The Role of Zakah in Poverty Alleviation: Evidence from Indonesia

Zakah is believed to be the main Islamic institution for the alleviation of poverty. Nevertheless, despite an increase in global income levels during the last century as well as continuing implementation of zakah worldwide, poverty persists in Muslim developing countries such as Indonesia. The main objective of this study, therefore, is to comprehensively explore and systematically analyze the economic (monetary) and multidimensional (non-monetary) impacts of the zakah institution in alleviating poverty in the context of zakah implementation in Indonesia as the world’s largest Muslim country. It also identifies the poor and assesses the determinants of poverty amongst the zakah recipients. Furthermore, it investigates the management model of zakah implementation in Indonesia, including its capacity, efficiency and effectiveness in delivering poverty-focused programs. To achieve the objectives, the study has utilized a mixed-method research design. As part of this strategy, it has conducted a survey and collected primary data on the socio-economic conditions of 685 poor households receiving zakah assistance in nine cities of the Greater Jakarta Metropolitan area in Indonesia in 2011. In analyzing the survey results, a number of quantitative methods including descriptive statistics, inferential statistics (ANOVA and logistic regression) and poverty index analysis were employed. It has also conducted semi-structured interviews with the management personnel of zakah organizations to investigate the model of zakah implementation and assess the capacity and efficiency of zakah organizations in Indonesia. The qualitative data obtained were analysed by using thematic (coding) and content analyses. The rich analytical methods were expected to generate high-quality data and comprehensive analysis that would address the research questions satisfactorily. The main result generally suggests that the zakah institution has contributed positively to reducing the hardship of the recipients, whose poverty is likely to be related to large household size, lack of assets and certain characteristics of heads of households. Specifically, the incidence, depth and severity of poverty amongst the households have decreased due to the contributions from zakah organizations. The impacts of zakah could be felt not only in the economic (monetary) dimension, but also in multiple dimensions of live particularly in terms of health awareness (health), school attendance (education), praying and fasting (religious/spiritual), business/technical skills (economic) and harmony amongst family member (social). Further analysis suggests that higher impacts seem to be enjoyed by the recipients associated with the non-government zakah organizations and those participating in the programs that integrate economic assistances with provision of basic needs. Based on these findings, a framework for an effective poverty-focused zakah management was proposed. Several policy implications and recommendations for various stakeholders of zakah in Indonesia are also highlighted. The overall results are ultimately expected to provide empirical evidence regarding the contributions of zakah in contemporary Muslim societies as well as to enrich the literature on zakah and Islamic economic implementation in the Muslim world.

Empirical determinants of saving in the Islamic banks: evidence from Indonesia

This study attempts to determine the factors affecting saving in the Islamic banks in Indonesia. By employing the Vector Autoregressive and its associated Impulse Response Function analysis for all Islamic banks in Indonesia from March 2000 to August 2007, the study analyzes the importance of real rate of return on Islamic deposit, interest rate on conventional deposit, real income and number of Islamic bank branches in determining the level of savings in the Islamic banks. The results highlight the influential role of conventional interest rate in determining the level of saving in the Islamic banks. In particular, higher Islamic deposit is significantly correlated with higher rate of return and lower interest rate. Furthermore, the study finds the existence of displaced commercial risk between the Islamic and conventional banks, such that the Islamic banks’ depositors transfer their funds to the conventional banks when the rate of return provided by the Islamic banks is significantly lower that the interest rate of its counterpart. The findings of this study have important implication on the risk management practices in the Islamic banks in Indonesia

Motivation for charitable act: A case study of cash waqf during pandemic in Indonesia

The Covid-19 pandemic has caused devastating socio-economic problems globally and created a higher demand for Islamic charities, including cash waqf. Therefore, this study aims to analyse the intention of Indonesian Muslims to perform cash waqf during the pandemic time. It employs the Extended Theory of Planned Behavior (TPB) approach and the Structural Equation Modelling (SEM) method in analysing the primary data collected from 404 respondents. The study found that all TPB variables significantly influence respondents' intentions to perform cash waqf during the pandemic. However, the most important determinant of the intention to do the charitable act is the perceived behavioural control variable. Meanwhile, attitude is determined by knowledge, religiosity, and trust towards waqf institutions. The findings highlight the importance of the ease of doing cash waqf and trust in waqf institutions in determining the Muslims' intention to perform charitable acts. As such, government and waqf institutions should accelerate digitising the current waqf system to provide more convenience in doing cash waqf. Furthermore, waqf institutions should maintain and improve trust towards their institution. All waqf stakeholders should also attempt to increase waqf awareness and literacy. The strategies are expected to enhance waqf collections needed by society, particularly during the pandemic. &nbsp

Shariah board governance and sustainability performance: analysis of sharia banking in Indonesia

