by 112.48%, and distribution has also inclined by 27.87%. lazismu central java region is also one of the amil zakat institutions that consistently exist in contributing to the people of central java in alleviating poverty and helping people who are affected by the covid-19 pandemic. in addition, lazismu central java is an institution whose financial reports have been audited by external auditors since 2018. this is what motivates the researchers in selecting the object. looking at the potential of these institutions, the amil zakat institutions should continuously improve their accountability and transparency to increase society’s trust (anwar & khalsiah, 2017). its accountability and transparency are going through with the release of financial reports and the institution’s performance (nikmatuniayah & marliyati, 2015). in terms of performance, apart from accountability, bastiar & bahri (2019) stated that performance measurement is crucial for amil zakat institutions to journal of islamic economic laws-january, vol. 5, no. 1, 2022 3 show the results of some or even all activities carried out by the institution. in line with harto et al. (2018) study, performance is the level of achievement achieved by an institution (harto et al., 2018). there are various models for measuring the performance of amil zakat institutions, although there are some available models that still are not relevant for amil zakat institutions. as mentioned by bastiar & bahri (2019), the models for measuring the performance of amil zakat institutions include; the national zakat index (izn), zakat village index (idz), centre of islamic business and economic studies (cibest), balanced scorecard, indonesian magnificence of zakat (imz) and international standard of zakat management (iszm). these various performance measurement models at the amil zakat institution have their advantages and disadvantages. however, this does not limit the amil zakat institution to choose a measurement model to evaluate the institution since each model has an interpretation required by each institution. further, research by zakariya (2016), pratama (2018), p. lestari (2010) conducted measuring the performance of amil zakat institutions using the balanced scorecard method. this method can interpret four perspectives simultaneously, including finance, internal business processes, customers and learning and growth. the papers concluded that the results of these studies are that the use of this method can describe all aspects of the business activities of the amil zakat institution. the objects of the papers do not all describe their performance well, as they are faced with several obstacles. data envelopment analysis (dea) is another performance measurement model with an intermediation approach using quantitative analysis, including data processing in the form of inputs and outputs taken from statements of financial position, cash flow statements and reports of changes in funds with the assumption of constant return to scale (crs) (a. lestari, 2015; saputra, 2020; akbar et al., 2020; fathurrahman & hajar, 2019). these studies pointed that the objects of these studies have a significant efficient level in zis management to 100%. however, 4 zakiy et al. some objects show inefficient results since their values are still below 100%. the indonesia magnifince zakat (imz) method has also been used for research on measuring the performance of amil zakat institutions in terms of sharia compliance performance, management performance, financial performance, utilization performance and social legitimacy performance (ardani et al., 2019). the results show a positive trend over the last five years and a significant increase from all aspects studied over the previous two years. in the last year, the zakat institution studied received a bbb score. another study conducted by (samsul haidir, 2020) measured the performance of amil zakat institutions using the cibest method, which measures the impact of zakat on the welfare index. the zakat index value of the zakat institutions shows 0.4878, representing a pretty good performance. looking from the macro dimension, it gets a value of 0.0495 that delivers poor performance. if viewed from the micro dimension, it gets a value of 0.78, so the performance on institutional variables and the impact of zakat is good. on the other hand, yunus & feriyanto (2019) conducted a study on performance measurement of amil zakat institutions using the national zakat index (izn) method to measure zakat based on a macro perspective. the results indicate that the zakat institution has a poor performance, as it only has a value of 0.2985 with the lowest variable on the apbd support variable and the variable ratio of the number of muzakki to the number of national business entities on the zakat institution database indicator. similarly, ainun et al. (2020) use the financial ratios to measure amil zakat institutions’ performance. however, this study is limited to the activity ratio of the amil zakat institutions during the period from 2016 to 2019. this study indicates that the calculation of each ratio component included in the activity ratio produces ratio figures that, on average, describe amil’s good performance during the mentioned period. looking at previous studies which only used activity ratios, it is interesting for the researcher to continue using the journal of islamic economic laws-january, vol. 5, no. 1, 2022 5 comprehensive ratio. the selected ratios have been through group discussion forums and research results issued by the centre for strategic studies of the national amil zakat agency. these ratios are re-managed as the ratios commonly used are not necessarily relevant to the amil zakat institution. these ratios include activity, efficiency, amil funds, liquidity, and growth ratios (baznas, 2019). by these performance measurements, the researchers try to find out the extent of lazismu’s performance in central java during the covid-19 pandemic as this current condition affects many sectors. on top of that, it is interesting for the researcher to measure the performance of amil zakat institutions using comprehensive ratios, especially to deeply know to what extent covid-19 impacts amil zakat institutions based on ratios calculation. based on the research background explained by the researcher, this research aims to measure the performance of amil zakat institutions using activity ratios, efficiency ratios, amil funds ratios, liquidity ratios and growth ratios before and during covid-19, and to explore to what extent the of covid-19 impact on amil zakat institution performance. literature review definition of financial performance performance is defined as an outcome that can be measured by describing the condition of an institution. the qualitative and quantitative measurement of the institution should include all the institution activities (bastiar & bahri, 2019). performance is also the result of the function of the institution’s work or activities influenced by various factors to achieve the institution’s objectives in a particular time (zakariya, 2016). financial performance is an overview of the company’s success, which can be interpreted as the results achieved from various activities carried out. in addition, financial performance is an analysis conducted to see the extent to which a company has implemented by using the rules of financial implementation properly and correctly (anastasya & hidayati, 2019). 6 zakiy et al. financial performance analysis objectives of laz the existence of performance measurements to evaluate activities. thus amil zakat institutions can apply the principles of its good governance by holding the principle of trust, transparency and professionalism (ermawijaya, 2018). in addition, cahyadi (2020) explained that performance measurements are carried out to find out information related to the activities of an institution sourced from financial statements. therefore, it concluded that the purpose of financial performance analysis is to find out what extent of amil zakat institutions performance is related to finance from various information obtained from financial statements, including zakat collection, zakat distribution and operational management, etc. this analysis was conducted mainly because the amil zakat institution has a strategic role in alleviating poverty and contributing to economic development (ermawijaya, 2018). financial performance as an object of analysis to see financial performance as an object of analysis, it needs an interpretation or analysis of performance in the financial part of the amil zakat institution, where it must obtain the data from the financial statements. the financial statement might show its full report and performance and provide an overview of the actual financial condition. all the performances need to be identified to make the right decisions and policies. therefore, it must obtain financial data from financial position statements and fund change statements to measure the performance that management has done or management’s accountability for the resources entrusted to it (anastasya & hidayati, 2019). types of financial ratios of amil zakat institutions financial ratio analysis of amil zakat institutions is carried out to compare the performance of its activities. the financial performance reflects the zakat institutions compliance to the conformity of sharia rules. financial performance is needed to measure the efficiency of amil zakat institutions in managing the funds and to explore to what extent their distribution. it will then show the amil zakat journal of islamic economic laws-january, vol. 5, no. 1, 2022 7 institution achievement in managing people’s funds (baznas, 2019). puskabaznas has issued relevant financial ratios that nonprofit entities such as amil zakat institutions can measure their performance. these ratios are (baznas, 2019): 1. activity ratio the activity ratio is a ratio that measures the operational activities of zakat, infaq, and sadaqah funds collected by amil zakat institutions. measurement of activity ratio is needed because the core of zakat, infaq, and sadaqah management is the process of its collection and its distribution. the measurement of activity performance can simultaneously measure zakat, infaq, and sadaqah fund collection and distribution activities over a period. 2. efficiency ratio the efficiency ratio is a ratio that measures the efficiency of operational costs that amil zakat institutions have incurred in collecting or distributing funds. the efficiency ratio is used to measure the costs efficiency in collecting and distributing the funds and the percentage of the cost used. 3. amil fund ratio the amil fund ratio is a ratio that measures the effectiveness of the amil funds utilization in its institution operation. measurement of amil funds is needed to assess the efficiency and effectiveness of amil funds used in the operational activities of collecting and distributing zakat, infaq and sadaqah funds. 4. liquidity ratio the liquidity ratio measures the amil zakat institution’s ability to pay off its short-term obligations. the liquidity level of amil zakat institutions needs to be measured to analyse the amount of funds that settle in zakat institutions. besides, it can also explore whether the available funds can cover all obligations of distributing zakat, infaq and sadaqah to determine eight asnaf according to sharia. 