!Volume 3, No. 3, January 2022

p- ISSN 2777-0915 | e-ISSN 2797-6068

270 http://devotion.greenvest.co.id

SHARIA FINANCIAL TECHNOLOGY IN THE

DISTRIBUTION OF PEOPLE'S BUSINESS CREDIT

PROGRAM FUNDS FOR MICRO, SMALL, AND

MEDIUM ENTERPRISES

Gema Aditya Mahendra

, Nurjaya

, Rayyan Alkhair

, Mohammad

Aminuddin

Faculty of Engineering, Universitas Negeri Semarang

1,2,3 and 4

[email protected]

[email protected].ac.id

[email protected]

, [email protected]

Keywords

Sharia

Fintech, KUR,

Banking,

MSME

Article Info

Accepted:

Revised:

Approved:

Abstract This study analyzes the presence of

Islamic Fintech as a sharia-based digital financial

institution as a role in distributing People's Business

Credit (KUR) from banks to Micro, Small and

Medium Enterprises (MSMEs). The research method

used in this study is a qualitative method using

secondary data with deductive analysis. The results

of this study indicate the potential and role of Sharia

Fintech in distributing KUR by banks to MSMEs.

The existence of sharia fintech is expected to

increase the productivity of MSMEs in Indonesia.

Introduction

The MSME development strategy in Indonesia cannot be separated

from banking support in lending. In a pandemic situation, MSMEs have

many problems to develop. Apart from the decline in sales due to the

spread of COVID- 19 (social distancing), it is also due to the lack of working

capital. This is due to the limited access of MSMEs to formal financial

institutions, as evidenced by data from Bank Indonesia which states as

many as 70% of MSMEs do not have access to capital to banking (Zuraya,

2017). MSMEs prefer to borrow funds from moneylenders even though the

interest on loans is very high because borrowing funds from moneylenders

has an easier process, capital loans are quick cash, and do not require

collateral or a financial footprint.

In fact, to increase the amount of financing from the formal sector for

MSMEs, the Indonesian government has issued a People's Business Credit

(KUR) program. In the program, formal financial institutions are required to

provide 20% of their credit to MSMEs, plus during the pandemic, the

Gema Aditya Mahendra

, Nurjaya

, Rayyan Alkhair

, Mohammad

Aminuddin

Sharia Financial Technology in The Distribution of People's Business

Credit Program Funds for Micro, Small, and Medium Enterprises

271

government provides incentives for placement of funds, as well as an

additional stimulus for interest subsidies for 60.66 million KUR debtors of

Rp. 35.28 trillion (Presidential Secretariat, 2020).

However, KUR is considered less effective in helping MSMEs because it

is not representative. KUR is mostly given to medium-sized business groups

as much as 47%, small businesses as much as 31%, while for micro-

enterprises only 22% (Iqbal & Muhammad, 2016). This is due to the

information gap (banks do not know the feasibility of micro-enterprises)

and granularity (the number is large and scattered but the credit value is

small) between micro-enterprises and formal financial institutions. Formal

financial institutions are reluctant to provide KUR funds to micro-

enterprises, considering that KUR is a fund subsidized by the government,

thus making banks unwilling to spend large amounts of money looking for

unclear MSMEs so that KUR is only accepted by MSMEs that are already

known to banks.

Seeing this problem it is necessary to have a strategy so that People's

Business Credit (KUR) from banks can be channeled to MSMEs by

minimizing all obstacles. These problems can be overcome with the

presence of Financial Technology (fintech). Fintech has become one of the

inclusive financial services that have been closely known by the MSME

group since 2018. Fintech has advantages, one of which is credit scoring,

which can evaluate the eligibility of potential credit recipients. However,

the perception of the Indonesian people with a population of 270.20

million people and 87.2% of whom are Muslim encourages efforts to create

sharia-based digital financial services (Wardhana, 2019). This makes sharia

fintech has the potential to mushroom among the community, especially

MSME actors.