This study aims to investigate the relationship between sharia governance and sustainability performance in the Indonesian Islamic banking industry. Sharia governance is measured by the sharia supervisory board (SSB) score and the individual attributes of its members (size, number of meetings, educational background, and diversity). Sustainability performance (SP) is proxied by its economic, environmental, and social dimensions, as defined by the Global Reporting Initiative (GRI) framework. Secondary data from 2010—2020 company reports are used and analyzed using manual content analysis. Panel data regression is also employed to test the hypotheses and identify which individual attributes of the SSB influence sustainability performance. The results show that the SSB has a positive and significant effect on Indonesia’s overall SP of Islamic banking. Among the individual attributes, the frequency of SSB meetings has a positive and significant effect on overall SP, while the diversity of SSB members negatively affects economic and social SP. Meanwhile, SSB member’s size and educational background do not affect overall SP. The findings are expected to enhance understanding of Islamic bank’s development and approaches to addressing sustainability-related issues of Islamic bank. This study also contributes as consideration in the improvement of standard practices or the current implementation of sharia governance in Indonesia and to promote sustainable operations through Islamic corporate governance

Islamic Financial Literacy Amongst Muslim Students in Indonesia: A Multidimensional Approach

Although Indonesia is the largest Muslim country in the world, the level of Islamic financial literacy in Indonesia is still very low. The Islamic financial literacy index in Indonesia is at 8.93%, much lower than the conventional financial literacy index which reached 37.72% in 2019. Therefore, this study aims to analyze the determinants of Islamic financial literacy in Indonesia amongst university students which is a group prioritized by government policies in improving Islamic financial literacy. To achieve this goal, this study develops a multidimensional Islamic financial literacy instrument that includes aspects of knowledge, attitudes and behavior and measures the multidimensional Islamic financial literacy amongst university students. The study collected primary data from 439 students from University of Indonesia and analyzed them using logistic regression method with Islamic financial literacy scores as the dependent variable and socio-demographic factors as the independent variables. The results of this study found that the majority of students (50.1%) had moderate levels of Islamic financial literacy, while 43.5% and 6.4% had high and low levels of Islamic financial literacy respectively. In addition, this study found a positive influence on the field of study, income, and Islamic bank account ownership on the level of Islamic financial literacy. In particular, students who come from the faculty of economics and business, have higher incomes, and have Islamic bank accounts tend to have higher Islamic financial literacy than other students. Based on these findings, relevant stakeholders in Indonesia are expected to continue improving Islamic financial literacy through various strategies and massive educational programs, especially for the groups which have low and moderate Islamic financial literacy. The results of this study are also expected to enrich the literature on Islamic financial literacy in Muslim countries

Does fintech threaten Islamic banking performance in Indonesia?

Purpose - This study aims to examine the impact of P2P Lending on both conventional and Islamic banking performance in Indonesia. Method - It uses a panel data regression method with a random effect model, with a sample of 63 conventional banks and 12 Islamic banks in Indonesia during the 2016-2020 period. The dependent variable is ROA, while the independent variable is the number of P2P Lending companies. Result - The study found that Fintech P2P Lending does not affect the conventional banks’ performance and has a minimal effect on the aggregate banks' performance in Indonesia. However, interestingly, Fintech has a significant positive impact on the Indonesian Islamic banks’ performance. The result is consistent when GMM is used in the robustness model. Implication - The findings indicate the importance of supporting the development of Fintech, especially Sharia P2P Lending, and collaboration between Fintech and banks to optimize the performance of Indonesia’s financial sector. Originality - This research is amongst a few studies that examine the relationship between Fintech and banking performance, particularly Islamic banking performance in Indonesia

Intention to consume halal pharmaceutical products: evidence from Indonesia

Despite the importance of pharmaceutical products in everyday life, particularly after the coronavirus outbreak in early 2020, only a few studies have attempted to analyse consumer behaviour with regard to halal pharmaceutical products. Therefore, this study aims to investigate the factors influencing purchase intention for halal pharmaceutical products among Indonesian Muslims. This study uses a theory of planned behaviour approach, in which religiosity and knowledge of halal product variables are added to attitude, subjective norms and perceived behavioural control variables. Primary data were collected from 225 Indonesian Muslims in Jakarta, the capital city of Indonesia and analysed using structural equation modelling. The study found that the intention to purchase halal pharmaceutical products is positively affected by attitude, religiosity, knowledge of halal products and perceived behavioural control. However, the influence of the subjective norm variable was found to be insignificant in this study. It is possible to improve the empirical model by including more explanatory variables and investigating the mediating effect of the variables. The study could also be scaled up to reach more respondents in different regions and countries. These additional aspects would provide better insights into the behaviour of consumers when considering halal pharmaceutical products. The findings suggest the importance of designing and implementing appropriate strategies and campaigns to enhance knowledge of halal products, of positive attitudes and of better resources/opportunities to consume halal pharmaceutical products. The industry needs to highlight its products’ halal and tayyib aspects through proper branding and promotion strategies. The government and other stakeholders could also implement education campaigns to increase halal products and halal literacy knowledge. These are ultimately expected to enhance the effectiveness of halal regulations and meet Muslim consumer expectations in the country. Despite the importance of halal pharmaceutical products, this area has received limited attention in the academic literature. Thus, this study attempts to elaborate on consumer behaviour in this niche area.University of Indonesi