5. growth ratio a growth ratio is a ratio that measures the growth rate of funds from previous years. the growth ratio is significant to 8 zakiy et al. measure the development of the collection and distribution of zakat, infaq, and sadaqah funds from year to year.first-time researchers often naively believe everything they read or are scared to criticise the work of others. however, academic research is all about critical enquiry! it is, therefore, extremely important that you critically evaluate the material that you read. do you agree with the arguments and conclusions of other researchers? if you disagree, why? can you identify contradictory arguments or findings? how could one explain these contradictions? do the findings of previous studies applyin all contexts or are the findings context-specific? what are the criticisms against the conceptual models or measurement approaches discussed in the literature? which limitations should be considered when interpreting the results of previous research? financial ratio calculation formula the ratios that can measure financial performance are the activity ratio, efficiency ratio, amil fund ratio, liquidity ratio, and growth ratio (baznas, 2019). the mentioned ratio can be seen in table 1. table 1. financial ratio calculation formula no ratio formula activity ratio 1 gross allocation ratio distribution of zakat funds + infaq and sadaqah funds (zakat funds collection + infaq sadaqah fund) + (balance of zakat final fundt-1 + balance of infaq final fundt-1) journal of islamic economic laws-january, vol. 5, no. 1, 2022 9 no ratio formula activity ratio 2 gross allocation ratio non amil (distribution of zakat funds + infaq & sadaqah funds) (amil allocation fund over zakat fund + amil allocation fund over infaq fund) (collection of zakat funds + infaq & sadaqah funds) + (last year’s zakat fund balance + last year’s infaq fund balance) (amil allocation fund over zakat fund + amil allocation fund over infaq fund) 3 net allocation to collection ratio distribution of zakat funds + infaq & sadaqah funds collection of zakat funds + infaq & sadaqah funds 4 net allocation to collection ratio nonamil (distribution of zakat funds + infaq & sadaqah funds) (amil allocation fund over zakat fund + amil allocation fund over infaq fund) collection of zakat funds + infaq & sadaqah funds (amil allocation fund over zakat fund + amil allocation fund over infaq fund) 5 zakat allocation ratio total distribution of zakat funds total collection of zakat fund 6 zakat allocation ratio non-amil total distribution of zakat funds amil allocation fund over zakat fund total collection of zakat fund amil allocation fund over zakat fund 7 infaq dan sadaqah allocation ratio total distribution of infaq and sadaqah fund total collection of infaq and sadaqah fund 8 infaq dan sadaqah allocation non-amil total distribution of infaq and sadaqah funds amil allocation fund over infaq and sadaqah funds total collection of infaq and sadaqah fund amil allocation fund over infaq and sadaqah funds 9 zakat turn over zakat fund distributed in year x (initial balance of zakat fund year x + final balance of zakat fund year x) /2 10 zakiy et al. no ratio formula activity ratio 10 average of days zakat outstanding 360 zakah turn over 11 infaq dan sadaqah turn over infaq and sadaqah fund distributed in year x (initial balance of infaq and sadaqah fund received in year x + final balance of infaq and sadaqah fund in year x) /2 12 average of days infaq dan sadaqah outstanding 360 infaq and sadaqah fund turn over 13 zis turn over zis fund distributed in year x (initial balance of zis fund received in year x + final balance of zis fund in year x) /2 14 average of days zis outstanding 360 zis turn over 15 distribution receivable ratio distribution of receivables fund total of distribution 16 time required for the realization of receivables funds distribution distribution of receivables fund × 360 total of distribution 17 down payment ratio down payment total of distribution 18 an asset of zakat management ratio total assets managed from zakat in the current year total distribution ofzakat fund efficiency ratio 19 collection cost ratio total of collection cost total of operational cost total of collection cost total of collection cost journal of islamic economic laws-january, vol. 5, no. 1, 2022 11 no ratio formula efficiency ratio 20 operating expense ratio total of operational cost total of amil allocation fund total of operational cost total of collection 21 hr cost ratio total hr cost total of collection amil fund ratio 22 amil rights ratio amil allocation fund over zis fund x 100% (zakat acceptance revenue share acceptance of zis fund placement) 23 the ratio of amil rights to zakat amil allocation fund over zakat fund x 100% (zakat acceptance revenue sharing acceptance of zakat fund placement) 24 amil’s rights ratio over infaq and sadaqah amil allocation fund over infaq and sadaqah fund x 100% (acceptance of infaq and sadaqah fund revenue share acceptance of infaq and sadaqah fund placement) 25 amil’s rights ratio to csr infaq and csr allocation fund for amil x 100% (csr acceptance revenue sharing acceptance of csr fund placement) liquidity ratio 26 current ratio total of current assets (zakat fund balance + balance of infaq and sadaqah funds + total of short-term liabilities) managed assets 12 zakiy et al. no ratio formula liquidity ratio 27 quick ratio cash and cash equivalents + supplies (total short-term liabilities + zakat fund balance + balance of infaq and sadaqah funds) managed assets 28 cash to zakat ratio zis cash and cash equivalent zakat fund balance managed assets 29 cash to zis ratio zis cash and cash equivalent (zakat fund balance + balance of infaq and sadaqah funds) managed assets growth ratio 30 growth of zakat zakat collection t zakat collection t-1 zakat collection t-1 31 growth of infaq and sadaqah collection of infaq and sadaqah fundt collection of infaq and sadaqah fundt-1 collection of infaq and sadaqah fundt-1 32 zis growth zis collection t zis collection t-1 zis collection t-1 33 distribution growth total distribution t total distribution t-1 total distribution t-1 34 growth in operating expenses growth in operating expenses year t growth in zis collection year t methods this study measures the financial performance of amil zakat institutions using activity ratios, efficiency ratios, amil fund ratios, liquidity ratios and growth ratios before and during covid-19. it explores the extent of the impact of covid-19 on the financial performance of amil zakat institutions based on those mentioned ratios. therefore, qualitative research is very relevant to this study, as qualitative research helps to holistically understand the phenomenon experienced by the subject of the study (kamayanti, journal of islamic economic laws-january, vol. 5, no. 1, 2022 13 2016). moreover, this study uses a case study approach which is relevant to describe the phenomenon in depth (bungin, 2012). this study selected the lazismu region of central java, one of the amil zakat institutions that has contributed significantly to the dhuafa community, especially in the current pandemic era. it can be proven from the significant amount of funds that have been collected and distributed by the institution. moreover, this study collected primary and secondary data to reach the objective of this study. the preliminary data in this study is financial statements released by lazismu in central java between 2019 and 2020. the following primary data is an interview with the director of lazismu to get in-depth information and confirmation of the extent of the impact of covid-19 on its institution’s financial performance ratio. the selection of the informants in this study was adjusted to the person’s capacity to provide valid information to the researcher. this research uses a case study analysis approach (yin, 2014). the case was raised from lazismu’s financial statements in central java in 2019 and 2020. the financial statements are measured and reviewed using ratios to describe the financial performance of lazismu in central java. as for measuring financial performance, use the ratios issued by puskasbaznas. after the calculation of the ratio, then the researcher will interpret the measurement of financial performance from lazismu central java. the interpretation results will later outline the extent to which the financial performance of lazismu central java region before and during covid-19. in addition, the researchers will also confirm and explore the management of the impact of covid-19 on financial performance to produce valid research findings. this can be done by reducing the data of interview results, presenting data and drawing conclusions and verification (yin, 2014). results lazismu is a muhammadiyah philanthropic institution that collects and manage zakat, infaq, sadaqah fund and other religious, social funds productively for the empowerment of people in need (mustahiq). established by the head of muhammadiyah centre 14 zakiy et al. in 2002, the minister of religious affairs of the republic of indonesia confirmed the establishment of the national amil zakat institution through decree no. 457/21 november 2002. with the enactment of zakat law number 23 of 2011, government regulation number 14 of 2014, and decree of the minister of religious affairs of the republic of indonesia number 333 of 2015, lazismu as a national amil zakat institution has been reaffirmed through the decree of the minister of religious affairs of the republic of indonesia number 730 of 2016. lazismu centre is at the national level that serves community empowerment through the productive utilization of zakat, infaq, waqf and other charitable funds from individuals, institutions, companies, and other agencies. besides, there is such a lazismu region at the province level and lazismu area at the district level. calculation results of financial ratios activity ratio no ratio 2019 2020 increase/decline interpretation 1 gross allocation ratio 0,85 0,64 (0,21) 75% ≤ r ≤ 90%. the interpretation of the gross allocation ratio is 85% which is effective. 60% ≤ r ≤ 75%. the interpretation of the gross allocation ratio is 64% which is quite effective. 2 gross allocation ratio non amil 0,83 0,55 (0,28) 75% ≤ r ≤ 90%. the interpretation of the gross allocation ratio of non-amil is 83% which is effective. 45% ≤ r ≤ 60%. the interpretation of the gross allocation ratio of non-amil is 55% which is less effective. journal of islamic economic laws-january, vol. 5, no. 1, 2022 15 no ratio 2019 2020 increase/ decline interpretation 3 net allocation to collection ratio 1,29 0,72 (0,57) r ≤ 90%. the interpretation of the net allocation to collection ratio is 129% which is very effective. 60% ≤ r ≤ 75%. the interpretation of the net allocation to collection ratio is 72% which is quite effective. 4 net allocation to collection ratio non-amil 1,38 0,64 (0,74) r ≤ 90%. interpretation of the value net allocation to collection ratio non-amil is 138% which is very effective. 60% ≤ r ≤ 75%. interpretation of the value net allocation to collection ratio non-amil is 64% which is quite effective. 5 zakat allocation ratio 1,01 0,73 (0,28) r ≤ 90%. the interpretation of the zakat allocation ratio is 101% which is very effective. 60% ≤ r ≤ 75%. the interpretation of the zakat allocation ratio is 73% which is quite effective. 6 zakat allocation ratio non-amil 1,01 0,72 (0,29) r ≤ 90%. interpretation of the value of zakat allocation ratio non-amil is 101% which is very effective. 60% ≤ r ≤ 75%. the interpretation of the value of zakat allocation ratio non-amil is 72% which is quite effective. 7 infaq and sadaqah allocation ratio 1,85 0,84 (1,01) r ≤ 90%. interpretation of the value of infaq and sadaqah allocation ratio is 185% which is very effective. 75% ≤ r ≤ 90%. interpretation of the value of infaq and sadaqah allocation ratio is 83% which is effective. 16 zakiy et al. no ratio 2019 2020 increase/decline interpretation 8 infaq and sadaqah allocation nonamil 2,07 0,78 (1,29) r ≤ 90%. interpretation of the value of infaq and sadaqah allocation ratio non-amil is 207% which is very effective. 75% ≤ r ≤ 90%. interpretation of the value of infaq and sadaqah allocation ratio nonamil is 83% which is effective. 9 zakat turn over 11,03 2,82 (8,21) if the value zakat turnover ratio is >1, it is considered excellent and shows that laz is very active in collecting and distributing zakat. if the value zakat turnover ratio is >1, it is considered excellent and shows that laz is very active in collecting and distributing zakat. 