Wardhana (2019) has carried out research on Islamic fintech in

providing capital to MSMEs; the results show that Islamic fintech has

succeeded in providing capital to MSMEs in Sidoarjo Regency. However,

this study uses sources of capital from investors. While research on

People's Business Credit (KUR) has been carried out by (Parwanti, 2020),

the results show that the distribution of KUR can increase MSME turnover

in Purbalingga Regency. However, this study uses Islamic banking in

distributing KUR. Meanwhile, according to (Widianto, 2013), states the

number of financial institutions in a province is positively correlated with

the proportion of KUR recipients, both sharia and non-sharia. Thus, the

more financial institutions there are, the greater the proportion of KUR

recipients.

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The research published in this article is about the role of sharia fintech

in distributing funds for the People's Business Credit (KUR) program for

Micro, Small and Medium Enterprises (MSMEs). This research is based on

problems faced by banks in distributing People's Business Credit (KUR) to

MSMEs. This role is present based on the potential that exists in Islamic

fintech that has been carried out by previous research. With this research,

it is hoped that it will create an effective KUR distribution system, increase

public awareness of the potential of sharia fintech, and increase the

inclusiveness of digital finance in Indonesia.

Method Research

The research approach in this research is qualitative research. A

qualitative research approach is carried out based on consideration of the

symptoms of the problems studied which are contemporary. The type of

research used in this research is descriptive research. Descriptive research

is research that provides a clearer picture of the role of Islamic fintech in

channeling KUR funds to MSMEs based on secondary data obtained. A

descriptive study does not require testing of certain hypotheses, but this

type of research will provide an overview in accordance with the observed

variables, symptoms that appear or also existing conditions come from

secondary data.

The focus of the research carried out is to analyze how the role of

Islamic fintech financial institutions in distributing KUR funds for MSMEs. In

this study, two main data sources were used, namely secondary and

tertiary data. Secondary data, namely the source of data used in a research

that comes from research that has been done by reading, studying and

understanding from sources that already exist before. While tertiary data

sources are supporting data from primary data, namely secondary, this

data is obtained through dictionaries, incyclopedias and so on which are

still related to the problem being studied so that they can be used as

support for existing data (Herviani and Febriansyah, 2016).

Data collection is done by taking data sourced from textbooks,

journals, scientific articles, literature reviews containing the potential of

sharia fintech in providing credit, and about the People's Business Credit

(KUR) distribution system from banks to MSMEs. This data is then analyzed

in depth and compared with data obtained from other sources so as to find

accurate results.

In order to obtain the validity of the data, triangulation techniques,

data sources, and data collection methods were used. This means that

researchers compare and re-check the trustworthiness of information

obtained through different times and tools. The data obtained from the

Gema Aditya Mahendra

, Nurjaya

, Rayyan Alkhair

, Mohammad

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Sharia Financial Technology in The Distribution of People's Business

Credit Program Funds for Micro, Small, and Medium Enterprises

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results of the analysis of journals and other literature studies are then

compared with other existing data that is still related to sharia fintech and

MSMEs receiving funds regarding the veracity of the data obtained.

Data is collected from secondary and tertiary sources, which are then

data reduction or unnecessary data reduction is carried out. After that the

data is presented systematically and coherently. The data is concluded,

then presents a conceptualization based on the data that has been

concluded.

Result and Discussion

1. Problems of Micro, Small and Medium Enterprises (MSMEs) to

Develop

Micro, Small and Medium Enterprises (MSMEs) is a general term in

economics, which refers to productive economic enterprises owned by

individuals or business entities in accordance with the criteria stipulated by

Law no. 20 of 2008. The development of MSMEs in Indonesia cannot be

separated from various kinds of problems. The development of micro and

small businesses in Indonesia cannot be separated from various kinds of

problems. The level of intensity and nature of these problems cannot differ

not only according to the type of product or market served, but also

between regions or locations, between centers, between sectors or sub-

sectors or according to types of activities, and between business units in

the activities or sectors involved same (Turmudi, 2017).

a. Elements contained in Micro, Small and Medium Enterprises

(MSMEs)

The elements of Micro, Small and Medium Enterprises (MSMEs), are

the constituent parts of something that can be said to be MSMEs. In

general, according to (Lastini, 2018), the elements of MSMEs are

divided into three. First, capital, capital is needed because in setting up

or running a business it takes a certain amount of capital and energy.