Determinants of Bank Stability in Indonesia

This study aims to analyse the determinant of banks’ stability in Indonesia, which is very important to ensure that the country’s banking system could be more effective in supporting transmission of monetary policy and more resilient in facing financial crisis. To achieve the objective, this study collected a comprehensive dataset from 94 banks in Indonesia, covering both conventional and Islamic banks, during September 2015 - June 2019 period. The data is subsequently analysed by employing dynamic panel data model. The results show that the main factors that positively influenced banks’ stability in Indonesia are exchange rate, financial inclusion, asset returns, and credit/financing growth. However, interest rates are found to be negatively influenced the stability. The findings are expected to provide insights for policy makers and market players in ensuring that the banks’ stability could be well maintained in Indonesia. The results are also hoped to enrich literature in economics and banking, particularly in emerging markets like Indonesia.JEL Classification: G21.How to Cite:Kasri, R. A., & Azzahra, C. (2020). Determinants of Bank Stability in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 9(2), 153-166. doi: http://doi.org/10.15408/sjie.v9i2.15598

Determinants of Bank Stability in Indonesia

This study aims to analyse the determinant of banks? stability in Indonesia, which is very important to ensure that the country?s banking system could be more effective in supporting transmission of monetary policy and more resilient in facing financial crisis. To achieve the objective, this study collected a comprehensive dataset from 94 banks in Indonesia, covering both conventional and Islamic banks, during September 2015 - June 2019 period. The data is subsequently analysed by employing dynamic panel data model. The results show that the main factors that positively influenced banks? stability in Indonesia are exchange rate, financial inclusion, asset returns, and credit/financing growth. However, interest rates are found to be negatively influenced the stability. The findings are expected to provide insights for policy makers and market players in ensuring that the banks? stability could be well maintained in Indonesia. The results are also hoped to enrich literature in economics and banking, particularly in emerging markets like Indonesia

Hubungan Industri Keuangan Syariah dan Pertumbuhan Ekonomi Indonesia

Sektor keuangan syariah dipercaya berperan dalam mendorong pertumbuhan ekonomi negara. Walaupun industri keuangan syariah Indonesia masih didominasi sektor perbankan, peran industri keuangan non-bank (IKNB) dan pasar modal syariah semakin besar dan tidak bisa diabaikan. Penelitian ini bertujuan untuk menganalisis hubungan sektor keuangan syariah, yang mencakup sektor perbankan, IKNB dan pasar modal syariah, terhadap pertumbuhan ekonomi Indonesia. Penelitian ini menggunakan metode kuantitatif, dengan Vector Autoregression (VAR) dan Vector Error Correction Model (VECM), dan data sekunder periode Januari 2017 - Desember 2020. Variabel dependen studi ini adalah Indeks Produksi Industri (IPI), sedangkan variabel independennya adalah Sertifikat Bank Indonesia Syariah (SBIS), Sukuk Negara (SBSN), Dana Pihak Ketiga (DPK) Syariah, Pembiayaan Syariah, Asuransi Syariah, Financial Technology (Tekfin) Syariah, Keterbukaan Perdagangan, Covid-19 dan Inflasi. Penelitian ini menghasilkan beberapa temuan menarik. Pertama, sektor perbankan syariah tidak berpengaruh signifikan terhadap pertumbuhan ekonomi Indonesia dalam jangka pendek, namun berpengaruh signifikan pada jangka panjang. Kedua, sektor pasar modal berpengaruh signifikan terhadap pertumbuhan ekonomi dalam jangka pendek dan jangka panjang. Ketiga, sektor IKNB berpengaruh signifikan terhadap pertumbuhan ekonomi dalam jangka panjang. Secara khusus, SBIS dan SBSN berpengaruh positif dalam jangka pendek sementara asuransi syariah positif untuk jangka panjang. Keempat, variabel asuransi syariah dan dana pihak ketiga memberikan dampak yang fluktuatif dan positif terhadap variabel IPI. Variabel eksternal seperti pandemi Covid-19 dan keterbukaan perdagangan juga mempengaruhi pertumbuhan ekonomi Indonesia dalam jangka panjang. Terakhir, ditemukan variabel yang paling berpengaruh terhadap IPI adalah variabel IPI sendiri. Hasil penelitian memberikan bukti bahwa keuangan syariah, khususnya IKNB Syariah, berperan penting dalam mendorong pertumbuhan ekonomi Indonesia