10 average of days zakat outstanding 32,63 127,59 94,96 the performance assessment of amil zakat according to the length of zakat held for the distribution of zakat is ≤ 12 months or 33 days, and then it is good. the performance assessment of amil zakat according to the length of zakat held for the distribution of zakat is ≤ 12 months or 128 days, and then it is good. 11 infaq and sadaqah turnover 2,11 5,68 3,57 if the value of infaq dan sadaqah turnover ratio > 1, it is excellent and proves that laz is increasingly active in collecting and distributing infaq and sadaqah. if the value of infaq dan sadaqah turnover ratio > 1, it is excellent and proves that laz is increasingly active in collecting and distributing infaq and sadaqah. journal of islamic economic laws-january, vol. 5, no. 1, 2022 17 no ratio 2019 2020 increase/decline interpretation 12 average of days infaq and sadaqah outstanding 170,38 63,34 (107,04) the assessment of the performance of amil zakat according to the length of infaq and sadaqah fund restrained for its distribution for ≤ 12 months or 170 days is good. the assessment of the performance of amil zakat according to the length of infaq and sadaqah fund restrained for its distribution for ≤ 12 months or 63 days is good. 13 zis turnover 3,55 3,99 0,44 if the zis turnover ratio value is >1, it is considered excellent as it shows that laz is increasingly active in collecting and distributing zis funds. if the zis turnover ratio value is >1, it is considered excellent as it shows that laz is increasingly active in collecting and distributing zis funds. 14 average of days zis outstanding 101,48 90,12 (11,36) the assessment of amil zakat performance according to the length of zis restrained for its distribution for ≤ 12 months or 101 days is good. the assessment of amil zakat performance according to the length of zis restrained for its distribution for ≤ 12 months or 90 days is good. 18 zakiy et al. no ratio 2019 2020 increase/decline interpretation 15 account receivable distribution ratio 0 0 0 if the value of the distribution receivable ratio is ≤ 10%, it is considered good. laz has been optimal in controlling the account receivable distribution. if the value of the distribution receivable ratio is ≤ 10%, it is considered good. laz has been optimal in controlling the account receivable distribution. 16 time required for the realization of account receivable distribution 0 0 0 interpretation of the time required for the realization of r < 3 months is good interpretation of the time required for the realization of r < 3 months is good 17 down payment ratio 0,01 0,01 0 r ≤ 10% is good. laz is optimal in controlling down payment activities. r ≤ 10% is good. laz is optimal in controlling down payment activities. 18 zakat managed asset ratio 0,01 0,01 0 r ≤ 10% is good. laz is optimal in allocating managed assets. r ≤ 10% is good. laz is optimal in allocating managed assets. journal of islamic economic laws-january, vol. 5, no. 1, 2022 19 efficiency ratio no ratio 2019 2020 increase/ decline interpretation 1 collection cost ratio 0 0 0 to measure the efficiency of the collection cost against the total funds collected. this ratio value can be interpreted with r < 2% is considered efficient. to measure the efficiency of the collection cost against the total funds collected. this ratio value can be interpreted with r < 2% is considered efficient. 2 operating expense ratio 4,03 3,80 (0,23) to measure the efficiency of operational costs against the total funds raised. the value of this ratio can be interpreted with r < 80%: efficient, then considered efficient. to measure the efficiency of operational costs against the total funds raised. the value of this ratio can be interpreted with r < 80%: efficient, then considered efficient. 3 human resources cost ratio 0,14 0,07 (0,07) to measure the efficiency of hr costs against the total funds raised. the value of this ratio can be interpreted with r < 10%: efficient then considered efficient to measure the efficiency of hr costs against the total funds raised. the value of this ratio can be interpreted with r < 10%: efficient then considered efficient 20 zakiy et al. amil fund ratio no ratio 2019 2020 increase/decline interpretation 1 amil rights ratio 25,57 35,08 9,51 the value of the amil rights ratio can be interpreted with r > 13.8% because above the normal number, the performance of this ratio is considered not good. the value of the amil rights ratio can be interpreted with r > 13.8% because above the normal number, the performance of this ratio is considered not good. 2 the ratio of amil rights to zakat 12,50 5,10 (7,4) in the calculation of this ratio, the reasonable limit of amil right to zakat is 12.5%. current performance is still at normal limits, so it can be said to be good. if it exceeds the normal limit, laz can further explain the high level of amil funds needed. in the calculation of this ratio, the reasonable limit of amil right to zakat is 12.5%. current performance is still at normal limits, so it can be said to be good. if it exceeds the normal limit, laz can further explain the high level of amil funds needed. journal of islamic economic laws-january, vol. 5, no. 1, 2022 21 no ratio 2019 2020 increase/decline interpretation 3 amil’s rights ratio to infaq sadaqah 152,30 49,68 (102,62) in calculating this ratio, the reasonable limit of amil rights over infaq sadaqah is 20%. current performance exceeds normal limits; thus, it is not good. if it exceeds the normal limit, laz can further explain the high level of amil funds needed. in calculating this ratio, the reasonable limit of amil rights over infaq sadaqah is 20%. current performance exceeds normal limits; thus, it is not good. if it exceeds the normal limit, laz can further explain the high level of amil funds needed. 4 amil’s rights ratio to csr 0 0 0 interpretation of the range of values of the ratio of amil rights to csr less than equal to 15% would be said to be good. but at this ratio, laz does not receive csr, and hence it cannot be assessed. interpretation of the range of values of the ratio of amil rights to csr less than equal to 15% would be said to be good. but at this ratio, laz does not receive csr, and hence it cannot be assessed. 22 zakiy et al. liquidity ratio no ratio 2019 2020 increase/decline interpretation 1 current ratio 1,01 1,04 0,03 current ratio 1 ≤ r ≤ 1.5, based on calculations, is good because laz can fulfil shortterm obligations, including zakat and infaq sadaqah distribution responsibility, at one period. current ratio 1 ≤ r ≤ 1.5, based on calculations, is good since laz can fill all its short-term obligations, including zakat and infaq sadaqah distribution responsibility, at one period. 2 quick ratio 1,01 1,03 0,02 quick ratio 1 ≤ r ≤ 1.5, based on calculations, it can be said to be good because laz can fulfil all its short-term obligations, including zakat and infaq sadaqah distribution responsibility, in one period. quick ratio 1 ≤ r ≤ 1.5, based on calculations, it can be said to be good because laz can fulfil all its short-term obligations, including zakat and infaq sadaqah distribution responsibility, in one period. journal of islamic economic laws-january, vol. 5, no. 1, 2022 23 no ratio 2019 2020 increase/decline interpretation 3 cash to zakat ratio 4,89 1,77 (3,12) r > 1.5, based on calculations, it can be said to be good. it is suggested to do a more in-depth analysis first. if the ratio value is worth more than 1 due to the obligation of distribution that has not been distributed, then it can be said less good. however, suppose the value of the cash to zakat ratio >1 is caused by the reserves of amil expenditures derived from other funds provided. in that case, it is good because the cash settles not because of any indication of unsettled distribution obligations. r > 1.5, based on calculations, it can be said to be good. it is suggested to do a more in-depth analysis first. if the ratio value is worth more than 1 due to the obligation of distribution that has not been distributed, then it can be said less good. however, suppose the value of the cash to zakat ratio >1 is caused by the reserves of amil expenditures derived from other funds provided. in that case, it is good because the cash settles not because of any indication of unsettled distribution obligations. 24 zakiy et al. no ratio 2019 2020 increase/decline interpretation 4 cash to zis ratio 15,63 5,17 (10,46) r > 1, based on calculations, is good. however, it still needs indepth analysis in the first place. if the ratio value is worth more than 1 due to the obligation of distribution that has not been distributed, then it is less good. but if the cash to zakah ratio value mentioned >1 is caused by the reserves of amil expenditures that could have come from other funds provided, then it is good. it is because the cash settles, not because of any indication of distribution obligations that have not been channelled. r > 1, based on calculations, is good. however, it still needs indepth analysis in the first place. if the ratio value is worth more than 1 due to the obligation of distribution that has not been distributed, then it is less good. but if the cash to zakah ratio value mentioned >1 is caused by the reserves of amil expenditures that could have come from other funds provided, then it is good. it is because the cash settles, not because of any indication of distribution obligations that have not been channelled. journal of islamic economic laws-january, vol. 5, no. 1, 2022 25 growth ratio no ratio 2019 2020 increase/decline interpretation 1 zakat fund growth ratio 49,02% r< 100%, there is an increase in zakat funds by 49.02%. although there is an increase, according to puskasbaznas interpretation, if the rise is below 100%, then the performance of this ratio is not good. 2 infaq sadaqah fund collection ratio 226% r > 100%, at this ratio there is a significant increase above 100%, then this performance is good 3 zis fund collection growth ratio 118% r > 100%, at this ratio there is a significant increase above 100%, then this performance is good 4 zis fund distribution growth ratio 33% r < 100%, there was a 33% increase in zis funding distribution. although there is an increase, according to puskasbaznas interpretation, if the rise is below 100%, then the performance of this ratio is not good. 5 zis fund growth ratio 58% r > 1, there was a 58% increase in operating costs. although there is an increase, according to puskasbaznas interpretation, if laz has not managed the zis fund efficiently, then the performance of this ratio is not good. discussion activity ratio remains on track this ratio measures the extent of zis funds distribution collected in the same period and balances from the previous period. this ratio has 8 sub-ratios calculated. over the eight ratios that have been calculated show a stable performance. the eight ratios include gross allocation ratio, gross allocation ratio non26 zakiy et al. amil, net allocation to collection ratio, net allocation to collection ratio non-amil, zakat allocation ratio, zakat allocation ratio non-amil, infaq and sadaqah allocation ratio, infaq and sadaqah allocation ratio non-amil. although all the eight ratios show a decrease from 2019 to 2020, these ratio remains on track. this is not mainly due to covid-19, but there were some humanitarian funds left in the previous year, and there is no policy to be redistributed. so that in 2020, the performance of these eight ratios decreased but remain effective. moreover, this performance shows a good trend. covid-19 does not affect the performance at this ratio; even the collection and distribution in 2020 increased compared to the previous year. this also indicates that lazismu strives to exist and contribute to the community, especially those affected by covid-19. “yes, because there is some humanitarian funds leftover, and that’s quite a lot. and there is no policy yet for distribution. the collection in 2020 is getting higher, but the distribution is also getting higher because there are covid-19 and other disasters.” (interview with ikwanushoffa) further, the activity ratio shows how active lazismu is in zis fund collection and distribution activities. the higher the value shows that lazismu is more active in collecting and distributing. besides, this ratio is also explaining the duration of zis funds collected are stored by lazismu. this ratio is crucial to calculate in analysing how long zis funds settle in lazismu. this ratio includes zakat turn over, an average of days zakat outstanding, infaq sadaqah turn over, an average of days infaq sadaqah outstanding, zis turn over, and an average of days zis outstanding. the zakat turnover ratio, infaq sadaqah turn over and zis turn over show a very active trend because the average of each ratio has a liveliness rate in the range of 4.00, which is not much different from the year 2020. especially, even during covid-19, this ratio is very stable as well as the collection and distribution journal of islamic