Capital in the form of money is needed to finance all business needs,

while what is meant by energy capital is someone's energy to run or

manage a business. Second, sales turnover, namely the accumulation of

sales activities of a product, goods and services which are calculated as

a whole over a certain period of time continuously and in one

accounting process. The third advantage, namely the activities of

traders who reduce some of the costs incurred with the sales they get.

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b. Factors Inhibiting Micro, Small and Medium Enterprises (MSMEs)

The development of MSMEs in Indonesia cannot be separated from

various kinds of problems. The level of intensity and nature of these

problems cannot be different and not only according to the type of

product or market served, but also between regions or locations,

between centers, between sectors or sub-sectors or types of activities,

and between business units in activities or sectors. the same one. There

are at least 4 factors that hinder MSMEs, namely the first is the lack of

capital, capital has become an important component in developing the

business carried out by MSMEs. In overcoming capital problems, some

MSMEs choose the informal financing sector such as loan sharks to

obtain capital. This is due to the limited access of MSMEs to formal

financial institutions. This is evidenced by data from Bank Indonesia

which states that as many as 70% of MSMEs do not have access to

capital to banking (Zuraya, 2017). Second, the lack of market access is

due to MSMEs also competing with large companies and large

companies often win this competition. Third, financial management or

financial management that is less than optimal, this is caused because

the majority of MSME entrepreneurs, especially those in villages, tend

not to understand their own financial condition. Important things such

as separation of personal and business finances are not carried out. The

bad impact is that businesses cannot develop and even experience

setbacks (Medcom.id, 2021). Finally, the use of technology is low even

though the current development of technology is very rapid. Based on

research that has been done, technological developments such as the

internet are able to expand business networks, develop businesses to

increase marketing. But in fact, only 20% of SMEs in Indonesia use

digital technology (Merdeka.com, 2020).

2. Distribution of People's Business Credit (KUR) for Micro, Small and

Medium Enterprises (MSMEs) Capital by Banking

a. The elements contained in the People's Business Credit (KUR)

People's Business Credit (KUR) is a loan or financing provided to

owners of Micro, Small and Medium Enterprises (MSMEs) in the form

of providing working capital and investment supported by guarantee

facilities for productive businesses. The government has launched the

KUR program but the source of the funds comes entirely from bank

funds or in this case financial technology. The KUR program is

Gema Aditya Mahendra

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distributed using a guarantee and credit pattern, this is intended for

micro and small entrepreneurs who do not have collateral but have

businesses that are feasible to be financed by other parties. The

government subsidizes People's Business Credit (KUR) with the aim of

empowering Micro and Small Enterprises (UMK) in Indonesia so that

their businesses become more advanced for a better economy.

According to (Diah Nur Parwanti, 2020), there are 7 elements of

People's Business Credit (KUR) which are described as follows:

First, credit is a fund obtained from the lender and then returned

on a term basis along with the loan interest that was agreed upon at

the beginning. Both debtors are parties who owe to other parties,

usually by receiving something from the other party (creditor)

promised by the debtor to repay at the agreed time. The third is the

KUR agreement, the KUR agreement can be interpreted as a loan

agreement between a bank as a creditor and another party as a debtor,

which requires the debtor to pay off his debt after a certain period with

interest. Fourth, namely the time, which is the period of time that is

determined during the credit application process or credit distribution,

takes place. The fifth is trust, namely the provision of KUR to debtors

because banks believe that funds distributed to debtors can be

returned. Finally, the risk, every KUR given to the debtor will contain

risks and the possibility of the debtor not being able to repay the loan.