economic laws-january, vol. 5, no. 1, 2022 27 activity of zis is increasingly active. this is also due to the society support who have a high level of generosity to others. moreover, the ratio of the average of days zakat outstanding, infaq sadaqah outstanding, and an average of days zis outstanding show a fairly good performance despite being hit with covid-19. the zis fund on lazismu rotates very fast in less than 100 days, and this shows that lazismu simultaneously distributes the zis fund to mustahik right after the collection. “the collection fund that has been received here is indeed immediately executed, avoiding funds settles. similarly, infaq and alms funds are also immediately executed avoiding the funds settle.” (interview with ikwanushoffa) finally, the ratio includes the ratio of distribution receivables, the time needed to realise receivables distribution, the down payment ratio, and the zakat managed asset ratio. lazismu has had no receivables in the last two years, experiencing insignificant down payments and zakat assets. therefore, performance shows good and optimal in managing the zis fund. the existence of covid-19 also does not affect the performance at this ratio, to the extent lazismu is motivated to have no receivables and down payments. this is done because the turnover rate of zis funds is fast and avoids idle funds during covid-19. throughout the years, lazismu also does not have assets under management, owned fixed assets that are purely selfacquired and used for the daily operational expenses. covid-19 doesn’t interfere with efficiency ratios this ratio measures the level of efficiency of lazismu in managing costs incurred against the total funds collected. in calculations, the average of the three efficiency ratios shows good and efficient performance. the three ratios include the ratio of collecting costs, operational costs, and human resources costs. the collecting cost ratio represents 0 in both 2019 and 2020, indicating an efficient performance, mainly because the calculation result is below 2%. besides, covid-19 does not interfere with performance at this ratio as the collection during 28 zakiy et al. the pandemic continues to run even increases quite significantly. at the same time, the costs incurred by lazismu do not exceed the limit, indicating that lazismu can manage the cost of the collection well even during a pandemic. “here we try to manage the costs incurred, but still efficient. as much as possible in managing the costs that come out, we always try to be efficient and following iku and ikal.” (interview with ikwanushoffa) lazismu also manages well operational costs. it has been shown from the calculation result of the operating expenses ratio in the range of 3.5. by 2020, lazismu could keep costs down or lower than the previous year. it proves that lazismu can control operational costs even in times of crisis covid-19. even the collection obtained by lazismu tends to increase quite significantly. the last ratio is the human resources cost ratio. this ratio shows an encouraging performance because looking from the results of this ratio calculation at an average of 0.11. moreover, even experiencing a decline in 2020, the ratio shows a positive trend mainly because lazismu could be more efficient in managing hr costs against the total collection received. similarly, covid-19 also does not affect this ratio much, proven that in 2020 the calculation result is lower than the previous year, meaning lazismu is more efficient in managing hr costs. “in managing the human resources cost, there is already a percentage of the rules, and we do that.” (interview with ikwanushoffa) an extra effort is needed for amil fund ratio the calculation results of the amil rights ratio show poor performance, as it exceeds the standard limit that has been determined. in 2019, the amil rights ratio was 25.57 and increased the following year by 35.08. this is due to the handling of covid-19, so lazismu allocates more to the right of amil through journal of islamic economic laws-january, vol. 5, no. 1, 2022 29 the mechanism of internal parties meeting. further, the ratio of amil rights to zakat shows good performance as the allocation of amil funds over zakat does not exceed the normal limit that has been determined. calculation results in 2019 amounted to 12.50 and 5.10 in 2020. there is a significant decrease, this is because the collection fund tends to be less compared to infaq sadaqah. thus, it impacts the right of amil to zakat due to the switch of muzakki to mutahiq caused by covid-19. many communities are affected, so they are no longer a muzakki but mustahiq. “for the additional handling of covid-19 and other benefits, it is permissible following how much the collection is received. further, we received mostly from humanitarian funds. then, we are considering to use humanitarian funds than zakat, since we are not too bold to use zakat fund because it is binding.” (interview with ikwanushoffa) however, the ratio of amil rights over infaq sadaqah shows a poor performance as it exceeds normal limits. but it can be acceptable due to the needs of amil, who are affected with a pandemic. in addition, the collection of infaq sadaqah increased quite significantly compared to zakat. the calculation of this ratio shows 152.30 in 2019 and 49.68 in 2020. there was a decrease, but it remained above the normal limit of 20%. “other benefits and for the handling of covid-19, it has been consulted to sharia councils.” (interview with ikwanushoffa) lastly, in terms of the amil rights to csr ratio, lazismu has never received csr. so, it is assumed that it cannot be assessed the performance of this ratio yet. the normal limit for this ratio is 15%. during the covid-19 period, lazismu has never received csr funds from any party. hence, this amil rights ratio needs extra attention from internal parties, as it will concern the employees. 30 zakiy et al. liquidity ratio is quite stable although there are slight shocks the current ratio shows good performance. this can be proven from the calculation of ratios was below 1.5, and in 2019 it was 1.01, followed by 1.04 in 2020. from the results of these calculations, it can be concluded that lazismu’s total current assets are able to meet all its short-term obligations, including zakat, infaq and sadaqah disburses. at the time, covid-19 also had no impact on this ratio, and it can also be seen that lazismu is still able to fulfil all his obligations. “it is very rare that there is debt distribution because in our office there is already a structured program so that the incoming funds are directly channelled”. (interview with ikwanushoffa) similarly, quick ratio shows good performance. this can be proven from the results of calculations still in the range of 1. in 2019 it was 1.01, and in 2020, it was 1.03. although there is more difference, it is still relatively good. it can be concluded that the total non-inventory current assets owned by lazismu can still meet all its short-term obligations, including zakat, infaq and sadaqah distribution. slight shocks occur in cash to zakat ratio and cash to zis ratio. this is evidenced by the results of the calculations being above the normal limit. therefore, the performance of this ratio is not good. this is because there are still distribution obligations that have not been channelled. there are several funds settled, such as humanitarian funds or infaq funds bound in the previous year that have the remainder. in the following year, there was no further policy related to the distribution of funds. besides, covid-19 does not have much impact on this ratio, but the funds that have not been channelled slightly interfere with lazismu’s performance in 2020. journal of islamic economic laws-january, vol. 5, no. 1, 2022 31 positive trends in growth ratios overall, the growth ratio showed a fairly good performance. this can be seen from the increase in the number of collection and distributions fund are quite significant. it is known that the collection of zakat funds in 2019 amounted to 2,037,466,413 and 3,036,279,128 in 2020. it can be seen there was an increase in zakat funds by 49.02%. although there is an increase, according to puskasbaznas interpretation that if the increase is still below 100%, then the performance of this ratio is still not good. it did not reach 100% because many muzakki were affected by covid-19, so it switched status to mustahiq. so, the zakat trend tends to be lower compared to infaq sadaqah. “in the event of a disaster, the level of solidarity or generosity of indonesian culture increases. therefore, the total of collection fund is also increased significantly.” (interview with ikwanushoffa) on the other hand, the growth trend infaq sadaqah is very significant at almost 200%. the collection of infaq sadaqah funds in 2019 amounted to 1,143,236,437 and 3,722,056,823 in 2020. there was an increase in infaq sadaqah funds by 226%, indicating the good performance of this ratio. similarly, zis growth also showed good performance with an increase of 118%. it is known that the collection of zis funds in 2019 amounted to 3,903,631,072 and 8,516,865,764 in 2020. it shows a significant increase due to the impact of covid-19. this is mainly because society became more generous with the disaster that befell his brother. at the same time, lazismu, which believed has a good trust, the community believes in channelling their funds to lazismu. in terms of the f zis funds distribution ratio, there is an increase of 33%. it is known that the distribution of zis funds in 2019 amounted to 4,716,358,817 and 6,262,200,020 in 2020. however, according to puskasbaznas interpretation that if the increase is still below 100%, then the performance of this ratio is still not good. but this can be understood because there are 32 zakiy et al. some allocated to the amil fund for the handling of covid-19. moreover, almost 75% of the total fund is allocated for covid-19 and helping the economic recovery of communities in 2020. in addition, lazismu does also quite efficient in managing its operational costs. it is known that the growth in operating costs amounted to 590,221,709 in 2019 and 931,990,546 in 2020. there was a 58% increase in operating costs. however, puskasbaznas’ interpretation mentioned that t if laz has not been able to manage the operating cost-efficiently, then the performance of this ratio is still not good. this is because the calculation of the ratio is still above the normal limit that has been determined. the cost in 2020 is higher than in the previous year, as proven from the rights received by amil. looking at the total collection, which is high, the right of amil received is also higher. then additional operational costs are intended for handling covid-19. financial performance of amil zakat institution is stable and tends to increase during covid-19 looking at the performance of lazismu in the central java region, it shows stability and tends to increase during covid-19. covid-19 does not force lazismu to stop contributing to society, especially in the current pandemic. lazismu central java region is an amil zakat institution with a high enough level of trust, so many people believe in donating funds through lazismu. lazismu central java region continues to increase its collection and maximize distribution to those in need so that the wider community can receive the benefits that have been given. financial performance in terms of activity ratio shows a fairly good performance. over the existing ratios, which have a specific value at normal limits and although some ratios are not good enough due to covid-19, there are humanitarian funds in the previous year that are still settling and have not been channelled because the executive has not determined further policies yet. moreover, the financial performance in terms of efficiency ratio also shows an efficient performance. in 2019 and 2020, lazismu central java region has been very efficient journal of islamic economic laws-january, vol. 5, no. 1, 2022 33 in managing collection, operational and human resources costs. covid-19 also does not affect these ratios. in addition, there should be extra attention from internal parties on amil right ratio. this is because, over this ratio, some performances exceed the determined normal limit. but other ratios remain on track. the distribution of amil rights is determined by the amount collected by lazismu in central java, in which the percentage of the division has been determined from the centre. lazismu has divided the right of amil according to the rules, although some are still above the normal limit due to the cost of handling covid-19. on the other hand, the current ratio and quick ratio show good performance. lazismu central java region can fulfil all its short-term obligations, including distributing zakat, infaq and sadaqah funds. there is also no impact on this ratio during the pandemic. lazismu is still able to fulfil all the obligations. but the other two ratios were slightly shaken. this is evidenced by the results of the calculations shown above the normal limit. therefore, it can be concluded that performance at this ratio is not good. this is because there are still distribution obligations that have not been channelled. there are several funds settled, such as humanitarian funds. these funds are infaq funds bound in the previous year that have the remainder. in the following year, there was no further policy related to the distribution of funds. covid-19 does not have much impact on this ratio, only funds that have not been channelled slightly interfere with lazismu’s performance in 2020. lastly, the growth performance of collection and distribution indicates good performance. it can be concluded that there is a significant increase due to the impact of covid-19. this is mainly because society has become more generous with others. besides, lazismu, which has a high trust from the society, is believed to be the trusted institution to distribute their funds. hal ini didukung dengan penelitian (safitri & huda, 2021), lembaga amil zakat menjadi solusi dalam meningkatkan pertumbuhan ekonomi ditengah pandemi covid-19. sejalan dengan (amanda et al., 2021), pendayagunaan zakat sangat membantu para terdampak 34 zakiy et al. covid-19 diantaranya sektor kesehatan, sektor sosial ekonomi dan sektor program eksisting. this is supported by safitri & huda (2021), mentioned that amil zakat institution becomes a solution in increasing economic growth during the covid-19 pandemic. similarly, amanda et al. (2021), stated that the utilization of zakat is beneficial for covid-19, including the health sector, social economy sector and existing program sector. conclusion the calculation of the five ratios, including activity ratio, efficiency ratio, amyl rights ratio, liquidity ratio and growth ratio, showed good performance, efficiency and increased quite significantly. although several sub-ratios perform less good results, the performance of lazismu central java region has explained its business process activities on its track. the performance before and during covid-19 is not much different, even showing a better trend during covid-19. this can be shown from the increase in collection and distribution that is quite significant. looking at the overall performance of lazismu in the central java region, it shows stability and tends to increase during covid-19. covid-19 does not force lazismu to stop contributing to society, especially in this current pandemic. lazismu central java region is an amil zakat institution with a high enough level of trust; hence many people believe in donating funds through lazismu. lazismu central java region continues to increase its collection and maximize the distribution to those in need so that the wider community can receive the benefits that have been given. references ainun, b., handayani, l., & fahmi, m. y. 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(2016). strategi peningkatan kinerja badan amil zakat daerah (bazda) kabupaten nganjuk (studi analisis dengan metode balanced scorecard). jes: jurnal ekonomi syariah, 1(1), 36–54. journal of islamic economic laws vol. 4, no. 2, july 2021: 137-176 137 shariah compliant macaulay’s duration model testing: evidence from islamic banks in indonesia syed alamdar ali shah1, raditya sukmana1, bayu arie fianto1 1universitas airlangga email: alamdar2000pk@yahoo.com, raditya-s@feb.unair.ac.id, bayu.fianto@feb.unair.ac.id abstract the purpose of this research is to test shariah compliant duration models on islamic banks in indonesia. this will be achieved using data of earning assets and risk bearing liabilities of indonesian islamic banks from 2009 to 2019. using multiple regressions the results suggest that shariah compliant duration models are robust to calculate duration of earning assets, return bearing liabilities and islamic banks. this research adds to the previous research of testing shariah compliant duration model. ultimately, it will improve profitability, risk efficiency and shariah efficiency by improved shariah compliant measures of risk management. this will ultimately improve market capitalization and returns stability in the long run. a major limitation of the study is very short length of data of islamic banks. still another limitation is difference in commencement of business of various islamic banks that makes length of data unequal. key words: islamic banks, earning assets, return bearing liabilities, duration model, maturity gap risk management model testing introduction the focus of developments in islamic financial services industry is islamic banking. islamic banking shares a common platform with conventional banks in overwhelming majority of the countries making them face similar risks with different impact (archer and karim, 2019). this different impact is also evident mailto:alamdar2000pk@yahoo.com mailto:raditya-s@feb.unair.ac.id mailto:bayu.fianto@feb.unair.ac.id 138 afifah, nurul alfiah kurniawati in their respective balance sheets (chattha, 2013; chattha et al., 2020). the activities of islamic banks are exposed to a variety of risks such as credit risk, counterparty risk, equity investment risk, market risk, rate of return risk and liquidity risk (ifsb, 2005; chattha, 2013; archer and karim, 2019). a major adverse affect of such risks is reduced market value of equity (bierwag and kaufman, 1992; bierwag et al., 2000; entrop et al., 2009; chattha and alhabshi, 2018). ror risk is similar to interest rate risk in islamic financial institutions (chattha et al., 2020). it is also sometime referred to as “benchmark rate risk” chattha and alhabshi (2018) and has the very much potential to affect the net worth of islamic financial institution alongwith their off-balance sheet positions, in case not properly managed (archer and karim, 2019; chattha et al., 2020). islamic financial services board (ifsb) has stressed to guard against the pitfalls of ror risk in pillar ii using duration gap approach. duration is the most common measure of risk management introduced by macaulay (1938) and used for sensitivity against yield curve movements by hicks (1939). hicks (1939) work extends the application of duration into estimation of interest rate risk (radermacher and recht, 2020). fisher and weil (1971) extend the duration for portfolio immunization and ho (1992) leads duration for non-parallel shifts of yield curve by introducing duration based on some key rates. bierwag et al. (1978) identifies an important consideration in the development of duration models that the choice of weights in a duration model is arbitrary and is dependent on its use. it has been established over the period that islamic bank balance sheets are structurally different from conventional banks (chattha et al., 2020). this requires them to develop their own risk management models and other measures to tackle their risk exposures (shah et al., 2021a&b). however, research over the period of time reveals that most of the research in islamic context is primarily based on applying conventional tools of financial risk modeling and management in islamic context. application of the concept of duration in islamic banks has also received similar journal of islamic economic laws-july, vol. 4, no. 2, 2021 139 treatment (chattha and bacha, 2010; chattha and alhabshi, 2017; chattha and alhabshi, 2018 and chattha et al., 2020). addressing the issue shah et al. (2020a) proposes a shariah compliant duration model that requires comprehensive testing. the purpose of this study is to test the shariah compliant duration models of shah et al. (2020a) following the theme of implementing the durations models under the theory of macaulay’s duration shah et al. (2020b). this study firstly develops a framework of testing a financial model and proceeds by developing a methodology for testing the shariah compliant duration models. it collects maturity wise data relating to return bearing assets and liabilities of islamic banks from pakistan. the model of shah et al. (2020a) has been tested by developing an alternative duration models excluding the principal amounts from the shariah compliant duration model. the purpose is to examine the effect of changes in returns on earnings assets and returns paid on return bearing liabilities on the maturity gap risk management of islamic banks in short run and long run. this research uses multiple regression analysis, johansen co-integration, error correction model, vector error correction model and threshold vector error correction model. literature review literature on islamic banks discussing the impact of changes in monetary policy on financial institutions it has been found that islamic banks respond to monetary policy similar to large conventional banks (zaheer et al., 2012). a study on 128 banks finds that privately owned islamic banks provide more protection to their shareholders’ equity as compared to state owned banks (daher et al., 2015). in a research about volatility and persistence in islamic and conventional banks it has been reported that islamic banks are more resilient towards uncertainties, but their resilience varies according to the model of islamic financial system a country has adopted (fakhfekh et al., 2016). the results of beltrame et al. (2016) suggest highly negative correlation between interest rates and returns of islamic banks. however, they report that negative effect can be mitigated 140 afifah, nurul alfiah kurniawati with growth in profit sharing investment accounts. this leads us to the finding that islamic banks also receive affect from variations in interest rates. sadiq et al. (2017) find that islamic banks in pakistan are less cost efficient due to excess liquidity, inadequate support and competition from conventional banks. addressing the financial sector of pakistan using dea technique in another study it has been found that insurance sector in pakistan is more technically efficient than banking sector (shah and masood, 2017). also the islamic financial sector has done better allocation of resources than their conventional counterparts (shah and masood, 2017). hamza and saadazoui (2018) in their work on islamic banks report that interest rate changes negatively affect the financing of islamic banks. although the results in performance analysis of islamic and conventional banks are similar but discussing the usage of credit risk transfer techniques it has been discovered that implementation of credit risk management techniques are not similar in both contexts rather there exists shariah compliance constraints in case of islamic banks (saeed and ayub, 2017). the impact of credit and liquidity risk has been analyzed by a few researches where they find no relation between the two and recommend different treatment (trad et al., 2017; ghenimi et al., 2017). research over the period of time finds that although size and capital expansion positively affect profitability but negatively affect liquidity. similar results have also been reported by shafiullah and shamsuddin (2018) who while addressing the topic of risk management find that islamic banks possess higher liquidity risk but lower insolvency and credit risks as compared to conventional banks. in additions, they discuss the issue of operational risk and report that it declines with increase in numbers and qualifications of members of shariah supervisory board. the relationship between sukuk and conventional bonds has been analyzed in terms of factors that affect correlations between the two. the results suggest that money market liquidity, stock market liquidity and credit information are the factors affecting volatility in emerging and