Therefore, banks must conduct credit analysis before deciding to

provide credit analysis before deciding to provide credit to debtors.

b. Requirements for Obtaining People's Business Credit (KUR)

In general, each bank has different requirements in providing

capital for People's Business Credit (KUR). However, generally,

according to (Wardhana, 2017) the requirements that must be required

in obtaining KUR are at least two parts, namely general and special

requirements. General requirements usually includes Indonesian

citizens and domiciled in Indonesia; minimum age of the customer is 21

years/18 years after marriage; self-employed where the business is in

accordance with sharia principles; and minimum length of business is 6

months. The purpose of financing is for working capital or investment

needs, Having a permanent business, Guarantee on behalf of own

property or spouse or parents or biological children and Administration

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fees follow the terms and conditions that apply. While the special

requirements needed are in the form of documents, namely a

guarantee card and NPWP.

c. Mechanism of Distribution of People's Business Credit (KUR)

In the KUR program, there are several stages until the funds are

received by the debtor, there are at least 7 stages in the disbursement

of KUR funds, namely financing offers made by agencies usually

through brochures, both requests for distribution are made in writing

by the customer by including the requirements requested by the

lender. KUR funds, third, the distribution agreement made by both

parties through paper on stamp duty which was previously checked by

marketing whether the person who submitted this was worthy of KUR

or not, fourth, namely the approval by the committee approved by the

company treasurer, the fifth opening a customer account, the sixth

signing of the contract, and finally the issuance of the approval letter.

d. Factors Inhibiting the Distribution of People's Business Credit

(KUR)

In its activities, every financial institution will always encounter risks

that will hinder the smooth running of the activities of macro and micro

financial institutions, including the distribution of People's Business

Credit (KUR). There are at least 3 main obstacles, namely: Information

Gap between MSMEs and Banking Parties, Limitations of Financial

Institutions in Certain Regions, and Non-Optimal Implementation of

Laku Pandai by the Financial Services Authority (OJK).

3. Potential of Sharia FinTech in Distributing People's Business Credit

(KUR) for Micro, Small and Medium Enterprises (MSME) Capital

Financing

a. Fintech Elements

Financial Technology (FinTech ) is an innovation in the financial

services sector that makes financial transactions easy and practical.

FinTech initiated the concept of digital money where a person does not

need to use currency or checks and has to go to a guarantor financial

service institution to make a financial transaction. FinTech brings

disruptive changes in human life, especially in terms of transactions

where transactions are carried out regardless of place and time.

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, Nurjaya

, Rayyan Alkhair

, Mohammad

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Although Fintech and banking both serve things related to money,

there are some differences between banking and FinTech such as:

First, in terms of services or business activities, banking has many

services such as transactions, lending and borrowing, savings (savings),

investment, insurance, e-banking and credit cards. FinTech companies

as one of the institutions that provide financial services do not have

complete services such as banking. The services provided by FinTech

are also only carried out through platforms or applications that use

electronic systems in their operations.

Second, in terms of where the funds come from, the source of

borrowing funds owned by banks comes from bank customers or

consumers who use the services of a particular bank. The funds owned

by the bank can come from the capital of the bank owner, customer

savings, time deposits, demand deposits and debt securities issuers.

FinTech has a source of borrowing funds obtained from borrowing from

other institutions or parties that provide money lending services.

Third, in terms of lenders, in banking, it is the bank itself that

provides loans to debtors. Whereas in FinTech that focuses or provides

lending and borrowing services, lenders are not FinTech, here FinTech

companies only provide a platform for people who need it. Loan funds

are given by people or legal entities who have funds and want to lend

them to people who need them.

Fourth, in the case of the guarantor of distribution risk, the risk of

borrowing is borne by the lender of the loan fund. The risk bearer for

distributing loan funds in banking is a bank, while the risk bearer in

distributing loan funds on FinTech services is a person or legal entity

who is able to provide a certain amount of money to be borrowed by

other parties through FinTech services.