developing markets almost similarly (bhuiyan, 2017). nawaz and farzana (2018) analyze management of journal of islamic economic laws-july, vol. 4, no. 2, 2021 141 investment risks in islamic and conventional banks and find that both types of banks use similar risk management practices for management of their investments. in another study on performance analysis of banking sector it has been found that profitability of banks is affected similarly in case of islamic and conventional banks in response to changes in interest rates (ahmed et al, 2018). chattha and alhabshi (2018), report that islamic banks respond similarly to changes in interest rates because they use similar benchmark rates of interest as their conventional counterparts. therefore, in order to disintegrate themselves they require a separate benchmark for pricing. chattha and alhabshi (2018) and chattha et al. (2020) observe that islamic banks have longer durations as compared to their conventional parts. these longer durations create a paradox. this is because longer duration means higher risk and higher risk should lead to higher profitability. contrary to this riskreturn principle a comparison of the results suggest that islamic banks are less profitable as compared to conventional banks (chattha and alhabshi, 2018; chattha et al., 2020). this islamicconventional bank risk-return paradox requires investigation. the impact of variations in capital adequacy has also been examined in case of islamic and conventional banks where it has been found that highly capitalized banks react positively to changes in capital adequacy ratio while the relation reverses in cases of low capitalized banks. the study does not report any difference between islamic and conventional banks (narmeen et al., 2018). shariah review of duration models: shah et al. (2021b) performs review of following duration models and regards them non shariah compliant. 1. additive multiplicative models: these include duration models of gultekin and rogalski (1984) examine seven models of duration proposed by cooper (1977), bierwag (1977), bierwag and kaufman (1978) and khang (1979). 2. stochastic duration models: duration models of cox et al. (1979) that are based on 142 afifah, nurul alfiah kurniawati stochastic nature of interest rates. 3. duration using taylor expansion and linear approximation: these include duration models of livingston and zhou (2005), tchuindjo (2008) and dierkes and ortmann (2015). 4. effective duration these include duration models of leland (1994) and leland and toft (1996). 5. duration of net income of banks these include duration models of toevs (1983), bierwag and kaufman (1992) and bierwag and kaufman (1996). 6. duration using logarithmic process: this consists of duration model of pattitoni et al. (2012). 7. key rate duration: this consists of duration model of ho (1992). 8. principal component duration these models are based on the works of willner (1996). 9. polynomial time value duration: such models are based on the works of osborne (2005), osborne (2014) and dierkes and ortmann (2015). 10. approximation of duration in non-flat yield curve environment this model is an extension of ho (1992) model of key rate duration. 11. dedicated duration these models consists of the works of macaulay (1938), redington (1952), fisher and weil (1971), zaremba and rządkowski (2016) and zaremba (2017). 12. first-order, second-order durations and convexities: these are present value of cash flow duration models of alps (2017). 13. approximating duration using insurance risk management properties these are based on the works of möhlmann (2017) and schlütter (2017). 14. orthogonalising the duration such models consist of the works of dechow et al. (2004), chen (2014) weber (2017) and chu et al. (2017). journal of islamic economic laws-july, vol. 4, no. 2, 2021 143 15. implied duration: a measure for equity duration this mode of duration has been proposed by dechow et al. (2004). 16. duration of an organization this model has been forwarded by weber (2018) using the works of dechow et al. (2004), campbell and vuolteenaho (2004), hansen et al. (2008), lettau and wachter (2007) and santos and veronesi (2010). 17. equity duration & book value duration mohrschladt and nolte (2018) extend the works of merton (1973), sweeney and warga (1986), dechow et al. (2004), lettau and wachter (2007), van binsbergen et al. (2012), schröder and esterer (2012), weber (2018) leibowitz (1986) and kadiyala and subrahmanyam (2000) to propose these models. 18. duration model of accounts receivable this model has been proposed by xu and ma (2018). 19. duration of assets and liabilities of insurance company fernándeza et al. (2018) propose such duration models for assets and liabilities of insurance companies based on expected values of cashflows, time and interest.. 20. duration measures for corporate project valuation these are duration models of arnold and north (2008) for evaluating corporate projects. 21. shariah compliant duration model chattha et al. (2020) and shah et al. (2020b) shah et al. (2021a&b) recommend and shah et al. (2020a) propose shariah compliant models of duration for earning assets and return bearing liabilities of islamic banks. these models have been tested by shah et al. (2021b). having reviewed the literature on islamic banks and various duration models developed and tested so far, the objective in this research is to further test the shariah compliant duration model of shah et al. (2020)a and tested by shah et al. (2021b). 144 afifah, nurul alfiah kurniawati methods this research uses the methodology of shah et al. (2021b) for testing shariah compliant duration models. following shah et al. (2021b) this research uses data relating to financial assets and liabilities of various maturity ladders as reported in various financial statements of islamic banks in indonesia pakistan for the period 2009 to 2019. maturities are calculated in terms of stohs and mauer (1996). according to them maturities of less than 1 year are taken at actual periods. whereas maturities ranging above 1 to 2 years are taken at 1.5 years, 2 to 3 years are taken at 2.5 years, 3 to 4 years are taken at 3.5 years, 4 to 5 years are taken as 4.5 years. however, for the last category that is primarily over 5 years or 10 years, the maturities are calculated on the assumption that every following year has the same proportion of assets or liabilities as the one immediately preceding until 100% of the values are allocated. descriptive statistics of the data consist of mean, variance, skewness and kurtosis. skewness has been measured by the third moment from mean divided by second moment to the ½ power. kurtosis is square root of fourth moment from mean divided by second moment. the descriptive statistic has been used to confirm the observations of bildersee (1975) gultekin and rogalski (1984), chen (2014), weber (2017) and chu et al. (2017) that returns are skewed leptokurtic. the research also calculates t-statistics to ensure the hypotheses that qual zero. this has been achieved by calculating the product of ’s to the square root of years in sample period and taking its ratio to the standard deviation of yearly estimates. lastly, average of r2 and standard deviation of r2 has been presented after adjusting for degrees of freedom. these are meant to measure the dependency between risk and return. procedure for testing a financial model has also been explained by shah et al. (2021b). their framework for testing the duration model has been given hereunder: journal of islamic economic laws-july, vol. 4, no. 2, 2021 145 f ig ur e1 . f ra m ew or k fo r te st in g a f in an ci al m od el 146 afifah, nurul alfiah kurniawati according to them, the relationship of return with duration can be expressed using the following function: (1) where ri,t is the net return margin b1 is estimated coefficient and duri,t is duration. guletkin & rogalski (1984) provide three hypotheses to be tested on duration models using multiple regression analysis that have been amended for use in shariah context by shah et al. (2021b) as under: “the relationship between returns volatility and shariah compliant duration is linear; shariah compliant duration translates the effect of changes in rates of return, benchmark rates and maturities on returns volatility of islamic banks; and, the markets for islamic banks are efficient.” all three hypotheses have been tested using the function as under: (2) in the above functions rr,o,t is the net return margin on earning assets, are average estimated coefficients, dk(r-1)(o-1)(t-1) is the duration of kth assets calculated using return and benchmak rates of the previous period and dk2(r-1)(o-1)(t-1) is the square of duration to check linearity and lastly is the factor to check whether duration normalizes reversed present values. journal of islamic economic laws-july, vol. 4, no. 2, 2021 147 the duration of earning assets have testing by regressing the independent variables on returns earned on earning assets. similarly the duration of liabilities has been tested using the function: (3) in order to examine the relationship this research examines two models of shariah compliant duration of shah et al. (2020a). the model of shah et al. (2020a) to be tested in this research for earning assets is: (4) and for return bearing liabilities is: (5) 148 afifah, nurul alfiah kurniawati this methodology complies earlier works of lanstein and sharpe (1978) and various subsequent studies such as lettau and wachter (2007), chen (2014), weber (2018) and shah et al. (2021b). for the purpose of this research the changes in returns of islamic banks have been calculated in terms of shah et al. (2020) a as hereunder: (6) where: ∆ = change ni = net income dea = duration of earning assets drbl = duration of risk bearing liabilities ea = earning assets rbl = return bearing liabilities ∆rorea = change in rate of return on assets ∆ibor = change in interbank offered rates ∆rorrbl = change in rate of return on liabilities ∆ibar = change in industry average rates of return on liabilities however, besides testing the duration of assets and liabilities it also tests the duration gap of islamic banks. the duration gap has been calculated in terms of shah et al . (2020) as under: duration gap = duration of earning assets – duration of return bearing liabilities (7) regression function to be used for testing duration gap shall take the following form: journal of islamic economic laws-july, vol. 4, no. 2, 2021 149 (8) results and discussion table 1. list of islamic commercial banks in indonesia and data period sr # name of bank data period 1 pt. bank aceh syariah 2016-2019 2 pt bpd nusa tenggara barat syariah 2018-2019 3 pt. bank muamalat indonesia 2009-2019 4 pt. bank victoria syariah 2010-2019 5 pt. bank bri syariah 2009-2019 6 pt. bank jabar banten syariah 2009-2019 7 pt. bank bni syariah 2009-2019 8 pt. bank syariah mandiri 2009-2019 9 pt. bank mega syariah 2009-2019 10 pt. bank panin dubai syariah 2010-2019 11 pt. bank syariah bukopin 2010-2019 12 pt. bca syariah 2010-2019 13 pt. bank tabungan pensiunan nasional syariah 2015-2019 14 pt. maybank syariah indonesia 2010-2019 data source: statistik perbankan syariah 2009-2019 150 afifah, nurul alfiah kurniawati table 2. summary descriptive of durations of earning assets maturities m=months y=years variance skewness kurtosis upto 3m 44.27% 0.4718 3.91 3m> to 6m ` 31.35% 0.3712 2.79 6m> to 12m 29.38% 0.3785 3.25 1y> to 2y 31.32% 0.5965 4.97 2y> to 3y 35.22% 0.4645 4.67 3y> to 5y 32.34% 0.3234 5.71 5y> 49.77% 0.3436 5.78 table 3. summary descriptive of benchmark rates earning assets maturities m=months y=years variance skewness kurtosis 1 months 12.27% 0.4675 3.45 3 months ` 13.35% 0.4894 3.56 6 months 13.43% 0.6821 2.17 1 year and above 12.31% 0.6794 3.97 table 4. summary descriptive of rate of return rates on earning assets maturities m=months y=years variance skewness kurtosis upto 3m 34.21% 0.4785 3.31 3m> to 6m ` 31.47% 0.4123 3.45 6m> to 12m 33.37% 0.4589 3.76 1y> to 2y 38.32% 0.4428 2.97 2y> to 3y 31.37% 0.4765 5.78 3y> to 5y 32.13% 0.4178 6.72 5y> 30.34% 0.5176 5.22 journal of islamic economic laws-july, vol. 4, no. 2, 2021 151 table 5. summary descriptive of returns earned on earning assets maturities m=months y=years variance skewness kurtosis upto 3m 12.32% 0.7425 5.37 3m> to 6m ` 19.73% -0.6145 4.91 6m> to 12m 13.78% -0.5432 4.53 1y> to 2y 37.43% -0.3245 3.23 2y> to 3y 39.32% 0.5463 3.77 3y> to 5y 41.32% 0.4981 3.21 5y> 51.44% 0.4237 5.79 table 6. summary descriptive of return bearing liabilities maturities m=months y=years variance skewness kurtosis upto 3m 37.32% 0.4231 4.23 3m> to 6m ` 32.24% 0.7124 6.56 6m> to 12m 27.85% 0.2378 7.47 1y> to 2y 45.43% 0.6756 4.12 2y> to 3y 45.88% -0.4235 3.56 3y> to 5y 41.32% -0.8675 5.35 5y> 42.57% -0.6234 5.12 table 7. summary descriptive of returns paid on return bearing liabilities maturities m=months y=years variance skewness kurtosis upto 3m 18.76% 0.6215 3.21 3m> to 6m ` 21.23% 0.7237 4.23 6m> to 12m 22.24% 0.6745 4.39 1y> to 2y 27.83% 0.4391 6.21 2y> to 3y 34.88% -0.2734 5.01 3y> to 5y 31.32% -0.3691 5.43 5y> 32.57% -0.2141 5.69 152 afifah, nurul alfiah kurniawati the results descriptive statistic in tables 2 to 7 conform bildersee (1975), gultekin and rogalski (1984), chen (2014), weber (2017) and chu et al. (2017) about confirmation of skewed and leptokurtic distribution. besides, various tests have been performed for implications of duration measures. the tests have been performed using maturity-wise data of islamic banks relating to their return bearing assets and liabilities. the results of testing the duration models on earning assets, return bearing liabilities and duration of islamic banks have been reported hereunder. the results have been presented in 4 different versions of returnduration regression equations that have been incorporated at the top of each respective table. tables 11, 15 and 19 are based on regression equations incorporating all the respective variables. however, in rest of the tables from tables 8 to 19 excluding tables 11,15 and 19 one or more of the variables have been omitted. for each of the holding period using model expressed at the top of tables 8 to 19 there are coefficients for each of the maturity bracket as regression coefficient estimate and respective first order autocorrelation. the table also shows p-values calculated on the basis of t-statistics of this testing procedure corresponds to testing mechanism of fama and macbeth (1973). have been calculated across return on earning assets and duration of earning assets relationships of entire indonesian islamic banking sector that has helped in obtaining period by period estimated alongwith the confidence intervals of significance tests. in the final columns of tables 8 to 19 r2 and s (r2) have been presented, which are coefficient of determination and its standard deviation. journal of islamic economic laws-july, vol. 4, no. 2, 2021 153 ta bl e 8: r eg re ss io n r es ul ts d e a e qu at io n 1 + p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 30 .7 3 -0 .4 5 0. 43 0. 05 0. 07 7 0. 07 1 0. 25 0. 19 3m > to 6 m ` 31 .2 5 -0 .3 1 -0 .3 6 0. 02 0. 07 7 0. 12 7 0. 22 0. 17 6m > to 1 2m 29 .7 7 0. 33 0. 34 -0 .3 2 0. 05 2 0. 17 2 0. 20 0. 12 1y > to 2 y 38 .7 1 -0 .3 5 -0 .4 1 0. 02 0. 01 7* 0. 13 2 0. 50 0. 32 2y > to 3 y 34 .2 5 -0 .2 7 -0 .3 2 0. 02 0. 03 1* 0. 11 4 0. 40 0. 35 3y > to 5 y 35 .2 7 -0 .3 1 0. 21 0. 03 0. 00 4* 0. 11 7 0. 31 0. 21 5y > 37 .4 5 -0 .5 1 0. 13 0. 01 0. 05 5 0. 32 3 0. 28 0. 19 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : i nd ic at es th e le ve l o f r at es o f r et ur n is n ot s ig ni fic an tly b et w ee n m at ur ity b ra ck et s. i n th e se co nd co lu m n is n eg at iv e an d in si gn ifi ca nt c on fo rm in g to th e ob se rv at io n of c ha tth a et a l. (2 02 0) th at i sl am ic b an ks ha ve h ig he r d ur at io n an d lo w er p ro fit ab ili ty . n on z er o se ri al c or re la tio n of i nd ic at e in te rr el at io ns hi p be tw ee n th e ra te s of re tu rn s. s er ia l c or re la tio n cl os e to z er o va lu es o f in di ca te d ur at io ns a re n ot in te rr el at ed . t he s ig ni fic an t pva lu es o f a nd s ho w re lia bi lit y of re su lts . 154 afifah, nurul alfiah kurniawati ta bl e 9: r eg re ss io n r es ul ts d e a e qu at io n 2 p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 24 .7 0. 48 -1 .3 7 0. 38 0. 04 1 0. 02 1 0. 16 2 0. 15 2 0. 02 1* 0. 33 0. 27 3m > to 6 m ` 25 .3 0. 41 -1 .2 2 0. 02 0. 03 1 -0 .0 31 0. 03 7* 0. 04 5 0. 01 7* 0. 34 0. 29 6m > to 1 2m 35 .7 0. 34 -0 .9 3 0. 57 -0 .0 71 -0 .0 31 0. 04 2* 0. 17 1 0. 02 7* 0. 47 0. 38 1y > to 2 y 34 .2 0. 33 -0 .4 4 -0 .3 2 -0 .0 37 -0 .0 25 0. 03 1* 0. 13 7 0. 02 2* 0. 49 0. 41 2y > to 3 y 28 .1 0. 26 -0 .9 7 -0 .2 1 -0 .0 31 0. 03 5 0. 04 1* 0. 14 1 0. 03 7* 0. 41 0. 39 3y > to 5 y 25 .2 0. 22 0. 83 -0 .3 7 0. 03 4 0. 02 7 0. 02 1* 0. 11 7 0. 04 1* 0. 45 0. 36 5y > 21 .7 0. 47 -0 .8 5 0. 09 0. 00 3 0. 03 3 0. 17 4 0. 21 5 0. 07 0 0. 45 0. 32 *a t 5 % le ve l o f s ig ni fic an ce e xp la na ti on : h as la rg el y re m ai ne d be tw ee n 20 a nd 3 0 in di ca tin g no b ig d iff er en ce in r at es o f re tu rn b et w ee n m at ur ity b ra ck et s. v al ue s of an d i nd ic at e no s ig ni fic an t lin ea r re la tio ns hi p be tw ee n re tu rn s on a ss et s an d du ra tio n. e xh ib its n eg at iv e si gn s to s ho w n eg at iv e an d si gn ifi ca nt s ho w in g no n lin ea r re la tio ns hi p of d ur at io n w ith r et ur ns o ve r 1 ye ar m at ur ity b ra ck et s. s er ia l c or re la tio n va lu es o f in di ca te in te rr el at io ns hi p be tw ee n th e ra te s of re tu rn s. h ow ev er , s er ia l c or re la tio n of an d th at d ur at io ns a re n ot in te rr el at ed . journal of islamic economic laws-july, vol. 4, no. 2, 2021 155 ta bl e 10 : r eg re ss io n r es ul ts d e a e qu at io n 3 p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 31 .4 4 0. 51 1. 39 0. 78 0. 03 0. 01 0. 00 9* 0. 17 2 0. 03 1* 0. 67 0. 51 3m > to 6 m ` 25 .2 3 -0 .3 9 1. 53 -0 .5 4 -0 .0 5 0. 01 0. 01 2* 0. 21 3 0. 01 7* 0. 34 0. 29 6m > to 1 2m 22 .2 5 -0 .2 5 1. 78 0. 34 -0 .0 4 -0 .0 3 0. 01 8* 0. 19 2 0. 04 9* 0. 45 0. 36 1y > to 2 y 34 .2 5 0. 35 0. 62 -0 .5 1 -0 .0 4 -0 .0 5 0. 03 9* 0. 12 9 0. 03 2* 0. 43 0. 25 2y > to 3 y 19 .2 3 -0 .2 9 1. 22 -0 .4 1 0. 04 0. 03 0. 04 2* 0. 32 8 0. 04 5* 0. 32 0. 23 3y > to 5 y 31 .2 2 -0 .3 5 0. 22 0. 31 0. 01 0. 02 0. 03 1* 0. 41 3 0. 01 2* 0. 23 0. 26 5y > 19 .2 5 -0 .5 2 0. 29 0. 67 0. 02 0. 01 0. 02 9* 0. 17 3 0. 04 5* 0. 41 0. 37 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : i nd ic at es n o bi g di ff er en ce o f ra te s of r et ur n be tw ee n ov er 1 y ea r m at ur ity b ra ck et s. ex hi bi t po si tiv e si gn s t o sh ow p os iti ve re la tio ns hi p w ith re tu rn s s ho w in g ra te s o f r et ur n an d be nc hm ar k ra te s s ig ni fic an tly aff ec t l on g te rm re la tio ns hi p of re tu rn w ith d ur at io n. 156 afifah, nurul alfiah kurniawati ta bl e 11 : r eg re ss io n r es ul ts d e a e qu at io n 4 p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 31 .2 4 0. 41 -1 .3 1 -0 .3 2 -0 .4 2 0. 02 0. 02 0. 02 0. 03 1* 0. 06 7 0. 03 1* 0. 01 7* 0. 62 0. 51 3m > to 6 m ` 33 .1 9 0. 78 -1 .3 4 -0 .7 4 0. 35 -0 .0 4 0. 02 0. 02 0. 04 1* 0. 15 7 0. 02 1* 0. 03 7* 0. 67 0. 42 6m > to 1 2m 37 .7 8 0. 75 -1 .6 1 0. 23 -0 .5 6 0. 02 0. 01 0. 01 0. 02 4* 0. 14 5 0. 03 7* 0. 02 4* 0. 44 0. 35 1y > to 2 y 25 .2 3 0. 74 -1 .3 9 -0 .4 5 0. 14 -0 .0 4 -0 .0 4 -0 .0 5 0. 01 2* 0. 11 1 0. 01 7* 0. 03 7* 0. 63 0. 51 2y > to 3 y 28 .2 4 0. 67 -1 .2 1 -1 .3 4 0. 12 0. 03 -0 .0 6 0. 03 0. 03 7* 0. 13 7 0. 02 2* 0. 02 0* 0. 27 0. 21 3y > to 5 y 25 .2 5 0. 25 -1 .2 3 -0 .7 8 -0 .2 4 0. 02 0. 04 0. 02 0. 01 7* 0. 01 6* 0. 01 5* 0. 05 4 0. 42 0. 35 5y > 25 .2 7 0. 27 -0 .5 7 -0 .6 9 0. 23 0. 09 0. 03 0. 01 0. 01 5* 0. 14 5 0. 02 5* 0. 04 2* 0. 27 0. 19 *a t 5 % le ve l o f s ig ni fic an ce e xp la na ti on : in di ca te s no b ig d iff er en ce o f r at es o f r et ur n be tw ee n m at ur ity b ra ck et s pa rt ic ul ar ly o ve r 1 y ea r. sh ow s th at th e re la tio ns hi p be tw ee n re tu rn a nd d ur at io n is n ot li ne ar . sh ow s th at ra te s of re tu rn a nd b en ch m ar k ra te s si gn ifi ca nt ly a ff ec t l on g te rm r el at io ns hi p of r et ur n w ith d ur at io n. s er ia l c or re la tio n va lu es o f , a nd a re cl os e to z er o, w hi ch s ho w s th at d ur at io ns a re n ot in te rr el at ed . journal of islamic economic laws-july, vol. 4, no. 2, 2021 157 ta bl e 12 : r eg re ss io n r es ul ts d r b l e qu at io n 1 + p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 55 .2 3 0. 42 0. 42 0. 07 0. 03 7* 0. 14 1 0. 75 0. 67 3m > to 6 m ` 52 .4 7 0. 34 0. 37 0. 02 0. 02 4* 0. 13 8 0. 67 0. 54 6m > to 1 2m 34 .2 3 0. 42 -0 .2 3 0. 06 0. 04 1* 0. 12 1 0. 58 0. 41 1y > to 2 y 33 .6 7 0. 37 -0 .2 2 0. 02 0. 00 7* 0. 06 5 0. 53 0. 57 2y > to 3 y 47 .2 8 0. 31 0. 11 -0 .0 7 0. 06 9 0. 07 1 0. 20 0. 47 3y > to 5 y 43 .2 8 0. 34 0. 33 -0 .0 1 0. 12 4 0. 08 1 0. 23 0. 24 5y > 44 .2 5 0. 42 0. 15 0. 08 0. 09 7 0. 07 6 0. 09 0. 26 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : in di ca te s th at le ve l o f r at es o f r et ur n is h et er og en eo us b et w ee n va ri ou s lia bi lit ie s br ac ke ts . v al ue s of a nd i n th e se co nd c ol um n in di ca te n o si gn ifi ca nt li ne ar r el at io ns hi p be tw ee n re tu rn b ea ri ng li ab ili tie s an d du ra tio n. n on z er o se ri al c or re la tio n va lu es o f in di ca te in te rr el at io ns hi p be tw ee n th e ra te s of r et ur ns . c lo se to ze ro s er ia l c or re la tio n va lu es o f s ho w th at d ur at io ns a re n ot in te rr el at ed . 158 afifah, nurul alfiah kurniawati ta bl e 13 : r eg re ss io n r es ul ts d r b l e qu at io n 2 p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 34 .4 7 0. 67 -1 .6 5 0. 54 0. 04 0. 06 0. 01 5* 0. 12 1 0. 06 5 0. 74 0. 41 3m > to 6 m ` 37 .5 2 0. 43 -1 .6 1 0. 31 0. 08 0. 07 0. 02 4* 0. 13 1 0. 04 1* 0. 62 0. 44 6m > to 1 2m 44 .4 7 0. 51 -1 .5 5 0. 73 -0 .0 9 -0 .0 3 0. 04 1* 0. 10 6 0. 02 5* 0. 52 0. 47 1y > to 2 y 45 .7 6 0. 39 -1 .4 3 -0 .6 7 -0 .0 3 -0 .0 1 0. 01 7* 0. 11 4 0. 03 7* 0. 56 0. 49 2y > to 3 y 32 .5 2 0. 54 -1 .2 3 -0 .8 1 0. 06 0. 03 0. 09 5 0. 13 7 0. 03 7* 0. 33 0. 21 3y > to 5 y 24 .6 7 0. 19 -1 .1 9 -0 .7 8 0. 04 0. 07 0. 12 3 0. 07 1 0. 12 1 0. 37 0. 27 5y > 29 .6 2 0. 15 -1 .2 1 0. 13 0. 01 0. 06 0. 13 5 0. 08 7 0. 12 4 0. 38 0. 23 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : va lu es a re si gn ifi ca nt fr om 6 m on th s t o 3 ye ar s. t hi s s ho w s t ha t t he re la tio ns hi p of re tu rn d ur at io n is n ot li ne ar . s er ia l c or re la tio n va lu es o f ar e no n ze ro th at in di ca te in te rr el at io ns hi p be tw ee n th e ra te s of re tu rn s. h ow ev er , s er ia l c or re la tio n va lu es o f a nd a re c lo se to z er o, w hi ch s ho w s th at d ur at io ns a re n ot in te rr el at ed . journal of islamic economic laws-july, vol. 4, no. 2, 2021 159 ta bl e 14 : r eg re ss io n r es ul ts d r b l e qu at io n 3 p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 29 .2 5 -0 .2 1 1. 41 0. 62 0. 06 0. 05 0. 01 2* 0. 14 1 0. 03 1* 0. 61 0. 47 3m > to 6 m ` 32 .6 7 -0 .2 7 1. 57 0. 51 -0 .0 4 0. 01 0. 03 1* 0. 11 6 0. 02 4* 0. 65 0. 58 6m > to 1 2m 35 .2 5 -0 .1 4 1. 32 0. 51 -0 .0 2 0. 02 0. 00 9* 0. 13 7 0. 03 1* 0. 65 0. 54 1y > to 2 y 34 .1 3 -0 .1 3 1. 45 -0 .5 1 0. 03 -0 .0 9 0. 03 5* 0. 31 7 0. 03 7* 0. 69 0. 62 2y > to 3 y 45 .1 4 -0 .2 7 1. 43 -0 .3 1 0. 17 -0 .1 2 0. 05 1 0. 22 2 0. 04 1* 0. 45 0. 39 3y > to 5 y 47 .1 2 -0 .2 9 1. 11 -0 .3 0 0. 25 0. 14 0. 04 2* 0. 14 7 0. 02 1* 0. 42 0. 37 5y > 46 .4 4 -0 .2 3 1. 09 0. 41 0. 08 0. 74 0. 02 1* 0. 12 4 0. 04 1* 0. 29 0. 25 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : ex hi bi t p os iti ve si gn s, th is sh ow s t ha t r at es o f r et ur n an d be nc hm ar k ra te s s ig ni fic an tly a ff ec t l on g te rm re la tio ns hi p of re tu rn w ith d ur at io n. s er ia l c or re la tio n va lu es o f ar e no n ze ro th at in di ca te in te rr el at io ns hi p be tw ee n th e ra te s of r et ur ns . h ow ev er , s er ia l c or re la tio n va lu es o f an d a re c lo se to z er o, w hi ch s ho w s th at du ra tio ns a re n ot in te rr el at ed . 160 afifah, nurul alfiah kurniawati ta bl e 15 : r eg re ss io n r es ul ts d r b l e qu at io n 4 p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 13 .2 4 0. 45 -1 .2 3 -0 .3 1 0. 63 0. 01 0. 25 0. 76 0. 01 2* 0. 14 6 0. 03 1* 0. 04 7* 0. 57 0. 43 3m > to 6 m ` 13 .6 5 0. 67 -1 .3 7 -1 .3 7 -0 .5 4 0. 35 -0 .4 5 0. 81 0. 04 1* 0. 10 7 0. 02 6* 0. 