Fifth, in terms of improving the credit of debtors who have

potential difficulties in meeting their debts, restructuring in the banking

sector is assessed first and given by the bank (ojk.go.id). While in

FinTech, the restructuring authority is not assessed by FinTech

companies but is carried out by the lenders, namely the person or legal

entity that has the funds. If the lender approves the restructuring of the

debtor who is considered to have potential difficulties in fulfilling his

obligations, then the FinTech company can provide restructuring for

the debtor concerned.

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Sixth, in terms of supervising the activities of running a business,

OJK supervises banks as institutions that collect funds from the public.

FinTech is supervised as an intermediary (platform) that brings together

lenders and borrowers and oversees the market conduct of borrower

and lender interactions.

Innovations in the financial sector such as FinTech must be adapted

to Islamic principles or values so that they are good in the sense of

fulfilling human rights in the right way, because according to Islam

something good must be obtained in a good way. According to the

MUI, FinTech services, which are financing using information

technology, must not conflict with sharia principles, namely, they must

be free from elements such as usury, gharar, maysir, dharar, tadlis,

zhulm and haram. Parties or legal subjects who are bound by this

regulation such as organizers (FinTech companies), funders and

recipients of funds must pay attention to the above sharia principles in

conducting business in the market dimension.

In entering into an agreement, consent and qabul must be carried

out in particular ways. The ways in which an ijab and qabul are carried

out are called "sighat". Sighat has three forms, namely done with words

or verbally, done in writing (deed) and done with gestures or actions

that have become a habit in doing consent and qabul. Ijab and qabul

can be done using one of the sighat above, each of which must give a

clear understanding of the existence of ijab and qabul.

In the context of shari'ah FinTech, sighat of ijab and qabul made

between the recipient and the donor of the fund is a written sighat

where the contents of the agreement are contained in an electronic

document which will later be read and signed by the beneficiary if he

agrees or accepts the contents of the agreement contained in the

document, electronic (qabul stage), types of contracts allowed in

carrying out FinTech business activities.

b. Sharia Fintech Services in Financing Micro, Small and Medium

Enterprises (MSMEs) Capital

MSMEs have an important role in terms of employment. Micro,

Small and Medium Enterprises create a lot of job opportunities and also

quickly, faster than other business activities. This is evidenced by the

absorption of labor up to 96.71 percent in 2016 with 4 percent by

medium enterprises, 5.7 percent by small businesses and 87 percent by

businesses (Wardhana & Oktafia, 2020: 86). The majority of business

Gema Aditya Mahendra

, Nurjaya

, Rayyan Alkhair

, Mohammad

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actors in Indonesia or around 99 percent are Micro, Small and Medium

Enterprises (MSMEs). With a dominating number from other business

activities, Micro, Small and Medium Enterprises accounted for 61.7

percent of total GDP in 2020 (Saptati, Setyowati, Aziz, et al, 2020:10).

The data above shows that the role of MSMEs is very important for

the Indonesian economy. It also explains that the government needs to

make policies and a conducive business ecosystem for MSME actors.

The development of policies and ecosystems that are conducive to

MSMEs is a two-way action, which is beneficial for MSME activity actors

as well as supporting national development. The first reason is that

more than 50 percent of GDP is generated by the business activities of

MSMEs. The second reason is because MSMEs are flexible business

activities in the sense that MSMEs are business activities that are able

to occupy all sectors ranging from agrarian, maritime, tourism and

others (Sarfiah, Atmaja & Verawati, 2019:138). This flexible nature

makes MSMEs mushroom and absorbs a lot of labor which then has a

positive impact on national income.

FinTech has several types of services that can be used as a means of

channeling funds for business capital for MSMEs such as; 1). Peer to

peer lending and 2). Crowdfunding. The concept in peer to peer lending

is online lending, where FinTech companies bring together people who

have funds with people who need funds. While the concept in crowd

funding is raising funds within a certain time to be distributed to people

who need a certain amount of money collected through fundraising.

The first type of service that can be carried out by Islamic FinTech

companies to fund capital for MSME actors is peer to peer lending

services. Peer to peer lending services are online lending of funds

managed by FinTech companies, but the FinTech companies that

manage them are not allowed to lend funds and issue debt securities to

recipients of funds or only as intermediaries (Prestama, Iqbal and

Riyadi, 2019:150 ). In running peer to peer lending services, shari'ah -

based FinTech companies must adjust the agreement process to

refunding funds according to Islamic legal principles. Contracts that can

be used in sharia-based peer to peer lending services include; qardh

contract and al -wakalah al -ujrah contract.

First, sharia fintech companies that become platforms or

intermediaries that bring together fund owners and potential recipients

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of funds through peer to peer lending services can apply qardh

contracts. In a qardh contract, the owner of the fund lends a certain

amount of money to the recipient of the fund who has accepted the

consent of the owner of the fund. The recipient of the fund has an

obligation to the owner of the fund to return the money borrowed in

the same amount In its implementation, the qardh contract is also

allowed to be added to the al - wakalah al - ujrah contract (withdrawal

of wages). FinTech companies that become platforms can also

implement al- wakalah al -ujrah contracts as intermediaries that bring

together fund owners and recipients of funds (Zustika, 2019:87).

Furthermore, services that can be carried out by Islamic FinTech

companies are crowd funding services. OJK divides crowd funding

services into three types, namely; 1). Fundraising for donations, 2).

Fundraising for loans (can be for business projects) and 3). equity-based

crowdfunding. The type of crowd funding that can be applied by Islamic

FinTech companies to fund MSME capital is fundraising for loans or

business capital. The practice of crowd funding in a shari'ah way applies

two contracts, namely the musyakarah contract and the qardh

contract. In a musharaka contract, the people who donate funds act as

investors. Whereas in a qardh contract, people who donate funds are in

the position of borrowers who will only get a refund according to the

amount lent by each person (Novitarani and Setyowati, 2018: 256).

In crowd funding that uses a musharaka contract, FinTech gathers

people who have funds but not enough to set up a business. These

people combine capital with each other and work together to establish

a business whose profits are determined proportionally for each party

who is a member of the musharaka contract. In crowd funding that

uses qardh contracts, FinTech companies gather people who want to

lend money to one person who needs some money to start a business,

which in this case is MSME actors. People who collect and lend funds to

one MSME actor will only get a refund of the loan according to the

amount lent and no more.

Conclusion

Based on the discussion above, it can be concluded that FinTech is an

innovation in the financial field by using information technology that uses

the internet network in carrying out financial business activities. The use of

electronic media and internet networks is considered to make it easier,

Gema Aditya Mahendra

, Nurjaya

, Rayyan Alkhair

, Mohammad

Aminuddin

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faster, and more efficient in carrying out business services by FinTech. KUR,

which has been distributed by banks, can be carried out by Islamic FinTech

companies as one of the institutions working in the financial field. Sharia

fintech is developing, sharia fintech also has a good impact on the economy

in Indonesia and MSMEs through the distribution of people's business

loans.

This can happen because many MSMEs need an injection of funds to

start and develop their businesses because based on a survey conducted by

Sarfiah, Atmaja and Verawati, more than 50 percent of GDP is generated by

business activities from MSMEs. The second reason is that MSMEs are

flexible business activities in the sense that MSMEs are business activities

that are able to occupy all sectors ranging from agrarian, maritime, tourism

and others. In addition, people's business loans offered by sharia fintech

are also very easy, namely by way of the deposit/credit application process,

financial literacy education and product recommendations, credit scoring

by sharia fintech, approval of financial institutions, loan distribution,

installment/credit payments, payment evaluation credit.

Based on the research we did, we provide input so that the

government can accelerate the spread of financial technology programs

because with financial technology the distribution of funds, especially in

the capital sector for MSMEs, is faster and more efficient. If necessary, this

financial technology can be applied to banks in Indonesia. Thus, community

and national economic growth can grow rapidly.

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