02 2* 0. 45 0. 37 6m > to 1 2m 21 .2 7 0. 55 -0 .5 4 -1 .5 4 -0 .5 5 0. 32 -0 .3 4 0. 24 0. 03 2* 0. 12 2 0. 03 5* 0. 02 6* 0. 73 0. 65 1y > to 2 y 24 .5 5 0. 52 -0 .7 8 1. 45 0. 35 -0 .2 6 0. 34 -0 .2 5 0. 04 1* 0. 13 4 0. 02 5* 0. 02 3* 0. 55 0. 45 2y > to 3 y 34 .7 6 0. 61 -0 .5 7 -0 .4 7 0. 54 -0 .1 4 0. 37 -0 .6 2 0. 01 9* 0. 09 4 0. 03 2* 0. 04 2* 0. 79 0. 61 3y > to 5 y 33 .6 9 0. 24 -0 .5 6 -0 .5 6 -0 .1 8 0. 12 0. 76 -0 .7 7 0. 02 3* 0. 14 1 0. 03 7* 0. 03 6* 0. 24 0. 21 5y > 33 .5 4 0. 23 -0 .9 7 -0 .5 1 0. 24 0. 25 0. 81 0. 25 0. 04 1* 0. 14 5 0. 04 6* 0. 02 5* 0. 21 0. 21 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : sh ow s th at th e re la tio ns hi p be tw ee n re tu rn a nd d ur at io n is n ot li ne ar . ex hi bi ts p os iti ve s ig ns th is sh ow s th at ra te s of re tu rn a nd b en ch m ar k ra te s si gn ifi ca nt ly a ff ec t l on g te rm re la tio ns hi p of re tu rn w ith d ur at io n. se ri al c or re la tio n va lu es o f a re n on z er o th at in di ca te in te rr el at io ns hi p be tw ee n th e ra te s of r et ur ns . h ow ev er , se ri al c or re la tio n va lu es o f , an d a re c lo se to z er o, w hi ch s ho w s th at d ur at io ns a re n ot in te rr el at ed . journal of islamic economic laws-july, vol. 4, no. 2, 2021 161 ta bl e 16 : r eg re ss io n r es ul ts d ib s e qu at io n 1 + p er io d y 1 y 2 y 3 y 4 y 5 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) ῤ( y 5) p( y 1) p( y 2) p( y 3) p( y 4) p( y 5) r 2 s( r 2 ) u pt o 3m 27 .3 4 -0 .3 9 0. 36 0. 07 0. 07 6 0. 05 8 0. 13 0. 11 3m > to 6 m ` 28 .7 4 -0 .2 7 -0 .3 3 0. 18 0. 08 2 0. 09 7 0. 15 0. 10 6m > to 1 2m 25 .2 3 -0 .2 9 -0 .3 4 -0 .2 2 0. 04 7* 0. 08 3 0. 23 0. 19 1y > to 2 y 28 .2 7 -0 .2 7 -0 .3 7 0. 04 0. 01 1* 0. 22 8 0. 52 0. 43 2y > to 3 y 31 .3 9 -0 .2 5 -0 .2 8 0. 07 0. 03 7* 0. 12 9 0. 43 0. 35 3y > to 5 y 32 .4 1 -0 .2 9 0. 19 0. 06 0. 01 9* 0. 14 1 0. 44 0. 33 5y > 35 .3 7 -0 .4 3 0. 10 0. 02 0. 05 5 0. 21 4 0. 32 0. 22 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : in di ca te s ab ov e 1 ye ar ra te s of re tu rn s ar e ve ry c lo se b et w ee n m at ur ity b ra ck et s. c on fo rm s to th e ob se rv at io n of c ha tth a et a l. (2 02 0) th at i sl am ic b an ks h av e hi gh er d ur at io n an d lo w er p ro fit ab ili ty . n on z er o se ri al c or re la tio n of i nd ic at es in te rr el at io ns hi p be tw ee n ra te s of re tu rn s. s er ia l c or re la tio n va lu es o f is c lo se to ze ro , w hi ch s ho w s th at d ur at io ns a re n ot in te rr el at ed . 162 afifah, nurul alfiah kurniawati ta bl e 17 : r eg re ss io n r es ul ts d ib e qu at io n 2 p er io d y 1 y 2 y 3 y 4 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) p( y 1) p( y 2) p( y 3) p( y 4) r 2 s( r 2 ) u pt o 3m 23 .3 3 0. 51 -1 .5 2 0. 41 0. 11 0. 04 0. 09 3 0. 07 6 0. 04 3* 0. 45 0. 39 3m > to 6 m 22 .1 9 0. 48 -1 .4 2 0. 57 0. 04 -0 .0 7 0. 04 8* 0. 08 8 0. 02 5* 0. 51 0. 45 6m > to 1 2m 28 .2 7 0. 53 -0 .8 5 0. 32 -0 .0 8 -0 .0 5 0. 03 6* 0. 14 5 0. 00 0* 0. 39 0. 28 1y > to 2 y 31 .2 9 0. 45 -0 .5 7 -0 .5 5 -0 .0 5 -0 .0 6 0. 02 9* 0. 12 9 0. 00 0* 0. 34 0. 27 2y > to 3 y 29 .2 2 0. 47 -0 .9 2 -0 .9 1 -0 .0 4 0. 04 0. 03 7* 0. 16 6 0. 03 7* 0. 55 0. 49 3y > to 5 y 30 .9 7 0. 46 0. 67 -0 .2 3 0. 05 0. 03 0. 04 4* 0. 06 5 0. 00 4* 0. 56 0. 51 5y > 28 .2 5 0. 55 -0 .4 2 0. 41 0. 06 0. 04 0. 15 9 0. 19 1 0. 04 5* 0. 29 0. 25 e xp la na ti on : v al ue s of a nd n eg at e lin ea r r el at io ns hi p an d s ho w n eg at iv e lo ng ru n no n lin ea r r el at io ns hi p of du ra tio n w ith re tu rn s. c lo se to z er o se ri al c or re la tio n va lu es o f a nd s ho w th at d ur at io ns a re n ot in te rr el at ed . journal of islamic economic laws-july, vol. 4, no. 2, 2021 163 ta bl e 18 : r eg re ss io n r es ul ts d e a e qu at io n 3 p er io d y 1 y 2 y 3 y 4 y 5 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) ῤ( y 5) p( y 1) p( y 2) p( y 3) p( y 4) p( y 5) r 2 s( r 2 ) u pt o 3m 25 .7 5 -0 .5 9 1. 43 1. 31 0. 78 0. 03 0. 01 0. 07 0. 00 0* 0. 08 1 0. 00 0* 0. 00 0* 0. 71 0. 65 3m > to 6 m 27 .9 3 -0 .6 5 1. 64 1. 47 -0 .5 4 -0 .0 5 0. 01 0. 12 0. 00 3* 0. 17 4 0. 00 1* 0. 00 0* 0. 53 0. 48 6m > to 1 2m 31 .4 4 -0 .4 8 1. 41 1. 32 1. 64 -0 .0 4 -0 .0 3 0. 01 0. 00 0* 0. 12 5 0. 00 4* 0. 01 7* 0. 41 0. 31 1y > to 2 y 33 .2 2 -0 .5 6 1. 42 1. 59 -0 .5 1 -0 .0 4 -0 .0 5 0. 13 0. 00 8* 0. 16 7 0. 01 2* 0. 04 3* 0. 39 0. 32 2y > to 3 y 35 .2 6 -0 .4 7 1. 67 1. 36 -0 .4 1 0. 04 0. 03 0. 14 0. 00 0* 0. 04 7* 0. 00 7* 0. 03 1* 0. 46 0. 39 3y > to 5 y 36 .4 7 -0 .4 9 1. 23 1. 48 0. 31 0. 01 0. 02 0. 15 0. 00 9* 0. 00 5* 0. 01 9* 0. 02 9* 0. 32 0. 25 5y > 33 .3 9 -0 .4 2 1. 42 1. 54 0. 67 0. 02 0. 01 0. 12 0. 00 1* 0. 12 3 0. 03 4* 0. 00 0* 0. 49 0. 44 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : sh ow th at ra te s of re tu rn a nd b en ch m ar k ra te s si gn ifi ca nt ly a ff ec t l on g te rm re la tio ns hi p of re tu rn w ith d ur at io n. s er ia l co rr el at io n va lu es o f a re n on z er o th at i nd ic at e in te rr el at io ns hi p be tw ee n th e ra te s of re tu rn s. h ow ev er , s er ia l c or re la tio n va lu es o f , a re c lo se to z er o, w hi ch s ho w s th at d ur at io ns a re n ot in te rr el at ed . 164 afifah, nurul alfiah kurniawati ta bl e 19 : r eg re ss io n r es ul ts d ib e qu at io n 4 p er io d y 1 y 2 y 3 y 4 y 5 ῤ( y 1) ῤ( y 2) ῤ( y 3) ῤ( y 4) ῤ( y 5) p( y 1) p( y 2) p( y 3) p( y 4) p( y 5) r 2 s( r 2 ) u pt o 3m 33 .4 1 0. 73 -1 .4 3 -0 .5 4 -0 .5 1 -0 .4 8 0. 13 0. 04 0. 03 0. 09 0. 02 1* 0. 13 2 0. 00 0* 0. 01 7* 0. 00 4* 0. 57 0. 48 3m > to 6 m ` 32 .5 7 0. 65 -1 .5 4 -0 .4 8 -0 .5 2 0. 65 -0 .0 4 0. 06 0. 05 0. 13 0. 00 0* 0. 17 1 0. 00 2* 0. 03 7* 0. 04 3* 0. 55 0. 40 6m > to 1 2m 34 .3 2 0. 61 -1 .5 6 0. 36 -0 .4 7 -0 .5 1 0. 15 0. 07 0. 02 0. 11 0. 00 3* 0. 03 1 0. 01 8* 0. 02 4* 0. 00 2* 0. 41 0. 30 1y > to 2 y 37 .3 1 0. 69 -1 .6 1 -0 .4 5 -0 .4 9 0. 23 0. 04 0. 12 0. 08 0. 06 0. 00 0* 0. 13 4 0. 03 2* 0. 03 7* 0. 02 1* 0. 43 0. 31 2y > to 3 y 36 .2 1 0. 68 -1 .6 4 -0 .4 5 -0 .4 4 0. 29 0. 07 -0 .0 9 0. 12 0. 08 0. 01 4* 0. 02 4* 0. 00 0* 0. 02 0* 0. 03 4* 0. 39 0. 29 3y > to 5 y 34 .3 4 0. 55 -1 .5 8 -0 .6 9 -0 .4 2 -0 .4 3 0. 06 0. 15 0. 03 0. 15 0. 01 1* 0. 07 6 0. 04 1* 0. 05 4 0. 02 1* 0. 49 0. 38 5y > 37 .2 2 0. 51 -1 .5 3 -0 .6 7 -0 .4 1 0. 41 0. 03 0. 12 0. 07 0. 17 0. 02 5* 0. 12 2 0. 00 1* 0. 04 2* 0. 00 0* 0. 54 0. 41 *a t 5 % l ev el o f s ig ni fic an ce e xp la na ti on : a nd ne ga te li ne ar r el at io ns hi p an d s ho w s th at th e re la tio ns hi p be tw ee n re tu rn a nd d ur at io n is no t lin ea r. a nd in di ca te r at es o f re tu rn a nd r el ev an t be nc hm ar ks a ff ec t re la tio ns hi p be tw ee n ne t in co m e an d du ra tio n of is la m ic b an ks . s er ia l c or re la tio n va lu es o f , , a nd a re c lo se to z er o w hi ch s ho w s th at d ur at io ns a re no t i nt er re la te d. journal of islamic economic laws-july, vol. 4, no. 2, 2021 165 descriptive statistics tables 2 to 7 of duration of assets and liabilities show that the data has skewed and leptokurtic distributions. the results of the duration functions after incorporating into multiple regression function have been reported in tables 8 to 19. tables 7 to 11 relate to duration of earning assets, tables 12 to 15 relate to duration of return bearing liabilities and tables 16 to 19 relate to duration of islamic banks in indonesia, which is calculated as duration gap. for testing the hypotheses multiple regression has been used for duration for assets and liabilities in four different combinations that have been reproduced at the top of each of the table, however, table 8 and 12 are based on full equations. the tables produce regression coefficients in columns 1 to 4, autocorrelations in columns 6 to 10, p-values in columns 11 to 14 and the last two columns report means and standard deviations of coefficient of determination. the results in tables 8, 12 and 16 do not let us accept linearity hypothesis both for duration of earning assets and return bearing liabilities. tables 7, 13 and 17 lead us to the finding that long term relationship of duration on returns is quadratic i.e., upwards sloping. tables 8,14 and 18 lead us to the findings that rates of return, interbank offered rates, principal sum and maturities are complete determinants of relationship between duration and returns thereby accepting our second hypothesis. table 9,15 and 19 lead us to the finding that factor of reversed present values do have relationship with duration in original state. this can be confirmed from making a combined analysis of tables 9&10, 14&15 and 18&19 that by including reversed present value factor into regression function neither the linear relationship is effected nor non-linear relationship. these results conform to bildersee (1975), gultekin and rogalski (1984), chen (2014), weber (2017) and chu et al. (2017). conclusion this research uses duration models testing procedures of guletkin & rogalski (1984) as amended by shah et al. (2021b) using multiple regressions to test shariah compliant duration 166 afifah, nurul alfiah kurniawati models. however, the results of this research although do not conform to all of the previous results of guletkin & rogalski (1984) but conform to the results of shah et al. (2021b). the results of first hypothesis conform to guletkin & rogalski (1984) & shah et al. (2021b) that duration of assets and liabilities do not have linear relationship. in case of second and third hypotheses the results although conform to shah et a. (2021b) but do not conform to guletkin & rogalski (1984). this is because rate of return earned on earning assets and interbank offered rates are significant factors for determining duration of earning assets whereas rate of return return paid on return bearing liabilities and interbank average rates of deposit are significant factors in case of duration on return bearing liabilities. this research confirms the works of shah et al. (2020a&b) and subsequently of shah et al. (2021b). this research further confirms the nature and behavior of earning assets and return bearing liabilities of two distinct islamic countries due to existence of a common feature of shariah compliance. furthermore, it answers the observation of chattha and alhabshi (2018) and chattha et al. (2020) that islamic banks have longer durations with low profitability. this is because islamic banks have earning assets of longer maturity at similar rates of returns; and on the liabilities they have to offer higher rates of return for liabilities of similar maturities when compared to conventional banks. this makes them bear more risk due to longer duration gap at lower profitability. limitations & future research directions the study mainly focuses duration of earning assets and return bearing liabilities and their relationship with earnings of islamic banks. furthermore, as the study is only conducted on islamic banks of indonesia, therefore a larger sample and testing in various other banks operating in non-muslim countries is also recommended to validate the model. lastly, the study only deals with assets and liabilities that have maturities alongwith return characteristics. as islamic banks have various assets and liabilities that do not have returns and maturities therefore a study encompassing such assets and journal of islamic economic laws-july, vol. 4, no. 2, 2021 167 liabilities will yield more comprehensive results regarding duration of a islamic banking organization. the study also severely suffers from availability of data. as most of the islamic banks do not have long histories, alongwith difference in year of commencement of business therefore the length of data is not enough and is unbalanced. the models proposed in this study therefore require continuous testing over the period to better analyze the respective models. this research has been conducted only on such full-fledged islamic banks that have been involved in business similar to conventional banks. therefore a study on all islamic financial institutions that deal with earning assets and return bearing liabilities such as takaful companies, islamic mutual funds and islamic microfinance institutions may further be used to validate the model. references ahmed, a., rehan, r., chhapra, i. u., and supro, s. 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